Passive Investor Spotlight #9: Becoming a Lifestyle Investor feat. Justin Donald

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. Got a really fun episode for you today. We've got a returning guest, Justin Donald. You may know him as The Lifestyle Investor. We had him on the show a few months ago talking about his book, The Lifestyle Investor, and really the concepts that he's created allows him to live this very financially free lifestyle while having a lot of success investing. So he runs a lot of different communities and masterminds. Helping teach people how to invest better. One of the cool things about his story is that he's really been able to grow his net worth primarily through investing really well instead of having a big exit of a business where a lot of people come into wealth that way. But he's really grown it by compounding his wealth over time. And so we wanted to bring him back on the show and take a different approach and actually use our Passive Investor Spotlight series kind of framework to talk through some of the ways that he looks at his own portfolio and his own risk-reward frameworks and how he finds deals and how he structures deals. He calls them invisible deals. And so it's really, really, really cool what he's shared on this episode. He even shared that some of the things he talked about, he's not shared on other podcasts before. So he really kind of goes into the nitty-gritty. Definitely don't want to miss this episode. A lot of great nuggets to pull from it. Hope you enjoy. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome back to another episode of the Invest Like a Billionaire podcast. Today we have a returning guest that we're very excited about. Uh, one of our favorite, uh, episodes that we've done before was an interview with Justin Donald, the Lifestyle Investor. We have him back for another conversation. Justin, how's it going?

Good. Great to be on the show again. Good to, uh, hang as always. You know, we just got a chance to hang out, you know, Ben, Jim. So good to see you again.

Right.

That's right.

Always love chatting business with you.

Yeah, it was fun. We got together just a few weeks ago and thought, hey, it'd be fun to have you back on. It kind of took a different angle. So we, in the last episode, just talked about your story, your brand called The Lifestyle Investor. You've been called the Warren Buffett of lifestyle investing, which is, you know, great tagline to get. And really describe what is lifestyle investing, how do you achieve it, what does that mean? And very, very cool episode. So go back and listen to that if you have not yet. But we want to take a different angle today. One of our favorite segments we do on the show is called our Passive Investor Spotlight, where we kind of dig into a little bit more of the nuance of, you know, how do you, how do you view kind of public versus private? You know, what kind of alternatives do you invest in? What do you think about from an allocation standpoint, how do you build your cash flow, you know, stacking and, you know, income versus growth, all these kind of questions that get a little more practical and more specific. Who better to ask than the Lifestyle Investor himself? And so we thought it'd be fun to bring you back on and dig a little bit more into it. So are you up for this, Justin?

I'm up for it. I mean, I eat, sleep this. This is like my favorite thing to talk about. So we can go in any direction you want. I mean, I can geek out on you with, with very specific stuff. I can give general overview, but I love talking about this. So yeah, I'm ready to rock.

Okay, this will be fun. So let's, let's definitely err toward the kind of geek side of things because that's, that's where it gets most fun, I think. But just again, for those that don't— are familiar with you, listen to other episodes, give us the quick background, kind of your story and your journey kind of into this world of lifestyle investing and kind of what that means to you.

Yeah, well, I just wanted to get to a point where I kind of owned my time again. I felt like, you know, at different seasons of life, I've been more or less in control of my time and, you know, how my time is being spent, how I'm earning income, if I'm earning income based on time. And at a certain point, I just wanted to buy my time back. I felt like I moved from you know, maybe a sole proprietor type of life to more of like the business owns me type of life. So it was more like reactionary than proactive. And I felt like I was just putting out fires or moving from thing to thing. And I just wanted to get to the point where I was choosing how I spent my time. So that's where this whole idea of Lifestyle Investor kind of came, you know, into fruition is that I wanted to buy my time back. I wanted to— not that I wanted to sit around on a beach and drink, you know, piña coladas, but I wanted to work on the things that I was passionate about on a schedule that I was passionate about, you know, and maybe some weeks it's a lot of hours and maybe some weeks it's no hours or it's a few hours. But I just wanted to have a lot more autonomy than I had. And so I started buying assets that produced income. And that income eventually grew to exceed our lifestyle. You know, first it was our bare minimum survival expenses, and then it was our lifestyle expense, and then it replaced my earned income. And then it got into this, you know, place of surplus where I had extra. So, you know, it can either go towards, you know, building an even, you know, cooler, more extravagant life, or it can go to investing more into, you you know, building wealth for the future. And I always opt to, I feel like I've got a pretty fun life. And so I just opted to, you know, reinvest all the surplus into other things. So once I had my time, I got really clear on where I was passionate and how I wanted to use that time. And that's where the Lifestyle Investor brand really blossomed. And I started teaching people how to buy assets and, you know, kind of sharing deal flow that I'm doing and negotiating preferred terms and, you know, the mastermind and the book and the podcast all kind of blossomed from there.

