Welcome to another episode of Passive Real Estate Investing. I’m your host Marco Santarelli. And I am glad you are here today. You know, there is a saying that money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. And that is by Ann Randall, who is a great author, has written some great, great books on independence, freedom, Liberty, money, and all the topics surrounding that. These are fiction books, by the way, they’re presented as a story, but you take away some great lessons about, I guess, just being in a free market and what a free market really is and why capitalism is so important and the importance of money and what it is and what it isn’t. But here’s a concept for you, you know, what would you do if you had complete financial freedom and therefore time freedom, would it lead to something that my guest today talks about, which is being a lifestyle investor, which essentially means that you’re creating financial and time freedom for yourself to live the lifestyle that you want.
I think this is a great concept, and I didn’t learn about that until 1997, but, you know, I think a lot of people don’t mix the two and combine those concepts properly. They think about investing to create financial freedom, but maybe that’s at the expense of creating a job that you are stuck in for a very long time or a business that is really just tethered to you. And you can’t really separate the two. So what does it mean to be a lifestyle investor? Well, that’s what we’re going to talk about today with my guest here. And, you know, it’s really more about a journey to financial freedom and creating the life of your dreams. It’s a very much a doable thing. It’s just a matter of knowing how to do that, having the right guide someone to coach you along or show you the way which is really just copying other people’s success.
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So it is my great pleasure to welcome Justin Donald to the show. He is an author of an amazing book that I just started reading. And I can’t wait to finish called the Lifestyle Investor: The 10 Commandments of Cashflow Investing for Passive Income and Financial Freedom. Now, really who doesn’t want that. Entrepreneur magazine calls Justin, the Warren Buffet of lifestyle investing. I think that is a great title and an honor to be called that he’s known as a master of low risk cashflowing investing specializing in simplifying complex financial strategies. And his ethos is to create wealth without creating a job. And I really love that because ultimately that’s what we want to create with financial freedom is that time freedom that goes hand in hand with it. What’s amazing about Justin is over the span of 21 months. And this was before his 37th birthday. His investments have drove enough passive income for him and his wife, Jennifer, to actually leave their jobs, which is phenomenal. That’s I think what a lot of us inspire to do, and it’s one of the reasons you listen to a podcast like this. So with that, Justin, welcome to the show.
Oh, thanks, Marco. It’s great to be here. I appreciate you having me on and I’m just looking forward to hanging out for some time today.
Yeah, well actually, you know, as I kind of dug deeper into your book and started reading it, I was like taken back because it seems that you and I have gone through down a similar path then had a similar experience and had a, you know, kind of an interesting journey along the way of being an entrepreneur and investor being involved in different things like real estate stocks, cryptocurrency, and all kinds of other things. It’s like, wow, this guy is like my long lost brother. So I was looking forward to getting you on the show here, because I think there’s a lot we could talk about. Obviously we won’t have enough time today to go through it all, but let’s start off with you because I don’t think many people know who you are and really what you’ve been through, but it’s pretty eye-opening and amazing. So why don’t you tell us a little bit more about you and your journey so we can kind of provide some context for what we’re going to talk about?
Sure. Yeah. You know, I love that we speak a similar message and that our backgrounds are similar. And I just remember, being in a place where I knew that the hard work I was putting in and the crazy hours on the startup side, anytime you’re looking to build a business or, you know, try to help scale something from the ground up, it just takes hard work and time. And I was okay inside of a season for doing that. But I knew even in that season that I didn’t want that long-term. And I knew, you know, whenever I had a family that wasn’t going to be the path for me, that I needed to make some choices today that would impact, you know, what family life would look like, or at least the way I would like it to look. And so I made a commitment to myself that I would work hard and I’d put in the time and I’d learned what I need to learn because I can’t be a stranger to work ethic.
But at the same time, I wanted to put myself around other smart individuals that had figured things out that, you know, had some hacks and some ways to simplify the game. And if I could just take what they’re doing and copy it, I knew that I could figure out how to be successful and get myself to a place where ultimately my income wasn’t based on time, but it was based on assets. And that was the big thing is I just wanted to buy my time back so I could control it. I could spend it where I wanted to with the people that I wanted to spend it with. I could focus on my health and have the time to make sure that category is right. I could have the time to be able to take new courses or read books or, you know, just educate myself in whatever way, builds me up the most. And then also give me, ,, the time to be able to show up with, you know, I guess the purpose that I have in life and using the passions and the skills that I’ve been blessed with,
What was the catalyst that put you on that road? Everybody has this turning point in their life, almost like a pivot that puts them down a new road, a new path life that changes everything.
