Appreciation Versus Cashflow: Finding The Right Investment Strategy For Your Passive Income Needs With Paul Shively

by Brandcasting You

Are you still teetering on the edge of whether to make that jump to investing in real estate? There are many ways to acquire a passive income stream but finding the right one can be tricky. Today’s guest is here to help you out! Paul Shively Principal at Equity Street Capital & Director of The Passive Income Club at Fortune Builders. Paul has over $500 million in equity raised for commercial buildings and up to $1 billion in real estate own. He joins Jeffrey Rutkowski and JD Esaijan to share advice on identifying the right investment strategy for you. Everyone wants something different, and there’s no one size fits all. They get into detail about appreciation versus cash flow and discuss when to get started in real estate. Get more insights from an expert and get started on your real estate journey today!

Listen to the podcast here:

Appreciation Versus Cashflow: Finding The Right Investment Strategy For Your Passive Income Needs With Paul Shively

I am here with the one and only Mr. Jeff Rutkowski. Jeff, how are you doing?

I’m doing great. I’m pumped. Let’s go.

We got a great show plan and an amazing guest.

Mr. Paul Shively is joining us. He’s a good friend of ours and the company, but you’re going to love this guy. You’re going to love his energy and passion for real estate. He’s legit and high-level, JD, over 5,000 single-family. Lots of transactions and experience. Over $500 million in equity was raised for commercial buildings. One of the principal owners of a company called Equity Street Capital with over $1 billion in real estate owned. You’re going to love him. I love the advice. Wait until you heard when he talks about how and when to get started in real estate. It’s probably some of the best advice I’ve ever heard. Before we get to that, we’re going to get into the word of the week segment. What is it this week, JD?

This week is appreciation versus cashflow. Both are very important and you’re going to learn a lot from Mr. Shively about them. You can look at cashflow as a more immediate strategy versus appreciation being long-term. That’s a very simplified way of thinking about it. We’re going to get into more detail because both are important to your investing strategies.

We want both. We’re going to talk about exactly how to do that. Let’s go. Mr. Paul Shively, welcome.

Welcome to the show. I’m here with my cohost, Mr. JD Esajian.

I’m happy to hear. I’m ready, Jeff. It’s got to be a great show.

It is. I’m pumped. We got the man, the myth, the legend, Mr. Paul Shively. I never knew his name was Paul. We love and know this guy, but we’ve known him as Shively, but I learned his first name is Paul in fact. The last name I called Shively Paul was when we met well over a decade ago.

It’s like the military. I was Rutkowski for four years and few people knew my real name, so I got out. Welcome to the show. Let me brag on you for a minute. The audience knows who you’re learning about. This man that you’ll be learning from, talking with, has been involved with over 5,000 single-family residential transactions.

We might have to lay everything out on the table and see, but you got a lot on your resume.

It’s not the age. It’s the mileage.

Not just that, but over $500 million in raised equity for commercial transactions. One of the principals in a company called Equity Street Capital that surpassed $1 billion in commercial assets owned. Not only that, but he has been teaching and training some FortuneBuilder students for the past several years. Anything else you want to say about this guy?

If you don’t know where you’re running, you’re just running.

Shively is amazing and a wealth of information, not on top of that, a great man, father, husband. We’re going to cover a lot of ground with some amazing information. I’m excited to get through it.

When I think of you, Paul, I think about growing money. That’s what it comes down to. What we’re going to get into on this show is how to grow your money. I have this amount set aside, what do I do with it? If you know anybody that could benefit from that, I want you to go get them on this episode, pull them in right now. The stuff you’re going to be learning is a gamechanger. Before we jump into that, Paul, I like every guest that comes in here, what was life like for Mr. Paul Shively prior to real estate? What did you do? How did you get to this point?

Number one, thanks for having me. I love it. Now that I’m thoroughly uncomfortable because you guys bragged about me. I’m excited to be here. Shively is a leftover from my previous life before FortuneBuilders, which not many people know. Much like you in military, in sports and baseball, you often get tagged your last name, especially if you have a random last name like Shively. It was either Pablo or Shively growing up as a kid. Life was good.

I worked cleaning gyms. It was my first job during college to get a beer money and meal money. A college baseball player needed to drink some beer and be able to have some money to pay for hamburgers and burritos and things we need in Southern California. I cleaned gyms and got my way through college that way. Odd jobs here and there, I cut yards and do all the stuff that everyone else does growing up to try and make as much money as we could.

We didn’t grow up with a bunch. I didn’t grow up with means or anything like that. The only reason I got into college was because I could throw a baseball about 92 miles an hour. Once I was there, my dad was smart enough to give me a lot of firm talk, too, in the most loving way to make sure I got the most out of my education, which was good, which then launched me into meeting you guys. I met JD, Than, and Paul right at the end of my college career.

