Real Estate Expert: How You Can Make REAL Money with These 3 Tips - Paul B. Smith

0:00Welcome to the Big Success Podcast. Cutting-edge conversations on business and personal success, as well as how to level up. Here's your host, number one business coach in the world, Brad Shoghers. You know, when it comes to explaining wealth, you go to a guy that lives in Monaco, has built multi-millions in real estate, and lives the lifestyle. I met Paul at the Las Vegas Grand Prix, Formula One, and we got to chatting about real estate. And I thought, oh my God, I need his knowledge on the podcast. I need you to understand what he says about how you create wealth. His early career was running big companies, everything from the Cadbury's, Roundtree, Schweppes, all of that fast moving consumer goods.

0:50He started in the automotive industry with Ford. Now, big real estate guy. And when I say big, I mean massive. Read the book, dive into the podcast, Paul's view on success. and how it happens for you financially, let's get to it. Paul, I got to ask your definition of success. What is it? I've got two. I believe that most people believe they are successful when they've got more economic success, more lifestyle success than their parents. And I think that is the normal definition of success. my specific personal definition of success i'm going to give you a little theory of mine we only we you and me people like us only do things for two reasons one is lifestyle so whether it's hanging out the formula one or you know whatever and the other one is legacy and success for me is this my grandchildren's grandchildren's grandchildren know my name grandchildren how many generations is that that like nine generations i guess yeah yeah because one of the things i do kept this secret from you is i collect rare coins so so one of my coins is from alexander the third better known as alexander the great and more than 2 000 years later we're still talking about him yeah and for goodness sake the guy died at the age of 30 yeah so he had he had no i'm 60 this year so i've already lived twice as long as alexander great and i will be very impressed if people are still talking about me in 2000 years time he had a good he had a good nickname it did help him you you didn't get blessed with you know a name that stands out like brad sugars you got paul smith i mean it's like yeah that's that's a flesh out yeah so we'll keep well that's where we got to have benedict in the middle there you go so that's right where do you feel in your life you chose success as a young boy schooling later in life where did you choose to be successful

3:07very easy for me I realized it wouldn't be for most people when I was 14 years old I was diagnosed with something called Crohn's disease I spent more than one year in hospital and in particular two different aspects to it on a personal basis I had three operations and all three well I had many operations but three of them were life-threatening I'm not particularly religious, but I was brought up as a Catholic. And when they think a Catholic is going to die, they give them something called the last rites. I was given the last rites when I was 14. So I was told, you're going to die. But that's a beautiful thing because I don't know about you, Brad, but I'm of an age now where, you know, I'm not saying I believe I'm still young.

3:56But, you know, this year I'm 60 and people around me have started dying. and my observation on life is this people only become uninhibited and clear about what they want when they are told you're gonna die you know in two months in three months in six months everything fades away and becomes irrelevant now the news for all of us human species is that we're all bloody gonna die we don't know when and i decided to cut the crap and i decided to literally live every day as if it was my last. Like, literally. Because none of us knows how long we've got. But when you've, I tell you what, it does help give you that clarity and that focus when you've had a near-death experience.

4:45And I ain't recommending it. I'm just saying that's when I got that. You know, age helps. Like, we're talking wealth today, right? Age does help. People are like, you know, why is Warren Buffett one of the richest people in the world? because he's been doing it 60, 70 years. That's why he's compounded for 70 years. Most of us don't learn investing until we're in our 40s or so, and then our compounding rate is only 30 years. And some people die in their 50s. They only get 10 years compounding. Before we get into wealth, what's your formula for success? How does success happen in your mind? Okay.

5:26Okay. So I'm a great one for the Warren Buffett quotes. And when people say, I do quite a lot on social, I'm still quite active on social media, because I'm still a, I'm not one of these retired wealthy people. I'm an active wealthy. So because I think, you know, what the hell are you going to do all day? So I do what I love doing. And very often, people say, you know, if you're really that rich, why are you still working that hard? and they'll say things like that or whatever. And my view is with regard to wealth in particular, you only discover what it is that you want to do when you don't have to do anything.

6:06And if you wake up every morning and think, well, what should I do today? That's not really a great way to plan your life. So for me, it's a combination of total and utter freedom to do whatever the hell I want together with a plan. And in particular, my plan is to help as many other people on the planet become wealthy as possible. So that's my life's mission, if you like. That's what I'm trying to do. Yeah, I remember when I wrote the vision for Action Coach of World Abundance Through Business Re-Education, people were like, you know, you're a little crazy, and it's like, you can retire. Why don't you just retire?

