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Don't miss out on the ultimate thrifting experience at our Pix Exchange parking lot anniversary sale at our Torrance location. Visit pixexchangehhh.org for more details. Today on Radical Personal Finance we talk investing. I'm going to give you my investment story and tell you why I have decided to become a real estate investor and what I intend to do about it.

Hopefully you can laugh a little at my experiences and learn a little bit and possibly develop your own investment strategy that is exactly right for you. Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets and I'm your host. Thank you for being with me today. I love talking investing and I thoroughly enjoy real estate.

Take from today's show advice. Do take some ideas though and then go and seek the advice that you need to build your own investment plan. Pretty excited to talk to you today about real estate investing. I've tried to be, you know, this show Radical Personal Finance is a mix.

It's a mix of advice. It's a mix of stories. It's also a mix of my story. And I don't claim to, it's not all about my story, but I do try to share with you some, at least some of what I'm personally doing and my personal approach. It's always frankly really tough to know how much to share.

I'm a pretty private guy. I like privacy. But yet I've decided to take kind of a public role here and share a lot of details about my life. Sometimes I lie awake at night and I say, "Why on earth do I tell people what I'm doing with my money?" Or, "Why on earth do I let people into my family life?" Because it's a little scary.

I'm a pretty private guy. But I think my reason for doing it is just to try to show that you don't have to be an extraordinary person in order to do some things. What often happens, what frustrates me is many times gurus and popular personalities paint everything as easy.

And you only see them after the fact. You only see them after their big successes. You only see them after they're multi-millionaires. You don't get to see the process. So I try to share a little bit of the process, share some of the things I do know or that I can teach, but also share some of the journey.

And so today we're going to do that. Today's show is going to be in three major parts. Part one is going to be my investment story about kind of what I actually know about, what I've actually pursued for my own personal investments. And then part two is going to be what I'm looking for in investment opportunities for me, for my life, what I'm looking for.

And then part three is going to be what is my strategy and plan as regards my real estate investment plan going forward. So if those topics seem interesting to you, I hope you enjoy this content. Let's begin with my story. In many ways, I think my story would be similar to many of you who are listening in terms of what I've invested in, what I've learned along the way.

I've always been interested in money. I don't know why. I can't explain exactly what. Probably I just wanted to be rich. You know, a little of that lust for money is probably at the foundation of it. But I've always been fascinated by money. And I've always had the benefit of being the youngest child.

And as the youngest child, I'm the youngest of seven children. And one of the big benefits of being a youngest child is you can learn from the experiences and mistakes of other people. Now I don't know whether this was causation or correlation, but I always tried to watch what my siblings did and did well and copy those things and what they did poorly and avoid some of those things.

And somehow along the way, I think due to the fact that I was educated at home through seventh grade, I realized that just I like to learn. And I didn't have to face the meat grinder that many people face of school where your love of learning is just hammered out of you and you become a listless fish flopping around saying I'm not interested in anything.

I never had that problem. I had enough time to engage with my surroundings and realize that I could learn about things I cared about when I was younger, that by the time I did go into a formal school environment, I was able to maintain my love of learning. And once I realized that I could learn anything I needed to learn in order to achieve whatever kind of a result I wanted to achieve, it was, I mean, it opened my eyes.

It was a life-changing revelation. When you understand that you're not stuck with who you are, but you can change and you can learn and you can adapt and you can build new skills and you can learn new things, I mean, that changes everything because it means you're not stuck.

You're not stuck in life. And so I know for me that was a big, big deal. I think in many ways it's that love of learning that causes people to, or that realization that you can change things that causes people to become interested in money. And so I was interested in money and I started reading.

I read books on finance and I read books on investing. I dabbled here and there with my reading in different topics of investing, but I was always drawn more to the question of the personal finance discussions. I've always found that to be more of my interest than the tactics and specific strategies of investing.

And so when I was 18, I knew two things. I wanted to build my financial foundation and I needed to invest. I had read enough personal finance books. I didn't have a lot of money earlier. I didn't know quite what to do with it. So I knew I needed to open a Roth IRA.

So on my 18th birthday, I sat down at the kitchen table and I filled out a credit card at two credit card applications to start building my credit score because I'd read the personal finance books on how to build your credit score. I knew exactly how to do it.

And I also opened my first investment account. USAA at that time, which was my bank I had banked with for years, was offering mutual funds that you could invest in with a starting transfer of $25 a month. And so that was what I did. I opened a Roth IRA and I started putting $25 a month into a USAA mutual fund.

I was very proud of myself and probably rightly so. I was doing some things better than some other people. Well, I was interested in different things, but I didn't really become seriously interested in real estate until I went to a seminar when I was in college. A buddy of mine, his dad was a real estate agent and he was a real estate agent.

And so they invited me to go to a motivational seminar with them down in Miami, Florida. We went down. It was one of these big ones. They worked out the American Airlines Arena in downtown Miami with a one-day motivational seminar. And the way these things work is if you ever get an invitation to go, they're good, but you got to be aware of what's going on.

They bring a bunch of really quality speakers together in the room and each of the speakers will give a presentation. It might be an hour, hour and a half. And they're supposed to do a good job with their talk. And then at the end, they have an opportunity to sell from the stage and to sell the next step if you're interested in their topic.

Well, I was entranced by the real estate guy who was giving his presentation from the stage talking about the financial independence that could be built with real estate and how great his life was and how they were offering another seminar. So I went to the next seminar and I don't know if I paid for it or if it were free.

If I paid for it, it wasn't much. But that three-day seminar was a really important seminar for me. Number one, I was sure that I was going to become a multimillionaire in about the next two years based upon what I learned in that seminar. It was a seminar that was put on by – they're bankrupt now – but it was a guy named Russ Whitney who was a real estate investor guru based out of Orlando, Florida.

