Becoming a Lifestyle Investor with Justin Donald

You know, I need to be earning a certain amount. It's got to be surplus income that comes regularly, every month, every quarter, so that if I miss it, I'm still earning that money every month. So it's, it's a good way for me to make a riskier bet that if I lose it, I'm not losing the asset that's producing that income again the following month. How much more successful would you be.

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Hey, everybody. Welcome to Business Lunch. This is Roland Frazier. This episode, I've got Justin Donald from Lifestyle Investor. Justin, welcome to the show.

Hey, thanks, Roland. Great to be here. I'm excited to hang out.

I am, too. So for everybody who doesn't know, why don't you tell us a little bit about the lifestyle investor, what you're doing now and then kind of how you got to this point.

Sure. Yeah. So, you know, sometimes I think people intuitively get what lifestyle investing is or what the lifestyle investor is, but most people are like, help me understand exactly what that is. And it's kind of this brainchild that I had. And, you know, I actually hung out with a mutual friend, Mike Koenigs, as we were kind of coming up with what, you know, what this new project was going to look like a few years ago. But my whole goal is that I wanted to teach people how to buy assets that produce income so they could stop trading time for money. Most people, and myself included, are, at some point in life, and maybe for a long stretch of life, just kind of a slave to something, a slave to the job they have or to security or routine or a lot of people move from corporate America into starting their own business for freedom and autonomy. But a lot of people, instead of running their business, have a business that runs them. And so, you know, my goal is just to help empower people to see that there's a different way to do it. And there are ways, via alternative assets and very safe investments, where you can truly get passive income on a regular basis. And when money's taken care of, it's so much easier to figure out what you want to do, how you want to do it, where you want to spend time. So I just talk about having people buy their time back and spending their time with their loved ones and on the. The items, the projects, the. The purpose that fills them up the most.

That's awesome. And so. So how did you kind of get started? What's the entrepreneurial journey story?

Well, years ago, when I was in college or about to go to college, I started working with a company called Cutco and really just enjoyed my time there. Learned so much about how when you have an opportunity to earn based on performance and not based on a fixed dollar amount, an hourly wage, that cool things can happen if you're a hard worker. And so I was able to pay for my college doing that and went to the University of Illinois. And as I was a student, and I'm going through figuring out where am I going to work, I'm going to graduate soon, I thought, you know what? I've had so much fun here with this company, It'd kind of be neat to open up my own office for them and see if I could be good on the management side. So instead of just selling the product as a college student and making money that way, what would it look like if I actually recruited a team and I, you know, learn the skills to manage people and to hopefully inspire people? You know, at that point in time, I didn't know if I could do it or not. And that turned out to be something that I really enjoyed. I just love coaching people. And so it was a really good fit, and our team did well, and I did that as, like, an internship before I graduated. And we did well from, like, a number standpoint. But financially, it was really incredible. I earned more than my parents earned, which is nuts. Combined income, you know, that summer. And so I thought, you know what? Maybe. Maybe I got a future here. So that's really what opened my eyes to this whole idea of, like, you know, kind of earning in a. In a different way and what it looks like to be a business owner and to Scale through other people. Okay.

And then, so what, what was the first? That's kind of a, I guess a semi entrepreneurial thing, right? You've got a company that, that makes great knives, by the way. And you know John Rulin, I'm guessing, right?

Oh, yeah, yeah. He's actually one of my closest friends. Our wives are friends. And so I was just talking to him yesterday.

Yeah, he's.

He's great.

So.

So where did you go from cut cut? What was the next entrepreneurial thing?