Hey, let me ask you a question. So when you were just starting, you know, acquiring this income-producing asset, so I'm assuming you had a regular, quote-unquote, regular job, right? You had the— okay, from reading your bio and whatnot. So the person who's out there that's, you know, maybe a professional, a high, you know, high-salary professional, but they're thinking in order to acquire enough assets to actually replace my income, that, that can seem like a long haul. And so my question is, did you fund that strictly from surplus of the income you were earning, or did you start syndicating or using other people's money in the process, or was it a combination? How can a person that right now is feeling like, I'd love to do that, but man, it would take me 30 years and I'm already 45. Address that?

Yeah, Jim, super important question. And I mean, I think that those that are very high income earning, you know, individuals, whether they're business owners or they're in corporate America, like that is the toughest spot to be in because you've got the golden handcuffs, you've got a lifestyle that you're accustomed to. If you leave it without replacing it, then life does certainly change. So for me, you know, I was a high-income earning professional. I kind of worked my way up, but what I realized is that I didn't have to replace it in one fell swoop. So I never raised money from other people. That is one way to do it, and I think it's a great way to do it if you have the bandwidth for it and if you want to develop the network for it. I know a ton of people that have done it, and it's probably a way that you can get to where you want to go a lot faster. I did not do that. I funded everything with my own dollars and I worked pretty hard to aggressively save and aggressively invest in the deals that I did. But the thing to keep in mind is that you don't have to replace everything. It starts off simple. Maybe it's replacing some utilities, then car payments, then mortgage, and eventually you're building up. And again, it's like, let's get to survival income. Like you can make a total pivot if you have your bare minimum survival expenses on a monthly basis covered, right? Mortgage, utilities, car payments, groceries, you know, whatever else comes along with it. So you don't have to fully replace everything. But if you can handle it, if you can swing it, you can keep your day job a bit longer and have that fund more of the investments. And again, you can raise money, you can do deals, you can do bigger deals. If you bring more people in, depending on where you sit, maybe you saved a lot of money and you can do it all yourself. So I think either direction works great. There's pros and cons to either side of the fence there. I just think getting a start at some point is really well worth it. And even if it takes, you know, a few years, I think it's still going to be worth it when you get there.

Yeah, I love both those things you said. Like, so much of it, it feels like it's this big far-off goal, but you can take it into little bite-sized chunks. Just replace your first utility bill, right, on a monthly basis and just get that snowball rolling. The faster you kind of do that, the faster the snowball goes, and it kind of compounds and builds up this momentum. The other thing I think is, you know, correct me if I'm wrong, but I believe in reading your bio, talking before, you've done all this without a big exit of a business, right? A lot of people build a business and then they can sell it. They have a big liquidity event and they have all of a sudden $10 million that they can now deploy. But you've been able to do this kind of step by step, you know, time over time and build up this kind of snowball just from excess. And is that, is that accurate?

That's accurate. Yeah. I still to this day haven't had a substantial, you know, business exit. You know, I just had my first 7-figure exit, but I was a minority partner in that exit. So my exit was not 7 figures. but the cumulative exit was. So, I mean, up until the point that I had financial freedom, I had no exits. So there was no significant windfall in cash. Everything was literally a step-by-step progression to cover my survival income and then my lifestyle income and then beyond.

So what was the timeframe from kind of that first passive income check, right, that you got from your investing in assets to achieving kind of what you call the excess, you know, the be able to fund the lifestyle was the kind of timeframe between that.

And if you don't mind, when you go through that, mention what kind of asset— I know that changes, but what assets initially did you, you know, poke the fork into?

Yeah, I got into mobile home park investing at first. Really, it at first wasn't something I was interested in. I had a friend that was going to do it and, you know, started learning about it. Was in single-family homes and was like, man, this is a lot of work, a lot more than I signed up for. The margins aren't there. The overhead, the capital expenditures, the management, it is a nightmare. And so he ended up selling, I think, 8 or 9 or 10 single-family homes and then going into buying his first mobile home park. And I got to watch him firsthand and it was a smooth transition. It did not seem hard to manage. And he's, you know, I was kind of like a hard money lender at the beginning and transitioned into being, you know, the, you know, an owner myself just buying the deeded property. And so in one fell swoop, one park, I replaced my wife's income. She was a teacher at that time and she didn't have to work. We had our daughter, you know, shortly thereafter and, you know, she could be a stay-at-home mom and, you know, it was a really good situation. So, that one, you know, I went to a boot camp to learn how to do it. Within months of that boot camp, I found a park, found an owner that was willing to sell or finance it with a 15% down payment. Then I bought another park from him. So, you know, in a matter of months from the time that I started learning about it, I had an acquisition. And within, you know, months of that, I had another one. And, and really in one fell swoop, my wife's income was replaced, and then with that second one, our survival income was replaced. So and really it was kind of like a back-to-back transaction that all ended up happening inside of a single deal. So I almost closed on one, found out about another one, added that to the contract over the due diligence period. And, and so, yeah, really we went to survival income immediately.

And did you have like a decent nest egg built up at that point to be able to invest, or are you just able to use creative financing and and other structures to kind of maximize the dollars that you had?

