80: Building Generational Wealth: The Life Plan Blueprint with Bill Faeth

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Welcome to the Short Term Rentals Profit show with Jason Hartman. If you're into Airbnb, VRBO or any other platforms and tools, this is the place for you. You'll learn a new slant on exciting, fresh new techniques for the world's most historically proven asset class that will enable you to create more we and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire.

Who walks the walk.

He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in several thousand real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now, here's your host, Jason Hartman with the complete solution for real estate investors.

It is my pleasure to welcome Bill Faith to the show. He is a serial entrepreneur. He's done 31 startups, he's had 19 exits. He's a prolific real estate investor and just a great guy overall. I'm sure you're going to learn a lot from this conversation today. Bill, welcome. How you doing?

I'm doing awesome. Thank you, Jason, for having me.

It's good to have you. And you are a big proponent of having a life plan when it comes to creating wealth and doing something without wealth that actually makes an impact and makes a difference. Maybe we want to start with that, but I know we've got a lot of other things to talk about.

Yeah, I mean, I would love to start with that. I think it's one of the most important facets, especially for somebody that's a serial entrepreneur like myself. You know, I have done 50 years old, I've done 31 startups. For most people, that's crazy talk, right? And for me, it probably was crazy talk through about the first 23, 24 startups that I did. Luckily, I started at a young age when I was 17. In high school, I was selling T shirts out of the back of my mom's 1984 Ford Tempo at football games. But in 2015, my life kind of changed. I was a member of eo, the Entrepreneurs Organization. I had kind of a negative forum experience, right? We had nine people, four super overachievers and five kind of lazy underachievers. And I walked in one day, I'm like, why am I spending eight hours a month in this and I'm getting nothing. You guys are Late, you guys don't have your financials, blah blah blah. And I left and dropped out and took the other three high achievers with me. We started our own mastermind called Spark. Jason and we noticed that there was one flaw in the model and that was all of us. Type A mixing with type B personalities, trying to self manage our own forum. So we hired a gentleman named John Barden who fundamentally changed my life. He taught me about the life plan and he'd been a two time Fortune 500 CEO. He was in an angel investor, he's about 15, 20 years older than us and it's really very simple. He taught us that we have the ability to architect our desired outcome. But we the key component, the tipping point here is if you want to have work and life commingled together, we needed to have a mindset shift that we weren't trying to separate like everybody else, right. We, everything had to work together and we had to be intentional and 100% aligned with our spouse. Every one of us four guys, we added two to our mastermind, had tremendous relationships. We none of nobody was divorced ever. Most of us have been married for like 15 years plus I'm now into 26 years. Never slept on the couch, never had to go to a hotel, never had a drop, you know, dead drag out fight with my wife. We have a great relationship. But what I found was we weren't a hundred percent aligned. We were about 75 to 80% and at that time I'd done 24 startups and I was chasing money and I built some 50 million dollar companies, multiple 30 millions, like six or seven of them over, over 10 to 15 million and had some success. But the problem is is she wanted me at home. I had a 4 year, 55 year old at that time, right. And she said something to me, Jason, that resonated for the rest of my life. I don't want you to turn into your father. And we talked about this pre roll. We both grew up without fathers. Mine left me and my mother when I was five and you know, I always wanted to be a tremendous father and I thought I was doing the right thing. Quadruple type A, ocd, all these traits that successful entrepreneurs like us have. But I was so focused on taking care of my family financially. I wasn't at home, I wasn't present and her and I weren't aligned.

So, so the misalignment wasn't a misalignment about money goals, it was about being available and being present. Right. You were, you were chasing the money too much, right?

She said, she said, one's enough is enough. You know, we were multimillionaires at that time. And she's like, I mean, do we need to make a million, 2 million, 5 million? When, when's it enough? And when are you going to stop and spend more time and when you're going to be home? When are you going to put this down, stop, you know, talking to work and whatever? And at that time, I had four companies that were going at the exact same time. And if you, if you do the math, my MO was to do three to four startups every single decade, right? So at that point we realigned. John had me go through what I wanted the outcome of my life to look like. Then two months later she did hers. And it's really critical that we didn't do it together because there's always an alpha right, in the relationship and somebody's going to comply. So we did it separately and then we brought them together and then that's when really the magic started happening for us. I've done less startups since 2015 and I've pretty much probably 4x my income while reducing my average work time from about 70 to 80 hours a week to less than 15 now.

So what's the secret on that? In a nutshell, I mean, I know.

