The Most Eye-Opening Financial Strategy That Will Change Your Life!

Once I started to discover what the banks were doing to us, I was like, why don't people talk about this stuff?

What are they doing?

They're taking our paychecks. That's why they set up direct deposits for just about everyone now. Why? It's free for your employer, but they get your money every Thursday night at midnight, direct deposit. And every night they're using it. They're sweeping it out of our accounts. They're taking and they're investing and they're earning interest all while they're paying us nothing. And I started to get furious about this, like, why don't people talk about this? Why don't we know this stuff? And does anyone even care? And so I did a lot of research on banks, trying to figure out how do they work, what products they offer, and how can we get some of those things to work for us, for the hardworking middle class. I read all these great books on, you know, how to flip houses and make millions of dollars, stocks, business, and all this stuff. But my concern was, How do I get to that point where I can buy a house? How do I get enough money to start a business or get into the stock market? That was my big dilemma.

Money Revealed is an exclusive video series where self-made millionaires share their secrets on how they got rich. In this episode, you'll learn how money works, the keys to creating real wealth, and how to create passive income. These are the lessons that they don't teach you in school about making money, and we've partnered with the series creator Jeff Hays to bring it to you on my YouTube channel. Enjoy.

I love it when success has a story. Alan Akina is one of the most beautiful souls I've ever met. What a vision and a purpose that he has. He came from very humble beginnings in Hawaii, very low financial or economic status, figured out some things and how to create wealth for himself, and then his purpose was to help others do this. And I have to tell you, as genuine and pure as he seems in this interview is as genuine and pure as he is in real life. This is a man who cares, who's helped lift a lot of people out of poverty, and has strategies for doing so that are applicable for you. So I'm really excited and happy to share Alan Akina's wisdom with you, and we're going to do that right now. Alan, thanks so much for taking the time to sit and have this conversation.

Absolutely great to be here, Patrick. Thank you.

So let's talk about your story and background that got you doing what you're doing. You tell us about where you grew up and kind of how you evolved into the work you're doing today.

Yeah, sure. So I, uh, come from a great place, Hawaii. I, uh, I grew up in a small town on the North Shore of the island of Oahu, a town that has 2,600 people. We got our first stoplight just recently, so we're, we're moving up there. Um, but growing up in Hawaii is beautiful, but it also has its challenges, as you probably know. You've been there many times. It's very, very expensive. And, you know, to live and survive, it takes some, some strategy and some thinking. And so the family situation I came from was awesome. I have a beautiful, amazing family. The only difficult thing for us was our financial situation. What that meant for me as a child was I grew up on the free lunch program from the time I started kindergarten till I graduated high school. We had WIC, we had food stamps, and we had all these different types of services just to survive. That's why today I absolutely, I absolutely hate eating Kix cereal.

Yeah, right.

Because that was the only thing that you go shopping for groceries, your parents say, okay, you can only get the thing that says WIC next to it, which was Kix, Corn Flakes, uh, all the stuff that had no sugar.

You know, when people go and visit Hawaii, like, you know, and you get the beautiful resorts and all that, I guess the people who actually, you know, are born there, you know, live there, etc., uh, there's not a lot of wealth, I think, for the locals, uh, in general. Is that, is that Is that accurate? Absolutely.

Yeah.

So most people are living paycheck to paycheck and to kind of get by. Families are living together to afford the rent, or if they're lucky, to actually afford the mortgage to pay for the house. And so, you know, those struggles that I had growing up really, uh, molded me into the person that I am today as somebody that's very passionate about personal finance. You see, I really wanted to know how money worked, and so I dedicated a large portion of my life to figuring things out. And, and once I felt like I had enough that was starting to help me, I took all my life savings, which at the time was about $20,000. I was married, we had 2 little children, and we were renting a place. And I said, you know, I'm going to start something I'm passionate about, which is teaching people about personal finance. So I started a small company. I named it 101 Financial because I felt like that was the beginning. That was the thing that I was missing. See, growing up in Hawaii, I saw this wealth, I saw the nice resorts, I saw the nice nice cars and, and things that could be possible, but I didn't see a pathway for me to get there. And I was searching, I was looking for ways to learn, and I, I read all these great books on, you know, how to flip houses and make millions of dollars, stocks, business, and all this stuff. But my concern was, how do I get to that point where I can buy a house? How do I get enough money to start a business or get into the stock market? That was my big dilemma. And so I created a program that that was helping me that could help others. So I started this small company and I started teaching people. And little did I know that there was more people that wanted to be part of this financial literacy movement that we were starting to create in the islands.

Is that really— is that the thing? Is it financial literacy? Because I could imagine that when you're living paycheck to paycheck, you know, there's, you know, I guess some opportunity maybe working at resorts or something, but probably not a lot of other industry that's got a lot of potential where you can move upward into executive positions and have high salary jobs. Because I wonder the same thing. You'd be sitting there and say, how do I even get started to be able to do any investing, etc.? And is that the core of what you had to figure out? And once you figure it out for yourself and say, okay, great, what made you want to bring it to other people?

Well, once I started to discover what the banks were doing to us, I was like, why don't people talk about this stuff?

Like, what are they doing?

So the banks are— I mean, they're taking our paychecks. That's why they set up direct deposits for just about everyone now. Why? It's free for your employer, but they get your money every Thursday night at midnight, direct deposit. And every night they're using it. They're sweeping it out of our accounts. They're taking and they're investing and they're earning interest all while they're paying us nothing. And I started to get furious about this, like, why don't people talk about this? Why don't we know this stuff? And does anyone even care? And so I did a lot of research on banks, try to figure out how do they work, what products they offer, and how can we get some of those things to work for us, for the hard-working middle class. I started to figure these things out and it started to work.

So you started to figure these things out. What things did you actually do personally that started working for you?

Okay, so, so when I first started to figure this out, I was a renter. And trying to go out and teach people about personal finance was a little difficult when you're renting. Why? Because people are like, dude, you don't even own a house and you're trying to tell me how to manage my money and pay off my debt. Well, fortunately, I was able to use some of these things that I learned. For example, when we take our paychecks, we put it in our checking account. The bank sweeps it out every night. They earn interest. We basically get zero. We found other tools at the bank that I call, like, we call a debt checking account. So where we could put our entire paycheck against our debt and suppress the balance for a day, a week, or a month. And by suppressing the balance, we save on what we call daily calculated interest. Why? Because the banks charge you and I interest against the outstanding balance, and they do it daily. So we found a way to reduce the daily balance, which thereby saves us interest every day. Then I would take that interest that I would save and I'd use that to pay down more of my principal. So I could, in effect, pay down principal without having to earn more money. I was looking at my— I looked at every dime that was leaving my pocket, right? You're like, okay, what do we spend on groceries, gas, our cell phone, etc.? Well, one of the biggest expenses that we have is our debt payments. And the biggest piece of the debt payment is the interest cost. So, we said, if we can reduce the interest cost, we could free up that money and use that to help us pay down more principal, thereby getting out of debt faster. And once you start to get out of debt faster, you now free up cash flow to be able to invest. And that's what I started to do, was I took that extra money that I had and I started to invest in real estate. And so, we lived in this little apartment on the North Shore of Oahu. It was less than 1,000 square feet. And we were able to pay that house off in 2 years and 3 months. And I used those—

Paid it off in 2 years?

Paid it off, paid off the complete mortgage in 2 years and 3 months.

How'd you do that?

With that principle.

Wow.

With that principle and also with managing my cash flow, just tracking every dollar coming in, every dollar going out, just being aware. You see, most people don't even know what's going on in their financial lives. I think the statistic is like 78% of people are living paycheck to paycheck. It's pretty scary.

And maybe, is it a sign of resignation, you think, psychologically? Because I see that a lot, and I imagine even on the islands, it could be a lot worse. Basically, we don't make enough money to do really much of anything. Me trying to spend all this energy tracking a couple of bucks here or there is not going to matter. In your case, you're saying it does matter.

Absolutely. Every dime matters. And once you get into that mentality, then you start to value your money more. You start to value the paycheck that you're earning from your job. And once you know how to make it work for you, you get more excited. But when you don't understand what's happening with your money, then it doesn't really matter. You know, 30 years is 30 years. Who cares? I might be dead by the time I, you know, pay off that mortgage. So who cares? Let's just have fun. But it doesn't have to be that way.

No. So do you— uh, it's what I'm hearing. There's, there's a mindset, you know, around this. So When you start working with people, how much of it is you working on their mindset versus how much of it is the mechanics of following some kind of a process?

It's probably 50% or more. But the first thing we do before we can change their mind, because they're already in a negative mindset, first thing we have to do is show them their numbers, get to a starting point. So we map everything out. What do you pay for this? What do you pay for this? It is a little tedious. It's hard work. That's why most financial advisors don't ever get into someone's budget. It's the dirty work, but that's where it all begins.

So can you maybe do the walkthrough? I'm the somebody. Okay, walk me through the process. So I come to you and I say, okay, I've got some debt. Really doesn't feel like I have much disposable income at all. I rent. I'd like to somehow buy a house one day, buy a house one day and have some kind of financial security. What would I, you know, what are my steps? What would I do?

The first thing we do is we have to create a starting line before we can see the finish line, right? The finish line for you might be, I want to buy my first house. Well, what's the starting line? Which means we got to track your income, all sources of income. What are your expenses? We want to list every expense, everything that leaves your pocket to pay for something. We're going to track it and then we're going to look at all of your liabilities. What type of debt you have? Credit cards, car loans, mortgages, maybe some student debt. And we're going to map it all out. Once we have this roadmap, and I'll tell you, it's a simple thing, but 95% of people don't ever write it down. It's the craziest, craziest thing. But once they do write it down, they can start to see. Then we start to formulate a roadmap according to what they want to do. Now, before you buy a house, probably the biggest thing that you got to do is get your cash flow in line and then get out of debt. And all the best investors in the world all preach that for working-class families, the best thing they can do is get out of their high-interest debt. Yeah, Warren Buffett says that, Mark Cuban says that, Kiyosaki says that. You gotta— you got a 25% interest rate on your card, your credit card, you need to take care of that before you can buy your first rental property, right? And that's the step.

So let's say on Oahu, uh, you're the typical person that is there that's that's making the decision to move in this direction, try to get more financially abundant, disciplined, what have you. When you see them, what's the typical predicament as far as how much disposable income they have, or what's the timeline and effort to really be able to pay down some debt?

So most people, so 60-65% of people will have a mortgage, and they will have 25 to 30 years remaining because they had just probably gone through a refi or they just bought it. So that's so far away from them that they, they can't even comprehend that. So we create these short-term wins for them. So we build what we call these 90-day financial roadmaps where we track every dollar coming in, every dollar going out, and we do it for a minimum of 90 days. Once we get them to do it for 90 days, then we go 6 months and then we go to a year. And now once they have this roadmap, now we can start to find areas that we are lacking in. So we might be spending too much here, or we might be doing this, you know, this type of activity where we could cut down on. And then we start to say, okay, which debt can we attack first? And if you go by the numbers, it's always best to pay off the highest interest debt first. And we do that in probably 95% of the cases. And so let's say you had a credit card. Average credit card interest rate in America is around 14 to 16%. That will pigeonhole anyone for the rest of their life if they don't take care of that. So we go after that and then we start to pay the minimums on everything else. And once we free up that payment, then we start to attack the next, all while we're using our paycheck against our debt. So we have multiple things happening. So we got the, the track— tracking going on, the roadmap. Then we got our paychecks working for us every single day. And see, once you start to teach people the why and the how, it creates a mind shift. Their mind starts to change. So it's not a diet anymore where it goes away. It becomes a habit, a new habit. And then they start to see themselves winning for the first time ever. That, man, my money's working for me. I'm getting ahead. I paid off this debt. Now what can I do? I'm going to go after the next one. And then they see homeownership becoming a reality. And that's exactly what happened for me is once I saw that, that struggle of managing the day-to-day finances go away, I saw that I could attack this mortgage and pay it off quickly. And once I did, the whole world opened up for me. And within, within 5 years, I had 7 properties in Hawaii. And, and one of those properties was a 17-acre lot on the North Shore. And here's what I realized personally is that my mind was so cluttered with just trying to survive at the beginning that I had no energy or time to be able to focus on building wealth. And that's the problem for most Americans. They are working so hard, they come home, they're struggling with the bills, and they can't ever think about how do I build wealth, right?

Yeah. So this is interesting because what you're saying is, and maybe for lack of a better term, you need mind space to be able to start building wealth. And if you're preoccupied with survival, then you don't really have that mind space.

Yeah. Well, as humans, we're predetermined to survive, right? We, we, we're in survival mode all the time. And then when it comes to your financial life, it's always in that survival mode. So people are always stressed out. They're always worried about the next bill and how they're going to make it. And so if that is consuming you, your mind has no room or space or cap to think about, okay, I'm going to get the next property and we're going to rent this out, we're going to do this Airbnb, or I'm going to start a business. I'm going to fill my 401(k). I consult with a lot of CEOs in regards to their employees' financial stress. They're like, "Hell, we got these great benefits, but our participation rate is so small." I tell them why. They're not worried about investing in their 401(k). They're worried about making it to the next paycheck.

[Speaker:BRADLEY] Right. So, when you create that mind space and maybe start to build, it sounds like it's a little bit of a momentum play and a little bit of a habit play. Build some momentum.

That's right.

Put some habits in and stuff starts to unfold.

That's right.

Did you have along the way anybody trying to discourage you in your own journey as far as saying, well, you know what, you're thinking too big, you know, there's no way you can do this. Listen, you're a kid born in this working-class area. You know, it's very expensive to live here. You just got to get out there and hustle. And you're, you know, you're dreaming if you think you're going to be wealthy one day.

Yeah, you know, unfortunately it happens in, you know, in every community. It's the crabs in the bucket. And that happened to me many times with professors from my college or coaches or just other people that were, you know, so-called friends of mine that like, he's never going to make it. He's thinking about doing this and that. He's never going to do that. And I just use that as fuel. I just use that as fuel to fire my passion. And I noticed that when I first started, my passion was small. I had a little bit of passion, but I had more fear than passion. But as I started to put work in and then I started to learn and understand more about money, that passion grew as my knowledge and my education grew, my financial education grew. And then that fear went away and that fear became very little, very small.

Was there a recommendation for— because I hear about debt reduction and no doubt, you know, consumer debt that's at high interest is a really debilitating thing that keeps you trapped. I think everybody agrees on that.

Absolutely.

Um, did you also, uh, create any like side hustle, or you find ways to try to increase your income while you're trying to reduce that debt? You know, what are your recommendations in that typically?

Yeah, so the first step is to get that plan. Once you get that plan, you can start to increase your wealth. You don't necessarily have to be completely out of debt before you can start to build wealth. But to build wealth, ultimately it's going to start with your personal finances. If you don't have your personal financial life down, which means managing cash flow, paying down debt, budgets, it'll be very hard and almost maybe detrimental to become an investor because that could fall back on you. And so what we've noticed is that when we teach people— and I did this myself— is learn personally, in my personal life, I was able to apply that to my business life and then into my investing. So my side hustle became investing in real estate, and, uh, and we've done many deals. And, um, and it's interesting how things always come back to you when it's the deal.

I mean, is the typical path, you know, when you have someone who's, um, you know, like working the ways that you're describing, saying, hey, I'm working my way out of debt, going to start budgeting, try to take some allocated disposable income and put it into investments. Is real estate, do you think, the best place, or do you have other paths that you recommend?

So I personally, I wrote a very simple book and I talk about true diversification when you build wealth. And my personal belief is that you need to diversify your entire portfolio. You see, financial advisors, a lot of them, almost all of them, tell us to diversify. Which is true, but they're only talking about diversifying in one asset category, which is paper. So you have stocks, large cap, small cap, mutual funds, bonds. Absolutely have to do that. But they're missing a big piece. We need to talk about true diversification across what I consider the 3 major asset categories: paper, real estate, and business. And so I teach people to have goals for that, and then obviously they choose one that they really like, and I have my favorites as well, and then one that you are sort of good at, and you have your third place.

When you say paper, you mean stocks?

Yes, I mean stocks, mutual funds, ETFs, all those things. And again, be diversified in your paper asset category. But I suggest not leaving out the other two major asset categories.

And you said they're real estate.

Real estate. And in real estate, there's two forms of real estate. So there's cash flow real estate, which are rental properties. And then there's what we call cash now properties. So these are flips.

Right.

Okay. And then the third asset category is business. And I believe everyone has a million-dollar business idea in their, in their head locked up somewhere. They just got to pull it out and take action and do that.

I like that. So you think everyone has a million dollars?

If I had one, then I believe everyone has one, especially coming from where I came from.

Yeah.

Being so poor growing up and building a multimillion-dollar business. Out of my small little apartment on the North Shore of Oahu, building a business that became Inc. 500 in our 7th year. We were the 2nd company from the islands to ever make the Inc. 500 list. So, it was a big deal. The islands celebrated. And then, one of the local TV stations, affiliate of Fox News, asked me to do some financial shows for them. And it turned into 8 years on the station hosting what we call the Financial Fitness Report. Led to a number one bestseller on Amazon and a company that helps tens of thousands of families across the country. So if I can do it, everybody can do it.

And I believe you when you say it.

I see. I, at the time when I started, I wasn't even a college graduate. Wow. I had dropped out of school and there are a lot of people like, well, Alan, do you have a finance degree? I was like, no, I was a biology major.

Interesting.

But really majoring in basketball.

That's what I did.

I played ball there, so spent more time in the gym than the library. But it can happen.

Wow.

So, and I sense, and I think this is a very cool thing, there's a bit of sense of pride saying, hey, you know, I grew up poor in the islands and this is what we were able to create. Is that a source of fulfillment for you?

Oh, absolutely. I feel like I'm representing my race. Native Hawaiians. There's a lot of challenges for our race, and, you know, one of those is financial. It's just a big problem, and for every race for that matter. But, but I feel like I need to set an example by doing things the right way for myself, and then by giving back, by teaching people. And the best thing that we could do, as you know, you, when you, when you have kids, the best thing you can leave for your kids is to give them education. I want to send them to the best schools and all these things. But what about financial education? They're going to go to the best schools, get a, get a really good job or have a business. But what if they can't take care of their money?

Right.

So that's, you know, the area that I focus in on for helping families is to provide that financial education.

So in your situation, because I know now, you know, you've got your own personal investment path, you know, you have to create your wealth, but you're also doing a lot of education and training. And have you almost given permission to Native Hawaiians to say, well, you know, he did it and almost what you said, hey, I did it so they can too. Has it created any kind of a movement in Hawaii on the idea of wealth and abundance for Native Hawaiians?

100%. It has because just like in any community, right, if you see someone that kind of looks like you, talks like you, has the same skin color as you, that they're doing certain things, there's either two emotions you're going to feel. You're going to feel a lot of jealousy, or you're going to feel like, wow, I— that's inspiring.