I was one of those lucky, in my opinion, when preparation meets opportunity. I had a lot of preparation for what I met Than on the beach, playing beach volleyball, believe it or not. I had no idea who he was and who any of you guys were. He had played football. Obviously, I played baseball. Two athletes jawing on each other, having fun, having a good time. I walk into my apartment one day after knowing him for months and he’s on TV. I said, “No way.” His name is Than not Tan. Whatever I thought, I didn’t know what his first name was. His name’s Than and the rest is history. We synced up and I had done a little bit of real estate dabbled here and there in college and everything. Luck was a preparation meeting opportunity. I took the most of it.

I got to know that beach volleyball game though. Who won? Do you remember?

It depends on who you ask.

Let’s take what happened in that game.

We played a lot of games together and Than is taller than I am. It took me a while to get an edge on him. Volleyball is a team sport. It’s not an individual. It’s you and a partner, but I’ve got the upper hand with Than in volleyball. He’s got the upper hand with almost every other sport. I don’t play basketball with him on purpose. He outweighs me by about 60 pounds. Every other sport, he’s got me. I got him maybe in baseball because I played and beach volleyball. Everything else he’s got me.

Let’s dive into it. I think about growing money. You manage a lot of my money, JVs and things like that. JD, correct me if I’m wrong, but people come up to me all the time, “Jeff, I got $50,000, $100,000, $200,000.” Even someone called me, “I inherited $20,000. What are my options?”

“What’s available in real estate? How can I make that grow?”

That’s when we send them to you. What do you tell them?

I get that question all the time. The answer there is my favorite answer and the one I don’t hide behind it, but I throw it out there early is it depends on so many things. People want the easy route. I do, everyone does. Everyday lives, when we go about it, we take the path of least resistance. Everyone does. It’s natural. Tell me what to do and I’ll do it. There’s red pill, blue pill. If you want this, you do this. If you want that, you do this. You go to Neverland or whatever it is with the red pill, blue pill analogy. You get what I’m saying?

FBL 7 | Passive Income

Passive Income: There’s no cookie cutter approach to investing because there’s no cookie cutter approach to life. Everyone wants something different.

 

It’s so custom to each individual. That’s what the past several years has taught me here at FortuneBuilders with all that money we raised and all those deals we did. There’s no cookie cutter approach to investing and life. Everyone wants something different. My answer to that is it depends. I lead with that. You and I had the same conversation. We sat down with families and had the same conversation. It’s what everything is based upon.

If you don’t know where you’re running, you’re just running. If you don’t have a destination, then you’re going through life. It’s the same thing with investing, rehabbing a house, whether we’re investing long-term, short-term, it applies in all aspects of real estate investing. Unless we know what our objective or our destination is, it’s hard to have success.

What it comes down to is knowing where you are and where you want to be essentially. You could then provide that roadmap in terms of how to get there. Let’s talk through a couple of the top investment objectives. What are would you say are the top 1 or 2 places people want to get and how would you advise them to get there?

In my opinion, there are the surface level objectives and then there are the deeper objectives. The things people will tell you, which is the analogy while you’re swimming on the surface, but the real core objective is way down deep there underwater. The objective is like, “I need to be able to make as much money as I can right now. I need to be able to make as much money as I can in the future.” There’s a time component. I need cash flow right now or I want my money to grow in the future. Those are two of the most dominant ones. There’s one that no one thinks about as well, too. I’ll share that in a moment.

There’s a third objective to that the people don’t think about it. Taking those two, “I need money now. I want this money to grow in the future,” in real estate terms, that’s cashflow and appreciation. “I want to invest for as much cashflow. I want this thing to grow. I want to invest as much appreciation in the future.” When you scratch the surface, because everyone says a version of those two, and most people say, “I want both.” Everyone wants to have their cake and eat it too as do we.

The reality is most investments have a function of both. It’s a matter of which one’s weighted higher in the investment. When you scratch below the surface level, you get down to, in my opinion, what the core objectives are is if you’re wanting more cash now, that usually means you want more time freedom right now. You want to own your own time. You don’t want to leave your job or the boss you want to fire, or you want to own your own time a little bit more.

We start with a cashflow. I need cashflow. When we get down to it, this is where that third objective, no one thinks about. It comes down to how does time function into that? Is it that you want more time now to do what you want or “No, I love my job. I want this thing to grow?” Why do you want it to grow? When you start asking questions beneath that, to get down to the core objective there, we’re usually talking about some legacy.

