How Personal Resiliency Builds Wealth with Dr. Allen Lomax

We can straighten out management issues within, you know, two to three months and we can then start generating cash flow much sooner than if we have to go in and do a renovation that is to take six to 12 months before we're able to turn that around and start having cash flow on those.

Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm your host, Chris Larson. If you haven't yet, get a copy of our book for free at our website, nextlevelincome.com. that's www.nextlevelincome.com. just click on the book link and I'll even send you a copy if you put your address in. On today's show, we have Dr. Alan Lomax. Dr. Lomax is a seasonal investor with a PhD in Organizational System Psychology and over three decades of experience guiding personal and organizational growth, inspiring dynamic professionals to passionately engage in the work of their calling while simultaneously securing the their financial well being. Stop training time and energy for your livelihood. Alan has created a unique blueprint that puts your money to work for your livelihood and frees you to engage in your passion while experiencing tremendous personal fulfillment. In academia, he secured his financial well being through passive real estate investing, allowing him to thrive financially while still making meaningful contributions in his field. After losing everything due to the financial crisis, Alan devised a resilient success strategy and is back financially stronger than ever and flourishing and in all areas of life. As founder of the Screams to Impact Prosperity program and the Screams to Impact podcast, he passionately empowers professionals to engage in their calling, make the galactic impact they dream of making and build their wealth. Today, Dr. Lomax is going to share more of his story and what he's got going on today. Alan, welcome to the show.

Well, it's great to be here, Chris.

Yes.

Long time since we've been together. It's great to be back with you.

Yeah, yeah, it's great to see you. I know you've had a lot, a lot going on and man, the landscape in real estate has changed so much over the past few years since kind of the Heart of COVID and we're coming kind of out of that, but we've seen the real estate cycle kind of shift a couple times as we record this. We're about a week out after the Fed just announced a 50 basis point rate cut which a lot of people find positive. So, so I'd love to talk about all those things, but before we do, I'd Love for you to share a little bit about your background and what you have going on.

Well, thank you. So I don't know where to start. I mean, I started my company, Steve Talker Capital, and inspired really because of having to overcome significant challenges throughout my growth and development processes. And my initial goal was, was, I think like many of us was, I wanted to develop wealth. And I soon realized that that's really kind of an empty, meaningless kind of endeavor. And I began to realize that there's probably a lot of people like me in professions like I'm in who have really essentially have a comfortable income and have really, in a lot of ways just become complacent with that income and forget about the fact that, you know, someday we probably do want to retire and want to. To have a significant income to continue with that. And we don't think about those times. So. So I really changed my focus from just developing my own wealth to looking to develop opportunities for others to develop their wealth, to stop exchanging their time, effort and energy for a livelihood, and to do that by developing multiple streams of income primarily built upon passive commercial real estate investments. And so if I can take just a moment to just share about my story.

Absolutely.

I. One of the more significant things that ever happened to me was when I was in the seventh grade. My family and I were sitting around black and white television and all of us were sitting around the same screen. So all of dates me considerably. But on the show came this special about homosexuality. And this was the first time I had really ever heard that word. And as they. They were interviewing the individuals, they had their faces and their identities concealed. And it was a pretty bleak introduction to the concept of homosexuality. But I realized instantaneously that that was me. And it was not a pleasant realization. It was more like a ton being buried in a ton of. Of bricks. And from that pursued, I mean, proceeded many years of depression on top of discovering that it was homosexuality. And I mean, having absolutely no place, nobody to talk about that issue. And then on top of that, I also undiagnosed dyslexia. There just was no such diagnoses in those days. And so I had been labeled since, since my grade school as a slow learner, not very bright, and so going through these things. Eventually I did graduate from high school, a college that admitted me and lacklusterly made it through college and got my degree and for many years just held down many different lackluster jobs and. And went really nowhere in life and even got married to conform to social standards after any of those years. My wife, who had more insight than I did, ended the marriage. And this was really my rock bottom moment. I went into counseling for the first time, and it was like a light switch. The, my life prior to that and after that has been a total different trajectory. I went back to school, got my graduate degree in counseling, secured a university position, and completed my PhD and found tremendous fulfillment in really what I called the work of my calling. And with stability in my life, I then began to invest in real estate and began like many of us do in the single family space and was doing quite well until 2008 and the crash hit. I lost my job that I loved dearly, and a significant portion of my wealth that had been developed was suddenly, suddenly gone. And a very dark time, A lot of reconsideration on where to go. And that's when I really discovered commercial real estate and realized that not only is that much more scalable than single family will ever be, but it's also a much more stable investment. And the other thing about commercial real estate is you don't have to go it alone. And so I been involved with, with professionals who have excellent track records and, and so by associating with them only as commercial real estate, itself a much more stable product than single family, it's much less risky. Being involved with professionals who have track records has mitigated my risk substantially. And so that has been my journey and kind of a full cycle journey there. And I spend my time and effort and energy now investing or helping other people to invest in passive real estate endeavors.