Yeah, I'd been saving up for a while for that first purchase. I didn't know where it was going to come from as I was saving. So this was, you know, a substantial amount of what I had saved. I mean, it may have been close to everything. The first one was $75,000, technically $65,000 and then $75,000. So I ended up doing that at the same time. and that was almost all of my money I had saved at that point in time.

So I think that—

or accessible—

what you just went through there, that, that is super key to, to our listeners and our watchers because a lot of people were thinking and what I was kind of feeling, you know, I've been there in the past, but the man, if I buy a house every year or 2 years, yeah, I could see down the road where tenants are paying off the mortgage. But again, I'm, You know, that's great if you're 20, but, you know, there's guys like me out there. I started over from scratch at 55. I was broke. Buying a house a year wouldn't have done it for me.

Right.

So, so you got smart. I mean, you saw that real estate was the play, but where, where's a niche to stick the fork in? And then you did— you used leverage, but smart leverage. Right. And that's what, that's what enabled you to get there. And that's why people actually need coaches and mentors like yourself that have programs and courses where you can help people get there, you know, faster. Nothing wrong with the slow, the slow, steady train. But again, the older you get, the more, you know, the closer we are to the, you know, the end of the ride. And we want to, you know, we want to get there. We want to get there to have that passive cash flow as quick as possible without taking undue risk. So appreciate that. Your secret sauce there, I think, was the mobile home parks. And with seller financing, just turbocharges that whole, that whole process.

So that's great.

Yeah. And it's multiple units. So it's instead of buying one single-family home, you know, I bought, you know, 60 lots in one transaction. So you have someone default, you don't even feel it. Right. And then that second one was 59. Now that one was not very— I mean, that was way less occupied. So I think the first one was like 97 or 98% occupied and the second one was like 37% occupied. So I had my work cut out for me. But all you had, baby, Yes, sure.

For sure.

So, so, so kind of from that point, give us kind of the high-level, you know, abbreviated journey from purchasing your first, you know, mobile home park to how you've built out your portfolio now. And also, I mean, it is important to note like this, you're kind of going more in an active approach to this first acquisition, right? With some, some people may not want to go and be as active as you were, though that may be a good place to start, right? To kind of really learn the ins and outs of some of these things. But You know, how do you kind of shifted your approach to from an active versus, you know, passive role in investing as you've wanted to, you know, create more time? So kind of give us that kind of journey from here.

Yeah, I'll give you the, you know, abbreviated version for anyone that wants to kind of read the whole story. It's outlined in my book, The Lifestyle Investor. But, you know, I really look at investing in kind of like two different genres. You kind of have two different sides of the fence. You got You know, side number one is where you buy deeded property. You're on the hook for everything. You're managing that asset. You can hire out a property management team to do it. You're going to take less of profit when you do that. So you can either, you know, really work hard to maximize the profits or you can go the syndication route. You invest in other people's deals, you invest in other people's funds. You're going to take a reduced return because you don't own or you own a, you know, a percentage, a small percentage of it. But it's institutionally run. It's, you know, managed third party or in-house. You're paying people, you're paying professionals, not people that are learning the job on the job. These are people that are actually good already with a proven track record. And so I think you're really weighing and balancing. Are you maximizing the return or are you maximizing your time? Like how much time you're putting into it? And I think either way is good. I think both ways are good. It's just getting clear on what you value most today. So early in my life, I valued the return portion of it. So I was willing to do everything. I was willing to be the property manager and learn it. I also think that was smart for me because once I did hire others to do it, or at the beginning I brought it in-house, is I learned everything. So I knew if people were doing a good job or not, or I knew if they were, you know, scamming me or not. And so there was an aspect to that where it was great. I did everything. My returns were much better. You know, I eventually tried to outsource some of that. We had some good groups and some bad groups, and I've since gotten a lot smarter on that front. But today I don't, I don't transact for time. You know, earlier in my career it was a time swap because the return I could make on my time was much greater than maybe what I was making or for the hours I was putting in. It was a larger dollar per hour doing that than doing my day job, for example. Or, you know, I'm able to leverage with systems or other people. And so that return is greater. Today I'm not willing to make that transaction. My transaction today is I'll take a lesser return for no time spent. You know, maybe the only time is the diligence on whatever the deal is. So again, I think either is great, but today my money works for me. I don't trade time for money. In the earlier years, I traded time for money, but I did it in a way that was calculated where I made a, you know, a move based on what am I earning today in my profession and what can I be earning with those dollars elsewhere? Can I do it as a side hustle? At what point can I transition and do it full-time or even part-time first and then full-time? Or do I even want to do it that way? Right. I mean, the other thing about real estate is some people get into it and it's passive income in the beginning. But when you buy too many of them, it becomes an active job and then they're trapped in their business, owns them again. And you see this in the real estate world all the time. So that's another case for investing in syndications and doing deals with you guys and many of the others that are providing amazing deals out there that are professionally managed and run.

