The Secret to Building Wealth: Stop Spending, Start Investing!

Learn how to shift your mindset from spending to investing, using real estate to build wealth and fund your lifestyle—without sacrificing financial freedom.

(0:09) All right. (0:10) What is up and welcome back to how to invest in commercial real estate. (0:13) Some say it's the best podcast in Gainesville, Columbia.(0:16) Actually I say that. (0:17) You are the only one that says that. (0:19) Well, if you say it enough, it's true, right? (0:21) But we do have, I feel like we have an interesting topic today, uh, but before, but first we'll (0:26) let Brayden give a couple of updates and you came up with the topics.(0:30) It is. (0:31) It is. (0:32) Guys.(0:33) I come up with all the topics. (0:34) Oh God. (0:35) What? (0:36) Who came up with last week? (0:37) Okay.(0:38) Most. (0:38) Before last. (0:39) Most.(0:39) Most. (0:40) Okay. (0:40) Just go saying all.(0:41) All right. (0:41) I exaggerated. (0:43) Okay.(0:43) 80%. (0:43) Let's go. (0:44) So, um, yeah, we, we had a deal we were supposed to close on last week.(0:48) Interesting, interesting perspective. (0:50) Um, not perspective, but interesting situation we were put in because, um, we did not close (0:56) on that deal. (0:57) Had a, a lender that continued to fail to meet a timeline.(1:02) Every deadline they gave us. (1:03) For months. (1:04) That's never happened in all of my investing career.(1:07) Have I not been able to buy the deal because the lender, uh, kept, uh, failing to meet (1:12) the close deadline and to the point where the seller was frustrated and so the seller (1:16) just decided to keep the property. (1:18) And so that's why we wired everybody's money back. (1:20) Didn't lose anybody's money, but, but we did have to send it all back.(1:23) And kind of just an interesting situation to remind us that, you know, as you approach (1:30) deadlines, you need to be weary, right? (1:32) Because, um, you, you never know, you know, you never know until you, unless you have (1:39) a contractual timeline. (1:41) And you've got to, yeah, you've got to nail, uh, everybody down in writing and, and get, (1:45) get commitment. (1:47) And, um, what would have helped us in this situation is even after we passed due diligence, (1:52) we should have left in there, uh, some type of a, a financing contingency.(1:56) Maybe not, uh, getting the loan because we had already been approved. (2:00) But if the, the lender delays for no fault of our own, uh, the closing gets extended, (2:07) uh, maybe not indefinitely, but for a 30 day period or something. (2:10) And we didn't have that.(2:12) So it was a good lesson learned for us. (2:14) Uh, (2:17) You don't even have a mic, Brian, what are you doing? (2:20) The other thing is, uh, sometimes investors ask us, well, what do you guys do? (2:24) Well, this is, this is some of the risks that we take on. (2:27) We're out the money.(2:28) The investors aren't out there in this money. (2:29) The three of us and Andy are out the money. (2:32) Yeah, that sucks too.(2:33) For sure. (2:33) We didn't lose anybody's money. (2:35) It was just like, Hey, wire us money.(2:36) We're buying this deal. (2:38) And then we didn't wire, you know, we didn't buy the deal. (2:41) So we wired everyone their money back.(2:42) So, um, exciting news is, is we immediately sent all of those people are upcoming deals. (2:47) We've got a deal that's launching out next week in Cincinnati. (2:50) We're super excited about it.(2:51) Um, we've got another deal about to go in a contract that's, that's closing the month (2:55) after, um, maybe even a little closer. (2:57) And then another one that's kind of been in the hopper for a while. (2:59) It's just, you know, it gets deals get stuck up in due diligence, right? (3:03) Like these deals take time.(3:04) They're not always clean and perfect. (3:06) So, um, no worries, we're, we're onto the next. (3:09) And most of those investors have reached out and express interest in that Cincinnati deal.(3:13) It's, it's a, it's a similar deal profile, um, both multi-senate retail shopping centers. (3:19) So we're, we're generally looking at the same stuff, which is nice. (3:23) All right.(3:24) All right. (3:24) So today's topic, um, interesting, uh, idea that it's a conceptual idea about money that (3:31) we want to try to help you guys, uh, kind of change your thinking. (3:34) And you know, if you want to be successful, if you want to be wealthy, uh, what we want (3:39) to tell you is you have to have the idea that money is not made to be spent.(3:43) Uh, so many people, they grow up and all they see in their family and friends, uh, colleagues, (3:50) whatever it is, you go to work, you get a salary, and then you take that money and you (3:53) spend it on shit you want to buy. (3:56) And that really is the whole thought process for most people. (4:00) Um, of course they want to make more money, but they don't associate making more money (4:04) with not spending the money they have and getting it invested.