446 | Small and Mighty Real Estate Investor | Chad Carson

22:16That's like the typical business advice you get is you need to build this big operation and then you can be the CEO and eventually the chairholder of the company. Like that's possible. Like people do it every day. But I think the thing that's not talked about with that kind of traditional business ladder is that it's really hard to do that. It's really hard to build systems. It's really hard to build operations. And so my advice is to pick the right properties and call your properties down to a small, manageable size portfolio. And yes, build systems. Yes, like I outsource a lot. the reason I can work two hours per week, as opposed to like 60 to 80 hours a week like I did when I first started, was I outsourced a lot to property managers.

22:51I let my tenants and my houses do the lawn maintenance and they can call the plumber here and there. So there's ways to build systems, but you can't systematize everything. There's always going to be fires to put out and it's hard to do. And so having a small portfolio, I think is a secret sauce to eventually having the lifestyle, the time freedom, the flexibility that you want. Chad, we're going to come right back to this because I want to ask you actually what makes up those two to four hours per week. Because, yeah, in theory, you've had now 15 plus years of iterating and trying to figure this out.

23:25And like you said, there are always fires. I want to talk about that. But I did want to just very quickly go back to something absolutely brilliant you said a handful of minutes ago. It would be a crime to not focus on this. And this is with that operating theory of working backwards. And it's subtle here in terms of you said about Clemson. Okay. I'm in a college town. What do people want to do there? What are they doing? They're going to school. And again, this sounds subtle, but this is really important. I have another example that I just thought of. Okay. What that means is like you said, people are going to want to walk to their classes.

23:57So you said also it could come down to one or two streets. Now picture that like in a real world scenario, there's some mean thoroughfare there, right? Like a six lane or four lane, let's say major road, which, oh, it sounds great. Hey, I'm close to this access and there are shops and restaurants. But if you're on the other side of that from campus, well, that's going to be a whole lot more difficult to walk to campus than if you were on the other side of that main road. So you might see two properties that are within 200 yards of each other, but one is dramatically easier for, again, when you're working backwards of what are they actually doing there?

24:33They're going to school. Now, another example that I thought of was like Airbnb. What are people doing there? They're sleeping in most cases, right? So I think about all the Airbnbs that I've gone to, their shades, like I know this sounds silly, but I'm a sleep optimizer. Like the curtains or shades that they have are horrendous. You get woken up at five 15 with streams of light coming in. I was just at one of these places last, last week, a simple little investment of a couple hundred dollars to get blackout shades or blackout curtains would be a massive difference and would just show to me that that Airbnb host is really thinking about, what am I doing?

25:09What are these people doing here? And how can I work backwards? So that's actually a pretty cool way to go through life is to think about that. Yeah. And the cool thing about real estate, and some people might be thinking about this if they haven't done real estate, like, oh my gosh, this is overwhelming. I got to figure all these things out about the shades and all that. But the cool thing about real estate is it's pretty intuitive. We've all lived in an apartment. We've all lived in a house. We've probably at this point all gone to an Airbnb. And so if you work it backwards from the experience of your customer, your tenant who lives there and say, what kinds of things does that person want to do?

25:38All right. They want to sleep without being woken up at 5 a.m. They want to walk to the campus. They want to walk to downtown. And this applies everywhere. This isn't just a college town thing. Everywhere I visit, I'm in here at Granada. There's an old community, like the oldest community in Granada is the best. It's the place where people want to live. And if you look at the rents, you can go on Zillow and anybody can do this. Go look in your town at where the rents are highest and where the prices are the highest. That's your A location. That's where people want to live. And as a real estate investor, you start asking yourself the question, why?

26:06Why do people like living there? Sometimes it's because there's a park there. Sometimes some people follow Starbucks, for example, in certain towns. Oh, there's a Starbucks there. I'm going to go within a quarter mile of that. And so these are pretty intuitive things that you don't have to have a rocket science degree and how to analyze markets. No, you just need to be a shopper who's lived in properties and go get on the street, walk in the neighborhood, walk to that eight lane road and say, wait a minute, this road is getting in the way of me getting to the place I want to go. I bet a property on the other side of this would be much more valuable than this side.

26:37That's intuitive, but that matters when you get into real estate. Yeah. And I think it's funny because I just thought of another example. And as you said, think about your own life and what are those little pain points. and if you have that problem, other people undoubtedly do as well. And I think about like hotels, Chad, this is the one that bothers me the most. So I'm getting my little pet peeves out here. This is fun. You think about a hotel chain like Marriott or Hyatt. I mean, they have dozens of brands, but when you walk into a hotel room, it's the same darn thing. It's two queen beds. You think about, there's not one person.