Well, when I was in my twenties, I think it was really easy to work hard. I feel like my badge of honor, what to me was like, the thing that you did was you put in a lot of hours and that’s how you knew you were successful is that you could outwork the next person. And I really thought that was the smart way of doing it. And that was like the, I guess part of my ego is that I could work this hard and I could put in 18 hour days, which I did consistently as I built a couple of different companies. And that really was kind of shortsighted. I realized later that you can accomplish a lot in less time, but it was working those hours where I realized, Hey, it would be better. And by the way, I read books that also, you know, were influencing me because early on my, in my career, I didn’t have a lot of people around me that lived the life that I wanted to live.
So I found those mentors and those role models through books. And so I would read books like, Rich Dad, Poor Dad, or a Cashflow Quadrant, you know, many other authors, but those two were two big books for me, four hour work week. You know, some of these are, you know, time hacks and some of these are just information or technology hacks. And it was amazing the way that my mind started working, it started looking at things differently. It wasn’t as linear. It wasn’t like, Hey, you just show up and you work hard and good things happen. It was actually, if you work smart and just apply yourself in these key areas, which really impact the business the most, then you can have other people do these other things and they don’t even have to do them that well. And so I feel like my eyes were opened and I just knew that at some point I wanted to say, Hey, I’m done. I’m just working because I want to work. Not because I have to work.
Right. Yeah. It’s a choice at that point. You know, the title of your book is almost perfect. I mean the lifestyle investor I learned a long time ago, it was actually 1997. When I first was introduced to this concept of building your business or your career, whatever it may be around your lifestyle, where you want to live, what you want to do, who you want to be around, the things you want to do, the amount of hours you want to work, basically build a business. It was really a conversation about business, not so much career, but build that business around your lifestyle. So that way you could do what you want to do. My quote-unquote cousin built a business in the country club industry because he loves golf. He wants to be golfing. He wants to be outside. So he built a business that was wrapped around that industry and allowed him the freedom to do what he wanted to do, you know, with golf and traveling and being a country clubs and all that kind of stuff. So, you know, kudos to him, but really that’s when I learned about it. So, you know, but with your book, maybe start off, by just telling us like, who’s it really for, and who’s it not for, but define what lifestyle investing is as you define it.
Yeah. So lifestyle investing really just investing in a way where you own your time and you can spend it how you want to spend it. So you’re not relying on a job. You’re not relying on an employer, a boss, you’re not relying on anyone. You have assets that produce income and you can live life intentionally by design, not a life by default on autopilot two in the same thing every day, waking up to an alarm clock to them, go to work. And I just didn’t want that. And so I wanted to create this life that I just felt so excited to be part of. You know, I feel like people have a lot of clarity around all the things that they don’t want. You know, sometimes I ask people, well, what do you want in life? And they’ll say, well, I can tell you what I don’t want is this, you know, I don’t want to be, you know, tied to a job or whatever it is.
So people have so much clarity around what they don’t want, but I find few people have clarity around what they do want. And most people are going to move in the direction of wherever their focus is, which is on what they don’t want. So ironically, they’re going to stay in the same patterns that they’re kind of doing. And so being a lifestyle investor is about kind of owning that and creating a life by design and being intentional to kind of carve out what that looks like and then pursue it. So that to me is kind of a life worth living and one that you can inspire others to live the same way.
Is it dangerous to assume that anybody and everybody can achieve, I mean, that level, that lifestyle through investing, or is it kind of eutopia of some kind?
Well, I think that the reality is anyone can do this, but some people are going to take action and some people are not. And so I don’t know who that’s going to be. I don’t want to be the judge and jury. I really believe that anyone who picks us up could do it because the background that I came from, which is, you know, very working class, very, middle-class probably a little below middle-class for at least a good portion of the beginning of my life. Like I didn’t have any real resources and I didn’t really have a blueprint, but I kind of copied people that had the things that I wanted and I was able to figure it out. And I just really believe that because I was able to do it that other people can as well. But this isn’t one that’s going to just kind of fall into someone’s lap. You know, most of the time it could happen, but it’s probably not. It’s going to be one where someone’s intentional and they’re taking action and they’re moving forward. You know, something I say in my podcast at the end of every episode is to take some form of action today to move towards a life of financial freedom and a life by design on your terms. And so I think those action takers are the ones that really get the biggest bang for their buck. But I believe the content is valuable and applicable to literally everyone.