So I would say that, you know, so the continuum is kind of You can go, you could go buy a machine that's dialed in that produces cash, or you can, or you could build the machine from scratch that will ultimately produce cash, or you could buy a machine that needs some work and you can add. But whatever bandwidth, whatever energy you have to, to apply to the machine is going to pay you, you know. So you want to pick the kind of machine that's going to be still paying you 10, 20 years from now. So Mobile Outpark, for instance, now you've probably sold it and moved on, but, but even if you hadn't, it would still be sitting there minting money for you. So that time and energy that you put into it, that wasn't, that wasn't passive, that was active work to build a passive income machine. And I think that's probably where most people are, are going to have to start unless they just inherit a lot of money or, uh, you know, or they have access to a huge 401 or something. So to make it, you know, to kind of lower the bar to somebody that's got a brain and is willing to work and has a decent income, it's kind of the best of both worlds because you can start applying some new skill sets. You know, you can either buy the 100% occupied mobile home park that's all dialed in, or you can buy the one that, man, this is going to be some work. But hey, once I do this work, I think it'll still be paying me in 10 years. It'll obviously require some upkeep. But I mean, that's kind of the model I've followed through my, through my career.

But yes, certainly. And, you know, to follow up on kind of the path, as you had asked me previously, you know, I side-tangent here, but, you know, to even address what you had said, I still own those first two parks. I've actually only sold one mobile home park to date, and I took that money and did a 1031 into two other properties. So I kind of doubled up on that and just grew it. And so those two properties are still minting, you know, cash. They're just cash flow machines and really have afforded us a great lifestyle. So we get offers all the time for people that want to buy them and we just, we haven't ever pulled the trigger. But that led us to more surplus income. You know, we bought our third park that then we rolled that into parks, you know, the next two, which covered our earned income. So we got the lifestyle, income, then we got to earned income, then we got to surplus income, and then our problem flip-flopped. Our problem originally was we don't have enough passive income or we don't have any passive income really is what it was to like now we have more passive income than we know what to do with, which doesn't sound like a problem, but it actually is a problem. It creates a situation where like I want to be a good steward of the money. That I'm being entrusted with. I don't want to just sit on it. I don't want to, you know, make poor choices. And so that's really what forced me to get into all the other alternative investments because I could either keep building the mobile home park portfolio, which we have done. We do have an arm of our business, our real estate arm, and one segment of it continues to acquire mobile home parks. But the problem would just get bigger and bigger. We needed to figure out a way to take that surplus income and allocate it in a way that wasn't just producing more cash flow today and also in a way that was smart, in a way that would de-risk the portfolio, in a way that would balance it better from an asset allocation standpoint. And so that's why I started studying who the wealthiest of, you know, the people that I could get access to their financials and to their portfolios and, you know, what family offices are doing for, you know, those that are you know, in that deca-millionaire, centi-millionaire category, what are the billionaires doing? What does their portfolio look like? And am I modeling it after that? Because, you know, most entrepreneurs, they have a huge risk because the majority of their assets are in their business. And then everything else from there is likely in public equities. For those that are professionals in the corporate side of things that don't have a business, generally most of their investments are in, you know, stock market, public equities, which again, like a lot of people say, oh, it's diversified. That's actually still a huge concentration risk because you're at the whims of how the markets react, which is irrational. You never know what's going to happen. So it's not to say that you don't invest there, but to put 100% or 90% or 75% of your total net worth in that one, like, sector, that's, That's like high risk and scary to me. Like, I would never do that.

Yeah. I mean, in a lot of the research we've done on the ultra wealthy, you know, in different groups like Tiger 21 and, you know, other reports you can find that are publishing the portfolio allocation of these ultra wealthy investors, generally it's about 25% or less are actually in the public markets.

That's right.

Which is severely flip-flopped for most retail investors, you know, where it's at least 75%. Is in stocks and bonds. And to your point, over time, you know, stock bonds, you know, they've become more correlated than they ever have before. They used to be kind of the helpful balance. But I think it was 2022 had the worst year for the 60/40 portfolio in history. And part of that is correlations are kind of going to one. So they all kind of move in tandem and you don't have the diversification that you maybe once had, you know, kind of shifting to that. So you've kind of talked about your journey and your approach to investing has shifted over time from more of an active approach where you can generate higher yield as you're kind of more involved in it to now where you're really more focused on maximizing time, return on time. So you're not wanting to be in the weeds and involved in every major decision on these things, investing more passively. What does your portfolio look like today? And maybe, you know, break it down from your personal, which may not apply to everybody, but then also to kind of how you would be rules of thumb that you use for evaluating, you know, different types of asset classes. You know, public versus private, you know, different levels of risk and reward that you're kind of benchmarking against. Just kind of give us a snapshot into, you know, Justin Donald's brain and how you think about the allocation portfolio. This is another, another area a lot of people don't think about when they're kind of getting started is they kind of just do onesie-twosie haphazard investment into just things that come across their desk without any real consolidated approach to here's what I'm trying to build and here's where I want to end up?

