Hello, everybody. It's Sam from the Financial Samurai podcast. And in this episode, I have with me a special guest, Chad Carson, author of The Small and Mighty Real Estate Investor. Welcome to the show, Chad. It's great to be here, Sam. Thanks for having me. Thanks for coming on. You have a great story because you played football at Clemson, a powerhouse school, and then you went on to do something that seems very entrepreneurial and you started investing in real estate.

So football, college sports, real estate, two of my favorite things in life. Can you share with the audience how your football journey came to be? It was always a childhood dream of mine. My father played football at Georgia Tech in Atlanta. And so I grew up going to games with him.

And it was sort of a father-son bonding thing with my brother as well. And I love the helmets and the idea of it and the stadium and the noise. And so luckily, I also had a little bit of size to actually match my dreams of wanting to play college football.

And when I got into high school, I grew up to be about 6'3" and eventually 230 pounds in college. So I had enough of a build to be a linebacker, which is what I played in college. And I was sort of on the bubble of getting a college scholarship at a big school.

And you might find it interesting. I got pretty good grades and I actually got recruited by some of the Ivy Leagues to play, by Harvard, Princeton, that kind of thing. But it came down to money and also location. And my parents did pretty well. They made good income and I would not have gotten any financial aid at the Ivy Leagues and no scholarships.

And I would have had to take on some debt and or get a full scholarship to play at a Division I-A school like Clemson University. And I chose the scholarship. So you got a full scholarship? Yeah, full scholarship and played all four years. And it ended up being the captain on the team my last two years.

So I was very lucky in a lot of ways because some of that is just luck of being in the right place at the right time. But I also had a good time playing. Wow. And so now as an adult with two children, how do you view that decision now?

Because so few people get to the pros. I mean, for you as a starter, as a captain, four years at Clemson, did you try to become pro for the first year? How did that go? I tried. It was always my dream to play college football. It was just sort of an opportunistic dream to play NFL.

It wasn't like, "Oh, I really want to do this." But I got recruited or the scouts were saying, "You should go try out." And I did the test and I basically flopped. I did really poorly my senior year. And my heart wasn't in it. I didn't want to keep grinding away at it.

I could have played in the Canadian Football League, but I just decided to hang it up and just say, "Yeah, I'm done. Let me figure something else out with my life." Football is one of those things that's so intense and there's so many injuries as well that if you make it four years and you still are relatively injury-free, I think you should call it lucky.

I got my school paid for. Let's move on. Yeah. I mean, I've seen some pro football players, so many, they retire at 26, 27. A couple guys or one guy left before earning his 20 million contract if he just stayed one more year. Is it that brutal? It can be.

Or is it a mental thing? Like, what's going on? I mean, there are definitely the knee injuries, the shoulder injuries. I'm a little more concerned about the head injuries long-term. And that's something that you never know what that really looks like. And the science is still kind of developing on that.

But I don't know. For me, at least, it was, there's other opportunities out there. I've played this card for a long time. I was interested in entrepreneurship. I actually applied to medical schools as well. So I was like, "I want to study abroad. I want to do some other stuff that I haven't been able to do yet." And so for me, it was like, "There's other options.

Let me go just do some other stuff." Right, right. And if your daughters, how old are they now? 10 and 12. Okay, 10 and 12. So you've got six to eight years. What if they got Ivy League, but you have to pay full price, or they got into a school like Clemson on an athletic scholarship?

How would you guide them to which path to choose? I am definitely more in the value camp. I see a lot of value in good public universities. I've had a good experience. I actually got recruited to play William & Mary as well. I don't know if that's your alma mater.

Oh, really? Is that your alma mater? Yeah, yeah. That is my alma mater. And I think there's so many great professors. There's so many good experiences you can have anywhere that having a bunch of debt or having to spend a lot of money as parents on something that, yes, I'm sure there's some financial returns, but a big part of me, even my story with as a real estate investor and a small, mighty investor is working it backwards from the type of lifestyle you want.

And I feel like going in the grind of having to pay off all that debt and having to get a really high paying job, as opposed to the opportunity I had, have no debt, I'm pretty sure I would not have become an entrepreneur at 23 years old if I had had a lot of debt.

I probably would have gone the more traditional route and tried to pay it off. And maybe that would have been fine as well. There's no telling what would happen. But I'm pretty happy that I did that because I've really enjoyed the flexibility and the entrepreneurship lifestyle. And I feel like debt is such a saddle for a lot of people.

It's something that limits your options, especially when you're 23, 24, 25, that if you have an opportunity to not have to do that and still get a good education, I think that's where I would, if my influence mattered, if they listened to me, that's the counsel I would give.

Got it. So what did you actually do right out of Clemson at 23? I took a break. I had this Forrest Gump moment when I was out training, thinking I was still going to the NFL. It was like 98 degrees in South Carolina humidity. And I got done running a wind sprint and I just laid down on the field and I was like, I'm done now.

It was just like Forrest Gump. I'm done. And I called my agent right after that and said, I know probably there's no teams that are going to call and try to get me to play, but if they do, I'm done. I'm retired. And I decided to go to Europe for a little while.

