Becoming a Lifestyle Investor with Justin Donald: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. Brought to you by the HubSpot. podcast network, the audio destination for business professionals with great shows like inclusion and marketing. Today, we're pulling a classic episode from the archives and we'll be breaking down how to become a lifestyle investor. To draw these value bombs, I brought Justin Donald into EO Fire Studios. Entrepreneur Magazine calls Justin the Warren Buffett of lifestyle investing. He's a master of low risk cashflow investing, specializing in simplifying complex financial strategies, structuring deals, and disciplined investment systems.

0:37And today at Financial will talk about how anyone can be a lifestyle investor, but who will take action and make big things happen and take action immediately. Take some form of action, take a step towards financial freedom, whatever that manner is in for you, and so much more. And a big thank you for sponsoring today's episode goes to Justin and our sponsors. Sales Evangelist, hosted by my friend, Donald Kelly, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Each week, Donald interviews the world's best sales experts, successful sellers, sales leaders, and entrepreneurs who share their strategies to succeed in sales right now.

1:14A recent episode you should definitely check out is the five ways to do daily outbound with LinkedIn. Listen to Sales Evangelist wherever you get your podcasts. Ever thought of giving a TEDx talk? It's one of the most powerful ways to share your message with the world and four-time TEDx speaker Taylor Conroy from Thought Leader can help you get there. Visit thought-leader.com to join Taylor's free training where he teaches you how to land a TEDx talk and spread your message to millions. Justin, say what's up to Fire Nation and what's something you believe about becoming successful that most people disagree with?

1:54Well, what's up, Fire Nation? It's great to be here. And JLD, thanks for having me. You know, here's the thing. I think people think when you have success, fame, money, that you end up being this greedy, mean, horrible, pretentious person. And I just think that that's not accurate. I think that money and success are a magnifier of who you really are deep down. And so to me, sometimes I feel like the default is, hey, they must have done some bad things or dirty things to get to where they are to have the success they have. But I think the reality is most people just find a way to add more value to the world.

2:35That propels them and their success. It propels the income that they make. And then that income and that success really just magnifies who they are deep down at their core. and I like to default and think that most people want to do really good things with their success. I love that message and I'm a big believer in the people that say that money can't buy you happiness. My response is always, have you ever been able to hand a blank check to a charity or a cause that you truly believe and love? Because if that doesn't really make you happy, I don't know what will and that can happen when you have the ability to do something like that.

3:12And Fire Nation, today we're talking about becoming a lifestyle investor. So let's just get right to the meat and potatoes, Justin. What the heck is a lifestyle investor? That's a great question. In fact, it's a very common question because I coined the term and a lot of people don't know what it means. So I think if you really think about it, you probably have the gist of what it is. But to me, it's living a lifestyle that is where you buy your time back. You basically have freedom of time to do what you want. Instead of making money by spending your time, you make money by your assets and by your capital.

3:48And so you have cash flow that comes in day in, day out, week in, week out. And it happens whether you're actively working or not, whether you're sleeping or not, whether you're vacationing or not. And so to me, it's the true liberation of your time in exchange for money. And it's letting go of the handcuffs that most entrepreneurs find themselves being shackled to their business. It started innocently, right? So you leave a job and you're like, I'm going to start a business. And, you know, most of the cases people want freedom and they want autonomy and they want to be able to, you know, just gain more agency in their life.

4:25And so it starts with a business. But that business, they're a slave to it. And this happens nine times out of 10 because they don't know how to scale. And as they scale, they're the bottleneck. But as they work harder, they're making more so they can justify that exchange of time for money. But at a certain point in time, most entrepreneurs find themselves really tied to their business in a way where they can't remove themselves. And so, you know, to me, it's really about buying that freedom back and working when you want to work. It's not about not working. It's about having the privilege and the opportunity to work on your terms wherever you want, as long as you want.