Yeah.

And those that are jealous, they're going to be in that mindset, and, you know, hopefully they break out of it. But for those that want to do more, they have that abundance mentality, those are the ones that I want to inspire so they can go in and change their next generation.

That's so great. And it seems like the things that you teach— and you, again, you call it 101, like, hey, it's kind of basic, right? The things that you teach are not complicated to understand. It's really almost— maybe it's the problem it's more boring than complicated, and it's hard to get people to want to do boring stuff.

Well, yeah, and for some reason, I don't know why they don't teach this in school, right? In my personal humble opinion, I feel that money management is like the number one life skill, right? If it's not number one, it's 1A. Yeah, but it's up there, right? I mean, we, we all— I'm not sure if you had to do this, but in Hawaii we had to take 2 years of algebra.

Yeah.

Well, who in the world uses algebra now? What a waste of 2 years. But I would rather have learned about money and investing.

Yeah.

Like, teach me how to buy a house when I'm in high school. Teach me about mortgages and credit scores. Teach me about debt and how that's going to affect my relationship. You know, I'm married. My wife and I have 7 kids, and money affects many, many relationships. It's the number 1 cause of divorce. And then for our children, we are as parents the number 1 source of financial education for our children.

That's actually a really interesting point, and I might want to dig into that a little bit more. So now you have 7 kids, so I guess you like to succeed on all levels, right?

We do it big on every level.

You're going to go big.

We're going to go big. We're going to have kids. 7. Is that how many houses you said you had within about 4 years?

Yeah, I have a whole investment strategy behind that, so I'll tell you later.

So, uh, so you have these 7 kids, and, uh, and now you're saying, okay, what is my responsibility as a parent for these children? What are you teaching them? Because I'll tell you that there's a lot of parents, a lot of people here, they are parents, and they want to learn from themselves, and they, and they want to be inspired and learn from what you're saying. But they also maybe say, I also want to learn how to be a good parent and be a good steward in this realm as far as my own family is concerned. So what do you teach your kids? Tell me how you approach it.

Well, I'm not sure if it was like this for you, Patrick, when you were growing up, but it felt like it was almost illegal to talk to your parents about money. Like, you ever ask, like, hey, Dad, how much do you make? You know what would happen? Like, don't talk about it. We don't talk about that stuff, right? That happens for a lot of families. So In our days growing up, you know, talking about money was bad. So what did that do to a child that's 7, 10 years old, 15 years old asking about money? It created this negative mindset like, we don't talk about this stuff, this is not good, right? I tried to flip the script on that and I'm very open. My wife and I are very open with our kids. We talk about money, we talk about properties that we're looking at buying, like, hey guys, you know, this house is for sale, we put an offer in on it. What do you guys think? And we're gonna rent, and we talk about our tenants, and we have them come over on Thanksgiving. We bring turkeys over to our tenants. When they move out, we bring 'em over to fix it up, and they paint, they get dirty with us. We bring 'em into investments. I remember starting my two boys out. We were doing some house building on the Big Island of Hawaii. So, we'd buy these lots, and we'd put some money in. So, I said, hey boys, do you have some money? "you can invest with us." So they both put in, they were 4 and 7 years old at the time. They put $500 in each. Okay, so they had all, we had little savings, so they put their whole savings in. We said, "Okay, this money is gonna pay for light bulbs and your money's gonna pay for paint." So they can relate to that, right? And then we did the deal and we flipped it and I gave them their check. And I remember my son at the time, the 4-year-old, his name's Kawika, he got his check and it included his principal that he invested plus his return, which was over 40%. In about 7 months. He was looking at that check, he was like, wow, I can buy more gumballs now, right? I said, okay, no, wait, we're, we're not going to do that, okay? So I have this next deal that's coming up. What if you put this money into this deal? What could it grow into? So we started teaching them. Did they understand everything? No. But now today, that same son, Kabika, he and I are doing his first deal He's, he's serving a mission right now and he saved up some money. So we both are splitting the down payment on a house.

Wow.

How's that?

19 years old.

How's that feel?

It feels great. Like I can see it. It's just, it's, it's amazing.

You know, I have to say that I think it's genius. The idea of saying, hey, we got a deal going. Do you want to invest with us? Especially at a young age. 'Cause I think almost every kid has some sort of savings, either that the parents kind of said, hey, we're setting up a little account, you keep a little bit of money in it. I mean, Christmas money, you know, birthday money, whatever it might be. But then also, or some kids have like just a little stash at home, what have you. But man, what a difference I think that would've made for me at a young age if somebody said, oh, here, I've got $500. And then sometime later, I'm getting all this money back. And in the meantime, I didn't do anything except put it and invest it. And then it came back and it was more like bigger. It came back bigger.

Oh, that's bigger.

So that is really— and it's interesting to say gumballs because they can equate something that they value with the size of this check.

Right.

And so, you know, that's really— I'm literally sitting here saying, I can't believe I never thought of that, you know, with my own kids. They never thought to do such a thing. It's just that living experience as compared to— because I think that's what's missing. I'm recognizing, oh, you know, let me teach you about this and let me teach you about that. No, how about the living experience of saying, put this in and get this back?

I started my kids teaching them what we call the 3 S's of money. So, so the money that we save, the money that we share, and the money that we spend.

I'll talk. Okay.

So, so when when our kids make money, so we would put them to work. You know, my wife has a camp that she does every summer, one week a year. We have them work at the camp, whether they're getting ice or doing this, and they earn a few hundred dollars every summer. And so after a few summers, that adds up. And so we have these, these, these little tray slider trays that we got from Walmart that had 3 drawers. We had money that we save, money that we share, and money that we spend, and we allocate a percentage to each drawer. And so over time they would, you know, they'd still be to have fun. We're not taking away the fun out of their money so they can still buy the gumballs. But their savings is starting to grow. At the same time, we're teaching them to share and give back to either people that are homeless or other people that need help or tithing or whatever it is. And they started to learn the value of money. Then once they had enough money, we said, hey, we're going to bring you into this deal. And we— I did little things to help them to understand that. Now, as they're older, they're getting involved in bigger deals. So right now, currently, my partner and I are looking at closing on an apartment complex. We're going to build a 90-unit apartment complex with commercial frontage. And so I'm open with my kids about it. I talk to them about the deal. I talk to them about how much is this— it's going to cost. And a lot of parents are afraid to talk about, like, how much this house is worth or how much rent you get. We talk about that. We have Section 8 rentals and we talk about the money that we get from Section 8. And then the tenant covers a little bit extra. We're very open and kids are smarter than we think they are when it comes to the money thing.

Yeah, because they're looking and they're thinking about it whether you know it or not. Yeah, I know my kids a lot of times I'm like, how did you, you know, how did you pick up on that? Or how did you know about that? Yeah, they're aware.

If we're not helping them with that dialogue going on in their mind, then they start to assume that, oh, when you have a credit card— I see my parents, they just get stuff when they go to the store by putting this plastic thing in there, like money's unlimited. We have to explain to them that, you know, because I learned this early on when my, my two older boys were kids, that it's like, why don't you just write one of those checks so you get more money? So it doesn't work that way. So we have to explain it because otherwise no one else is going to do that for us.

Yeah. But even if they grow up and if they have a credit card that you give them, the same kind of thing, it's like, well, I just I'll just use it whenever I need it.

And you know, that's where the debt cycle starts, right? Is when they go to college, right? They get their first credit card offers and the credit card companies, they're very smart. We had hired this PhD, this math PhD to come work for us. And he told me this story of how he worked for some other banks and he was on a committee to help design credit card offers for college students. And their research showed that every college student will have discretionary $20 a month that could actually go towards a credit card payment. So they designed the offers and it was pre-approved with the university card. And here's how they marketed it at the bookstore. So anytime a student made a purchase, they had a pre-approved flyer for the credit card, stapled the receipt to that, and here you go. And that's where the debt cycle starts for kids.

They just suck you in, huh? And make it—

It's branding.

It's like, and you know, 'cause there's always, when you're under the constant strain of fiscal management, saying, hey, I got very limited resources, I'm a student, what have you, to say, well, I might have a moment of relief if I use this credit card. It's very seductive, isn't it?

No one's teaching them, and they're giving away— I mean, you know, the first week on college campus, they have, you know, student week, and they have all the booths, right? So they have, you know, this club to join and this club. In between all the clubs and activities, there's the credit cards. Yeah, the branded credit cards from the university and everyone's getting— if you sign up for this, you get a free shirt or a giant size Kit Kat bar and all the kids are like, yep, sign me up. I take that Kit Kat bar. But they get this credit card and it's approved for $500. It's not much, but we got to understand what the banks are thinking behind the scenes. Look, we lock this kid in. They can afford the $20, right? But when they graduate and they get a job, all we need to do is increase their limit, right? Now they got $2,500. Right now they got $5,000 and it's branding.

Wow.

It's keeping them in the cycle.

Is credit card debt maybe the biggest challenge to the average American right now, do you think?

That's the start. Yeah, that's the start of it because that's the easiest type of credit to get because the banks can give you small sums.

Right.

And so they get you started with that. Another big problem that we're starting to see today is student debt.

Yeah.

Massive, massive. Student debt has surpassed credit card debt in America probably about 2 or 3 years ago. Oh, wow.

Okay. So, there's more student debt than credit card debt.

Absolutely. And the interest rates that we're seeing is like almost double what people are paying on their mortgages.

Wow.

This is unbelievable.

So, now, if I'm coming in to your program, I'm getting advice and direction, and I've got some credit card debt, and I guess the details matter, but I've got Student debt, I imagine you're working hard on getting that student debt also reduced or—

We're analyzing interest rates and payments. And so we're looking, okay, the interest rate, what is the interest rate on this? Should we take care of this one first? Or maybe there's this one type of debt we can pay off to free up a bigger payment, right? You have like $400 or $500 going to your car payment and you have this much to pay on. Maybe we'll knock that out first.

Right.

So we free up that cash flow.

Right.

And then we use that to attack other debt. It's strategy. It's just understanding numbers and then understanding the mentality of people.

And I think part of the mentality is to say, hey, listen, once this debt's paid off, don't think, oh, I got this extra money I can go spend.

Absolutely not.

That's the temptation.

They'll get spanked from Ellen, right?

So, but they don't do that.

They don't want to get spanked. But, but the way we do that, and in all honesty, is we set financial goals with them. Once we create that plan, we have a goal. So the goal says, okay, look, once we get out of this debt, now I can buy a house, or I already have a house, I'm going to pay it down, then I'm going to buy my first rental property. And once you start to create these goals and people have a pathway and they understand, they're going to do it. They're going to do it. They just need to be taught.

That's a big part of the psychology, isn't it? Because if they don't have a goal, then, you know, they don't have any discipline, no direction.

Yeah, just like anything, no direction.

Yeah. So that's interesting. So by saying, hey, there's a goal out here, so that's what keeps them on the track to get to the goal. So that's— so I guess there's these varying pieces that you assemble. Uh, I'm intrigued, before we just leave the one thing, any other things about, uh, parents teaching their kids? Because you had the 3 S's, right? Um, you, you had, uh, you know, the thing of getting your kids in a deal. Any other things that you think a parent might use to help teach your kids about money?

The number one thing is parents gotta get their stuff together first. It starts with them.

Lead by example.

They got to lead by example. And if they're not sure about their money, they don't have a plan, then when they talk to the kids, kids can sense that they're a little shaky on what they're saying, that they don't really believe what they're saying or they're really doing it. So they have to have that conviction inside. That's what causes true change. And that's how I believe we change generations, is we, we, we work with these parents, these families, and we help them to be as successful as they can, because just by their example, And them being comfortable with their money now and not being afraid, now they can have those honest conversations at the kitchen table that I would never be able to have with their children.

Right, right. In my experience on the planet, all the years I've been on the planet, consumerism, I think, is like at an all-time high. It just seems like, you know, there's just more and more stuff constantly coming at you that you can buy. And a phenomenon over the past years for gift giving when I was a kid, and I can remember these clearly, I'd get, you know, my birthday, you know, from my aunts, you know, uncles, whatever, you know, I'd open it up and it'd be, there's some cash in there. And I can remember the envelopes with the little thing cut out with the head, you know, I'd see the face of whoever the president was and I'd know what it was without seeing the number.

Yeah, I remember those.

Yeah. So, you know, that was, and I kept a little safe where I stored all my cash. But now it's like, hey, a gift card to, Best Buy, a gift card to Starbucks, which means that you, you literally got a gift that requires you to consume, that you can't save, you can't invest, what have you. What's your view on that?

You know, it's so hard to fight the marketing dollars of these multi-billion multinational companies. Like, you go to Starbucks, there's all the gift cards there, right? Best Buy, when you check out, gift cards. Amazon, gift cards. Everyone's getting it. So Instead of trying to fight that battle, let's play along with it. And so what I do personally for my kids and some of my key people is I give them gift cards to invest in stocks.

Is there such a thing?

There is. So there's this really cool app, this company called Stockpile, and I love them. I have all my kids with a Stockpile account. I even have one personally because I wanted to do it myself. And they have these cool gift cards. So this was a couple Christmases ago. I bought gift cards. So I bought like $100 of Tesla stock for this son, right? He's, he likes cars. And I bought $100 of Disney for my daughter. I bought $100 of Apple for my other son. And so for each kid, I got different stocks and it comes in a gift card. And so they see it has the logos on it and everything. And then you take it to the app and you go and upload the money and you start to track your investments. So we started with a few hundred dollars with my kids just recently, and we've, we've been putting their money in there, and they get to see it every day. It's so simple, and they track it, and we look at it all the time. And then, and then we, we taught our kids to say, hey, we're going to put some of your money in there, and I want you to find 3 really good companies that you can invest in that you think is going to be solid. So they know things that I don't about different companies, right? Right. And so I had a daughter that that picked, um, Urban Outfitters. I'm like, what is Urban Outfitters? Like a hiking— like, no, that it's a clothing company. Like, why did you pick that? Well, because all the teenagers buy clothes there. Okay, well good, so put some of your money in there. And then my kids bought Apple and Disney because they sort of see the trend with possibly going to Disney Plus. This was a couple years ago, and now their Disney stock has just taken off. And they, of course, they love Apple, and they're tracking all this, and it's getting them to talk about it. And it's— has— it gives us something to communicate with, with them when it comes to money. And here's the cool thing is they can actually trade that. The trades are like $0.99, so it's very minimal. They can buy and sell stock. But what happens is when they do either one, they buy or sell a stock, it sends me a notification via email to approve it or not.

Oh, wow.

So I'm getting these email messages like during school hours. I'm like calling my son like, Dude, are you trading stocks during school? Like, Dad, Dad, it's good.

Yeah, good boy.

Dad, the stock dropped. Like, okay, good. Because when everybody else is selling, when the stock drops, we're buying. So when it goes red, that's when we look to buy. When it goes green, let it go. Let's let it keep riding.

Well, what's the name of that gift card again?

Stockpile.

Stockpile.

It's an app. Yeah, you can buy their gift cards, and they even have them at like a few like grocery stores.

I think they had it like What a brilliant idea. Rather than say, you know, give you a gift that makes you a consumer, give you a gift that makes you an investor.

You're consuming stock. That's what we're doing.

I love it.

It's a good one.

And I love the fact that you're quite happy your kids are trading while they're at school.

Oh yeah, I was a proud daddy. I think my wife was a little disturbed that they were doing it during math or whatever, but hey, what do you say?

I think that's terrific. What are the majority of your activities today directed at?

You know, my, my passion— I have a hard time sleeping. I'm always thinking about personal finance. How can I help more people? There's such a need out there for financial education in families that can, that can change your lives like how I changed mine. I changed my entire family's life for generations now because I decided to make a stand. I decided to learn about the basics of money. And that's, that's my— I'm totally consumed with that now. And how do we help more people worldwide that have that same problem? I mean, you see the effects, it's, it's out there. And, and for me, I'm in a different financial space now. I live in different neighborhoods now, but I never ever forget where I came from. Never ever. And that, those humble roots of where I came from keeps me grounded. And keeps me working hard.

So in spreading financial education in the way that you're doing it, is this something that you have maybe some ideas about as far as saying you want to move into specific areas of cultures or communities to bring this to, or does it matter just whatever comes to you, or, you know, what's your plan?

So we started in Hawaii in 2002. So just as of this filming, we're over 17 years now. And we've helped out over 30,000 families across the country. And our job is to continue to do that and continue to look for innovative ways to find and teach. One of the challenges for our company as far as growth, but it's actually a beautiful thing, is we're actually in what we call the trenches. So every family that we work with, we're actually sitting on their kitchen table with them, either in person if we have an instructor there or on their kitchen table via a Zoom or something, but we're personally walking them through it. Now it's much more difficult to really scale that way because it's hands-on, but it's truly one of the only ways that it can work.

Any particular stories that inspired you, you know, with some of the, some of the transitions or transformations that you've seen happen as people are going through this process?

Yeah, so there was this young couple on, on the Big Island. Have you ever been to Kona?

I've never been to Kona.

Beautiful, beautiful place. And so this, this young couple, Shannon and Kapena, they had twins while they were in high school. He was 15, I think she was 17. They had 4 kids before they were 20. And so when I had met them, they were living in public subsidized housing. They're paying $74 a month in rent. They came to one of my classes and they said, you know what, I think we need that. And we started teaching them. And this was just over 11 years ago. First thing we did is we helped them to get out of their consumer debt, $40,000 in consumer debt. We helped them to get rid of that in about 18 to 20 months. And then our plan was to help them to buy a home, which, which they did about a year later. They saved up for a down payment, they got a home. Today, I'm very, very happy to report that they are on their 11th house. Wow. They're on their 11th house, all in Kona. They became investors. They saw they could do it, one property, and they did another and another. And I was just there a couple months ago, and they took me on, on a little tour of their new lot. So they bought a 5-acre lot that just overlooks the ocean, just on the side of the volcano, and it, it overlooks the ocean. It's beautiful. And their, their family's lives had changed. And the, the, the two twins that they had in high school ended up going to some amazing colleges. They're in college, one in Paris and one in Philadelphia.

It's amazing the statistics on a 17- and a 15-year-old who have a child.

Absolutely.

You know, them ever getting to any semblance of non-dependence, never mind being able to, you know, like pay their own bills or generate wealth, but, you know, to actually not even be dependent on the system. The chances of that happening are so, so remote.

Yeah, typically families like that will be on government assistance for quite some time.

Yeah.

So is it your premise that literally those statistics can be absolutely like blown apart just through some education? I mean, is there something that's uniquely special— I guess this is what I'm asking— something uniquely special about that couple, or is it just a matter that if you have the desire and you'd ought to learn you can do this.