And he was put on these seminars and he had his teachers teaching. And in retrospect now, I've learned a little bit more, but it was a masterful psychological presentation, carefully designed to stimulate that lust for money, to stimulate the buying desire and to stimulate all of our desires, but to teach us a little bit about real estate as well.

I was intrigued, so just amazed by what I learned. I learned you could buy real estate with no money down. I learned how you could invest in real estate with other people's money. I learned how leverage worked. I learned how I could get rich in just a couple of years without much hard work.

And I was so impressed by it. I was so motivated and enthusiastic to continue on. I was ready to buy every course that they offered. I was this close to putting down a credit card and getting a $30,000 private coaching package. I almost did it. And thankfully, I was so excited and enthusiastic about how I was going to become rich.

I sat down and told my dad all about it. And thankfully, he advised me not to buy the $30,000 private mentoring program. And thankfully, I listened to him. Hopefully you heard the slight sense of sarcasm in the term "advise." He put his foot down and said, "Don't do it." And thankfully, I obeyed.

And I'm so grateful to him that I did. But it was a big opening to me where I realized, "Wow, I can invest in real estate. And this is really exciting to me, all these things that I can do and all this money that I can make." The major challenge was I didn't have any money to start with.

I was basically broke all the way through college working my way through. And I never really had much money where I could go out and buy real estate, nor did I have a good enough advice or confidence to go out and build it the way that some people have been able to do it with no money down from the beginning.

I wasn't knowledgeable enough and I wasn't getting good enough advice to do it. In retrospect, I'm thankful that I didn't pursue it at that time because I sat back and I watched several of my friends who had been in similar circles proceed to build their real estate empires and then lose them in the real estate crash of the late 2000s.

And it really taught me a lot. See, I'd gotten really into it. I bought all the books and all the DVDs and the Carlton Sheets thing and read all... I went to the Rich Dad seminars and read the Rich Dad Poor Dad books and Dolph D'Arou and all these gurus that were prominent at the time.

And I was convinced that they were my ticket. I didn't yet know how to filter good advice from bad advice. I didn't yet know how to protect myself. So I was casting around looking for who to listen to, but I didn't know how to choose the right person to listen to.

Well, I fast forward. I went through a few different crises in my college years trying to figure out, "Okay, what am I going to do?" And I studied abroad. And so I let most of those financial things go for a little bit until I came back my junior year and got a hold of Dave Ramsey's stuff.

Dave Ramsey's book, Total Money Makeover, decided to go ahead and dig in and pay off my debt, worked like crazy to do that. Got a good job, lived on nothing, saved, paid cash for my senior year of school, and then paid off all my student loans a couple of weeks before I graduated by working like a maniac.

And that opened my eyes up to see some of the things that I could do. Well, I graduated from college. And at that time, I was just... I'd been so focused on paying off debt. I hadn't gotten involved in any other major investment plan. I opened up my 401(k) at work.

I was putting still some money into my Roth IRA. Worked one more year for the company that I worked for when I graduated, the company had been in college. But there was a little bit of a crisis there. So I was kind of getting ahead a little bit and then falling back.

And the crisis was that the deal they had made with me was that they would give me a little bit of extra tuition money if I would consider working there in a different capacity after I finished college. Well, I finished college. I said, "Okay, what's the job we're going to do?" And they said, "Well, we don't really have another job." But at that time, I had been working in their graphics department, creating graphics for their client presentations.

And I just said, "Well, I'm not going to keep doing this. I need to get the big shot job." So I quit the job. They said, "Well, call us." And my plan was I quit the job and took a road trip all around the U.S. Took got in my little 1993 Honda Accord and did a 13,000-mile road trip all across the U.S.

and up to Canada, visiting my friends all along the way. Came back and we set up a job as an analyst. That worked out for another year. I was getting ahead financially. I was able to save money. I had just made it. I didn't have more than a few thousand dollars saved in savings accounts when I graduated from college because I'd been so busy paying off my debt.

And then the road trip had used up most of my money. Worked there a year, was able to save up six months of my expenses in that year, and then I got laid off. And that left me in a situation where I'm just saying, "What do I do?" And so that was when I wound up getting in the financial services business, joined Northwestern Mutual and started my financial planning practice.

As I built my financial planning practice, I built it based upon financial planning expertise. And so always over on the personal finance or financial planning side of things. Never really made a lot of progress on the investment side. Focused for the first three years on insurance sales and developing my financial planning knowledge.

And then finally, I went through the basic license and got my investment licenses. But just because you're a licensed investment broker doesn't mean you have a clue about what you're doing with regard to picking stocks or anything like that. And I just said, "Well, I'm not an investment expert, but I do understand the mutual fund market." And I was a real expert with the mutual fund market, but not from the perspective of knowing when to buy and sell, knowing how to time the market, knowing how to do that.

I never once told a client that I could do any of those things. I just explained what we could do. Never focused on that seductive side of the industry of promising the things that you can't promise. I was an expert at financial planning, and we had enough company experts that I could be confident in on the investment portfolio management side of things.

Along the way, my own personal investments were fairly mainstream. I had my Roth IRA, which I had funded a little while. I had my 401(k) from my job. I had my pension plan as a financial advisor. I bought some mutual funds, but everything was basically mainstream. Took a while until I could build the financial foundation under myself as a financial planner.

Took several years to build that, and I was sitting there looking and saying, "Okay, now what am I going to do? How am I going to invest my time and invest my money?" The biggest benefit of being a financial advisor was that – well, one benefit of being a financial advisor was that I had a lot of income potential, but it was all based upon the business.