27:13There's not one person. I don't care. Maybe you went to the Cornell School of Hotel Management or something. There's not one smart person that has ever said, oh, wow, maybe people in families go to sleep at different times. Oh, wow, maybe families come larger than four people. Having flexibility in terms of the number of beds would be brilliant. If you had five single beds, you have a bunk bed in the corner for kids, you have a little curtain that goes around it. Think about how families could actually enjoy that room so much more. The parents could be out, the kids could be behind a curtain in their bunk beds.

27:48Like, goodness, there's not one person who's smart enough at one of these major brands to figure this out and like make life easier for families. And again, that's working backwards from a lived experience of, oh, wow, I have a kid who goes to sleep at nine. I have a kid who goes to sleep at 11. And the kid who goes to sleep at 11 has to hang out in the bathroom of the hotel room, right? Like, so anyway, I'm harping on this because I think, Chad, I hope this is actually a takeaway is, is this working backwards? Because it's a cool way to think about problems and think about more importantly, solutions.

28:17And I think that's what you've done with such, such wonder here with the small and mighty is, okay, let's get back to like the working backwards from the money because most real estate investors say, Hey, what's the most that I can get? How much can I scale this up to? Can I get a thousand doors? And I think you take the exact opposite tact. and I'd love to hear you talk through that. Yeah, and part of this is thinking about working it backwards from the person, you, who's listening to this, who's actually gonna be investing. Think about your journey as a real estate investor. So you're going to start as a new investor.

28:49Your goal is just gonna get a deal, get one or two deals, learn. You're gonna learn a ton. That's your goal at that point. The second stage though, you go to this wealth builder stage is what I call it and is where you're really accelerating and your focus during that stage is taking$100 ,000 nest egg and turning it into a million dollar nest egg or you're trying to reach your FI number. You're trying to get to this point where you can actually live off of your investments. And so a lot of what you hear, the advice you hear in the real estate space are tools and strategies focused on that. And that's great.

29:15That's where a lot of people are and that's fine. What I found missing though, and one of the gaps I'm trying to fill with this book is like at some point, you've got to change the game you're playing. Like you've got to switch your tools because eventually like continuing to move the goalpost and getting bigger and bigger and bigger and saying, all right, I'm making$300 per month in cashflow. I want to make$120 ,000 per year. That's a lot of properties, 300 times whatever I got to get, right? Well, here's the transition point. And this is where it's a little counterintuitive is at some point when you have enough equity or maybe more than enough equity that on paper, you could actually live off of this.

29:49And what you can do and what I did was my business partner and I started changing how we allocated our cashflow. So instead of going and buying another property and saying, all right, we got$100 ,000 saved up or$20 ,000 saved up, we're not going to go put that as a down payment on another property, we're actually going to go pay off properties. We're going to pay off the debt on our properties because the key word, going back to your money, your life, we had enough. We had enough properties. I'm happy to go through some of the simple math, but we had enough that we knew we could cover our financial independence number with theoretically, if we just turn that equity into more cashflow with our rental properties.

30:26And so paying off debt is one of these sacrilegious things to do in the real estate community for some reason. But it's something that, number one, reduces your risk, which we should talk about. Risk is the chance that things go wrong. What if we have a very small chance, but what if we have another depression for 10 years and rents go down by 30%, 40 % and values go down by 60 % or 70%. What if that happens? It's possible, right? And if you've already built a million dollars in net worth or$2 million, why take a chance of going backwards back to where you started 10, 15 years later. Warren Buffett had a quote saying, it makes zero sense.

31:02It's like insanity to risk what you already have to get something you don't need. It's insanity. It doesn't make sense. And so the practical application that I'm trying to put forward as real estate investors is, yeah, use that as a tool. It's great. Just use that as leverage. But at some point, let's start talking about strategies to reduce your risk, pay it off. It also increases your income. If you have a $1 ,000 mortgage payment on$100 ,000 loan that you've had for 10 years, pay that off and And you've now freed up$1 ,000 per month or$12 ,000 per year investing$100 ,000. That's a 12 % quote cash on cash return.

31:37You're freeing up$12 ,000 a year. So that's a good thing. That's helping you. That's part of the math of living off your rental properties is freeing up cash flow, is reducing your risk. But it also has a psychological benefit is that one of the tough things about real estate is that stock investing has like dollar cost averaging. Just every month, invest, invest, invest, invest. And over time, the market goes up. Real estate's a little more, you know, like you kind of goes and lurches. You buy a property, you do this. But if you start saving up money and doing something like a debt snowball, it gives you a very specific place to put your money instead of like spending that money on a vacation or spending on something stupid.