Yeah, great question. You know, Ben, and what I would say, like, you're spot on on some of your stats. I've been Tiger 21 for 5 or 6 years, and so I'm always looking at the allocations that the members submit. And, you know, they've got some great data points that I think are definitely worth taking into account. And the reality is very few people build their wealth in the stock market. A lot of people maintain their wealth with a hope to grow it with a percentage of it there. You know, a lot of people, you know, retail investors and those in corporate America are generally overallocated to it, you know, just based on the data. But if you look at the wealthiest people in the US and in the world, I just see more, you know, data from the US. It is, it is surprising how small of a percentage is actually in the stock market. So, and by the way, you mentioned, you know, one of the worst performances ever. I mean, the last 100 years, you can look at the data, the 60/40 stock-to-bond portfolio allocation that was touted as the safest way to invest your money was the riskiest, worst-performing in 2022, right? Like that, that should set off, you know, alarms and red flags galore. Not to mention that you have the statistic that, you know, over the last 15 years, only 5% of money managers, financial advisors outperform the S&P 500 index. So they charge a premium for you to invest your money with them, but then they perform— 95% of them perform worse. And the 15 years before that, only 4% of them beat it. And the 15 years before that, same thing. And by the way, from 15 years to the next 15 years, it wasn't even the same 4% that were the 5%, right? So it's like the, the, the, the— all you need to know is in these statistics that most people pay a lot in fees to have worse performance than the cheapest way to get allocation to, you know, the public equities, which is just you know, some of the indexes, you, we can just use the S&P 500 index, which is your lowest cost way of doing it. You can go in on your own. So I, I just wanted to share that most people build their wealth from a concentration strategy, but they maintain and grow their wealth from a diversification strategy. So if you look at the wealthiest people, they're not trying to get wealthy in the stock market. They're using the stock market as one component of their asset allocation. And oftentimes they're not even using it for the return. They're using it because they can borrow against it. They can use margin to invest in other things without creating a capital gains transaction. If they sell a stock, they have to pay capital gains tax. If they borrow against it, they don't pay any tax and they can acquire more assets. So the ultra-wealthy aren't using it straight up for the return. They don't want to lose money. And long-term, they're banking on that segment outperforming, but they get real-time, like, you know, ways to outperform based on a cumulative utilizing of those dollars plus the return. So I think that's important to note. And if you look at, I mean, I've looked at, I mean, literally hundreds of centimillionaire, billionaire family office Tiger 21, you know, the banks publish, you know, these reports on asset allocation and you are generally seeing public equities at about anywhere from 15% to 30% right now. And by the way, some of the largest endowments in the world, the largest endowment in the world or in the US at least, had based on credible information, had less than 15% of their portfolio invested in the stock market. You know, so like think about the groups, the institutions, the, the Ivy League programs of the world and where they're investing their money. Like, I would like to copy them more so than, you know, follow the herd. And, and if you keep— I mean, we can geek out on all the details, but you got another 25% that's generally real estate. You got another 25% that's generally private equity, and then you got 25% everything else. And that can be, you know, a small crypto allocation. You've got fixed income, you've got cash and cash equivalents, you got precious metals, you've got private credit, you've got agriculture, you've got commodities. And so some of these are like 1% allocation, right? You're just— or half a percent allocation. Others of these are, you know, maybe a larger percentage, but there's not actually a lot of variance across the board. You look at the wealthiest people in the world and specifically in the US, the numbers are pretty darn similar across the board. Right.

It's so interesting to me. It kind of reminds me, I saw over the weekend this kind of bar chart of the, the actual causes of death by year and what those things were. And then it was right next to it what the media reported on by percentage of airtime compared to the actual. And it was like completely opposite, right? Like all the terrorist, you know, things and all the homicides, like they're very, very small percentages of the overall deaths. But it's like makes up 50% of the airwaves. It seems very similar, like where the kind of mainstream media is always pushing you know, this simple, you know, cookie-cutter approach to stocks, bonds, mutual funds when the ultra-wealthy aren't actually doing that, right? If you break it down and look a little bit deeper, it's really not how they're investing. And you mentioned it down as like Yale Endowment was one of the first pioneers of this, you know, many decades ago to allocate into the private alternative sectors to generate alpha, to generate above-market return. And they were very successful in that, being the most successful endowment you know, for a long period of time. So I would definitely recommend— you said you're part of Tower 21. For anyone that's out there, it's not familiar with this group, you can go and download this allocation report. They publish it quarterly for free and you can see exactly what Justin is talking about. And it's a really great, nice little graphic. You can see how this breakdown is and it's published quarterly. I've been following it for many years just because it's interesting data points and most of the time, I mean, maybe there's slight changes over time, but largely it's pretty well baked in as far as what the allocations are. So you kind of follow that similar approach to kind of what would be represented there from your own portfolio, or how do you kind of personally adopt some of these, these concepts?