Wow, that, that's. First off, thank you very much for, for sharing, you know, really, you know, fairly in depth, you know, some of your, your story. Alan. And we got, we got several things that I'd love to kind of pull out of that and kind of go through. You know, I was listening to your experience, and mine is different, but I lost my best friend when I was young. I lost my father when I was young too. And you know, I went, I went to counseling for that to, when I was 25, to kind of help me out of that. And I look back at my life, a lot of people, you know, you, you and I were talking earlier. I just actually faced another very tragic loss of my sister here recently. And, you know, I've had people reach out and talk about that. And you know, one of the things, fortunately, is that going through some of these prior challenges has given me, actually, I hate to call it this, but a skill set to manage through some of these troubling times. And society's changed a lot, obviously, since, you know, you were younger. And even when I was younger, it's significantly different. My cousin was the president of the LGBTA society at Virginia Tech, so I got to experience that community when I was in college because we, my cousin, that was my closest cousin. And even that I know is significantly different than, than a few decades before. Going through those challenges and working with professionals in that, you know, are there any specific skills or anything that you feel has really, you know, given you the ability to handle challenges better today? What are your thoughts on that?

Well, yeah, I think there's, there's several challenges. I think one of them is, is resilience and, and the belief really that that transformation is possible and that even in our darkest periods of time, if we can remember those things, we can always see the light at the end of the tunnel. And, you know, I've remade myself a number of times throughout life. And we can, you know, as long as we have our health, we can always continue to, to remake ourselves. And, and so the, you know, and I think the other lessons learned on that and particularly in conjunction with real estate, is, you know, the reason that the, that 2008 was such a huge challenge for me is because I was over leveraged. And I mean, you know, I still use leverage in real estate. Who doesn't? But, but I limit that considerably and realize that, yeah, leverage is tremendous. And as long as the economy is going up, you can over leverage all you want, but you never know when that crash is going to come. And there's one thing that is certain, it is going to, it always is going to turn. And so I just do not over leverage anymore.

Yeah, that's a great point. Just published actually a podcast on the 24th of September, which is actually, they were recording here and I talked about the real estate cycles in a, in a recent webinar that I just did. If you haven't go back and listen to that episode from a few weeks ago, and to your point, Alan, you know, real estate goes in cycles and you know, in a curvilinear world, I think a lot of people don't realize, you know, as humans we see things linearly. So, you know, we, we don't, we're not able to zoom out, you know, whether it's climate cycles or financial cycles or societal cycles, you know, these things, they tend to rhyme, if not repeat themselves perfectly. And I think specifically, as you mentioned, with real estate, if, if you understand that real estate can go up and can go down, then you can, like you said, take appropriate measures, not over leverage and do that. I saw when I was, I was in my early teens, I saw my parents both lose their jobs. They're working for Jimmy Dean Construction back. Which Jimmy Dean sausage, which you and I remember. Not everybody that listens will remember that, but Jimmy Dean sausage. Jimmy Dean also had a construction company, JD Construction. Both my parents were working for him in the early 90s. Savings and loan crisis happened. They both lost their jobs. And I'll never forget that. You know, you, as you mentioned, you know, that experience is sitting around the tv. You know, I remember sitting there, you know, in, in our dining room and just, you know, remembering, you know, the stress that my family was going through at the time and then obviously seeing 2008 again. So, you know, you kind of, you kind of learn those lessons. And if you're listening today, you know, that's the reason that Al and I are talking about this is so that you aren't doomed to repeat the same mistakes that have been made before. We kind of turn like deeply into the real estate side. Alan, just kind of, you know, talking about the importance of resiliency. I've thought a lot about this. I think, you know, if you don't have your personal house in order, it's hard to have a really stable financial house, in my opinion. And I think it's, you know, this is, you know, we talk a lot about finances on this podcast and real estate and alternative investments, but my coaching clients know the first thing we talk about is our health. Whether it's your physical health or your mental health, if there's something that you haven't addressed in, in, in your world, in your personal life, then it's kind of, you're kind of glossing over or just trying to, to sugarcoat things with money. And I think there's a big problem in our society in that, like you mentioned, it's like we're chasing wealth, we're chasing retirement. And I always ask people that, say, hey, I want to retire earlier. I want to, like I said, what is your plan? Like, what are you going to do? Because I think we're all drawn towards something that gives us more significance. And, you know, being productive is important, being accessible is important, being connected is important, I think, which is a huge thing, you know, what are your thoughts around that?