6:42Because I would, you know, we see what happens to all the movie stars and rock stars when they got all the time and all the money on their hands. I like having something to do. So if you look at then the relationship between failure and success, how do you view that relationship? Oh, Christ. Well, I tell you what, a few years ago now, I'm in my third year in Monaco, and that has been, people say to me, did you move to Monaco because of taxes? Well, not really. I wouldn't move somewhere I didn't want to move to just because of the bloody tax. So I'm an absolute firm believer in the fact that your network is your net worth.

7:25It's just they're the same thing. And the more and more like super wealthy people I meet here, the more and more I understand that really successful, really wealthy people, they're not afraid of failing. They're afraid of not failing. Hang on, explain that to me. All right. I'll do it in two ways, maybe. So they're afraid of not failing because I've got a really good friend of mine, a guy called Jonathan, and he does crazy stuff. He sails across the Atlantic solo both ways with just like a bagel in New York and he comes back again and stuff like that. And he's in his 60s, by the way. And he says, if I don't keep pushing it to the edge, how the hell do I know where the edge is?

8:17So that's number one. But number two, I don't know if he'd be so well known over there in the States, but a guy that I know pretty well over here is Stelios. He's the EasyJet guy. So he's a multi-billionaire, very successful business guy. and my wife and I would just chat into it we're a member of the same couple of clubs and we were just talking to him and we just said to him how many successful businesses you got because you never stop he's got easy jet he's got easy storage he's got easy office he's got easy hotel he's got easy everything and his answer took us aback a bit he said well to any substance I've got 50 I said, what do you mean any substance?

9:02He said, well, you know, proper businesses that make more than a million quid a year. And the follow up question for that was, oh, OK. So in order to get 50 successful ones, how many businesses did you start? And he said 250. 50. So in other words, if you look at it differently, if he wasn't afraid not to fail, he started five businesses for every one that's succeeded, yeah? And he then took the mickey out of me. I used a slightly ruder word than that, but I'm trying to keep it clean. And he said, but you got it easy. I said, what do you mean I got it easy? He said, well, you're in real estate.

9:43how can you possibly lose in real estate? I mean, what could possibly go wrong? I said, well, trust me, there's plenty of things can go wrong. His head was in a place that almost real estate wasn't a proper business because it wasn't risky enough. And I get that if you compare it to, well, doing what he did, starting an airline from nothing. it and so that's what i mean when i say and these are my words not theirs but the more successful super wealthy and i'm by which i mean billionaire plus level um people the more that i discover that they're afraid not to fail if that makes because you know if they didn't fail four times they wouldn't succeed once love it love it you're on the big success podcast we're going to be back with Paul Smith and we're going to dive into wealth and real estate when we come back.

10:37In 30 minutes a day for 30 days, 30X Business will take you through the exact hard-won business principles that Brad Sugars has personally developed over the past 30 years as an entrepreneur, investor, and business advisor. Join Brad and his team and 100 other entrepreneurs who want to start building a successful business today. All right, you're back. Big success podcast. Remember to click that like and share button. Click the bell to get the reminders. Paul Smith, wealth. Let's imagine I'm 20s, early 20s. What should I be doing to get myself rich in my lifetime? Oh, this is going to sound really, really boring.

11:15But the first absolute fundamental thing you've got to do is make sure that your income exceeds your expenditure. Now, I'm with Dickens on this. I don't know if you're familiar with Mr. McCorber from one of Dickens novels income 20 shillings expenditure 20 shillings and sixpence misery expenditure 19 shillings and sixpence happiness so you've got you've got to get the right side of the line you've got to start regularly and that's just basic financial discipline because i don't know about you brad but i know so many people they start on 20 grand they get to 30 grand they get to 40 grand they get to 100 grand 200 grand and their lifestyle just moves with their costs and they always spend So, number one, discipline.

12:00Number two, and I'm probably going to send everyone to sleep now, wherever you live, you've got to get really good at tax. Because I've just done a series on social media and stuff, Who Stole My Millions? Okay, and here's the gist of it in like one or two sentences. The average salary in the UK is like 40 grand. And similar in the States, call it$50 ,000, something like that. You work for, let's say, 50 years from 20 to 70, something like that. So let's do it in dollars. Let's say you earn$2.5 million throughout your life. What do you die with? Virtually nothing. I'm talking about the average person.

