RPF0331-Chad_Carson_Interview
00:00:00.000 | Don't just dream about paradise, live it with Fiji Airways.
00:00:05.000 | Escape the ordinary with Fiji Airways Global Beat the Rush Sale.
00:00:09.120 | Immerse yourself in white sandy beaches or dive deep into coral reefs.
00:00:14.040 | Fiji Airways has flights to Nadi starting at just $748 for light and just $798 for value.
00:00:21.160 | Discover your tropical dreams at FijiAirways.com.
00:00:24.920 | That's FijiAirways.com.
00:00:26.640 | From here to happy.
00:00:28.160 | Flying direct with Fiji Airways.
00:00:29.800 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:38.560 | skills, insight and encouragement you need to live a rich and meaningful life now while
00:00:43.600 | building a plan for financial freedom in 10 years or less.
00:00:46.880 | Today my guest is Chad Carson, aka Coach Carson.
00:00:50.360 | He's a real estate investor and financial freedom advocate.
00:00:54.440 | And Chad, early retiree, is that the case?
00:00:58.000 | We're almost there.
00:00:59.000 | It depends on how you define it.
00:01:01.280 | But I feel pretty good about my life right now.
00:01:03.760 | I'll say that.
00:01:04.760 | Awesome.
00:01:05.760 | Well, welcome to Radical Personal Finance.
00:01:06.760 | How do you define it?
00:01:09.280 | Well, I've been working on that for about 13 years and it's one of the reasons I got
00:01:14.200 | interested in your website and looking at it because I know you kind of pick apart the
00:01:17.760 | same thing about these different stages of financial independence.
00:01:21.440 | And I've sort of come to that the best definition I can give is that I'm climbing a mountain
00:01:26.480 | and at the very peak of the mountain is this idea that I'm going to have a large number
00:01:30.800 | of assets and those assets pretty easily produce passive income that pays for my lifestyle.
00:01:35.920 | And that's sort of the general big picture.
00:01:38.560 | But what I found for myself along the way is that I've hit a lot of plateaus during
00:01:44.120 | that climb.
00:01:45.120 | And some of those plateaus have been, you know, I might not have 100 percent of the
00:01:48.800 | income I need, but I have half of it or I have three quarters of it or I have a lot
00:01:53.320 | of money in the bank and I can take many retirement for a year or six months.
00:01:58.280 | And so I guess I've sort of had a hard time defining it because I've enjoyed the process
00:02:03.500 | a lot as well.
00:02:05.080 | And I think I'm getting closer and closer to the peak and the actual definition I want.
00:02:09.640 | But it's been fun along the way too.
00:02:12.720 | So tell us your journey.
00:02:13.720 | Where did you start with working toward building financial independence?
00:02:16.960 | Did you come from a privileged background or where did you start?
00:02:20.880 | I did hit the ovarian lottery, as Warren Buffett likes to say.
00:02:24.760 | I didn't have a bunch of money given to me, but I had good parents who were very supportive
00:02:29.760 | and I played football.
00:02:32.200 | And so I got a college scholarship to play football at Clemson University.
00:02:37.520 | And so that pretty much paid for my school and I got a school education for free.
00:02:41.680 | I didn't have any debt when I got out.
00:02:43.680 | And so in that respect, I had a clean slate when I started.
00:02:48.000 | And sort of the fork in the road for me after college, I was a science major, biology.
00:02:52.800 | And I thought about teaching.
00:02:53.800 | I thought about medical school.
00:02:55.560 | I also thought about going some, you know, working for some Wall Street companies and
00:02:59.840 | kind of go the business route.
00:03:01.200 | But for me, the allure was always entrepreneurship and starting my own thing.
00:03:06.800 | And so I got into the real estate entrepreneurship path, just sort of on a whim out of college.
00:03:12.840 | And I had to own my car and I had a thousand bucks in the bank and I just had to figure
00:03:16.800 | it out and scrap by.
00:03:18.160 | And that's sort of been my story for the last 13 years.
00:03:22.440 | Being an entrepreneur, trying to make a living as a real estate investor, but then also building
00:03:26.800 | wealth and working towards that financial independence that we were talking about.
00:03:30.600 | Were you surfing late night cable TV and came across Carlton Sheets, his program?
00:03:37.640 | Something like that.
00:03:38.640 | Where did you get the idea?
00:03:39.640 | Well, see, another reason I was fortunate is my father had rental properties growing
00:03:44.160 | up.
00:03:45.160 | And so he had some books on the shelf and I would, you know, I was perusing the books
00:03:48.240 | on a shelf during a break in college and noticed one of them.
00:03:51.240 | It was actually a Mark Haraldson book.
00:03:52.920 | I don't know if he's kind of an old school guy from the 70s or 80s.
00:03:56.400 | And it was one of those just super catchy overdone titles, you know, like, you know,
00:04:00.320 | retire and this many years.
00:04:02.280 | And I said, oh, wow, that sounds great.
00:04:03.560 | I hadn't started working, but I really would like to retire.
00:04:06.680 | And so I started reading it.
00:04:08.280 | But the good thing was I had all these books on the shelf.
00:04:10.400 | It was like a library that I could just absorb.
00:04:12.600 | And I'm a learner and I love to pick it up.
00:04:15.440 | And so I started reading and it really planted the bug in me because I'd seen my dad work
00:04:20.600 | in it.
00:04:21.600 | And I never liked real estate growing up because he used to make us, you know, make us during
00:04:25.280 | the summer go clean out some of these foreclosure houses that he bought.
00:04:29.000 | And in the Georgia summers, Atlanta would be 90 degrees and there would be, you know,
00:04:33.120 | old deer meat in the freezer of these refrigerators that I'm cleaning out.
00:04:36.240 | And I said, this is horrible.
00:04:37.880 | And who in the world would ever, I don't know why you would do this.
00:04:42.520 | And of course, when you get out of college and you start thinking about potential, you
00:04:45.920 | said, wait a minute, dad was actually pretty smart guy.
00:04:49.760 | And so I saw for a year I apprenticed under him and I was a bird dog where I just I said,
00:04:55.920 | you know, dad, I've read in the book that there are these things called bird dogs where
00:05:00.120 | I could basically find an experienced investor deals by hustling and going out, knocking
00:05:04.840 | on doors and sending letters.
00:05:06.920 | And so he told me a definition of the type of deals he was looking for, the locations
00:05:11.840 | he was looking for.
00:05:13.120 | And I hustled and went out there and found them during that first year and bought deals.
00:05:17.600 | And I made a little bit of a markup on every deal that I bought him.
00:05:21.340 | And that got me started.
00:05:22.340 | That was sort of went from there.
00:05:24.360 | So I want to talk about that start.
00:05:26.920 | But before we do that, do you have kids now?
00:05:29.440 | I do.
00:05:30.440 | Yeah, I have a three year old and a five year old.
00:05:32.920 | Do you make them go out and rake the leaves in one of your rental properties?
00:05:36.200 | Do you anticipate putting them through the same thing your dad did to you?
00:05:39.800 | I'm so thankful to my wife because they're so much more helpful than I was as a kid.
00:05:44.160 | I said that this could not be my genes because I was complaining the entire time.
00:05:48.040 | And my kids are like, dad, can I help you?
00:05:50.000 | Can I help you?