5:02Take off as much time as you want. Work only with people that inspire you. Work only on projects that interest you. Work on things that are using your true gifts and are in alignment with your purpose and your passion in life. To me, that's what being a lifestyle investor is about, is it's getting clear on what you want and living a life by design and really planning it versus a life by default and going on autopilot. There's a lot that I love about what you just shared. One thing I want to pull up for you, Fire Nation, I want to repeat this because, man, I was just like, yes, when you said it was true liberation from living a life of trading time for money.

5:40I mean, who doesn't want that type of liberation? I mean, Fire Nation, you're listening to the wrong podcast. If that's not you, let me tell you. So let's talk about the who. Who, JD, can become a lifestyle investor? Well, really, it's anyone that can. It really is going to come down to who is going to take action. So a lot of people read things, they learn things, they hear things, and there are people that take action and they make big things happen. So in my world, I see entrepreneurs as being a great market because entrepreneurs have already taken action. They've already made the move to start something and gotten out of their comfort zone and have gotten comfortable with the unfamiliar and the unknown to the point that they've been able to do things that most of the world has not been able to do.

6:30So do I think anyone can be a lifestyle investor? Sure. Do I think entrepreneurs though have the general framework and the makeup just out of the gates that give them a little more of an advantage? Yes. And not to mention, entrepreneurs likely have some sort of cash flow coming in from their business that is going to help create and supplement the investing that they want to be able to live on that cash flow. Now, you have 10 commandments of lifestyle investing, and I want to go through each one. I want to go through each one very quickly and efficiently because, again, Fire Nation, if you want to get these 10 commandments in full, you have the opportunity to pick up Justin's book, The Lifestyle Investor.

7:11which by the way, I am a little over halfway through and it's getting some really good parts right now. So I'm excited to chat with Justin actually after I finished the book, but let's go through these 10 commandments, JD, one by one, go. Sure. Well, the first one is lifestyle first. And to me, it's really important to invest in a way that supports the lifestyle you want. And so, you know, in this commandment, one of the things I do is I really try to encourage the reader to to dream and envision and then capture in writing what the ideal life would look like. You know, what are all the details?

7:45I even have a checklist in four different categories of, you know, freedom of time, freedom of relationship, freedom of purpose and impact, and really just helping people instead of just living life going on autopilot, but actually planning and designing and creating space to create what it is that they want. A lot of people spend their time to create income. That's the majority of the world. And I just believe that when you can do it in a different way where you're not sacrificing time for money, then you can invest it with the people who matter most. You can have epic experiences. You can live life to the fullest.

8:22And you're just full of passion. So lifestyle first means not compromising the lifestyle that you have for the investments that you're going to have. Right. So there is a tradeoff of time and money here. There's a tradeoff of, hey, do you want the best return and you're willing to put a little time into it? Or do you want to put no time into it and get the best return you can get for that little time, right? That to me is what lifestyle is about. So it's getting clear on what it is that you want and then figuring out a path that supports it. But just knowing that you can buy assets that produce cash flow that supports your expenses and your needs.

9:00Number two, reduce risk. Warren Buffett famously said, don't lose money. It's the number one rule of investing. And so I take this very seriously that I need to reduce the risk and find ways to make whatever investments I do less likely that I lose money. So either I'm making it so that I can't lose money or I'm making it so that if I do lose money, I can only lose a little bit of money. I'm not going to lose my whole investment. But at the same time, I can still structure the deal to get a good return. The risk and the reward don't have to be linked like many people have heard in the past. So a few fun strategies that I like to do.

9:43There's something that I put in a lot of my contracts that's called a put option. And maybe you're familiar with this in stock market terms or in trading. But one of the things you can do in an actual contract is you can have a mechanism that basically says you can get your money back at any time for any reason at all with a return with interest tied to it. because you're just feeling uncertain about the investment. And I have lots of people that agree to these terms. And so they can they can take that investment. And if at any time I want to get it back, I can get it back and I can have them personally guarantee it.