I want to do something for my family. I want to improve my family’s life trajectory. I want to be able to leave something for future generations or send kids to college where I had to scrap and begged to get to college. I want to be able to send future generations to college. All of a sudden, if that’s the objective, by nature, how much risk are you willing to take to get there? Do we need that to be super steady and secure? Can we take some risks? How many years do we have? That time component. It sounds easy. People come to us all the time, “I got $10,000, $2,000, $5,000, $20,000. What do I do with it?” We’ve got to have these conversations first to understand what they’re trying to accomplish.

What about you, JD? Are you a cashflow or an appreciation guy?

I’d like both, but the reality is it depends on where someone’s at in their life and their situation. For me personally, having a young son. Earlier in my career, I’m okay foregoing maybe immediate cashflow to be able to have that money grow in the long-term. I’m willing to put money into something for 5, 10, 15, 20 years down the road of maximum growth.

To me, it’s about diversification. Typically, you’ll hear that amongst different asset classes. I always like following your lead diversify within real estate. I had some stuff that throws off some nice cashflow like some of the stuff in Memphis, and I got some stuff going in Dallas for appreciation, little less cashflow. Why don’t we get into that a little bit? Obviously, you’re able to connect people to different places and different relationships that you’ve established over the years.

Shively was the one, yourself and Paul and then we started killing it with CT Homes and making some cash, where do we park that? You began to go out and research different markets and establish these relationships. That’s obviously opened up opportunities to people like me and so many of our students, but talk to us about what you see as like the most attractive markets for cashflow and appreciation.

What people don’t understand is a lot of the answer to that is like an economics lesson. It’s interesting. I try to keep it super simple because you can get super complicated with this and it can be a rabbit hole. What’s important to understand for everyone reading is there’s usually what we call an inverse relationship between growth, appreciation, and cashflow usually. The higher growth something has a higher growth a city has. New York City when it was booming, Dallas, Texas, when it’s taken off like a rocket ship, home values there are appreciating super rapidly.

The natural thing in the way the economy usually works is rents are a trailing metric. What happens is rents can’t keep up with that pace. Rents move very slowly, which in our world is a good thing because it provides a stability. We’re not like the stock market where it can crash in two days. It usually doesn’t happen. Historically, rents are very slow moving because of that. As markets grow rapidly in growth, in price and appreciation, usually rents trail behind.

You can’t wait until all the traffic lights are green to get where you wanted to go.

Usually, if you think of a market where home values are appreciating tremendously, San Diego, California, Dallas, Texas, a lot of the Southeastern, it’s taking off. Rents will trail behind. Cashflow will be lower in those types of cities. The reverse is true where home values maybe appreciating because everything’s appreciating, especially post-COVID and even pre-COVID that was happening, too. The more stable and steady cities, and stable and steady growth cities usually have higher rent numbers, which means you can cashflow a little bit more.

What we like to focus on is this a little bit of both, the Memphises, the Dallases, the Jacksonville, Floridas, the Kansas Cities, the St. Louises, the Little Rock, Arkansas. You take Little Rock Arkansas. You don’t think of it as a blowing up city that’s exploding in home value. It is going up, but it’s not growing 15%, 20%, like it’s crazy. That naturally to keep it super simple is more of a cashflow centric market that does have some growth to it versus like Dallas, Texas, where houses I bought a few years ago, I’m looking at the value is going, “Holy moly, this thing’s grown.” I’m not cashflowing as much in those types of cities.

In those markets where you’re looking at your numbers as well, “This is what I bought it for. This is what it’s worth,” what’s a good way to think about that asset? What’s the next step? It’s become popular.

I get so excited to talk about it. I apologize. It’s a wonderful opportunity.

It’s one of the main reasons you buy and hold real estate.

It’s something we can talk about more in another show. If you guys want, we can come back to talk about it. Creating infinite return is one of the things that I get giddy about. Some of those properties that I was able to defer some gratification, you and I have talked about this years ago when you started instilling a mindset into me and a discipline, which I am eternally grateful for you, JD. Deferring some gratification, some of that cashflow, and investing for the long-term can reap benefits where now some of my lowest cash flowing properties or some of my best investments because I’ve created infinite return.

I’ve put my down payment down. I’ve let it run for 4, 5, 6, 7 years. Because it’s grown so much in value and equity, I can go to the bank and refinance that asset. Not only get all of my initial capital back, but sometimes plus some of my rentals. Everything’s unique and different for every individual investor and every investment has risk. Was it all sunshine and rainbows? No. Did I have maintenance of vacancy? Yes. Stuff’s going to happen.