I could talk with the older financial advisors. I could clearly see how I could go from $50,000 a year to $500,000 a year in the next five to ten years. I could clearly see how I could make a million, $2 million a year. When I would compare various investment alternatives to that income potential, I generally found that my best bet was to focus on the income potential.

It would be silly for me to spend hours away from my financial planning practice focusing on investing in a little real estate deal that was going to make me $50,000 when by investing those same hours into my practice, I could go from $100,000 a year to $400,000 a year.

So I stuck with mainstream investing, mutual fund ownership. Along the way, I did try from time to time to get interested in the technical side of things. I considered becoming a chartered financial analyst. My main attraction to it, though, I had to admit to myself, was not that I actually cared about being able to understand the nuts and bolts of stock analysis, but rather that it was just super hard.

And I liked the fact that I could build prestige if I were able to do the stuff that was super hard. And I just finally realized I didn't care that much about learning the in-depth company picking approach type of thing. So I just said, "That's all right. I don't need to.

I'm good at asset allocation. I'm good at financial planning. I'm good at explaining these things and being the in-between." Years passed, and as I just watched the financial planning industry, those of you who know my story, I came to the conclusion, I said, "What we're doing just isn't working very well." The vast majority of my clients were never going to be rich.

And it wasn't because I was doing anything bad for them. It wasn't because I was necessarily selling them a bad investment or doing a bad job with their tax planning. It was just that their whole financial plan was weak and impotent. It wasn't... I mean, what's the point? You put aside money in your 401(k) and you see everyone stuck in mediocrity, stuck working jobs that, well, they're doable, but they're not that great.

We don't care that much. People not really applying themselves to their business or to their career. It's just, "Well, I'll get a little bit better, mediocre. A little bit of credit card debt here. Put a little bit of money in the 401(k) there. Buy some mediocre investments that might go up at 7% per year over time, which means that in theory I might have a few hundred thousand dollars when I'm 65 years old." It's not an exciting plan.

And I would find that I was very good at showing people another way, but that then they would fall apart. And I was excited about my financial plan because I'm sitting there looking at my business and saying, "Well, I can go from $100,000 a year to a million dollars a year." And as I started to learn about the impact of savings rates, I'm looking at my expenses and saying, "Well, I can cut these things down.

And look, I can be financially independent." And I was excited, but I couldn't. Just the standard American financial plan sucks. So that was where the show came from. Just some of the conversations I have with people and I'm like, "Somebody should teach somebody how to integrate these things." Not that mutual funds are bad.

Not that 401(k)s are bad. They're just weak. It's like telling a 400-pound fat person that, "Well, if you just do one little thing, if you stop drinking one soda a day, you're going to lose weight." Is that a good start? Maybe. But that's not the kind of thing that's going to have them on the cover of a fitness magazine three years later.

So that's what's so difficult with the message of radical personal finance. Not that there's anything wrong with those things. And for some people, they might be right. But I just got sick and tired of it and said, "This is not as good as it should be." Well, I learned that I love business.

In that process of learning myself, learning a lot about finance, learning a lot about investing, studying a lot of things, reading a ton, being interested in different areas, I learned that I love business. I love deals, but I don't love charts and ratios. I don't love technical analysis that has to be done on an ongoing basis.

I tried to get into trading. I tried to get into these things and I'd read the books and just, "Ah, this isn't for me. I'm bored." But I still love business and I still love deals. And then I became over time dissatisfied with the ethics of many of the large companies that I own.

I'd read the newspaper and I'd read what the CEO of this company said or the CEO of that company said and I'd be like, "Well, I don't want that person getting any of my money." And I'd read what this company was doing here or that company was doing there.

I'd say, "Well, I don't like that move." And read about the amount of money that my own company sent up to Washington to change the politicians' mind. And I was like, "Well, why are we doing this? The entire system is corrupt. This system of crony capitalism in the United States where the companies run the government, it's just utterly corrupt." And finally, I got to a point where for that reason among other things, I just became disillusioned with the ethics of many of the companies.

I don't want the blood money. I don't want to profit from the activities of this company. I don't want to be in a position where I've got to stand before God one day and say, "Oh, yeah, I was rich and fat and happy because we built an economy that exists based upon the war machine and I sit back and collect my dividends while we bomb everybody around the world, keep the entire war and global conflict and I just sit back and profit from it." That doesn't make me feel really good.

I don't want the blood on my hands. And I just finally came to the point where I said, "I can't take it anymore." And so I sold all my stocks, sold all my mutual funds and have sat in cash for over a year just kind of sitting and waiting.

Now I'm not trying to impose those things on you. You have to deal with your own conscience. But that was a surprising turn of events for me. I didn't expect to have to face my conscience on many of those things. So I came to the realization that I want to know what I own and why I own it.

And I started to build my own investment plan. This has been a combination of years. And as I talk about investments here, I'm talking about the major growth assets. I'm talking about investments that are designed toward wealth. I'm not talking about savings or insurance assets. On today's show, I'm not talking about savings account or precious metals or cash values and life insurance policies or any of that stuff.

I'm talking about growth investments. And I started to build a philosophy of what I want in an investment program. I'm a little annoyed that I'm 30 years old and I didn't know this at 20. But hey, some people did. I sometimes get a little jealous that other people had it figured out, but I didn't.

But I figure, well, I'm 30 and there's probably a lot of 40-year-olds listening to me that are jealous that they didn't figure it out when they were 30. So I better just figure it out. And so now I want to tell you about kind of what I want in an investment plan.