10:16So that would be one strategy. There are many strategies, you know, in the book, I go through countless of them. Number three is find invisible deals. So this one is really fun because these are the deals that are off the beaten path. These are deals that the general public is never going to find out about. These are off market deals, or maybe it's a new trend. Maybe it's an emerging market. Maybe it's in a network that has deal flow and you can only get access if you're part of that network or if you know certain people. Or maybe it's having access to institutional deals where they vetted it to a degree that you never could as an investor.

10:56And so you can piggyback off of what they've already done for research, where most of the time they don't let small dollars in. You know, institutional money, this is some of these institutions that I invest with, their minimum investment is a 50 or 100 or 500 million dollar investment. So to have access to these deals, it's all about knowing the right people. And invisible deals are where a lot of the fun in investing actually is. Let's move on to another one of my favorites, which is commandment four, and that's getting your principal back quickly. So in this one, most people don't even think about this as a possibility.

11:37Most people don't even think, well, I could actually get the initial principal or the initial capital that I put into a deal out quickly because most people are conditioned to invest for the long haul. I put money in the stock market. I don't touch it. I put it in a qualified plan. I can't have access to it until I'm at retirement age. I put money into a real estate deal. Nothing's going to happen for 10 years. I put money in a venture capital fund. I'm not going to find out for 10 years what the return is. Whereas for me, I actually like to structure deals that are on a one or two year term or that I can somehow, like in the real estate world, get a refi in one to two years.

12:15And so I have my money in a deal. I get my equity. I get my money back within one to two years, I can reinvest that money again into another deal, get more equity, so on and so forth. So in my book, I talk about the velocity of money. And one of the examples I give is instead of putting one investment in one deal that is a 10-year term where all my eggs are in one basket and I hope it works, I could instead do what I do, which is find two-year terms, have five different investments with the same amount of money, but equity in all. So it diversifies my portfolio. It increases my likelihood of good returns, but it exponentially does it because I'm in five different deals.

12:59And if one goes bad, I've got others to balance it out. Commandment number five is to create cash flow immediately. And this one is important to me. I'm a cash flow investor. So I want to know on day one that this thing cash flows. So I don't buy businesses. I don't invest in opportunities unless I know that there's cash flow. Or as long as I have the cash flow that I need for my lifestyle and for all the things that I want to do, then I could take some of my surplus cash flow and maybe invest in something that isn't cash flow producing. But to me, that's foundational. That's number one. I don't want to subject my money to equity deals or to the stock market or to anything that fluctuates a ton or there's a long-term payout or that there's not a lot of control until I have all my expenses covered, which I do through cash flow.

13:51And I've done this in a lot of different ways. It can be structured through debt. It could be structured through real estate. It can be structured through operating companies and private equity. There's a lot of different ways to do it. Fire Nation, these 10 commandments are all in the lifestyle investor. And by the way, you're going to be able to go into much more in depth when you get into the book, obviously, as I'm in the process of right now. We're going to be talking about maybe a couple more of these. We'll see when we get into the next level. But I actually am going to move into something that I think is very fascinating about how Justin broke seven figures for the first time and then eight figures in his net worth.

14:27Because you know I'm obsessed with transparency, Fire Nation. As soon as we get back from thanking our sponsors. Happy 2024, Fire Nation. Q1 is here and that means new goals, more growth, and upgrading your day-to-day workflow. While most sales folks are stuck in the mud of manual scheduling, digging into data, and tracking down leads, let me share a better way to win so you can get a jumpstart on your year. The new HubSpot Sales Hub is smart sales software for today's multitasking reps. It's built to help you manage every stage of your sales pipeline with ease. It's filled with easy-to-use and powerful tools that make closing deals and collaborating across departments a breeze.

15:04Sales Hub is an all-in-one platform for multiple things, including converting contacts into customers, accelerating sales with smarter sequences, managing deals with simple and powerful tools, forecasting targets and smarter sales insights. Plus, you can supercharge your work with AI-powered apps like ChatSpot. Bottom line, Sales Hub is focused on helping you work smarter, not harder, so you can get after all those other New Year's goals. Close more deals and get on track for your best Q1 yet. Explore the new HubSpot Sales Hub and AI tools like ChatSpot at hubspot.com slash sales. Do you have a message inside that you know is meant to be shared with the world?