I believe in financial education for everyone. Everyone deserves that chance to be educated so they can make the decisions for themselves. Whether they're motivated or not, we should give them that opportunity to learn. And those that want to do it, just like anything in life, they will do it. But those that don't, then they will obviously get what they are working for. But, but everyone needs a chance to learn, so they, they all have that equal opportunity to have a shot at building wealth. And that's the goal. The goal is for them to build self-sustaining wealth. But the first step is we got to get your financial life together.

Well, Alan, this is one of the most inspiring and fun conversations that I've ever had. Just seeing your own story, seeing how you stay connected to your roots but have a vision for a future and how you're trying to lift a bunch of other people. Out of financial stress and give them a better life. It's a really noble, noble thing, and I appreciate you taking the time to sit and share that with us.

Thank you, Patrick. I appreciate what you and Jeff are doing to create these series to share with the world as part of that financial literacy movement that I've been a part of for over 17 years. So I thank you for everything you're doing, and I appreciate it, and a big mahalo to you.

Thank you. I had a very Italian upbringing. It was exciting when I heard I was going to interview somebody named Marco Santarelli. And let me tell you, Marco is a smart guy who's created great success and wealth in real estate, and he teaches others how to do it. To me, real estate has always been a bit of a challenging perspective. You know, how do I get in? I've gotten lucky in real estate sometimes, and I was unlucky in real estate other times luck should have nothing to do with it. So if you really want to learn about real estate, then you want to listen to Marco Santorelli. He's got some amazing perspectives and strategies that you can probably put on the ground right after this interview. Enjoy. Marco, thanks for taking some time with us today.

Thank you, Patrick. Glad to be here.

So you're a big fan of real estate investing. So how did that come about? What got you into real estate?

Well, I don't know how, but at a very early age, I just knew I wanted to be wealthy. And this probably happened when I was in the range of 8 to 10 years old. So I made it my mission at the time to study wealth, business, money, whatever it could be. And I just became an entrepreneur at an early age. In fact, I was coding at the age of 13. I couldn't buy real estate, but I was studying real estate in my teens. When I turned 18, I bought my first rental property. It was a townhome unit. I bought it, fixed it up, I leased it, I managed it myself, held it for a number of years. The biggest mistake I made at the time, not knowing it at the time, is I sold that property. But that's when the writing was on the wall. And I just continued going down that direction. I got my license, continued to buy real estate and learned as I went.

Did you go to college or you went right into business?

I went to university and interestingly enough, I took criminology.

Huh.

Had nothing to do with business. But I thought that law enforcement was what I wanted to do. But I realized that number one, it wasn't my passion. Number two, I couldn't make the type of income to create the wealth and sustain the wealth that I wanted. So I shifted gears and I became an entrepreneur, started some businesses and invested in real estate.

And has it pretty much been real estate from day one for you or any other businesses that you were in?

The short answer to that is I've had multiple businesses and therefore multiple failures and experience is the best teacher. So when you can fail, fail fast and fail forward, you build on your past experience and success to do better and create more the next time you move forward. That happened with real estate, but it also helped me with business. But I combined all that experience together to help me not only invest in real estate personally as investment, but to create a business wrapped around real estate investing. So now I can show other people and teach other people what I was doing. Happily. And that's what I'm ultimately passionate about.

When you were young and self-studying, were there any particular influences that stand out?

Early on, it was Tony Robbins. I still have to this day the Personal Power Program on audio cassette with the journal, right? I don't have my values, my goals written in that. But he was an influence. Brian Tracy was an influence. I don't think I had a lot of mentors early on in the real estate space. I just knew from conversations with other people that real estate has been and always was the true wealth creator. I mean, wealth is held in real estate, but if you know the right strategies, you can create and build wealth rapidly using real estate. So not only did I come to learn quickly at an early age that real estate was a wealth creator, but it was a way to create enough passive income that you can become financially free. And knowing that as a teenager, I decided to pursue that and build as much income as I possibly could to funnel into investment real estate. Because if you can do that, if you can figure that part out, the key to creating wealth is actually to learn how to create as much active income as you can and convert that into passive income. Because the more passive income you have, the faster you will achieve financial freedom. So the key to going from active or earned income to passive and portfolio income is really the key to creating financial wealth.

So do you make a distinction between income and wealth, or, you know, being rich, say, because you're a high earner versus having true wealth, or are they kind of the same thing to you?

They're related, but there's a distinction. So when we talk about wealth, let's differentiate wealth and being rich.

Okay.

Okay. So someone who is truly wealthy, financially speaking, will always be wealthy. Why? Because we're talking about streams of income. You have passive income. It's predictable, it's sustainable, it's passive. Someone who's rich might look good on the surface. They may have, may have a lot of possessions, they may have a lot of money in the bank. But the reality is, is that we're talking about chunks of cash. So if you burn through it, if you have $1 million and you're living off $100,000 a year, you can sustain yourself for 10 years, but then what happens? At that point, you're broke. The wealthy person now has passive income that's sustainable and predictable every single month, every single year, that they can survive forever. And not only that, pass it on to their heirs. So when you're truly wealthy, you have the ability to sustain and hold your wealth and your lifestyle and more so whatever you want to do. You have the freedom. Not only it's financial freedom, but time freedom. You have that. You don't have that if you're rich. So the income from being wealthy comes from the passive income that you have from your assets, the assets that you build to create that passive income. Like the real estate that I was buying. The reason I bought the real estate was to create the wealth through equity that I can now turn into more real estate that kicks off a steady stream of passive income. So now I have the passive income to create the financial freedom I need, yet keeping the equity at the same time. That's true wealth.

Did anybody in your family, your parents or other people, were they like, have this type of personality you did toward wealth creation or having wealth breakthroughs, or was it a different upbringing for you?

I wasn't born with a silver spoon in my mouth. Both my parents worked sometimes 2 jobs. I did not come from wealth. In fact, my parents were immigrants from Italy. So my mother worked 2 jobs for the longest time to make ends meet. My father was extremely conservative. He did not want to buy a house. He did not want to invest in a business. My mother was completely the opposite. She was entrepreneurial. My father held her back. But recognizing that, I got a taste of both mindsets. But I chose my own path. I just knew again early on that I did not want to work 9 to 5. I did not want a J-O-B, which some people refer to as just over broke. You know, the reality is, is that about 60% of the US population doesn't have a financial plan. 47% can't even put $500 together in the case of an emergency. 50% of the US population doesn't even have $500 in savings. It's a pretty scary thing. That doesn't necessarily mean that real estate investing is not attainable for most people. I'll never say it's attainable for everybody because it's just not right for everybody. But I never came from, you know, an environment of of wealth or riches or even education for that matter. You know, I went to public school, but I found my own way. I just identified with it.

And you're first generation here then?

Yes.

Wow. So that's quite a, you know, American dream success story in a sense. You know, parents, son of immigrants that finds his own way. So what are most of your business activities now?

I actually have my finger in 5 businesses. The core business is the real estate investment business where we freely provide knowledge, education, resources to real estate investors or want-to-be real estate investors. I just call them people. And ultimately, it's not about the education. It's actually about taking action and building a real estate portfolio. So now you have that passive income and you are creating wealth. So once you have the education and you have the willingness and the ability to invest, We have properties in 22 different markets around the country at any given time. They're completely turnkey ready, tenant occupied, professionally managed.

So you do like a vetting process for people ahead of time that want to invest in real estate?

Yeah, it's a system that I created to give you the history of the system. Really, it happened back in late 2003 when real estate was on fire. You know, markets were appreciating all around the country. I chose to get back into real estate investing, but full time because I just come out of a dot-com crash. At the time, I was the third co-founder of a dot-com business.

Painful.

Very painful. You know, it's one of those rags-to-riches stories where you think you're going to be a multimillionaire overnight. And we were on that path. But when the Nasdaq crashed, all the venture capital funding dried up. And, you know, we had to close the business. We had to shut it down. And I had to lay off 105 people.

How— so with that, how important is it for people to understand that? Because we could sit here, have a conversation, talk about all the wealth you built in real estate, how you advise other people to do it, etc., and boy, isn't this great? But maybe what people don't hear are the times where, uh, you know, the dark night of the soul. You know, you think you're going to be a millionaire, there's a dot-com. But so how do you overcome that psychologically and keep going to, to rebuild and to find new ground stand on to be able to create wealth?

You really need to be clear about what you're trying to achieve. You need to have a purpose. You need to know what you want and you need to have written goals. I know you hear this time and time and time again. The reality is a small percentage of people actually sit down, think about what they want, and write down their goals. It's not a hard exercise, but there's something about doing that that puts in motion the things that you need to do in order to get on the path to gain the knowledge you need in order to get to that next level, build the team, and start executing on whatever your plan is.

So this is, this is kind of important because especially coming from, you said, some of the influences like Tony Robbins or Brian Tracy who were all about goal setting, right? And, you know, documenting what it is you want to make happen. So you talk about, you know, hey, it's not that hard and this is, this is why it's important. What do you think the psychology is of someone who says, I have ambition, but they won't get to a point where they'll start writing down goals. What are they telling themselves, or what do you think that means? What's— how do you interpret that?

If they don't have the ambition, they probably don't have clear enough goals, um, and— or they don't have a burning desire. They really don't want it bad enough. Because we all have the same amount of time. We choose to do what we do in that time. And so whatever's driving you to do what you do is where you put your priority. If you're watching TV every night for 3 hours, clearly that, you know, you're either really lazy or you don't have clear, specific, measurable, attainable goals that excite you, that fire you up, that make you want to do something better for yourself, for your family, for your legacy, your heirs. But when you can create that passion, you will take action. You will do what it takes. You will build a team around you to execute on the plans that you build. It's not that hard. People just hold themselves back through fear. They talk themselves out of what they could do. Look, to get results, you need 3 things. You need the ability, the willingness, and the execution. If you have those 3 things, you can achieve almost anything.

That makes perfect sense. So let me ask this in your perspective. What aspect or what ratio would you say of your success personally? And maybe we could extrapolate this as a general rule, is your headspace and what ratio of the outcome is you choosing real estate as the vehicle? Like, you know, because some people say, oh, it's— well, real estate's just a great investment. And I heard you say sort of, well, not for everybody. It's for maybe for a lot of people and certainly is for you. But how much of it is the, you know, if somebody's trying to have a wealth breakthrough right now, they're trying to say, I wanna, I just wanna get on a path and break through and become wealthy. So some might say, well, real estate is the path. Could be true, but how much of that is their headspace?

90%.

Wow.

Okay, so I wasn't expecting that answer.

The reason it's 90% is because everything starts, ends, and lives in your head. What you do, what you achieve, and what you don't do and what you don't achieve All starts from your mindset. You know, the great book Think and Grow Rich. Napoleon Hill talks about this extensively. That's why that book is worth reading at least once a year. I'm part of 5 masterminds. I was part of 7. It's very time-consuming, but I want to surround myself with like-minded people.

And incidentally, I'd say the investment in these masterminds is not small, right? I mean, some of them are as much as $25,000 a year or so.

I have friends that have $100,000 masterminds. I have 3 friends that have $100,000 masterminds. I'm not in those ones, but I am in the $25,000-$35,000 masterminds. Why do I do that? Because I want to surround myself with like-minded people who are achieving, who are goal-oriented, achieving the same types of things that I want to achieve, or maybe not, but they're all trying to better themselves. They believe in personal development, they believe in growth, they want to better themselves and achieve more. So I go there to learn and to grow personally inside and outside. It's not just the information I get from the mastermind, but it's the networking and the growth that I get from it. But mindset is so critically important. You have to, first of all, believe that you can achieve what you want to achieve. And if you don't feel that way, follow my first rule of my 10 rules for successful real estate investing, and that is educate yourself. If you just sit down for a couple of hours a week and read a book and just set a goal to finish a book every week or two on real estate, on anything personal development from Brian Tracy, Tony Robbins, whatever it may be, Awaken the Giant Within, whatever it is, you will start to believe that you can achieve more than what you're actually doing because your limiting factor typically is either you, and if it's not you, it's the 5 friends that you hang around with the most. Because if you average out their income, it's probably going to be what you're ultimately going to earn and make. So if you are broke, find 5 new friends who aren't.

So if I were to ask you, okay, I'm going to get started on this path, I want to read a real estate book or real estate investment book. What's the first thing that pops into your head?

Well, fundamentally, it's, it's Rich Dad, Poor Dad, you know, and the reason I say that, not that it's a tactical book that's going to give you the how-tos. I mean, we teach the how-tos. But getting into a space where you get out of the matrix, to use that analogy of, you know, the movie, where you understand what assets are, what cash flow really means, what income-producing assets are for, and the difference between consumerism and investing and all that stuff, you know, you really need to start there and then build upon that. So the entire Rich Dad book series is a great place to start. Gary Keller's book Millionaire Real Estate Investor is another great book. This is going to give you a lot of the mindset and it's going to give you a lot of the strategy that you need. There's still more to be learned in terms of the tactics, but then that gets to the question of, am I an active real estate investor or am I a passive real estate investor?

Which are you?

Well, I'm both, but that's because I'm a full-time real estate investor and I have the time and the knowledge and the ability to do it. But if someone came to me and said, what should I be? I would say, look, stop watching, you know, TV and all these, you know, flipping shows, because that really is not real estate investing by my definition. When you're fixing and flipping properties, you're making, again, chunks of cash. It's transactional. It only lives for as long as you're actually doing the active job of buying distressed properties, fixing them up and flipping them, assuming you're making money at it, 'cause you can lose a lot of money just as easily as you can make money. But a lot of people have been kind of brainwashed into thinking that, oh, that's real estate investing. It's a form of real estate investing, but you're putting up all the capital, the time, the energy, the knowledge, and taking on the risk to do that. Real investing means that you're acquiring and building a portfolio of income-producing assets that are generating passive income. So that way you don't have to work every month or every year. You can live off of the income. From your assets. And it doesn't have to be real estate, it could be other stuff, but I just happen to love real estate because it is the most powerful wealth creation tool and you could do it the fastest. So for the most part, if I had to pick one, absolutely I'd be a passive real estate investor.

You help people achieve their own wealth breakthroughs, I guess, through your educational services, uh, in part at least. So let's say I'm somebody who— I want this now, I decide I'm going to get on a path here, I want to walk I walk into your environment, you know, your services, and I say, okay, here I am, how do I get started? What are the steps that you take me through to turn me into a real estate investor that can build wealth?

So 99% of the time when someone actually contacts us, whether by phone or on our website, they have two things. It's what I call their capacity. Capacity comes down to two things: cash and credit. So credit is the ability to qualify for long-term financing, essentially a 30-year fixed-rate mortgage, which is beautiful. It's great debt, not good debt, it's great debt. So the capacity to qualify, the credit to qualify and the capacity, meaning the capital, you can invest with as little as $18,000, $20,000, $25,000, because let's face it, most of the income-producing real estate that builds a great portfolio is in the range of $100,000 to $200,000 for a normal 3-bedroom, 2-bath home in a good quality neighborhood, what I'll call a B+ neighborhood. So that's all you really need in terms of capacity. So when those people come to us, they've already somewhat self-selected themselves and educated themselves. And a lot of times it's because of our podcast or books that they've been reading, such as the ones we just talked about. And now they're saying, hey, I'm ready, I'm, I'm willing to move forward. I just need someone to hold my hand and I need the team. So the reason they would come to us— and I don't say this to be, you know, you know, a pitch or, you know, self-promotion— but the reality is, is we have already vetted all the teams of people that you would need in 20 to 25 different markets.

So let's talk about what, you know, who needs to be on this team. So pretend for a minute you don't exist, but, you know, as far as you don't have a team or something to plug in, and I'm trying to go out, figure this out, learn how to do this. So assuming you didn't have that team, now you say, okay, you check, you know, what, what kind of capital I have, what kind of credit do I have? And I've got the ability to get started from those two things. What's the next thing I do?

The really the starting point is to build your team. But the starting point to that is really to have a conversation or two, what I call a strategy session with someone who's already an experienced real estate investor and can hold your hand and guide you along. And for us, we call them investment counselors because they're essentially counseling you.

So what's the key? Like, so let's say, you know, you didn't have a team when you got started. You know, it was you basically getting figured out. So what did you see? You found property, you had certain criteria around it, I'm assuming. So what kind of criteria I'm looking for?

So, okay, great question. So now that builds out to, you know, a whole other conversation. So when I first started in late 2003, early 2004, I was living in Orange County, California, and I was investing 2,000 to 3,000 miles away from Florida all the way up to Michigan. I didn't have a team. I had to build my team. So I had to not only find and vet the people that were going to be on my team, but I had to create the systems that would allow me to invest from a long distance and do it successfully. And sure, I've lost a lot of money in the process. I've tripped, fell, got kicked in the gut.

And that's actually important. So let's go into the mistakes. So the roles for the team are what? I guess you need a realtor to find property for you, right? That you can trust, that knows what you're looking for. Is a part of that team a banker or a lender or somebody that, you know, is predisposed to understanding you and being able to lend?

So let's address that question first. So here are the key people on your team. There's going to be more. You need an acquisitions person. It may not be a realtor. It just depends on what your strategy is. But essentially someone who's going to bring you the deals. Okay, it could be a new home builder, could be a turnkey real estate provider, it could be a real estate agent or broker where they're just pulling it off the MLS. Maybe you're dealing with a wholesaler because you're doing some of the work. It's an active approach that becomes a passive investment. So your acquisitions person. Second, you need financing. So you're going to need lenders and mortgage brokers to be able to get you the financing because you could leverage your money 5 to 1 with is fantastic. You need property management, key person on your team. Property management is critical. In fact, I jokingly say you live and die by your property manager. So you really need professional full-service property management in all the markets unless you're managing it yourself.

What do you allocate for a percentage of the income to property management?

I always budget 10%. The reality is, is because of the relationships we have, it'll range from 7 to 10. It averages 8%.

Okay.

But at the end of the day, I'm not going to nickel and dime my property manager. The cost difference between 8, 9, and 10% is nominal. I just want to have great management, and I want my manager focusing on me and my, my inventory, my portfolio— in other words, my assets— as much as possible. Because at the end of the day, I want them leased for as long as possible. The, the expense in owning property is is not that 8%, 9%, 10% management fee. It's really the turnover. The turns are the costly expenses in owning investment property. Now, now it's a built-in cost. You expect it, you budget for it, and you plan for it. So it's not like it's going to be a shock or a surprise. But the longer you maintain and keep a tenant without having that turnover, the more of that cash flow or positive cash flow you retain.

So we got 3 key members of the team. You know, somebody to help with acquisition, lender, and property management— professional property management, I think, is the term used. What other members do you think are necessary?

Well, I'll add two more to that list because these are people that you're in communication with on a regular basis, be it monthly, quarterly, semi-annually, or annually. And that is your asset protection attorney and your tax advisor. You'll always be working with a tax advisor because you're your tax situation will change from year to year and you always want to minimize, reduce, and eliminate taxes. And so a tax advisor will be the key person on your team for that. And that person—

Are they specialists pretty much in this area? They need to like specialize here or a typical tax advisor would work?