I went to Germany for a month and just did a study abroad experience. I worked a little bit painting houses for my dad who had some rental properties. And then I went back and took some classes at Clemson. I talked the athletic department into paying for some classes. So I think I took entomology and Spanish and philosophy of science, just some fun stuff, just because I didn't know what I wanted to do.

But I also took a business class and I met this professor in this business class who's a real estate investor. And he seemed to have this really flexible lifestyle and he was an entrepreneur. And he just really intrigued me what he was doing. And I said, you know what?

I think I'm going to try that for a little while. And I started talking to him after class and he is still to this day a mentor of mine. He was a private lender to help me get started. He loaned me some money. He gave me a lot of advice, just a friend.

So you never know what's going to happen when you take a class at a university and it goes from there. Right. Got it. It's interesting that you had the NFL thing and then you had the moment and then you started on real estate. And so tell me about the book.

It's a big book, 380 plus pages. It's very thorough. It teaches everything you need to know about analyzing property. And one of the things that really struck out to me was this quote or this statement, "Own the minimum number of investments that accomplish your goals. Instead of 10x, you want to half x." And I thought that was really an insightful line.

Can you talk about what that means? Yeah. This is a part of my experience was I went down the 10x, let's go big path because I was as a new entrepreneur, you're always absorbing information from different sources. And I went to classes and a lot of the real estate I think is more susceptible than other places.

There's a lot of rah-rah, let's go big, you can do this, buy a lot of properties. And I got taken up into that a little bit my first few years. And I have a business partner by the way. So we're 50/50 business partners and the two of us got started buying properties and we started flipping a lot of houses.

That was our business model early on. And it seemed to be the logic was if that's working, if you can make $20,000 or $30,000 per flip, why not do 10 of those or 20 of those or 30 of those? And so we as new investors were like, "Okay, I think we can do that." And so we just started turning the volume up.

But the problem was, we actually did that, we did pretty well. But the problem was 2007, we had 33 properties that we bought in one year. In 2007? In 2007. That's tough, man. The storm clouds are brewing. And so not only do we have a tough economy ahead of us, and we kind of saw that, I didn't predict it, I didn't see it coming, but you could feel it as it happened.

But then we also had this moment, my business partner more than me, I think, where he's like, "What are we actually investing in real estate for? What are we trying to accomplish?" And the business model we're going now, you have to hire employees, you have to spend a bunch of money on marketing, there's a lot of overhead.

And so we had sort of this realization that, "Wait a minute, there's an alternative path. We could just kind of keep this business smaller, simpler, grow a little bit slower, have less risk." And still, for me, I made a list of things I wanted to do. And I wanted to do things like hiking in the middle of the day, playing basketball for two hours, pick up basketball is one of my favorite things to do.

I wasn't married yet, but I wanted to have a family, I wanted to get married, have kids, I wanted to spend time with my kids and be present. So when I looked at all those things, money was definitely a factor, but it was more about time and mobility and flexibility.

Those were the currencies that really mattered the most for the things I wanted to do. And so our idea at that point was, "How about build a business model, a real estate investing model that focuses on working backwards from that lifestyle first?" And it turns out that sometimes keeping it smaller, simpler, accomplishes that lower risk, it accomplishes a simplicity, it allows you to move a little bit slower, and yet it still can accomplish all of your goals if you want.

That's the mighty part, small and mighty. I don't think you have to compromise your ambitions. You might have to delay it a little bit. You might have to maybe not be quite as aggressive as other people who are maximizing their leverage. But in the end, the tortoise is still beating the hare, I find, and I think it's a good approach.

Well, tell us about the 30 properties you bought in 2007, though. What happened to that? Because I remember that was a very, very painful time for the next five years or four years. I would say 90% of the deals we did were good. We flipped a lot of houses.

I remember our best flip, we made $65,000 on one flip. So that was nice. We had other properties that were rental properties, a couple of multifamily properties that had good cash flow. I got a lot of properties with seller financing and private financing. So I wasn't susceptible as much to the bank lending issues and the commercial loans like a lot of people were.

But then we had about 5% or 10% of our properties that because we were going so fast, because we were just being lazy or sloppy or whatever you want to say, we bought in the wrong locations. We underestimated repair costs. And so there was enough of a problem there that we had to like screech the brakes.

We had to feed those properties using a lot of the cash we had made for the last two or three years. So luckily, we didn't spend much money. We set all that money aside, most of it. And I lived very, very lean anyway. But we needed it. We didn't make any profits for the next couple of years.

If we made some profits, we spent it fixing up properties, negative cash flow. But I would say by 2009 or end of 2009, we were convinced that we're okay. We're fine. We're not going to have to. And then we started, the good thing was on the other side of that, of course, was a ton.

There are a lot of good deals. And so any real estate investors still standing at that point who still had access to money, which we did, because we had a lot of private lenders, we still had a couple banking relationships, we were able to scoop up some of the best deals ever for the next five, six years.

Like it didn't stop in 2010. I mean, some of the best deals we bought were in 2015, 16, even after the recession. What would you, if you have a percentage breakdown between properties that you own for cash flow and properties you own to remodel and flip? What's the target percentage breakdown now?