So there were two different paths. So at that point in time, I knew at some point I wanted to have my own thing, just completely mine, 100%. And so the path there was, you know, I had a friend that was in single family homes. We talked about teaming up on some mobile home or, well, teaming up in real estate. And he said, well, what do you think about doing mobile home parks? And I was like, I don't know. I don't know about that. And he's like, well, I'm going to go to a boot camp. You should come with me. And he's like, you want to go? And I said, no, not really. That does not sound of interest to me. Fast forward. He did really well. And I got to watch from the front row. And so I said, all right, well, maybe I should try my hand out at this. And so I found a mobile home park that in that single transaction, it replaced my wife's income. My wife was a teacher at that time, teaching business to high schoolers. And so in one fail swoop, it was just incredible to swap out her income, buy her some freedom so that we could be on the exact same schedule. This is right before we had our daughter. It made like, you know, just the whole parenting thing and being able to stay home and kind of be on your own schedule, really, you know, really just the right fit for us. And it was fun, it was interesting. It was pretty easy. It's not a tough asset class. And I thought, well, let's. Let's buy another one. So we got another one that replaced our survival income, and then we bought another one that replaced our lifestyle income. So these are some of the things that I always love talking about, you know, with my community, the lifestyle investor community is, you know, getting to your survival income number, getting to your lifestyle number, and then getting to the number that's like your ideal lifestyle. And so we eventually got there. We're able to replace the earned income that we had, which is obviously the highest taxed income that we get. Traded it for passive Income, which is the lowest taxed income, and the rest really is history because that buying our time back opened up so many new doors, so many new avenues. It took so much weight and pressure off of me to perform, to provide. And I just felt like I fell into this creative space where I could learn, you know, I could learn new things, I could figure out what's next. I could open up my mind to the possibility of starting another company, which I did with a couple of friends because I didn't need money. I was covered, and so I could take a risk. And I, you know, we started this company called IFM Restoration that took off and ended up being, you know, we're one of the largest providers of, of maintenance for the large institutional owners of single family home rentals and just does incredible work across the board for some of the, you know, some pretty big names that most people would recognize.

So the mobile homes, was that something that required a lot of capital to get into?

You know, it's, it's interesting because there, this is the least consolidated real estate asset class. You have a lot of baby boomers, people looking to retire, that own these parks. So institutional money has the smallest percentage of ownership inside of mobile home parks than any other asset class. Right. So that creates a unique opportunity where you can actually buy them. And I know one of your big things that you've had a lot of success with is buying businesses for little or in many cases, no money down. And so that is very possible. I have a lot of friends that have done it. Now, for me personally, I haven't bought. I have bought businesses with nothing down. I have not bought a mobile home park with nothing down, but I have gotten seller finance and just 15% down and even some other attractive terms that I've been able to negotiate over the years.

Nice. That's fantastic.

So you went from the mobile home.

Thing to a maintenance, and was that just kind of opportunistic? You had some buddies that were either in there or knew something about it, and so they were just like, hey, do you want to come do this with us?

Yeah, that's right. You know, I think they had a little bit of. Know how they definitely had the time and the drive. And I was in a position where I had the opportunity to inject some capital in, put some credit lines in, and just really get the company foundationally in a good place from the standpoint of legal, setting up some recruiting systems and really kind of just taking care of the insurance. All these things that I had to do with mobile home Parks I now understood and I could put in place so that we could get a good foundation and that business is scaling and doing great. You know, I'm just an equity partner today, but a huge advocate, and I love to endorse the work that they're doing, you know, all across the U.S. but my goal when I invest in a company is that I don't want to trade time for money. I'd rather just trade capital for other, you know, capital for a return on that capital. That, to me, is very scalable versus, you know, for a while, I did some consulting for entrepreneurs and people looking to scale their. Their businesses. And while that was fun for a season, I really got to the point that I wanted to really own my time in a way that served me best. That inspired me, that fulfilled me, and I pivoted more out of helping people scale their business into helping people scale their wealth and scale their cash flow. And that, to me, was a lot more fulfilling and a lot more exciting. And helping entrepreneurs realize they don't have to pour every bit of profit back into their business. And that if you buy your time back, your business can still thrive, it may even thrive more. That is really rewarding work to me.

And so how do you suggest to them that they do that? Because that's something you hear from a lot of entrepreneurs is my business owns my life and I can't break free of it.

