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So many people would be well served by taking a look at their expenses. Many people would be well served by getting to that number first and then perhaps clearing all the leverage on their portfolio. Best ever listeners, before we get into today's episode, I want to ask you, do you have a strategy right now where you are getting leads that come into your inbox while you're sleeping?

Do you have a strategy where you are optimized with both Google AdWords and SEO, search engine optimization? If not, then guess what? Today's your lucky day. We've got a free strategy session just for you. And it's with Dan Barrett. If you recognize his name, he was a guest on episode 565.

And he is the only certified Google partner agency that works exclusively with real estate investors. Go to adwordsnerds.com/strategy and get a free strategy session to learn with him how to implement an online strategy for your market in both SEO and Google AdWords. Go to adwordsnerds.com/strategy Best ever listeners, welcome to the best real estate investing advice ever show.

I'm Joe Fairless. This is a show where, well, we cut out the fluff and we only talk about the best advice that moves your real estate investing business forward. This is also the world's longest running daily real estate podcast. I'm Barbara Corcoran from Shark Tank, Robert Kiyosaki, Rich Dad Poor Dad, and a whole bunch of others.

Today we're going to be talking about a very specific skill because, oh, by the way, happy Sunday, best ever listeners. Today is Sunday, so we're doing a special segment called Skill Set Sunday where you're going to come away with a specific skill. And, well, you're going to be able to apply this skill towards your investing career and ventures.

Today to walk us through this skill, we've got Joshua Sheets. How are you doing, Joshua? Very well, sir. Thank you for having me on. Yeah, nice to have you on the show, my friend. And the skill that we're going to talk about, well, you know what? I'm going to talk a little bit about his background first, then we'll talk about the skill.

Joshua is the host of Radical Personal Finance Podcast, which teaches how to achieve financial freedom in 10 years or less. He's a financial planner that mixes creative approaches, deep dive financial planning techniques, and business strategy. He's based in sunny West Palm Beach, Florida, and you can say hi to him at his website, RadicalPersonalFinance.com.

And what we're going to come away with today is a broad understanding of how personal finance and professional financial techniques are interrelated and why you need both. With that being said, Joshua, you want to give the best ever listeners a little bit more about your background and what you're focused on?

Absolutely. I come from a long background of being interested in personal finance and kind of the wealth building world. And then I spent six years working as a professional financial planner. I'm a certified financial planner, chartered life underwriter, I have a master's degree in financial planning, etc. So I dug deep into the world of technical financial planning and out of frustration for the fact that people usually disconnect these worlds, the world of technical professional financial planning techniques and the world of what I call personal finance, which real estate would be a component of the world of personal finance.

People often disconnect them, and I look at them coming from both backgrounds and said they should be fully and completely integrated. They're not opposed to one another. They should be working together. And so a couple of years ago I decided that I was going to be the one to cross that bridge.

So I closed my financial planning firm and I launched Radical Personal Finance. And for the last over two years I've been working very, very diligently to try to cross that bridge for people. Well, let's start first with some definitions. So can you define personal finance and can you define professional finance?

I would define very loosely personal finance as all of the stuff that you do toward money. And so the advice under personal finance, to give some examples, would be things like don't buy a latte every day and the famous latte factor. Save that money. The advice would be something like invest in real estate.

The advice would be something like get out of debt. The advice would be something like fund your 401(k). These are all the things that you do that are commonly heralded in financial periodicals and financial shows as things that you should do. Now the world of technical financial planning is the specifics.

Okay, if you're going to buy a piece of real estate, should you purchase it within a trust or within a business entity? If you're going to invest into a retirement account, should you use a solo 401(k) or a SEP IRA? Or should you establish a defined benefit pension program for your company?

Or if you're going to buy life insurance, should you buy term life insurance or universal life insurance or whole life insurance, etc.? And so usually these two things are sold in very different ways. Personal financial advice, especially with something like real estate, is usually sold through the form of a motivational seminar.

Something like you can get rich if you just buy rental properties and you can purchase it with no money down or whatever the latest thing is that's being focused on at the various cycles of the real estate market. And so these types of seminars are very influential. This type of education is very influential.

But what happens is, as happened to me when I was a financial advisor, a real estate investor might be sitting there saying, "Well, as I look at my situation, I'm just going to go buy more real estate. And that's going to fix all of my financial problems. I don't need to worry about a budget.

