Financial Freedom with Real Estate Investing

October 2017
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Mon, 30 October 2017

MB 082: Wealth Can’t Wait – With Paul Morris

Wealth is code for freedom.

If you want to be a millionaire, it’s probably because you want control over your time. You want the autonomy to make your days your own and spend them with the people you love. Today’s guest chose real estate as his path to freedom, spending less than he earned and investing the excess in apartment buildings. Maybe you are interested in doing following a similar path, but something is holding you back…

Paul Morris is the co-author of Wealth Can’t Wait, a New York Times bestseller that identifies the seven traps that keep people from building wealth and equips readers with a comprehensive set of skills to achieve financial freedom. An active and consistent investor, he has grown his real estate portfolio to more than 700 rental units and 150,000 square feet of retail commercial space, and Paul was named among the 200 Most Powerful People in Residential Real Estate in 2013 and 2014.

Prior to working full-time in real estate, Paul enjoyed a successful legal career, working as an associate at a major international law firm and as Senior Counsel with the US Department of Justice. He has a degree in economics, a master’s in management from Oxford, and a JD from Cornell Law School. Today Paul shares his early experience in real estate, investing in a duplex while he was still in school. He speaks to the kinds of investments he prefers, the pros and cons of working with a partner, and how to get started in real estate with little to no money. Listen in to understand the three rules for investing that have helped Paul avoid losing money, as well as the seven wealth traps that keep people ‘stuck on the sidelines.’ Find out what’s holding you back and get on the path to health, wealth and freedom!

Key Takeaways

[1:55] How Paul got into real estate

Working class dad invested in real estate
Provided income without working
Bought duplex in 1990 (Ugly Duckling)
Always worked with partner, gives courage

[4:59] The pros and cons of having a partner

Paul recommends working without partner
Choose partners based on brainpower, integrity
Clarify deal points, exit strategy in writing

[8:11] The kinds of investments Paul favors

Prefers buy and hold strategy
Buy and flip too risky

[11:03] Paul’s philosophy of wealth as code for freedom

Ask yourself why you want to build wealth
Money affords power to choose, create
Allows to pursue greater goals
Love, health and time

[15:57] The 7 Wealth Traps

Staying in a comfortable job
Avoiding risk
Viewing wealth negatively
Giving up (not staying the course)
Holding on to toxic friendships, the Weak Social Circle
Victimizing yourself
Thinking you know it all

[26:40] How to start investing in real estate with little or no money

Buy a home, live with roommates to cover mortgage
Use other people’s money

[29:32] Paul’s 3 rules for investing to avoid losing money

Buy where you know
Buy value-add (worst house in great/gentrifying neighborhood)
Buy cashflow

[33:12] What Paul is excited about

Providing great, safe units in LA neighborhoods ‘turning a corner’
Traveling with daughter, girlfriend
Becoming better table tennis player

[34:04] Paul’s perfect day

Freedom to dress casually, work from home/coffee shop
Finished in time to pick up daughter from school bus
Hot yoga class with girlfriend

Connect with Paul Morris

morrisx.com

Paul on LinkedIn

Resources

Wealth Can’t Wait: Avoid the 7 Wealth Traps, Implement the & Business Pillars, and Complete a Life Audit Today! By David Osborn and Paul Morris

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko

“7 Ways You’re Hurting Your Chances at Building Wealth, According to 2 Self-Made Millionaires” in Business Insider

Interview with Lewis Howes and Grant Cardone

“7 Strategies That Will Help You Build More Wealth, According to 2 Self-Made Millionaires” in Business Insider

“Are You on Track to be Wealthy? Two Successful Entrepreneurs Share the Most Important Skill to Have” in Forbes

“5 Timely Investments You Should Consider This Summer” in Forbes

Coaching with Michael

Review the Podcast on iTunes

Direct download: MB_082__Wealth_Cant_Wait__With_Paul_Morris.mp3
Category:Commercial Real Estate -- posted at: 7:09pm EDT

Tue, 3 October 2017

MB 081 - The Passive Income Investor - With Tim & Tom Black

There’s more than one way to skin a cat, and though we spend a lot of time on the podcast addressing aspiring syndicators, there are other routes to financial freedom via real estate investing. High net worth individuals who are interested in getting a little skin in the multifamily game should consider the benefits of passive investing. Regardless of approach, the end game of apartment building investing remains the same: Permanently replace your income and get out of the rat race for good!

Dr. Tom Black (also known as The Passive Income Physician) was working as a busy emergency doctor in a high-volume trauma center. Yes, he was making good money, but he was working insane hours and he rarely saw his family. Tom was financially secure, but far from financially free—and he was fed up with sacrificing his time for money. Already enamored by the cashflow potential of real estate, Tom purchased several single-family homes and even tried his hand at commercial real estate before stumbling into his first multifamily deal, a 305-unit in Arlington, two years ago.

Tom’s brother, Tim Black, enjoyed a 32-year career in entertainment, retiring as the COO of a large hospitality company in March of 2016 when the business was sold to private equity. Eventually, his brother convinced him that multifamily was the best means to making your money work for you, and together they started Napali Capital. The firm has grown quickly, and the Blacks currently have 1,000-plus units in assets under management. Today Tom and Tim explain why multifamily is the best choice for passive investors, how to assess the risk profile of a multifamily deal, and the characteristics to look for in a potential syndicator. Listen and learn the returns a passive investor can expect from multifamily, the skill set necessary to become a successful investor, and the staggering tax benefits afforded by the platform.