12:46I'm not talking about you, obviously. And if you then analyze who stole all my money, I don't care where you live, it's tax. And unless you get really good at paying the correct amount of tax with all the benefits and the schemes and the systems that you can use. So, you know, in the States, whether it's a 401k or in the UK, whether it's a SAS or, you know, there's you've got to know the basics. But just just take that as a specific example. you're in your 20s, you're a good young man or woman, and you've decided you're going to start putting into a pension because you're responsible. Yeah. My 20 and 21 year old daughters, literally they're Roth IRA and I pushed them to do it, but I know that's going to make sure they're okay.

13:34All right. Well, here's the thing. In the UK, let's say you did that. Virtually at end, the average pension pot of the average person in the UK is just a little bit over 120 ,000 pounds by the time they retire, which is scary. Have a guess at the, I don't know if you'll know this or not, have a guess that the typical fees that a typical pension scheme will take off you in order to amass your 120K. Jeez, I don't know. It's going to be, it's going to be enough percentage points that I'm going to be crying about it. Yeah, it's about 140K. so more than you more than you get you paid in fees that's insane yeah i put stuff up like this on social media and i get hate from all the financial institutions obviously because and i've published videos called the great pension scam and whatever but okay now let's say by some miracle you're completely exceptional and you've amassed a pension pot of a million quid of million dollars.

14:36Now, that would be exceptional. What happens? Well, in the UK, you've got this arcane system called an annuity. And almost everyone where they retire, they buy a financial product, they give away their million pounds, and they buy an income stream. And they'll maybe buy an income stream of 3%, 4%. So on their million, they'll get 30 or 40K a year, something like that. Yeah, so they can live off of it, yeah. Yeah, and when they die, it's gone. So the biggest asset that they've got, and that's just tax. So when I say you've got to learn your tax system, in the United Kingdom, you can very simply put it in, don't put it into a normal pension scheme.

15:21put it into something called a SAS, small self-administered scheme, and I write about this stuff all the time. A SAS is a trust. It's exempt from inheritance tax. There's no bugger can get their hands on it apart from you. And I set mine up for free, zero pounds. I even look at it here in the States. I see all these people burdened with college debt, And it's like, if you think smart enough in the beginning, firstly, I don't see there's ever going to be a return on the college other than who my kids get to meet when I send them to the right colleges. If they make good connections, then that friendship group will serve them later in life.

16:06But even the simple 529 account where I fund that account now for my five-year-old daughter, it sits and earns tax-free returns till she goes to college and then pays for her college. And I'm assuming it'll have a lot more than she needs. So it'll not only pay for her college, it'll pay for her room and board. But you're right. Tax, mortgage interest and tax are the two biggest expenses in your life. For sure. And then number three, because I'm a property guy, buy a bloody house. Yeah. Okay. And people say to me, because I bought my first property in 1982, so 42 years ago in London, and I paid£9 ,000 for it.

16:55And I did it up myself all those years ago, because I was only 17 when I bought it. And less than two years later, I sold it for£32 ,000. pounds so and the way it works in the uk because it was my home it was tax free so i essentially i turned 10 grand to 30 grand off i went and people say to me oh but paul you could do that then you can't do it now because the average house in the uk is like 300 000 pounds yeah and i said do you know what it's even easier now than it was then because i was 17 i couldn't get a mortgage i had to save up that cash by working bloody hard now you can get a 95 mortgage you need a 5 deposit deposit.

17:32So what's 5 % of 300 ,000? It's 15 grand. And that's 40 years later. And here's a little one for you. In the UK, not that I live there anymore, but I'm still quite closely connected to it. They got the budget coming up in March, you know, the fiscal, we're going to wreck the economy a different way that we hadn't thought of before statement. And have a guess what they're thinking the government it's election year same as it is in the states scheme yep yeah first time homeowner scheme and they're now actively talking about a one percent deposit mortgage yeah in australia they did that for i gotta be 10 years and they they gave people it was between seven and fifteen grand as part of their deposit for a house the government paid for it so So, you know, it's all of these things.

18:25Okay, so let's jump ahead a little bit. Let's say we take those three rules. Let's say I'm now 40 years of age. I'm a little more panicked now. What have I got to do at 40? What should I be really focusing in on? Okay, next thing. And I'm going back to Trump. I'm going back to Buffett again. I don't know why Trump came out of my mouth. But Trump's on my mind at the moment for various reasons. Buffett says the average millionaire has got seven streams of income. And I've seen that attributed to many, many different people. So in my view, if you're like a regular person working a regular job, that's dangerous.