Yeah. You know, I’ve said it time and time and time again. And I get asked this often when I get interviewed too, I mean, you could become the most knowledgeable educated person out there. I don’t call that person an investor, although they have the capability and the knowledge to be that person, but you could become the most knowledgeable, educated person out there, but without taking action, the rubber never hits the road. You don’t get any further ahead than where you are today. And so the concept is applied. Knowledge is really what produces the results that you’re looking for knowledge by itself will get you nothing. Right.
Well, and I’d even take it a step further or an extra, you know, think about it from this standpoint, for those people that have maybe a harder time taking action, because they’re unsure. They want to make sure that they understand everything before they move forward. I’ve got a lot of friends in that boat, but I actually think a lot of the discovery happens when you just move forward. Even if you don’t know what you’re doing, even if you don’t have all the information and you might fall flat on your face that first time, but you’re going to learn lessons that are gonna allow you to be better the next time. So I actually think to just move forward, ,, it’s the whole thing of like ready fire aim. You can aim later, but let’s start getting some reps in because you’re going to learn what you need to learn by doing that.
I agree. I totally agree. You know, I do recommend your book and I don’t recommend most books because a lot of them are just kind of filler and fluff and you know, they have a few good nuggets in it that, I mean, they could be boiled down into like 10 pages. Yours actually has a lot of great content, a lot of good quotes and a lot of useful information. The bulk of your book is made up of these 10 commandments, what you call the 10 commandments of cashflow investing for passive income and financial freedom, which is great. We can’t cover all today, but let’s maybe touch on four or so. The very first one that you laid out is lifestyle first. And we’ve already started talking about this, but why are you saying lifestyle first? Is it kind of similar to what I was saying before about designing what you do around the lifestyle or the life that you want to have?
Yeah, most certainly, you know, when you think about it and I, and real quick, the 10 commandments are kind of like my 10 criteria for why I invest, because I really think it’s important to have some sort of framework. So instead of making emotional decisions, you can actually make, you know, decisions that are based on a yes or no based on some sort of framework. That’s more logical and unemotional. And when I think of lifestyle investing, I just think it’s imperative that people get clear on what it is that it costs them to live. Most people have a job or a business and they have income and then they build their life around it. But what I have spent a lot of time doing and what I coach people to do is to figure out what it costs them to live the current life they have.
And actually even before that, what does it cost them to live at a bare minimum? Like what is just your mortgage or your rent plus, you know, car payment, utilities just bare minimums, food, living expenses, right? Just the basics. And then what is it on a monthly basis? What is your current lifestyle, a monthly basis? And then what is the lifestyle that you’d like to live and how much is that on a monthly basis? And instead of waiting for this perfect job, that’s going to show up to allow you to live that perfect life. You can actually just kind of chunk away at buying different assets or investing capital in a way that you get cashflow that inches towards that monthly number, those monthly lifestyle expenses. So that’s what the first one’s all about is like getting clear on what it is that you want out of life. What do you want your life to look like? What does that life cost you? And even before you get there, how can you at least cover the bare minimum expenses so that you don’t have to work? You get to work because you’ll make a lot better decisions in life I have found, and my clients have found by not making decisions solely based on money, not doing a job just to make ends meet, not just covering whatever the bills are and staying in a place that you don’t want to stay.
Yeah. I think you chopped it into three categories. Did you not like you’ve got your fundamental living expenses and then you’ve got the ability. Maybe you could break down those three categories. I don’t remember exactly what they are.
Yeah. So your bare minimum kind of survival. What does it cost you to survive? I mean, we’re talking ramen noodles, maybe a little bit extra, just see, you know, in a worst case scenario that you don’t have to show up to a job that you don’t want to be at or to a business that you know is suffocating you. So it’s a choice. Yeah. That is just a huge weight off your shoulders. And then it’s lifestyle. What does it cost you to live your current lifestyle? Current vacations, current investments, current everything, ,, eating out meals, entertainment, the whole nine yards. And then what is it for the life that you really want to live? Like what is there just a certain car that you would love to drive? Is there a certain vacation that you’d love to take? Is there, you know, what does that look like? And then break down what it costs because you don’t have to buy these things outright. You can lease them, you can have them for a day. You can. I mean, there’s just so many different ways that you can do it.
You know, one thing I noticed that was pepper throughout your book and this plays heavily into that first commandment is the importance of mindset. Just understanding that there’s a strong connection between your personal development and the way you think with everything else. And I mean, we’ve heard this time and time again from people like Napoleon Hill, among many other people. I mean, what would you say to somebody about their mindset and how to improve it or build it? And so they can be clear and focused on this path towards financial freedom.