00:05:51.000 | So I think we'll we won't get to the deer meat in the freezer yet, but I think I'll
00:05:55.000 | let them pick up trash at the rental properties when we go on the construction site or something.
00:05:58.840 | I think that'll be the first step.
00:06:00.360 | It is like we joke about it, but for me, it's actually one of my primary motivators
00:06:07.240 | for investing in real estate is because it can be a really good family business and can
00:06:12.280 | provide you with a lot of ways to give your kids opportunities for meaningful work while
00:06:18.120 | exposing them to the process of investment.
00:06:21.160 | And that's a benefit that many parents, if they don't have their own business or if
00:06:26.880 | they don't have something like real estate, it's tough to find work for your kids to
00:06:30.840 | do.
00:06:31.840 | But if you can put them to work and, hey, we're going to clean out this property, going
00:06:35.320 | to go clean it up, you can have hard work that's safe and still teaches them the lessons.
00:06:41.160 | So I think it's a huge benefit of real estate.
00:06:43.080 | Absolutely.
00:06:44.080 | Myself.
00:06:45.080 | And you could use one of those tricks where you can have a 10-year-old making a couple
00:06:49.280 | thousand bucks during the summer and putting their money in or off IRA, right?
00:06:52.320 | Absolutely.
00:06:53.320 | Yeah.
00:06:54.320 | It's one of the fun avenues you could take with that.
00:06:56.480 | It's without question one of the things that people should do.
00:07:02.000 | Bird dogging.
00:07:03.000 | Explain what – so I feel like this is a really good way for people to get into real
00:07:07.240 | estate and since you've actually did it this way, explain what a bird dog is and how
00:07:11.680 | somebody who's interested in pursuing your path might go about doing what you did.
00:07:16.080 | Okay.
00:07:17.080 | Well, I mean a non-technical definition of a bird dog is for those who aren't in the
00:07:21.040 | south and do hunting.
00:07:22.040 | I grew up in the south and so bird dog is a little more intuitive.
00:07:25.040 | A bird dog in hunting would go point out where the birds are in the bushes and the hunter
00:07:28.520 | would then go catch the birds or shoot the birds.
00:07:31.280 | And so that's essentially what you do.
00:07:32.880 | What I did as a bird dog was I would sniff out those deals and sometimes that would involve
00:07:38.320 | – one of my core ways that I've always done and still do to this day is just riding
00:07:42.560 | neighborhoods and looking for vacant houses.
00:07:45.320 | And so I could literally, "Hey, there's some grass really tall in that house," and
00:07:49.840 | I would go to start sniffing around and knock on the door.
00:07:52.880 | "All right.
00:07:53.880 | There's nobody there.
00:07:54.880 | I'm going to knock on the neighbor's door, talk to the neighbors.
00:07:57.200 | Hey, I'm interested in buying this house.
00:07:59.280 | Do you know who I can talk to about buying it?"
00:08:01.080 | And just start asking questions and getting involved.
00:08:04.800 | And I would start doing that.
00:08:05.800 | I'd start talking to realtors.
00:08:07.720 | I would send out some letters to different kind of marketing campaigns.
00:08:12.640 | And the point being though that a bird dog is sort of on the front end of the acquisitions
00:08:17.720 | funnel of buying these products of real estate.
00:08:21.080 | And the benefit for a brand new person who's willing to hustle and who's got some courage
00:08:27.520 | to go knock on doors and talk to people is that you don't have to know all of the rest
00:08:32.520 | of the funnel of real estate.
00:08:33.960 | You don't have to necessarily have to know how to raise the money.
00:08:36.680 | You don't have to know how to do all the negotiations.
00:08:39.440 | You don't have to know how to even analyze 100% of the deal.
00:08:42.440 | You need to recognize some factors of what's a good deal and what's not.
00:08:45.880 | But a bird dog is basically just pointing the bird out and then they bring in the big
00:08:49.480 | dog.
00:08:50.480 | They bring in the investor who has the capital and the knowledge and the experience.
00:08:54.720 | And that person actually knocks the deal down and gets it.
00:08:58.000 | And you have some sort of arrangement.
00:09:00.120 | Either if you're a licensed realtor, you can make a referral fee, a finder's fee.
00:09:05.000 | If you're not, maybe you can figure out a way to get on the salary for that investor
00:09:08.160 | or find some other way, legal way to do that and make a small cut.
00:09:12.800 | My cut was $2,000 for every deal that I brought the investor.
00:09:17.160 | And for that investor, that could be a very good investment because they're getting a
00:09:22.240 | deal they might make $30,000 on or have a lot of cash flow for many years.
00:09:26.520 | So that's a reasonable fee to pay.
00:09:28.520 | Yeah.
00:09:29.520 | And so to just identify it from my perspective – and by the way, Chad, if you disagree
00:09:32.840 | with anything I say, please add your own perspective.
00:09:35.920 | You're the one who's actually actively engaged in this business.
00:09:39.440 | I'm a newcomer to the business.
00:09:41.600 | But one of the major benefits just to point out here is a core skill of real estate investment
00:09:47.600 | is finding deals.
00:09:49.640 | But early in your career, as you explained there, fresh out of college, no money in the
00:09:53.600 | bank, it can be tough to have the money necessary or valuable to put together deals.
00:09:58.920 | And so you can – by working as a bird dog, going out and finding deals for other investors,
00:10:04.660 | you can hone and develop the skills of finding deals and then you can get paid for that work.
00:10:11.200 | And the investors down the road, you always face this tradeoff of time and money.
00:10:14.520 | Young people usually have lots of time and not much money.
00:10:17.480 | Older people usually have a decent amount of money and a lot less time.
00:10:21.560 | So if you can bring a good deal or a fair deal to an investor who's got the capital
00:10:25.940 | to expend and they can do that without them – without it requiring them to have a lot
00:10:30.280 | of time off driving around neighborhoods looking for empty houses when they could have more
00:10:34.560 | productive uses of their time, you're performing a very valuable service, building skills that
00:10:39.160 | are important, putting together capital, putting together deals, gaining experience and getting
00:10:43.920 | paid for it all the way through.
00:10:45.760 | So it is a way that somebody who literally you have no job, you just have a little bit
00:10:51.200 | of knowledge, you meet an investor or some investors, find out what they're looking
00:10:55.080 | for and you go out and find them deals, you can create a business for yourself starting
00:10:59.720 | from scratch.
00:11:00.720 | Yeah.
00:11:01.720 | I mean you nailed it.
00:11:02.720 | You nailed the benefits.
00:11:03.720 | I'll give some caveats to this whole strategy because I think this idea of bird dogging
00:11:08.520 | and some people in the late night infomercials might call it – there's a business called
00:11:12.200 | wholesaling within real estate and I think it's a really good idea for a beginner.
00:11:17.360 | For me particularly, the reasons that I thought it was an awesome idea was I was lacking in
00:11:22.400 | knowledge, I was lacking in money and so if I looked at my personal balance sheet, I had
00:11:27.920 | some liabilities there.
00:11:28.920 | I had a very small bank account of wisdom and experience and money but what I did have
00:11:34.080 | like you said is I had a lot of time, enthusiasm, I'm a quick learner and so I had to go
00:11:38.320 | with the strengths that I had and I was willing to communicate.
00:11:42.160 | So on the flip side of that though, a lot of people are sold that they need to get started
00:11:45.800 | with bird dogging or wholesaling but really it's a particular skill set that a person
00:11:51.400 | who's a good bird dog has.