19:03Yeah. Because artificial intelligence, you know, all the things, all the threats to your good old white collar job, you can't rely on that. So I would say you have to have a second stream of income. and I'm not one of the people that says you should start some sort of crazy side hustle or drop shipping on Amazon or whatever just just if you're working full-time and that's like you know what you do the way I normally talk to the people that I train educate support is by all means choose property as a second income stream but you know fine stocks and shares and you know that sort of stuff if that's what you want to do.

19:40But do not quit your day job until your second income stream is at least three times what you're earning in your primary income stream. Why three times? Because if you've been, you said you're in your 40s. So you've built a whole career of doing whatever you're doing. You've got good experience at it. And And I hate it when I see people saying, you know, midlife crisis, I'm 40 years old. I've decided to tell the boss what I really think of him. And I'm going to be a property investor. I think that's insane. I just think, why would you do that? You've got to keep your income. So you've got your borrowing capacity.

20:24So you've got all of that stuff that you have to do. All of that. You know, I read that about Warren Buffett saying seven income streams. and seven properties is seven income streams. I don't need seven businesses or, you know, I'm the crazy one. I've got 11 companies. So I'm crazy with your EasyJet guy of having lots of companies. But again, I've been through 50 something companies and most of them were successful. I sold them. But if, okay, so let's leap ahead. I'm getting towards retirement. Maybe I've done some of the basics right. but if I want to get there faster, what should I be focused on?

21:06Sure. Well, if I give you a UK answer, then a general answer. Almost everybody in the UK, certainly that's got any kind of sensible middle management or senior management job and they're earning a few quid, they've all got a reasonable pension pot. And what I teach a lot is to take that pension pot and take control of it. So put it into your private pension and it's a very straightforward thing to do here in the UK and you can then use that private pension to start investing in commercial property. If you set it up in the right way, you can use that pension pot to actually lend money to your development companies and you can fund residential property.

21:51So most people are sat on this pretty significant war chest of money that they don't even know about. So that's number two. I think this is true of most places in the world. So this is a more generic answer. Most people in most of the Western countries I'm familiar with, they've got this mission to pay down their home mortgage and get it paid off. and that creates what i call lazy money so they've got a house that's not an asset it's a liability because it they're paying for it even if there's no mortgage they're still paying for upkeep and you know whatever utilities and most of them have got hundreds of thousands of dollars or pounds or euros or whatever locked up in place for christ's sake grow a set take it out and go and buy something else with it.

22:42Yeah. Or I recommended to an older person the other day, sell your house, go rent something, use all of that money to go and buy seven or eight properties because they had enough money there to be seven or eight deposits, control seven or eight properties, pay rent in the one that you're going to live in because they were going to downsize anyway. Like, come on, don't be crazy with this thing. All right. We're going to get back and we're going to talk scale in wealth. We'll be back in a moment. Remember, click that bell so you get the announcements. Paul and his wife, Aniko, have started, run, purchased, sold, and own a number of businesses.

23:17They own residential and commercial property, have an estate agency, project management company, and own a firm of solicitors specializing in property. To learn more about Paul Benedict Smith, please visit touchstoneeducation.com. And you're back, Paul Smith, wealth through property. um let's go into brr buy renovate the remodel uh and reach refinance or redraw down on that thing it's a strategy that you love why do you love it so much okay because you master that you can have an infinite amount of property which sounds like a crazy statement to make. The first year I got serious about that was a particular niche within the buy, refurbish, we call it, or I call it buy, refurbish, remortgage.

24:08But yeah, buy, remodel, redraw down, BRR. And I don't really care at the end whether you sell it or you put a tenant in it. It doesn't matter because you've created that value. The first year that I got serious about it, very, very briefly. Up until the age of 40, I was doing a big corporate job, but I was doing property on the side. Best thing ever happened to me, I got made redundant when I was 40. So what the hell do they call that in the States? I got let go. Got fired. Yep. Fired. Best thing ever happened to me because I suddenly had to think on my own. I had to get corporates 20 years as running my own businesses.