And what's the portfolio breakdown now? 0% flips now. We don't do any flips. I live in Spain right now. So we've been here for the last 12 months. And we really transitioned more into the buy and hold model. But for us, the flips were just a substitute for people like you working your investment banking job or your Wall Street job or somebody who's a doctor and they're working that job or somebody who's a teacher.

It was just the way we paid the bills. And so starting off, it was 100% flips for the first two years. And then starting about 2004, maybe a year and a half then, we bought one rental property, but we did it very creatively with a smaller down payment and seller financing.

So we really had to be very scrappy in order to be able to, because we weren't very bankable. For us as an entrepreneur to go into a bank and say, "I'd like to borrow money, 30 year fixed money." They're like, "You're basically unemployed as far as we're concerned. So forget that." So we had to start a little slower on the rental process, which was fine because we weren't ready yet.

For us to go buy a bunch of rentals without cash reserves, without the backing was not a smart move anyway. So it kind of flipped from 100% flips to 90% flips to by the time we got to 2009, 10, which was about five, six years after we started, I would say we probably did 10 or 20% flips, 80, 90% rentals.

And now it's 100% rentals. And how big is your portfolio now? We have 33 properties, but then out of those properties, we have some multi-unit properties. So it's 100 units total and I have a 50/50 partner. So I kind of look at my version of the portfolio is like 16, 17 properties and 50 units.

So I'm kind of on the bigger side of small and mighty. I've also been doing this full time. So this has been my career and this is how we paid the bills. And the thing I've realized though is that I could have in 2009 when we started making those switches and this transitioning, we could have gone the path of trying to grow out of this.

Like, all right, let's just get bigger. Let's manage more properties. And even at the size we were, we started coasting and we'd sell some, we'd buy some, we'd sell some, we'd buy some. We haven't tried to significantly change our portfolio, especially the last five, six years. We've kind of kept it where we are and reinvested the capital into paying off debt, into doing other ways to restructure our capital instead of just buying more properties, buying more properties.

And given you have a partner, did you set up a LLC? Yes. Yeah. So we just had hired an attorney to help us do it and set up a simple LLC. And we're literally like, we're both the managers, we're both the 50% owners. We didn't really know what we were doing, I'll be honest, when we first started.

And a lot of people ask me about how do you, partnerships don't usually work, they usually fall out. And part of that was just luck. But I think the part that worked out was this was a friend of mine first and we went to seminars together, to classes together.

We also divided up the tasks. So when we first started, I was the acquisitions person. I was the person who talked to private lenders and banks. He was the one who managed the remodel and then got it sold or rented out. And so we got literally like split the business in two.

And over the years that's changed. He's got a tech company, he's got an internet business. So over the years, he's kind of spent a lot of time on that, which has been good because that business has made a lot of money as well. And we've looked at it as like interchangeable parts.

At some points, I'm the person doing a lot of the work, other times he's doing the work, but it was very clear whose roles and responsibilities were what, how we're getting paid. And so I think that clear communication and then just having some similar goals that both of us wanted not to go and keep on growing and keep on syndicating and doing all that.

We had pretty similar goals on what we were trying to accomplish. Got it. So in terms of capital raising, what's the source of your capital now in terms of buying a new property? Either a private loan, which just means going to an individual who's made us loans before and they either have the money in the bank, just they just have cash money, or they have a self-directed retirement account.

It's been a really common tool we've used. So maybe they have a million bucks in the retirement account, but they only want 500,000 in the stock market. They want to have some exposure to real estate as well, but they don't want to do all the rental work or they don't want to own a rental in their retirement account for whatever reason.

So they'll just make a loan to us. And originally that loan was a 10% interest loan when we were flipping houses. And so it's like a hard money loan basically. But as we grew and as we hit the recession, we went back to our private lenders and said, "We're going to pay all your loans off because we can't afford to pay 10% interest or we can just start paying you 6% interest and we'd be happy doing that.

We can cash flow it at that interest rate." And we had two or three of them switch to that. And so we've been paying them 6% interest for years. So it's either that or we use our own cash these days just to pay cash for it. Got it. It is interesting now in this higher interest rate environment, I mean, it looks like inflation definitely has rolled over 3% CPI in June, 2023.

How do you see the lending environment now and how do you see it going forward over the next 12 to 24 months? The thing I've noticed is that the lending goes in cycles. And I like to study the history of real estate investing. And if you look at people who invested in the '70s and early '80s, this is nothing.

This whole interest rate change is pretty similar, especially in the early '80s where Volcker raised interest rates a lot. And the common theme I heard studying that time in the market was people had to get creative with how they got their financing. It wasn't just, "Let's go to the bank, let's plop down 20% and let's make it work." You either had to put a lot more money down or you had to maybe get a lease option or do a partnership with somebody or get seller financing.

That was much more common in the past, I think, because interest rates were so high. If you got an FHA loan in, I might get the year wrong, I think it was 1984 or so, your interest rate might have been 16%, 18%. I can't remember the exact numbers. And if you had somebody with an existing loan or somebody who owned a property free and clear and they were willing to loan their finance to the property at 12%, that's a 4% spread from the market rates.

