#9: Paul Young, Entrepreneur & Investor - Why you need an investment criteria, parenting > your career, and the pitfalls of using a cheap tax advisor

So I had a house at the moment, at that time that was worth a half a million dollars. We had just about made the last mortgage payment. I went and I took a home equity line of credit out at prime minus one at that time, which was probably about 2% interest for 300 grand. And I had found hard money lending and I did a couple of hard money loans at 12% interest at that moment with my $300,000. And suddenly I've got $36,000 a year of passive income. Well, you might as well have given me drugs at that moment because that was like, okay, I am so hooked on this. And it just became a major focus for me to make sure that we were living below our means, well below our means as much as possible. And we were investing in real estate was what I love.

On today's episode of Heading west, we have real estate investor and president and founder of Highest Expectations, Paul Young. Steve, there seems to be this fallacy that many business people, especially entrepreneurs, have in that in order to grow their career, grow their business, that there has to be sacrifices made in the family life. And in talking with Paul today, it was so interesting to hear how he's able to really how he was able to balance those two things out so that they were more complementary than opposing factors. Have you experienced that a lot with other entrepreneurs?

Jake? Yes, I have, and even in my own life. But it's the common knowledge I gotta spend all the time with the business to get it going. And usually what the sacrifice is is your family doesn't see you and you're distant to the family and the kids and your wife. But what Paul has done is done a great job of showing how he's done it, where he puts the family number one and the business number two. And it's a great balance and he's grown a very successful business. It was a great story.

It was, it was, you know, it was interesting too that he also brought up that in doing these things, and I don't want to spoil it for listeners, but in doing these things, they were also tax write off. So there was a tax benefit in his ability to integrate his family into his work and he was able to close a lot more business in integrating his family into his work. Super interesting.

And the other thing I found interesting were is he said, time is my friend learned. I learned a lot from that.

Yep. Well, I think we've teased the listeners enough, so let's just head west. Stay tuned as we discuss why you need an investment criteria. Parenting is greater than Your career and the pitfalls of a cheap tax advisor. With our guest, Paul Young. This episode is brought to you by Skyline Point Capital. If you're anything like me, you're always considering where to invest your money. Stocks, bonds, crypto, and rental home. The list is literally endless. As we've all seen over the past year. The stock market is unstable, the housing market is just weird, and inflation is on the rise. In times like these, the clear place to invest my money is in multifamily real estate, AKA apartment complexes. Here's why. Returns on real estate investments have little to no correlation with the stock market. There's lower volatility, stable income streams, and the tax benefits are insane. And let's not forget that the apartments will typically appreciate in value over time, which means you can walk away with a pretty nice return when the complex is sold in three to five years. Best of all, multifamily investing is passive, so you get all the benefits without the hassle and headache of your typical rental home investment. Getting started has never been easier. Head to skylinepointcapital.com to learn how you can start investing today. Cool. Well, we're here. We made it. All right, by the way, I. I.

Think a whole new experience.

I know, right? I. I think I asked this last time we chatted, but are you calling. Where are you at right now? Are you in Florida or are you.

Somewhere else at Florida? In my.

Is this your personal residence or is this a rental?

Yeah, my personal.

Okay. And you just got back?

I'd like to turn her into a rental, but my wife won't let me.

Kind of have to balance that personal use and desire to monetize everything. Right.

Yeah. Right.

And you just got back from Park City, is that correct?

I did.

How was that?

Yes, Park City was amazing. The snow was awesome. They're having an incredible open season and got to pound some great slopes and new power.

Good.

It was awesome.

So is that one a residence as well, or do you rent that one out?

That's. That's an investment property.

Okay, nice.

Well, I'm in an incredible investment property.

I don't want. I shouldn't have asked that because that. That cues us up to go into real estate right away. And I don't want to start there because I want to. I want to go back because there's a cool story about how you actually got into real estate or a progression there. But so let's. I want to start back to the beginning, and it's interesting. You and I have had the chance to talk and Your, your journey, your story is not too dissimilar from Steve's in a lot of way. Like, your backgrounds are very similar. So this will be a fun conversation as we talk about, you know, both of you leading an industry, leading company, passive investing into real estate as sort of a way of utilizing your extra income to eventually maybe replace all of your salary. The importance of family and, and money for memories. So let's, let's jump back to how you got into the industry in which you started in, which was tiling, right?

Yeah.

How did you start there?

Yeah, I mean, out of college, I didn't know exactly what I wanted to do. Ended up moving from the northeast down to Florida. I had worked for a pool company in the northeast. I figured I'll come work for a pool company down here. Well, it didn't work out so well for me. I went to a college, I looked on a board and there was somebody hiring for a manager of a tile company. But I don't know about tile, but I'll go do that. Got that position and just learned and became an expert in the tile industry and just grew and grew and grew. Managed five companies over 30 years in that industry. Went to the manufacturing side after about 10 years and just, I think it's so important to become, wherever you are, an expert. And I ended up doing incredibly well in an industry that if you had asked me in college or any other time, hey, will you. You're going to end up in the tile industry. Like, I have no interest in the tile industry, but it afforded me to travel the world, making relationships all around Asia, South America, Europe, with amazing people and create beautiful products that I walk into homes and businesses and see all the time. So it's been a tremendous, tremendous career path that I never would have expected.

And so you've, you've since exited that, correct?

I did, you know, so I was, my last role was a CEO and managing partner of a firm that became one of the three largest in the country, probably in the world. In the space of wall covering mosaics, floor covering mosaics, tile specialty, small format tiles. We were a very large supplier to Lowe's and Florida Core nationally. And private equity came in. I was working my butt off, as most CEOs do and traveling around the world. I think 2019 was probably 250,000 air miles, 120 nights in hotels. And when the opportunity came with a, this great private equity firm that was interested in getting into the space and starting with us as a foundation for other building products and utilizing our Relationships with Lowe's and Florida Core. I felt it was a good time to take an exit. I. I don't think you got to kind of recognize your limitations, and I don't think I was the guy to lead them to go acquire a bunch of companies and quadruple the size of the business. And I think a legacy CEO partner staying on can bring some challenges with that. So I think it was in everybody's best interest for me to exit. And I've been working on the side with the real estate, and I was ready to throw myself full time.