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16:14Join Taylor to learn exactly what TEDx organizers are looking for in their speakers, how to write a talk that goes viral once it goes online, and more. Visit thought-leader.com slash fire. Join Taylor for his free training and get your message out of your head, out of your heart, and out into the world where it belongs. That's thought-leader.com slash fire. Justin, we're back. And something that I've kind of become known for in the industry, Above and Beyond's daily podcast, is income reports. I have published now 89 monthly income reports in a row, show all of our revenue, all of our expenses, the actual net worth, sorry, the actual net income that we make.

16:54And I even have a percentage of gross revenue to net revenue every single month. And I'm always looking to be above 70 and hopefully above 80. Twice, I've been above 90%, which is obviously awesome. But I want to talk about your transparency. Talk to us about how long it took for you to break seven figures in your life. And then that seven to eight figures and actual net worth. Talk to us about that transition. It's an interesting transition because every time you hit a milestone, I think it's really important that you celebrate it. I love that you publish your financials. I think that's really cool.

17:26I've dug into your numbers as well. And that's awesome. So, you know, for me, I was able to hit seven figures as, you know, as I guess a business owner, an entrepreneur. And so I had confidence that I could do it. It wasn't a matter of can I do it? It was what was the strategy to do it? And I did my first investment deal in real estate. I actually invested in a mobile home park, which replaced my wife's income. And then the second mobile home park that I bought really covered our total expenses like at a minimum. So not lifestyle, but like survival expenses. And then the third one that I bought covered all of our income at that time.

18:10And so, you know, our cost to live and survive was one hundred and twenty thousand dollars. But we had the luxury of having cash flow that exceeded that one hundred and twenty thousand dollars per year. So that really was kind of the first mark was with these cash flowing investments. And that happened around the age of 34 or 35. And then we were able to then kind of double up through other passive investments. And some of them happened to be in the real estate space. I did end up buying more rental property because that's really a space I know well. So I bought more mobile home parks, but I got into other things.

18:53I got into multifamily. I got into storage units. I got into a number of different cash flowing investments. And so the accumulation of these assets is what really put us into the eight figures for the first time. And so it took a little bit of time to do that. You know, it took, you know, for my wife to be able to replace her income. That was instantaneous. You know, the moment that we signed it, she was only making$36 ,000 a year as a teacher. And once we signed that, that was done. That happened, you know, kind of month one, her income was replaced. And then it took, you know, a couple years for me to replace my income.

19:28And then it took a couple more years to really get into that eight figures. Let's talk about specific advice, Justin, that you have for somebody who is dreaming right now. They're listening to these words we're talking about. They're going back over those five commandments we've talked about. They know there's still five more commandments they need to implement in their lives as well. And they're dreaming about living on passive cash flow. What's your advice for them? Well, my advice is to take action immediately. One of the things I say in my podcast at the end every episode is take some form of action.

20:01Take one step towards financial freedom in whatever manner that is. If it's reading a book, if it's meeting someone for coffee, if it's just getting into a circle of people that you want to be in. I mean, your peer group is so important because peer group is really like that's the influence, right? That's where you change your thinking. And once your thinking changes, your habits change and your behaviors change. So to me, it's who are you hanging out with? Are you hanging out with people that play the game of life at a higher level with bigger stakes in a way that you want to emulate? And then I also think coaches and mentors.

20:40Do you have someone in your life that's pouring into you in an area and they're going to give you the real deal? They're not just going to tell you what you want to hear that makes you feel good. You probably want someone that can do that as well. But I think you want someone that is going to have the tough conversations and is going to help you think in a different way than what you're probably accustomed to. Most of us adopt a mindset and beliefs from those that were most influential. That's true. Usually our parents, right? Or other family members or people we spend a lot of time with. And so it's important to recognize how much influence others around us have on us and what their mindset means to our mindset.