And so similar to today, if you can find a private lender who's sitting on some money and some cash in the bank, and maybe they're making 4% in a CD or a treasury, but they'd like to get a little bit more and still be in a safe investment that they understand, offering them a first position mortgage on a property that's worth 500,000 and they loan you 300,000 and you pay them 6% interest.

I mean, there are people out there who will say yes to that. That's not an unreasonable proposition. Yeah. It is interesting. So it seems like part of the activity is finding the source of capital and that keeps on going. It's not just investing. You got to find that source of capital.

Yeah. And part of that is just networking with other investors. Like the best private lenders I found were former real estate investors who just got lazy and who just didn't want to go out and do the deals themselves. And so there's a double benefit there when you're a new investor or you're new to a market by borrowing money from somebody who knows what they're doing.

They don't want to lose their money and so it's very beneficial because I would show the deal to my private lender and they would be like, "Nope, I'm not doing that one." I'm like, "Why not? Why wouldn't you do that deal?" And so then I would get an education from these people who have a lot more money than I do.

And I find that to be very helpful is to surround yourself by other people who have skin in the game and actually be willing to listen, be humble enough to say, "Hey, this person actually knows more than me because they've been investing for a long time," or they just have a concern that's legitimate, maybe I should listen to that.

And so that was my original strategy. And then I sort of expanded that toolbox to also start talking to sellers. I think getting seller financing some form or fashion is a lot harder to negotiate. It's not something that if you go on the MLS and make an offer on the MLS, it's not very common that a real estate agent is going to help you negotiate that.

And so typically you got to go directly to the seller. Typically you got to kind of filter out which properties you look at. I like to find properties that a landlord has owned for 20 or 30 years because they have a higher likelihood of having equity in the property because the property's gone up in value.

They paid the loan down in many cases. And so you have a lot more options when you're sitting directly with that landlord and they might want to exit the property management business. And so by you managing the property for them by buying it and continuing to get them a cash flow over the next five, 10, 15 years, it's not an easy negotiation because you got to build some trust with them.

But I found those to be some of the best deals in the end because I now have a relationship with that person. They now probably have another property or they're willing to loan me more money. And so you don't need many of those. You could just get two or three of those relationships and that could set you up for the rest of your deals that you have.

Yeah. Oh, that's interesting. Yeah, relationships sounds like it really drives a lot of capital sourcing and a lot of deal flow. You have this great formula and it talks about the numbers in terms of seeing a hundred deals, viewing a hundred deals and then making. Can you talk about that count from a hundred down to that one offer?

Yeah. So it's for anybody who's been in sales, buying acquisitions of real estate properties, real estate investments is a lot like any kind of sales funnel. So a sales funnel means if you were trying to sell your product, you've got to talk to maybe a hundred people who are potential prospects and you've got to filter them and say, all right, maybe 20 of those people actually meet the criteria of somebody who would be a good fit for this product.

And then out of those 20 people, you talk to them and maybe one or two of them are willing to talk to you and receive an offer. Now those one or two you make an offer to maybe, you know, maybe you make four offers and maybe one of them accepts your offer.

So out of a hundred people, you get down to four. And that's, that has been my experience in the real estate game. Not necessarily the exact same numbers, but every time I've talked to a new investor who's like, ah, I can't ever find any deals. There's no deals out there.

My answer is always like, well, how many offers have you made in the last month? And they're usually like one. So I said, you got rejected on offer on one offer you made one of one and you're telling me there's no deals in your market. Like come back to me when you've made 10 offers and then we'll, we'll see how it works.

I think this is really smart going, thinking about a funnel top of the funnel is wide and it goes down to find that one deal. And I've read books about creativity and how it's not just, Oh, you just think about it. It's like you kind of work on many, many prototypes before you find that one amazing thing.

So it's just like the Dyson vacuum cleaner. It was like 3,500 little shifts. And so that, that, that's a really very important thing for investors, real estate investors to think about now in terms of just kind of managing the properties. Cause I, I feel like I'm a small, mighty investor because I have, I think I forget now like three in San Francisco, one Tahoe and then Hawaii.

I can't manage more than really ideally three or four in San Francisco. And also I've, I've hit my limit in terms of how much property tax I want to pay because that's just ongoing and it bums me out twice a year when I got to pay that. How do you view, you know, property taxes and do you have kind of like this mental hurdle limit and how do you, do you have, I guess, property managers to manage and do you have problems managing your property manager?

Yes, I'll tackle the property management part of things first. And for me, just the end result is that like living in Spain this year, for example, I've tracked it because some people didn't believe me when I told him before, but I typically spend on average about two hours per week managing my, my rental properties.

Now, that being said, I used to spend 60 hours per week building this portfolio. So I don't want people to get the impression that this is like a real estate starts off like a, like a startup, startup company with a lot of work. It ends up more like, I think it can end up like a blue chip stock.

Like I think there is that transition point. But for me, the way I was able to get it down to two hours per week were, were team and systems, team and systems. So like team is I have property managers and in particular, like I have different properties within my portfolio, but I have student rental properties and student rental properties are much more time intensive because the average, average time that a student stays is probably a year and a half on, you know, some people say a year, some people say two years, every once a while you get lucky and get a English PhD student who stays seven years, but like that's about, that's about the best you got.