32:13It's like, no, like I'm going to save up until I get a hundred thousand bucks and I'm going to pay this loan off. Like that's, it's a psychological benefit that it gives you a goal. And then the fourth reason I like paying off debt is that there's just simplicity. So you've made, there's a fork in the road here. You've made a choice to have a smaller portfolio and kind of draw a line in the sand and say, at this point, this transition in my career, I'm going to simplify, increase income, reduce risk, instead of trying to get bigger and bigger and bigger. And you could always grow later on, by the way, you could always refinance your property.

32:43And my business partner and I had a lot of these multiple forks in the road, like, let's grow a little bit more, let's do this. But once you take your chips off the table, to use a poker metaphor, you've now made a decision to become more small and mighty to reduce your risk. And it's a different path. And the thing I will say about it, a lot of people have paid off their home and made this decision and had these debates about whether you should pay it off or not. The peace of mind I had during COVID, during a really difficult time when I was nervous. I'm like, I don't know if the college student is going to come back to school for the next year.

33:13I had no clue for a month or two there. But the peace of mind I had having a really safe portfolio wasn't 100 % debt-free, but we had like 10 % or 15 % of our whole value of our portfolio was debt. Meaning like if you had a million dollar portfolio, we had like$150 ,000. Right. Which is astonishing. Let's be clear. It sounds like a big number when you say it out loud like that, but that is astonishingly low percentage. Yeah. And we started off at 70%, right? So it's over the years, we've just plugged away, plugged away, plugged away. We've kept some debt here and there. There was really low long-term interest debt.

33:46But my whole kind of long point here is that to work it backwards from what you want, which is my case, travel, work a couple hours per week in my business, have enough income to pay for all my expenses for our family. That was a key component of working it backwards was putting the tool of debt back in the toolbox saying, it was a good tool. Glad I used you when I did, but transitioning to a point where I have a lower debt, lower risk portfolio. And it was the best decision we've ever made. Yeah. No, that's brilliant. I love how you keep saying debt as a tool, right? Because it's funny. I highlighted in a quote in the book, debt is a tool, not a religion.

34:22And I think I've identified a couple of these quasi religious communities, let's say in the financial world, obviously you see with Bitcoin and the laser eyes, you see it with the dividend investors for sure. And these leverage loving real estate investors. I mean, those are the three that jump out to me immediately that it just, it seems like all reason and rationality get thrown out. It's just like, okay, we've determined this is the best way to do it. So therefore you're an idiot if you don't follow. And I just, I find that like abhorrent in every way. And I wanted to ask about the nuts and bolts of this transition, because like you said, you went from roughly 70 % debt to about 10 or 15 now.

35:04And let's talk through like really how somebody would do this, because I think this ties to like the fundamental essence of what you're talking about with small and mighty. So, all right, if someone's investing and they bought their first two properties, everything's going well and okay, it's time to buy a third or fourth. Like at what point would they figure out, all right, that's enough in terms of the number of properties and it might be smart to transition to starting to pay them off. Like, how do you think about that? Cause that's, there's a sliding scale there. Yeah. So it's a really good question.

35:37There's a little bit of wiggle room here. So I'm going to give you some rules of thumb, but you know, one thing I, advice I give in the book and actually have a whole exercise where you can figure out what your small and mighty investor number is. That's really important. It's important, not because it's going to be exactly what yours is going to be five or 10 years from now, but just to have a goal to shoot for. And one way to figure that out is you can think about a property. I'm going to give you real simple numbers just to make it easy for people listening. Let's say you had a house that rented for$1 ,800 per month,$1 ,800 per month.

36:03And after all of your operating expenses, that means your taxes, your insurance, your maintenance, a management fee, everything except for your mortgage payment. Let's say you had leftover$1 ,000 per month. Those numbers are pretty real. I have a lot of properties having$800 in operating expenses, plus or minus is a pretty good number. But let's assume you paid that property off. It's free and clear of debt. There's no debt. So the question would be, it's like simple math, like how many properties making$1 ,000 per month would I need to pay for my living expenses? And so let's use the number$10 ,000 per month.

36:34That's actually my number. For our family to live in Spain, to not have to worry about money, really, we spend money. Today, we paid$150 to get a van to pick us up at the airport in a nearby city. And we could have taken the bus. We could have done other stuff. We're like, you know what? Let's just spend the money. We got the money. That's included in a$10 ,000 budget for us. And you work it backwards and say, if I had 10 properties that made$1 ,000 per month each, that's$10 ,000 per month or$120 ,000 per year. And so when you're making your goals, you might say, you know what? I need to get approximately 10 properties that look like this in my town.