21:20And so for me, I just didn't have a whole lot of people in my network that I wanted to emulate. So I took to reading. I just found authors that were doing it and I devoured their books. And I would go to courses and seminars and I would meet people and I would go to business networking events. And I just wanted to play the game of life at a higher level. And so I was really intentional about meeting new people. And for a long stretch of my career, and I still do this today, is I take someone out for coffee or lunch, at least one new person a week. And this is a tremendous habit that has been one of the most beneficial and successful keys to my success is that I have gleaned a lot of wisdom from a lot of people much smarter than I am because I was intentional about setting up time to get outside of what the day-to-day was for me and really kind of get top level on what is it that I want in life.

22:19Of your first five commandments, my personal favorite is finding invisible deals. And one thing that I've recognized over the years is that it takes money to make money, Fire Nation. Like it was really hard for me to go from zero to$100 ,000 because I had to earn every one of those dollars. To go from 100 to a million was not easy, but it was easier because I had some money now I could do some things, invest in myself. To go from a million to five, that was quite a bit easier. And then go from five to 10, like, I'm not going to like lie. Like it wasn't overnight, but it kind of felt that way. I was like, almost like, I'm like, whoa, I'm, I'm already in eight figures right now.

22:56Like, because it takes money to make money. Now I have these investments in different areas. You know, I was able to invest in a company called Gimlet Media that was then bought by Spotify for$233 million, huge payday. I was able to invest in the stock market, has had a huge bull market all these years. And so I'm making more money a lot of times in these investments that I'm making actually in my business. and I'm just seeing this exponential compounding growth. And listen, these invisible deals are available when you have the money to jump on them, to know the right people, to make them happen.

23:26So all five of those first five commandments are obviously awesome, but I wanted just to share why I love number three specifically. And I'm recognizing that right now in my situation in life, it's awesome to find and to have the opportunity to do these invisible deals. Let's end with obeying, Justin. Of the final five commandments, just pick out one, maybe your favorite of the last five. Doesn't have to be though, just one you think would be a good one to end on and then we'll say goodbye. Well, I really enjoy Commandment Six for a lot of reasons. It's called Find an Income Amplifier, but this is where you can really kind of make the deal exciting.

24:07This is where you can find something that makes the return better or enhances the terms in some way, shape or form. So I go into a lot of details here, but this could be something as simple as an equity kicker where you're in a debt deal, but you're able to negotiate a piece of equity for free. It doesn't cost you anything. You still get a balloon of your investment back at the end of the term, but you now have equity upside. Or it could be accelerated distribution schedules. So a lot of the time I'll invest in operating companies and I'll say, hey, I am happy to make this investment. I want you to be able to use it to scale, but I also want to be paid back quickly so that I can get that capital out of the deal.

24:46So I'm going in an equity position, but the return is more similar to a debt position and I can have enhanced payback. So in some of my deals, I get paid back 80 % of the profit or the distribution or 67%, even though maybe I'm only a one third partner, I'm a 20 % partner. So those are a couple of cool ones. And then for anyone in my mastermind, my investors club, my private clients, one of the things that I do for them as I negotiate these sidecar agreements where I get special and preferred terms. I get a reduction in fees. I get a reduction in the minimum investment to make it more palatable for people that maybe don't want to put as much into a single investment.

25:31And we might even get an enhanced kicker on the returns. And maybe we get some extra equity or warrants in a company. There's a number of different things I've been able to negotiate, but I love being able to set this up ahead of time and then take care of everyone in my network because I just let them kind of carry on and piggyback off of my terms. I don't have a separate set of terms. So whatever I go in at, I just offer those same terms to the rest of my group. And anyone who wants to go in can, but no one has to. It's a very laid back approach. But there are a lot of different ones that, I mean, one of my favorite deals is a revenue share.