Right. So on average, you're always leasing properties. So I used to do that myself. I learned how to do it, but it's much more time intensive. So we hire property managers. I have two different property managers who we kind of split it up between them and they do a great job.

They have people who are constantly working on that and I get texts from them. So I give them $500 per month or $500 per transaction that if they have a problem that costs $500 or less to fix, they have my authorization to go ahead and do it. Don't call me.

I'll look at it on the, I'll look at the report later. I'll, I'll see it. But if it's over 500 bucks of our refrigerator costs, 900 bucks, then they'll text me and it's usually it's a quick response. I'd yep. Go for it. Thanks for asking. Thanks for getting a quote.

Let's do it. And they'll go and procure their refrigerator. They do it all. Yeah, they do it all. Yeah. And how much do they make? I guess they make a, in my case, a 10% a fee of the collected rent for per year. So if you have, if you have $10,000 in rent collected that month, they make a thousand dollars.

And if you were a hundred percent vacant, they wouldn't make any money. So there's an incentive for them to keep the properties full. But there, but so I find it to be pretty closely aligned. I think my interest in the property manager's interest, they, sometimes you have to push back a little bit on expenses.

Like if they say, Oh, well let's just do that. Cause it's simple. And that's the contractor who we told first. I might have to some, some, sometimes say, Hey, let's get another quote. That seems pretty high. I think it would be good for a dreaded for 700 bucks. Let's, let's do that.

But, but that doesn't take much time. I mean, I've been able to do that pretty easily. That's, that's, that's the 10 to 20 minutes per week. And the worst case scenario, I had a septic tank that went out this year and that's, that's awful for everybody. Right. The tenant, first of all, has to deal with that at the house they're living in and septic tanks for all those who live in big cities or when you don't have a sewer system and you're living outside the city sewer system, you have your own sewer system in the backyard and they break and they have problems.

I don't recommend them for rental properties, but we happen to have a couple that have them. And so we had to deal with that as a much bigger, um, much bigger bill to fix it. I think it was ended up being eight or 10,000 bucks and we had, it took a while and the tenant was upset.

So I mean, there's, there's some problems like that. But again, my property manager is the one who is on the front line. I'm the one communicating with them. And most of the time, most of my time is spent actually doing bookkeeping and just looking at the reports and just focusing on the numbers and what's going on.

And to get to that point though, first I had to find, find a good property manager, have a good relationship with them, train them, train each other a little bit to expectations and then also building systems. So I still, I still manage process. I still manage a few properties myself from Spain from where I am.

But in those cases, those are my single family houses with longterm tenants and sometimes I'll empower them if they want, they cut the grass themselves. For example, part of the lease, they, if there's a big problem, I'll say, Hey, if you have a heating and air goes out, here's the, here's my go to contractor.

Just call them. Don't, don't worry about trying to crack me down. Just call them. I trust them. They'll go out and fix it. And so there's, you know, there's a vast difference between a student rental apartment and Airbnb managing that with a long, a longterm rental and a single family house.

I find that to be a much different property management proposition. So for somebody who had, I mean, I know in your case, I'm not sure how often they turn over, but from a management standpoint, it's, um, that those would be more, more of my lower, lower management, single family house type.

Is it lower management but lower returns the single family? Cause I'm just, I've yeah. Single family and then a condo. It's basically that for me. Yeah. The cashflow is always going to be lower as a percentage of the value. That's, that's the game with single family houses is that they're like a, you know, a quality dividend stock that's going to get like a, you know, 1% dividend or zero dividend, but they're going to be tend to be the ones that grow over time.

And so the game with single family houses has been, let's buy them. You're not gonna make much cashflow for the first three to five years, but the, but the rents are going to grow, the value is going to grow. And in some cases I might sell that property and use that as like a chess piece to buy another property or to pay off another property.

Or in some cases, like I have some keeper properties that I don't ever want to sell, or at least not for a while. And because they're, because they're low maintenance, because they're in a great location, because I get seven applications every time I rent it. So you can sort of pick and choose.

I got, I've, we basically called the herd. We've sold off some of the properties that were the least desirable, highest maintenance, highest issues with tenants. And we've kept the ones that were easiest. And, but, but we strategically use the ones that we didn't keep to sell them either to do a 1031 exchange and buy another one.

Or in some cases we just bit the bullet and paid the taxes in this and use that to pay off debt on, on other properties. Is there, um, I guess it's, it's a people business. And so do you have any kind of tips or red flags in terms of finding a great property manager and also finding great tenants?

Are there just some common red flags that people overlook that they shouldn't? Uh, well, with tenants are a little simpler in that I would say you just got to have some written criteria and you got to stick to them. And there's so many reasons to do that. There's one fair housing laws say that you're supposed to have just objective financial criteria and you don't even want to try to go there of trying to be, Oh, this, I have a gut gut feeling.

This person's a, seems like a good tenant. You just don't want to do that. You want to have objective criteria, but it also makes sense from a business standpoint because I, when I was a new, a new landlord, a lot of my biggest problems were when I had those kind of those edge cases where I was like, Oh, it seems like a nice person.

You don't have to try to have a big heart, you know, man, but it seems like a good situation. But if you, if you would have just looked at their debt to income ratio, or if you just want to look at their credit score, it would have told you they don't qualify.