There'S a lot to it, but there's two big things. Number one is today, when we're done, because it's 12:47 my time and it's a Wednesday. I was gone last week. I missed Faith Fridays. My social media media manager branded that she thought we were just going out and having fun on Friday afternoons. We're actually auditing our success as parents, as lovers of best friends, business partners, everything. We have these metrics for us to audit ourselves. We typically do it on a Friday, so I got to make up for last week today, then we'll do it again on Friday and then we come home. And the big thing for us is we have two daughters. I've got an 18 and a 14 year old, and we started this with them in 2017. How present were mom and dad this week? How much did you feel loved? On a scale of 1 to 10, what do we do good, what do we do bad? Just basic stuff to where they were involved in our relationship and not just watching from afar. Right. So that made. That was really important for us as children, but or for as parents. One of the big things, though, is this, and this is not for sale. So I'm not pitching Anything. This is my success planner. I took what I learned from John. People like Brendan Burchard that have a strong relationship with Grant Cardone kind of took all how they're managing their lives. And a big influence for me was Gary Vaynerchuk. Gary manages his life Monday through Friday down to the two minute mark. So one of the big things for me is I learned how to set priorities. But this was a big component over here, right? So I have three priorities on a daily basis. And what I learned is to get rid of all the distractions. So I would set my start time, I would write down an estimated time to completion and I would monitor my completion time. And what I found out is I wasted a lot of time with this thing and the notifications coming in on my Slack channels and all that different type of stuff. So I had to learn to block that out, turn that stuff off so I could complete my priorities. Because I don't work off of like a 10 or a 20 point task list on a weekly basis. I work off of three priorities every single day. And I start with one and when I get done with number one, then I fill in number two. I don't even look at two or three and get distracted by it. It's this micro focus on number one complete, number two becomes number one complete, number three becomes number one complete and so forth.

Yeah, yeah, good stuff. You know, we had Cal Newport on the show, the author of Deep Work and several other books. And I think you're definitely right. We are just so distracted nowadays that the attention, muscle, it's just obliterated in most of us, you know, and so we've got to go back to that. I mean that, that three thing idea. I remember Earl Nightingale telling me that when I was 17 years old. Right. You really can't get more than three things done in a day. More than three.

You're 100. Correct. I go back to like you mentioned when you were 17. When I was 19, I just dropped out of UCLA on a full ride golf scholarship to play professional golf. And there was the most renowned sports psychologist at the time. His name was Dr. Bob Rotella. And I went in, he's like, bill, what do you think about in your pre shot routine like the 30 seconds before you're going to execute, Right. I said, well, I'm thinking about mechanics, setup, all this type of stuff. And there was like nine things and I'm going through this mental checklist. He's like, we have to pare that down to 00 because you need to Rely on muscle memory and confidence as opposed to going through these checklists. So what it did is it started paring down from nine to seven. Then he tried to get me to three. He's all, you can only mentally process one thought every 10 seconds. Right. So if you have a 30 second pre shot routine, it took me like three to four years to get it to zero. And zero was only when you were in the zone. Right. And I look at the same thing in our life today. If I'm not fully entrenched with you, if I'm looking at my phone or one of my other monitors or not paying attention, then I can't give you that full attention. So I kind of applied that, what I learned through Dr. Bob, into my real estate investing, into my professional life, and probably most importantly, with my kids.

Yeah, yeah. So let's talk about the angle of money and the idea of Enough. And I just want to share my screen and show you something for a quick moment because I think you're going to have some good comments on this whole idea. And this is from the book Die with Zero. And basically what it says is that at some point we've got to start spending down our wealth because we're going to die with too much. And this is the sort of arc that he explains. Like at some point, you know, we're surviving, then we get a little more comfortable, then we get to the point of we can afford all the luxuries. Right. But by then we're usually so old, and it doesn't mean that old, but you know, maybe 50. Right. To where if we don't start spending down that wealth a little bit, we're not going to have the help to do it, you know, in the next couple of decades maybe. Right. There's a high chance of that. And also if you have children, you're not going to be around to help them spend your wealth. Right. This isn't about being selfish or living like a narcissist or anything like that. It's about having your money have impact while you're alive. And he talks about why are you waiting to your dad to give your money to your kids. Right. You know, that's one of the things he talks about. So you and your wife had this conversation about Enough. Right. And I just finished reading Jack Bogle's book Enough, which is more a discussion about Wall street and how the greed is so excessive on Wall Street. But there are a lot of applications of this idea. So I just thought you might want to comment on that.

I Love it. And as I told you before we got started, my oldest daughter just turned 18. She's going to become a doctor and she's going to Belmont University for the first year of their pre med program. And that's going to cost me 55 a year. Right. And then probably another.