Before I do, sponsor for the first half of the show, Jay Fleischman, Student Loan Show. Jay is an awesome guy. He's a student loan attorney. He also hosts a podcast called the Student Loan Show. He's been on Radical Personal Finance twice. Both of those interviews were packed with content, packed with information.

And if you have student loans, I urge you, I personally urge you, sit down with Jay for a consultation and spend some time just looking to see if there's an intelligent strategy that can help you. Many, many people in today's society have tens of thousands of dollars of student loans.

And there might be a unique and creative strategy that you can find that will either help you to lower the interest rate that you're paying, lower the payments, and maybe even have some of the debt forgiven. Jay is a real expert on these things and he knows his stuff.

He is an attorney who teaches other attorneys how to do this type of consultation. So if you have student loans or if you know anybody with student loans, you have a brother or a sister, a buddy, a friend, a son or a daughter, if you know anybody who has student loans, I urge you to get a personal consultation from Jay.

Go to studentloanshow.com/radical, studentloanshow.com/radical. There you'll see Jay's multiple packages there. He offers a $25 discount on the email consultation with listeners of Radical Personal Finance. You can start there. That's a discount on a consultation for your federal student loans. Or if you have private student loans, you might want to go ahead and sign up for one of his higher packages.

But that would be money well spent. And if Jay can't save you any money, I've gotten good response that Jay's been able to help a number of people. If Jay can't save you any money and you waste your 50 bucks, it's not a waste. It's called being intelligent about what's going on.

But so far, the feedback that I've gotten has been very favorable. So studentloanshow.com/radical. While you're there, make sure to subscribe for his podcast and subscribe in iTunes. Check it out if you're interested in the topic of student loans. And also, if you have need for – if you're in any kind of litigious situation with a creditor on student loans, remember Jay does that type of work as well.

He's admitted to the bar in California and New York and he has a team of attorneys all over the country that he can refer you to. So studentloanshow.com/radical. I'm sure that my investment requirements will change going forward. But for today, I have five important pillars that I've built for my own personal investment strategy, things that are important to me in my investment activities.

Nothing magic about this. Maybe some can go away, some can come in the future. But here are mine. Number one, I want to own investments that I understand fully. I want to do stuff with money that I understand. I think this is one of the biggest mistakes that people make is they invest in things they don't understand.

And this can be on the crazy spectrum or the not crazy spectrum. But time and again, I've done a couple of shows when the market – stock market is volatile and things. And I just say, "Do you not understand your investment strategy?" The people who get nervous when markets are wonky are those who don't understand their strategy enough to follow through.

And I want to do stuff with money that I understand. I've heard other pundits and gurus make that advice and I believe it makes all the difference in the world. Do things with money that you understand. Now the challenge with me building my own personal investment plan has been I needed to get a little bit of time from my financial – for my financial interests to disappear into the past.

It's so difficult to be able to face your opinions and to be able to face your – the things that you believe if they're biased based upon a financial interest. So that's one of the reasons why I've taken so much time to comment about things, just to kind of test and see, well, do I really believe the things that I used to teach people two years ago when I had a financial interest in their actions or not?

Most of them I do believe. Some of them I question. But it's important to me to do things with money that I understand. I don't think any of us should do anything with money we don't understand. We get screwed when we do things that we can't fully understand. If we can't – if I can't explain to my 10 or 12-year-old niece or 15-year-old nephew or something like that, if I can't explain what I'm doing with money, I probably shouldn't be doing it.

So if I understand my investments, then I'll be comfortable with what's going on. If I understand them, I'll be comfortable with understanding the forces that are acting upon them. If I understand what I own and why I own it – this is one of the reasons why mutual funds I think can be so dangerous, is many people don't understand what's in their mutual funds.

All they see is the mutual fund statement. So the numbers start going down. They don't know what it is. If I own investments and if I own quality assets, then when markets get bumpy, then I'm not so worried about it. If you own shares of Coca-Cola Corporation and you know that Coca-Cola Corporation has a strong business plan, they've got this incredible global market presence, they've got this incredible reputation, if you read your annual reports and you stay a little bit abreast of what's going on with Coca-Cola stock, and all of a sudden you wake up and you open up your brokerage statement, you see that your Coca-Cola stock has declined in share price by 20 percent, you don't worry about it.

You just say, "Bummer. The market's down. There's a lot of stuff going on. People don't like this right now, but I'm okay with it because it's a really quality company." So I think understanding leads to comfort, and comfort is what makes all the difference in the world to be able to stick through difficult times.

So I want investments that I understand. Number two, I want investments that I can control and/or I can influence. Now I'm using the term investments broadly here, but I'd want investments that I can control and/or influence, if possible. So the best example is radical personal finance. I have invested a tremendous amount into radical personal finance.

I've invested primarily time and energy and sweat and tears and labor, and also a good bit of money, but I control it and I can influence it. I know the things that if I do these things each and every day, this will lead to the growth of the business.

So private business is one of the biggest things where I can control or influence, but I also want this in my investments. So I want this in—this is why I'm personally very attracted. I'm not attracted necessarily to technical analysis of large public-traded companies. I'm very attracted to venture funding.

I'm very attracted to private business investment and local private businesses. During my time as a professional financial advisor, I got to meet some people, and I got to meet some cool people here in my local community that were doing fascinating things. I met people who were investment managers at family offices, private family offices, and multifamily offices.

I met people who were just wealthy people who were running their family's trust funds. I met people who were investing in all kinds of interesting things. There's one guy that I met that I thought was fascinating. He invested in a local supermarket chain. Somebody came to him. That person needed funding, and they invested, and the investors made a ton of money, and the owner of the supermarket chain has made a ton of money.