I would say that they need to be specialized enough in the sense that they truly understand investment real estate and the tax laws surrounding it. Ideally, if they're real estate investors themselves, you can probably be assured that they understand it.

They've studied it. That's actually a really good little— do you invest in real estate? Good. Right. You can work with me.

Right, exactly.

I like that.

And then that person is going to be in communication with your asset protection attorney from time to time because all the entities that you have as asset protection vehicles have to fit the financial strategy that you have that's being set up by your financial advisor. So there is tax impact or implications for each entity that you set up and where you reside and what states you invest in. So those two people are going to be communicating.

When we interviewed Robert Kiyosaki for a previous series, he talked about the great tax advantage, and others have too, in real estate investment. So can you walk me through that? Like, what, you know, if I'm somebody that says, hey, I want to get— it's hard to accumulate wealth when you're getting taxed to death? As soon as you start making more money, you get less of it. And it's like, how do you start to accumulate any real wealth? But it seems that through real estate investment, there's ways to get great tax advantage. Can you speak to that a bit?

Yeah. So not being a CPA or a tax advisor, I will give you kind of the nuts and bolts. Essentially, if you do it right, you can own real estate, income-producing real estate, and build a portfolio and become not only wealthy, but rich at the same time without paying tax, which means that it's not that you're breaking rules or avoiding to pay tax. What you're doing is you're deferring, you're minimizing your tax impact and you're deferring tax. Done the right way, you could defer it forever. And then ultimately, when you pass your portfolio down to your heirs, there's a reset in the cost basis of that portfolio where now the people who inherit your real estate portfolio are starting at a new cost basis so they don't pay any tax. But the short answer to your question to get to that is, number one, you have passive income coming from your properties. When your taxes are done right by your tax advisor, the depreciation that you get from the properties can minimize or essentially eliminate the tax impact from that passive income. That's the first. There's a second as well. The second is the fact that you build equity over time in your portfolio, which creates net worth, creates wealth, and then you take that and you build more wealth, which is something we can talk about. But if you were to sell that property, you would be responsible for paying capital gains taxes.

Right.

But if you do something through the magic of what's called a 1031 tax-deferred exchange, which is just the tax code in the IRS book called 1031. It allows you to effectively sell property and take the equity and roll it into other real estate, more real estate, which allows you to accelerate your wealth creation because now you're leveraging up and building a larger portfolio quickly from the equity gains from the previous properties. And you don't have to pay taxes on that, or at least not now. And if you do it right, ever.

You can basically just keep deferring it. So if I were to do you know, maybe a high-level walkthrough, if I'm understanding correctly. Basically, you've got— you can offset your passive income, you know, from a tax advantage that there is as far as depreciating the property. And so when you pay 20% down, you know, you only have 20% capital in, but you depreciate 100% of whatever the value of the property is over some period of time. And then when you do sell and you have the windfall, rather than paying tax on the windfall when it happens, you can reinvest and then you can keep deferring that tax as you keep doing that. So I see how as you're expanding and growing, especially if you're using debt to acquire the properties, you're offsetting income. That's, that's how they're not paying taxes and they keep deferring it down the road.

Yeah. Just to drill that down into both of those just a little bit more for the sake of clarity, the depreciation on residential real estate, like 1 to 4 unit properties, is 27.5 years. Why 27.5 years? I have no idea. I don't know where that number came from, but that's just what the IRS—

some negotiation.

Yeah, right. So you take the improvements, which is everything but the dirt, because the dirt won't depreciate. But you take everything else, the sticks and bricks that sit on the dirt. The IRS will allow you to take 1/27.5 as a fraction of that every year without spending a dime. So it's a non-cash deduction, which is amazing, which means you don't have to spend a single penny. Penny to get that deduction, that depreciation. Right now, again, if it's done right, you'll never have to recapture that later because you can keep rolling your equity into new properties.

And there's, you know, it's the government saying we want you to keep investing in real estate. So that's why they give you that incentive rather than, you know, you can defer your tax if you'll put money into real estate again so that they want to hold up the real estate market through that tax incentive. Yeah, yeah, yeah. So it's really, You know, so now I see, well, this is why maybe real estate— I don't know of any other area to invest where you get that kind of advantage.

There really isn't. I mean, have you ever known the government to be good at creating affordable, safe, clean, affordable housing for people?

No, that never happens, right?

They don't know how, and they're terrible at it. But they know that entrepreneurs and individual investors like you and I can do it and do it well. So they incentivize us through the tax the things that they can't do well. So that's really what the tax code is. If you look at it, most of it is about deductions, not about taxation.

So your activities now, as you said, you do training, training other people how to do it. You're an active investor yourself that you manage. So are you still mostly single-family homes, apartments? What do you invest in yourself?

So my favorite is single-family. It's the most abundant asset. In real estate. It's— it makes up about 70% of the housing stock. It's very liquid. It's easy to understand, easy to get into, fairly easy to get out of because you have a very large exit pool of potential buyers or investors. And so I love single families, duplexes, and fourplexes. That's really the product type that we specialize in. And that's really most of what me and my, my, my team and I hold. But I've invested in apartments. I just closed on a 22-unit package a couple of months ago in Florida. So whatever can generate wealth, create wealth and create passive income and is a prudent play, a prudent investment from day one. So you've got positive cash flow, it carries itself and it's in a market and a neighborhood that will appreciate over time. That's a smart investment. You have to have all those elements. I call cash flow the glue that holds your deal together. So you have to have that cash flow because Equity grows over time. Appreciation happens over time. It just has to in an inflationary environment like we have. So if you can have the longevity, the sustainability to be in the game and invest intelligently, you will become wealthy.

What are the hazards? What are the potential pitfalls for getting into the type of real estate investing that you recommend?

One of the biggest mistakes I see investors make, and I made this myself early on, multiple times, is thinking that I'm going to dip my toes in the water, or I'm going to start small, which means for a lot of people that I'm going to purchase a $40,000 or $50,000 rental property, which often is in a C, C-, maybe a D-class neighborhood. The problem with that is a couple-fold. Number one, and you know, I'm being careful in what I say, But the facts are the facts. If you look at the tenant class or the demographic of the people that live there, they typically don't have a high regard for the property that they're living in. You know, they're more transient, they tend to create more damage, they have more problems, self-created or otherwise, that just create headaches and hassles, whether for you and/or your property manager. Number 2, that $50,000 property probably was $50,000 $10,000 10 years ago and probably will be $50,000 10 years from now. So if your goal is to create wealth, create equity, grow your equity so you can leverage that into more real estate and increase your passive income, that's not the place to do it. So don't start small in terms of these inexpensive properties in D-class neighborhoods. Now everything's relative, of course, you know, coming from California or even in Salt Lake City, you know, A C-class neighborhood may not be $50,000. It might be $100,000 or $150,000, whatever it may be. But you need to start the right way and continue to build your portfolio the right way, which means that you are following your investment criteria. So you set your investment goals, you break that into an investment criteria, and you follow that criteria because that is your playbook or your recipe for what you're going to be investing in. And it'll tell you where you're investing and what you're investing in. So that's the first mistake, is starting small supposedly, but buying inexpensive properties. Don't do that.

So you mentioned one key mistake that you've made, you know, starting out and investing in real estate. What are some other ones?

So one of the other mistakes I made early on is I hired my real estate agent, who was my acquisitions person at the time, to be my property manager. So she supposedly knew how to manage properties, and she probably did a good job, but I wouldn't go as far as saying I think she did a great job. The problem was is that she had to split her time between working with clients as a real estate agent and being my property manager. But really where the proverbial crap hit the fan happened was when she collected $6,000 of rents in cash. It was a market where a lot of people paid with money orders and cash. She took $6,000 of that and never sent it to me. She claims she had sent it to me. She claims she had dropped it off at UPS, but there was no tracking. And so I never received that $6,000 for that one month of collected rents. And my mistake was just using the wrong person, you know, for the right job. I needed a professional property management company.

Wow.

Okay. That, that I'm sure early on was a mistake that hurt not to get it, you know, the 6 grand.

Yeah, because I had mortgages to pay.

Yeah. Wow. Interesting. So, okay, well, that's a good one to learn from. What else?

A big one is choosing the right neighborhoods. Again, you know, you want to invest making the right decisions right from the beginning, and investing in real estate should not be based on price or what you can afford. It should be, what do I want to get from my investment? You know, am I after growth or cash flow or a combination of the two? What type of tenant or tenant demographic do I feel comfortable with, do I resonate with, do I want? And so for me, I, you know, we classify neighborhoods as, you know, A's, B's, and C's, and D's, and more granularly, you know, A+, A-, etc. So for me, the sweet spot lies in what I would refer to as a B+ and A- neighborhood. It's kind of the best of both worlds. I know I'm going to have appreciation and appreciation potential going forward, I know there's an exit strategy there, there's a retail market, so if I ever need to sell that property, I can. But at the same time, I'm not going into premium areas where the pride of ownership is so high that there is no cash flow because the properties are just very expensive and the cash flow is just not high enough to, you know, meet the operating expenses and the debt service for that property. So I like the range of B to A, neighborhoods. The mistake I made early on is I was investing heavily in C-class neighborhoods, and they look great on paper, but the reality is, is that when you have tenant turnovers, they're costly. They'll wipe out the entire cash flow for that year, and unfortunately, there's very little to no appreciation in many of those markets, those neighborhoods. So you really don't stand to gain anything at the end of the year. I didn't know that at the, at the beginning, you know. I was still a relatively green out-of-state or long-distance real estate investor. But having learned what I learned through experience, which is the best teacher, I've become a very seasoned and effective and efficient investor. And now I know exactly what to look for, and I can identify it within, you know, 5 minutes.

Is there milestones where you're kind of graduating in this world, saying, okay, I've got— I did my first property, you know, in the style that you're describing, then I was able to add a second, maybe a third. At what point am I in a new category? How many properties do I have? And let's— I know that maybe, you know, what kind of property you're talking about. Let's say they're $100,000 or so single-family homes. At what point am I going from kind of an initial investor to a little bit more of a matured place? Like, what are the— and at what point do I have to hire more staff and team, you know, what's kind of the milestones in this path?

So some investors choose to build a portfolio where they get to 5, 10, 15, 20 single-family homes or duplexes, and they have enough equity where they cash out of those, not by just simply selling them because then there's the taxation, but they 1031 into larger properties as they go. So they, they move from single families to duplexes and fourplexes, then ultimately they take the equity in those fourplexes and they start getting into small and then ultimately medium-sized apartments. That's one direction. The other direction, or strategy if you will, is to continue building a portfolio of these 1 to 4 unit residential properties. And there's nothing wrong with that. We have a client, for example, his name is Lance, and he started off with zero properties, bought the first 4 very quickly within 1 year through us, and to this day has bought over 35 single-family homes. And he's got a passive income of over $10,000 a month. He's got a great portfolio and a lot of equity. He doesn't have any desire to move into apartments. He understands and loves the single-family unit of real estate, and he's happy there. So there's no right or wrong. It's really just what you're comfortable with. From a time perspective, I'd like to think that you should probably budget 5 to 10 minutes per month per property or per unit, per door. Really, that's just accounting. Reviewing your statements each month, communicating with your property managers, which is usually by email, if and when necessary, and just managing and overseeing. So you're the CEO of your investment empire, if you will. You oversee your property managers who are your frontline management. They're managing your assets and they're handling the accounting. And everything else can be automated. Income comes into my checking account every month from the properties in each LLC, and then I have auto payments set up for principal, interest, taxes, insurance. So I have inflow, I have outflow, what's left over is my net cash flow, and it just sits there in the checking account until I redeploy it into more properties or other investments.

Is each investment a separate LLC, or do you hold all your single-family homes in one LLC, apartments in a— how do you— what's your entity structure?

So that question is an asset protection-based question. There is also a tax element to that, so I'll give you a 40,000-foot answer to it. The general rule of thumb, and I am not an attorney and I do not want to be one, the general rule of thumb is that you will hold your property assets in LLCs in the state that they reside. So if you have properties in Atlanta, Georgia, you're going to create one or more LLCs in the state of Georgia and you will title those over into a disregarded entity, an LLC. Disregarded simply meaning that it is not an operating business. The taxes come in and go out, they flow through and you just report it up to whatever the holding company is. The purpose for that LLC is simply for asset protection. Now then the question becomes, how many properties do I hold in that LLC? The better question to ask is how much equity do I want to hold in that LLC? Because you can have 5 properties in there with no equity, then there's nothing to go after. If there's a lawsuit, there's nothing to sue for. I'm not suggesting you do that, but really it comes down to a comfort level. You have to draw the line in the sand and say, okay, I'm— when I get to $100,000 in equity, I'm going to split out any multiple properties that I have in an LLC into other LLCs and just keep it diversified, if you will, that way. This is a conversation between you and your asset protection attorney. What I wouldn't do is put everything you own in one LLC and think that's good or okay. It typically isn't, and I don't think any asset protection attorney would tell you to do that.

I imagine, though, you can get insurance, you know, to cover a lot of this, too. And it may be an umbrella policy to, you know, kind of be a buffer between what your liability is and what the assets are.

Great question. Always have insurance. That's not even an option or a discussion point. So you will always have property insurance to cover for the basics, you know, hazard insurance. You'll always put $1 to $2 million of liability insurance on your properties, each property. Then in addition to that, you'll want gap insurance or umbrella insurance to backstop anything that wouldn't be covered by that. So insurance is not an option. You always insure everything you own and then insure yourself and insure, you know, everything through an umbrella policy is just a backstop. So that is in addition to the entities for asset protection.

Who shouldn't do this? So now I mean, everything you're laying out says, my gosh, this seems like the best type of investment for wealth development, et cetera, for all the reasons we discussed. Are there some people that you'd say, you know, this is not the right type of an investment for you, you should be looking in other directions?

I would like to think that everyone should own real estate, but the reality is, is a lot of people are just not financially responsible. Unfortunately, in our school system, We don't have financial education, very little to none. And so people graduate, you know, high school and get into college and they know very little about money and how it works. And if they knew, you know, what an asset is and what it can do and how to create passive income and know that there are other options than just having a job where you're exchanging time for money, where you can actually put money to work and it doesn't even have to be yours. It could be OPM, other people's money, where you're putting other people's money to work for you, which is what we do all the time as real estate investors. All the time. We leverage our investment capital 5 to 1. In fact, I've done many deals where I've put in zero. I've leveraged 100% of it and still been cash flow positive. That's possible to do. The point is, is that I'd like to believe that most people, if not everyone, should own real estate. The reality is, is a lot of people don't understand finance, don't understand money, and are not financially responsible. They have a consumerism mentality. And if you gave them $1 million, a year from now they'd be broke because they would blow it all. So no, it's not for everybody. You need to, again, have the ability and the willingness and the knowledge to invest. And you can gain those things. You could become those things. The knowledge is is out there. In fact, a lot of it's free. It's given away free all the time.

So you mentioned these 10 rules you have. Can you share— you said the first one's education, educate yourself.

Yes.

So can you share some other ones?

Yeah. So a big one is to be market agnostic. And, and let me explain why this is a big one. Being market agnostic— and this is really where I started in 2004, when in 9 months I had purchased 84 doors, 84 units So in a very short period of time, I had amassed a pretty large portfolio, but none of it was in California. In fact, I wouldn't touch California with a 20-foot pole. It's just too expensive. The numbers don't make sense. It's a high-risk market. There's a lot of downside. In fact, we're depreciating in most markets in California right now. So it's not a place I would want to be anyway. But being market agnostic is understanding and realizing that here in the United States, we have over 400 metropolitan statistical areas. And every market is local. In fact, you could argue that every market is hyper-local. What's happening in Detroit, Michigan, is certainly different than what's happening in San Diego, California, which is certainly different than what's happening in Salt Lake City, Utah. Every market has its own drivers and dynamics. So what is happening in terms of price, price growth, population growth, positive or negative, the rental market, etc., etc., differs dramatically in some cases between markets. So if you want to be an intelligent, prudent real estate investor, you have to understand that you need to put your capital to work in the markets where it's going to work the hardest for you, grow the fastest, and generate the highest rates of return, cash-on-cash return and total return on investment. How do you do that? You pick a market that has immediate cash flow, an immediate rate of return, and growth and growth potential. And at the core of that is really just jobs and job growth.

Right.

So you have to be market agnostic in order to be able to make those intelligent decisions, meaning you can't be married to a market. If you— unless you're market agnostic, you're not going to be a very successful real estate investor. The analogy I like to use is this: I do tons of research and I determine that Coca-Cola is the greatest stock to buy today. However, I don't live in Atlanta, Georgia, where the corporate headquarters of Coca-Cola is located. Therefore, I cannot buy Coca-Cola stock because I'm not in the same market. How ridiculous is that?

Right.

So when you separate yourself from the markets and you choose markets based on the fundamentals and the trends and what's going on, you will become far more successful than you would otherwise.

So that makes perfect sense. You want to go to where the stars align basically for what your investment is, not where you are geographically.

Exactly.

What other rules do you have?

So geographic diversification. So I hate when stockbrokers and financial advisors say you should diversify because really they're saying, let's not diversify. We're just throwing darts at the wall and just seeing what sticks. The reality is a lot of stocks will go up, a lot of stocks will go down, or funds will go up, funds will go down. And you can't really predict with a high degree of certainty what's going to happen. How do you safeguard against, you know, the changes in the market, which is emotionally driven, very psychologically driven, and you have very little control over? You diversify. Well, in real estate, you can diversify, but intelligently. And the way you do that is you diversify geographically. We already talked about markets being different, and what happens in one market is different than what happens in another market. A very simple example is the more recent announcement by Amazon where they were trying to find you know, HQ2, their second headquarters. Well, that was a big deal because it's going to bring thousands, if not tens of thousands of jobs, plus a bunch of businesses that will surround themselves around that Amazon distribution center because they want to be right there to just drop off inventory quickly and cheaply to have wide distribution. Well, that just brings a lot of jobs, therefore population growth, therefore demand for housing. And so now you have upward pressure on prices. and you have demand in the rental market and rents will go up as well. Knowing that you have to be market agnostic like we were talking about, but it allows you to, to invest in other markets because of things, dynamics that are going on. So my rule of thumb, very quick and dirty, is basically if you're building a real estate portfolio, do 3 to 5 in 3 to 5. What does that mean? It means pick a market that aligns with your investment goals and your criteria. That could be Kansas City, Missouri. It could be Atlanta, Georgia. It could be Dallas, Texas. And you invest in 3 to 5 properties in that one market. Now you have a footprint in that market. You have a management company managing your small portfolio of 3 to 5 properties. You can grow it beyond 5 if you want, but have that footprint in that one market. When you get to about 5 properties, identify a second market that's geographically different. And often that'll be in another another state.