Like it's just, just a hard line right there. And I have found, you know, maybe you miss a couple opportunities here and there where people who could have done it, but, but you also miss the 95% of the cases where they probably would have created a problem at some point.

There's a reason there's typically a reason there. And so we've just, we've given our property managers, here's our criteria, credit score and debt to income ratio, amount of income. And we've had far that not to say we have zero problems, but we've had far fewer problems by doing that.

And so that's the tenant side property manager side. It's like, it's like hiring any team member team member. And I look at go back to football, the sports is some of the best football coaches. They, they see themselves in the, in the people development business. They're in the business of, of recruiting.

They recruit like when you're a college football coach, your number one job is recruiting. And so I see myself as a, as a owner of a business of picking not just any old property manager, I pick the best, like go to the ones who have some kind of quality that you identify as like, wow, they're really, they're like 1% they're on the ball.

And so in my case, I have two different kinds of property managers. One's a bigger has a bigger operations, a lot of systems. They have hundreds of properties. I have another property manager who is kind of a boutique property manager and they have zero overhead. They have no office.

They're working remotely. I love that. Like, I think that's really scrappy. And they, they, they kind of, they're kind of like me. They like to just kind of work from home and do that and they make it work with technology. And so both of them do it in different ways.

But I identified in both cases that, Hey, these, just watching them before I even hired them, like, all right, they're the ones who are kind of rising to the top of my idea, my mind, studying them, talking to them, talking to their, their clients. I was very slow to move to them.

And when we did, it was a very deliberate decision to hire those people. And definitely it's improved the quality of your life much more. Oh, it's, it's night and day. Like I, this is not the first time we've lived abroad. We lived abroad in Ecuador and my property manager, they remodeled properties for us while we were in Ecuador.

They sent me, they handled it. They charged a fee for that, which they should by man, by doing a bigger project. But I'm telling you, it's when you get the right team members, it's not just like twice as good. It's like 10 times, a hundred times better having quality people.

And sometimes you got to go through some, some tough ones or some make some mistakes, learning who the good person is and who they aren't. But I think, finding that person, how do you do that is by talking to referrals, talking to other clients, talking to other, other owners.

And then just, you know, like I believe that most people have a good gut feeling on, on the character of the person. Like, I think if you, if you study their character, are they looking you in the eye? Are they kind of, are they too fast for you? Are they talking too fast?

Like there's just some of those things that we've learned over hundreds of thousands of years of evolution or whatever, you know, like, you just, you just sort of know whether they're the person who's going to, who's shooting you straight or not. Got it. I got, I got a question for you because I have this one tenant that I brought in last year.

They have family, it's a good tenant, great tenant, like ideal tenant, I think. But I feel like she has contacted me more than she should. And then my problem is I'm always quick to respond. And I create this, you know, this mechanism where, oh, my, my, so she asked me, for example, oh, can you bring in my garbage bins?

Because we don't, we're gone for a month and a half. And I was thinking to myself, you say you have a housekeeper who's comes every couple weeks, why don't you just ask her? But it's like that close and open of a relationship. Like how, what, what would you recommend?

And then she says like, oh, do you mind cutting the trimming the bushes or whatever? Because, you know, it doesn't look good. But in the lease, it talks about them maintaining. What kind of, how would you recommend I get out of this situation? Because I'm like a nice responsive guy, but I'm like, man, I think I have to slow my response times or something.

Yeah, I probably, I probably struggle with the same thing, Sam. Like, this is where having a business partner is good. Like my business partner is also a nice person, but he's a little bit more like, no, it's in the lease. Like, sorry. So, so, so maybe it's, maybe it's like have your, your, your silent business partner behind the scenes who says, you know what?

We can't, if we did that every single time, it would just, I'd have to drive across town, like find some excuse. But like, I don't know, like I find that like, I learned a lot from kindergarten teachers and first grade teachers and second grade teachers and how they set the expectations.

You know, like when a kid goes into class the first day, it's like, they seem a little bit mean almost. The kids are like, Oh man, like this teacher is serious. That mean teacher on the first day is almost always the best teacher. Then everybody loves that teacher. They're so amazing.

And I find that to be very similar with landlording. I've had to learn this the hard way as well. That if you, if you're, if you push the rules a little bit harder upfront and say, Hey, this is what, this is not the rule. This is what we do.

And they kind of learn their lesson like the first graders, second graders do. And then your life's a little bit easier after that. Yeah. I mean, it's interesting. She says, do you mind, you know, planting some succulents? So actually what I did was I went above and beyond over the past month and I went to the landscape score.

I, you know, I got 20 bags of mulch. I planted 70 pounds of succulents. I mean, it looks good now, but I decided to do that as a teachable moment with my son to get him, get his hands dirty and do the work and to see what it entails.

But the problem is she's going to come back from like, like a dingy yard. She didn't maintain herself to this. I think it's like a $5,000 landscape job. And then I'm like, Oh my God, what is she going to expect from me going forward? You know, like it's almost like she's lonely and it's like, she just wants to talk.

I know. Well, the problem with owning rentals directly is that they, you have, it's easy to have this temptation to, to just get involved. And I think one of the benefits I've had is that I am very not handy. Like you're not, you're not there. I'm not there. I'm in another country, first of all.