Well, your mindset is everything. And your mindset is ultimately going to direct your activities, your behaviors, your routines. And so to me, I just think it all starts there. And that really begins with feeding yourself. What’s the education that you need to be consuming. And that goes to, I mean, if you skip all the way to commandment, number 10, this one’s all about, you know, that every, basically every dollar gets a return and it’s this whole idea of like time spent getting a return and who’s your peer group and who are your mentors and who are you spending time with because that’s who you’re going to become like. And so I think it’s imperative that you’re surrounding yourself with people that are going to bring you up, not pull you down that are going to get you to think about life and business and finances in a different way than you currently do, or they’re going to drag you up. And most people are hanging out with people that generally drag them down or, you know, stay complacent.
Very true. Interestingly enough, I actually put a checkmark beside (inaudible) and number 10 because I was intrigued by it. We’ll leave that one for last. Let’s go to your second commandment. We’re not going to cover all of them today, but I need you to explain, reduce the risk. I have to be honest, it’s the chapter I didn’t read, but I know it has to do with examining deal structures and minimizing risk, and maximizing returns. And what’s funny about that is that’s actually a sentence on our website, not saying that you copied her or anything like that, but you know, one of the value adds that we provide to our clients is to maximize their returns while minimizing risk. And that has a lot to do with picking the right markets in the right neighborhoods, looking at the fundamentals as well as whatever else is going on there. And I know that’s not exactly what you’re talking about, but it’s important to reduce the risk while maximizing return. So I’m going to let you talk about that however you want.
Sure. Yeah. So reducing the risk is imperative and by the way, you nailed it in real estate. There are a lot of different ways you can do it. You know, I like to look at this as kind of like a, top-down all encompassing, you know, depending on where you’re investing, you’re going to probably reduce the risk differently. And so sometimes I guess the whole framework of where this comes from is if you lose money, it takes so much work. And so much time to get that money back. If you lose half your money, it takes twice as much to get it back, but you still have forever lost the opportunity cost of what that could have earned you. So when I look at this second commandment of not, you know, like I don’t want to lose money, I want to really protect or hedge against risk.
So how do we get as little risk as humanly possible, but as bet, you know, as best reward or return as we can. So some ways that you can do it, you mentioned it in real estate and real estate, you use collateral, you know, how do you get in a first position, a first lien position or a senior debt position. So if something goes wrong, you’re paid back first and how can you collateralize so that whatever it is that you’re investing in or loaning to that the collateral is two or three or five times the value of the investment dollars. So that way, if a deal goes bad, you actually do better than if it just went according to the terms which were already and why you sign the contract. So to me, it’s not that I ever want a deal to go bad. I don’t want a deal to default, but if the pressure is there, that the deal is going to be that much better than, you know, it kind of, it decreases bad actors and kind of helps people be on the same page.
So, you know, another way is through something called a put option. So a lot of the time I will do investments where I negotiate in a put option, plus a certain percentage. I’ve got a deal that I did to put option plus 20%. So let’s say that at any point in time, I didn’t like the deal. The deal terms changed. It’s taking too long. Maybe the company that’s managing it, isn’t doing a good job. For whatever reason I can get my money back at any time. And if you add that provision of interest rate, you can get 20% during that holding period while they did have your money. So that’s an easy way to have the upside, but you’re capping the downside. You’re at least going to get your money back. Maybe you don’t get a return on that money. Maybe you get a put option with, you know, no percentage interest on it, but at least you can get it back. So there are a lot of other ways that you can do it, but those are just a handful of ways where you can reduce the risk. So that way you’re not losing money. And then you can focus on increasing the return.
So I agree with you with, you know, with options, put in call options where you can control your risk. That’s one thing you can control because investing directly in stocks, you can’t control anything about that. You know, it does what it does. Maybe if you apply some technical analysis, you have a little bit of a visual or vision into where the market is headed. But, ,, the reason I don’t like stocks on the publicly traded stock exchanges. There’s very little if any control at all, but that’s also the reason why I love real estate. There’s a tremendous amount of control is one of my favorite investments. In fact, you know, it ranks at the top, I guess I’d like to know is real estate your favorite investment or investment class asset class, or is there something else that you, rank up there in your top two?