Some of my rentals I’ve been able to pull out my initial investment and then double my initial investment again because of the function of the market appreciate. It wasn’t anything fancy or special. There’s no secret sauce to it. It’s interesting. Most portfolios, people who are getting started with $2,000 to $20,000 and $200,000 to $2 million, a well-rounded portfolio should have a balance of both, back to our initial investment objectives, cashflow or appreciation, financial freedom and time ownership or legacy. A good balanced portfolio should have some balance of all of those things. It’s a function of how old are you and how much time do you have. Which of those levers do we need to pull first?

I want to ask you about this. We were talking about this BRRRR strategy. It’s been like, “We’ve been doing this for years, but all of a sudden, it seems to be a hot topic.” I want your thoughts on that, but before we do, I want to let the audience know quickly about something that can help you guys. If you’re interested in learning about starting to invest in real estate, you want to learn how to grow generational wealth like Paul’s talking to here, develop multiple streams of income, whether you’re brand new, closed a few deals, or a seasoned investor, FortuneBuilders is offering a new online class that gets into the best strategies to get started in this market.

It’s hosted by expert investor, Than Merrill. It’s a one-day virtual webinar hosted on Saturdays, and you could go to FortuneBuildersShow.com, register for free. When Paul was talking about investment objectives, one of the great things I love about the class is it shows you all the different, niches, and paths that you could take in real estate. Check that out and share it with a friend as well. Talk to me about BRRRR.

BRRRR is something that has taken off in the last few years. It’s exploded on a lot of the real estate blogs and the online space that real estate investors participate in. BRRRR stands for Buy, Renovate it, Rent it out, Refinance it, and then Repeat. It’s a great way to get started. It’s popular right now because a lot of folks are recognizing it as a way to get started in real estate with little to no money. It’s a sexy topic. A lot of people can relate to it.

What’s interesting though is I see advanced investors who have the ability to invest their own capital as well, too, take that and put it into the classification of a passive investment as like a rental. It is a rental strategy. What it’s designed to do, it’s another way to be on the active side like JD is in flip the house, but still control it on the back end, which is phenomenal. If your goals and objectives are, “I’m okay spending time putting in the sweat equity, the energy, rolling up my sleeves, and getting a ton of time into this thing.” My objective is not to create a $20,000, $30,000, whatever the profit number is. I would rather take the smaller residual income that continues to come from rent. You’re doing a flip and instead of selling it, you’re refinancing it and you hold it for the cashflow.

This is a wonderful strategy to get started into real estate. The one thing we’ll talk about is time’s your best friend in real estate. The earlier you get started, it’s a wonderful strategy to get off the shelf. One thing people should remember with the BRRRR strategy is let’s be ands not ors. It’s not the only thing. I meet and have met some 30, 40, 50-year-olds, who are super successful with BRRRR and do $10,000, $15,000, $20,000 a year. They’re killing it. They’re doing wonderful.

I’ll talk to them like, “What’s your passive income strategy? BRRRR.” I’m sitting there like, “BRRRR takes a whole ton of time, effort and energy. How many times are you saying I did X on my BRRRR?” That’s not passive then. Let’s create two railroad tracks. BRRRR can be a wonderful, active railroad track. Let’s invest some of those profits passively to create that time ownership as well, too. Create both, you need two railroad tracks to get to where you want to go.

FBL 7 | Passive Income

Passive Income: Unless we know what our objective or our destination is, it’s really hard to have success.

 

You have the investors that have dialed that in to where they do spend very little time on it. It’s still an active investment strategy, which there’s nothing wrong with that.

No, it’s great. It’s wonderful. It’s an awesome strategy.

Taking some of those proceeds or refinance profits and putting into things that are truly passive.

That’s my bailiwick. That’s my whole job here at FortuneBuilders. My job at Equity Street is we create passive streams to take everything I’m saying with a grain of salt. I love BRRRR, but it’s interesting because a piece of education is being able to create an active income and a passive income stream. Real estate for yourself is vital to an actual well-rounded real estate business.

I hear that all the time, “I got rental properties. I have passive income,” but they’re managing it themselves.

It’s taking the calls from tenants and everything that goes into that.

Give us the Paul Shively definition of passive income.

My definition has evolved over time. My gut and initial answer is four hours a year or less for me defines passive. What’s interesting is as I’ve evolved and frankly trying to be as humble as I possibly can. I’m very fortunate and lucky. I have quite a large portfolio now. It takes me more than four hours now to do my own mental tracking and manage all of my passive investments. Paul Esajian tells a joke about, “How do you want to get, two generations from now, your picture above the fireplace on the mantle.” You buy real estate and hold it long-term.