And then second of all, even when I'm there, I'm like, Hey, I'm not good at any of that stuff. Like fixing that toilet. I can't do it. You call the plumber. So I've just written checks. I've written checks. Even when stuff I could learn how to do, I've just said, you know what?

I just can't do that. I don't, I'm not, I'm not competent to do that. That's not, you know, that's technically what I would tell her in that case. It's like, you're welcome to do that stuff. You're welcome to, I'll give you permission to add landscape into the house. That'd be great, but you're going to need to do it.

That's, that's the deal. Yeah. Yeah. I'm too handy. Like I just look at you too. I'm like, you know what? I can do that. I'm going to save money and do that. And I don't have this pride of like, I mean, it's my property, so I might as well make it as nice as possible.

And then you kind of go overboard. So to me, I think that is the value, a huge value of the property manager, that separation that, you know, focus on business. And this is just business, not personal, but that's it. And the money makes work makes sense to people complain about the 10% management fee.

But like if you hired somebody and if you had a business and you hired somebody to be your human resources person, you wouldn't look at their salary and say, Oh gosh, I got a big expense there. You say, no, this is an investment. Like this is an investment to pay a property manager because it allows you to have life.

And in your case, of course, you've got so many other business opportunities and you can do, and I love that you letting your son see you do. I think that has a ton of value beyond just money. But at the same, beyond that, I think it's, you've got a lot of other, other opportunities.

We can make a lot more money than landscaping and doing any, any of the maintenance stuff, any of the management stuff. You, you, you've definitely got other high return on investment activities. It's amazing though, like scarcity mindset, because I have that scarcity mindset. I don't want to pay 10% for someone to do it, a job that I can do myself, especially since I'm in the city where I can manage the property.

So that is that scarcity mentality that I've had that I think a lot of people do have where they don't want to spend the money because we're frugal and we can do it ourselves, but the returns, the upside could be huge. And so I'm going to follow your lead when I finally move abroad.

Cause I've been talking about going back abroad once my kids both are over five years old and then hire a property manager. Cause I think that return on investment will be much higher. So talk to us about, you know, being 12 months in Granada, Spain. Yes. Southern Spain, Granada.

I mean, that's unbel, that's amazing. It's great. And your kids are 10 and 12. How did you decide to do that and how did you set up a education for your girls? So the origin of the story goes all the way back to when I first met my wife, like our very first date, we talked about studying abroad or going abroad and living abroad.

It was just a common interest we had. And my wife is a Spanish teacher. And so that was my pick, that was my pickup line with her. It was like, Oh, we're, we're in yoga class. And she's like, I teach Spanish. I'm like, I like to learn. I would like to learn Spanish.

That sounds good to me. So that was how I got the first date. But then we decided before, even before we had kids, we went abroad. We've just, it's just our hobby. We love doing it. We've seen a lot of value in intercultural exchanges, learning new languages. It's just amazing.

It gives you so much, so much different, a different perspective on life, humility. And so we wanted our kids to have that. And we did it when they were three and five by going to Ecuador, to Cuenca, Ecuador for 17 months. And it was just so amazing that we got, we came back, we have family at home and we had some reasons to come back.

But we said the moment we came back, we're like, we got to do this again. And we thought it would be too late if we wait too long, you know, maybe high school starts and our kids are doing activities. So 10 and 12 were, they were actually 11 and, uh, 11 and nine when we started and we enrolled them in local Spanish schools and we got some help.

There was a consultant who helped us find a house, set up, went and talked to the school. We've never done that before. Usually we just helicopter in and figure it out ourselves, but we hired a consultant to help us do that. And it was a great, great idea. She got us into a really nice local school that was as a public school and it's also very international.

So there's a lot of expats living in the community here. And so, you know, half, over half the kids are Spanish speaking, but then you also have, uh, she has a friend from Norway and another friend from Ireland and another friend from Australia. And so there's a, it's a really fun experience, not only learning Spanish and having to take all your classes in Spanish, which is a learning growth experience, but also just seeing like, wow, there's just so many different people who think differently than you and do talk differently than you.

And, uh, I don't know where that's going to lead, but I think it's a good, a good lesson to have in their life. Absolutely. I think it's only, I think 60%? No, I forgot what the number of percentage of Americans own passport is, but it's not, it's not very high.

And I hope if more people can travel and see the world and learn another language, there'll be more harmony and peace in the world. What do you think is the ideal age to start traveling abroad with your children where they'll really appreciate their travels? I think after three, our youngest daughter was three when we went to Ecuador and she doesn't remember right at the beginning of the trip, but she remembers the end.

So I think, you know, three is I think when you start getting some pretty good, some decent memories of things and it's from a language learning standpoint, three to five is really, is, has a lot of good, interesting studies about fluency and ability to speak without an accent by learning it earlier.

I think that's just the brain neuro neuroplasticity and the tongue. I don't know what all the details of how that works, but my younger daughter, when we left Ecuador would correct me all the time. I would speak Spanish and say, yeah, and she's like, and then she would like correct my, correct my Spanish and wag her finger at me.