37:08And when I get to 10 properties, you could decide to stop at that point. Or let's get in the weeds a little bit. You could say, I'm going to buy 15 properties. And one of the first ways that we started paying off debt was we bought more than we needed. So we bought 15 instead of 10, so to speak. Our numbers are a little bit bigger because I had a business partner. But we bought 15. We sold five of them. We kind of culled the herd, so to speak. We sold off some of our cows or sheep or whatever. And we used the winnings. We used the profit from those. We didn't do 1031 exchanges. to defer the taxes forever.

37:40We actually paid taxes on that. And you can do that strategically though by thinking about how much money you make every year and selling when you're in a low tax bracket, things like that. Stuff you know about as a CPA. But we would sell those properties, use the profits to pay off debt on some of the ones that we kept. So that's one really good strategy that we use is buying a little bit too much. If you wanted to own two properties, you could buy three or four, sell two, keep one or two. That's like the, I'd say like plan A as one way to do it. But you can also use personal finance strategies like the debt snowball.

38:11That's something else we've done. So my business partner and I made a game out of, let's save up cash. And we actually put a separate savings account, not in our regular account, a separate bank, a separate savings account. And that money would pile up, pile up, pile up. And when we had enough, we had a list of debts that we wanted to pay off. And sometimes these were higher interest debts, first and foremost, or these were debts that had balloon notes where three years from now, we had to pay the full amount of the note, which is really dangerous, by the way, in real estate. Because what happens if you have to refinance$550 ,000 loans and no banks are loaning you money?

38:41Right. Or the interest rates have gone up 4 % or 5 % in the intervening time. Exactly. So we're seeing this pattern happen again. Like in 2007 and 8, it was because no banks were loaning money. In 2022, 23, it was because the interest rates really changed. And that, if you want to understand how commercial real estate got in trouble, that's pretty much it. But we small and mighty investors, we can strategically start cleaning up our debt, paying it off using debt snowballs, pay it off using selling properties. And then you can also just strategically refinance your properties. It's almost like you're restructuring your debt.

39:11For example, we had... Let's just take two properties. You had two properties. Originally, there was a 70 % debt, but over the last 10 years, you've paid it down to like 40 % LTV. Well, in my opinion, I would rather have one property with debt and one property free and clear instead of having two properties that are 40%. And so what I would do is I would actually refinance that property and have like an 80 % debt on one property and a 0 % debt on the other. There's a couple of reasons for that. This is, I think of it like a strategic refinance is that net net is not, your overall portfolio is still the same loan to value because you have the same amount of debt, but you've now increased the cashflow in that free and clear property.

39:49You've reduced the risk on that free and clear property. And I would also argue, having been through the great recession, that when you actually owe 80 % to a bank instead of 40%, you're in a better position negotiating wise with the bank as well, because you have a 40 % loan to value loan, they're going to be much more likely in Armageddon's situation where everybody's, you know, can't pay their bills or tenants aren't renting properties and the banks want to get their money back. I had friends in 2008, nine, who had this happen where the banks, they had commercial notes and the bank said, pay us the money, no negotiating, we don't care.

40:19And it was because they had a very favorable position for the bank instead of a favorable position for the borrower. So that's just a little very specific tidbit. But all of those are ways, debt snowballs, buying more than you need, and then strategic refinances that you can clean up your portfolio and eventually end up with something that's high income, low risk, low hassle that you can sleep well at night. Yeah, I love that. I'm glad you focused also on the snowball because I was thinking about that in terms of, okay, what would this actually look like if, let's say, you had some reserves? Because I think this is important, right?

40:51Like your real estate business clearly needs to have some cash reserves on hand. So you're not advocating or by any means, okay, we're going to put all of the money we have on hand into paying down debt. That clearly not what we're talking about, but you have that amount of money set aside. And then is there an argument for, all right, let's say this person doesn't need any current income. Let's say they're working full-time, the regular W-2 job. And this is kind of like the, all right, I'm going to pull the cord or flip the switch or whatever you want to say on my W-2 when I get to X amount of debt paid off.

41:26And then, okay, every month, let's say they've got these 10 properties and they're cash flowing, I don't know, after the debt, they're cash flowing$500 a piece. So that 5 ,000 bucks, somebody theoretically could pay that 5 ,000 and just send that as an extra principal payment on, let's say in your case, like you said, the highest interest loan, or maybe you do it the opposite way. And it's the lowest principle. Obviously, each person can figure that out. But I mean, that's a pretty viable strategy, right? Absolutely. Yes. And these are the kind of mental strategy games that you have to play. And it's a lot like the index investing stock world in that this is a psychology game.

42:03Yes, it's math. Math matters. But the psychology is how can I get from point A to point B where I can pull the plug on my W-2 and I can know that I'm getting closer. That psychology feeling that progress is really important. As someone who played sports and played and saw how people like how human beings can do their best, I realized how important motivation is. And so debt payoffs, like you're talking about, is a great example. If you have 5 ,000 bucks a month in cash flow and you have a W-2 job, so you don't need the money, just set that money aside. And the most optimized way to do it would be every single month, pick one mortgage and just pay off that one mortgage.