I always joked. It’s like, “How do you get to that point?” Eventually, his punchline is your full-time job becomes managing your money instead of managing your real estate. It’s not that I’m doing anything with the transactions themselves. I’m managing my investment strategy about those rentals. When is it time to refinance? When is it time to maybe sell one and reap appreciation and do a 1031 exchange?

What then do I do to analyze which passive options are best for me at my given time? I’m sitting down and I’m thinking about, “I have X amount of dollars to invest. Let me look at my portfolio again, go back to my investment objectives. What’s the next piece I should add to this?” Being disciplined, not just doing a deal to do a deal. We all get bright, shiny object syndrome. Everyone says, “This is a great deal.” Everyone that you trust says, “This is a great deal. I should do it.” Let’s hold on and wait a minute. Is it the right one for you?

It takes me more than four hours a year to do all of that. I’m recognizing that’s coming from a place of privilege. When you’re starting out and doing your first or second deal, a fifth deal like that time may be a couple of hours a year. That’s totally fine. As you grow and evolve, your definition of passive investing will grow and evolve, too.

What do you think of this whole picture of the fireplace joke?

My brother came up with that because he’s always wanted to be in the picture above the fireplace. That’s fun, but it’s a very good analogy because it creates a visual in your mind. I love the fact that you pointed out wealth is when you get to a point of managing your money. It’s not an amount of money per se, but there’s a big difference between managing your real estate, taking calls from tenants and coordinating a handyman or a contractor to go versus looking at your portfolio and saying, “What am I going to do with my money?” It’s a true differentiator. It’s also good to point out because I know I felt this way. It can feel overwhelming when you’re starting out saying, “That’s where I want to get to, but I’m not there now.”

How you start is you start. You buy your first house. At some point, you don’t have one house. You have 5, 15 and 20 and then you’re looking at refinancing. I’ve been there overwhelming like that’s where I want to get to. I want to be the picture above the fireplace. It starts with taking a step forward and buying your first property, identifying where you’re going to put that chunk of money that you have.

Fill that fear void with education.

You shared me it was somebody here that you were talking to.

Someone in our legal department was talking to me and doing some legal work on a structure of another commercial deal that we’re coming up with here shortly. We started talking about, “What are you doing?” I love talking about real estate and talking shops that he started scratching the itch. You know me, 30 minutes later, we’re still talking about real estate. He was like, “That’s like a drop of water into an ocean if I’ve only got $2,000 or $5,000 to invest.”

I said, “No, hold on, time out. We’ve got to adjust this mindset.” It’s someone I know and respect. He was a super smart guy who I go to for legal advice all the time. He’s structuring deals for us, but he’s having that same thought. This is pervasive. This is in all of us. When we first get started, all of us have that thought and that demon in the back of our head, “I’ll get started later or whatever.” You can’t wait until all the traffic lights are green to get where you wanted to go. Force that first one to get green. When it’s yellow, go. The first one because that’s how we all started.

I remember literally I was 18, 19 years old. I didn’t have any credit. I sent my dad the down payment money and forced him to buy my first rental property to get started. Time is your best friend with real estate. Even if it’s $2,000, 5,000, whatever it is, find the way. There are so many options out there. It doesn’t have to be, buying a house is a wonderful option, but that’s one of a million and one ways to make money in real estate actively or passively.

The reality is the less money you have, oftentimes, the more active you have to be to then grow the money to then get to be on that passive side of the coin. There’s nothing wrong with that at all. Two railroads, you need both to get to where you want to go. If you have a smaller amount of money, it may mean, “I need to do maybe a BRRRR method” or something like that. We’re going to spend more time. If in that one year, you do one of those deals, you’re infinitely further ahead than if you waited. Let’s get started now is the one thing I can say to anyone reading. Get started early.

That’s the one thing I would say, my dad helped me. Than helped me because I met Than when I was 21 years old. As soon after I met you and your brother, JD and Paul, they helped me get started. By 22, I’d already started. At my age, I’ve got several years of real estate under my belt and portfolio. Now I’m so much further ahead thanking my lucky stars that they helped me get started, forcing me to get started at 22.

It’s one of the things that you get to focus on is helping people of all different ages or stages in their career or life get started. I spend a lot of time on the single-family side where we’re buying, fixing, and selling. We talked to investors within the community. They do a wholesale and have $5,000, $10,000, $15,000 and that’s a chunk they can get started with. How do you start with any amount of money? What’s the first step you’d recommend?