00:11:53.600 | So a lot of people who have never been in a sales job in their life or they don't have
00:11:56.960 | a lot of time or they look at their own personal balance sheet and they don't have those skills,
00:12:03.000 | then there's a lot of other ways to get started in real estate and it happened to be a good
00:12:06.720 | one for me but I think often that way of getting started is oversold a little bit because it
00:12:13.040 | has so many benefits because you're learning one of the key strategies of real estate is
00:12:17.120 | you have to find the deals and that's one of the bottlenecks for so many investors.
00:12:21.480 | So it's a really valuable skill to do and I really built up during that year that I
00:12:25.360 | worked and with bird dog, I did make some money.
00:12:28.000 | I made $24,000 in one year which fresh out of college is not screaming but I could have
00:12:34.000 | done better in some of the other avenues that I was thinking about but the balance sheet,
00:12:39.160 | my personal balance sheet of skill sets grew enormously and my confidence and by the end
00:12:44.640 | of that 12 months, I made my father happy and he bought deals and I went on my own way
00:12:51.040 | and those skills that I had personally, I could then say, "You know what?
00:12:54.520 | I know how to find deals.
00:12:55.520 | I'm very confident in that.
00:12:56.920 | I have systems that work.
00:12:58.560 | Now what's the next step up as a business model?"
00:13:01.640 | And for me, I went into business with a business partner up in Clemson, South Carolina.
00:13:05.520 | I moved up the road there and the next step was to find people with money to partner with
00:13:10.240 | me instead of me just giving them the whole deal.
00:13:13.080 | So if I could go for example and find a person who had $100,000 and it was an investor who
00:13:19.320 | trusted me and was willing to work with me, it made sense for that investor to split the
00:13:23.420 | deal with me and so instead of making $2,000, if it's a $20,000 deal, now I'm making $10,000
00:13:30.160 | and that was sort of – so that skill set I learned in the first year built naturally
00:13:34.240 | to the next level where I could make more money on every deal using that same skill
00:13:38.320 | that I built for the first time.
00:13:40.840 | So to clarify, how long now have you been – how many years ago was that when you graduated
00:13:47.080 | from college?
00:13:48.080 | 2002.
00:13:49.080 | I'm doing the math backwards but I think it's about 13 years.
00:13:53.520 | So looking back about 13, 14 years, you have been engaged full time in real estate during
00:13:58.880 | the course of your career thus far?
00:14:00.440 | Yeah.
00:14:01.440 | It's my everyday business and I've taken breaks here and there but this is the way
00:14:05.680 | I put food on the table for 13, 14 years.
00:14:08.880 | But you have not gone and worked a job, something like that to create capital for yourself.
00:14:13.800 | You've figured out how to build capital while staying involved in the real estate
00:14:17.120 | business.
00:14:18.120 | Is that right?
00:14:19.120 | Exactly.
00:14:20.120 | I have a kind of parallel universe.
00:14:21.120 | I've been raising capital, making money as a real estate investor, buying and flipping
00:14:25.200 | houses, assigning deals to other people and then I've also bought rental properties
00:14:29.760 | and held long term capital assets in addition to that.
00:14:34.040 | So explain to my audience how you've done this and the reason I wanted to set those
00:14:38.680 | parameters is this is one of the challenges.
00:14:41.640 | There are many ways to invest in real estate.
00:14:43.260 | Real estate is not magic.
00:14:44.260 | It's just an asset class that has unique characteristics but it does have some real
00:14:47.960 | benefits for wealth building and wealth creation and many people have built major fortunes
00:14:53.600 | through investing in real estate.
00:14:55.960 | And if I have a listener who let's say is working a corporate job and just simply purchases
00:15:00.920 | a house here and there on the side, they have some certain advantages.
00:15:04.520 | They're relatively financeable.
00:15:05.840 | They've got stable income.
00:15:07.680 | They have something steady to fall back on.
00:15:09.960 | Perhaps they have a high savings rate so they can cash flow the properties, etc.
00:15:14.480 | You've taken kind of the cowboy approach though of actually figuring out how to make your
00:15:18.040 | deals where you didn't have any capital in the beginning.
00:15:21.320 | The whole way along, your business has needed to give you a place to live, put food on the
00:15:26.600 | table and find and fund investment opportunities.
00:15:30.760 | So how did you practically tactically do this starting with nothing and building up the
00:15:36.120 | portfolio that you've accumulated?
00:15:37.680 | How do you do it when you don't have any money?
00:15:40.360 | Yeah, good question.
00:15:42.960 | I think there's a couple major kind of factors that played in my favor.
00:15:48.140 | Some of them I wasn't aware of up front.
00:15:49.520 | I think I got lucky a little bit and maybe had some good advice from people.
00:15:53.680 | But one of the things was non-real estate related and I think it's something just personal
00:15:58.560 | finance related was that I've been fairly frugal.
00:16:02.160 | And so when you start out at college, I basically would have lived in the back of my car if
00:16:05.920 | I had to make this thing work.
00:16:07.840 | But I never got to the big lifestyle.
00:16:11.320 | My money came in chunks.
00:16:13.120 | My first year of business, I didn't make any money until the second six months.
00:16:16.200 | My second year in business, the same thing happened again.
00:16:18.680 | I didn't make any money until the second six months.
00:16:20.520 | So I got used to really early on having to live lean.
00:16:24.920 | And so during the times when I wasn't making any money, you just eat ramen noodles and
00:16:29.760 | you deal with what you got to deal with.
00:16:31.720 | But then you make a lot of money and it comes in and you set that money aside and don't
00:16:35.440 | necessarily spend it because you know there might be another lean period.
00:16:39.160 | So I think that habit is that personal habit of living frugally.
00:16:42.840 | Living frugally has been helpful because there's been so many ups and downs.
00:16:46.840 | I started in an up market and a kind of rising market 2003, 2004, 2005, 2006 and really had
00:16:53.720 | my growth period during those times.
00:16:57.160 | And so that frugality and the ability to go back to your roots was very helpful.
00:17:03.300 | But the second part of it, I think, and this is the part that maybe was a little bit fortunate,
00:17:07.840 | was because I was not bankable, because I had good credit but I didn't have a job, a
00:17:13.080 | W-2 income that I could go to the banks and borrow a lot of money.
00:17:15.800 | It was sort of a blessing in disguise because, as I told you, the first year I had to learn
00:17:20.400 | how to work with other investors to put my deals together.
00:17:23.880 | And so my natural evolution was to start going to individuals and asking them if they would
00:17:29.320 | put up the money for my deals.
00:17:32.120 | But partly because I just felt like that's what we had to do because I wasn't confident
00:17:36.520 | going to the banks and asking for a whole lot of loans, although we could get a couple,
00:17:40.280 | one or two loans with a local bank.
00:17:42.760 | So the strategy we used, we had to get really creative with our deal structuring.
00:17:47.860 | And so that was good long run because most of our deals, if we had, when we started holding
00:17:52.500 | deals and holding rental properties, instead of owing money to a commercial bank that had
00:17:57.980 | a three-year balloon or a five-year balloon, we had loans with private investors or we
00:18:03.240 | had lease options with sellers or we had seller financing where the terms were with the seller
00:18:09.560 | instead of with the bank.
00:18:11.000 | And so we were able to negotiate really favorable terms on our financing.