Well, that’s a great question because I got my start in real estate. So I have a special love for real estate. I got started in mobile home parks and I love mobile home parks. In fact, I just closed on another one yesterday. And you know, I just think that there is this incredible opportunity in real estate, because if something goes wrong that doesn’t go to zero. You know, if a stock, if something happens with a stock and by the way, nothing may have even happened to the company. It might’ve just been like, Hey, we had to recall treadmills like Peloton did. And then, you know, the stock drops like, well, they’re going to get them back out. I mean, to me, it’s just kind of crazy the fluctuations that happen in the market where you can take a dollar amount and it could go to zero, but in real estate, it’s not going to zero.
So to a certain degree, I mean, you’ve got some risk reduction right there, but there are other asset classes that I like. And by the way, I’ve invested in virtually every form of real estate that exists, unless it’s super obscure, I’ve invested at some point in time in it. Most of my holdings have been in mobile home parks, but I’ve definitely done storage and warehouses and distribution centers and multifamily, apartment complexes, single-family homes, you name it. And so I like it all. I think there are pros and cons to everything, but I also think that there’s something great in the world of operating companies. If you can truly be a passive investor and you can structure terms that get your investment back quickly, you know, we’ve got a company called Casey Dogs. It’s a dog training company out of Kansas City. And, ,, and in fact, Patrick Mahomes trained his dog at our dog training facility.
And we bought this. I had a couple of partners that are the operators of this business, and we bought it because there was a trend we could see that people were buying more pets during COVID. And so it just seemed like a really smart play. And so we bought this company I structured and accelerated, ,, distribution, which is another way to de-risk a deal. So I put in the capital to buy it the down payment, but I had an 80-20 split of money coming back to me until that equity investment was paid off. And then we would go back to a standard distribution based on the way the operating agreement reads. And so I was able to get my money back out of that deal and about five or six months, and it’s all upside from here. So that’s another one where I don’t have to do anything.
My partners are hardworking, they’re brilliant. They’re doing a great job growing the business. And so that’s something that I like, and I also really liked debt deals. You know, there are ways that you can get equity in debt deals. A lot of people don’t realize this, but in debt, you’re in the first position to get repaid. If something goes wrong, you’re ahead of equity investors. And so I like that. So if you can then also negotiate an equity kicker, where you get all your money back when the term’s done and you get a good interest rate, but then you have equity, even when all your money’s out of the deal. That’s powerful.
Do you do that with equity in addition to the debt, or do you have the debt repaid and converted, or like a convertible note where the debt is repaid back as equity and part?
So I prefer to do just a straight equity kicker. I like getting all my money back out. Now if the company, so, you know, in a perfect world, I can negotiate where, you know, I’m able to convert if I want to convert and I’m not, you know, I don’t have to that. All the choices are on my side that, you know, if I want everything back at the balloon payment at the one year, two year mark, I can do that. Or if I want to convert it to equity or half or a quarter or whatever amount, I mean, that’s ideal. But what I want in addition to that is I want an equity kicker. I want money that is going in as equity that I don’t have to put in myself. So it is like free equity and it’s a brilliant thing. So that is my favorite.
Yeah. I did four of those last year. It was a debt deal, a note on a two to three-year term, but then I had an equity kicker. Sometimes it’s a warrant, you know, you have a warrant at a pre-money valuation, which is also not as good, but it’s comparable. And that way, at least you have an equity position going in. So that’s a smart way to do it, you know, by all means. So just wrapping up that commandment, what would you say are the most risky investments or asset classes? Well, do you avoid, some of them are involved?
I do. I mean, it depends on what your area of expertise is. I think, you know, land in general, you can do really well in land, but generally you’re not getting rental income most of the time. And so sometimes to float that mortgage payment, it can be tricky and sometimes people bite off more than they can chew. So I’ve seen people do really well in it, and I’ve seen people really struggle with it. I think that you’ve gotta be careful in a lot of asset classes that can be rebuilt, like with something better. So like apartment complexes, I like them if you get them at the right price. But the thing I don’t like about them is that someone can build a nicer, bigger, more luxurious, more amenities option right across the street from you. And so like, you know, there’s no scarcity there. I like assets that have some scarcity. That’s part of the reason I like mobile home parks is because they’re only 44,000 of them in the U S and about a hundred of them get redeveloped per year. So that to me is powerful. I think hotels are really tricky right now. I think hotel conversions to multifamily could be really big. And I know some people doing well on that, but I think straight hotel, this could be a rough time in that industry. I think you got to even be careful with distressed assets too.