So two things come to mind immediately. One, wow, talk about perfect timing. 2019 just snuck out before COVID like.

August of 2019 and a few months before the world went to hell.

Somehow you either had great timing or a crystal ball tucked away in your closet. But two, I'd love to hear. I'd love to hear how you had the foresight to know that you weren't the person to lead it to the next frontier. You know, you hear that. That the thing that got you to where you are isn't always the thing that gets you where you want to go. There has to be a change, but rarely is it a consideration of your own role in the business. So what was it about maybe your background or the way you were trained that kind of helped you come to that realization and have the humility to make that decision of, I'm not the person who's gonna be able to take him further and step away from it.

I honestly think it was two. Part one was a personal side of the price to pay to go to that next level. And the question of when is enough enough? And I felt I've seen a lot of guys, you know, who have gone to the next level. A great sacrifice, personally and family wise. So, you know, I knew what that next level looked like, and I don't think I was willing to pay the personal price. And again, there was a point where I felt like, okay, enough is enough, and, you know, when. When do you walk away? And then the other was just the skill set that has the experience of buying merging companies. I had watched a number of private equity firms come into our space, and none of them succeed. And I think a big chunk of it was simulating companies together is a very challenging thing. Cultures and, and history of owners and legacies of. Of the people that are involved in that are tremendously complicated. And I didn't think I. I didn't have enough experience in that. We had not acquired any companies along the way. It Wasn't going to be. I wasn't going to be the right person. And I think it's important to recognize your limitations and. And the cost that you're going to pay and make decisions that are best for you and the organization.

Hey, Paul, how did your team manage the process being bought out by a private equity?

I think they managed it quite well. We obviously didn't make that public until it was looking pretty solid because you don't want to. You know, you're going a million miles an hour running a business, and everybody around you is swimming in rushing waters, and you don't want to complicate their lives until you're quite sure that this is going to happen. And I think that the team saw the opportunity for the company to grow tremendously. We had a lot of great people who worked really hard, some of the hardest working people I've ever worked with in my life. And I think it was. It was something they were excited about.

Go ahead.

Did you just. Did you have just a couple of the executives involved, or was it mainly you running the process with the private equity?

No, my partner was largely running the process of the private equity because I was going nuts. We had just taken a massive expansion with Lowe's Nationwide, which was perfect timing because it increased the value of the company. We got an order that was nearly four times the size of any historical order. We had gotten an opening order and a huge base space. Yeah. So I was running around like crazy, you know, in Asia and Europe, executing an impossible timeline, and my partner was managing a lot of that process.

That's great. Having a partner that can handle that kind of two different talents and.

Yes.

Need to get done.

Yep.

You had.

Yeah, it worked out well.

You had mentioned that part of your consideration of stepping away was obviously that you didn't feel like you were the person, but also what it would cost to continue going forward. And I assume you're referencing mostly about family. Right. Because you probably have kids at this point.

Family, sanity, you know. You know, it's. It was challenging enough to have nearly 100 employees, offices in Asia and Europe, 24 hours a day. There's something going on. And being in manufacturing, there's always challenges. You had all the China tariffs and, you know, where are things going with China? I was working on getting the company out of China as much as possible, paving new territory in Vietnam and Thailand. And it. I mean, it was already a huge amount of work. And then if you want to add into that, acquiring three or four companies, assimilating them, working on leading them. That's, that's a, that's a big cost and there's guys who are cut out for that. And then I was a very hands on CEO. I mean, I knew every inch of the company and I think that was going to be challenging for growing, moving forward. Yeah, I think honestly I had reached my plateau and I had done a great job. I had grown the company six times the size. It was incredibly profitable and. But I had recognized I had reached that limitation and I didn't. I had already sacrificed a decent amount. I think I balanced family very well in the midst of it, especially the fathering side of things. And I just didn't want to lose more time. And again, I think it goes back to when is enough enough? You know, do you need to have a 80 foot yacht in the backyard or do you need to invest in the relationships and enjoy that?

Is your life going to be better with a couple zeros at the end?

Yeah. And the private equity, my partner, like, hey, you'll get five times as much when we exit this thing. And, and I'm like, well, nobody knows that for sure. Most private equity firms have failed in our industry. And what am I going to lose along the way? And is that going to be. And what if I had five times as much? What am I going to do with that money? You know, I feel like I had a pretty good life as it was already. And for me, enough was enough.

And people, I think people forget that, you know, adding more zeros to the end of your net wealth doesn't come with the same amount of problems. It actually increases the problems that you have to deal with.

It does, it does. It's amazing. It's so challenging. I, I was with a friend like five years ago when we were just killing it. I'm like, hey, I, I have more money than I ever had before and I worry about money more than I ever do. Why, why the heck is that? I mean, this is crazy. If I had, you know, in my late 20s, early 30s, said when I have this amount of, it'll be enough and I'll be fine and I won't be worried at all. Well, I had exceeded that by three times as much and I still was worried about it and thinking about it and he's like, well now you got some stuff to lose.

Yeah.

And, and it comes. Challenges of giving away effectively larger sums of money is, you know, to organizations that are doing a good job in charitable work or whatever it might be, has its challenges. And, and I know a lot of people would say, well, I'd really like to have your problems.

Sure.

So, you know, there's obviously a tremendous amount of blessings that come with that as well.

But, yeah, disclaimer, I don't have the.

Extra zeros add complications.

I do not have that problem yet. So that was a disclaimer. I've heard adding zeros makes the problem worse, but you had talked about you travel a third of the amount of time, a third amount of the year, but still having to prioritize your kids, are still wanting to prioritize your kids and your. And your spouse. How are you able to actually balance that? That's, you know, if you're. If you're out of town for that long, what does that actually. What does that actually look like for you? And what sort of impact did it have on your. On your family?