00:18:15.800 | And more than anything, though, we were able to have partners on our deals who, when things
00:18:20.340 | got bad, 2007, '08, instead of us having to go refinance a lot of loans at the worst time,
00:18:26.320 | we were able to sort of weather the storm.
00:18:29.680 | And even though we had a good bit of leverage, I mean, we started with very little capital.
00:18:33.720 | And so we obviously had a lot of leverage.
00:18:35.900 | The kind of leverage we had was a little bit different than the traditional leverage you
00:18:39.440 | would look at.
00:18:40.440 | We had lower terms.
00:18:41.440 | We had lower interest rates.
00:18:42.440 | We had private individuals who we could sit down at the table and talk to and say, "Here's
00:18:45.400 | the situation.
00:18:46.400 | Here's what we're doing."
00:18:47.400 | And so that's my second thing is that I think growing from where we did from scratch and
00:18:52.440 | not having a lot of capital to finally building some capital, in real estate, it's so cyclical
00:18:57.520 | up and down and the market's going to change.
00:18:59.960 | The financing is such a critical piece of it.
00:19:02.560 | And you have to be as worried about the financing and the terms of your financing and who you're
00:19:06.560 | financing it from as you are the real estate deal you're putting together.
00:19:10.760 | I'd like you to expand on what it was actually like during those years, maybe talk about
00:19:15.640 | a couple of deals because I've mentioned this on the show and I've had John Schaub on the
00:19:19.080 | show and I know you're a student of Schaub's, at least you've read his books.
00:19:22.720 | He emphasizes extensively why he prefers not financing with banks.
00:19:27.640 | And one of the major reasons is safety in difficult times where if you wind up in a
00:19:32.880 | difficult period and you need to sit down and work on something, you're much safer as
00:19:37.900 | an investor having your financing with other investors, other individuals because you have
00:19:43.640 | more options.
00:19:44.640 | But that's not generally intuitive to many people.
00:19:47.360 | So explain what it was actually like during those years, describe some deals and what
00:19:52.080 | you had to do and why what you just said is true.
00:19:55.640 | Okay, sure.
00:19:56.640 | Yeah, I can remember one specific time.
00:19:59.440 | So 2007 was a very interesting year for us for a couple of reasons.
00:20:03.080 | One is we grew a lot.
00:20:04.320 | We had 48 closings in one year.
00:20:07.600 | So we acquired 48, you had 48 times we went to a closing where we were buying property
00:20:11.800 | and some of those were multiple properties.
00:20:14.120 | Well, the theme was at the end of that year, we did well on a lot of deals, but we had
00:20:19.160 | enough, a handful of deals that were not as good and we kind of bit off more than we could
00:20:23.240 | chew.
00:20:24.240 | And it was at a point where the storm clouds were kind of forming on the horizon.
00:20:29.880 | You could see things happening, the market's kind of softening up.
00:20:32.960 | And so at one of those points when we bit off more than we can chew, we had a deal that
00:20:37.280 | we basically needed some extra capital on.
00:20:39.920 | We underestimated the amount of rehab that we'd have to do.
00:20:43.640 | That happens all the time, by the way, it seems like.
00:20:45.680 | Even experienced investors underestimate how much it's really going to take to fix up these
00:20:50.360 | properties.
00:20:51.920 | And so we're short some money and how are we going to do this deal?
00:20:55.040 | You don't want to be stuck in an in-between point where you can't get it sold or you can't
00:20:58.960 | get it rented.
00:21:00.400 | And so you need that capital.
00:21:02.160 | And so we went to a person who had one of our early investors and said, here's the situation,
00:21:08.160 | we need some capital.
00:21:10.060 | And we basically looked at some of our other properties and cross-collateralized.
00:21:14.520 | So basically, it took five properties and said, we have first mortgages on those properties.
00:21:21.160 | And would you be willing to loan a second mortgage on this property?
00:21:25.400 | If we had walked into a bank and asked them to do that, I mean, there's no chance.
00:21:29.800 | They're not going to go in second position because that means if we go bankrupt, if something
00:21:33.680 | happens to us, they're going to lose.
00:21:36.320 | But this private investor, he liked us, he trusted us, but it had to be more than that.
00:21:41.400 | He had to feel like, I'm putting up money.
00:21:44.320 | If you get run over by a bus, I don't want to lose my money.
00:21:47.160 | And so we put him in the types of situations where we said, if we have to, we'll de-do
00:21:52.720 | the property.
00:21:53.720 | We will give you, here's an appraisal on the property, it's worth $200,000.
00:21:58.760 | You're loaning us up to $120,000.
00:22:01.400 | So the point is, we looked at each property.
00:22:03.860 | And he as an investor, as a savvy investor, was able to see that his risk was a reasonable
00:22:09.480 | risk.
00:22:10.480 | And he made the loan and got us through that.
00:22:12.900 | And so we paid him back off after we sold a couple properties.
00:22:16.720 | So I guess the point of that, that's one particular story, is that you have a private lender can
00:22:22.120 | sometimes look outside the box a little bit and think about the deal and look really at
00:22:26.320 | the collateral.
00:22:27.480 | Because the collateral to me, even this day, if I'm going to loan somebody money, I want
00:22:31.400 | to know that they'll perform.
00:22:33.020 | But as a real estate investor, my number one rule if I'm loaning somebody money is, am
00:22:37.360 | I willing to take that property back on the terms that I gave, on the loan to value, or
00:22:42.520 | the terms that I loaned them the money on?
00:22:44.040 | And if that's the case, if I'm willing to take the property back, then I'm willing to
00:22:47.960 | make that loan.
00:22:49.800 | And so that's what his situation was.
00:22:51.760 | And so that's one of many benefits.
00:22:54.240 | But I think that flexibility and that ability to look outside the box on some collateral
00:22:59.200 | is one aspect.
00:23:01.200 | The other aspect is, and I never ran into this, but it was always kind of helped me
00:23:06.200 | sleep at night in the back of my mind, is that I often thought, what if the price levels
00:23:13.520 | dropped?
00:23:14.520 | We almost had a Great Depression again, Great Depression number two in 2007, '08, '09.
00:23:18.880 | What had happened if the rents that I previously had at $1,000 a month dropped to $600 a month?
00:23:24.200 | I mean, that's possible.
00:23:26.040 | That's one scenario we haven't seen in our lifetime.
00:23:28.920 | And if I have a, all of a sudden, my $500 or $600 mortgage payment that cash flowed
00:23:33.120 | yesterday isn't cash flowing today, what do you do?
00:23:36.720 | And in most cases, with a traditional loan, you're going to lose the property.
00:23:41.240 | That's just the bottom line.
00:23:42.600 | Well, there's a scenario, and that might still happen with a private lender, but there's
00:23:46.640 | a scenario I could think of, especially if I have a track record and trust level with
00:23:50.120 | this person.
00:23:51.120 | I go to them, I sit down, and I'm completely transparent.
00:23:53.640 | I say, here's the situation.
00:23:55.840 | Our rent that was $1,000 a month is now $600 a month.
00:23:59.280 | We are upside down.
00:24:00.760 | If we keep on going at this pace, it's going to be ugly.
00:24:04.320 | And we just want to be honest.
00:24:05.400 | And we're trying, before we ever have a problem, we want to talk about it.
00:24:09.120 | And we might be able to work out something.