I have to ask this question just because it’s just in the news every day and it’s just a hot topic, but cryptocurrency crypto, anything. Yeah. So how do you feel?I
So I’m a fan the way that I look at it, well, actually I should say this I’m a fan of cryptocurrency that has utility, and I’m not a fan of anything that the market’s just going to pump for the sake of pumping that people are distorting. The value like happens in the stock market, happens in the crypto markets as well. And I am a big fan of something that has utility like Bitcoin, where you have scarcity, you have a finite number, no more Bitcoin are ever going to be made. So it is to me, I don’t look at it as, Hey, what return can I get on this money? I look at it as, Hey, the dollar is being devalued every day. We’re printing trillions of dollars. Right now there’s $11 trillion that has been proposed to be printed this year alone on top of a deficit last year in the trillions of dollars.
So there’s no doubt that our dollar is becoming weaker and I want to hedge against the de-valuing dollar. So that makes sense to me. I think a Ethereum is also very strong. I think there are some altcoins that are probably going to do well and new ones that don’t even exist now that will get created. But I think that most of them probably won’t do well and won’t make it in the longterm. And you know, if you’re playing that market, you should take your gains when you can, or, you know, take out at least what you put in so that you’re not losing. And then leave a little bit in for the upside as many we’ll call like a moon bag or a moonshot.
So I, I had 10 cryptocurrencies back in 2016 and then the January, 2017, everything went to hell in a hand basket of those 10, nine are gone. One survived to this day and it was Ave. So, um, yeah, extremely volatile. But I do agree with you that you need to have utility Bitcoin and Ethereum, two very different things. Both are the 900 pound gorillas in the space at this point in time. So you have no control over it. But I think the upside potential far outweighs the implied risk that’s there. So I think that’s good.
Another thing about it is this doesn’t have to be like all in. I mean, I talk to people all the time and it’s like, well, what percentage of your net worth do you have in cash? Cause you probably should have some in cash in a safe. And what percentage do you have in gold or silver? Cause you probably should have some in precious metals. Again, it’s just a hedge against a de-valuing dollar. And so, you know, Bitcoin is the same. Like, you know what, if you have half a percent or a 1% or 2% of your portfolio in it, you know, even a lot of these big companies now are having, you know, anywhere from one to 3% on their balance sheet in crypto, a lot of private companies are doing it here. Michael Saylor of MicroStrategy. You know, he’s all in Elon Musk is in. And by the way, there are at least a hundred private companies that have not said that they are holding Bitcoin on their balance sheet that are based on some inside info.
Yeah. Actually I would take that one step further. I would say that it’s a hundred to one for every known company that is putting treasury into a crypto asset. Like Bitcoin. There’s probably a hundred others that are not saying anything, but they are converting cash into some other asset like gold, silver crypto. That is not deflationary. So I love it. I love it. Okay. Moving forward, let’s skip down to commandment number five because this resonates very well with me being real estate, create cashflow immediately. That’s what I like about income producing rental property is you can have a tenant there from day one and you’re cash flowing immediately and you know, all is good. So talk about commandment. Number five. Why is creating cashflow immediately important? And where do you put the emphasis there?
Oh this one is powerful, because most people don’t realize that you can buy real estate where you’re making money day one. And a lot of people like I have friends that are like, well, yeah, but that’s rare, right? It’s hard to find something that does that. And the answer is no, actually I wouldn’t buy anything that doesn’t do it. There are some people that have an appetite to buy things that don’t cash flow. I don’t have that appetite. So anything, I buy it, cash flows and it cash as well. And I see the potential of it, cash flowing even better. And so I hope that your listeners, and probably since you have so much expertise in the real estate space, your listeners know this, but there are so many deals that cashflow right out of the gates that you can buy, the cashflow covers the mortgage or the debt service.
However you buy it and you have profit. Or even if you break even and have no profit, you have someone else paying the mortgage on a piece of real estate that you are gaining more equity in every single month. It’s brilliant. So that was the framework of how I built everything. And because I built up this strong cashflow, it got me to a point where I was able to diversify out of real estate and diverse, find other assets, asset classes, areas of interest because I had to place those funds. And so I’m very thankful for the cashflow approach. And even today, it’s still the number one thing that I look for.