Are they, are they almost always metro? You keep saying metropolitan areas. Are you sometimes going more rural or are you sticking close to the metropolitan areas?

Well, that's a good question. It's in the MSA, the Metropolitan Statistical Area. So if you look at a place like Dallas, it's made up of many submarkets which are actually independent cities. They're not Dallas proper.

So you include those in?

Yeah, I'm talking in general terms like the Dallas metropolitan area. I wouldn't say you're investing in Dallas, the city of Dallas, or in McKinney, or necessarily, you know, Arlington, or anywhere there. It really depends. Again, like I said before, real estate is hyper-local. So you have to not— you start off by looking. This is actually one of my other rules, to take a top-down approach. You start with the market and work your way down to the submarket, and then ultimately to the neighborhoods. And then you're investing in properties that are specific to that neighborhood. That's how you get into the hyperlocal aspect of real estate. So when I talk about Dallas, I'm really talking about regions within the Dallas metropolitan area, which is, you know, another conversation. But I would just want to be clear, it's not that I'm saying anywhere within the city of Dallas or the metropolitan area of Dallas.

Right. So, yeah, and I think you answered my question because I'm saying, okay, when you're saying, you know, pick 5 or, you know, invest in 5 and move to another area, you're saying completely outside of the Dallas metropolitan area.

Yes.

Okay.

That's what I was trying to get at. Okay. Right.

So we're going to buy 3 to 5 5 properties in the Dallas metropolitan area. We'll identify specifically where, you know, the data is out there to figure that out pretty easily. So once we've done that, you could do that in the course of, let's say, 3 months. You could do that in the course of 3 years. It doesn't matter. You've got a footprint in Dallas, in the Dallas metro. Now we're going to pick another market. If I've, if I've identified Jacksonville, Florida, as being the next growth or hybrid market that I want to invest in because it aligns with my investment goals and criteria, We start building a 3 to 5 property portfolio there, and then we do that one more time in a third market. And we can do 4 or 5 different markets if we want. But that creates a great foundation of having about 15 properties spread across 3 metropolitan areas. And that's the place to start. You can continue to build it from there depending on what your strategy is. You can just accelerate the payments, pay them off, and have 15 properties kicking off $1,000 to $2,000 a month. Month, you know, in income and live off of that. Or you can take a fast track and accelerate your portfolio growth by taking that equity that's growing in those properties and refinancing or doing 1031 exchange and redeploying that equity into more property to build a larger, faster portfolio. So ultimately, when you do get into your cash flow strategy, it'll be much, much larger than what it would just taking kind of the slower approach, which is, you know, 3 to 5 and 3 to 5.

Great. So those are, I think, some pretty good rules. Any other ones that come to mind?

So another rule of thumb is really, you know, my 8th rule, and that is use professional property management. It's kind of like a no-brainer in a sense. There's no reason why you should be managing your own properties. I think your time is more valuable than, let's say, an 8-9% management fee that you be paying to a management company. So I would rather spend my time with my family, focusing on things I'm loving and passionate about, and looking for more investment property than trying to, you know, manage my properties, which may not be time-consuming, but it's just not something I want to do. I refer to property management as a thankless job. It's not something I would ever want to do. I certainly wouldn't want to start it as a business. So let other people do it. And, you know, that's just my, my rule.

That was definitely, over the years, an inhibition for me is I The idea of being a landlord just was never attractive to me. But you're saying there's professionals that can handle this for a small piece of the income.

Right.

And so they're professionals. They understand the tenant-landlord laws. They know how to deal with tenants, properly screen, qualify, and place them. Why should I be doing that, especially from, you know, 2,000 miles away when I'm investing in other markets, when I can have someone do that easily, quickly, professionally, and minimize my downtime? Another rule is my 10th rule, and that's a key rule, if you will, but it's just a benefit of investment real estate, and that's leverage. The fact that you can leverage your investment capital with real estate 5 to 1 is incredibly powerful. It's a powerful wealth creator. So I can take $20,000 today and purchase a $100,000 3-bedroom, 2-bath home in a market like Indianapolis, parts of Houston, Memphis, markets within Alabama like Montgomery, Huntsville, and do very well with that property. I'll have a very good cash-on-cash return, but I'm only putting 20% down and I'm borrowing the other 80%. But guess what? I get 100% of the benefits. I get 100% of the amortization on the loan, 100% of the appreciation, 100% of the tax benefits, 100% of the cash flow. And I also benefit from the fact that my 30-year fixed-rate mortgage is being amortized not just by the payments that come in every month that, by the way, my tenant is paying, not I, but inflation is eroding 2% to 3% or 4% of that loan every year. So I'm getting kind of this phantom or invisible rate of return each and every year just from the forces of inflation. The bank is not benefiting from it. I am. They're not readjusting for inflation. It's to my benefit. So being a debt holder, meaning that I'm borrowing the bank's money to purchase income-producing assets for myself, makes me a beneficiary in many, many ways.

Yeah, that's interesting because, you know, just thinking about having $20,000 sitting in cash somewhere, you know, and maybe getting some small insignificant return as compared to saying you can leverage up, have all the advantages you just described, seems like a very unique opportunity as far as trying to build wealth with smaller resources?

Yeah, I'd like to think that most people should start with $100,000. And believe it or not, a lot of people have access to $100,000. They don't even realize it. And this is true for the coastal markets, the expensive markets like California, even in Utah, New Jersey, New York, where they have $100,000 or more sitting in their property, whether it's their principal residence or maybe a second home or investment property. I call that dead equity, dormant equity, idle equity. The fact is, is the return on that equity is zero, right? But what if you could take that equity, even if you're borrowing against it, let's say $100,000 at 6% interest, interest-only loan, which is only $500 a month in payments, but you can turn that $100,000 into 4 or 5 income-producing properties in the Midwest or, you know, in some of the other markets that we're in. Now all of a sudden you've not spent that $100,000. You've invested that $100,000. All you've done is you've moved it from your IRA, self-directed IRA, principal residence, other property, wherever it may be, and you've turned that into 4 or 5 rental properties that are now creating cash flow for you and creating wealth through gains and equity. And in 5 years, you can take that newfound equity And rework that, you can pull it out or refinance and turn that into a larger portfolio and increase your passive income and accelerate your wealth creation. So anybody that can come up with $100,000 immediately, whether it's savings, income, or otherwise, and turn that into a small portfolio of 5 properties, and every 5 years you essentially refinance and rebuild and build up, leverage up your portfolio, in 10, 15, 20 years, you'll be amazed at what you've created. That is how you can get to financial freedom. And I break financial freedom into 4 categories, if I can touch upon that.

Yeah, please.

So, think of it as a pyramid. The largest part of that pyramid is essentially what I call financial frustration. You know, this describes a lot of, you know, the American population where they just can't seem to get ahead. You know, They're always chasing their tail, they just can't get a break, they're always broke, whatever the case is. They're financially frustrated. Even people who have regular income from a W-2 job feels that way. But when you break out of that, you get to a point where you have financial stability. And this is often what happens when people get married. Now they have two incomes coming in and there's some more breathing room, or you get a promotion or whatever the case is. But when you're financially stable, you're making ends meet, you're, you're not overly stressed, you're, you're living paycheck to paycheck, maybe you're putting some stuff away, but your income is typically coming in from active income. You're working for it. When you start investing with the mindset of building passive income, what happens is you go from financial stability to financial independence. You've achieved that when you have predictable and sustainable passive income coming in. And that's the key. It's got to be passive income because it needs to be 1 to 2 times your living expenses. If you were to lose your job or quit your job, you can still maintain the same lifestyle that you have because you've got 1 to 2 times your monthly income. You're covering the nut, as they say. But it's got to be predictable and sustainable. Then that last layer, that's small tip on that pyramid is what I refer to as financial freedom. At that point, you're— you've achieved 3 times or more. Ideally, it would be 10, 20, 30 times, you know, whatever your monthly living expenses are. And that's just a matter of what your financial goals are. You know, you set those goals, not I. But financial freedom is when you have true time freedom. You have enough passive income, which is reliable and sustainable, coming in that you don't have to worry about anything financially. You've achieved everything you want to achieve financially, or maybe not, but you've got everything that would be a concern covered. And now you can get on to bigger, better things, things about your mission, your purpose, whatever fulfills you spiritually or otherwise. And that's really a great place to be because you can sleep in in the morning, you have no stress, you can give back to the community, you could do things, go on a mission, whatever it may be.

Well, Marco, we've covered a lot of ground and explored what I think from a wealth creation standpoint, it's really a magical world, this whole world of real estate and the way that you approach it. So I really appreciate you taking the time to share all your experience with us.

It's been my pleasure, Patrick. It's been a lot of fun.

The first time I met Ron Phillips is when I sat down to do this interview. And let me tell you, I was not expecting what I got. Ron really knows his stuff when it comes to real estate investment. As a matter of fact, after the cameras stopped rolling, we're looking at some of the crew who said, hmm, I think I could do this. My partner and the producer of this project, Jeff Hayes, his wife Dori had never invested in real estate before. Next thing I know, a few months after she saw this interview, she's got a couple of properties. So Ron really knows what he's doing. He has great expertise and experience, and he has a way of explaining it that makes you feel like you can do it. And it doesn't only feel like you can do it, you can do it. So enjoy this interview with Ron Phillips. It's something that can change your financial future. Ron, thanks so much for sitting down with us and giving us your time.

Yeah, it's my pleasure. Happy to be here.

So you have a background in real estate. How did you get involved in that?

I love to read, so I just started reading books. I was actually reading books just about money in general. I traded one to a buddy of mine and he gave me a book that was specifically about real estate investing. I'd had some experience with it in my past, not personally, but with some people that I knew. And so, it just resonated. And then I, I just started diving in and trying to learn as much as I could learn about it because it was fascinating to me. And then I did a real estate deal and never looked back.

So what form of real estate investing do you do?

Well, I started out doing like wholesaling and rehabbing or fixing houses and selling to the market. And then I, I started to realize after I hung out with some, I was buying properties from a couple and they kept having houses. And I was a little bit fascinated as to why they continued to have properties. And it turns out they were selling off their rental pool and replacing it with other properties constantly. So, I was buying these properties and they always seemed available for lunch. They didn't seem to work as hard as I did. And so, I just started to ask them questions about what they did. And lo and behold, they really didn't work as hard as me and they made considerably more money than I did. So, it didn't take me very long to try to start to understand why. Why is it that they have time and they have money and I have time— I don't have any time and I have money, but it seems like there's a cap to that. And they owned a rental real estate portfolio that produced cash flow like a machine every single month. And I didn't. I was producing my income from buying properties or buying inventory, selling the inventory. Well, once I'm out of inventory, I'm out of business. So, I just had to constantly fill this engine that I had made, which is not— there's nothing wrong with that. But once I realized that you could fill it once and it kept paying you over and over again, I just, I'm not the sharpest tool in the shed, but I figured that out real quick. You could actually have these things just constantly produce money for you.

So basically you were like flipping, you know, what they'd call flipping houses. You'd buy it, rehab, and then sell it and then get the next one. So it was very transactional, the business. It's transaction to transaction that you were living.

It was. And I was in business with my brother and we we found a way to create a little bit more of a machine. We had a mortgage broker that was helping us out. He would get the people all qualified for us. And so we had people coming in on the buyer side and we had figured out how to create a pretty decent funnel on our acquisition side too. And so that thing was starting to, to churn out some pretty decent volume. And then there was some, just some regulation changes that really hurt our business in the, in the early 2000s.

What were those? And those— because this is kind of important when you're dealing in a regulated industry, you know, and there's aspects that touch real estate that are very regulated, right? Sure. And those are things you have to kind of be prepared for. There could be shifts and how might that affect you?

So what was it that actually happened Yeah. And we were completely unprepared for it. We were selling all of our properties. All the people that were coming to us were using HUD financing. And so we were very—

just explain what HUD financing is.

Yeah, it's a government-backed loan product. Right. So they— and this was pre-2008 crash. So back then, anybody that fogged a mirror could get a loan. I mean, literally anybody could get a loan. And so all of, all of our business— well, not because we were, we were rehabbing houses that were kind of in the lower income area. And so since we were so dependent on this one source, there was some fraud that had happened in Kansas City. HUD changed their guidelines for rehabbers. So we had to have 12 months on title before we could sell a property to a person that was using a HUD loan.

Which means you had to hold it longer?

Yeah, for a year.

Wow.

So our machine that we had built all of a sudden came to a grinding halt because we couldn't get rid of our properties. Like, we had to hold them for a year, which forced us into the rental market. Interestingly, right when I had already been talking to these, these other people. And so it was fortuitous that I understood So that stopped my business, but it also forced me into another business that has been more lucrative. But to that point about regulation, there was also some things that happened in the rental market right around the same time, because in the area where we had these homes, Section 8 is prevalent, and Section 8 is government-paid-for housing, right? So they get a voucher and then they can go and rent a property. In Kansas City at the time, they had based housing on, or the amount of rent on a point system. That was to supposedly have better housing. And so, you got points for ceiling fans, you got points for certain things that you put in the house. And so, people could go in and they could point out a house. In other words, they get the top rent, but the house really wasn't that much nicer. Our properties were really nice because we had rehabbed them for retail, not for rental. We were getting really, really high rent. Good news for us is that because we bought them very low and we had a spread in them, when they changed the guidelines, it didn't kill us, but it could have because a lot of people were paying very high prices for those properties because of this point system, because the government was paying above normal rent range for these houses. And right around the same time, they decided they didn't want to do that anymore. So they went back to market rent and lowered the rents. I mean, the rents lowered several hundred dollars per door overnight. And so people who had overpaid, now, now they were in jeopardy of getting foreclosed on, which didn't, didn't happen to us. But those two things right there should tell— told me you don't want to be, you don't want to be dependent on these programs that the government can just change overnight. You want to be dependent and you want to make sure that you run your numbers on market rents and understand, have more exit strategies than just, just one exit strategy on your properties.

So if I just want to fast forward to the end here, are you available a lot for lunch?

I am. Yeah, I am.

So now you've figured that part out.

I am. Yeah, I've actually moved into multifamily properties. They— I mean, it's a fantastic game to play if you just get in and learn it and start playing and play it right.

So going back here though, I had to imagine that in the development of your business, when you were selling the homes, you needed sort of that windfall to be able to invest in the next property is what I'm imagining. So now all of a sudden you slow that because now you got rent trickling in as compared to saying that you have, you know, a large sum of cash to go and make another investment. So were you able to get other types of financing to support your business or how did you navigate that?

Well, I completely— I did a complete shift. So I did a, I did a mind shift at that time. I realized that I, I didn't want to do this transactional thing that much anymore, not so much because of the HUD thing, but that was a wake-up call. But more because I really like the lifestyle these other people had. And that's really— when somebody goes into business, we go into business as entrepreneurs to make a lot of money so that we have time, right? What ultimately ends up happening though, for a lot of entrepreneurs, is they just don't ever quit working because there's always this next level or this next thing. And we actually don't ever get to the point over here where we have the time and we get to enjoy the fruits of our labors. What I saw in these other people, this couple specifically, was that they were doing both. They could add to their portfolio in a small amount of time. And at the same time, their portfolio was continuing to work. It's like having a business where someone is running it and you're just a passive investor of the business. And I didn't have that in the transactional-based business that I had. So I did a complete shift. When I did that complete shift, I realized that I wasn't the only one in that situation. I met another guy who was selling to people in California. So at the time I was in Kansas City, they were selling to people in California, because in California, the prices are ridiculously high, especially— this was in 2005. So especially in 2005. $1,000,000, $1,500,000, and the rents are low. So the numbers don't work. You can't buy a property and cash flow very well. So that passive income doesn't come in or you have to put an enormous amount of money down to make them cash flow. Where in the Midwest, it's not like that. Prices are low, the rents for the prices are pretty high. And so the cash flow is really good. So I realized there's all these people out here, they can't do this in their backyard. And I already have all the systems in place right here in Kansas City to make this thing work. So, I partnered up with that guy and we started selling. We sold hundreds and hundreds and hundreds of homes to those people. At the same time, I used that income to build my own portfolio. And I just kept doing that. I've been doing that since 2005, helping people purchase investment properties that are managed for them professionally. And produce this cash flow that I learned that was a really good thing to help busy professionals do that on their own because it's hard for them to do it. That's because it's not their business.

So are you providing capital for them to do this or—

No, no. They— so just like my business produces the capital for me to invest in my own, a dentist or a dock worker or whatever it is that a person does for a living, they produce their income. They save it, they buy investment properties with it, just like I'm doing. So it's the exact same thing they do. They do their business, I do my business. Just happens to be that my business helps them in the pursuit of these rental properties.

And so now, and these rental properties are single family, or at least when you started out, these were single family home rentals, single family duplexes and some fourplexes.

So all smaller residential rental properties.

And the market research that you do, the main factors I think you might have cited, I wonder if there's any others, but you said, you know, what is the cost to purchase a home, what are rentals going for in that market, and these things kind of have to equate somehow. So when you do this, are you looking to be at zero cash flow based on the debt service versus the rental, or do you look to have a little bit positive? A little bit negative. What's your calculus on it?

No, the game is to have as absolutely as much rental income as you can above all of your expenses. Right. So principal, interest, taxes, insurance, homeowners association dues. And then the big ones that most people— those are all the ones that you can— you can clearly see what those are going to be, right? You know what your payment's going to be. You know what your insurance is going to be. You know, all these costs, those are hard costs. Then there's some soft costs that you have to figure in as well, which is vacancy rate. Because your home's going to go vacant, right? You're going to lose some income and maintenance because anybody who's rented a property or who has owned a rental property knows things go wrong or just owns a rent, owns a house, knows things go wrong and the owner of the property has to pay for those things, right? So once you've figured in all of those numbers, after all of that, the house has to be positive cash flow. And the more The more you can get, the better.

Do you have sort of a, you know, standard for what you allot for vacancies and for maintenance?

You know, there's industry standards, but I prefer to do it based on the area, right? So we're in 10 markets and then we move markets based on the economy and what's happening in those markets. Each one of those markets has different characteristics. And you could even take Kansas City, for instance, as a macro, you could also do micro inside of there as well. In the Northland of Kansas City, there's a different vacancy rate than there is in inner city Kansas City, which is different from, you know, the east and the west, all of that stuff. And we prefer to run numbers based on actual data from our property management companies and say this is the exact— for the last year, this is what the vacancy rate is.

How much does that fluctuate with time?

It's all over the place, especially with the markets, because the vacancy rate after 2008, after the crash in Detroit, I mean, was above 50%. I mean, it was insane.

And when that kind of stuff happens, I mean, people in your business probably tank, I'd imagine.

Yeah.