24:56I did it for the very first time in potentially quite an interesting way that everyone might be interested. I didn't buy a regular house. I bought a nursing home where it was a nine bed nursing home. And I bought it because I've been a property investor for 20 years at this point. I knew what I was doing. And I bought that property for just a touch over 400 ,000. I spent about 100 ,000 on it and it revalued when I'd finished because I turned it from a nursing home, basically a business that had gone bust. Yeah. And I turned it back to a family house, which is what it was always built on because it's a 200-year-old property.

25:36I've still got it. It's in Scotland. And when it revalued, I looked at the numbers and I thought, Jesus Christ. Because I'd spent round numbers half a mil and it revalued at 1.2 million. And I did that project in four months. Now, my previous corporate job, and this is going back to, I can't remember if it'd be 2000 or 2001, but it doesn't really matter. Let's call it 20 odd years ago. I was the managing director of a multi-billion pound company with thousands of employees and they were paying me 400 ,000 a year basic you know quarter of a century ago yeah and i just made tax-free 700 grand when somebody else did all the work because i didn't do any building work in four months so if you annualize that i just earned 2.1 million and no effort.

26:37I was on holiday. I went to Africa.

26:43I climbed Kilimanjaro. And so I just thought, shit, this beats working for a living. And I did have in my head, well, you know, maybe I'll just do this for a bit and then I'll go back and get a proper job working for someone else. And then I just thought, no, not the faintest chance. So the next year, I'm struggling to remember, I think I normally say we did roughly 50, we being me and the wife. We did, I think, 48 properties the next year. It's like one a week. And then it just went boom because it does. Well, you get so much equity, you've got to place it somewhere. It's a system. I'm an engineer fundamentally.

27:31My first degree is mechanical engineering. Engineers have got this concept called repeatability, which essentially means you do the same thing, you get the same result. So when you get an engineer to understand the system, they'll just keep doing it. Now, there is a downside to trying to teach an engineer something, which is this. And I am an engineer, so I can say this. You can always tell an engineer, you just can't tell them much. so let's go then to the scale side of this thing good to great doing those properties doing that stuff yeah then you hit the scale segment tell us what are the main lessons you had to get to go from doing the the good size to doing the massive things how did you have to shift your mindset set as well, I guess.

28:22Okay. Well, here's where I said I was lucky at 14 in all sorts of ways. I was lucky again at 40 because most entrepreneurs have never run a two and a half billion pound business like I had and had thousands of stuff. The main challenge of scale for most people in most businesses is easy, is people. So it's easy to tell you what it is, but what I'd already had is 20 years of man management experience drilled into me in big blue chip environments. So I was in that luxurious position where I could just merge entrepreneurial traits that I clearly had, but I'd suppress them for 20 years with big systems.

29:08So you go across that and people talk about crossing the desert. I don't know what you would call it. A lifestyle business to me that you could probably have two or three people and you can probably make a million pounds a year profit yep that's what i would call a lifestyle business but then you got across the desert and you've really got to get to a minimum i would say of 50 employees it depends on your sector but for real estate i would say 50 because you you probably want a project management division you probably want some sort of we would call it a state agent so a realtor so there's there and we own a firm of uh solicitors as well so we've we bought all these companies over the years yeah the ones you need to do the work you buy and yeah so and i see so many companies hit the wall and the founders just give up they get they don't come to people like action coach to help them across the desert, try and cross the desert on their own.

30:10And what happens if you go try and go across a desert without a map? You generally die of thirst because you know what you're doing. And the person that will take it from zero to a million is typically often not the same person that will take it from a million to 50 million or a hundred million. You need a completely different skill set. And the biggest challenge I would say facing most entrepreneurs, I mean, you'll know better than me because you deal with more businesses than I do is the biggest challenge isn't really the staff in my experience it's getting the owners to let go and and and I'm going to come back to Formula One again here and I'm going to give you a specific analogy because we were talking off air before about yeah Lewis Hamilton and Ferrari just for everyone's benefit where we met was at the Vegas Grand Prix so that's how we met so yeah and And Lewis Hamilton is currently with Mercedes for another season.

31:11And I would regard him, other people might disagree, as one of the best drivers of all time. But even though he's the best driver of all time, or one of, he's still one of a team of 2 ,000 people it takes to put that car on the road. And what he doesn't do is go into the factory at Brackley and start telling people how to hone cylinder boards. He doesn't know how to hone a cylinder ball. So you, if you are mad enough to believe that you are the best person on the planet to do everything, you're utterly delusional. In my view, and I come across as harsh. But I genuinely believe if you are stupid enough to think that you could, because I hear people say this all the time.