And I thought, "Wow, that's the kind of stuff that I want to do. I want things that I can influence." So for me, that's a big deal, control or influence, because if I can control or influence it, then I can take my human capital, my labor, my contacts, my influence, any of those kinds of things, and I can push them at that, and I can affect the real estate—excuse me, I can affect the growth of the business, hopefully positively.

I could affect things negatively, but hopefully positively. So for me, that's important to me. And I've recognized I can't do that with many investment strategies. Next thing that's important to me, I want to invest in a way that I can get high returns. Returns matter in investing, big time.

And recognizing, back to the radical personal finance framework of wealth building, remember, the only three things you control—how much money you make, your income; how much money you spend, your expenses; and the rate of return you earn on the difference. And if you control that rate of return, and you can control it in the sense of moving from bonds to stocks—I always worked hard with my asset management clients to move them from bonds to stocks in an appropriate way, but because that decision alone, over a long-term investment career, will make a bigger difference than probably anything else.

It's the asset allocation decision. So returns matter, and I want to invest in areas where I can get very high returns. Challenge you something. Take the amount of money that you have invested currently and ask yourself how much money that would be worth if you invested at a 5% return in 20 years.

How much it would be worth if you invested at a 10% return for 20 years? A 15% return for 20 years? A 20% rate of return for 20 years? 25%? Go to 50% and ask yourself that question. Now, here's the problem with returns. I do not believe that if you, as a normal person, get involved and buy a piece of software over the internet that's going to teach you a cool stock-picking strategy that you're going to be able to magically create 30% annualized rate of returns each and every year, fast, cheap, and easy, just by using the computer program.

That doesn't work. But yet, there are people who routinely create 30% annual rates of return on their investments. And that will be everything from the car dealer who's buying cars cheap and flipping them and selling them at a profit. That's a business, but it's also an investment. That's the local real estate investor who's structuring a note and discounting a note that he owes in such a way that it creates a 30% growth rate.

That is some people who are investing in publicly traded companies, but there are investment opportunities out there. And if I lock up all my money in areas where I can get average market returns, it's going to take me a really long time to build wealth. So if I can get high returns, I should be pursuing that because returns matter.

Next thing for me, number four, I want an investment plan where I can leverage my investments safely, because leverage matters. To use probably a simplistic metaphor, ask yourself how much you can pick up by yourself and ask yourself how much you can pick up by using a crowbar as a lever.

It's a big difference. Leverage matters. There are many types of leverage. Financial leverage through the use of debt is not the only type of leverage, but it's one type of leverage that you can use. That you can leverage your time, you can leverage your influence, you can leverage your contacts.

Radical personal finance for me is a leverage business, because what I grew annoyed with as a financial planner is I could never multiply my time and efforts. If I was sitting face to face with one person, I couldn't be sitting face to face simultaneously with another person. So it drove me out of that business.

One of many things that drove me out of that business is I can't find the point of leverage. I can't find the lever to push on that makes this thing grow. Now as an example, radical personal finance, I have massive leverage. I'm still creating things, but I can bring other people's work in, leverage my business.

And if I go from 10,000 listeners to 100,000 listeners, it requires zero additional time. It requires just the tiniest bit of additional time for me to make sure that the technology is robust enough to handle it. If I went from 10,000 to 100,000 listeners, it would require zero additional time.

If I went to millions, it would require something different. So that's leverage. But financial leverage is important. And so I want investments where I can use financial leverage in an intelligent and careful, safe way, because I personally am a very risk-averse person. I want to control my risks. I want to plan for them.

I want to have backup plans. It's funny, I talk to people who say, "Wow, so risky for you to start radical personal finance." I haven't had risk all along the way, because I've controlled for it. I've known what it was, and I was able to handle it. I had backup plans.

Yes, there is a risk the business would fail, but that didn't put my family at risk of bankruptcy. That didn't put us at the edge. So I've controlled for the risk. And so I want to use financial leverage in an appropriate and careful way. And there are many ways to do that.

Number five, I want to own investments that I'm proud to own and I'm proud to profit from. I want to do things that I'm proud of telling my children about. I want to do things I'm proud of being seen publicly, in the sense that if things are disclosed, I want all of my actions to be honorable and above reproach.

I want them to be things that I'm proud of. I'm not proud of owning Citibank stock. I'm not proud of some of those types of things. I want things I do to be things I'm proud of. So here's my strategy going forward. Number one area of focus for me is to invest in my own businesses, both the current businesses that I have and future businesses, because that's where the most leverage comes from.

That's where I have the most control, the most influence. That's where the highest returns come from. That's where the business, the things that I can fully understand, those are the things where I can apply leverage very safely. And those are the things that I'm most proud of. So my own businesses, both now and future.

Number two, I want to invest in other people's private businesses. I want to be the guy who's putting up money for a percentage of ownership in the supermarket chain that's making money hands over fist. I want to be the guy who's backing the local business that needed a boost in order to build this really world changing product or service.

I want to be the guy who is putting some money behind the technology that can make a huge difference in the world and make a lot of money while it's going. So I want to invest in other private businesses. Number three is to invest in real estate. And that's what the next part of the show is going to be about is my specific plan.

But I want to invest using real estate for reasons I'll go over in a moment. And then number four is I want to own individual stocks in some publicly traded businesses. And so those are kind of that those are the aspects of my personal strategy. Now the challenge is what's the right order to do these things?

And that's where number one, the best first thing I need to focus on is my own business because my business gives me the lifestyle freedom that I need and want while I am building financial independence. My business allows me to do the things I think are interesting. I don't have to ask a boss when I go in and do this.