00:24:10.640 | We're going to get creative.
00:24:11.640 | We're going to sit over the table at coffee.
00:24:13.440 | Maybe we can give that person equity in the property, and maybe they'd be willing to reduce
00:24:17.240 | some of the current cash flow in exchange for equity on the back end.
00:24:21.400 | Maybe there's other things we can do for them.
00:24:23.480 | The point is, you can be a little bit more creative when you have individuals that you
00:24:27.280 | can sit down with.
00:24:28.840 | The other side of it, if you're having to sit down with a bank who's having their own
00:24:31.640 | financial trouble, they're calling in all their loans, the last thing they're going
00:24:35.240 | to do is be creative with you.
00:24:36.840 | So that's another scenario.
00:24:38.480 | It should be intuitive.
00:24:41.040 | If you could sit down with somebody to whom you owe $100,000, and some of these deals
00:24:48.000 | may be much more, but a nice round number.
00:24:51.360 | And if you're saying, "There's a good chance I'm not going to be able to pay you this $100,000
00:24:56.000 | back," they've got a $100,000 problem.
00:24:58.560 | And when it's their money, they've got a $100,000 problem.
00:25:01.240 | They're going to be motivated to say, "How do I solve my $100,000 problem?"
00:25:05.280 | That's the risk that we take as investors and as lenders when we lend money.
00:25:09.960 | We're taking on the risk.
00:25:11.240 | And so we know if something happens, I'm going to have a problem.
00:25:14.160 | When you're dealing with a bank, you're calling an 800 number.
00:25:17.360 | You're dealing with some mindless customer service rep that has no personal stake.
00:25:23.520 | They're still going to get their $62,000 salary this year whether or not this particular deal
00:25:27.680 | goes through.
00:25:28.680 | The guys at the top simply said, "Hey, this is what we're looking for," and they've got
00:25:32.520 | to follow the situation.
00:25:35.240 | So you've got to beat your head against the wall until finally maybe you can get somebody
00:25:38.000 | with some authority to solve the problem.
00:25:40.640 | But if you can sit down at the table with somebody to whom you owe $100,000 and say,
00:25:44.160 | "Here's the deal.
00:25:45.160 | Here's the situation.
00:25:46.520 | This is usually someone who's going to be experienced in real estate.
00:25:49.040 | They're going to understand the situation," you can work out a deal.
00:25:53.420 | You have the most opportunity to work out a deal that's a win-win for both sides where
00:25:58.480 | his $100,000 problem is solved and your $100,000 problem is solved as well as compared to the
00:26:04.800 | bank.
00:26:05.800 | Exactly.
00:26:06.800 | That's the attitude I've taken.
00:26:07.800 | Fortunately, other than that one situation, I've never really had to call in favors of
00:26:12.360 | my private lenders.
00:26:13.360 | But the thing has been, and I've had them tell me this, they've been mentors as well.
00:26:17.840 | That was another benefit of having private lenders early on is that these are people
00:26:20.880 | who have accumulated a million dollars in some cases, several million dollars.
00:26:24.600 | Here I am as a rookie investor.
00:26:25.920 | Who do I want loaning me money on my deals who can have an extra set of eyes other than
00:26:30.520 | somebody who's experienced and who's willing to give me advice and they're a mentor?
00:26:34.440 | I had all this mentorship along the way.
00:26:37.200 | The thing they always told me was, I think it was a Zig Ziglar quote, which I've loved,
00:26:41.600 | is that if you want to become wealthy, I'm paraphrasing, if you make your investors a
00:26:48.000 | lot of money, you're going to just by default make a lot of money.
00:26:52.840 | They told me that and they said, "Look, if you take care of us," and I know it's self-serving
00:26:55.800 | for us to say that, "But if you take care of us and always treat your investors well,
00:26:59.680 | make sure they're made whole, you'll have zero problem long run making a lot of money
00:27:04.720 | for yourself."
00:27:06.320 | That exactly panned out.
00:27:07.680 | That formula panned out, particularly with private investors because I've made some of
00:27:12.520 | these investors money year after year after year after year.
00:27:15.560 | Their retirement accounts have grown.
00:27:17.120 | They've had stability through a big downturn.
00:27:19.160 | They've gotten steady payments.
00:27:21.020 | There's been some deals where I lost money, but I made sure they were whole and they knew
00:27:25.120 | that.
00:27:26.120 | That kind of trust and credibility is a really long-term valuable thing to the point where
00:27:32.280 | now we're in much better shape now.
00:27:35.120 | We've made it through those downturns and we've been going after opportunities for the
00:27:39.880 | last five, six years.
00:27:41.280 | When we see an opportunity, we have these same investors who've been through the storm
00:27:45.120 | with us.
00:27:46.120 | When we see a big opportunity, we say, "Hey, got this opportunity."
00:27:49.800 | Sometimes it takes five minutes to put a deal together for several hundred thousand dollars
00:27:54.040 | of a loan or an equity stake.
00:27:57.720 | That's the kind of power that it's not only a doom and gloom kind of thing to protect
00:28:01.160 | you during the downturn.
00:28:02.600 | It's also an opportunistic thing because think about when the best opportunities are in a
00:28:07.200 | real estate market.
00:28:08.800 | It's when there's very little liquidity in the financing market, in the bank.
00:28:12.240 | The banks are not loaning money.
00:28:14.160 | Well if you have this sort of recession-proof source of funds where you're taking care of
00:28:18.320 | several wealthy private investors, you can then go back to the till over and over and
00:28:23.720 | over again, especially during the chaotic times when they're kind of, "Oh, I don't know
00:28:28.040 | if I want to have my money here or there."
00:28:29.680 | Well, I've got this really good real estate deal that has a 10% cap rate.
00:28:32.560 | It's in a wonderful location.
00:28:34.880 | You'll loan me 50% of the value of the property.
00:28:38.840 | So if something happened to me, you could take it back and be in an incredible position.
00:28:43.880 | You get these kind of relationships and you're protected on the downside, but you also have
00:28:48.200 | the ability to move really, really quickly when a good deal comes about.
00:28:52.160 | That's something else that John Chavez talked a lot about is it's really difficult to move
00:28:55.920 | fast on the best deals if you have to go apply for a loan, get an appraisal, do all the inspection.
00:29:02.200 | That's just too slow for the way real deals work in real estate.
00:29:06.200 | This is how it works at the lower end and also how it works at the bigger end.
00:29:10.520 | When people are experienced and they come across a deal, when they see the deal, they're
00:29:13.760 | confident of it.
00:29:14.960 | If they've got the track record with their investors, they'll write a contract right
00:29:18.960 | there and then go make phone calls for the money.
00:29:22.000 | The thing that I think is often a little bit opaque to people who haven't been involved
00:29:27.320 | in the investment markets on a personal basis yet, because many of my listeners are employees,
00:29:32.680 | many of them, their investing is constrained primarily to perhaps investing in a retirement
00:29:38.080 | fund at their job, things like that.
00:29:40.620 | When you haven't been involved in the active markets or people actively marketing, it seems
00:29:44.480 | like finding money is going to be hard.
00:29:47.240 | All the local rich people that I have interacted with, they're always looking for a good deal.
00:29:53.880 | They keep lots of money set aside.
00:29:55.880 | You might reach them at a time where all their money is out, but in general, they usually
00:29:59.600 | take control of the money and they're looking for deals.