I'll just go buy more rental properties." I had a client that was like this. He had 70 or 80 rental properties. He was always broke and he kept trying to fix the fact that he was broke by going and buying more properties and doing more deals. Now, that's what often happens if you don't value the technical financial advice.

On the flip side, the danger is that you spend so much time on the technical financial advice that you don't get any of the motivation or don't get any of the practice. Somebody's worrying about how to optimize the asset allocation in their retirement account when in reality they should be out walking neighborhoods or cruising Craigslist and trying to put in offers on houses.

And so these two things need to be fully together because you need both in order to be successful financially long term. So how do we think about this? What's the approach that we should take? Well, good financial planning always starts with goals. And you should always build from specific stated goals, which are goals that are for you.

So trying to stay focused with the real estate bent here to help your audience with the most. Real estate should be just simply a funding mechanism for life. Oftentimes when you ask people how much real estate they want to own, they'll throw out some round number. I want to own 10 rental houses or I want to own $5 million worth of property or 25 houses or things like this.

I always ask people why? What are you going to pay for with those properties? Usually these numbers in my experience come from reading a motivating book, hearing a motivating speaker who talks about how rich they are and how much great things that they can buy. But many people never sit down and say, "Well, what do I actually need?" So the median household income in the United States of America is somewhere in the $40,000 range.

You could hit $40,000 a year of net profit from, depending on your market, something like four rental houses, maybe five rental houses, once those houses are debt-free. And so what happens is because people aren't actually sitting down and looking at their budget and figuring out how much money they need and then making a plan to meet that with their investment strategy, to meet that with a specific number of houses, they wind up pursuing either an inefficient plan or a risky plan.

Just using my very simple example, many of your listeners will want to spend more money. I'm not saying there's anything wrong with spending more money or trying to accumulate a bigger portfolio. But the quicker you can get to a place of financial stability and the lower your goals are, the easier it is to get there with less risk.

So many people would be well-served by taking a look at their expenses. Say there's something like $4,000 a month, which is median in the United States of America. You can live a great lifestyle on $4,000 a month. Many people would be well-served by getting to that number first and then perhaps pursuing aggressively, clearing all the leverage on their portfolio, so that they have total safety.

So that no matter what the market cycle is, no matter what the market condition is, they can actually maintain that lifestyle. And I could point to scads of real estate investors who've learned this the hard way. That will probably serve as a better foundation for a lifetime of wealth than just trying to pursue the big fancy-sounding personal finance goal of I own 25 properties, and then perhaps making a mistake with the buy, structuring the financing unwisely, and winding up losing it all and having to start again.

So there should be a combination of good technical financial planning techniques, clear goals, and what unites them is having a clear goal and then using different funding mechanisms for those goals. Yeah, I completely agree because so often I've had over 700, 800 interviews on this podcast and I've had the privilege of interviewing people who have gone through 2008 and lost it all and are rebuilding.

And the way they're rebuilding is that they are not leveraging nearly as much as what they were, and they have cash on hand for when the next market correction happens. And that's basically what you're saying, where you identify what your goal is, and you then look to see what type of leverage you have in your portfolio, clear out the leverage, meaning the debt, and then you've got the cash flow on hand regardless of what the market happens, right?

To add to what you said, the idea behind taking an approach is to recognize owning real estate is not an end in and of itself. It's a means to an end. And so as soon as you have that goal achieved, you should be working to stabilize it because it's far better to achieve a basic goal, stabilize, and then move on from a place of strength than it is to always be stretching out your hand for something more and more and more and more.

Real estate is a fine investment class. It has created many, many, many wealthy people, but it also has its own problems. And so without focusing on something like good financing and minimization of financing, you wind up stretching too far, market cycle changes, immature investor, and they have to start all over again.

Another example of the parallel is in technical financial planning, we spend a lot of time focusing on asset allocation plans and diversification. My experience has been that real estate investors, at least the ones that I've personally interacted with, have a tendency to discount the value of asset allocation planning, of diversification.

Usually, in order to do well in real estate, people find one area of specialty that they do really well with, whatever their business strategy is. And they focus on that area of specialty to the exclusion of other things, whether that means they only invest in real estate, they don't invest in anything else, that means they don't own publicly traded securities, they don't own bonds, they don't own gold or silver coins, they don't have bank accounts with cash in them, everything's going to be in real estate.

Or if it means they exclusively focus on a very small specialty type of real estate investing, and they wind up with a very concentrated portfolio. Well, a good financial planner is going to look at that and say, "You've got a lot of risk here. So what can we do in your situation to diversify your risk?" And so at different stages of a real estate investor's life cycle, they need to consider very carefully how to diversify their risks and what forms of risks they're diversifying from.