Yeah, another great question. And, you know, Ben, for me, I want to model after the smartest people, the smartest groups, the smartest investors. You know, if you're following mainstream media, you're following programming from those that are the biggest investors, donors, contributors. So it is, it is— there's marketing to a retail investor and Wall Street is— they know what they're doing. They are marketing to the masses that you should have your money with them. But if you look at the wealthiest people in the world. And let's talk about, you know, I don't, I would imagine a lot of your, Mark, your audience is US-based, probably most of it US-based. The wealthiest people in the United States, you go across any of the reports, you go across any of the groups, you will see that over half of their portfolio is in real estate and private equity. Over half. And we can geek out on, you know, private equity. What is venture and what is, you know, early stage and what like, you know, I'm not a high-risk investor. So I mean, for me, I would want just a small allocation of 1%, 0.5% in kind of the moonshot type of stuff. And for me personally, I like that coming from assets that already cash flow so that I'm not losing the principal. I'm just every month I'm getting cash flow. And if I were to put something in, it's a piece of that cash flow. That to me is de-risking. That high-risk investment, because on the, on the angel side, your smartest investors out there basically say that you need to have about 100 angel investments to get one good return. And if you're a great angel investor, if you get 2 out of 100, like if you follow Naval Ravikant, like, I mean, just think about like he's one of the most successful angel investors. But think about those stats. Those are horrible stats. But there are ways to game it. There are, you know, there are things that we've done in our mastermind where we've been able to group it in different, you know, funds where maybe we have exposure to 600 to 1,000 in one fell swoop, where not only can we capture the gains, but we can write off the losses. And so it becomes very advantageous in a one investment, one fell swoop. We're able to play the odds of getting the exposure to get the wins right. So there are hacks, there are ways you can do it. There are ways like I— there are hacks even to the VC investment, which is typically a 10-year plus 1 or 2 or 3 extension years at the end of that fund. But we figured out ways to kind of get in in the middle or get in at the end, whether it be on a secondary or whether it be a group that does a Series A extension in and out on a Series B secondary and just ways to take the biggest gains of that 10 years in the shortest period of time. So instead of waiting 10 to 13 years, you can get in and out in a year, 2 years, 3 years. So there are ways that you can get an edge that we participate in. And so I model my portfolio after the groups, the people, the family offices, the billionaires, the people that I see having the best results, people that year in and year out are performing really well. I am still heavier in mobile home parks, and so my allocation's going to be a little different there. And from a real estate standpoint, I think that's your safest investment class. Yeah. And I mean, it's just, it's recession-proof and affordable housing's always going to be a thing. And so if I'm going to be heavy in something, I like that. Industrial's next for me as second heaviest. And so, you know, I'm probably a little more concentrated there than, what I would recommend. And by the way, I'm just sharing my, you know, opinions and thoughts and what I do. In no way is this financial advice, but, you know, I love teaching people the way I look at things. And, you know, I'm an educator at heart and I love, I love facilitating great conversations. So, yeah, I think, you know, having a percentage of your allocation in Bitcoin is probably a smart bet or half a percent if you're super skittish or maybe even up to 2%. You know, having, having money in— you guys are doing a new deal, right, on the commodity side, oil and gas, you know, having, you know, 1%, 2%, you know, in there. I mean, this is in line with what the family offices do. Well, yeah, we get Jim's, you know, raising it up, you know, I'm bullish on oil and we're in a good season where you could be bullish for it. Right. But the, the reality is you want a little of everything. So whether the market's good or bad and that's all relative, you have something performing well that is uncorrelated. So to me, I like having that uncorrelated, you know, all the uncorrelated assets.

So let me ask you this. So getting into mobile home parks, you know, a decade ago was a really good time to get into it, right? And now it's a little bit harder and cap rates have massively compressed. And we've seen that kind of across all of real estate to where cash flow is very difficult to find. Number one. So for you, it's kind of lifestyle investor, a key kind of principle. And, you know, part of this is current cash flow. So getting paid distributions right out the gate, you know, it's, it's, it's been more difficult to find those types of deals that are cash flow at a reasonable rate of return for the risk you're taking. You know, how has that impacted your approach and can you replicate what you did maybe a decade ago Is it by shifting to different asset classes? Is it, you know, maybe just accepting a lower rate of return given, you know, some of this cap rate compression? Are you expecting kind of a reversion of cap rates over the next couple of years through about 5 questions in there? But kind of give us your thoughts on that because I think that's an important thing to, to discuss because timing matters in all of this. And you got in at a really good time and obviously you're a very smart person. You've done a very, very good job growing growing this, but it also helped being in the asset class that has massively appreciated over the past decade.