Yeah. We love cashflow. I mean, people say cashflow is King. Even if it’s not King we’ll, we’ll call it queen. But the beautiful thing about real estate is, and I say this often on the podcast is cashflow is the glue that holds your deal together. So let’s just hypothetically say you have zero cash flow, which can be argued is still cashflow, but you have no cashflow. You’re still gaining from the tax benefits, the equity growth on the amortization of the loan, as well as the appreciation that happens over time. Not necessarily consistently every year, but you do gain that appreciation. So you still have returns, but cashflow is beautiful, but you got to think long-term not short-term because let’s say you have zero cashflow today, maybe zero cashflow next year. But then you find yourself in a position with your income properties three years from now, where now you do have positive cashflow because you’ve increased the rent or you’ve made some adjustments to your expenses or whatever it may be. Well now you’ve got cashflow, but then thing longer term, what happens when you start to pay down that mortgage or refinance and you’ve created a source of cashflow and then even further down the road. Now you have no mortgage. Let’s just say, hypothetically, that’s your strategy. Now you have great cashflow. It could be a thousand, $2,000 a month from that one door. Well, now if you have two doors, five doors, 10 doors, Hey, that’s a pretty good passive income to support a lifestyle financially free lifestyle.
Yeah. And you can use this as collateral for other loans to buy other properties at a certain point in time, you fully paid the mortgage off and you own it free and clear. Or in my opinion, the better strategy is to always have debt on it because you don’t pay taxes on that debt. So you pull money out, you can live on that money. You can buy more cash flowing assets would that debt, but you don’t know taxes on that money. And it’s just interest rates the way that we’re seeing them today at an all time lows or close to all time lows, it’s the cheapest money we’re ever going to see. So I want as much of that as I can, that is safe. You know, I, I don’t wanna, I’m not trying to overdo it. I’m not trying to over leverage, but in a home, I mean the goal is to have as little equity as possible in my opinion, and use that cash wisely for other investments. And the other thing is on the side of like, you know, a foreclosure, if you only have 10% equity in a home and someone else has 80% equity in a home and you both default at the same time, you better believe the bank is going after the 80% equity home. I mean, that’s a business. They are in business to make money. The less equity you have, the less likely people actually come after you.
Yeah. One thing you said actually is a really good nugget and people don’t realize that. I think it kind of goes past people very quickly. It’s an argument to actually be in debt forever, like to perpetually be levered because borrowing against your assets means you still keep the asset, but you can take money out of them to reinvest and build more, invest more and build a larger portfolio while not being taxed on it either because you can’t tax debt. And so it’s a great way to accelerate the growth of your investments in your portfolio size, which is a great segue to, you know, your ninth commandment use leverage to your advantage. So maybe throw a couple of comments out about that.
And so I love using leverage where it makes sense and my favorite type of leverage is, and by the way, I should also say in my book, I have a section on how you can live just on debt, based on the fact that real estate is probably going to appreciate, I don’t know, 10% per year or something like that and how you can continue to pull money out and live on that money indefinitely. So it’s kind of a cool section, but you know, I like leverage when leverage is working for me. I don’t like to buy things in cash. I don’t think that you need to, I’d rather repurpose that and earn some sort of cashflow on those dollars and get my money working, you know, more like the banks do with a fractional reserve lending standpoint, right? Like how do we do more of that, you know, own something for as little down as humanly possible and take the rest of that capital and do the same thing with something else.
So seller finance is my absolute favorite. And in real estate, this is a place where it is very common to find seller finance deals, meaning that the seller is willing to carry the note that they will act as the bank. And that is therefore a non-recourse loan. So if anything happens, you default, their only recourse is to take the asset back. They can’t come after you and other assets that you have, and you can negotiate whatever terms you want. You know, my very first seller finance deal was 15% down, 5% interest, which sounds high today, but it was a 10 year term with an option to extend for another 10 years. I mean, these are just unheard of terms that I’m happy to pay that interest rate because the work. And so I think that there’s a time and a place also to, you know, go with agency debt, which is your Fannie Mae Freddie Mac, and have a 30 year note with a fixed interest rate over that timeframe. You know, that is just an incredible opportunity. So there are a lot of different ways to finance deals and, ,, I like using leverage to my advantage as best I can.
Agreed. Agreed. So in wrapping up, I found your 10th commandment kind of interesting. I mean, on the surface, it makes a lot of sense. Every dollar of investment gets a return. Well, you know, someone might say, well, I mean that isn’t that the definition of investing, but you kind of took it a little bit further where you start talking about the people you work with, your team of professionals and whatnot. So maybe just expand on the concept of every dollar of investment gets a return.
I’m spending money and notice I’m talking about spending it. This is an expense. This isn’t investing it. So I’m spending money on legal. All right. Well, I intend to get a return on my time and my dollars in legal. So in other words, you know, at one point in my life, I used to really skimp on like legal, like I wanted to do as little as I could and pay as little as possible. And man did, I think I was just winning. And really soon you find out that that’s not good and you need to have good legal in place. But when I interview people to work as one of my advisors or attorneys, or, you know, someone that’s on my board, if you will, I want them to know that I’m hiring them to teach me why they’re doing what they’re doing. I’m going to pay them to execute it as well.