I mean, and that's one of the rules. You don't buy in a one-horse town. The horse in Detroit was the auto industry, and when the horse got sick, Well, the market followed, right? But there were a lot of marketplaces that still had a really solid underlying economy because their economy was diverse. So same thing with Las Vegas. Las Vegas is really good when it's really good. And then, you know, when the economy starts to go down, Vegas is built on companies and people going there to spend money. And when there's less money, less people go there. Same thing up in the oil fields. There's a really big boom, you know, recently up in the north of our country. And up there, I mean, the numbers were staggering. They were staggering. Except for there's only one thing up there. And it's oil. So if the oil market gets hit, it affects everything that goes on up there. And I don't want to be in places like that. I want to be in places where if this part of the economy gets hit, I still have a solid base over here. So, we try to mitigate all of the risk. Can't eliminate it, but you try to mitigate it as much as possible.

What's interesting is like after 2008, so many people ended up in foreclosure. I imagine the rental markets might have been more demand for people to rent because they couldn't stay and service a mortgage anymore.

Absolutely. Rents actually increased. So it's funny because if you, if you bought on, on solid fundamentals in 2008, the month before the crash, so you had all of your numbers dialed in, everything was dialed in. What actually happened with your property is as it lost value, which unless you sell it, you know, the house doesn't get its feelings hurt because it lost value.

Right.

So what actually happened with that is your cash flow rose. Because rents increased and vacancy rates decreased. So, it was a perfect storm. At the same time, our mortgage rates stayed and went down, stayed at historic lows and then went down. So, you could actually refinance and you could have lower interest rates and then lock them for 30 years, which in effect, shorts the dollar long term.

Yeah, it's very interesting. So do you rely a lot though on that equity in the current properties to purchase new ones, or—

Nope, not at all.

How do you go about that?

Not at all. So I never buy, and I never encourage other people to buy properties based on appreciation. Appreciation is a gift, and when the market gives you the gift, you harvest the gift and you go buy more properties, right? But you buy properties on fundamentals. You buy them like you would a business. Nobody goes in and buys a business because they think that they're going to make it better. They buy the business on the profit and loss statement. So you go into the business, you look at the P&L, and then you'll get a multiple of whatever that business produces. It's no different with real estate. You've got to go in and you've got to look at it. Usually you have to build your own P&L on it, which is basically that pro forma. You've got to know what all the costs are, and then you've got to understand what the, underlying soft costs are. And when you do that, you buy it on— based on, you know, pretty good fundamentals. There's always things that could happen that can— there's always risk, right? But you can mitigate the majority of that risk. And then if the property loses value, it loses value. You're still— you're still producing a positive cash flow, which is giving you, you know, it should give you either high single digit or double-digit cash-on-cash returns, someone is paying your mortgage for you, which is a return because there's principal reduction happening there. That's usually between 3% and 5% a year, which is better than most people get long-term in their funds. Right. Just by itself.

So the principal paydown is usually 3% to 5% a year. Yeah.

And it's 3% to 5% on the invested capital. So that's the other thing, right, is you don't have to pay cash. You can You can leverage real estate, so you have to figure returns on what you put into the property, not on what the property's worth.

So what market— what market are you most focused in right now?

I'm focused in several, actually, but they're all in the Midwest.

Okay.

So before the market tanked, you know, in 2006 through 2008, we started to pull away from the high appreciating markets because as they outappreciated the rent, The numbers didn't work anymore. So we pulled into the Midwest where it's safe. You can still get cash flows and you can do that pretty much any time. And then in 2000, after 2008, when, when everything crashed, we went back, we went back into Florida, back into Phoenix. And actually we didn't go into Vegas because of the economic things that I talked about. We went into Boise, which was a very similar market. Except for it had a stronger economic footing. And we bought properties from 2009 to 2012, '13, depending on the market. And then the same thing happened. All of those markets have appreciated like crazy. And then by 2014, we were out of all of them and we went right back into the Midwest.

Out of them, you sold the houses?

No, we just stopped selling houses. So we stopped buying there and we stopped selling to our clients. Clients there because the fundamentals didn't work anymore. The, the numbers didn't work anymore. Um, but we held those properties because we weren't at the top of the market yet.

So we're using clients. So you're basically saying, what are you selling to clients when you say we're selling to clients?

This is same thing I buy.

Okay.

So single-family, duplex, fourplex for, uh, for entry-level people, people who don't, who don't have a big portfolio yet so they can start to understand how this works. And then larger multifamily properties for folks who have some experience and have assets.

So you literally have people that, for lack of a better term, follow you around and say, hey, when you're, when you're ready to sell some of these properties that are investment properties, we're here to buy them.

We're constantly selling them because I can't, I can't buy them all.

Right.

Right. So what my core business does is we— I realize that there's a demand for this. Far more demand than, than I can personally buy. So what I do is when I go into a marketplace, I put all of the infrastructure in there that I would need anyway. I'm buying properties for myself, and then I do the same thing for my clients. And, um, and then they buy and they use the same infrastructure that I'm using in that area. And then when I pull out of that market, that means I just stopped selling. It doesn't mean that my infrastructure is gone. My infrastructure still there. But then we usually wait a few more years, let the market— so right over the past year, we've been telling people, look, in Boise and Phoenix and Florida, these markets have appreciated like crazy. And I don't know how much longer they have. Anybody who tells you that they do is lying to you. Nobody knows. But I know that you have appreciated substantial amount. The market has given you a gift. You know, you may have put $50,000 into this property over here. But that property is now worth $200,000 more. So take your $250,000 and then you go do it 4 more times. So you've added 4 properties to the original, to the original one that you bought. That's the name of the game because they didn't put any more of their own money in there. The market gave them that money. And if you harvest it and don't wait for the market to crash, you can, you can leverage that into more properties.

So it sort of becomes a little bit of luck and timing as far as how fast you can scale something like this, unless you have some type of capital resources. But it seems like when you get a little bit lucky and the market goes up, like you said, you can now leverage into other properties and now have a bigger portfolio.

Yeah, absolutely.

So let's go through the whole process maybe for somebody who's watching this right now saying, okay, what's the step-by-step? You're in a place like Boise or like, you know, somewhere in the Midwest or Florida, and now you're going to look for a home, you're going to negotiate, you're going to purchase it, you're going to maybe do some things to it, you're going to put it on the rental market. Can you just take us through your process, how that works?

Sure. So I don't buy and rehab and rent properties anymore because that process for me, those are, those are separate businesses. So what I do is I go into an area and I, and I find people who already have a rehab business, or I go in and I find a builder and I say, this is what, this is what I'm looking for. And then I either have them build that specific product for me and for my clients, or I go into the rehabber and I say, You need to find this type of home or this type of duplex and you rehab it. You do all of that stuff. You take all of the risk doing that part. And then we will pay just under market value for those. So you get, you get, you get your return. So you win. And then my clients win because they've got a property that usually has a tenant already in place. It's already being professionally managed. And all they have to do really is come up with the down payment for the property. So for them, it's super easy. For me and for my team, there's a lot more work, right? Because we have to go in and vet these people, make sure they know what they're doing, and then help. Like in the case of the builders, sometimes it takes us 6 months to a year to actually put that project together because they've got dirt, but they have to put the infrastructure in the dirt. We have to run the numbers. We have to chase all of the pricing that's constantly going up and trying to keep those numbers working the whole time we're doing that. And then we'll buy some of those and we'll sell the rest of them to our clients.

And are you trying to work without realtors to save that?

I am a broker.

So you act as your own?

So I don't need them. Yeah.

So you can act as your own and that would save costs. So If somebody was getting into this business, would it be a good idea for them to get a broker's license?

Well, not necessarily. I mean, it's, it's not necessary if all they're going to do is buy real estate and hold it. They really don't need that. And if they're going to go do this on their own and they live in the Midwest where you can do this all the time, it doesn't really matter what the market's doing. You can always do this. The fundamentals pretty much always work. Then they can go do it themselves. But I would also, I would strongly recommend that they still go out and find a professional property manager because 95% of us are not made for that business. It's a hard business. When your tenant calls you up and, you know, they have health problems and whatever, most of us have a heart that says, I got to let them slide. But you also have a payment you have to make. Yeah, right. And it's business. So having a management company that can sort through that stuff for you and also take the calls about the toilet, take the calls about all the stuff that you don't want that's in the middle of the night that affects your, your, your personal life. They take all of that stuff for you and all of the headache and the angry tenants and all of the stuff you don't want to do. So I strongly encourage people, even if they're buying in their own market, to find a professional property management company.

Is that a major part when you talk about the infrastructure you put in? Major part of that is the property.

It is. It is the absolute key to making this thing work. So if you have a solid property management company, they can take a mediocre investment and turn it into one that's pretty good.

What percentage of revenue do you have from rental income? Do you allocate for property management?

Depends on the market, but it's usually somewhere between 7% and 10% of the gross rents.

Well, okay, so it's a pretty good chunk.

Yeah, I mean, for, for what they do, it's a really small chunk.

Yeah.

I've owned a property management company. It is one of the smallest margin, thankless jobs you could possibly ever want to do. I can't believe people actually do it. There's, there's— you have to scale it really big or keep it really small to make any money doing it. It's either got to be kind of a mom-and-pop deal or it's got to be a big outfit in order for the numbers to work. And then they get angry calls from the tenants and they get angry calls from the owners and nearly nobody thanks them for doing a great job. So for those of you out there who actually own rental properties, thank your managers, send them Christmas cards. You're the only one doing it, I promise, and you'll get better service.

So at what point— so if somebody says, you know, I've got some extra money, I've been working for a while and trying to figure out what to do with it, I don't like the stock market. Real estate has much more appeal for me. What do you think, in the markets that you work in at least, what do you think the minimal amount of capital you need to start becoming like a client of yours where, you know, they can follow you into markets and pick up some homes? What's the minimum amount of capital they would need, and how long before you think they start to really see a return on that capital?

It really depends on the market, but let's let's go from the low end, you probably need around $20,000 to $25,000 plus reserves. And usually that's 6 months, which is, you know, for that price of a property, you probably need another $5,000 to $10,000. So the total—

so the range of the actual property value is where?

That's around $100,000.

So you're looking at homes about $100,000?

Yeah, because you can do that on a single-family home right now. You can put 20% down on a property. Leverage the rest out. There's some closing costs in there, and then you got to have reserves. So, one of the biggest mistakes people make is that they'll go in and they'll buy a property and they had reserves, and then they'll use the reserves for the property to go to Cancun or whatever, and then something goes wrong with the property and they don't have the reserves anymore. It's a big rookie mistake. You have to have reserves for your properties, and you have to have reserves for your personal life too, right? So you got to have enough reserves for your personal life before you start having reserves for investment properties. And people like to get out ahead of themselves because the numbers look really good. They get super excited about it, right? And then they go out there and do it and they do it a little prematurely when if they just spent 6 more months getting their finances dialed in, right, then they would have had a better experience.

So then $20,000, $25,000 or $20,000 for deposit, $5,000 reserves, you get your first property, rent starts coming back, I guess, immediately. And then, you know, now you're, I guess, as far as managing your rental income, you know, you're allocating for vacancy, allocating for repairs, allocating property management, all those things. But so what period of time? So if I started with $25,000, in what period of time do you think would be before I'm ready for my next home?

Depends on how much you can save, right? So when we meet with people, we try to help them understand that buying one property and then trying to leverage that property, another property, that takes time. You know, in the situation in Boise, I was just telling you, but we just did a 1031 exchange, which we could talk about in a minute, where we take those funds and tax-deferred exchange them into other properties. We did that. They bought in 2011 and we're doing it this year. That's That's 6 years, 7 years, right? In 7 years, there's $200,000 plus all the cash flow, plus the principal reduction, plus the tax benefits. So there's 4 returns that are happening simultaneously on that property. But that, that client didn't just buy that property. So they saved money that year, bought the next year, save money and then buy. And when you, when you do that, when you keep doing that, you've accelerated this thing because then this one property turns into— for her, that one property turned into 4, right? Right. And then it did it with the same amount of money. But the one that she bought the next year, it's doing the same thing. She's currently trying to sell that one right now, and it's going to spawn another one too. So it depends on how much capital you have, how quickly all of that can happen. But we see clients all the time who have $200,000, $500,000, $1 million in a retirement account. And they're scared to death because they've watched the stock market for over a decade now go straight up. I mean, the thing has just been going up. And they don't know what to do with their money now. Because as soon as that thing crashes again, they could lose 50% of their money. And away we go again, right? Where they can take that money And with— they don't have to take it out and have a taxable event because a lot of people don't realize this, but you can move money from a 401(k) into a self-directed IRA and an IRA can actually buy and own real estate just like it can a stock. And so they can actually buy real estate inside of their IRA. All that money goes into their IRA, tax-deferred, all the gains. So if this client I was talking about had purchased inside of their IRA, they wouldn't have to do a 1031 exchange. They're just selling a property and replacing a property because it's all tax-deferred inside of there.

Does the rental income have to come into the IRA?

It does.

So everything just— it's almost the IRA is its own LLC business.

It sounds like it is. It's a tax-deferred or it's a tax-free. So imagine that inside of a Roth, right? A Roth, you don't get any tax benefit putting it in there. But all of that growth that I just talked about happens inside of a Roth. Now we've spawned 1 into 4 inside of a Roth. All of the cash flow is going back in there as a return. There's still principal reduction because you can, you can actually leverage inside of your IRA too. So your IRA can actually go get a loan to buy real estate and all of that money goes back into there. So you've got all 4 of those returns still happening inside of a tax-free environment. Tax-free forever can be tax-free for your kids. I mean, it's super powerful what you can do.

You'd be taxed on it though once you pull it out.

Not in a Roth. No, no, it's tax-free money. So imagine this, you take 10, maybe you're young and you take 20 years, but whatever it is, 10 years, 20 years, and you build up these, this rental pool inside of your retirement account. And so now you've got all this capital that's sitting in there. But it's producing rental income. The rental income you can take out, it's tax-free, and you're still not cannibalizing your money. Most people, they'll put their money into an annuity at the end so that they don't outlive it. But the reality of the situation is that they do. If the market goes down and your annuity payout, if the percentage rate that you're getting paid out goes down, now all of a sudden you're eating into the capital and you'll run out of money. Well, with rental properties, when the market went down, the rent went up. People got more income. I got more income during that time. And if it's inside of a Roth IRA, you can take that income out. It's all tax-free while your properties are growing in value inside of there and you're building generational wealth.

So in your mind, you know, because so many people who are watching this series they're trying to figure out what's the smartest or the best or the most leveraged thing I can do with whatever money I have saved in a retirement account or that I might have in some other types of savings account. It sounds like, especially from a tax perspective, because it's very hard to accumulate cash when you're paying a lot of tax, right? Absolutely.

It kills it.

It kills it. I mean, even if you're a high wagerer, by the time you live a decent lifestyle, pay your taxes, etc., there's not a whole lot left. Right. So, but in this particular circumstance, you're talking about a Roth IRA and saying you can now acquire assets in it. They grow tax-free over time, and that's your future waiting for you. And income that it generates, you can pull out during the course of the hold period, I guess, for the property. You can pull that out tax-free.

Yes, so long as you're 59 and a half, right? So, it's a retirement account, so you can pull the principal out tax-free. The principal that you put in there out tax-free if you need it for things, right? But you can't pull gains out until you're 59 and a half. At that point, you can start pulling it out in your retirement years, but it's all tax-free.

But what about the profit side of it from the rental income?

Yeah, no, it all goes into the IRA and it has the same exact rules. You can't pull it out for personal use. And you also, you can't go use one of the houses. So, if one of them just happens to be in Palm Bay, you don't get to go stay there on vacation.

It's got to be an investment.

It's an investment property only. But I tell my people, I said, look, if you're comparing this to a stock, here's the comparison. You go in and you buy a stock, you own a piece of a company of which you have no control. You really don't know anything about it. The CEO can tank that company. The market can tank that company. You have nothing you can do about it, right? You paid cash for your share and you're going to get whatever return. If it's a dividend-producing stock, it's going to give you some dividend, right? But usually a dividend-producing stock is not a growth stock. And, and the same is true of the other way, right? So if you can ask your stockbroker to give you a stock that both produces a high dividend, also has pretty strong potential for growth, and that you can buy on payments that are fixed for 30 years and that you have 100% control of. So in other words, you've bought the company now, you control the company, and there are things that you can do that will actually change the value of the property. Like, I can actually affect change in this investment because I own 100% of it and that has significant tax benefits. And oh, by the way, I'm buying it on payments, but I want someone else to pay for it the whole time. Right. And if a stockbroker can produce a stock that'll do that, then it can compare to real estate. Otherwise it doesn't.

Really interesting way to characterize it because there's always that ongoing debate, you know, what's the best thing to do. And I think your argument's very compelling, you know, but people have to trust themselves that they would know how to buy a company, you know, metaphorically speaking.

Sure.

So if the market were to stabilize or go down as far as the value of real estate, so now basically saying, okay, so we're not really able to take the gift, as you call it, you know, that you could take and reinvest. The actual typical rate of return as far as saying, okay, my positive cash flow is, I have to imagine, is fairly minimum. By the time you've paid all the expenses, allowed for vacancies, allowed for your management fees, there's probably in a typical area that you would invest in at this level of $100,000 home, how much positive cash flow as a percentage would you say there is?

Yeah, so we see typically somewhere between 8 and 12%.

Oh, is that high?

Yeah. And that's actually low because, because again, we're in a market cycle right now where the prices have gone up. And, you know, I talked about the stock chart. Well, look at the real estate chart. I mean, nationally, the real estate chart has gone pretty crazy, too. The difference being that in real estate, it's all local. So where California's graph is a little bit psychotic right now, it's not the same way in the Midwest. They're kind of boring markets. They don't appreciate crazy, you know, they don't have crazy swings in the market conditions. And that's why we pull back in there when the market starts to get crazy. But there, after figuring all of your expenses, short of something, you know, really, really crazy happening. Yeah. I mean, we see returns that are somewhere between 8% and 12%. And of course, anything can happen to your property. I mean, I have— I had a property last year where we had we had a really, really crazy thing happen. We had 5 units that had pipes freeze. It's in the South where it doesn't get cold. So they don't build them the same as they do here in Utah. Right. And it got really, really, really cold there. And pipes froze, flooded 9 of my units. And, you know, that turned into vacancies and it turned into— I mean, which is out of the scope of anything that I prepared for. Other than that, I had reserves for it.

Right.

But, and I had to use the reserves while I was waiting for the insurance to come in.

I was to say you're insured, but that might take some time also.

Yeah, because you have to work with them. And during that whole time, well, I have tenants who can't live in a flooded place, right? So I had to pay for hotels for them while I found another place for them to go live. And then I had 9 vacancies for all of those months. So can something really crazy happen to your real estate? Absolutely. It can't happen to me last year. And so last year, after all the insurance payments and everything like that, I didn't make any money on that property from the cash flow, but someone was still paying my mortgage for me, right? I still got tax benefits. And last year my values went up. They could have just as easily gone down.

Right?