Yeah, all great questions. And, you know, we could break down, we can go in several directions here. Let's just start here with the mere fact that mobile home parks to me are still, there's still the opportunity to get great returns because it's the least— it's the least institutionally owned or the least concentrated asset class out there. So you've got really about— I think the newest data is still under 10% of all mobile home parks are owned institutionally, whereas you got the flip-flop in multifamily where you got over 90% that are institutionally owned. So yeah, there is all kinds of compression there. The spread is high. I mean, it's hard to make sense of it. And And yeah, I want to stay away from deals that don't paper. And I mean, and for the record, I have said no to a lot of deals over the last decade that were using, you know, floating rates or, you know, bridge, you know, short-term bridge financing because I'm too risk-averse to want to play that game. And even though I had a lot of friends that made a lot of money because the timing was right at the moment, the timing's wrong, you lose money. And so Because of that, I'm in no— I have no risk of any deal going bad based on interest rates because I'm not in anything that is subject to the interest rate hikes. I'm all in long-term debt, so— or long-term rates. And so that, that to me is, is, you know, first and foremost is like I'm going to make good decisions and I might say no to some stuff that could have made money, but that's okay. Maybe I lose some in a frothy environment, but then I win in a tight environment. So that has served me and has served our community, Lifestyle Investor community, really well. But again, when we go back to like, you know, institutionally owned asset classes, find the ones that, I mean, you've got more baby boomers looking to retire in the next 15 years. I mean, basically the largest wealth transfer in the history of the world is about to happen in the next 15 years. So baby boomers are going to be passing down You know, their wealth, their money that's going to be inheritance to the millennials. And so if you want to figure out like how to make money, one of my commandments is finding these invisible deals. That's my third commandment of cash flow investing, right? And finding invisible deals is like paying attention to the trends. What's coming? Well, we know millennials are going to control more wealth than, you know, any other generation in the history of the world, right?

It—

I've seen some reports say that it's $76 trillion. I've seen other reports say as high as $106 trillion. So, um, you look at like the, the, the net worth of, of the country of China, you're talking about $75 trillion. So, and, and they're second largest. So you're talking about the greatest wealth transfer in the history of the world is about to happen in the next 15 years. So if you know what millennials like, how they spend their time, how they spend their money, what, you know, buying criteria they have and decisions. There's so much opportunity. But then also look at who's going to be transacting. So who owns what assets? What are baby boomers selling? Well, a bunch of them own businesses, a bunch of them own real estate. So like paying attention to that trend is going to make a lot of people very wealthy.

I love it. So, I mean, you kind of alluded to it, but timing matters, trends matter. How is— or were you kind of seeing, you know, the next— obviously mobile home parks are still good deals out there. You know, they're harder to find than they were 10 years ago. But where else are you seeing, you know, like more specifically, what are some other asset classes and other things you're seeing that you feel like are, you know, good long-term trends to kind of position for as an investor?

Well, anytime you're buying from, you know, a baby boomer, someone that wants to retire, someone that, you know, their kids don't want their business. So they're, you know, I mean, in all reality, they don't think they can sell it. And so they're going to just shut it down. It's a profitable business that they're just going to close the doors on. Any time you can find that seller, you're going to get a great deal. So it doesn't matter what the business is. And by the way, if you pick businesses that are, you know, performing well, that are trending well, that are, you know, home service-based businesses or I mean, we could go in many directions, but like these are all great businesses. Fine. You know, I've got a company in single-family home maintenance. And so we know margins on plumbing and HVAC are the two greatest by a landslide margin. So finding businesses in those spaces, I mean, there we could go in many directions. Roofing, huge margins there. So I mean, those businesses are great. The real estate that's being, you know, handed down, I think there's all kinds of opportunity in the secondaries market for companies that are super profitable, like I've bought a ton of secondary, secondary shares in companies that are profitable today that employees just need, you know, that there's a life situation, they need to sell their shares. They're way ahead anyway from when they came in. So they win. And then you get in at a super low valuation compared to where they are, but they're cash flow positive. So I've been doing that a ton. You know, when you have these market corrections, it creates so much opportunity. I mean, the list goes on and on. There's endless places to be able to buy assets at a good price in a safe way, in a risk-adjusted way where if things go wrong, you're not losing all your money. But if things go right, you're making many multiples on your money.

I love that. I mean, it's so true, right? So many investors right now are terrified of what's going to happen in the economy. And are we going to go into this deep recession? Is, you know, are we ever going to get out of this pickle we're in? And it freezes a lot of people to not make decisions, not make investments. And sure, you got to be cautious. You've got to understand what you're doing. But at the same time, inflation is not your friend right now if you're sitting on a ton of cash. And we have the same perspective. There's opportunity everywhere. You just have to know where to look and you have to know how to, you know, make investments in times like this. You've talked about some of the things you like, and obviously the mobile home parks were this major catalyst for you personally. You know, have there been any, you know, on the other side of it, things that didn't go the way you expected, whether it was, you know, as an LP or as an active investor that you invested in that kind of left you with a, you know, a really good learning opportunity, good experience, maybe you lost money, you didn't lose money, but something that really you live with now that has helped you, you know, invest going forward on the negative side of things?