So that year was particularly difficult because of this large order we've gotten from Lowe's. So that was, let's say, a bit atypical. But let's say I was traveling a third of the time generally, and. And a lot of that was bringing my family with me. If I'm in China, and my wife and my kids have been with me to Asia, they've been with me to Europe, and I've brought them to business meetings. When my daughter was young and I was traveling in the United States, and I was on a distribution side, I'm like, she was nine years old, my oldest, and I took her on a sales trip with me, and she helped me carry and tile and do presentation. And the impact that that had on my customers, they never forgot that guy brought his daughter, and she was so cute. She was great. You want to talk about leaving a lasting impression and the reputation that I developed for, hey, he's a great family guy in the midst of the challenges of traveling a lot for business. So I had a daughter who went to college in the UK and I went over to the UK and I opened up the largest customer in the UK in the tile business strictly so I could have reasons to go a couple of times a year to see her and have it and have it paid for as well. And it was. It was a good business decision, but it was largely based on that. And then when I had to go to shows in Europe, I'd fly her over and we'd spend a weekend in. In Italy or Spain or wherever. So there's ways to integrate your family if you are intentional about it, and the people around you in business will respect that, in my experience. And you will stand out as very unique because very few people do it.

Paul, remember when we started our business, we were doing trade shows and my wife was in our booth demonstrating the product and dicing and slicing for our business. And it is a great experience if you can do that. And in your, and you're, in my case, my wife got to see exactly what we're doing and what it takes.

To sell in the booth.

It was all good.

And then the other thing is I took my vacation time. I worked, you know, to be honest, on my vacation. So I had to do some emails because I was, let's say 150email a day kind of guy and maybe a few phone calls. So I wasn't overwhelmed when I came back. But I negotiated in my last four weeks of your vacation. I needed those quarterly breaks to recharge. It was best for me, it was best for the business. I never left it, you know, so, so it, and if anything urgent came up, I was dealing with it and I was managing things. But I, I, I always say this really the vacation time for executives and people who are, who are powerhouses in the business is actually a fallacy because you turn you, you shove those hours to a lot before you leave and a lot when you come back and you take some of them while you're gone. So you know, you've probably worked the hours, you just reallocated them, but you given committed time to your family and that was, you know, we did cruises, we did skiing, we did place going to Europe and Hawaii and great things that, that were memories that we made even in the midst of the craziness of running a business.

That's, that's a great way I think of approaching integrating your family into business is bring them along with you, integrate them, include them on whether it's decisions or things you're doing. I think, speaking of fallacy, I think there's a fallacy, I know there's a fallacy because I think it quite often is that if I just put in more time, more work, I'll make more money to be able to support my family and take care of them.

And while that might never ending hamster.

Wheel, Never ending hamster wheel. And while it might meet a temporary need, you never know the long term effects of what that costs to get you that maybe extra couple dollars in the near term. And I think especially as men, and I can only speak for men, so, or anybody who's working, that has kids, that's a mental, like you said, hamster wheel that we got to get off. Because when your kids are in their teens, they might not know you as well as they probably could have, or they might have complexes because mom or dad was never there. And so I think there's this fallacy, too, that we've got to get off of, of just putting in more time to be able to support our family.

Just a little bit better, 100%. And you don't know what tomorrow brings. You know, we all have been in business long enough to know nothing ever goes the way you think it's going to go. There's no straight lines in business. And sometimes it goes radioactive better than you thought, and sometimes it goes straight to hell. And it's part of being an entrepreneur. And any entrepreneurs live all of that. And what you have is today with your family. And I had to remind myself every year, every day, virtually, my kids are never going to be three again. I'm never going to capture three again. I got to make sure I stay connected to them. My kids are never going to be four again. I'm never going to get this opportunity again. This is a once in a lifetime chance, and I had to keep that focus. Fathering was a huge passion for me, which was interesting because I was not going to have children. I was scared to death to have children. It didn't have the best fathering, as most guys in our generation didn't experience. The. The most connected dads and thought, we don't want to bring kids into this crazy world and kids cost a million dollars and blah, blah, blah. And then we got pregnant and everyone's come up to me going, oh, you're gonna have a baby. Yeah, I'm gonna have a baby. Oh, my God.

Oh, boy.

And then when I held my daughter and she just stole my heart and experienced that level of relationship and love was just mind blowing. I made a very conscious decision that I can fail at anything. I am not going to fail at this. And this is so incredibly important. This is my biggest opportunity of a lifetime. And, you know, closing the biggest deal of my life with Lowe's as a combination against what? You know, having been able to walk my daughter down the aisle and look at her in the face and said, we did this really well. I'll take my daughter down the aisle all day long. And you just can't lose sight along the way. And the propensity is, if you don't work at it, is to let that happen. And in the name of providing for your family and giving your kids everything that you didn't have or whatever it might be you'll make all these sacrifices along the way, and honestly, the kids really don't give a crap about your stuff. They want you.

So true.

There's this quote that's always rang true to me. I don't know if you've seen the movie Father of the Bride. It might be Father Bride 1 or 2. Steve Martin narrates the movie, and at some point he talks about. And he says, and I'm paraphrasing that because he owns a company, a shoe company. He says, it doesn't matter what I accomplish in my life or at my work, if I screw up being a dad, it was all for naught. And so 100% always rings true. It's like, yeah, it doesn't matter how great I become at being a businessman or a real estate investor, if my kids don't know me, my wife hates me, it was totally all for not. And I failed at prioritizing the things that actually mattered.

And often, I should say often, but we, you know, commonly we'll see guys who are super successful who lost their family along the way and their kids don't want anything to do with them or whatever it might be. And. And I think what, you're not successful, what. What good is it to have all this stuff, to not be able to share it with the people that you love the most? And I am so grateful for the relationship we have. Both my daughters are married now. They've married great guys. They love to be with us. We vacation together, we hang out together a lot. That is true success for me, not a sellout to a private equity firm.