Right. So when you've got 4 levers you can pull, it's a lot better than having one. Yeah, that— and that's the thing that I love about real estate is I can actually affect change. Then when you move into actually the multifamily properties, you can affect even more change because the value of a multifamily property is based on the P&L. And I can, I can 100% affect change in a P&L because there's a whole bunch of costs in there that are, that are not fixed costs that I can affect change in through proper management. And so when I go look at real estate deals that are multifamily deals, I'll go look at those. The first thing I'm going to look at is the profit and loss statement. Well, let's see what they're spending money on and what I can do better and, and be more efficient with. Because as soon as I do that, I get a multiple on my money, and I don't have to wait for a property to sell down the street for more money, or an appraiser that's going to say, wow, house next door sold for this, so yours is only worth this. It's not that way. I just forced appreciation into a property by affecting the financials. And that's why I really, really love multifamily properties, because I can— as a businessman, I can go in there and go, this is just run horribly. So let's put some efficiencies in here, manage this property better. I don't have to change rents. I don't have to do any— I don't have to fix anything. I'm just fixing money on an income statement. Right? That's all I have to do. And I can raise the price and the equity in the property dramatically.

Yeah, I was about to say, so it seems like multifamily properties are even preferable, at least from what you're describing for you at this point.

Not for somebody who's new, right? Because if you mess up, you've messed up by a multiple.

Yeah, it's a big—

that's a big mess up, right? People can withstand a single-family home mess up. Up. But once you're in there and you understand how things work, it's a natural progression. So this— the client I keep talking about because it's fresh in my mind is, you know, it was a fourplex and she's traded into a little bit larger property, right, into a multi-family property. That multi-family property, she can actually affect the value of that home where she couldn't the fourplex. That is specifically dependent on the market. It's specifically dependent on the appraiser and what they're going to say about the value, which is also dependent on everything that's happening around it. Multifamily properties, while, while there, there is a market kind of cap rate or level as to what the multiple is, the financials are 100% in my control. I can, I can affect those.

All right. What percentage of your business right now is your own investment in properties versus serving clients?

Well, I separate them completely out. And so, you know, we do— we sell hundreds of properties a year to our clients. And, and that's my core business. That's my business. So like a dentist has, you know, they're operating on teeth all day long. That's my, that's my business. That makes me money.

And it's the profit that comes in from that business based on increase in equity in the homes that you're selling.

No, because the homes that I sell, I don't own. So I don't take percentage ownership in, in the deals that I help my clients buy. They own them 100%.

You just take a transaction fee on every one.

Correct. I'm a broker, so the seller pays my fees. So our clients don't actually ever pay us a dime for anything that we do. I get paid by the seller, which is fantastic for our clients.

So this is interesting because I've never heard this before. So basically what you're doing is you're taking your knowledge and expertise in this arena and you're sourcing homes that would be the right targets. They have the right profile for a good investment property.

Correct.

And then you have clients who say, hey, we're going to buy those homes from you. You're going to take a transaction fee as a realtor. They're going to get into investment properties and they're going to get a lot more intelligence in purchasing them because they have your experience. And so you're specializing there and you just transact a volume of these and they get to use our infrastructure.

That's correct. So I guess the other thing I have to add to the whole stock thing is that the seller or the company has to pay the stockbroker in addition. So I don't have to pay the stockbroker, right?

That's right.

I forgot about that one. Yeah, but it's a good one.

It's a good one.

It's a real—

sellers in real estate, almost invariably sellers pay the fee, right? So the buyers don't have to. And all I did was position myself so that I can, I could help the maximum number of people, not take their money away because their money's better spent in the investment. But at the same time, I'm helping these sellers because we can move a whole lot of properties because we've got a whole bunch of people over here that want the product that they can produce.

Right. It makes a lot of sense. 401(k)s, for example, if you're invested in the market, your mutual funds, even if you're not in a 401(k), but any investment mutual funds, there's all these fees that are baked in that, that you don't see, and you're taking all the risk.

Yeah. And so, it's funny because you'll turn on financial TV and the financial TV will tell you this has been the return. And then you open up your statement and you go, what the hell happened to my return? It's 3 or 4 points less than what they're telling me or even what they tell you on the statement. And it's because of fees and it's because the market does this. So, every time you lose money, You paid fees all the way down and you pay fees all the way up. It doesn't make any difference. The stockbrokers and the fund managers all make fees whether you make money or lose money.

And they've got guaranteed income.

Absolutely.

Yeah. So you've given a very compelling argument for how this style of real estate investment really makes a lot of sense. Who shouldn't do this? Who's the person that, you know, you want to avoid this?

That's because it is not for everybody.

Right.

So I'm glad you actually asked that. If you are the kind of investor that doesn't want to open their statement on their 401(k) because they— you don't want to see if it's good and you don't want to see if it's bad. You just want it to be right. You should never own real estate because, you know, people say passive income and then that triggers something in people's mind that says I have to do nothing. But you got a management company out there, but you do have to communicate with them. I mean, they're going to, they're going to make sure that the work gets done. You don't have to fly there. You don't have to do any of that stuff. But they do need your authority. You have to give them the authority to actually make the repairs, right? You have to communicate them about, look, my property has been vacant for 30 days. Should we lower the rent a little bit? Should we offer an incentive? Like, what can we do? Because they're going to kind of stick with what you told them. You got to be a little bit present. You got to be a little bit involved in your investment. You have to open up the bank account every month and go, okay, I have 10 units. Let's see if all 10 of them came in this month. And if they didn't, what's my next logical step? I'm going to call the management company and say, why didn't the money come in and what are we doing about it? And there are some people, I don't understand why, but there are some people who just don't.

So passive income doesn't mean mindless income.

Exactly. Yeah, that's great.

They have to pay some.

I'm going to steal that and I'm going to use it in every presentation I do. Yes.

Thank you. Perfect. So the management companies collect your rents also?

Yeah, absolutely.

I mean, so it's not just maintenance management, but they're collecting the rent there. Are they renting the property to— they're showing the place?

Absolutely.

And all that for 8 or 10%?

Yeah, that doesn't seem like a very big number, does it?

Now it seems like a good number.

Yeah, that's a pretty good deal.

Yeah.

And their margins are so slim and they just get beat up. I already said that, but I mean, people don't understand how bad they get beat up for such a small amount of money, which is why I don't do that business anymore. But yeah, they, they collect the rent, they take all of the phone calls, they produce reports at the end of the year. They produce reports so that you can give them to your accountant. So your accountant can prepare your taxes. They, they do so much far and away above what people think they do. And, you know, for $1,000, they're getting $100, getting $100 a month to take all of that abuse from everybody and then make sure that the property is— is— make sure that your investment that's yours, that you own 100% of, is working correctly. It's, it's a small fee, and we get, we get them reduced because of volume. But even if you had to pay 10%, which is pretty much retail, right? It's not a bad deal. The real insidious piece of this is that 95 or more percent of our country doesn't have any idea how any of this works, right? They don't understand money. They don't understand finances. All they understand is at the end of every month They've got more month than they've got money, right? They don't know how to fix it, so they just get angry. And then we have the more insidious people that come in and they fuel— they just fuel the anger, right? And they, and they, they do class warfare and separate people instead of saying, how did you get wealthy? How did that happen? Instead of thinking to themselves, wait a second, I know somebody who has more money than me. Why don't I just go figure out what they did? If you ask anybody why they're doing any of the stuff they're doing to create income, it's, it's for their loved ones, right? And yet, unfortunately, I mean, when you work 70 hours a week, 90 hours a week, you don't get to— you don't get to do that. All in hopes that one day, if we live long enough, that we can, when we're all broken down, spend time with our family. What a messed up deal that is. I say get out there, figure out how to make the money now. Don't leverage yourself into a whole bunch of debt so that you can actually spend time with your family and not be enslaved right now.

Yeah, well, this was an extraordinary conversation. I really appreciate you sharing your wisdom and your experience with us. I know a lot of people are going to benefit, so thanks for your time here.

Thank you. Appreciate it.

Vishen Lakhiani is the founder and CEO of Mindvalley, and let me tell you, mindvalley.com is having a global impact. His ability to think, put together concepts, inspire, and innovate is pretty unprecedented. You'll see why when you tune into this interview. Vishen is driven with a passion, and his ideas, I know, can transform your life. So tune into this interview with Vishen Lakhiani. Vishen, thanks so much for spending some time with us.

Absolutely. Happy to be here.

So let's start with your background, your story. How did you become an entrepreneur? What got you into what you're doing today?

So like all good entrepreneurs, I started with my first idea failing and then my second idea failing, then my third idea failing. And at this point, the failure was really brutal. I'd lost around $30 grand I'd borrowed from my father. I was in Silicon Valley. It was the year of the dot-com bubble bursting.

2000 or so?

2001, I believe. And I moved to Silicon Valley with bold dreams as a computer engineer to start a software company based on an idea I had. I didn't understand how tough it was gonna be. I lost everything. I was only able to afford renting a couch from a Berkeley college student. On that two-seater couch was my entire life. And so the economy was so bad, I remember April 2001, 14,000 people were laid off in San Francisco. People were attending pink slip parties, and I had no job prospects. I had lost my business. I'd lost the $30 grand from my father. The only job I could get was a dialing for dollars job. I had to pick up the phone and persuade lawyers to buy technology. To help manage their law firms. And it was brutal, it was depressing. If you've ever been a telemarketer interrupting a busy Texas lawyer in the middle of his workday, you are gonna hear more fuck yous than what you'd ever expect. So one day after the 9th lawyer told me to fuck off, I fell into a depression and I got on Google and I decided to seek hope. So I searched for something. I can't remember what it was. Maybe it was, why does life suck so bad? Or it was, why can't I be happy? And I found a class on meditation. So I flew to LA, I took that class, and I returned to my job the next day. And that class shifted something in me. What I know is that I started using abilities of my mind that I never previously were— was utilizing. Not the stuff. That I learned in school, and in 1 week, I doubled my sales. I continued going deeper into these practices, these transcendent practices, this art of going within to improve how you function in the world, and I doubled my sales again and again. In 4 months, I got promoted 3 times. At 26, I was made director of sales, and now I was a key leader in this company. They shipped me out to New York. I opened an office. I was 26 years old, I had men in their 40s reporting to me, and I learned a ton. And 18 months later, I decided I wanted to start my own business, but this time I did it right. I had learned sales, I had learned marketing. I wasn't just a software engineer thinking that if you build it, they will come. I brought these ideas into my next business, Mindvalley, and it's been a freaking joyride ever since.

So where did you grow up?

I grew up in Kuala Lumpur, Malaysia.

So you grew up in Malaysia, and was your father in Malaysia at the time you borrowed the money? Right. So, you know, after having a succession of failures and you got yourself turned around in the ways you described, what got you to say, okay, I'm ready to go back and try again? Because that had to be a very big decision.

Right. So one of the biggest things that I think we have to go through in life, right, is failure. And how we approach failure really depends on our worldview. But I know that in studies of highly successful people, one of the key ingredients to their success is grit. It's the ability to go through the road bumps of life without making those bumps rattle you to the point where you can't continue. And so I changed my worldview of failure. I started seeing failure as an opportunity to grow, because from every failure there's a seed of knowledge that's going to be planted. And this applies to failures across all dimensions of life. Someone dumps you, it freaking hurts, but you learn what to do correctly in your next relationship. And when a business fails, it is so painful, but you learn what to do better. In my case, I learned that I had needed to master not just coding, but marketing but sales for my next business idea to take off. So I started learning from these failures. And when I changed my mindset to view failure as information— failure is not a judgment, failure is not gonna be a perpetual stamp on your brand, failure is just information on what doesn't work. And you use that information and you do what works. And so now I really approach failure with the sense of like ease and joy. Gonna fail? No problem. I wonder what I'm gonna learn.

Really interesting is how it was just a change of mindset or adopting mindfulness, if you will. Was that a part of your culture ever, your upbringing, or was this the first time that you discovered it?

You know what? The style of meditation I first picked up was basically a meditation program that originated on the Texas-Mexican border. It didn't come from India or China. It literally was started by a Texan-Mexican by the name of Jose Silva in the '60s. He started a program called the Silva Mind Control Method, and I guess you can call it Tex-Mex meditation. But true to American style, it wasn't about just going within. There's a grand myth in meditation that the point of meditation is to master these inner states. That's true, yes. Mastering your inner states, for example, can help you to ride through failure, but you are not gonna truly live a great life if you're only going within. You gotta step out. You got to be able to use the lessons you learned from introspection to go out in life and build and create and change the world. I call it the difference between the Buddha and the badass. You need to reconcile both. The world doesn't just need badasses who are going out there and crushing it, at the expense of their health and stress and anxiety and broken families. The world also needs Buddhas who can master the inner state, but the world doesn't need more Buddhas who are just going to be meditating in a cave. I mean, get out there and do something. So I like to see meditation and life as the point of merging the Buddha and the badass. So you master the inner game, but you use it to actually go out and do good at your career, at entrepreneurship, at getting that product or service out to market.

The businesses that you started and failed, did any of them resemble what the ideas of Mindvalley are, or were they completely different?

Many of them were completely different. I started an early version of Instagram in 2005. Back then it was bound for failure because proper phones with cameras didn't really exist. I started a type of email software that allowed you to take back an email. You know, have you ever sent a drunk email and you wish you could take it back? It allowed that. It failed. So there were countless failures, but I learned from those failures and I learned what to do that worked.

So how did the idea of Mindvalley come about then?

So Mindvalley came about because taking that class on meditation allowed me to just completely excel at my job. And I started asking myself, why is it that we don't learn this stuff in school? And that's when I came across a quote by Mandela. He said, "If you want to change the world, change education." So I thought, well, this is an interesting idea. If I can create something that can truly change the world, why not do it in education? And since I stumbled upon the education of meditation and mindfulness, let's focus on that. And that's how Mindvalley started. The "mind" in Mindvalley literally comes from Mind, mindfulness, and so on.

Was your father having any conversations with you when you decided to leave your job, which you were doing really good at, and then to start Mindvalley?

No, at that point I was 26 years old. I got to make my own decisions in life. So, yeah.

So was he— after you failed with his money—

No, but I remember what my dad told me. Okay. My dad said, Vishen, okay, if you can't get to a level where you're making at least $100 grand a year, you can come work for me.

Aha, so he was like your safety net.

He was my safety net, yeah.

Do you think he wanted you to fail so you'd come work for him?

No.

Okay, he was there for you.

See, my dad, the great thing about my dad is I didn't grow up in a rich family. My dad worked as a manager at a department store. My mom was a public school teacher. Like, growing up, it's not like we had a ton of money. I slept on a mattress next to my parents' bed until I was 12 years old. But then when I was 13, my dad actually decided to quit and become— start his own business. And I learned from that. I started observing him and I decided that, gosh, I want to be an entrepreneur. I decided when I was 14 or 15 that I would never take a job, that I would start my own company. So my mind was always obsessed with this idea. And even as I failed, because we all know it's hard, it's not easy. Even as I failed, I kept pushing through with the intent to someday be an entrepreneur.

Do you think now, in reflection and, and working with so many people that you work with in the world, do you think entrepreneurs are born? Do you think that somebody can make the decision? It's not a hardwired thing that they can become it? Uh, how do you see it?

Well, today I don't believe that we should glorify entrepreneur, right? They are sucky entrepreneurs and they are great entrepreneurs. They are sucky employees and they are great employees. So that distinction is not what I care about. What I care about is, are you doing something that you truly love, that pays the bills, that allows you to serve your purpose, and that you're really good at? The Japanese have a name for it. It's called ikigai. When you can find your ikigai, you find that sweet spot between what you really love doing, what you're good at, what you were born to do, what you're using your natural skills for, what makes you money, and what allows you to contribute to the world. That's the sweet spot you want to go for. Now you can do that by starting your own business, you can do that by finding a company that gives you room to work in a role where you get those 4 ingredients. You don't have to be an entrepreneur. I mean, if you think about many of the people who are changing the world, they were not entrepreneurs, but they changed the world. Think about the thousands of scientists at NASA who helped put a man on the moon, right? Those people, they should be so proud of what they did. They were not entrepreneurs. So let's not over-glorify entrepreneur. Now, at the same time, you could be designing logos on Fiverr for $5, you'd be an entrepreneur. The spectrum is just too big.

It's interesting. So the catch-all of entrepreneur, right, there really needs to be— I think Einstein said, make everything as simple as possible but not simpler. And it's maybe an oversimplification.

It is. It's a gross oversimplification.

So in terms of having wealth breakthroughs, what do you think yours was? Was it finding mindfulness? What was the, what was the What was the breakthrough that got you from failure to being working at a job to now a very successful business founder?

So I think it was this, right? I believe, I've come to believe that your success at entrepreneurship or at your career has very little to do with your skills. What it rather has to do with is your beliefs about the world. We create a world around us based on who we believe we are. If we believe that hard work is essential for success, you will have to bust your back to be successful. If you believe that money is hard to come by, you're going to work really— you're going to be putting in lots of hours to make money, and it's going to be tough. If you believe that business is difficult, that being an entrepreneur is difficult, you're going to face that. Our beliefs truly shape the world. We live in. Now the problem is many of us don't know what we believe, right? If you think about beliefs, beliefs are like icebergs. There's a little bit that's above the water, right? But there's a lot that's underneath that we don't know. The beliefs that are underneath the water, the larger chunk of the iceberg, often those were beliefs programmed in you when you were a child. But we don't know that until something happens that brings it out. So in my first 5 years building up a business, we were doing okay. And then I became a father and my son Hayden was 1 year old. And I decided I'm going to cut back working just a little bit, maybe an hour, maybe 90 minutes a day so I could be a dad, right? But I didn't realize that an insidious little belief was in my head. You see, when I was a teenager, I remember my father coming back from work one day And the doorbell rang. My dad was at the door. He opened the door. He walked in. My mom was in the kitchen cooking and I was watching TV. And I, without looking up from the television, I go, "Hey, Dad." And dad walks in. And all of a sudden I hear a loud crash and I turned around and my dad has collapsed backwards on the floor. Like boom, he hit the ground. My mom came running out, "What was that?" And my dad was lying on the ground. We shook him awake. He had literally collapsed from exhaustion. Now I love my father. He was my role model. He's the reason I became an entrepreneur. So when I saw that, a belief entered my head, and that belief was to be an entrepreneur, to be successful, you have to work hard, and it's going to cost you. It's going to cost your health. It's going to make you tired. You're going to be coming back at 9 or 10 PM. That was what I took on. So when I became an entrepreneur and I became a father and I decided that I was going to spend some time with my kid, that belief started taking place in the back of my head. Okay, you're going to cut back your working hours by 1 hour? No worries, but you're not going to be successful. And that's when I— 1 year after becoming a father, I found that the business was bleeding money, and if we didn't correct things in a few months, we were going to go out of business. We were making about a quarter million a month. Which sounds like a lot, but we were losing $15,000 a month, and our bank balances were running really, really, really low. My business partner at that time had an MBA. He was still in college debt, right? He had a Stanford MBA, owed a ton of money to Stanford. I didn't have my own apartment. I was living in a bedroom in my parents' house. I was driving a Nissan March. It was tough, and that's when I sank into a depression. I'm like, "What is going on? I've been doing this for 5 years and it has to be this uphill battle? I've got a 1-year-old child." Now, very often breakthroughs come from breakdowns, right? And that was when I decided to just go on a bit of a journey. I remember traveling to San Diego to attend a seminar by a philosopher by the name of Esther Hicks. I picked up some books by another spiritual spiritual writer, Neale Donald Walsch. I attended a seminar by Harv Eker, the guy who wrote the book, The Millionaire Mindset. And as I started going through all of this deep study in the works of these spiritual philosophers, I had an awakening. And that awakening was, I'm experiencing what I'm experiencing in the world in relation to money because my money beliefs were messed up. I'd taken on meanings about money from observing my father, from observing my culture, and I decided that making money was hard, that making money required hard work, that making money was going to be a slog, that you got to make a sacrifice. You either work hard and are not a good father or you become a good father and see your business fail. And all of those beliefs were shaping my world. I started connecting the dots between Harv Eker and Neale Donald Walsch and Esther Hicks. Neale Donald Walsch in his book "Conversation with God" speaks about the idea that our beliefs create our reality. Harv Eker speaks about how there are no hard and fast rules about money except what you believe to be true, right? And this awakening shifted something in me. In 8 months, as I came out of my delusion, in 8 months the business grew 400%. We went from a quarter million a month to a million a month in 8 months flat. And that transformed my life. But what I learned from that was that making money is easy. Hard work is a myth. And primarily, the world that we experience is a function of the beliefs in our head. Reality doesn't exist. We make it up.