There's a risk of being very focused on one specific neighborhood or one specific type of real estate. So you always want to balance the fact that your best deals are going to come when you're a market specialist. So therefore, yes, specializing one neighborhood is a good plan to start with.

But things can happen beyond your control. So as you're building wealth, it's good to diversify out of real estate into other investment classes that are helpful to you. Diversify out of one neighborhood or one particular type of real estate so that you can have more safety in your overall portfolio.

Do you invest in real estate? I have invested in real estate in the form of my own personal property. I don't currently own any rental properties. And why have you chosen not to do that? Because a couple of things. I do intend to. In fact, I'm very carefully-- I know the specific neighborhoods.

I know the specific real estate strategy. I've researched it extensively as far as I've chosen the strategies that will work the best for me. But for a couple of reasons, in my local area, I'm currently waiting. Number one is I'm watching the market in my area. And the particular type of real estate strategy that I desire to build, which is very much on the model of what John Schaub teaches-- single-family houses, 322s, middle-class neighborhoods-- this particular market is not at an excellent bargain price.

Doesn't mean there aren't bargains available. It's not an excellent bargain price as an asset class. Number two is that my best form of opportunity right now is in the form of my business. So my business is completely unconstrained from the potential investment returns of an asset class like real estate, where the growth of the value of the market is going to be dependent upon the underlying incomes locally.

My business is an infinitely leverageable business. I run a virtual internet business. I've been building it for two years. And there's no physical factor that constrain the growth. And there are some key places that I'm focusing on investing my money, my savings money, into that business to gain the investment growth from that business.

And so right now, I can make--I believe, I'm in the process of proving-- I can make a much higher return from my business activities than from my real estate activities. So my current plan where I am, as we record this here in September 2016, is I'm focusing heavily on my business right now, and then I'm stockpiling cash.

And that cash forms an excellent foundation for my business stability, and it also will form the foundation that I need to be able to find good properties here in my local area. And so I'm looking at real estate investing not as a primary source of cash generation, but as an excellent source of me parking some of my investment dollars.

So I'm watching the local market, keeping an eye, and then my own personal gut on my local real estate market is a couple years from now, we're going to have a lot more deals available than today. And so I will be in a position where a couple years from now, I'll be ready to go ahead and transfer some of my cash into property.

What's something that is a mistake that you see commonly repeated among real estate investors? You mentioned the lack of diversification, but is there something else that you see? Probably the biggest thing is not doing enough research on different ideas and different plans. Many people who get into real estate get in through the form of some sort of real estate seminar, a real estate book, and those things are great.

I learned a lot in my younger year. I first got interested in real estate through a real estate seminar by one of the shysters who is now bankrupt and out of business, thankfully. And I was a hair's breadth away from maxing out my credit cards to buy the $30,000 consulting package that was going to make me rich in no time.

And I watched a few of my friends who went in, I watched a few of my friends go completely bankrupt in 2008. So I'm thankful I was saved from that. But I spent years thinking that there was only one real estate strategy. And then when I was digging into it much more deeply and starting to study, I realized that no, that's not the case.

There are many real estate strategies. And there are many types of businesses, many types of approaches to investing. I had a number of very wealthy real estate investors who were clients of mine. As I interacted with them, I realized that one thing they had done is they had found a style of real estate investing that suited their personality, that suited the type of business that they wanted to build.

And real estate businesses are now still on my backup list of businesses that if my current business were to fail, I would consider building some sort of real estate investment business. But there are so many different types that you could build. And most people don't do any research. It's like they won't spend $100 or $200 on some really good books and read them in order to educate themselves on different opportunities.

And then think to themselves, "Ah, new construction. That would actually fit me really well." Or buying single family houses or commercial real estate or tax deeds. It just usually goes based upon whatever the latest newsletter I bought was that I found was interesting. I recommend do a survey of the marketplace and go and meet investors.

Go and ride along with them and go and find them. And then understand the business models. Understand what your source of capital is. Where are you going to get investment capital if you're starting with nothing? Where is the profit point in a deal? Where do you actually get your profit from and your cash flow?

And then based upon your situation, you'll know how to approach investment. It's different if you just got out of high school and you don't have any money but you have a lot of time. You can build a real estate business with no money and a lot of time. But it's going to be different than the guy who's 55 years old who has a massive income from his job or business and he's just parking some money in real estate as a component of his investment portfolio.