42:39So don't spread it out over 10 properties. That's the worst thing you can do if you want to get out of debt quickly. What you really want to do is pay off the first property. And now you freed up a$1 ,000 mortgage payment on that one. So now instead of$5 ,000 a month, you have$6 ,000 a month. And then you go to the second property. And now it's a snowball that keeps growing and growing and growing. And not only that, it's pretty flexible too. So you might get to three or four properties and say, you know what? I'm actually pretty good here. I've got$10 ,000 a month or$8 ,000 a month coming in.

43:06You might do what we've done, my wife and I, take a mini retirement. Say, you know what? I'm going to press pause on my debt snowball, and I'm just going to live off the cashflow for the next 12 months or six months. And I'm not going to wait until I'm 55 or 60 or 70 to go take this vacation. I'm going to like do it right now. And that's actually what we did. Like when we took our first four month trip, we were not financially independent. We had a couple, a thousand or two coming in and cashflow. We just saved up the extra money and then we just did it. And then we did it again. Every time we've taken a mini retirement, we've been a little bit better off and a little bit better off.

43:37Whereas this time in Spain, we haven't, you know, the budgeting wasn't really a big deal. It's like, all right, we got enough money in the bank. good, spend the money. And it's just, it's been fun to see that progression of the portfolio, but also the way you can live your financial independence lifestyle based on the progress you make over time. Yeah. And I love the, your definition of a small and mighty investor from the book is quote, own the minimum number of investments that accomplish your financial goals. And I think we've talked about that and it's just, it's so beautiful. And I'm curious, so, okay, 10 to 15 % of your total real estate assets, you still have some debt on.

44:11Is the plan to pay it off entirely? And if not, talk me through the strategy because obviously you have vastly, vastly more knowledge about real estate because it could go either way. And I'm not sure how you're going to answer this. Yeah. This is a debate that goes back and forth with my business partner. And I love our debates because he's super smart and we get to kind of have our own little personal mastermind. And at the moment, I think I'm more inclined to pay them all off, just simplicity wise. But the other thing is like a lot of the loans we do have are private loans to individuals like family members and people who like actually like getting 6 % interest from us or 4.5 % interest.

44:46And so they're like, don't pay us off. Like, what are you talking about? Like we like this interest. And so we're sort of at this place where the debt we do owe is super low risk. It's friendly lenders. We have one bank loan and that one bank loan is in a really low, it's like 25 % loan to value. So we're not really worried about it. So at the moment, We're not really in a, let's pay it off more. But you come back and we talk about this 5, 10 years from now, I'm pretty sure we'll be debt-free on most of our properties. And the other thing we're doing now, so where does the capital go? Because we have some extra capital to reinvest.

45:17We're investing with other people. We did one deal with another person who listened to my podcast and I got to know and he is in the FIRE community and we partnered with him. So we're the passive partner and he and his wife bought a property, an eight unit property and they're the operators, they're managing it. And so we're the behind the scenes money. So that's another way where we don't want to be the ones operating it. We've been there, done that. That's cool. We've got our number on management, but investing in other people has been something that we've sort of we're experimenting with. So that's at the moment, that's kind of where our heads are.

45:47Yeah, that's fascinating because ultimately, this is very personal. I think that's what's so critical about all of this is every aspect of this is personal. You're not trying to prescribe what somebody should do in every particular instance. I could have seen you answering and it wouldn't have shocked me if you had said, all right, look, we have our number and we even have like our fat fine number of how much money we need per month. I think you said about 10 ,000. I assume let's just say for argument's sake, your business partner, the same, then any amount over that 20 ,000 per month, then, Hey, maybe we think about adding one more property.

46:19And then, all right, we have this management down. We know all the systems. We know what to look for. This would be simple. And then we just kind of roll that in and we pay that one off. Like that wouldn't have shocked me because I suspect it wouldn't have increased your time per week from two to four hours. Yeah, that actually is happening. You're right. Good intuition on that one. But here's the thing. So remember, I talked about your criteria for your property. It's called a buy box. My buy box is super, super tight. If it's not in these locations, this type of property, single family, single story, brick exterior on a crawl space, I have it very specific.

46:55That property landed on my lap while I was in Spain a couple months ago. It was a former, it was right next door to another rental we had. It was an owner I talked to a long time ago. He said, hey, if you ever sell, I'd love to buy it. Please let me know. And he called me. He was ready to sell. I was in Spain and we had the cash to buy that. So yeah, it's both. But then by buying that property, we could decide to just increase our portfolio by one property. We also might reevaluate the list of properties we have. We might have a new one that's at the bottom of the list. We're like, all right, this one has a bunch of trees in the yard.