I don't have to ask somebody. I'm accountable to you, the listening audience. You guys are my boss. But in the aggregate, I get a lot of flexibility from that. And so the first thing for me to stay focused on and even to stay laser focused on this year in the coming years is to continue to build the momentum behind my business.

That should be thing number one. What about investing in other private businesses? Well, this is where I reach a challenge of scale. I would like to invest in other private businesses, but I do not yet have enough investment capital to be able to meaningfully make a difference in most businesses.

And if I were to put as much investment capital as I have into other businesses, it would be far too risky for me. I don't have $5 million yet where I can carve off a million dollars or half a million dollars to invest in businesses that are speculative that may or may not go belly up, may or may not make me a ton of money.

I can't take that much risk at this point in time. It's too risky for me. So I'm not at the scale of assets where it's appropriate for me to be trotting around town saying, hey, entrepreneurs, come on. I've got Joshua Sheed's venture capital fund. I'm not there yet. I've got to build the assets, continue to build the income, continue to build the investment capital to where I can go ahead.

And when I reach the point where I can easily write a $25,000 check or $100,000 check without completely messing up my risk profile on my investment portfolio, then I'll be ready for that. But what I can do for investing in private businesses is build the infrastructure right now. I can build the context.

I can build the knowledge, the things I'm learning with all of my own current endeavors. All of that stuff is preparation for that. So my own business right now is going forward hot and heavy on that. Investing in other private businesses, that's very, very slow. It's not appropriate for this stage of my wealth building.

Number three, real estate is appropriate at this stage of my wealth building. And we're going to talk about that in just a moment when I show you why and what my personal strategy is for that. Real estate is a place where I can invest. I can apply my knowledge.

I can apply my expertise. I can apply the advantages that I have in my local market. I can apply the capital that I have without taking undue risk. I don't have to put – I won't risk my investment capital to where if I have a deal go bad that it runs the risk of putting my family out on the street.

So real estate is my best investment opportunity right now. What about individual stock ownership? That's also a good opportunity. But the challenge with individual stock ownership for me at this stage is I want more leverage and higher returns than I can get with the assets that I have right now.

And so I have some companies that I'm watching and I'm paying attention to. But it's much more challenging to leverage your money safely in individual stock ownership than it is to leverage it in real estate or in business. It's much more challenging to do it safely. So I pay attention but it's not my number one focus right now.

That all changes as time goes on. I am very attracted personally for my personality type, especially given some of the constraints that I mentioned earlier. I'm very attracted to value investing and just to value investing. That's my personal bent in the area of stock ownership. So I don't enjoy trading.

I have no interest in being a short term trader. My investment strategy with publicly traded businesses is very simple. Have a simple brokerage account and buy shares when I believe the price is good in companies that I want to own for the rest of my life. And then sit back and spend the dividends.

Because truly that's the ultimate of financial freedom and financial independence where you're simply living off of the dividends of companies that other people manage. None of that. That's true passive income. All of these other investment activities are passive income. True passive income is sitting back and living off of the dividends from companies that other people manage and other people supervise.

That's the real benefit. But at this point you get, but in exchange for that really passive income, you're going to get lower returns than these other more active types of investments that I am doing. So in a moment I'll just talk about my real estate strategy. Before I do, sponsor for the second half of the show is Trade King.

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Again, it can be for your major money. It can even be for your play account. Good strategy is, I think, to have a play account, something that keeps you interested on the side. So let's talk about real estate in my own investment. So as I described, those are my four basic focuses.

And for me, number one, business and real estate are where I'm at at this scale of my financial plan and the things that are appropriate to me. But I have some major concerns with real estate. I've studied it a lot over the years. I've studied the strategies. I've studied the different approaches.

I've studied the different ways to invest in real estate. There's dozens of ways you can invest in real estate. But I have two big concerns that I don't want to pursue. Number one is I do not want to do physical construction work on real estate projects. I don't want to do it.

I can do it. I'm more capable with DIY projects than most people. I'm more capable at fixing things than most people. I've got a lot of experience, but I have enough experience to know that I don't want to do it. It's not the highest and best use of my time.

I don't enjoy it. And I find it frustrating because I don't do it a lot. So I don't want to use a real estate strategy that involves me doing physical construction work. Lots of people, that's the best thing for them. Whether that's you buy a move into a house and fix it up while you're living there on the weekends, and then you turn around and sell it and take all that increased money tax-free, you can do that.

There's a bunch of people who are very good at that. I have family members who are very good at that approach. That's not appropriate for me. I don't want to do physical construction work. If I have to do physical construction work, I would rather become a stock-picking guru than go and do physical construction work.

It's easier and more fun for me to learn that than it is to learn the physical construction. Number two is I don't want a maintenance-intensive landlording job. Real estate investing, at least done in the way that you are buying and owning properties, is kind of a funny mixture of a business and an investment, where you're getting attributes of both.

It is a part-time job in a way. And so for me, I don't want a maintenance-intensive landlording job. So I could go out today, I could buy a 100-unit apartment complex, I could move my family into one of those units, and I could run the 100-unit apartment complex, or 20, whatever, you make up the number.

I don't want to do that, because those type of tenants are very maintenance-intensive. It's a lot of work, and that's not work that I think that I'm very well-suited for. That's not what I want to do with my money. So given those two constraints, I need a strategy that will account for those constraints if I'm going to invest in real estate.

Lots of ways I can skin this cat, but I've chosen to focus on one specific strategy, at least for now. And that strategy is to buy single-family houses in the middle of the market in my local area, and to buy them and to hold them for a long time.