It’s beautiful because this applies to whether you’re starting with little or no money, anywhere from 30 all the way up to 60. I have students I’ve worked with who were about to retire or now retired stage at the tail end of those careers. That’s, to me, the group I love working with the most because the need is real. It’s concrete for them. Often, they have spent that time we talked about going through what it is they want. It’s clear for them where people early in their life and it’s natural.

You have a little bit less clarity of what you’re looking for. Earlier in your life, you’ve got the experience and the knowledge. You’ve gotten your licks. You know what it is you’re looking for. That group and demographic I love working with because the reality is everyone has a starting point. Everyone has something customed to them that can help improve their financial situation whether it actively or passively improve their portfolio.

That’s what’s beautiful about it. Oftentimes, when you’re in that 40, 50, 60-year-old demographic, you’ve got a tremendous track record of income. You’ve got a track record of some savings and some investments. What we can do is look at all of that and see how was that all performing. How is what you have built, whether little or a lot, it doesn’t matter what you’ve built at the tail end of your career. You’re 50, 55 60 and you’ve built X, Y, and Z. What we can do is come in and say, “Let’s look at that. Let’s analyze that.” How can we either tweak this or change that, or take that out of a CD or a checking or a savings account or a money market account or whatever it is and show you what your other options are.

There’s no one option that fits everyone. That’s the unique part of it. What’s beautiful, I love and why I still do this is to show people what their options are and there are options for everyone. No matter how old you are, where you are, money-wise, starting out at the tail end of your job. You want to retire. You don’t have to retire when you’re 55. You can retire when you’re 35. David Madden, I loved his story because I was able to help him. He came to us and said, “My wife hates her job. She’s sick and tired of it. She has a pension coming up, but can we work to replace that pension income?”

We worked over a course of a couple of years, now he had some income coming in, so we could do some things. He had a stable job. He was able to qualify for some things. Everyone’s financial situation is different. There are options for everyone. With him, we’re able to create a plan that helped his wife retire multiple years early from the job she didn’t want to do anymore. That’s why I still do this.

JD, I’m not sure if you think Shively can handle this or not. It’s the Fear Factor. You’re telling people just to get started. What is it, in your opinion, that holds people back the most? What form of fear stops people from taking action? How do you overcome it?

The biggest thing is they’re fighting the indoctrination and the lack of education. Fear comes from not knowing what’s going to happen. In the absence of certainty, our minds go into a vacuum. My mind does it when I have uncertainty. If I have uncertainty about something, my mind goes to the worst place possible. It creates scenarios that may or may not ever happen. I dwell on it, which is where we talked about fear.

FBL 7 | Passive Income

Passive Income: Being able to create an active income stream and a passive income stream in real estate is vital to an actual well-rounded real estate business.

 

Fear comes from what we dwell on. If we are finding ourselves dwelling on all the things, what could happen versus having the education about how to control the outcomes. That’s how we overcome it as well, too, is we insert education and knowledge into whatever the scenario is. My team and I talk to people all the time on the phone. Do I have to jump on a plane if I buy a property in Florida and fix it up? What if I lose all my money? What if?

It’s the fear of not knowing what’s going to happen. You were explaining how you heard a quote and listening to an audio book where they’re talking about the difference between being scared and fearful. Everyone gets scared.

Fear comes from what you dwell upon. The difference between being scared of something and not wanting something to happen and having fear about it is the amount of time we dwell upon it. I’m scared of dying. I don’t want to die. I’m scared of bad things happening to me, but I don’t dwell upon it. I’m fearful of it or have fear around that because I have certainty about those outcomes. I don’t dwell on it. I don’t think about it. I’m controlling my mind track. How do I do that in real estate and investing? How do I get over that initial fear that everyone has?

I tell people this on the phone, if your palms aren’t sweaty and your stomach is not churning during your first investment, you’re not human. I don’t want to work with you that much because you’re not human. You don’t care about the outcome. Everyone does and you should. How do you get over that fear is you insert the education, the knowledge and the systems around how to control outcomes?

That would make the reverse true for the positive, dwell on the good things, educate yourself, surround yourself with people. See the outcome. I don’t think I’ve ever asked you this, but what did your first deal look like?

A 1,200-square foot brick that happened to be in Memphis, Tennessee that I wired my dad the money to do. It was everything I had in my bank account from cleaning gyms and the little money I made from a fairly short baseball career. I didn’t even ask my dad. I just wired him the money. He was making that information is wired. I walked into Wells Fargo. It was a parent’s account still. My dad’s account was still the parent account of mine.