47:26They're falling on the house. This one has a septic tank. that one's got to go. I have a couple of properties on my hit list that they're not bad, but they're just like, they're kind of bugging me. I don't like to think about it. And so now that one's a good, the one we just bought is a really good property. We'll probably add one or two more to the hit list and sell those at some point. Chad, I love that concept of buy box. It reminds me of the Ted Williams strike zone where like, hey, I'm going to keep this really small. If that pitch that comes in, I'm going to hit 400 or more when I swing at these pitches.

47:54It's, yeah, I mean, you're looking, in essence, you really are, not to torture this, but you're looking for that fat pitch. And because you're in no rush, you can sit back and wait. And if that comes around every three years, you buy one. If it comes around never, yeah, who cares? It's the irony of when you start having more money, you're more picky, and then the good deals start landing on your lap. That's just, that's the, Warren Buffett actually has a quote he talks about. He, he's the, I think he used Ted Williams as his example. He said, buying investments is like being in a home run derby.

48:22And for those who aren't baseball fans, like home run derby, like you do not have to swing. Like they will just keep throwing you pitches until you hit exactly where you want to hit it. And that's what he says. Like my, my bat is on my shoulder until I get the fattest perfect pitch that's in my buy box. And in real estate, the more you can do that, like the more you can avoid getting desperate or trying to like have to do this deal. Like I get it though. When I was a new investor, sometimes you just got to do a deal just to learn. And that's your call to university, you know, call it your property university.

48:49But at some point, every deal you do should get a little better and a little better. And so not only are you compounding money, but you're also compounding knowledge and skills. And so by your fifth deal, your sixth deal, your seventh deal, you should be a little bit more picky than you were on your first deal. And yeah, in life, you can see the people who can actually follow through on that, right? And you also see that literally in the home run derby, which is funny. We're talking so much about baseball here, but like, you'll see some players, they'll let a couple of balls go past them. And then it seems like they get antsy, right?

49:20They get a little bit antsy and that next pitch comes and it's not that optimal pitch, but they swing at it anyway. I'd love to do like a statistical analysis on that because I suspect some people are more psychologically suited to that than others. And yeah, you're seeing that certainly with Mr. Buffett and Munger. I mean, they sit around, they sit on their hands all the time. That's what makes them great that they don't jump at stupid things. They wait for that fat pitch. And so going back to the small money investor, kind of bringing this full circle, I feel like being small gives you that same attitude that Buffett and Munger have.

49:54Because when you go big, when you start having overhead and you have to pay for an office, you got to pay for people salaries, there's a time and place for that. But when you're small and simple with low overhead or no overhead, now you are the patient investor. Now you don't have to do the stupid move. And so it's all works together. The more you can keep things small and simple, my own experience has been, not only are you going to have more peace of mind, you're going to be able to sleep at night, but you're also going to buy better deals. You're just going to be a better investor. And I've been a big believer in this before I even knew the name of it.

50:26But part of me writing this book was like, I want to operationalize this and I want to have the techniques. For example, when should you pay off debt? When should you not? When should you sell properties? How should you sell properties? How do you finance properties in a way that doesn't sacrifice the whole thing? I have a list of seven safe debt rules that I've used over the years. And most of those have been mistakes I've made. And I got burned and had to learn from it. So that's the kind of stuff when you try to emulate a style of real estate investing or any investing, you want to find someone who, first of all, works it backwards from the same place you're trying to go to.

50:55They're not trying to scale to the moon. They're trying to get to the same place you're trying to go to. And then, not that you're going to emulate exactly what I'm going to do, because that's impossible. But you can borrow principles. You can borrow best practices. You can borrow techniques. And that's what, you know, the cool thing about books is that it's the best I've learned in the last 21 years as an investor condensed into a book that you can hold in your palm. And you can use that as a cheat code as a real estate investor. That, to me, like still blows my mind that the books are this amazing tool for that.

51:24Yeah, it's remarkable. This book specifically, I think it's somewhere in the vicinity of 375 pages. And we have touched on the tiniest, tiniest little bit of this. I think the important stuff, of course, right? like the actual ethos behind the small and mighty. But let's be clear, the book dives into every little nook and cranny of the real estate world from building teams and negotiating to debt to finding properties, all of this stuff. We couldn't possibly talk about that on one podcast. We'd be here for 20 hours. But for the fledgling real estate investors, I mean, this book, it really has a little bit of everything.