00:30:02.640 | Your job is find the deal and the money will flow.
00:30:06.360 | What I've often seen happen as well is if you've got a good deal and you call up one
00:30:11.520 | or two investors that you might have worked with, and let's say that at the moment, the
00:30:18.760 | majority of their money is out on deals so they're not able to invest with you, they'll
00:30:22.320 | pick up the phone and call other investors because they're passing along a favor to somebody
00:30:26.640 | else.
00:30:27.640 | "Hey, this is a deal."
00:30:28.640 | They'll put in a good word and they'll open the doors to other investors.
00:30:31.040 | That's right.
00:30:32.040 | Yeah, it's that first one that's the hardest, but once you convince one person with money
00:30:35.840 | that you're reliable and you know what you're doing, the second, third, fourth or fifth
00:30:39.720 | are a lot easier.
00:30:40.720 | That's exactly the way it works.
00:30:42.720 | Yeah.
00:30:43.720 | Bring it forward, Chad.
00:30:44.720 | Are you willing to share with us what your portfolio and what your business looks like
00:30:47.360 | now 14 years later?
00:30:48.880 | Yeah, we can talk about that.
00:30:52.120 | You want to know what kinds of properties, what they look like?
00:30:55.600 | Yeah, what are your investment strategies?
00:30:58.280 | What are you doing?
00:30:59.280 | How much are you owning?
00:31:00.280 | How much are you flipping?
00:31:03.080 | What has actually taken you 14 years to build it?
00:31:06.200 | What does your actual portfolio look like now?
00:31:08.120 | Right.
00:31:09.120 | Okay, sure.
00:31:10.120 | So for us, early on we were a multifaceted business.
00:31:13.480 | We did a lot of finding deals, flipping them, assigning them to other investors.
00:31:19.080 | But over time, our long-term evolution was we wanted to be a buy and hold investor.
00:31:24.040 | That was our core strategy.
00:31:26.440 | That was also our lifestyle strategy.
00:31:28.920 | We don't want to be working a job all the time.
00:31:31.320 | And so we wanted to transition a little bit more of the passive part of the business.
00:31:35.120 | And so for the last five, six years, more of our evolution has been we own single family
00:31:40.680 | and small multi-unit buildings, and we're in a college town.
00:31:44.200 | So most of our, I don't say most, I'd say over half of our properties are apartments
00:31:52.360 | typically on the lower rent end of the college town.
00:31:56.600 | And you have some very luxurious, really nice apartments with pools and clubhouses and those
00:32:03.120 | sorts of things.
00:32:04.320 | We're more on the grad students and the people who are looking to pay their own way through
00:32:07.920 | college and a little bit more affordable.
00:32:10.200 | And so we like those older multi-unit properties, two bedroom, one bath, one bedroom that are
00:32:14.920 | walkable to campus.
00:32:16.360 | They can jump on the bus.
00:32:18.120 | And so that's sort of our core purchase strategy that we're continuing today.
00:32:24.720 | And we have, it kind of fluctuates because we're buying and selling a little bit, but
00:32:28.280 | we have about 60 units that we self-manage.
00:32:32.400 | And so we have a business partner and I have done this business together for most of those
00:32:36.960 | 13 years.
00:32:38.580 | And so we have a little management company of our own that works out of my basement and
00:32:43.040 | we have people pay remotely, pay online.
00:32:47.240 | We go, when we go sign a lease, we go meet at the local library.
00:32:50.160 | You have all the contractors, we just meet them on site.
00:32:53.200 | And so we have a very lean management business, but we can handle about that much because
00:32:58.600 | we have one good person who works with us who we've sort of trained up to do, initially
00:33:03.240 | do bookkeeping and then she learned how to do some of our collections and then do more
00:33:07.960 | of our kind of turnovers and working with the contractors to get stuff done.
00:33:11.400 | And so I'd say 90% of the work, our one kind of in-house person can help us handle.
00:33:16.920 | But if we get any bigger than this, which we are looking at a few more kind of bigger
00:33:20.800 | deals at the moment, that's sort of our lid on the number of properties we can manage
00:33:26.680 | with that structure.
00:33:28.400 | And so we're probably going to go to third-party management with some local managers we've
00:33:31.800 | been cultivating relationships with.
00:33:34.200 | And so we'll have some more properties managed by these other companies.
00:33:37.320 | Why do you like the college apartments?
00:33:40.600 | Well, I mean, it started off because I was in a college town.
00:33:45.360 | It was just sort of where I wanted to live and that was the best opportunity in our town,
00:33:49.560 | the most stable investment.
00:33:52.520 | We've been riding a fortunate demographic trend in our town because the college has
00:33:58.200 | been expanding.
00:33:59.640 | So when I graduated in 2002, the university had about 17,000 students total.
00:34:06.240 | And now we have 20,500 or so, almost 21,000 and there's supposed to be more on the horizon.
00:34:12.200 | And so we've experienced zero, I mean, literally, maybe 0.3% vacancy over the last six years
00:34:19.160 | on most of our properties.
00:34:21.320 | And we've had increased rents the entire time.
00:34:23.360 | And so that's just been a fortunate, I didn't experience that early on when we first started
00:34:27.560 | doing it.
00:34:28.560 | That's just been something you go through these waves or sometimes the things you have
00:34:32.160 | no control over benefit you.
00:34:35.160 | But I like the stability of college rentals.
00:34:38.320 | There's some quirks that you have to deal with.
00:34:40.240 | Everybody moves in at the same time in August.
00:34:42.720 | Everybody moves out at the same time as you have these turnover periods of one week where
00:34:46.040 | you're blitzing and fixing up, cleaning up properties.
00:34:49.520 | But the positive side of that is we rent all of those properties for August and February
00:34:53.640 | and March.
00:34:55.040 | And so we've got 100% of our properties rented before August.
00:34:59.840 | And so we know which ones we need to hustle on, which ones we need to work on.
00:35:03.800 | And so that's sort of the demand for rentals is the nice, one of the nicest part about
00:35:09.640 | the college rentals.
00:35:10.640 | Isn't it more labor intensive though?
00:35:12.720 | Yes.
00:35:13.720 | So it's a little bit, so compared to, we also have single family houses, regular three bedroom,
00:35:18.520 | two bath houses outside of the college town.
00:35:20.760 | That's a smaller percentage of our portfolio, but that's your typical John Schaub kind of
00:35:25.080 | investment.
00:35:26.360 | And we also have some single family houses in our college town that we rent to faculty.
00:35:30.240 | And those are night and day in terms of how passive they are.
00:35:36.040 | I had one house that somebody just moved out of, they were there for four years.
00:35:39.780 | They took care of, of course, all the yard work.
00:35:42.400 | Occasionally we'd have to call somebody to do something, but it was very easy to manage
00:35:46.880 | that property.
00:35:48.360 | These college rentals, they are more active.
00:35:52.200 | So it's more of a business than it is a passive investment.
00:35:55.560 | But at the same time, I could also, there are lots of investors here in town who hire
00:35:59.960 | third party management companies to handle a lot of that for 10% of the rent.
00:36:04.920 | So it's not, there's more turnover, but at the same time you can build some systems and
00:36:10.240 | some models to handle that.
00:36:12.080 | How do you decide how much of your time to allocate between running the businesses that
00:36:18.600 | you're involved in versus finding more investments?