Well, I think, you know, I think my story illustrates that. And maybe I didn't emphasize that maybe as much as I would have liked to when I was relating that story, but you know, I've been posting for almost four years now, and the label of my show has been real estate investing abundance. And I recently have made the change to streams to impact. And, and certainly there is a lot behind that title switch. And one of the main reasons that I'm shifting the label on that is because I'm really shifting the focus of that from strictly wealth development through real estate to really being a show that is there to help people to develop and grow as, as people, as individuals. Because I think it is absolutely like my story illustrates. If I had not gone into counseling, if I had not gotten my own personal self together, I'd still be out there struggling. No matter what kind of financial opportunities may have come my way, I would have screwed them up. And you've got to get your house in order. I mean, there are people out there who, who find their niche in financial development and they're terrible, horrible people, but they found their niche and they're not happy. And I mean, what's the point in having wealth without having really personal prosperity? Yeah. And so streams to impact. It's about developing multiple streams of income, not for the money, but for making a positive and meaningful impact in life.

I love that. Yeah. Thank you for sharing that. Because I think, look, that, that is like we were saying earlier, like, that's the most important thing, like, what is your why? You know, Simon Sinek says, like, what's your deep why? And you know, I think when, when you've overcome challenges, you know, I was, I related this in, in a, in a story kind of talking about my sister. Like, when you face deep emotional challenges, you know, going out gotta race bicycles, it that physical pain isn't as much when you've gone through challenges and come out the other side, you know, like, like the crash of 2008, 09, 2010, and you're like, hey, you know what? This, the world didn't come to an end. We're still here. You take some lessons away and you move on from that. And I think that's, I'm. I was in the optimist club when I was younger and I still would call myself an optimist. Whether it comes to, you know, the political landscape today or politics or the finances of the country, I, I think that we're going to figure our way out of it. And I hope that, you know, shows like this can help contribute to that and help increase people's optimism. But when it comes to real estate, let's talk about kind of our respective businesses here. Alan. I know you, you guys just closed on a pretty big deal over in Tennessee. I was just in Nash, Nashville last week, so I would love to hear kind of some, you know, you mentioned a couple things like with respect to leverage. I know we've, we've talked about this several times. But I think, you know, one thing that I remember when I was working in the sales space and I trained reps, I'd tell them, I'd say, hey, you know, if you talk to a customer, don't, it's okay to repeat yourself because as humans, we need to hear things that you probably, you could probably tell this better than me with your, with your, your education and your professional background. But, and correct me if I'm wrong, but we need to hear things about seven times before it becomes common knowledge. So I would love to kind of go through some of the things that you learned from the residential space in 2008, the great financial crisis, and why you now focus on multifamily real estate. You mentioned the scalability, you mentioned the lower risk. You know, you mentioned working together as a team. Anything else that you can add to that? And you know, kind of, what types of specific commercial projects are you focusing on now and why?

Okay, well, you know, there's, there's a lot of allure out there to invest in, in single family properties. I mean, the, the home television program, what's, what's the name of it? I mean, they, there's the flipping program. Yeah.

There's. Oh yeah, tiny homes and there's all these little. Yeah, yeah.

And, and they just really glamorize that process. And. Well, I mean, to be honest, I really did enjoy buying a shack and turning it into a castle. I mean, there's lots of, you know, it feels good. It feels wonderful. And I've got terrific photographs of before and after. And, and it was, and it's enjoyable. And I can see certainly the allure that, and yeah, you can develop wealth that way, but it's not passive. And, and it takes a lot of, and a lot of hands on involvement there. And, and, and when I first started out, I mean, I was doing everything from the, the plumbing, the electrical, the sheetrock painting. So I learned a lot of skills and, and those, you know, those are good skills to have. I don't necessarily apply them anymore, but anyway, it was, it was a fun process and I enjoyed it. What I think that, I mean, I didn't realize, I didn't realize the significant risk. I mean, when you're, when you're going out there and Putting your capital into a single family home, that's, that's a huge risk. And, and I was burying that whole risk really essentially on my own shoulders there.