What's that, 55,000 a year? Yeah, yeah.

And that's just for tuition, room and books, probably another 10 or 15,000. But I love that graphic that you put up. So I just gave her $250,000. But to access that, she has to unlock certain things, right. So one of the things I don't want her to become is a very typical. No disrespect to physicians or doctors, but most of them are not financially literate because they focus so much on their education to become a physician or a surgeon or whatever that is.

They're scientists, right?

100%. So I've spent probably the last three to four years of her life, and I'm just starting with my youngest daughter who's 14, on really empowering them to become financially literate as well as building their confidence for young women. So she has to do very specific things. And one of the things is she has to take and get A's in business courses at Belmont, which has a tremendous business school. And then we are working together. Then I will invest the money with her, not just give it to her or you know, in a checking account or money marketing account or whatever that is.

Some of the things that you look, that you show on that graphic there are really important. I'm, I just turned, I'm 50 and a half. I'll be 51 in May. I achieved what my, me and my wife determined financial independence at 48. So a few years ago, one of the goals for us was to do it. But here's the problem.

What's your definition of financial independence?

Financial independence for us is that we can live off of our passive income and we have a plan to reduce our debt to zero. So that's all part of architecting our life plan. And that I have a net worth of cash liquidity that is more than what my debt is. So, and I'm an open book. I made just under $4 million last year, like 3.8 million in net income, not gross revenue. I've got a $19 million short term rental portfolio with 3.8, $3.9 million worth of debt on it. So I have a huge delta of equity. There's. And I just added another property last month that takes me to A run rate of my forecasted income for this year to be at $1.14 million in net income. So if you look at that rental properties off of my rental properties. Yes.

By the way, are those all single family homes or do you have some hotels in there or something?

That's just my solely owned short term rental portfolio. That doesn't include. I co host, I have a hotel through investment group, that type of stuff.

Just one of the. Are those single families or those are.

All single family homes. Y and one condo, single family homes and one luxury condo at Glacier National Park. So that the 1.14 million tied into my life plan to where since we've already financially free, one of our goals is to be Dave Ramsey lives right around the corner from me is to become debt free. So I'm trying to keep my net income off the rental properties to pay them off down to zero. When my youngest daughter in three and a half years graduates from high school, that's when me and my wife will officially retire. Because now we won't have the responsibility of taking them to school and soccer and all that type of stuff once they go to college. That ties into the life plan so I can strategically reconstruct my portfolio every single year to tie to that primary goal of reducing debt down to zero. That would include our primary residence that I'm in right now. That would include the real estate portfolio. I have no credit card debt, no car debt. But one thing that I will do either this year or next year, depending on what happens with the tax benefits and the cost segregation study in the short term rental loophole, it should be repealed in Congress next month. But if it's not, then I'm going to have to probably go buy an airplane, you know, to take advantage of section 179 to office.

You only have 60% accelerated now on that.

I think that is correct and that's what sucks with the cost seg. But I believe it's going to be repealed. It passed the house a couple of weeks ago, should come back and they'll benefit all of us on the real estate side to 100% for another five years.

Got it. Okay, let's talk a little bit about why real estate if we could. You picked that as a vehicle. Obviously entrepreneurship too. But you know, most of our audience is interested in real estate investing. So I just want to get your take bill on on real estate and why it's your thing.

So I had invested because people told me to invest at a very young age when I made some money into the stock market. And like other people, I got hurt in the stock it. I got hurt in a Ponzi scheme, actually. And from that point on, I was kind of jaded and just invested into myself and my grandfather.

Like a Ponzi scheme by a public.

Company, a Ponzi scheme by a stockbroker that I played golf with four days a week that never asked me to invest with him, but I saw what other members of my country club were getting returns from him, and finally I did.

Yeah, it was the subtle. It was the subtle come to me sale.