That's great.

And being able to retire and not have to work anymore.

Paul, I've got a question for you. How did you instill your family values in your business to your employees?

So I had a handful of employees who, who worked their butts off and never took their vacations. And I would just pull them aside and push them like, you need to take your vacation. You need to go, you know, build some time with your family. And my family, everyone in my company knew my family. My kids had been to work and whatnot. So I just largely tried to live by example when I saw people really out of balance try to challenge them. Interesting thing is most of those people wouldn't take that challenge. They were stuck in a mode. And I think what happens is we come. I believe being a great dad doesn't come as naturally to guys as being a great mom does to moms, to women. And we're fearful of this thing, especially as your kids hit your tween years and the more challenging years. And we don't like not being. We don't like being uncomfortable. Right. So fathering can be uncomfortable. And you got to get beyond that uncomfortableness and push through it, and you get the prize that's worth far more than anything that you've ever experienced in your life. So we hide at work. I think there's a combination of a sincere desire to succeed and provide for your family, but I also think there's some element that drives us to. I'm successful at work, I'm liked at work. I get a lot of accolades at work. And maybe in my fathering role at this moment, I'm not getting that. So I actually kind of in my heart prefer to be at work. And I think that happens to a lot of guys, particularly when you hit the years where, you know, those younger years where your kids want every moment that you'll give them, and then they switch all of a sudden on you. And now, well, you don't mean as much to me. My friends mean everything to me.

Yeah.

You know, and. And that's where I see most guys. Okay, I'm gonna go just pour into my career. Because that also happens to time often with some of the peak years of our careers. So I think we hide.

One of the things we did in our company, it was after multiple years and you have to work 8 to 5 and you can't get off for kids events or et cetera. We finally came to the point where we said, if you have a kid's soccer game or a play over the noon hour or. Or anything with your kids at school that. That you should be there. You go, you go. Doesn't matter what time of the day it was. But the thing we said, just don't let the team down. And the people loved it. They worked harder and et cetera. And we would kick people out of the building if we heard there's a soccer game at 4 o' clock or T ball gamer, etc. Just that environment, they. The parents need to be there at those games. And for sure, that is. That worked really well. And someone told us we should do that, we said, all right, let's do it.

I had this one guy who was one of my top managers, high producer, incredible worker, and he just wouldn't take his family on vacation. So I made a bet with him over a deal that we were trying to close with the customer that if he lost the bet, he had to take his family on vacation. And you know, that was my way of trying to get him to finally do what he need to do. But, but going back to what I just said, honestly, he didn't. And I'm like, I don't get it. And I, and I think the, the fathering role was maybe a little more uncomfortable than work. And, and he was probably hiding.

Wow. So I, I'd, Paul, want to move into, into real estate because. So we've gotten to the end of your, I would say your career, but your career in tiling. Right. And leading that company got bought out. You, you eventually exited as CEO. Did you jump into real estate then? Or were you, were you investing previously with the income that you were getting from your salary as sort of a passive way of replacing your salary?

So I was, I was investing mostly all along. And, and so I'd say we, our family started out as a Dave Ramsey follower of no debt, pay down your house, put money in the bank. We were on that track. We were just about having our house paid off. We had, you know, I don't know, 50, $100,000 in the bank. That felt like a lot to us. And then I picked up Rich Dad, Poor dad, and it changed my life, to be honest. And I'm like, okay, this is actually maybe so for, for a common American who's in deep credit card debt and doesn't know how to manage their finances, you know, Dave Ramsey's formula of cooking your credit cards at 350 degrees is, is maybe good. But if you've got some astuteness and, and responsibility in your financial life, the Rich Dad, Poor dad book really changed my thinking. So here I am about to pay off my house. I read Rich Dad, Poor dad, and thinking, I have got to put my assets to work for me. This is going to be the way that I'm really going to find financial independence. It's not going to be from my job of regularly coming in and saving. And so I had a house at the moment at that time that was worth a half a million dollars. We had just about made the last mortgage payment. I went and I took a home equity line of credit out at prime minus one at that time, which was probably about 2% interest for 300 grand. And I had found hard money lending and I did a couple of hard money loans at 12% interest at that moment with my $300,000. And suddenly I've got $36,000 a year of passive income. Well, you might as well have given me drugs at that moment because that was like, okay, I am so hooked on this and it just became a major focus for me to make sure that we were living below our means, well below our means as much as possible. And we were investing in real estate was what I loved, I had always loved. When we traveled, I looked at my wife will tell you, no matter where we are in the world, I'm looking at real estate prices. I'm just curious about it. So it was a passion that I had had and, and the rich dad poor dad book just really reignited that. And then we started purchasing properties in places that we wanted to be that would serve both as something that we could build memories for as a family, as income, as tax write offs, you know, all the tremendous advantages that real estate offers. So we, we have a few pieces of property that we love and that are great income producing for us and the hard money has been a huge vehicle for me. I'm still very much involved in that, love that.

So I'm going to assume that some of our listeners aren't maybe that they're just getting into real estate and they're not seasoned vets. So can you explain for those who are unfamiliar with the phrase what hard money lending is and why specifically was that so desirable or attractive to you?

So in, in for a myriad of reasons, somebody will not go with traditional financing either because they can't. They don't have the credit history, they don't have the W2s. They may be making incredible amounts of income but don't have the W2s which banks are just so in love with, which I don't understand. You could be making a million a year on your K1 for, from the profit of your company and you, you show 50,000 on your W2 from your salary and they won't lend you anything because of that or they're real estate investors who are notoriously not making any money on deals somehow and they need money quickly usually to close a deal. So they'll come to brokers. I work with a broker. I don't actually work with customers directly and I will never work in someone's personal home. It's business to business. And you lend money at higher interest rates. 10, 12 interest rate, usually interest only. All of, all of my loans I work with interest only. So it makes it a reasonable monthly payment and it can be anywhere from six months to three years that somebody needs to buy a property, fix it up and then they're going to rent it out. And after they've got the rental income they can then qualify for a Traditional mortgage would be an example. And so it's, it's a wheelhouse that I've been in for about 15 years now. And it's. I absolutely love it. To me, it's been my safest, strongest investment.