Yeah.

And, and the, the margins are, are much, much more minimal than what, than what most people realize. And, and it really took 2,000. Go ahead.

Yeah. On that note, I apologize. But just to underscore that, Alan, I think, you know, one, I think it's, it's great. You know, I grew up swinging hammers and shoveling shingles and laying wood floors with my stepfather. I think understanding, you know, that side of real estate is important. But what you just said, I think a lot of smaller investors don't understand the risk or the actual returns either, because when they look at a property, and I've heard this, I said, you know, I'll talk to an investor, like, I'm getting a 30% cash return on my property. And I said, okay, who's managing it? They go, well, I'm managing it. I said, okay, so you're managing the property. So you're not paying management fee. What's your vacancy? Oh, well, I don't, I don't have, I've not had any vacancy. So they're not accounting for, you know, future vacancy. Setting aside that, what about maintenance? Oh, it's a newer property. I haven't had any maintenance. Okay, are you setting aside reserves for maintenance? So, you know, you set aside, you know, management fee, which you should either pay yourself or pay a company. You set aside vacancy, you set aside maintenance, all those reserves, you're looking at 20 to 30% of your gross revenue that's coming in. And, you know, it takes that 30% return that I was talking about. And in that specific example, it dropped it into the single digits for that specific investor. And I said, hey, you need, if you take an apples to apples comparison, you know, compare that to a professionally managed apartment building. And then I also said, if you have one vacancy or one issue with the house, you know, that wipes out potentially all of your income. Significant risk. Are you a high income business owner or professional earning 2, 300,000 or even more a year, but still feel like you're living paycheck to paycheck? Are you comfortable working till you're 65 or 70 to retire? Or do you want to achieve financial independence and live life on your own terms? You could join myself and Matt Foer and learn how we both became financially dependent in our early 30s. We will teach you how to make, keep and grow your money, teaching you strategies to maximize your Earnings keep your income that you've earned through tax strategy and legal structures and ultimately teach you how to grow it by determining your personal investing strategy strategy as well as teach you how to analyze investments so you can grow your passive income to the point to live life on your own terms. Our coaching clients reliably do this in seven years or less. To learn more, check out our coaching program at nextlevelincome.com forward/coaching. That's nextlevelincome.com forward/ coaching.

Yeah, so I mean I appreciate you pointing that because I mean that was exactly what, what happened to me. I mean it's like well, look at all the tax advantages I'm getting which were tremendous. Look at this, this steady income that is coming in and, and you see all of those things and, and, and I, and so many people who are investing in single family real estate do not do exactly what you just did there. We are not paying ourselves a salary, which we should if we're, if we're self managing. We're not taking into consideration what's going to happen if there is a vacancy and how long is that vacancy going to be. What are the costs of bringing that unit up to rentability once it is vacant and what's going to happen if there is a vacant major expense. I mean rifts have to be replaced every, you know, seven, ten years or so. And one of the problems that I ran into, I mean, you know, as long as I had a good income and I was employed, I could absorb all of and, and not really feel the, the risk that was involved in there. Once I didn't have my job and, and one of my properties built in the 1970s, the sewer fells and where's that money coming from? Suddenly I didn't have my professional income to absorb all of that. And that's the problem with single family investing. And almost everybody I talk to is predicament. Those people who are successful in single family and have scaled up to 50, 60, 70 grid units. That's not passive income. There's no way that that is passive income. They are working hard and long hours to develop that portfolio.

Oh absolutely, absolutely. Yeah. So now multifamily is a big focus. What, what types of, what types of multifamily projects are you all focused on? I know the one you guys just closed on recently was in Tennessee. Is there a specific asset class within that space that you focus on?

Generally speaking, the, the partners that I work with and I work with a number of different partners but, but we're Looking for properties that we can bring immediate appreciation to. The ideal property is a property that is basically in physically good shape, but there are managed issues. It's much easier to correct management issues than it is to go in and do a full blown renovation.

But especially in today's market when rent increases are lower and repair costs are higher, your return on investment is not what it was 10 years ago.