And I love that. Like I love being corrected by my kids and talking about my accent. And so that, I think that that age is great. Three, four, five, but all, but if that's too early, elementary school is wonderful too, because it's just a great, you can meet so many people by being a family living abroad.

We've had that connection with people here that maybe you wouldn't if you were just going on your own. It's often hard to break into communities, but when you're an expat or when you're living somewhere for a shorter period of time and for us being in a part of the school community was our first community, it was wonderful to meet other parents and to have activities that just made the experience so much, so much richer.

Yeah. And, and you say you've, you've been there for a year now. Yes. And why are you coming back? Well, we've asked ourself that question because we're, we're kind of, we're having mixed feelings. Part of it is again, family, like we have some roots in our community in Clemson, South Carolina.

Part of it, our family lives, my parents live nearby, my brother lives nearby. And so we just, we miss that. The other part of it is we, we've always kind of felt torn when we live abroad. We don't feel like we a hundred percent fit in. We're like, all right, we're kind of like, we'd like to contribute to a community.

We'd like to have some roots here. And so, but then when we go back, we also feel like, oh, we're the, we love to travel. We like to go places, but we, but we have, we've, we've gotten very involved in our community in Clemson, South Carolina, beyond just the real estate.

Like I volunteered and we started, uh, one of the problems I saw in our community, like a lot of us places is the, we're in a small, small town, but you can't walk anywhere. Like I would push my kids in a stroller and almost get run over by a truck.

Just go into the park a quarter mile away. It's like, where, where are the sidewalks? Where are the bike paths? Where are the, and so I kept asking that question and all the city planners were like, well, no, there's some plans here, but nobody's done anything about it. And that frustrated me as an entrepreneur.

And so back in 2015, I gathered some friends, friends of mine, and we all started a nonprofit called friends, friends of the green Crescent trail. We've been building a network of biking and walking trails. It's been a long process, but we raised $3 million. We've finally building the first three miles of trail this year while I'm in Spain.

And so I think those kinds of things, just getting involved in my community and feeling connected to my place in Clemson has been my personal reason. One of the reasons I want to go back. Got it. It's been a great journey, Chad, and it's been great talking to you.

If you could leave us with how new people would want to get started on your path, what's, what's kind of like a basic step just to get started? I would say just look at where you are financially. And I would say 10% of where your head should be is probably looking at the vision of like, this is where I want to go.

Here's my financial independence goals. I want to eventually own assets that produce 120,000 a year, 240,000 a year, like just set a big goal. Like, don't be afraid to set that goal. But then that where the most of the rubber meets the road is in these practical, tactical little steps.

So if you've never bought a property before, like find it, find one technique that you like like house hacking or buying a turnkey rental or all the advice that you have on your website, Sam's great. I like just find one little technique that you can use, implement it. And that, that one, that one deal you do will be like a university education compared to even the best podcast, even the best, you know, I hope you, I hope you buy my book and I hope you use that as a guide.

But my, my whole goal with the book is to say, here's a guide that fills the gap between you either thinking about getting investing or maybe you already being an investing and you don't know how to transition to the point where you live off your income. Like I want to fill that gap, but you've ultimately got to do it.

So I would say just like getting that entrepreneurial muscle of actually taking action, real estate can feel scary because you're borrowing a lot of money. The prices seem to be really high, but if you have a longterm perspective, if you understand the fundamentals of what a good deal is, if you understand the fundamentals of good locations, then you can be sort of counterintuitive to what a lot, you can kind of go against the grain of a lot of the, the rah, rah, scared stuff on the news and actually just focus on like a tortoise light mentality.

One step, one step, one step. That's my, that's my approach. And I think it's, it's, it serves the, the tortoise is still beating the hare and the, and the investing race. I really believe that. And I think it's a, that's really what the book's about is showing you a way to invest in real estate.

That's not necessarily scaling and buying thousands of units. It's just, if you want to buy five properties or two properties and just make the most out of those two to five properties, like that's a completely viable strategy. And that's, that's something I want to support you in and show you how to do that.

Yeah. Well, it's a great book. Can you let the listeners know about the deal you mentioned to me and where we can find your book? Yeah. So the, the, for the first month is available. So if you're listening to this in July after July 20th, it's available at bigger pockets.com forward slash small and mighty writing out the and so I'm sure we'll have a link to that somewhere.

Perfect. And so if you use the code samurai, you can get 10% off. So that's, that's if you, yeah, there's, there's a lot of bonuses that go with the book when you get on bigger pockets. Like I have a, a bonus chapter I wrote called the small and mighty invest small and mighty investing in the, in a high market or at a high price market.

So 2023, how do you adjust? How do you do that? I guess my bonuses, like I show my schedule, like what I'm actually doing every week for two hours and how I got to the point where I spent two hours on the, on, on, on my rental properties. So all of that you can get at the bigger pockets website, but then eventually back in August, it'll also be available on Amazon, on audible, all the normal places as well.

Got it. That's awesome. You're living the life that I think I definitely would like to live once my kids are older. And I think many other folks and listeners would like to live it as well. So thanks so much coach Chad Carson and we'll see you around. It's been a pleasure, Sam.

Thanks for having me. All right, take care. Take care. Yeah. Okay.