Paul, what's the typical hard money lending amount from people that you've worked it started with and people that have been with you for quite some time.

So the lowest that makes sense is, is $100,000 loan because you've got paperwork and what not to do. And then I've gone as high as $600,000 loans. And for me, it ends up a lot about what's the loan to value. That's what I end up caring about the most now, you know, after doing it for so many years, borrowers may look better on paper than others, and they'll surprise you in the long run. The question is, how secure is your underlying collateral? So all the hard money loans are first mortgages against the property. So I have the primary lien. I won't do a second mortgage space or anything like that. And I won't loan above 65%. Loan to value gives me a lot of leeway that if someone doesn't pay, I'm going to be okay.

You'll have another property in your portfolio then.

Yeah, yeah. It doesn't ever work that way because they have so much equity, they always sell before foreclosure. You know, it's funny, I used to get nervous about I didn't have for years any potential foreclosures. And in the last few years, I had a few and that I had to actually file on. And the first couple of them I did, I was kind of freaked out. And then I started to realize, no, none of them have ever gone to foreclosure because of the amount of equity that they have. And if it did go to foreclosure, gee, that would be a great way for me to get a backdoor investment in a property I'd love to own. I wish they all would stop paying me and I could own every property that's on the books for you right now.

Everybody in, everybody listening on the podcast is going, okay, I think I need to get into this thing.

I'm taking notes. Something for me to learn in 2020.

If somebody's interested in doing that. I tell you, the best way to do it is to, you know, there's in every city is a real estate investors club, and in those clubs there's always these guys who are the brokers that are advertising hard money loans. You just go see some of those guys and say I might be somebody who wants to lend in your portfolio. And then you, you kind of vet them out. That's, that's how I, I ended up doing it was from the local real estate investor club.

What do you have to give the broker? What percent?

I don't give the broker anything. So the broker brings me the deals. They're charging anywhere from two to five points and that's where they're making their money. And you know, they, they have their group of people who are their funders and they bring the deal to you and they say here's, here's the deal and I'll look at, and I'll go, I don't like the equity in that, I'm not interested. Or the borrower has a 400 credit score that's even possible and doesn't have enough wherewithal to pay back the loan. So I vet those loans and over time you build a great relationship with the broker. So I've helped my particular broker bring in a lot of other lenders because he's been great and we've got a multi year relationship that he knows exactly what I'm looking for. He doesn't ever bring me anything at this point that, that wouldn't be okay with me.

Paul, have you ever teamed up with another hard money lender to you both put money in or you just do it by yourself?

You know, I did a couple of deals with some family members because they were watching and they're like, hey, but that's complicated, you know, I gotta divide the monthly checks, I gotta do the tax return with that. And I'm like, listen, I'm gonna help you get your own loan. I'll walk you through it. But sharing loans isn't fun. So no, I haven't done that.

It's causes a little, you know, and.

My brother did it with me for a while and then he also went into a group that does it. But, and he's having some challenges because he's not actually holding a percent of the corporation or a, the asset itself, you know, and this is where, when I look at the bitcoin blow ups lately and other financial things I've seen, it's like, listen, if I don't have some method of, I don't want to, for me personally, I don't want to stick money into a fund that I don't have some ownership of in some way or another or some underlying collateral that, that, that I'm holding possession of because I'm at that stage and have been for a while of I don't want to lose principal. I'm willing to risk my profit, but my principal is going to carry me for the rest of my life. So safety on my principal is an absolute top priority. And so there are funds that you can go into that are doing hard money lending, but if you got some unscrupulous people in those funds. I did a couple of REITs that I really got hammered in and it shied me away from just giving money to people, trusting that they're going to manage it.

Well, that can be really scary when you do that. And how far away from your home, your, your main area or is your furthest hard money lender or lending property?

I've, I live in Florida. I've done as far as Rhode Island. Yeah, I've learned about, I did Rhode Island, I did New Jersey, and both those turned sour. And those states aren't as friendly to lenders as, as other states. So I also learned I need to better understand, I need to talk to a attorney in those states, the person who's doing the closing, and say, okay, if I have to foreclose on this person, what does that look like? You know, in places like Florida, the default interest automatically, if you have it in your mortgage, goes to 18%. So let's say my loan is out at 11% and the person stops paying me and it takes me six months to go through a process. Well, at the settlement, I'm going to get 18% for that six months. So in Florida, if you stop paying me, I kind of get excited, you know, and because I know you're going to pay off eventually because there's too much equity in the property or you're going to sell the property. So now I no longer have stress about problems that come up because I've been in it long enough and I've watched how it really works.

It sounds like you have, and correct me if I'm wrong, but it sounds like you have sort of a criteria of what and how you invest in things. Is that accurate? Do you have sort of like it has to meet these criteria before I'm going to actually get into an investment.

I, I do. So there's from a, from a standpoint of, let's say, just a pure financial investment, it's going to be as, as I mentioned, partially already is. I'm not risking capital. I got to know that my capital is going to be safe. That's my top, top priority. Tax consequences are a big issue. You know, how does this come through? Is it going to come through as, as ordinary income that's going to be taxable at a higher rate or is it going to be able to come through as capital gain or in some other way that has some tax, tax advantages because that can really make a big difference on the true return after taxes on, on an investment. When is it going to be stressful? Is it going to require a ton of my time, you know, or things that are, that are really important for me? I can't stomach huge volatility. I'm just not a good stock market person because I know over the long run I'll probably do okay, but I can't handle that something dropped 50% and I'm supposed to be okay with this, you know. So, you know, the volatility is something that's important for me. Then when it comes to, let's say the real estate investments that we've done, which we have in Park City, Utah, we have in beautiful lake area in Tennessee, Florida, I look at those from the standpoint of can my family and I enjoy those. You know, here I've got an income producing asset that has great tax implications and, and the home run is that we can go skiing in Park City. You know, in addition to the fact that we've got all this other assets that are working for us. So that, that's another thing that I look through and then if I'm doing it with somebody, I, I do value partnership so they can be very difficult is doing. Do I like this person, do I trust this person? Is, is it going to be fun to work with them and if it's not early on, cut bait and move on.