I’m like, “I want you to transfer whatever the amount of dollars was into my dad’s account.” They look at me and they’re like, “Is it your dad” or whatever? My dad gets on the phone and said, “What are you doing?” I’m like, “I’ll tell you later, don’t worry about it, just say yes.” We sat down and I called him, had a long conversation. He was all kinds upset. He’s like, “I take care of you, not the other way around.” I’m like, “No, dad. This is my money. This is what I want you to do with this money. I want to buy a first rental property and I need your credit to be able to do it because I don’t have credit. You’re the ones who taught me that early credit partnering scenario.”

I did the same thing when I bought my first house. My parents had to help with the deposit for the down payment. I paid them back over the course of a few months maybe. You lean on who you can lean on. You figure out a way to get it done.

We’ll have to get you back in on another show to talk about credit partnering. That’s powerful. It’s a great strategy.

There’s a ton of ways to get started when you’re first starting out. You can even do that at the tail end of your career. That’s the beautiful thing. There are a million and one different ways to make money in real estate.

We’ll do that. That’s what got you out of your farming career.

That is what got me out of my farming career. I got tired of wearing Wranglers and a buckle.

The first time he was on the show, I 100% thought you’re joking. I was a farmer. I’ve known this guy all my life. He’s like, “What’d you do before real estate? I was a farmer.”

It’s not what you expected.

Time can be your best friend or worst enemy in real estate.

It’s the best investment show ever. We’re going to talk real estate. We’re going to laugh. You’re going to learn about agriculture, vending machines, credit partnering.

I got one more question. I want to close the show with the top tips that you have for our readers. We’re coming on the tail end of this COVID season pandemic that has turned the world upside down and overall had a very positive effect on the real estate market. What would you say to the person right now that’s like, “The market’s gone up so much, I’m going to wait for it to drop?” You don’t want to buy at the top of the market and that was not the time to get it. What do you say to that person?

Number one, you’re not alone. It’s very common thought. It’s a fairly logical thought. It’s important to meet people where they are even though I drastically disagree. That’s okay. We need more of that in this country. We cannot agree, but we can still have a conversation about it. I start with let’s take a step back. Let’s take a different philosophy and approach, instead of trying to time the market, which intelligent people have been trying to do for many years. It’s very hard to do. Let’s then time your investment trajectory and let’s take the market instead of the side for a minute. When is the right time for you?

That’s the factor you can control and the only factor you can control. In your sphere of influence is, when is the right time for you? What’s going on in your life? What are your investments like we talked about? Financially, when does it make sense for you to start investing? Once you get those things down, then you can look over at the market and get the education on what are my options. Given the market and what the market dynamics are right now, what is the best investment for me that matches my objectives?

We may make a different investment decision, potentially. We’re not going to be completely blind to what’s going on in the market, but let’s first start with know, when’s the right time for you to invest. You take advantage of that when it’s the right time. Same thing with buying their first home, a couple of guys who work with us in the office here, we’ve had this conversation with them over lunch.

“I’m going to wait for the market to do this. I’m going to wait for this to happen.” The reality is they don’t need to wait and they’ll be thanking us when we push them into that first investment 5, 10, 15 years down the road, because the market always changes. It’s not always about what the market’s doing. It’s more important what you’re doing in the market at that time. That comes from market knowledge, surrounding yourself with people who have that experience, getting education, using systems. There’s money to be made in great investments in any market to be had.

I’ll take Andy Tanner’s quote, “I’ll give credit where credit is due.” Andy Tanner is a wonderful thought leader that no one study and love and he’s a good friend. He has a quote, “How many sides of the coin are there? Are there two sides of the coin or there’s three? There are three sides of the coin.” That’s where knowledge is the edge. There are heads and tails and the edge and the point. That’s where true knowledge is. To be able to make money on both sides of the coin in a down market, in an up market.

To be able to make money and good sound decisions, you have to have knowledge of both, but you have to be able to see that you don’t need these market conditions. X, Y, and Z has to line up and you make money. No. CT Homes can make money in any market conditions. You can invest with the systems we have in any market condition and still make money. Do you have to make different decisions? Yes. What I would tell people is to focus on yourself first because that’s in your locus of control.

The bottom line of the conditions is never going to be right. There’s never going to be six straight green lights. If you’re waiting for the perfect time, it’s never going to happen. JD, you have experienced this with CT Homes. You came off the best quarter in company history. Anything you want to add on to that? What you’re seeing there?

Shively nailed it. It’s focusing on what you’re doing in the market. If you always fight for your own limitations, you’re going to win every time. You say the market’s not right or the market’s going to come down. What we’ve done is you look internally. You improve your systems. You refine what you’re focusing on. You get more in tune with the market. If you want to look at one thing that has differentiated 2021 for us, is we’re hyper-focused on what the market’s done, been doing, and going to do. You get more focused on the market. You can see those changes before they happen.