51:58So Chad, we're going to tell people where to find the book in a minute, but I always have to close the loop. I would kick myself as a podcast listener and certainly as a podcast host. I said before that we would come back to basically what you can't outsource or we talked about the, okay, two to four hours per week after all of this stuff. Can you just give like a real quick sense of like what a couple of those things might be? Yeah. So believe it or not, the most time I spend still is bookkeeping. And so we were actually in the process of hiring a bookkeeper. And we've had a bookkeeper in the past.

52:29And she was great. She retired. And we just took on the bookkeeping ourselves. So between me and my business partner, my business partner usually reconciles our bank accounts. I usually go back and enter all the information on the transactions. At this point, we don't have as many transactions. Most of them are pretty simple. But yeah, bookkeeping is like 50 % or more of that. And the way it works, practically speaking, like I said, average of 2 hours per week. But one week might be... I do four or five hours of bookkeeping for the month. And then that's all one day. I set aside a Thursday to do that and not really focus and do my deep work on that.

53:01And then other weeks though, I might have just 30 minutes. And that 30 minutes is actually pretty strategic and important. I'm usually getting... I'm responding to texts or emails from my property managers. There's a relationship we have with them. They're my most important team member where I am in my stage. So we have two different property managers in Clemson, both do a great job. They might text me, for example, say, hey, we need to replace the refrigerator. It's going to be a$800 or$1 ,000 expense. That's over the$500 that you've given us allowance to spend. So I give them some leeway, like, hey, it's - Tim Perry style.

53:32Exactly. That's where I got it from. But if it's 250, 300 bucks, just do it. I still want to know about it, but I'm going to learn about it in the report at the end of the month. I'm not going to learn about it and have to make a decision because I'm somewhere else and it's hard to get in touch with me. I don't want to be the delay in them solving the problem for our tenant on an emergency or something. But if it's a refrigerator, they send me a text. And so that's the other 30, really literally 30 minutes a week. Hey, I got a text. I spent some time responding, go for it. Usually it's just like, yep, go for it.

53:59That's fine. Or I say, hey, that seems a little high. Can you shop around and get another quote for that? That kind of stuff. And so responding to property managers and bookkeeping. And then one of the other reasons we're only spending two hours is we're in a maintenance mode now. We're not buying, selling, remodeling. That's where most of the time as a real estate investors spent is in that load up phase, is in the acquisitions, is in the managing contractors. When we were doing that, we spent a lot more time on it. But I always tell people real estate investing is really interesting because it begins like a startup company where you have to spend a lot of time on it.

54:32And it ends like a blue chip stock. It ends literally a couple hours per week. And for me, yes, it's not as passive as an index fund. Maybe you spend zero hours that week, but it's passive enough. I've never had my real estate business get in the way of me doing what I want to do in my life. Two hours per week from anywhere in the world, like, okay, that works for me. That's good. That's about as passive as it gets. I think the myth of passive income is something that you and I both know, especially people think so many forms of income are passive and very few are. I mean, obviously, Chuseify is a labor of love for me, but my family will tell you for darn sure that I'm up here on my computer a lot of times and there's nothing passive about this.

55:18Obviously, I don't think of it as an income generating thing, but nevertheless, there's very few types of business that are truly passive. But man, to cut something down to two to four hours per week, and it sounds like, I mean, Chad, my challenge to you would be, man, get a bookkeeper that you like and trust. I mean, you guys shouldn't be doing that at this point. That's silly. You're right. You're right. But bookkeeping is kind of, this is a peculiarity for me. Like it's a little therapeutic and it's also a little bit of, it's a little bit of me. It's like cleaning the kitchen. Like it's not something you really want to do, but like once you do it, it's like, all right, now I know where my business is.

55:50I know what things are going on because I'm not involved in the day to day. Like I think about bookkeeping. I tell people it's kind of like a superpower, like Neo and the matrix where like Neo, he saw everything with zeros and ones when they finally got a superpower. Like I see bookkeeping that way. And I've heard of a lot of business owners who still look at the books on a regular, who still write checks, who still do stuff like that, or still pay the bills, because it's like the lifeblood of the business. And if you can just get a little glimpse into it, you can actually understand what's going on.

56:17And every once in a while, you identify a problem that needs, it's an acute problem that really needs more attention. And so then you can jump right into it. So, you know, it's, it's one of those things, but what I, we are hiring a bookkeeper and what I'm going to have him or her do is they're going to do the reconciliations of the bank accounts. They're going to do just the basic entries. And then I'm going to go back and I'm just my bookkeeping time that I'll still have is looking at the KPIs, the key performance indicators, like, all right, what's our vacancy on our properties? What are the, where, where are we reinvesting money?