That's incredible. Steve, if you have a question, go ahead.

No, I was going to say, so when you're going to Park City, you're flying there tax deductible. Your expenses are tax deductible because you're checking on your property, right?

100%. And I just did. Coming off of a trip, I had the most incredible ski vacation in irs, if you're listening. I worked, I, I met with my, my property manager. I, I had to deal with some things inside the property. I wanted to put up, you know, some, some different decorations. I actually decided to go ahead and list the property because we have an opportunity for a 1031 into a great lakefront property. It legitimately did a good amount of business when I was there, but everything I did was expense as it should be because it was a business trip that had some pleasure along with it.

A lot of the real estate investors, that of my peers and multifamily, their whole goal of the year is to pay no taxes. Pay no taxes. And that's their goal. They know that down the road they're going to have to.

Yeah.

When the 10, they're going to have to do something. But right now is if I don't pay taxes, I'll have more money to invest in real estate assets and continue the flywheel going from that side of it.

And I think a lot of people miss that in their investment strategy is the tax consequences of your investment strategy. You know, things coming through when you're a higher earner and you're doing well in your. In your, let's call it, your day job, your regular career, and you're in that higher tax brackets, let's see, at one time, as high as 40%, which I was running when, when I was getting my K1s out of the company and we were killing it. Hey, you got to filter. If the government's going to take 40%, and if you're in a state that they're going to take another 10, you better filter every decision through the tax consequences because they're really significant. And that was a, you know, a key, key thing for us still is today.

And it's interesting that, that people think they've got the high income and they make this income and the government takes all the taxes and from that side of it, but it's not anything new. But it's not about how much you make, it's about how much you get to keep.

You keep.

And that's.

That was a rich dad, poor dad principle.

Absolutely.

That I walked away with. And it's critically important. So when someone comes to me now and says, hey, but, Paul, let's buy this house and we'll flip it and we'll. And we'll make a, I don't know, 100 grand, 200 grand. That's going to come across to me as ordinary income. So for the risk I'm taking, I'm going to lose not quite half, but close to half. I'm not interested. I'll buy that house and I'll turn it into an Airbnb and I'll rent it out for at least two, you know, long enough for it to become a capital gain when we go to sell it. But I'm not interested, for example, in flipping houses.

I'd love to go.

Even though that can be a good financial model, it's just got tough tax consequences.

Yeah. And you it sure, you've got to, you got to think through every one of those. I mean, part, like you said, part of your criteria is, what's this going to do for my tax at the end of the year? My tax statement, because one little misstep could throw the rest of it off. And so you gotta, you gotta weigh and balance every one of these steps and if it makes sense this year, if it's gonna make sense next year based upon my income and.

Yep.

But like you said, the goal is zero taxes, if at all possible.

And a good accountant makes all the difference in the world for teaching you how to, how to do that. And real estate is an incredible tool for it.

Paul, I'm glad you said that because I think people miss that you said a good real estate, a good accountant, tax accountant. Most people think that the person that will do your tax return is qualified to do your real estate strategy. Tax strategy. And that is not true.

You.

I learned that the hard way. You know, I lost a lot along the way and I ended up with an accountant. Now that's just amazing and has, you know, really gotten me to understand things in a better and a different way. So that accountant was life changing for me.

Paul. How, how did you know that? How did you know, like, oh, that it's time for me to change? Because we have listeners that are probably in the same boat and they don't know what the triggers are to change.

You know, advise them. A lot of listeners are probably in this situation, situation where I grew with an accountant when I was making a hundred thousand dollars a year to making over a million dollars a year. And, and that isn't the same accountants and that you got relationship, you got years with them. They don't understand it at the level of that there's a whole different group of accountants who understand that and understand all the tax advantages and the consequences of your investments. And they have a whole different mindset. And I stayed way too long based on relationship with somebody. And honestly it was for me, they made an $85,000 mistake on my taxes that was caught by another firm that I was shopping who said when we sold the company, there's, there was a certain trigger of a smaller percentage, but it was a significant amount that they click the wrong button on. And when I came back and mentioned it to her, she was like, oh, wow, well, we would have caught that. Yeah, we have about two months left to catch that. And you know, and that's when I'm like, oh my God, I have got to make a Change. And as your wealth grows, you need people around you, lawyers, accountants, whatever it might be, who understand that world in a different way.

Were you afraid to make the change personally?

You know, there's the relational part. There's the comfort part. You know, she knows me, she knows my business. She knows my family. I got to start out with somebody new. Yeah, all of that was there, but, oh, my God, I. The swing in. In somebody who knew the taxes at that level was huge. It was six digits, multiple six digits in a tax difference with the right accountant.

I think people have the, you know, similar to dating that. In that people are afraid to make a decision that might. That. That might result in a worse situation. Right. They might not like, yeah, the relationship they're in now or the accountant they have now, but for one, they don't know if there's anything better. And two, they're worried that if they make. That if they take the bold step to move into that new relationship, that they might regret it and it might be worse. They don't know how good they actually have it. And I know for me personally, that was me for a long time, as Steve and I have talked about this offline, is I had like, to your point, a relationship with somebody who's been doing my taxes for a long time. Did a really good job, actually. But there were some things that I needed as. As me and my family started to grow, started to own and sell businesses, invest in real estate, that, you know, there's things that had to change, and we've since moved. But to your point, Steve, of asking, how do you know? And you know, there's value in having a good accountant. I remember when I was just starting to make good money and I was trying to do taxes, my own taxes, myself to save money and somebody. And I cannot remember who it was, but someone told me that attorneys and CPAs, a good one is well worth whatever they charge you. And that's 100.