So I mean we can go in and we can straighten out management issues within, you know, two to eight months and we can then start generating cash flow much sooner than if we have to go in and do a renovation that is to take six to 12 months before we're able to turn that around and start having cash flow on those. We do both of those. And I mean what we are really looking for is the rate of return and how soon it is that we can bring cash flow to our passive investors. And I mean we're not going to go into a project unless we are really confident that and return at a minimum 18% return on annual average rate of return with a period of five, average of five years. If we can turn that around within two to three years, fantastic. But we will never underwrite for a two to three year project there. So is that, does that, is that questions there?

Yeah, no, I think that's, I think that's terrific. And I think you know a lot of the, the, specifically the mobile home projects that we've been working on here recently are, are very similar. Like we're looking at finding mom and pop operated parks. Like we, we have a 10 park portfolio that we're in process of acquiring right now. And a single owner, not a professional, he acquired all these parks actually had 11. We're buying 10 out of the 11. And he, his rents are, you know, we're talking like 400amonth rents. They're 100 to 150 below market. So those are operation to your point. And you know those operational efficiencies are a lot easier to address than going through and you know, replacing or filling say 50% of the lots and doing that. So I think that's a, I think in today's market specifically that's really important. The other thing that you mentioned earlier, I want to circle back on, you know, our leverage on that specific deal is about 60, it's actually 62% just shy of that. What, what types of loans are you looking at Alan today? And kind of what types of leverage are you looking at in terms of LTV?

The this last project was, was a 70, 30 and it was institutional finance, a lot of it through Fannie Mae and the partners I work with have excellent track records and so we can get those institutional loans that tend to have the best interest rates on them and their bridge loans have been difficult. There was a property that we were working with one of our partners on and they did have a two year bridge loan on it. So those are still out there. Oh yeah, we, we ultimately passed on that it was just more risky than we wanted to go into this environment. Even though, I mean we, we even knew at the time that the projections were, that interest rates were going to, going down, it still just was two year time frame is, is just awfully risky there. Yeah, so the, so I mean those of course are the ideal loans out there, but there are. It, you know, it depends on the size of the project and what we're looking at. Credit unions are a wonderful place to go if you know a local credit union are excellent to work with and generally have pretty good terms as well. And if you can find a local bank, if there is such thing anymore, they're always nice to work with as well.

Yeah, no, absolutely. Some of our smaller projects, our car washes, those sorts of things we've had really good success with, with local credit unions and doing that. And yeah, they love it because they want to be, they want to participate in the community and the terms, terms tend to be better. So yeah, if you're, if you're getting started, if you have smaller deals, don't overlook credit unions for sure. As we wrap up here, Alan, if you, if you do one more time, share a couple things. I know you got some great resources on your website. Also want to hear a little bit about your podcast, which I'm fortunate enough to be joining you here again shortly. So maybe you could share the best way for the audience not only to get a hold of you but also get access to those resources that you have.

Yeah, so there's really three resources, three free resources. One is the podcast Streams to Impact and you can find that on all of podcast streaming sources and it's also on YouTube. So just for Streams to Impact and you should be able to find that. And we broadcast once a week, so four to five shows per month. And then the other free thing is that we have the free training video on passive investing and they can find that@steedtalker.com passive that's like the horse S-T E E D and talker like I'm doing now. T A l k e r.com passive.

That right down here in the show notes too.

And so that's a free resource, a good training video. And at the site they can also schedule a free consultation. And giving the time and effort that I put into those, it's the consultation is worth hundreds of dollars. But we're offering it to and it being the value that it is, I don't know how much longer we can continue offer it for free. But in that we will take some time to help those in the consultation to very mindfully examine their values and examine what their highest vision is and are those values supporting the vision. And we'll take a look at the challenges that are in the way of attaining that vision. And we'll end up with a blueprint as to how to proceed forward. And of course I'm going to offer them if there's compatibility and I feel like they're a fit for us, we'll offer them the opportunity to join our Streams to Impact Prosperity program. And if they're interested in it, well and good. If not, we will depart as friends and they will depart with a blueprint for their future. So all of that can be found at stevetalker.com forward/awesome.

Alan, thank you so much. It's always good to see you. Always good chatting with you here. We're practically neighbors right down the road here in western North Carolina. Very fortunate for both of us to live in one of the most beautiful areas, in my opinion of the world. Dr. Lomax, thank you so much for joining us today, sharing your wisdom, your background and all of the things that we talked about today with our audience.

My pleasure. Thanks for having me.

Hey Chris, here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.