Yeah. I mean, there are tons of, you know, opportunities. We can call them opportunities today. They sting in the moment when they don't go as planned. They hurt, you know, when you lose money or you had your money locked up for years and you just break even, although sometimes that's a win, right? But it's painful when it's just completely opposite of what you anticipate. But I'll also tell you, the times that I've lost money, the times that I've broken even, those have been some of the best learning experiences out there. So yeah, I mean, there are definitely some deals that I'm in. In fact, I think I'm legally allowed to talk about this. I just testified in federal court for a Ponzi scheme that I was an investor in that I had critical info in. And you know, was, was requested by the federal government to share the info that I have for this case. And so I just got back from that. And, you know, that, that's a great situation that I talked in depth in my book about where I lost money. This was not a good deal, but I learned so much from that experience that I have become a better investor. I've lost less money because of it. I've made better returns because of it. And had I not lost that money, had I not gone through that experience, it would have opened me up for many other losses in the future. Right. I have a new criteria that I use now. And so if you're in—

these are outlined in your book, I'm assuming, right? So yeah, without giving the whole, you know, giving it away because I'm going to read the book after this, but what are the kind of 2 or 3 things that it kind of shifts your perspective on or kind of the non-negotiables that you have now when you're looking at opportunities?

Well, it's funny, I've got Murphy's Laws for the Investor and for the Lifestyle Investor. It's like, you know, if it's— if it seems too good to be true, it is. I mean, I got a whole bunch of these words like you just have to do your due diligence. You can't base it on emotion. You got to base it on fact. You have to— you got to you can trust, but you've got to diligence it, right? So you don't have to go in to every situation feeling like people are lying to you. But I think you will be better off if you go into every deal that you're vetting coming from the standpoint of this is not a good investment. I'm a no. Prove to me why I should invest in this deal as opposed to this is a good investment. Let me see if I can talk myself out of it. And new investors think every deal is a good deal because they don't have enough exposure, they don't have enough reps. And so I think just the simple mindset of going into every deal saying, this is not a good deal, I'm a hard no right now unless I can be convinced otherwise. That single thing has been a game changer for me.

Hmm. That's so interesting. I think so much to another thing I see a lot of early investors do is they just look at the returns, right? Are the returns X? And they just base all their investment decisions based on that without considering what's the risk I'm taking for that return. Is that return mostly cash flow or mostly back-end profit when the deal exits? And what's the likelihood of that happening? Right. And kind of risk-adjusting everything is something that I feel is another helpful thing that you're kind of alluding to.

But can I pile on to that?

Yeah.

How successful is the third-party group that is actually running it, or is it in-house? How much experience have they had? Have they been through a recession? A pro forma means absolutely nothing. I don't care about your today pro forma. Show me your last deal that went full cycle pro forma. And how did you actually perform to it? And how many deals have you done and how many deals have gone full circle? Like, all those matter. Did you only succeed in the last frothy 10, 11 years, or did you have success beyond that? Because I only want to invest in people that have been through a recession and have the experience and the know-how, like We could diligence that in so many directions, but a retail investor doesn't get that. You know, new investors don't get that there's ways to manipulate the preferred return with catch-up clauses, that there's a difference in the waterfall structure between an American waterfall and a European waterfall. There are ways that these groups can make money before the investors make money, and then there are other ways to structure it where the GP or the sponsor can't make any money until the investors get paid back and make their return. And so The more you learn, the more reps you get, the more you, you figure out like who are the good players that have good reputations, that have the experience, that treat the investors the right way. You know, you're going to benefit from that, but you got to get in the game and every investor is going to lose at some point. Every investor is going to lose money at some point. And that's just part of the hard knocks of learning how to become a better investor so that you lose less in the future.

Yeah, that's awesome. Well, I've said it like I said I was going to say it. I'm going to say it now, but you've got to listen and check out Justin's media platform that he's put together on this Lifestyle Investor. Check out his book, The Lifestyle Investor. Check out the podcast. It's also Lifestyle Investor, I believe, right? Yeah. And go, go to thelifestyleinvestor.com. He's got a lot of resources. He's got different online courses. He's got masterminds, a lot of really cool things in this community he's building on helping educate investors, which is something we're obviously very passionate about here on the podcast. And just, just love what you're doing, Justin, and just really appreciate you getting out there and teaching people what you're doing. So this has been so cool to have you back on. Thanks. Thanks for spending the time with us.

Thanks, Justin.

Yeah, thanks for having me. I'd love to just make a real quick plug for the book. It was a passion project that I never thought was going to take off the way that it took off. I, I never expected to be a number one Wall Street Journal, USA Today bestseller, or top 1% of all books sold. But I went into this book saying all the profits of this book would be 100% donated to, to charities that I support, namely fighting human trafficking. And so I'm really proud to say that this book has now been responsible single-handedly for donating hundreds of thousands of dollars to these humanitarian efforts. And so, you know, I just want to champion, you know, some of the groups like the Tim Tebow Foundation and Love Justice International and many of the other groups out in the space that are doing cool things. So I talk a lot about financial education. I want to help people become financially free. But a lot of people don't realize that some people don't even have their actual human life freedom, and we want to buy that back.

Well, thanks again, Jess, for coming on. It's been really, really fun.

Thanks for having me. Always a blast. I could talk about this stuff all day. So, uh, hey, we'll see you in California in a couple weeks, right? I can't wait. I'll be there. We'll have some fun.

Awesome. All right, thanks so much.

Thanks, guys.