And these. And those are the people that charge you, you know, good money.

Yeah.

But they bring you back much in return. You know, I think in life in general, just in what you just said, the misery of the. Of the known is often more comfortable than the risk of the unknown. Until pain becomes your greatest motivator. You know, and. And something like me looking and going, oh, my God, I almost lost $85,000. And. And taxes was the trigger point. I had already kind of known in my heart, you know, this. This is just. Doesn't look right. This doesn't seem right. Just. You have Things that, but it's, it's a moment of pain in anything in, in relationships and business or whatever that actually are the greatest catalysts for change. And until the pain point hits you, you'll often stay in the misery of the known because at least you know it. And you know, that's successful entrepreneurs know better and they push out into the risk of the unknown. And that's really where the rewards are.

Paul, one, one last thing on, on this topic, pain got you to make a change. But a lot of people, as their business is growing, they're, they're getting, their wealth is increasing, they're happy, there's no pain and etc. They don't know what they're missing.

They don't know what they don't know.

They don't know what they don't know. How can you, what would you advise somebody that's listening?

I would advise. And what I ended up doing was interviewing three accounting firms. Let them look at my last two years of business and personal taxes and let them come to me and tell me why I should work with them. And when I, when they opened my eyes and to things that I was missing, then, then that's when I knew, okay, so now it was a matter of choosing a firm. So you got no risk to let somebody, you know, talk to buddies who are like, you asked friends around you fellow entrepreneurs, do you love your accountant? And they say, oh my God, I love my accountant. Bring your stuff to them and let them look at it. It's not going to cost you anything. And if they bring, come back and say you, you could save if you did this, this and this. And what about, why aren't you doing this? Which is what happened to me. And I'm like, oh my God, you're right. And then I had to decide which firm.

And what I hear what you're saying is before you have pain, go ahead and have some other accountants look at your tax returns. Even insurance, car insurance, home insurance, whatever you're doing, shop it out. It's be amazing.

We get comfortable and we lose a lot of money in our comfort because of that. So I think that's important in every aspect, like you said, and it keeps the people you're working with on their toes because they get comfortable too.

They do.

It's the nature of relationship over time. Right.

Hey, Paul, going back to your criteria for investing, I find that one incredibly interesting and two, really helpful. Did you have a way you went about setting that criteria? And I asked that for listeners who are they Recognize that they probably need a better set of criteria for making decisions on investments going forward. How did you go about setting that, that list?

By making mistakes.

Welcome to the club.

By losing some capital on some stupid stuff that looked like, you know, it was really going to pay off. By doing it with people that I thought were really trustworthy and turned out not to be. And you know, hey, in life in general, if we allow our errors to be our greatest teachers, they, they are. And if we allow them to crush us, then, then you're making a big mistake. We're all going to make errors. Do you walk away wiser, smarter and actually grateful that you got that lesson and that it would, it had a few zeros less than it would 20 years down the road. So it was pain that taught me bad choices.

I think that we all, as entrepreneurs and business owners, that's how you grow, that's how you develop for the future. I learned the best from my mistakes that I made. And we all make them. We all make them. The key is pick yourself back up and continue on and go, I'll never make that mistake mistake again.

Yeah, I've had a lot of friends who lost, you know, everything they invested in crypto and I never got in. And I've been so curious about it and so wanting to do it, but, but I made a rule based on a painful mistake many years ago that wasn't really that costly when I look back at it, that I'm not losing capital ever again. That's how that one came in to play for me is, you know, at that time I might have lost $15,000 of capital, which was huge for me. It was probably more than half of my life savings at that moment in my, my life. Better that than losing a million and a half now, you know, so that, that was a lesson that I walked away with. Okay, from now on, this is how I'm going to look at it. Trusting relationships that you get in the business with that you think are really going to be amazing. And then the first six months there's just all these red flags and learning to pay attention to those and trust your gut on that. And rather than now spending three years together, just go, no, I just don't think this is going to work out. You know, let's just, let's just cut bait now. So that was another one. I just got to be with people that I'm really enjoying working with people who are like minded in their work ethic and integrity and when it's not, cut it sooner than later, you know, so each of these were largely built on experiences that were the opposite of the rule that I ended up putting into place.

Paul, how have you. You were talking about your partners. Integrity, same values. You like, you like them. What else do you do if you get into a partnership with a new person? You don't know. Can you walk us through the process, how you vet this partner?

So what I've done more lately, and I gotta be candid to say, because I've started a lot of new ventures for fun, I need to keep active. I'm not a guy who's going to go golfing and fishing. I'll end up in trouble and it's just not, not, not good for me. So my wife is like, you are not retired. You opened six LLCs in the last 12 months.

That sounds familiar.

A lot of what I've been doing more of is walking alongside that person for a few months first. And you know, you're so anxious to get going in something right away. It looks good, Great. It sounds great. Let me just. Why don't you just start to do it without the partnership first, moving in that direction, spending time together, coming across situations that have their challenges, watching how that person handles it from a work ethic standpoint, from an integrity standpoint, you gotta walk alongside somebody for a few months to really know. You know, we've all managed employees and somebody can look amazing on paper, do incredible interview and you get them in and within a month or two you've got a pretty good sense, you know, and it's not uncommon to go, that person looked amazing on paper and but boy, there's some serious challenges with it versus somebody who maybe didn't look amazing on paper and they're a rock star and they didn't know how to interview well. But you know, and you know that in time, time is your friend in everything. You know, we. When you're a fast moving entrepreneur, moving from one thing to another, I think you look at time as your enemy. That's another thing that changed for me a lot in my later years of life, of realizing time as a friend. I heard a message once at a church that time is a weapon that forces deception to reveal itself. It was very impactful for me that somebody can hide who they are, can hide lack of integrity for a period of time, but long term, you can't. It leaks out.