Yeah, yeah. What was. It was like the whole Bernie Madioff thing, about a year and a half before Bernie Madioff went public. But so I kind of. I invested into myself and I never really invested. My grandfather left me two shares of Berkshire Hathaway, which I've grown to seven a stock. So I do invest into that. I have invested into some stock for my children, just, you know, hold it and forget it type of stuff. Not day trading, bitcoin or anything like that. I got into, into real estate because of the flexibility of it, because of, you know, being able to have appreciation, the security of it and the flexibility. And one of the reasons that I pivoted from long term rents into short term rents is because I could get the same amount of appreciation, but I could increase cash flow by 5 to 7x and what. And it was all by happenstance. I owned a couple of condos in downtown Nashville where I live, and a friend of mine had started doing short term rentals. And I'm like, well, how are you getting $8,000 a month? And I'm still charging 2,600, you know, for a six month lease or a 12 month lease. And that's kind of when I was introduced to it. But I knew, based on what was going on in Nashville, because I had about a 10, $11 million ground transportation company. So I was in city council meetings every week battling Uber, who was trying to take over the world. And they won. They ended up doing it right. Travis Kalanick was a brilliant CEO, but what was happening is these Airbnb bills were hitting, you know, those same city council meetings. And it was just so volatile that I never invested into Nashville. I sold those properties and went to a place, Gulf Shores, Alabama, that had 30 years of history of regulation to where it was more insulated. And we see all these things in New York and Philadelphia, Honolulu, Dallas, or all these urban areas are cracking down on short term rentals. So I went to the insulated Markets to start investing into. And I saw very similar results before rolling. A lot of your guys may have heard of Mike Kalowitz. He wrote, you know, profit first, the Pumpkin plan. I use a version of the pumpkin plan to level up my properties and what I call return on equity audits that I do every quarter on my investments, whether it's the motels, whether it's apartment buildings, whether it's single family homes. I look at the flexibility of when I'm underwriting a property and I'm usually buying short term rentals to make sure that it can still be positive cash flow and a sound investment on a debt service coverage ratio, on a midterm rent and even break even or be profitable on a long term rent as well. So that way I have the fallback. And you and I kind of discussed this yesterday, that flexibility of real estate is something that we don't have in the stock market. Right. You pay one price to get in, you pay another price to get out. That's it. And we're locked in. You know, I just don't see another vehicle that is as flexible, secure as what we can get with real estate. And all three of those, whichever one you're comfortable with, long term, midterm or short term.

Yeah, yeah. Now, excellent point. And there are so many advantages because it's a multi dimensional asset class. Good stuff. Okay, so what do you think about the future of real estate? I mean, you know, we, we know about the benefits of it, but there's, you know, there's a lot of talk, Bill, about people who are trying to time the market, everyone who thinks they can sort of outsmart the whole thing, and they just categorically just never win, these people. But, but, you know, it is amazing to me how the human mind just never gives up on thinking that they've got a better way that, you know, and I guess that's great because, you know, that's what creates innovation and stuff. Right. But you know, when it comes to Mr. Market, if you will, and that's the old saying they use in the stock market is Mr. Market. Right. And then the random walk down Wall street idea, and you apply those ideas to real estate as an asset class, what do you think about the next, you know, the rest of the decade? The next 10 years?

I mean, I think there's only one time to get in, Jason, and that's today. Yeah, the earlier that we, the earlier that we get into real estate, the better chance we have of making money over the long term. I've, I've I've flipped nine properties in my life and they were all in 2021. In one market that was appreciating at 3 to 5% a week to where there's no way I could make a mistake. Right. I think that flipping a lot know a lot of people got Jerry Norton, the flipping master. I mean he is the flipping master. He's made a ton of money flipping. But I am here to build wealth consistently and conservatively over time. Right. And I believe that the earlier that I get in, the better off I'm going to be over a long period of time. And that's what I'm teaching my girls. That's what I teach my students. People that want to get rich quick, go, go day trade, go do bitcoin, you know, whatever it is, take those risks. I didn't have the father I talked about. I learned from my grandfather who grew up in the Great Depression. I want to be very, very conservative. A lot of people think that short term rentals is risky, you know, compared to midterm or ltr. It's not if you know how to mitigate your risk and go into the right markets. Right. So I look at a couple of things. I look at cash flow, I look at appreciation, I look at debt pay down. Like I would never do an interest only loan unless I am actually going to be disciplined enough to create my own escrow account and pay down my own principal. Especially if there's some type of prepayment penalty like with a DSER product or whatever that is. So I'm looking every single day on where I can put my money still conservatively, but get the strongest return. Doesn't matter if it's in real estate or out, I always end up coming back to real estate. You bring up the next 10 years, Grant Cardone is singing from the rooftops that we're going to have the largest correction in the history of real estate, you know, coming down and that, you know, a lot of apartment complexes and you know, the long term rents are going to crash, whatever.

I, I mean certainly the office market is going to crash. It.

Well, it's already crashed but 100, 100%. And there may be opportunity for people to buy, you know, high rise office space in Manhattan, Chicago, Boston, these mega cities and convert those into apartments if there's demand. But I think there's so many forms of real estate from farmland, from the tax benefits to apartment complexes, single family homes, beach houses, whatever it is. There's opportunity always in real estate, even in down markets. So the One thing that I do, Jason, is when I see the market going this way, I'm going in the opposite direction. When everybody's flooding into, you know, buying apartment complexes, I'm going for boutique hotels or single family homes when that flips. And I don't think that we will see single family homes affected for probably at least four or five years, if not longer than that. We just don't have enough inventory right now. So that's why I'm continuing to invest in the single family homes. I pulled up Gulf Shores after we got done yesterday and looked at single family homes are available between half a million to a million dollars. There was 67 properties in the prime location and about a four and a half mile trade rate is 67. I called my real estate agent who's.