And my favorite strategy over the years, of all the dozens of real estate books I've read and all the things I've studied, my favorite strategy is John Schaub's "Building Wealth One House at a Time." That was his book on the subject. He's been on the show. But that is my favorite approach.

I just got back this weekend from going to John Schaub's seminar. Now this show, I intended to record this show on Friday morning. I left my house in West Palm Beach at 4.30 on Friday morning to drive over to Sarasota, and I intended to record this show in the car on the way there because I didn't want my show on real estate to be influenced by the seminar that I'd come from.

I didn't know, am I going to be super excited or not? This was a carefully—I went to this seminar because what Schaub teaches is what I want. I'm not creating this strategy because of what I learned at the seminar this weekend. But unfortunately, as I was driving across the state, it was blackout, it was dark, and it was also raining.

And so I didn't think it was safe enough for me to be recording my podcast while I drove, and I wasn't able to get it done at any other time. I intend to do a separate review of Schaub's seminar. In short, it was excellent. But I just want to clarify that I chose the seminar because since I've chosen this strategy, then I need to make sure that I become an expert in my strategy, and Schaub is the guy I want to build a relationship there with him so I have the chance to help.

So he has a chance—if I need help, I've got the go-to guy for that. So I've chosen to invest in real estate because, number one, real estate—local, individual, residential real estate—is an inefficient market. It's an inefficient market that I can personally understand, value, and I can exploit the inefficiencies when I find them.

By investing in what I know, where I live, I can be confident. Much more easily, I can be confident in my analysis. And because it's inefficient, I can find problems that people have, and then I can solve them for them. That's what real estate is. So I can put together a deal, and I can put together a creative deal which appeals to my personal inclination.

That's what I like to do. I like to find creative ways to use—whether it's creative ways to use certain types of real estate contracts, whether it's creative ways to put together financing, whether it's creative ways to solve people's problems. That's what I'm good at. I like doing that. I'm good at that.

And so I can find those deals and put those things together, and that's using what I'm good at, putting together the deal, solving the problems in a unique and elegant way in a local, inefficient market where I can be confident of the values. Real estate is something where I can apply a unique skill that I have and a unique work ethic that I have that many people aren't going to apply.

See, many people look for deals by sitting back and waiting for something to pop up in their MLS. Well, you got some more competition. Got a bunch of friends of mine who invest in real estate here locally. Some of the markets they work in are cutthroat, and you're constantly in competition with it.

But I'm willing to do things that other people aren't willing to do. And so by doing things that other people aren't willing to do, I can find deals that other people aren't going to find. I can operate a local real estate investment business at an appropriate scale. So the amount of investment capital that I have set aside is very appropriate to local residential real estate investment.

I'm not broke, so I don't have to go out and try to put together deals with no money down, with no cash, where I can't handle anything and I'm kind of living on the edge. There have been people who've been able to do that, but I'm not in that situation.

And so that brings me a lot of confidence. But I'm not at the point where I've got $10 million that I'm trying to figure out what do I do. And that's where you've got to look at the scale of your investment capital. If somebody has $200 to their name, they're better off not investing in real estate.

They're better off buying a broken weed eater on Craigslist, fixing it and flipping it on Craigslist. If somebody has, what was it, Warren Buffett, we use him because he's such an extreme example. But think about what a massive problem Warren Buffett has investing his money. He's got so much free cash flow.

And if Warren Buffett makes $100 million investment, it's practically irrelevant. It's a blip on the radar screen. It's not that big. So he's got to put together billion-dollar deals. The guy with $10 million that he's managing, so he buys a house for $150,000. Let's just say he's practicing a flipping strategy.

Buys a house and flips it and he makes $50,000. What impact does a $50,000 growth have on his $10 million portfolio? Not nearly as much as if a guy with a million dollars does that same deal. So you've got to think and always apply the concept of scale to everything.

So my investment capital is at a scale where I can work appropriately in the real estate market. I won't invest so much of my money in any one deal that if a deal goes bad, it bankrupts me. But I can still, with some creative real estate techniques, I can still make a big impact in my experience and those deals are accessible to me.

I can get excellent returns. So in the local real estate market, because it's inefficient, because I can put together the deals or I should, to be clear, I believe I can, I'm convinced that I can build the skill of doing it, whether or not I do it on the first deal or the first 10, I have no idea, but I'm convinced I can at least build the skill of doing it, then I can get really excellent returns, far in excess of what I can expect by investing in – far in excess of what I can expect by buying a mutual – an index fund from Vanguard.

And another important thing is I can use in real estate, I can use financial leverage safely. This was one of the things I was most intrigued by when I wanted to go and go to Shab's seminar was in my interview with him on radical personal finance, he talked about putting together deals with low money down and he talked about purchase – buying and selling properties but in a way that you're not giving a personal guarantee for the loan and that you're not working with a bank.

And what was interesting I learned, he said in the seminar, and he didn't make a big point of this in his book, it came out in the interview on radical personal finance here, but he didn't make a big point of it in the book, but he's been a real estate investor for 40 years, bought and sold a ton of properties, but he's never borrowed money from a bank and he's never given a personal guarantee on the property.

Now he's also never defaulted on a loan and he's always paid every single loan, but I didn't understand his strategy for doing that. Now after attending his seminar I do and I'll cover that more in the future. But I can use financial leverage safely with the amount of capital that I have to control valuable assets and that'll be really, really good.

And real estate leverage is unique in the world of leverage. In stocks if you have a margin call that can wipe you out. In real estate your risks are limited if you're using appropriate financing mechanisms with careful protections. And then with Schaub's system he focuses on the middle market system and by putting together the deal one of my investment criteria is I need to make sure that I'm only doing deals that are going to be keeping me out of physical construction work.