Can you repeat one more time?

Time is a weapon that forces deception to reveal itself.

That's true.

And you know, I work with a lot of younger entrepreneurs. My Kids, friends, and anywhere that come across that. That they're so anxious about something in a moment, in a time, I'm like, listen, back off. Time is your friend. You know, I've got a couple of opportunities now. That one, that was a great business opportunity. I know it will work, but I need a partner in Tennessee. On it. I've got a guy that I. That I do love, but we've worked together for a long time, almost a year. And the inconsistency of following through on things and whatnot made me just pull the plug on it because I can see enough challenges there to go. This isn't. It may work out financially, but it's not going to work out in the way that we work together and the way that we approach business together. And we've walked alongside together long enough for us to know that. And I think he was in agreement and was amicable decision, even though it was a great business opportunity. Being in partnerships is tough. It's tough, but the strong majority are hard, Much harder than you would imagine. If you got a great partnership, be very great.

Yeah.

And do you pick a partner that's got different talents than you?

Preferably, Absolutely. It's great to bring someone to the table who offsets your. Your weaknesses. I think some people might be threatened by that. I love that. I always like to have employees who challenge me about things we were thinking or directions we were going. So, yeah, that's great if you can.

What's that old saying? If you've got too many people alike, then there's too many of you. There's not a need for the rest of you.

You look at a football team, and I use this as an analogy, but you've got 11 people on the offense and 11 on the defense, and they're all different players, but you put them all together, from left end to the quarterback to the halfback. You put them all together, all these different people, and you have a football team that's driving down the field scoring touchdowns.

Yeah.

Just like life.

Or. Or a soccer team like Argentina.

Like a soccer team like Argentina.

What a great game.

Top five sporting events I think I've ever seen.

So happy for Messi.

Yes. That was incredible. Well, Paul, we end. We're coming up on the end of an hour. An hour blew by.

Hey, Jake. Jake. Hey, can I ask him one last question? And then we'll go into the. Hey, Paul, people have asked me this and guys that I surround myself with and et cetera. If we had your wife here.

What.

Would she tell us? About you.

I am too busy, too high strung. I don't know how to sit still. Even in retirement. No. By the way, we've traveled the world this last couple of years. We saw Covid as an incredible opportunity to travel, even though we were not vaccinated. We went to Europe, we went to Hawaii. We, you know, it was this incredible opportunity to go to places. So we've built some amazing memories and. And she would like me to golf and fish and watch Netflix. More Hallmark. But she understands me to know I'm just. I just not built that way. And satisfaction of life isn't that. And I think the other thing you should say is I'm incredibly relational. So I think for me, I'd want to end on a note of. Success in life is measured in richness of relationship. No matter what you've got, whether you got nothing or you've got a lot, if you've got meaningful, deep relationships, then you're rich and. And having a ton of money, but not having good relationships. Let's look at superstar Hollywood people who. Whose lives blow up and. And you don't know who's around you because you're successful, because you're famous, because your money. Because of your money or whatever it is, and maybe your family's blowing up along the way or whatever. It's no measure of success at all. And if there's something that's become incredibly clear to me this last 10 years is the richness of life is. Is measured in the richness of relationships. And money is a vehicle to enhance relationships, to. To be generous to. To those around you, the people in need, and to enhance relationships. So that's a big focus for me in these days is how do I make incredible environments to build relationships further with my family, with extended family, with friends, the people that I love, new people who come into my life.

Well said.

Yeah, amen to that. Well, we are coming to the end of an hour, which again, flew by super fast. But we end every episode with a speed round of seven questions. Quick questions, quick answers. But it's just a way for everybody to get to a little bit more.

Now that I'm not a CEO anymore, I don't know that I'm as sharp as I used to.

That's all right. That's all right. All right. Number one, do you have any daily rituals that you swear by?

Just some quiet time in the morning when I'm in bed. You know, I actually linger in bed about an hour now and thinking about things, thinking about the day that's an important one to me. I didn't have that luxury before. I'd wake up and my phone was buzzing from Asia and Europe.

What's one item you could not live without?

Now? I'd say my family, but that's not an item. So the honest answer to that is my. My iPhone. And my wife would say that too.

Yeah, it's. That's the number one answer. So we're seeing a trend. What's.

I'm being honest.

Yeah, no, no, it's a good one. But it's funny that we're interviewing people in business, so that that's probably makes the. The most sense. Sense. It'd be their iPhone or their I or their Mac. What's one piece of real estate advice that you'd give to listeners?

Just get started. I mean, wherever it is, whether it's lending, whether it's buying a piece of real estate, you know, getting quote, unquote, the vacation home because you can qualify for it, and making that into a vacation rental, do it. Real estate's amazing.

Yeah. In what situations do you find at your the most happy or fulfilled?

I love being with my family and seeing them enjoy an incredible environment. We're heading to Hawaii next month. I just love to sit back and watch everybody enjoy that.

Oh, man. Talk about being able to. To enjoy the fruits of your labor. You get to see your family, but also in a place that you've worked hard to get them to. All right, last one. Uh, the. Obviously the. The title of the show is called Heading West. That's a sort of a way of saying that life is a journey. You start at one point, you end up in a different location, and you learn a lot over that journey. Lots of failures, lots of ups and downs and things, but life's a process. But I want to ask you a question about the end of that road. As you head west in life, where do you hope to end up?

I want to end up being known as an amazing dad who helped other dads be amazing dads. That. That honestly would be out of anything more than leaving my family. Great real estate. Good financial resources would be that relational aspect, if I understood the question correctly. I hope that was that.

That was perfect. Yep.

Great answer.

Yeah. Paul, this was an amazing time and so thankful that you'd spend some time with us chatting today.

Thanks for having us. I've never done a podcast before. I was a little bit nervous. But you guys are okay.

I appreciate that. Well, we'll have to do this again real soon.

Thanks.

All right, talk to you later.