Key Takeaways

[2:41] What prompted Tom’s involvement in real estate

Poor student in HS, gained confidence in Navy
Top of class in medical school
Couldn’t sell house after finishing residency
Rented to incoming resident
Enamored with cashflow
Busy doctor in high-volume trauma center
Making good money, but sacrificing too much time
Bought land in east Texas for commercial development
Resigned from practice and moved to pursue real estate

[5:51] When Tom identified multifamily as a ‘way out’

Bought foreclosures in Houston during downturn
Single-family was hard work
Studying economies of scale
16-unit commercial development offered buffer in budget
Multifamily could take him to next level

[7:23] Tom’s shift from single family to commercial real estate

Cashflow limited to specific markets, required travel
Single-family very competitive
Saw vacant land, wanted to be ‘master of own destiny’

[8:19] Why Tom wanted out of full-time medicine

Concept of security vs. freedom
Medical practice not sustainable
Doctors in their 70’s still working

[9:25] Tom’s first multifamily deal

Moved to Dallas for medical directorship
Attended real estate investing lectures
Stumbled onto 305-unit off-the-market deal in Arlington

[10:29] The difference between commercial development and multifamily

Developing is rough, many working parts
Multifamily offers formula for success, mitigated risk
Evidence-based reasoning appealed to Tom as doctor

[13:31] Tom’s advice around quitting your day job

He continues to work in medicine one day/week
Don’t be in a hurry to quit until achieve cashflow

[14:34] How Tim came to work with his brother

Poor student, but excelled at leadership
32-year career in hospitality/entertainment
Retired in March 2016 (COO of large hospitality company)
Started Napali Capital together, capitalizing on each other’s strengths
Firm has grown rapidly, responsibly
Education is foundation of their business

[16:54] Why multifamily is the best choice for passive investors

Money works for you (cashflow, appreciation, depreciation, amortization)
Lack of affordable housing, cultural trend to downsize
Multifamily is stable and tangible

[19:22] How to assess the risk profile of a multifamily deal

Depends on syndicator, underwriter
Napali Capital is very risk averse (2% raises year-over-year)
Tim & Tom don’t offer huge returns (9% cash-on-cash)

[20:41] The returns a passive investor can expect in multifamily

9% cash-on-cash
90-100% return in five years
Napali always exceeds projections
130% in 24 months on 305-unit

[22:22] The skill set necessary for a passive investor

Ability to read P&L
Knowledge of underwriting
Understanding of costs (rent rates, insurance)
Consider a mentor

[23:58] The Black’s advice around choosing a syndicator

Look for trust, integrity
Communication is key
Transparency (share financials)
Invest alongside you

[25:54] How to pacify the passive investor’s fear around risk

Trust the track record, pedigree of the syndication team
Stock market presents much greater risk

[27:06] The staggering tax benefits of multifamily

Stock market, mutual funds require payment of capital gains tax
With depreciation, taxed income is either substantially less or zero

[30:10] Tom’s final tips for aspiring multifamily investors

Get off the sidelines
Dip your toe in the water (crowdfunding)
Get educated

[31:09] What the Blacks are excited about

Growth of firm
Dynamic of relationship

Connect with Tim & Tom Black

Napali Capital

Email Tim: tim@napalicap.com

Email Tom: thomas@napalicap.com

Resources

The Passive Income Physician Blog

The Passive Income Physician: Surviving a Career Crisis by Expanding Net Worth by Thomas Black MD

Invest with Michael

Financial Freedom Summit Wait List

Free eBook: The Secret to Raising Money to Buy Your First Apartment Building

Direct download: MB_081_-_The_Passive_Income_Investor_-_With_Tim__Tom_Black.mp3
Category:Commercial Real Estate -- posted at: 6:41pm EDT

Tue, 3 October 2017

MB 080: Nighthawk Equity: You Find the Deal, We Do The Rest – With Mark Kenney

Your chances of doing even a 60-unit multifamily deal on your own—with no track record—are very slim. Even with the capital and the knowledge, if you are lacking in the reputation department, brokers will have no confidence in your ability to close. Enter Nighthawk Equity, my partnership with Mark Kenney. You bring the deals, and Nighthawk does the rest.

Mark has been investing in real estate since he graduated from Michigan State 23 years ago, partnering with his twin brother to buy and rehab a $36K duplex. He continued to pursue small deals and flips during his career as a CPA and consultant for KPMD. Eventually, he started his own IT company. The business thrived, but 80-hour weeks and extensive travel translated to suffering in his personal life. With his marriage in trouble, Mark made the decision to take a huge pay cut, hand off the big projects to someone else, and pursue real estate investing full-time.

With the support of his family, Mark spent nearly a year securing his first big multifamily deal, a 64-unit building in Dallas. Adhering to the ‘law of the first deal,’ his second and third deals followed right away. In four years, Mark has purchased 2,000 units and raised tens of millions in capital. Today, Mark shares the process of working with Nighthawk Equity to secure a deal, explaining how we came to join forces, the response to Nighthawk, and the right time to get Nighthawk involved in your deal. Listen in to understand the mission of Nighthawk Equity, and how the firm also supports passive investors looking for a solid ROI.