56:44Like, I think I could spend that time optimizing the business instead of just cleaning up the kitchen. Right. Debits and credits. Yeah. Look at the, I love that. that's really great. And also, frankly, know thyself. That's a really critical thing. Obviously, tongue in cheek with my little challenge to you, but it sounds like that's time well spent, at least much of it is. And like you said, maybe you can focus a little more on KPI and a little less, but are we really going to quibble over? It's probably we're talking a half hour here at the end of the day. Exactly. Chad, this has been an amazing conversation.

57:12Absolutely. I love chatting with you on or offline. This has been even better than I anticipated. So the book, we're publishing this on july 17th the book comes out in three days this thursday tell people where to find it and what they do to purchase yeah so i know we'll have links in the in the show notes and the description but it's if you go to biggerpockets.com forward slash small and mighty just written out like that that is the the page where you can order the book and if you happen to be listening to this on july 17th the day this podcast episode comes out it's still going to be in the pre-order phase but that could be a good thing too if you pre-order it i have some really cool bonuses that come with buying it before July 20th.

57:52For example, I'm going to have a live Q &A call where I'm going to talk about how to apply this to the 2023 market and what the difference is with high interest rates and limited supply. How does this apply? So that's something else that you can get. And I'm also going to give away some one-on-one coaching and signed copies of the books, stuff like that. So that is the pre-order. And if you listen to this after July 20th, it'll be available in that same link and you can get it through BiggerPockets. And I just hope it's something that is helpful for you. It's a guide. I put my heart and soul into it to be as helpful as possible for you and to be a guide for investors who aren't trying to scale to the moon, who want to work it backwards from lifestyle, free time, whether you're a beginner, whether you're further along.

58:31A lot of investors who are 10 years into this, but they want to figure, how do I get out of this thing? How do I live off this income? That's a big part of my why of writing the book is serving them as well. Yeah. I love it. And like I said, the book is fantastic. It's like a, a, this overview of this mindset, but B it's the nuts and bolts of all these aspects, all of this that you've picked up this knowledge, this hard one knowledge over 15 plus years as a real estate investor, it's in the book. So the book is fantastic. Like you said, we will have it in the show notes, but it's biggerpockets.com slash small and mighty.

59:04So write out and Andy and bigger pockets was nice enough to actually give a 10 % discount for anyone listening to this. So put in the promo code choose FI. So caps shouldn't matter. But yeah, it's just choose FI. That'll get you 10 % off. And that's whether it's the pre-sale. And like you said, the pre-sale, you have all these amazing little bonuses. So if you want to pick that up in the next two days, that would be fantastic. Or after the fact. And Chad, we were talking and you were incredibly kind to also offer a PDF of your personal buy box. And we talked about that in the episode. I'm super excited to see this when you send it over.

59:43And if you want to get a copy of that PDF, actually get on the ChooseFI email newsletter. So choosefi.com slash subscribe, or just go to literally any page on our website in the upper right-hand corner. You'll see a box for the Fi Weekly. Get on that. And I'm going to send that out the following week. So that'll be July 25th. I personally handwrite this email every week, send it out Tuesday morning. So that'll come out July 25th and trying to really appreciate all you do for our community and for being here. This is great. Brad, it's always fun. I personally enjoy it. Like you said, we have fun just kicking around and exchanging ideas, but this has been an honor.

1:00:21Choose FI is a big part of my own journey and just really appreciate what you guys have done building the community and everybody listening to this is a, this is the best, best community on the internet. Great folks. And I just, I hope this will be, this episode has been helpful for you and kind of helps you move forward in your own five journey. Yeah. Well, thank you for the kind words. And this truly is an amazing community and thank you all for listening and being a part of it and taking action most importantly. So until next time, Chad, thanks again. Thank you. Thank you for listening to today's show and for being part of the choose five community.

1:00:51If you haven't already, the best ways to get involved are first subscribe to the podcast. So you're listening to this on a podcast player and just hit subscribe and then subscribe to my weekly newsletter. I actually sit down every Monday and write this by hand and I send it out Tuesday morning. So just head over to choosefi.com slash subscribe. And it's really, really easy to get on the newsletter list right there. And I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsource personal finance show.

1:01:30And finally, if you're looking to join an in real life community, we have choose a buy local groups in 300 plus cities all around the world. So head to choose a buy.com slash local, and you'll find a list of all of those cities in 20 plus countries all across the world. And if you're just getting started with five, or you have a family member or a friend who you think would be interested, two easy ways choose a buy episode 100 is kind of our welcome to the five community. and even though it's a couple years old at this point, it still stands up and it's a really great just starting point to get an understanding of what is financial independence?

1:02:06What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life? And then Choose a Vi created a Financial Independence 101 course. That's entirely free. Just head to choosefi.com slash fi101. And again, thanks for listening. Thank you.