So that means I'm not interested in flipping houses, I'm not interested in buying run-down houses and fixing them up, I'm not doing that type of thing. I'm putting together a different type of deal. And also by working at the middle market, if you go back and listen to his interview on Radical Personal Finance he talks about the time that he has off because he's built a very low maintenance landlording business.

So he does a really good job with that. And then I think that also the reason I'm pursuing this now is I personally think this is a unique time in my lifetime for me to have some breakout years in my own personal wealth. As I record this here in January 2016 my guess and my bet that I've been making, and I'm not an economist, I have no credentials or track record of any kind to point to where you should listen to my prediction, I'm just telling you my opinion today.

But my best guess is that I think that we'll be back in a recession in this year, next year, next couple, three years. We're overdue for a recession. Now I wasn't in a situation in the last couple of recessions that I've been through as an adult. I wasn't in a situation where I could take advantage of them.

I didn't either have, in 2001 I was in college and I didn't have any money and so whatever. 2006 and 2008 and that whole long period there, depending on when you technically want to use for your years to measure recession in, I was also still building a new business and I had invested all my money in that business.

So I didn't have a lot of investment capital and I didn't have things squared away. So I wasn't able to really take advantage of them. I didn't have a ton of money that I could sink into the stock market at lows or anything like that. But what I am convinced of by studying history is that a lot of people get, excuse me, a lot of people go broke in a recession, but some people get very, very rich.

And if you look at many of the great names, many fortunes were built in something like the Great Depression. So recessions and depressions can be times of opportunity if you're paying attention and if you are stable. So that's why I've done so much work on radical personal finance to try to help and encourage and give all the tools and ideas that I can think of to help you be stable.

That's one of the reasons why I've worked really hard to build financial stability in my life with, it's one of the reasons why I sold my house, take the profits and build that resilience and build that stability. So I'm at a point now where if necessary, if I start, if you guys as listener base, you guys get to a point where you're suffering financially and we go into recession or depression, and let's say if it's severe and difficult and you guys have to start cutting back, well, I've built, I've tried to work hard on my own personal finances to keep my obligations to the bare minimum.

That gives me flexibility. And so I am determined that whenever the next recession is, whether I'm right and it's this year or next year, who knows, somewhere in this next two or three years, whenever it is, I need to be ready and prepared to take advantage of the opportunities wherever they are.

I think there'll be opportunities in my local real estate market, but I can't wait. I can't wait for us, you know, for 20, let's say that next year, 2017, we wind up in recession in the U.S. Well, and then that trickles through, trickles through, trickles through. And then 2018, 2019, that starts to be felt in my local real estate market.

People getting foreclosed on, people are losing their jobs. And then there's just this general downturn. I can't wait until 2019 to say, oh, OK, I'm going to become a real estate investor and start educating myself and preparing for it. That doesn't work. It's too late because I don't know the skills.

I don't have the network. I don't have the strategies. I don't know what I'm doing. So what I've got to do now is focus in 2016 on working hard, shopping my market, getting in tune with the market, finding deals, looking for them so that if I'm right, and this is again just my guess and my opinion, if I'm right and a couple, three, four years from now we are either in, going into, in or past a significant recession, if I'm right in that situation, then I've got the skills and I can profit from it.

And so I've got to build my strategy in a way that allows me to profit from it because my hope is whenever the next recession is, my hope is to come out of it in a much better shape than I went into it because I was prepared and looking for it.

I think there'll be some cool opportunities and I think that will be, I think there'll be some, just some things that we can use and implement. I think we've got some cool opportunities coming up with this approach. So that's why I've been focusing on, that's why some of the reasons, the transitions I've made, that's why I sold my house, selling my house cut my expenses, lowered my risk, freed up investment capital.

It was just across the board, all part of this plan. That's why I've been bringing the content that I've been bringing, that's what I've chosen and I'm going to be bringing you guys on, I'll be bringing you guys on the journey with me. It's one of the cool things about Radical Personal Finance, everything integrates.

As I study and learn strategies, I can share them and teach them with you. As I share them and teach them to you, that will help the listenership of the show. That will result in me being able to charge higher prices for my advertisers. That'll result in more listeners to the show, which will help and more of you supporting the show on Patreon, which will help me.

And then I can leverage that and turn that into more investment assets. And all along the way, it's built together. Even one of the things about investing in real estate is the steps that I've been making towards being able to invest in private business is trying to build my local network much more proactively.

For the last couple of years, I've been slow about building my local network. Well, real estate gets me out in my local community, has me building that local network, has me focused on connecting with other investors so that when there are opportunities and people need money, then they'll be calling me.

That's one step of the plan. Hopefully this is useful to you. Again, it's always hard for me to know what to share and what not to share, but I've tried to be very open. I've tried to be open because you can learn from either what I'm right about or what I'm wrong about.

If I make mistakes, you can pick those things up. I think hopefully it'll be encouraging to some of you. That's my plan as far as why I've chosen going forward to be working on real estate investments. Make your plan. Your plan may be similar to mine or it may be exactly the opposite, but I encourage you to think through your plan.

What are the things you want in your investment plan? What are you looking for and what are the strategies that are going to help you? Hope this content has been useful today for you. If it has been useful, I would appreciate if you were willing to pay me for it.

You can do that voluntarily. If you found value in today's content, please consider becoming a subscriber of the show as a patron. The way that you do that is go to RadicalPersonalFinance.com/patron and you can estimate what you think the value of this show has been for you. Then you can send some of that toward me as a thank you compensation for the work that I've put into creating the show for you.

Go to RadicalPersonalFinance.com/patron and I'll be back with you soon. (upbeat music) (upbeat music)