00:36:22.240 | If you are focused on building long-term wealth through an investment buy and hold strategy,
00:36:28.280 | you've got 168 hours in your week.
00:36:31.040 | You could spend that time going and finding another deal.
00:36:34.040 | You at this point could finance it with other people's money and possibly find a cash flow
00:36:38.440 | positive deal.
00:36:39.920 | How do you decide to not pursue that in order to pursue your property management business
00:36:45.080 | or to not do a flip or not do a property management deal in exchange for going and finding the
00:36:51.320 | house?
00:36:52.320 | How do you make that decision?
00:36:53.320 | It's gotten easier now.
00:36:56.120 | My answer to your question seven, eight years ago would be I do all of it and I just work
00:37:00.000 | 80 hours a week.
00:37:02.040 | But right now, I would have the business of flipping houses.
00:37:05.000 | I would have the business of rental properties.
00:37:06.520 | I would just do it all and we brought on help.
00:37:09.300 | But currently, it's part of the evolution.
00:37:11.600 | My climb up the mountain has been I've looked at, and this is something I got from a Tim
00:37:16.160 | Ferris book back in 2007, but I look at my time and my money as two different bank accounts
00:37:22.360 | and equally important.
00:37:26.160 | As we've made more cash flow from our rental properties, I've been willing to give some
00:37:30.400 | of that money to other people to let them do some of the tasks I was doing before.
00:37:36.520 | I might go from year to year and make the same amount of money even though our revenues
00:37:39.680 | in our business and our investments have gone up.
00:37:42.280 | But it really has freed up my time immensely over the last few years.
00:37:47.320 | Most of my time now, we did one flip a year ago and so actively, we're not as active in
00:37:54.760 | the business side of the real estate now.
00:37:57.000 | We are more oriented towards the long-term purchases.
00:38:00.700 | Most of the purchases we're making are not going to make us a huge amount of money right
00:38:04.360 | now, but they're going to make us a lot of equity on the back end, a lot of steady cash
00:38:08.880 | flow coming in.
00:38:09.880 | We're just building that cash flow because, again, going back to the frugality, you can
00:38:16.720 | cover most of your personal overhead with some of the steady rent that's coming in.
00:38:22.160 | That gives you options to not have to go do the active stuff.
00:38:26.720 | I've chosen not to do as much of the active real estate business, partly because I'm just
00:38:31.160 | interested in other things.
00:38:32.680 | I'm writing a blog now.
00:38:34.040 | I've been building that business for a year.
00:38:37.080 | There's just been other interests and other things and family.
00:38:41.840 | That's been the wonderful part about this.
00:38:43.320 | That's the whole story of all this is that I haven't had to wait until I've been ultra-rich
00:38:51.120 | to be able to benefit from a lot of the lifestyle choices that come with that idea of being
00:38:58.200 | rich.
00:38:59.200 | I've been able to choose and say, "I don't want to work that hard here.
00:39:02.760 | I want to work 20 hours a week in the active part of my business.
00:39:06.000 | I want to work 20 hours building the wealth."
00:39:09.040 | Then that's it.
00:39:12.160 | Maybe that changes from week to week or month to month.
00:39:16.200 | At this stage, what does an average work week look like for you?
00:39:21.720 | I don't want the idealized picture.
00:39:23.520 | I want the actual legitimate picture.
00:39:27.040 | What does an average work week look like for you?
00:39:29.400 | Yeah, let's think about this week.
00:39:31.920 | I'd say 50% of my time right now, we've just purchased a couple of rehab units.
00:39:39.120 | So 5 to 10 hours of my week are going out and making sure that the contractor and the
00:39:46.000 | teams are doing what I asked them to do in the upfront bid.
00:39:52.120 | You just have to be on site.
00:39:54.160 | Whether you're going to be on site or somebody else is going to be on site, getting out there
00:39:56.880 | and looking at the project, there's just always little things that come up.
00:40:00.000 | So 5 to 10 hours a week managing projects.
00:40:03.000 | But those will be done in about a month and be rented out.
00:40:05.560 | So the next month, that 5 to 10 hours won't be there.
00:40:09.040 | So that's part of a week.
00:40:11.160 | Other parts are, we just did some marketing and some lead generation a month or so ago.
00:40:17.080 | So I would spend another 5 to 10 hours a week just taking phone calls from people who are
00:40:21.720 | interested in selling their property, talking to them on the phone.
00:40:25.480 | Today I had a 30-minute conversation with a gentleman who called off a letter I sent
00:40:30.040 | and we discussed his situation, his property.
00:40:32.440 | I asked questions.
00:40:34.000 | We went back and forth and had a conversation.
00:40:36.240 | And then we set up a time for me to meet with him when he's going to be in town.
00:40:40.280 | And then I'll go meet at the property.
00:40:41.280 | We'll take an hour or two, look at the property, go have coffee maybe, discuss the property.
00:40:47.080 | And so that part of my time might be another 10 hours a week.
00:40:53.200 | And then the other fortunate thing I've been able to do is think strategically.
00:40:57.840 | I'm going and working on the business and what systems need to be improved.
00:41:02.920 | And so I'd say another third or quarter of my week would be looking at some of our payment
00:41:07.760 | systems.
00:41:08.760 | I'm going to be leaving the country next year for a year and trying to manage our business
00:41:12.800 | from Argentina.
00:41:14.480 | And so how is that practically going to happen?
00:41:16.480 | If I'm not there, how can I pay my contractors?
00:41:19.840 | How can I deal with paperwork, sign leases, things like that?
00:41:23.880 | And so I'll spend time researching the paperless systems.
00:41:28.440 | I'll spend time working on our talking to other investors, reading on websites like
00:41:32.480 | BiggerPockets, how other investors are doing it, and working on improving systems and making
00:41:38.200 | the business work better long run to be a little bit more passive, a little bit more
00:41:42.080 | systematic.
00:41:43.520 | And so that's been probably another third of my real estate business.
00:41:48.240 | So between those three, managing projects and other people who are doing things for
00:41:54.360 | me, including my bookkeeper and people who work for me, and then looking at deals, acquiring
00:42:00.320 | deals, working on systems, those are the three things I spend most of my time on in the real
00:42:06.120 | estate business.
00:42:07.120 | I'm doing a lot of writing, but my wife would tell you, we put the kids to bed at 8 o'clock
00:42:12.120 | and I'm writing from 9 o'clock until 12 o'clock sometimes, writing blog posts.
00:42:18.920 | My real estate business is sort of like my laboratory, and then I'm going and writing
00:42:22.200 | an article and saying, "Here's what happened.
00:42:24.720 | Here's the mistakes I made."
00:42:25.720 | And so I love that juxtaposition of learning, going to a John Schaub seminar, learning what
00:42:31.520 | he tells us to do, going and practicing it, seeing if it works for me, and then going
00:42:36.160 | and discussing and kind of boiling down the results in an article and sharing it with
00:42:40.000 | other people.
00:42:41.000 | So that's just a cyclical thing for me that helps me learn and do better in my own business.
00:42:48.000 | What is the real estate advice that you consumed when you were in your early 20s that you believed
00:42:54.840 | at the time, but now you look back on and would no longer believe or advocate for?
00:43:01.520 | Yeah, I saw a lot of advice about nonchalance with leverage, being too not cautious enough,
00:43:15.080 | not careful enough with leverage.