How do I do that? Yeah, this is, I mean, the most common thing that I hear is that statement right there. So each person's a little different. I mean, some people have the time or the desire to kind of get hands on and have a side project. Other people don't have the time, don't have the interest. Maybe they have the interest, but they know they don't have the time. And so it needs to be some other passive activity. And so I think there are a lot of ways you can do it. You've. You've got syndications out there where you can put virtually no time into it. You've got a team that, you know, you've got to do your due diligence and make sure that it's a good team. They know what they're doing, they've been in business for a while, they've gone through a recession before. I mean, all the things that, you know, that they give a pro forma, and they can actually hit the numbers that they project to hit, and you can see if someone's going to be a strong partner in that. And you can do that with Real estate, all different types of real estate. You can buy businesses that, you know, a lot of people buy businesses thinking that they're buying lifestyle businesses when really they're buying themselves a job and in some cases another job. Right. And so I think that, you know, we've been able to buy some businesses that have salaries already built in that the owners are paying themselves. You can just plug in an operator and you know that you can still earn money even covering that salary. Right. So that to me is a better way to buy businesses. Or you can buy part of businesses and just, you know, have a component of, I don't know, maybe it's equity, maybe it's debt, maybe it's both. Maybe it's a royalty or a revenue share. There's so many different ways to do it. I've got a little bit of all of them just depending on the situation.

Where. Where do you find most of these folks getting an operator for the business? If it's. If it's not already in there or the owner is leaving and they're coming in, they don't want to be the operator. Where do they have the most successful?

Well, so I try to think about me. When was I willing to work hard and when did I want someone to give me a chance where I would have poured in blood, sweat and tears to, like, get a business where it needed to be. And so I just kind of roll the clock back to that age that I was. And this was just, you know, younger. This is, you know, post college, having some experience, but being hungry, not having a family, so being able to work when I needed to work. And so I look for part that, you know, I've got to be able to trust you. In almost every instance, it's been someone that I've known, someone that's worked with me in the past, someone that I have some form of relationship with, someone that has other people that have spoken highly about them. And then it's someone in a season of their life where they can go all out, they can do what it takes to run it. You know, early on I wanted someone to take a chance on me. No one really did. Maybe I didn't do a good job putting myself out there, but I know that had someone done that, I would have hustled for them. I would have worked so hard, hard. And I've just found the same thing. Like now I'm on the opposite side. I don't care about making the greatest return, the best return. I just want to make a reasonable return and give someone Else the opportunity to get out of the rat race. And that's one of my favorite things that I've been able to do is pull people out of corporate America and plug them into an opportunity where a they don't have to worry about the salary, it's covered and in some cases maybe even it's a bump. Right. They get a 10k pay raise to come run this business that I bought or, and I should say and the opportunity to have equity and not a little like, you know, why not be generous? Why not give a bunch of equity to someone and give them all kinds of upside so they have tons of skin in the game. But I do like them having some of their own dollars in it because that is also important to me.

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Do you have any formula that you kind of like go by template wise? Obviously every deal is different, but where do you start?

Every deal is so different. I mean I literally have no two deals that are the same or even close to the same. Sometimes it's just the, you know, what are the numbers working out to and how do we plug some mechanics into to get everyone to feel good. So my goal here is, is not I win, you lose. My goal here is how do we both win? How do we both create a better situation for ourselves that we're inspired by and will work for us not just today, but even long term. One of the things for me is I like to be very, I don't want to lose money. So I'm risk adverse in the sense that I would rather do a deal where I make a small return with a very low probability of losing money than a deal with a big return or big potential return where I could lose money. So I'm trying to de risk the deal all the time. So you know, if I bring in someone that's an equity partner and maybe I'm real generous with the equity forum, we might have a different distribution schedule that I get all my money out. So if I put the most Money in, you know, I'm paid first or maybe I'm paid 90%. It's you know, as an accelerated distribution schedule until all my money's out. Then we revert back to what a standard equity split would be based on the cap table.

Yeah. What are the asset classes that you like to look at and what are some of the ones that you try to stay away from?

And are you asking this specifically for my portfolio or for, you know, the instance of, you know, having partners running.

Things for yourself as type of, the type of companies that you're looking at?

Yeah. So in the world of companies, I mean, we could go down a long path. Of all the different types of real estate. You're not looking for real estate, right? No.