So there seems to be a pattern here, because when things are breaking down, you seem to have gone looking for solutions and usually outward, like, you know, like the first time going to LA, learning meditation and it's still the mind control. This time, you know, right, you're in this predicament and you go and you do these different programs and reset your, your mindset. Uh, so now if somebody's watching us right now, they're facing challenges, they're struggling, what have you, um, you, what are, do you have a methodology or technique to help uncover what these beliefs might be?

Absolutely. Well, uncovering beliefs can be tricky. There are two ways we uncover beliefs. My friend, the Reverend Michael Beckwith, says that we grow through Kensho or we grow through Satori. Kensho is growth through pain, right? That's when you end up in hospital and through that painful experience, you understand how to take better care of your health. Or in my case, your business is failing and through that painful experience, you to reflect and understand how you are operating through a false lens as an entrepreneur. That's growth through pain, Kensho moments. But we also grow through Satori. Satori is growth through insight. Now your soul, and I believe we all have a soul, your soul is designed to make you experience life in the most beautiful way. But most of us are too fucking stubborn to listen to our soul. When you learn to listen to the soul, and this is where meditation and introspection come in, you grow through Satori. Your Satori moments come to you, insights, aha, revelations, awakenings. But when you're too stubborn to pause and listen, your soul will have to mess up. And that's when the breaks happen, that's when the breakdowns that lead to the breakthroughs. So you have a choice, we all have a choice, and you can choose Kensho or you can choose Satori. Satori is a lot more pleasant. Now here's how you choose satori, right? Firstly, it's not always going to be possible to meditate and have a revelation and have this idea download, so there might still be Kensho moments every now and then. But the more you practice personal growth and critical reflection and journaling and meditation and reading books on philosophy, the more the satori moments come. The more the awakenings come. So that's one thing. Now, that rule is one of the first pillars I believe every entrepreneur should adopt, and that is make growth your number one thing. My other friend, Sri Kumar Rao, who's one of the top MBA professors in the world, said, "You know what the problem is with American business schools? They teach you that your business is about your business." And Rao says that simply isn't true. The only thing that your life is about is growth. Your soul is here to grow. If your business fails, it doesn't matter. Did you grow? If your business becomes a billion dollars, it doesn't matter. Did you grow? The only thing that matters is that growth. Growth has to be your number one goal. And when you embrace that, a couple of interesting things happen. Firstly, you will actively go out and seek satori moments through reading, through classes, True meditation. That was what I was doing when I learned my Tex-Mex style of meditation. That was what I was doing when I attended seminars by Harv Eker and Esther Hicks, right? I was seeking satori. That's a really important rule. I made growth number one and I grew out of my pain. So that's the first thing. Make growth your number one thing and if you as an entrepreneur do that, the money will come. As you grow, everything around your life grows. Your relationship with your kids, the money, your business, everything grows. But you need a second rule because remember, there might still be pain. As much as you're growing, there might still be things you're unconscious of and life might come and hit you. Now, the second rule is this: Embrace pain. Kensho moments are not bad. What if all pain is nothing more than a soul simply moving us in the right direction. And sometimes to move you in the right direction, someone has to smack you at the back of your head. And what if pain is nothing more than that? So what I mean by embrace pain is to remember this. The Afghan poet Rumi said, "O ye who cannot take a good rub, how will you ever become a polished gem?" The embrace of pain is a beautiful belief system to adopt. When you go to a gym and you work out and you come I'm out there and you can barely walk, you're growing yourself through pain, right? But we are trained to believe that failure, that pain is wrong or shameful. So let me give you some classic examples. You fail at a business, you feel like a failure. But what if you change that mindset? What if you simply go, oh, this is nothing more than information, I'm going to learn from this and bounce back. You fail at a relationship or you go through a divorce, you are labeled a failure. That's stupid. What if you see that as simply a way to grow yourself, to understand what you truly want in a life partner? So when you view pain from a different lens, without shame, without guilt, without blame, pain becomes information. Now you can apply this as an entrepreneur. One of the companies I've studied, a company that I really love in terms of how they operate, is Google. And Larry Page, the founder of Google, has a very interesting interesting philosophy. It's called the 50/50 rule. So Google operates, all their teams set objectives and key results, right? It's classic goal-setting mechanism. But one of the interesting things that Larry Page introduced, and I brought this into my company, is the 50/50 rule. 50% of your goals must have a 50% chance of failure. Therefore, every department in Google must have 50% of their goals as basically a coin flip, a 50% chance of failure. Now Google actually fails at 40% of everything they do according to Steven Levitt's book In the Plex. I mean, remember Google Buzz? Failure. Google Glass? Failure. But Google also gave us Gmail, it gave us YouTube, it gave us AdWords. It's had incredible successes. But failure at Google is simply seen as information. No guilt, no shame, no judgment. Now you can apply the same principle in your life. Today when I set my goals, I make sure that 50% of my goals have a 50% chance of failure. Now when you think about this, you actually only want to be accomplishing not 100% of your goals because that means you're thinking too small, but accomplishing 60 to 80% of your goals because you must create room for failure. And this pushes you to be bold, it pushes you to dream big, but it also pushes you to not fall into the traps of feeling guilty or feeling ashamed when failure, which is inevitable, strikes. Now, when you take those two mindsets and you bring them into your core, you operate in the world in a completely different sense.

Well, what's interesting is you're talking about risk, you know, and sometimes many people think that risk is a bad thing or they become risk-averse. But probably the driving emotion that would prevent somebody from doing it, where what you're describing is associating shame with the failure, right? And nobody wants to feel shame, right? And then they get— then they play small because they, they want to be safe. So, uh, at what point do you feel like you started taking risks on a consistent basis, and what kind of— what kinds of things did you learn from it?

So one of the first things I do, and I do this across my entire company right now, close to 300 people, every department has their list of objectives and key results. All the key results are perfectly measurable, so you know if you've hit it or not. For example, our app division might say, grow the number of people on our app every single hour from, say, 15,000 to 22,000 by this date. And sometimes the goals that they set are ridiculously high. We don't even know how we're gonna achieve them, but we set them anyway because of the 50/50 rule. So it creates a different style of running an organization where people can dare to be bold and where if you fail, there is no judgment. It's perfectly normal and it allows me as the founder to also place bets where I might fail. That's perfectly okay. The removing of that shame and judgment is essential to creating innovation and to allowing your mind to really expand.

By giving them permission to fail, does— do sometimes they lose motivation and saying, oh, well, you know, I'm expected not to make, you know, a certain amount of these goals anyway. Is there some kind of a carrot you offer if they happen to hit it that gets them to want to strive for it a little bit?

Actually, what I believe is that human beings are naturally goal-driven organisms, right? The attainment of the goal itself is huge for people, and when you hire the right people, they're going to be goal-driven. So there are no carrots. You don't want carrots. You want people to to pursue the goal for the sake of knowing that they pursued that goal because getting there meant something. Nobody climbs Mount Everest for a certificate. They're climbing Mount Everest because accomplishing the goal builds up on their identity. It makes them a different person. It's our natural sense to evolve as an organism. When we achieve something, the harder it is, the more it gives us pride, honor, the more it makes us believe in ourselves, we change from attaining these goals.

So you've got all these learnings now. How long has Mindvalley been out there?

Mindvalley, in terms of the business model that we have right now, since 2013.

Okay, so it's been out there roughly 6 years.

Right.

Okay. And your trajectory is really strong right now. You're building a big community. At what point did you start recognizing that putting or creating a brand from this business that is public-facing, that, you know, sort of defines you becomes important?

Well, I didn't really think of it as a brand until I started realizing that there were certain things in the world that I cared about, that I really wanted to use my business as a force for good to stand behind. Right. You have said this. Your stand is your brand. I wasn't even thinking about branding. But I was obsessed about certain stands in the world. Standing up for the environment, standing up for unity in politics, and I decided to add that to my education brand. And it was really interesting because we lost a couple of our followers, but the company expanded and grew exponentially.

And this is an interesting thing then, 'cause I don't wanna go over that too fast. It's, you talk about a wealth breakthrough. For you, when you took a stand, it alienated, you know, some part of your audience. But you simultaneously grew pretty quickly, I think, right when that happened. So what's the phenomenon? Why would that be?

I believe that— well, recent studies show that 75% of American consumers want CEOs and brands to stand for something. So people are now demanding more accountability in CEOs, in companies. We got to take a stand for the environment. We got to take a stand for unity and not division in politics.

So this is really about leadership, whether it be in a home, in a business, in politics. The same rules apply across the board. Mm-hmm. So when you start having some of these realizations, did it impact you also as a father?

Absolutely. So my daughter's name is Eve. Eve is 4 years old. Old. And all the business decisions I set, I ask myself a question that I call the Eve question. So 20 years from now, when Eve graduates college, will the actions of my products and my services make the world better off for Eve or worse off? Are the products and services that I'm releasing based on creating consumer demand, you know, like Coca-Cola? High fructose corn syrup manufactured as happiness in a red can. Is it something that's destroying the environment? Is it something that's helping nationalism arise on the planet? Or is it something that's creating a better synergy between human beings and the ecology? Something that's contributing to human health and education? So I try to make the to make the world a better place. Now one of the guidelines I look at is the UN, the United Nations Sustainable Development Goals. The UN looks at, looked at around 20 to 25 goals that they say that all countries and all businesses should be looking at. These are goals that allow us to create a better world. It includes better education, it includes clean water. So all my businesses must align with the UN Sustainable Development Goals.

Interesting. One time when I was interviewing John Mackey, the co-founder and CEO of Whole Foods, I asked him, you know, what kind of legacy do you want to leave? And he said, I don't think it goes— kind of egotistical to think about leaving a legacy, isn't it? But you're talking about leaving a legacy. So do you have a sense of like, you know, here's the legacy that I want my actions and creativity in my life? Absolutely. Go ahead. What is that?

Yeah. So what I want to do is I want to create the greatest education system humanity has ever had because a lot of the problems we are facing in the world today come down to a broken education system. The reason obesity and diabetes are on the rise is because our education system doesn't teach us how to eat healthy. Let's, let's go deeper. Education teaches you biology. They don't teach you how to live in a healthy body. Your education might make you memorize facts of history and geography. They don't teach you how to truly be creative. How to thrive at a job, how to start your own business. You might learn economics. You don't learn how to get rich. You don't learn how to create a better world. You learn how to be safe so you can get a decent job, but you don't learn how to become a job creator. Education prepares you for very little in life in terms of what matters. And today, if you have a smartphone, which almost everyone does, you have access to more information than the President of the United States had in 1995, yet we still train our brains for the world of the 1980s and 1990s. So what I'm seeking to do is to completely transform education globally. Mindvalley is my vehicle, and we focus on creating the best learning platform, the best teachers, the best curriculum design, and most importantly, the education that truly matters, how to make human beings thrive as a human being.

It sounds like you're making a distinction between academics and education.

Right. Like Mark Twain said, right? Yeah. Never let school get in the way of your education.

Right.

Exactly. Because what you're describing in academia, you know, it doesn't really resemble the real world in any kind of a practical way. So you're talking about making education practical. Right. To be able to put it on the ground. And that's what Mindvalley is is really what its thrust is.

Right.

So in doing that, how do you translate that into your internal culture as far as the employees? You say you have 300 employees roughly right now. And so how do you translate that so that they get that and they're all kind of— everybody's pulling the chariots in the same direction?

So firstly, we practice what we preach, right? The people at Mindvalley, we do our own programs. I do our own programs. For example, one of our top programs is Lifebook, which you had a role in creating. Everyone at Mindvalley, as soon as you join the company, within month 1, you go for a retreat to the mountains. You spend 4 days in deep immersion creating a book of your life, a 75-page document of how you want your entire life to unfold in all the categories of being human. And at the end of that, you can take that and decide, you know, 'Working at Mindvalley will help me get there, so I'm going to stay.' Or you can say, 'You know, I think I'll go leave and start my own business,' and that's okay, right? So everyone in our company starts with a clear vision for their life. Now it goes further. Then, because we have incredible programs in health and fitness such as WildFit, we have programs on muscle building, programs on meditation, people go into these different streams and they master what they want to master. So as I've been leading this company between now and 2016, I've actually gotten healthier on almost every health metric. I've put on more muscle, I've lost around 14 pounds, I've gotten way fitter, and so have everyone who works for me. There's a joke at Mindvalley that in your first year you will lose anywhere from 10 to 20 pounds.

So you create that in the culture, they start to all line up with that. Right. You have a lot of younger people in your audience that are kind of starting out or embarking.

Right.

Now, okay, you've got the experience of failure, you've got the experience of success, you've thought about these things a lot. You also have the benefit of relationships with some very influential people. Now they're coming to you saying, hey, I want to go and make my mark on the world. I want my wealth breakthrough. I want to be able to, you know, to do something great that I'm passionate about that I'm properly rewarded for. Where do I start? What would you advise them?

Well, I think the first thing is, is understand that school trains you for a tiny slice of life. It says that what truly matters is your career and the money you have in your bank account. That's not true, right? We're both familiar with the Lifebook methodology. John Butcher, our mutual friend, talks about looking at life from 12 different different dimensions including dimensions of character, emotional states, intellectual life. And I know you actually helped create Lifebook.

Yeah. Well, we were the first experiment. Lifebook was John's own personal thing and then he taught it to us and we gave him feedback on the whole process and that's how it became a business.

And you even helped come up with the 12th category, intellectual life.

Yeah. Intellectual life was very important for me. So my wife, Laurie, and I were, you know, we would look at the things that we were interested in and that was a part of the feedback we gave, yeah.

Yeah, so one of the first things I'd encourage people to do is to go— so Lifebook is now run by Mindvalley. Jon is a dear mutual friend of ours. One of the first things I'd advise people to go is to go to life.mindvalley.com and take the free Lifebook assessment. And it'll shine a light on how to look at your life from these 12 dimensions and understand where you might be falling short and where you might be thriving. See, the classic mistake people make is that if you're in a job, you want to specialize. If you're a graphic designer and you want to really improve your hourly rate, you don't go and suddenly master coding. You stay at graphic design and you become a master of graphic design. That's how your income goes up. But at life, you don't specialize. You need to be well-rounded. I mean, you could be making tons of money, but if your health is bad, that's really going to mess up the quality of your life. You could have incredible relationships, but if you are broke, those relationships are going to go through some hardship. So you want to create a well-balanced life. Now when you take the LifeBook assessment, you start going through a form of critical reflection. It takes around 22 minutes and you come up with a picture of where in life you are thriving and where you need to improve. Now by knowing where you need to improve, you now know the right books, the right teachers, the right programs to take so that you can create balance in your life.

One of the takeaways I'd say so far is that wealth and developing wealth is— it starts with asking the question of who to be as compared to here's what you need to do. With that, now you've been at this for a while. You've practiced mindfulness. You've gone through your failures. You've got your success. The momentum, everything you're doing right now. How much does continued self-discovery play in your current life? Are you still trying to dig up blind spots? Are you still trying to find out what's below the surface in that iceberg?

Of course, you can never stop at self-improvement, right? And it's the most important thing to fuel your life. Now, I believe that everyone should spend an hour a day dedicated to their own self-evolution. I call this your rate of self-evolution, your ROSE. So how fast are you growing your ROSE, your rate of self-evolution? So every single day I start my day with meditation. I go on to optimized exercise. I go on to nutrition, which might be supplements, it might be intermittent fasting, it might be making myself a healthy shake. I might do some journaling. I might do a gratitude practice. I listen to podcasts or Mindvalley programs on my way to work. All of that takes an hour, but every single day I'm becoming a better human being. I believe all of us should grow so fast that our friends whom we haven't met in a month have to get to know us all over again.

So burning down your identity and kind of emerging something new from that is an ongoing process, right? So when you are going through these realizations and changes, like you do, do you find it destabilizing when you're going through some of these identity shifts or changes? Like, where you might have— do you have a period where you feel a little bit lost, or is it a pretty smooth road?

It's pretty smooth. Once you get into the practice of personal growth, it's a gentle upward ride.

Knowing a little bit about you and knowing that you practice what you preach, you don't have your employees start work till, I think you said, 11 o'clock, right? So they— 10:30, 11:00. They can get up in the morning and also have all these practices before they begin their work day.

Exactly. It's called, there's a word for that, it's called morning autonomy. It's giving people freedom to own their mornings so they can utilize their mornings to spend time with their spouse or to work out at the gym or to meditate or to read a book. It actually creates happier, better employees.

Does that shift go later into the night or what time are they done typically?

People choose. We don't have set working hours. You finish your work early, go home early.

Well, I think that's about as great a sentiment as we could possibly end on. So really appreciate you sharing your experience, your wisdom, and your thoughts with us.

Thank you.

To see the next episode in the Money Revealed series, check the video right there next to me. I think you'll love it. Continue to believe, and I'll see you there. One of the things that is really interesting about crypto is there's a bit of a self-fulfilling prophecy type model going going on where not only is it extremely exciting technology, not only are we seeing really, really exciting early markets, but also it's so exciting