Those would be two very different activities. Is there anything else that we haven't talked about as it relates to personal finance and professional finance techniques and them being interrelated and real estate investors that you want to mention? I would say buy good advice. I want to be careful about not generalizing too much.

But you always want to buy good advice. Buy good professional advice. And especially in the areas of financial planning, knowing the best way to structure a transaction, knowing the best way to structure your financing, knowing the best way to structure your ownership. If you buy good advice, especially with technical financial planning, it can have a massive potential impact.

And I'm not lobbying for any one specific thing. But what happens is there can be a tendency among a subset of real estate investors to be very, very proud, and rightly so, of the skill that they have in putting deals together. And then to automatically dismiss those of us who were technical experts in a particular area, putting the transaction together, putting the financing together.

And you want to be careful there. Both are important. No, the technical expert is usually often not a rainmaker. But you want them on your team, and you want to take the time to absorb and study good advice because the profits are usually found at the margin. So in real estate, number one, fundamental economic principle is that change always occurs at the margin.

That's where changes occur. It doesn't occur in the middle. It always occurs at the margin. And so a lot of your wins in a deal are found at the margin. If you go into a property and you sit down and you're up against another investor, and if that other investor is just simply looking at that property in the most basic form, they might have a rate of return that they're estimating from that deal of X percent.

But if you go into that and you know that I can make a slight tweak here with my financing, I can make a slight tweak here and cut costs in this thing here, and I can make a slight tweak here with my sales process, and if you understand the full process, you might be able with your return to get X plus an extra 30 percent.

Well, you do that systematically over the course of a career, and that X plus 30 percent makes a huge difference. So if you look at what seems like small differences in individual deals when they're accumulated and compounded over a lifetime, it makes a huge difference in your total level of wealth.

What's the best place the best ever listeners can reach you? If you're interested in listening to my show, Radical Personal Finance, just search the App Store on your phone for Radical Personal Finance. That's the best thing to do. I've got almost 400 episodes there, in-depth financial content. We cover everything from how to live in your car to complicated financial planning, how to structure trusts and how to set up and understand estate planning, give the basics.

And none of it will substitute for good personal advice, but what I tell my listeners is you'll be well-equipped to actually understand the terminology and understand where some of the loopholes are so that you can get good personal advice applied to your situation. I've been taking notes along the way.

I already mentioned what we talked about earlier, and that was the goal and the plan and clearing the leverage. But a couple of other things that I wrote down while you were talking I think is just something really insightful and that we all as real estate investors need to own this philosophy, and that is owning real estate is a means to an end.

And I've always said that about fixing and flipping and wholesaling because it's just a transaction. It's not a long-term strategy. It's basically a job where you get income, and then you need to do something with that income. But I also need to look in the mirror and look at my business model where I buy apartments with investors and share in the profits, but usually we have a five-year exit strategy.

So really what I'm doing is also very similar to fix and flipping, just on a different level. And I think there's a lot of ways that that philosophy can be applied. So make sure that we realize that this is a means to an end with the end being the goal that we have stated for what we are trying to accomplish financially.

And then the other thing that you mentioned that I thought was really interesting for real estate investors in particular is there is thick irony in that as real estate investors, in order to be successful, we have to specialize and be very good at one thing. But hey, guess what?

101, personal finance, you've got to diversify and make sure that you're covered should something happen to that one thing that you're doing. And that's something that we've got to keep in mind specifically and tactically. Maybe it's different markets. Maybe it's making sure we have multiple exit strategies. There's a lot of different ways we can look at that.

But just opening up the topic of conversation is important for the best ever listeners and myself included so that we can begin or continue to self-assess how we're approaching real estate investing and how we're approaching our personal finances. So really grateful that you talked through that and grateful that you're on the show, Joshua.

Thank you so much. Everyone go check out his podcast. He's got an app in the App Store, so just search for Joshua's name or search for his podcast, which is Radical Personal Finance. Thanks so much for being on the show. Hope you have a best ever day, and we'll talk to you soon.

Thank you, sir. Are you looking for a hard money loan or do you have a mortgage note that you want to sell? Then email David@HassleFreeCashFlowInvesting.com if you recognize this company. Well, that's because David was a best ever guest on the show. It's episode 122, David Campbell, and you can email him at David@HassleFreeCashFlowInvesting.com if you're looking for a hard money loan or if you have a mortgage note to sell.

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