00:43:17.040 | And I think that, and today I see that coming back a lot.
00:43:20.000 | I think that permeates not just real estate, but the entire financial spectrum.
00:43:24.640 | I don't think people really understand risk and they understand what can really happen
00:43:30.360 | and they usually project out what's happened for the last two or three years instead of
00:43:34.280 | 20 years in the future.
00:43:36.680 | So I think particularly for new people and a lot of the real estate businesses has a
00:43:41.320 | lot of educational people, late night infomercial kind of people, you sell the sizzle and not
00:43:46.080 | the stuff that's scary because nobody would buy the scary stuff if you actually told them
00:43:50.160 | what was going to happen.
00:43:52.280 | And so I think that I would learn strategies and I don't know if I want to get into the
00:43:56.780 | weeds of specific strategies.
00:43:58.280 | I can't, well I'm happy to, but there was something called like a buying a property
00:44:01.480 | subject to the mortgage and you would buy it and there was this enormous amount of things
00:44:07.000 | you need to think about with these subject to strategies and some of these more creative
00:44:10.120 | strategies and yet you'd go to a read a book or go to a seminar and they would say, this
00:44:14.800 | is a way you can get in without having to go to the bank, without having good credit.
00:44:17.960 | And I just think that's really dangerous because my idea has been you have to master a subject,
00:44:24.520 | you have to really dig into it deep, you got to get advice, you got to get help and so
00:44:29.360 | I think that kind of selling people the surface level of knowledge is really dangerous, particularly
00:44:34.280 | when you're dealing with huge assets that have a lot of leverage.
00:44:37.280 | I mean that's just asking for a lot of trouble for people and so I think that idea needs
00:44:42.800 | to be, a little bit of fear needs to be in people's head and I think that fear is healthy.
00:44:47.960 | I don't mind, I'm an entrepreneur, I like taking some chances and knowing that the upside
00:44:54.040 | is there if I take a chance and I think most people who are willing to get an entrepreneurship,
00:44:58.160 | if they can look at the risk with open eyes and they know what's possible, they can then
00:45:02.840 | make choices to either do what we were talking about earlier, only get financing that has
00:45:08.120 | some feasible terms and that has ability to have some flexibility or also maybe you just
00:45:13.680 | hustle more, maybe you decide I'm just going to sell this deal quicker or whatever it is,
00:45:17.840 | if you know that risk, you can deal with it instead of kind of having your eyes closed
00:45:22.800 | a little bit by some of the education out there.
00:45:25.400 | What's the next stage for you with regard to financial freedom?
00:45:31.600 | Well I think it's continuing, I sort of compared our business to, maybe you know more about
00:45:38.160 | the stock market and businesses than I do maybe but my understanding of a lot of mature
00:45:42.640 | businesses was that as they grew, during the early entrepreneurship stage, you had to take
00:45:47.480 | some chances, sometimes you had to use some leverage but then as you grew, you became
00:45:51.840 | more and more stable on your balance sheet and so for me and my business partner, it's
00:45:56.680 | been strategically paying off certain properties, reducing risk, increasing cash flow and then
00:46:03.640 | on other properties, not necessarily paying off all the properties but on those other
00:46:07.560 | properties, shoring up the financing, getting long term, low interest financing to sort
00:46:12.240 | of hedge your bets for the future and so I think we're just, to answer your question,
00:46:16.800 | we're trying to stabilize and kind of be a nice solid base of cash flow and be able to
00:46:22.040 | handle all sorts of different situations that could come about but most of all, having that
00:46:28.000 | stability so that we can continue doing, exploring new things.
00:46:32.460 | Real estate is very fun for me, I enjoy it but it's only part of the, it doesn't capture
00:46:36.880 | my interest 100%.
00:46:38.360 | I've got other things that I really like to do.
00:46:41.080 | My wife and I like to travel, I like to learn foreign languages, I like to teach my kids
00:46:45.440 | different things and be involved with them.
00:46:47.520 | I'm working on a non-profit in my town to try to build a greenway through our little
00:46:52.160 | college town and I've become the president of that non-profit and I'm spending 10-15
00:46:56.520 | hours a week on that kind of thing and so there's all sorts of fun uses of my time that
00:47:01.560 | open up and so that to me is the future of my business is that I want to spend 20 hours
00:47:06.720 | a week or 10 hours a week on my business and then have the other amount of time to do whatever
00:47:11.800 | else it is that I want to do.
00:47:13.600 | Tell me about Argentina.
00:47:16.080 | Yeah, so we traveled there in 2009 and just love it.
00:47:21.960 | It feels like the western United States, big mountains, open spaces and we, my wife and
00:47:27.000 | I love speaking Spanish and we want our kids to become fluent and so we're looking at a
00:47:30.720 | couple of towns, we still haven't nailed down where we're going to be but it's either going
00:47:33.800 | to be Mendoza, I think it's kind of the wine region of Argentina near the mountains, lots
00:47:40.320 | of outdoor activities or there's some other towns, there's a city called Cordoba, Argentina
00:47:46.320 | and we just, I think we're exploring it and it's going to be a fun adventure but I think
00:47:50.640 | we're going to get an apartment and walk our kids to school every day, let them enroll
00:47:55.120 | in a local elementary school, get to know people down there, experience another culture.
00:48:00.760 | That's just sort of our little, our thing and the opportunity to be able to do that,
00:48:06.840 | I feel really fortunate but it's just hopefully going to be an experience we can all look
00:48:11.640 | back on and say this has just been a fun growth experience for all of us.
00:48:16.800 | Jad, this has been awesome.
00:48:18.320 | Thanks for coming on.
00:48:19.320 | You write at coachcarson.com.
00:48:20.320 | Coachcarson.com.
00:48:21.320 | Any other sites or resources you'd like to plug?
00:48:24.320 | Sure, yeah.
00:48:25.320 | I mean I write at biggerpockets.com as well.
00:48:27.760 | I have a regular monthly column there and so people can check, they're interested in
00:48:32.120 | real estate investing, sort of pick apart different subjects particularly with financing
00:48:36.840 | and acquisitions and so on both my newsletter at Coach Carson and BiggerPockets, I write
00:48:42.160 | a lot about that.
00:48:43.160 | So, I'd love for people to connect there.
00:48:45.760 | Cool, man.
00:48:47.440 | Awesome.
00:48:48.440 | Thank you for listening to this episode of Radical Personal Finance.
00:48:51.660 | If you're interested in building financial freedom for yourself and your family, please
00:48:55.720 | subscribe to the podcast with our free mobile app so you don't miss a single episode.
00:49:00.460 | First search the App Store on your mobile device for Radical Personal Finance and download
00:49:05.000 | our free app which also contains an archive of every past episode of the show.
00:49:09.800 | If you have received value and financial benefit from the content of today's show, please
00:49:15.160 | consider becoming a supporting patron.
00:49:18.120 | Radical Personal Finance is listener supported and it's your direct financial support which
00:49:23.280 | enables me to bring you this content.
00:49:25.580 | In addition to your voluntarily paying for the content you've just heard, as a supporting
00:49:30.280 | patron you will receive a number of member only benefits including a private Facebook
00:49:34.680 | group, access to our weekly Q&A calls and discounts on future products and services.
00:49:39.880 | Details can be found at RadicalPersonalFinance.com/patron.
00:49:42.280 | Again, RadicalPersonalFinance.com/patron.