Been down there and what you're saying is that's a low number.

Oh my God.

Yeah, because people have to have a data. When you, when you say 67, and I know that market extremely well because my mother lives there.

Right.

And you know, we do a lot of business in Alabama, but nobody has the point of comparison.

You're talking 27,000 homes in that market that I'm referring to 14,500 of them are short term rentals. And there's only 67 single family homes. There's plenty of condos available. Right? There's like probably a thousand condos available, but single family homes, 500,000 to a million. There was 67, 2019, there would be between 300 to 500 of those properties on the MLS.

Yeah, I know, it's, it's amazing. I mean, and yet the Crash bros are out in force saying the market's going to crash. You know, we're all going to be wrong.

Wasn't it supposed to crash in 2023 when interest rates hit like 8%?

Yes. And it was supposed to crash in 2020 and 2019 and 2015, and it was supposed to crash in 2012. And you know, really, even through the Great Recession, people made money if they bought prudent properties. You know, it's such a great book. I mentioned it yesterday when we talked about the Psychology of Money. The biggest enemy we have is not the market. It's not the anything. It's our tenacity and our own mental fortitude. In other words, when all this stuff is happening around us and all this news is coming in, can we just hold the course? Right? Those are the people that just win the day. They don't make like snap decisions. Oh my God, I got to Sell all my real estate. It's going down. You know, they just sit there and they decide that this is not a capital appreciation market, it's a cash flow market. I'm just going to be a good manager. I'm going to optimize my rents, I'm going to minimize my expenses and I'm going to keep my tenants and they sail right through. You know, it's. Everybody focuses too much on price and appreciation when they should just be focusing on the whole holistic investment, multidimensional.

I agree with you 100%. You think back into 2020 and you know, spring right around this time, the people that sold, you know, based out of panic. Yeah, I have a great friend in Long island, he sold half of his portfolio. It ended up costing about $260,000 because he panics. You think about the tried and true test of real estate is like you said, it's fortitude. It's being willing to hold on to it through those times when you might take a 10 or a 20% hit on the overall property value. If you're still cash flow positive or break even. Just hold on to that sucker, right? Because at the end of the day it's going to end up going back up. You only get hurt if you sell at the.

And just remember, like an iceberg, most of the return on investment in real estate is below the surface of the water. That's where most of the iceberg is. So that debt is being debased by inflation. So it's getting cheaper to repay. Your tenant is paying down your mortgage. You're not seeing that, you're not paying attention to that. Right. The mortgage is being amortized down. The debt is getting inflation induced debt destruction. You're getting tax benefits and your asset is probably appreciating most of the time for sure. Right. And you're getting leverage. So that appreciation is magnified with the leverage.

Right.

You know, so if you have 5% appreciation, but you have an 80:20 loan to value ratio, you just multiply that by five, you're getting 25%, in essence, appreciation. So it's like people just don't get it. They just get too emotional and they just cut losses. Like in the stock market, stop losses make sense sometimes, right? If you have a 15% loss, you just put in a stop loss order and you stop losing money. Right? You cut your losses. But with real estate, it's harder to understand your losses and gains because of that multidimensional aspect. And most people just look at the price and they think, oh, that's the whole thing. No, it's not the whole thing.

Well, it's funny that you bring that up. And my mastermind, we have a rule and it's no stories on the purchase or the exit. You can't tell stories. We're going to look at the performer on the front end and we're going to look at the financials on the back end and that tells the story because we see like what you're talking about is people self talk themselves into making emotional bad decisions. So we try to eliminate that. No stories. Financials only.

Yeah, yeah. Good stuff. Good stuff. Well, Bill, anything? I didn't ask you that. You want to just wrap it up with and tell people where they can find you?

No, I think you've done a fantastic job. I love the conversation. They can find me@billfaith.com that's billfaith f a e t h.com my business is build short term rental wealth. I think you just joined my Facebook group. I've got about 31,000 investors in that Facebook group. It's a wealth of knowledge. And build short term rentalwealth.com those are really kind of the three places. And unless you're on Instagram. Bill Faith 73 all right, Bill, thanks.

For joining us and happy investing.

Thanks, Jason.

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