In quick turn real estate like CT Homes primarily focused on is you get in and out of an investment in 2, 3, 4 months. It’s very rare. In fact, it hasn’t happened where the markets crashed that much if you’re buying on the right principles. You make better buying decisions. You focus on your negotiations. You make more relationships, and refining our systems along the way. In 2021, regardless of the financial benefits and gains that the company CT Homes has made, we’ve gotten better as a team. We’ve been proved the systems more this year than any other year in company history. Those systems are going to roll right into education and curriculum on the FortuneBuilders’ side.

We’re going to get you in here in the very near future and do a show out of that right there. That’ll benefit the audience tremendously. Shively, we’re going to get you out of here on this last question. In this show, we have many investors that are experienced. They’re doing deals. We have many that are starting out. Many of them are thinking about getting into the business. What are the top three tips that you would leave with our audience?

Tip number one would be, spend the time even before you get started, two parts preparation, one part execution. What I mean by that is spend the time. Nailing down what it is you want, what it is they want. Are they investing or thinking about investing for what reasons? Is it time ownership or is it for future benefit? Is it the immediate benefit? All of those things we talked about. We don’t need to hash it all, but those investment objectives. Nailing those down will help them make better decisions of where they should start.

Don’t just invest to invest. You can look up and do 5 or 20 deals in your first year and you can be further away from your actual goal, believe it or not. Trust me, I’ve done it in years where I’ve chased those bright, shiny objects. I got further away from what I wanted and I wasn’t as happy. I can’t buy happiness. You can buy real estate. It’s almost same thing. I would say two parts prep on investment objectives and what it is you want and planning out your life.

FBL 7 | Passive Income

Passive Income: There’s money to be made in investments, great investments to be had in any market.

 

Tip number two would be, fill that fear void with education. Know what your options are, get educated on what your various options are, whether it’s BRRRR, private money lending, investing in commercial or single-family homes, or active and passive investing. There are a million and one different ways to make money in real estate. No one is right nor wrong. No one is the best. It’s a matter of when you have part one, your investment objectives and your plan.

Part two, you’ve got the education, your path becomes crystal clear to you often. I know what it is I’m looking for. I know what all my options are and I know the pros and cons of each and how they fit into my objectives. This is super simple what I should do. Let’s go. Number three is go. Don’t wait whether you’re 55 or 85 or 22, it doesn’t matter. Time is your best friend or your worst enemy in real estate with all investments. It’s the way money works.

You used the example of a 55-year-old person. A lot of times, you’re starting from such more of a position of strength that you can get from 0 to 60 a lot quicker then. It’s been great having you on the show. Thank you.

We got to get Shively back and focus on some of the other things that we had a moment to touch on.

We’ll do that. That’d be something that’ll help a lot of you guys reading. It’s a great strategy you get started, but hopefully you enjoyed this show. Again, if you want help getting started in real estate, learning what your options are, getting the education you need, go to FortuneBuildersShow.com. That’ll land you in a free one-day class where you can start educating yourself, building up your confidence, knowing what your options are. As always, thank you for joining us. Take a minute to like the show, rate the show, whether in YouTube, Facebook, Instagram, whatever, and share it with people you know that can benefit from this education. We’ll see you next time.

Thanks, everyone.

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About Paul Shively

FBL 7 | Passive IncomeEquityStreetCapital.com
Equity Street Capital is focused on achieving attractive risk-adjusted returns while maximizing long-term capital appreciation by investing according to our disciplined strategy of acquiring high-quality real estate investments at an attractive basis.

Through an intensive research and underwriting process along with our strategic partnerships with experienced operators, Equity Street Capital seeks to foster growth and unlock value across our portfolio by focusing on asset management, property operations, leasing, and targeted value-add initiatives.

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The Passive Income Club was created for one sole purpose – to help our students make money passively through real estate.

Founded by our expert team of real estate investors – Than Merrill, JD Esajian and Paul Esajian – The Passive Income Club was developed to share the exact investment strategies that the FortuneBuilders founders personally use to grow their cash flow investment portfolios.

Utilizing these same real estate investing strategies, our team builds customized investment plans for each of our students to create true passive income through real estate.

With the Passive Income Club, you’ll work one-on-one with a personal passive income specialist who will show you how you can build a real estate portfolio that produces significant monthly cash flow.

The Passive Income Club Team will give you access to some of the best turn-key rental investment properties we have sourced from across the country, as well as access to our nationwide property management relationships. We’ve done the hard work and research, so that you don’t have to.

With a long-term wealth plan in place, you’ll be able to build a diversified investment portfolio with both the active and passive sides of real estate investing.