Well, I mean, real estate would be one. Right. So just kind of looking in your portfolio, do you have kind of an asset allocation strategy so that you're saying, you know, I like to be X percent in real estate and Y percent in, you know, equities or just kind of, what does that look like? How do you think about that? How do you approach that?

Yeah, so high level, Roland. That's good. Okay, so the way I look at it is I want to model my finances, my portfolio, the way that the wealthiest people in the world do. And I have read all kinds of data on the wealthiest people in the world in the US family offices, ultra high net worth investment groups like Tiger 21. I'm part of that group. And so I see the numbers, I see what people are doing. And one of the interesting things is when I was younger I thought everyone made their, the majority of their money in the stock market. Like I just had bought this idea that like, that is the place that people go. Everyone puts their money there. And the more wealthy people I met, the more I realized most of them don't put the majority of their wealth there. And a lot of them don't put it there until they've had a big exit and then it's generally still like 20, 25%. So the data that I've found is really shows that the wealthiest people in the world have over half of their net worth in private equity and real estate. And so I decided I would model, you know, what we're going to do for our family around that. I'm just going to copy the best of the best. I'm not going to try and reinvent anything. So yeah, so our portfolio is, you know, over 30%, probably closer to 35% real estate. And I love real estate. I mean, we've owned virtually every type of real estate that there is unless it's super obscure. You know, I still think mobile home parks are the best. I know it the best. It's recession proof, it's limited, you know, resource, it's highly in demand, it's affordable housing. There are a lot of perks to it. So I like it. I like self storage, I like industrial distribution centers and warehouses for the right price. I like multifamily with you know, apartment complexes and that kind of stuff too. But right now you're just seeing some crazy, crazy valuations. And it's hard for me to feel comfortable going in at such a low cap rate and such a high interest rate like that spread to me that, you know, the, the, the gap between the cap rate and the interest rate is everything. So if I can get a 20, if I can get a 3 point spread, then I'm making a 20% cash on cash return. That's awesome. I mean I try to not be under that. And in some of these asset class, some of these real estate sectors, that's really hard to do, you know, so there's a lot where there is no spread or there's a negative spread. And so you know, I'm just being more careful there. So I love real estate. I specifically like cash flowing real estate. Private equity is probably another 25% of our portfolio. I love the opportunity to get into businesses where you can negotiate unique structures, you can make money right on the top, you know, a top line rev share. I've got some royalty agreements that I like, I've got some debt structures. So maybe it's like a note plus an equity kicker or plus you know, some, some warrants where I'm not paying for those, those are you know, added as a bonus or negotiated in. I love that because then I can get my money off the table and still have upside. I like senior secured debt where I've got plenty of collateralization around assets that I would like to own in the event of a default. So if I can have like five to one, I mean even three, you know, three, four or five to one where you have an asset that's, that's over collateralized and I loan you know, 500,000 into something that's worth, you know, $5 million or you know, $3 million, whatever it is, like if someone defaults, I end up doing better. I like that scenario because it really puts pressure on people to honor the agreement that you have in place. But in either scenario I can win. So I like that. I like that a lot. I like having uncorrelated assets. And so we've got a portion of our portfolio that's in bitcoin, gold, silver, wine, bourbon, you name it. Art, tons of stuff that's off the beaten path. Music, royalties, original content, motion pictures. There are things that perform really well even when the economy's not performing well, when the stock market's not doing well. I like cannabis, hemp, CBD for the right deals. And again, I'm not high risk, so I'm not a straight equity investor. But there are ways to get equity kickers when you're just lending to highly profitable companies that have bank statements and are with one of the 600 ish regional banks that do bank with these types of companies that, you know, it's not federally legal, but maybe it's legal in the state and some banks are comfortable with that. So I mean, I mean the list goes on. I love to learn and I like to find new areas. I like venture, I like SaaS. SaaS is a big component for me. I want at least you know, 5 to 10% of my portfolio in that. And there are ways to do that on a cash flow basis, not just like a invest and hope that it goes the long haul. There are some kind of tricks to the trade or kind of hacks in the world of VC where I like VC venture capital, but I like to get in and out a lot faster than 10 years. Like that's a long time and that's a risky proposition. But there are funds and investment opportunities where you can get in and out in a matter of two or three years and still get a really good return. So, you know, I just try and stay away from really risky proposals. And if I'm doing super risky, Roland, I want that to come from and I do have a small bucket that I'll do for high risk stuff, but I want that to always come from cash flow. I don't want it to come from something that, you know, I need to be earning a certain amount. It's got to be surplus income that comes regularly, every month, every quarter, so that if I miss it, I'm still earning that money every month. So it's a good way for me to make a riskier bet that if I lose it, I'm not losing the asset that's producing that income again the following month.