But I want them to teach me the process. So that way, the next time I understand it and I don’t need to use their services as much, or I can use the same amount of time, but I can ask better quality questions and we can get more creative. But the goal is, and I do this with my CPA as well. I don’t want you to file a tax return. Anyone can file a tax return. I want you to teach me why you’re structuring my finances, the way that you are and why is this on the return where it is? I don’t want to go blindly into having people take care of stuff. When I can be a student, I can learn it. And a lot of this stuff I can end up doing on my own. And even if I don’t want to do it, I should at least be educated because the more educated I am, the better I can utilize their services.
Yeah. Very well said. Good stuff, Justin, there’s so much in your book, which is great. Again. I said it before I say it again, I recommend it. It’s a really good read. Is there anything else you’d like to share before we wrap up here? Because I’m going to end this with you, just telling people how they can find out more about you and where they can find your book and whatever else. So any final thoughts? Yeah
My final thought would be again, take some form of action today. And to me, the best form of action is find some people that they kind of believe what you believe that they want to embark on this path of financial and partner with them, create a brain trust and talk and read books and share ideas. Find a mentor, someone that will take you under their wing. And if you’re going to pay someone to do it, pay someone, that’s actually gotten the results. Like they’ve done it themselves. They’re not just coaching you in theory, like a professor at a college that is book trained on how to run a business, but you’re getting the adjunct professor. That’s running a business, that’s teaching you how to do it. So that’s, my advice is move towards where you want to go partner with the people that are going to help you get there and get out of your comfort zone a bit, because it is going to involve things that you haven’t done before. And there’s fun and joy in that and embrace it.
Yeah, that’s beautiful. So basically what you’re saying is that there’s really no excuse to not to learn something and move forward and accomplish something most certainly. Yeah. Awesome. Okay. Tell our listeners how they can find you and where they can get more information. Where can they find your book, et cetera?
Sure. Well, what I’m going to do for all your listeners is the book is so you can go on Amazon if you want to get the book, but for anyone who wants to go to get it online, you can go to my website, lifestyleinvestorbook.com. And all you gotta do is pay for the shipping. The book is free and there are a few other cool things offered in that. And then I also want everyone to know that all the proceeds from the lifestyle investor book, they all go to charities that in this case, right now, it’s all going into Love Justice International, which is a charity that stops human trafficking. They’re in 17 countries around the world. And so my goal is to make an impact with the content from an education standpoint, but also financially in supporting organizations that I just think do incredible work in the world.
So no matter where you buy it, Amazon or lifestyleinvestorbook.com, you can know that those proceeds are going to a good cause. And then for anyone that wants to see any of my other programs and products, you can go to justindonald.com and I’ve got an online course, a masterclass mastermind and private coaching that right now is at full capacity, but there’s a waitlist. And then I have a podcast. I have the Lifestyle Investor Podcast and I interview some really cool people. And what we’re talking about here today, I would, I mean, there’s so many different layers and levels and, you know, Marco, you and I, we could talk for hours more on this stuff. And this is part of why I love having a podcast is I get to bring in really cool people that are incredibly smart. And we just got to have fun and talk about investing and cool life hacks. And, you know, it’s just a blast. So, ,, I appreciate you having me on the show.
Absolutely. Hang tight here. Cause, there’s someone I might want to introduce you to that is also working to reduce human and child trafficking. So, there might be a good connection for you there. Awesome. So anyway, Justin, thank you so much. Great content. I appreciate you taking the time I look forward to having you back on in the future and, with that, thanks for your time.
Well, that was a great interview with Justin. I honestly felt a little bit rushed going through it because there was so much more I wanted to talk to him about and ask him about. And I told them at the very beginning that I’ll try and keep this down to about 30 minutes or so. And I think we went for about 45, maybe 50, and I was starting to feel bad, but in either case, there was some good content there and I’m sure there’s a lot more coming, feel free to get his book. I really think it’s a great book.
That’s it for today. If you’re looking to invest in real estate, remember we offer a free strategy session with my team of investment counselors. So don’t hesitate to look into that. Also, if you have any questions about real estate investing, I’m starting to do the Ask Marco episodes again here. So feel free to just submit those on the passiverealestateinvesting.com website, if you haven’t done. So remember to subscribe, love to grow our audience, and that way you get notified of new episodes as they come out. And that is it for today. Thank you for being here and we will see you all on our next episode.
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