Absolutely. So what would you say out of all of those things and maybe anything that you didn't mention yet, what are you most excited about right now in the investment opportunity world?

Oh, That's a, that's a fun question there. There's so much out there that is exciting and interesting. You know, I just got done with an investment opportunity for kind of like a next level gaming opportunity. You know, pay to play gaming with really some cool innovations with NFTs and utilizing Web2 and Web3 and kind of the future of that, like I think that's going to be really big. I still think E commerce has so much room to grow and there's tons of opportunities. Cannabis I think is going to be huge, you know, as that becomes federally legal. And so you kind of get this prohibition type opportunity there. You know, I'm looking for like what, what are these, you know, frontier markets that could be massive returns and then what are the trends that are upcoming that maybe we can catch that wave early but do so in a protected way. I still like real estate. I mean real estate, like for people that are sitting on cash, that money is just eroding every single day. And I think it's okay if you're sitting on cash with an idea or a game plan for how you're going to use it and that when you use it, it's going to make up for the time that it's sitting idle. But I really like to own assets that produce income. And so as inflation rises, as monetary supply expands, those assets become worth more. So I'm keeping up. And there are a lot of different ways that, I mean there are a bunch of different funds and investments out there where you can just have your money sitting in very liquid high interest earning accounts, 5, 6, 7, 8, 9, 10% with monthly distributions on that, with liquidity within 24 hours. And so to me, banks are becoming less relevant, kind of high risk already. A lot of people look at them as like the safe institution, but it's one of the few places that exists that you are guilty until proven innocent. It's the opposite of our legal system. And I know so many people have had their money frozen where they can't get access to it because the bank decided that they're doing something wrong, even though they may not be.

Right. Right, interesting. So for people that want to find out more about kind of what you do and you and lifestyle investor and all that, what are the best places for them to do that?

Yeah, so there's a few places that people can go. You know, I'd say first and foremost the lifestyle investor book really became a much bigger hit than I ever anticipated it would. And a number one Wall Street Journal bestseller, USA Today bestseller And all the proceeds of that book go to a charity called Love Justice International that stops human trafficking in 26 countries around the world. So really cool spot. And so for people that want to get on Amazon, they can, you can also go to, for your community, lifestyleinvestorbook.com and if you pay for the shipping, we'll send you one. So that's, that's one place. And the proceeds will still go to charity. And then for any of like, you know, the programs, the products that we do, you can go to lifestyleinvestor.com or justin donald.com and there's all kinds of things. We've got a blog, I've got a podcast called the Lifestyle Investor. I've got an online course. I've got two different masterclasses, one on mobile home park investing, one just on passive income. We've got a mastermind called the Lifestyle Investor that is a very exclusive mastermind of high level entrepreneurs and you know, I would say professionals that are playing the game of life and business and investing at a high level or desire to, you know, those are some of the main things. And there's a bunch of free stuff on there too.

Awesome. Well, I appreciate you being on the show and encourage everybody to check out your stuff and I think it's, it's a very fun area that you're into and, and definitely something people should check out.

Well, thanks, Roland. Yeah, I mean you've been doing this for years and have a lot of experience and so yeah, I mean it is about as fun as you can get. To me, I just light up seeing the opportunities and really just helping people find financial freedom, that's the game changer because you and I can only hit it once. But inside of our communities, we can empower many others to do it. And it's just as exciting helping other people do it as it ever was to do it myself.

100%. Awesome. Cool. Well, thank you so much. I appreciate it.

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