(4:07) Now it's buying more shit. (4:08) It's just, yeah, it's just, I got this money and now what do I buy with it? (4:11) You see it all the time. (4:12) It's like, you know, I got to get a newer car now because I have excess money.(4:15) I want a vacation. (4:16) I got to get more insurance. (4:18) They might put a hundred dollars, a paycheck or something and a 401k or something.(4:22) And that doesn't change. (4:23) But everything, yeah, that doesn't change, but everything else. (4:25) All right, let's spend that.(4:27) And so we want to contrast those two ideas of spending the money on, let's say a luxury (4:31) item versus investing that money and let it go to work for you. (4:36) Because that's how you should see every dollar you're spending. (4:39) You shouldn't see it in today's values for today's usefulness.(4:41) You should be looking at that dollar and saying, what can this dollar do for me? (4:45) How can this dollar create more of itself and how can it grow over the future? (4:49) And what is this dollar going to be worth 10 years from now, 20 years from now, even (4:52) 40 years from now? (4:53) And then the value of that dollar is so great that you're not going to want to go spend (4:57) it on, you know, liabilities, vacations. (5:02) I mean, you want to do those things, but you're going to want to make sure you're investing (5:05) first. (5:07) And so let me kind of conceptualize this topic by saying this.(5:10) Let's say you have $120,000 and you want to go buy a $100,000 luxury car with cash, safe. (5:18) And, you know, that's fine if you want to do that, it's better than borrowing. (5:22) But what if you invested that $100,000 not in the car, but in a commercial piece of real (5:29) estate, maybe even a residential piece of real estate? (5:31) What are those going to look like? (5:33) So anybody else want to kind of help walk us through it? (5:36) Yeah, I think it's important.(5:39) So the idea, right, is we're trying to buy an asset that produces passive cash flow that (5:45) pays for these depreciable things like cars. (5:47) A car is a great example. (5:48) It could be a boat.(5:49) It could be your vacation house. (5:50) It could be your vacation fund, whatever it is. (5:52) The idea is that we're creating passive cash flow, could be just quit our job, right? (5:56) Doesn't have to be for a car.(5:57) We're using car as an example because let's just say, you know, a nice car is $1,000 a (6:02) month payment, give or take, big round number. (6:04) And $100,000 is super easy to go and get anywhere from 12 to 18% cash on cash, depending on (6:11) the size, location, asset class, you know, how many partners, everything like that, (6:16) cash on cash return. (6:16) So it would be very easy to, let's say, take $100,000 and go buy a building, whether that's (6:23) a $400,000 building, a $500,000 building, maybe a little bit less if you're leveraging (6:28) less, if you're getting a smaller loan, and that's helping you create the passive cash (6:34) flow, right? (6:34) Yeah.(6:35) So let's take our example. (6:36) We're going to take a $500,000 real estate building. (6:39) And we're going to say for the sake of this example is that produces 15% cash on cash (6:44) return.(6:45) So that's what pays out to you every year by buying it, by owning it. (6:49) All right. (6:50) And so then we say, okay, what's $100,000, we had $120,000 to start, and we're going (6:54) to put $100,000, we're going to buy this $100,000 car and we're going to put $20,000 down and (6:59) we're going to borrow $80,000.(7:01) Right. (7:02) Okay. (7:02) And so what's that payment? (7:05) So a six year, for a six year loan, it's $1,283 a month.(7:09) And I think that worked out to be a little over $15,000 a year. (7:12) That's right. (7:13) And so in this example, we go instead of buying the car, a $100,000 car and having no payment, (7:19) we go buy the commercial building and we get a loan on the car and we have a $15,000 a (7:24) year payment.(7:25) But the real estate is going to produce $15,000 of cashflow that year. (7:30) So that's going to make the payments over that six year period for your car and it's (7:34) going to pay off that car for you. (7:36) And so in this scenario, you don't have to choose between a luxury car and investing (7:41) your money.(7:42) By investing your money, you get the car for free. (7:45) And that's what we're trying to get people to think about is how do you use your money, (7:50) invest it wisely and let it buy the things you really wanted. (7:54) But here's the thing.(7:55) After six years. (7:56) Yeah. (7:57) What else do you get? (7:57) So let's just go back to the example.(7:59) Let's just assume we bought the car, you know, go back to the safe example. (8:02) After five years, it's not like you're left with zero. (8:05) You can still sell the car.(8:07) The car's paid off. (8:08) Maybe that $100,000 car is worth half. (8:11) You know, it's what, 20% a year, give or take.(8:14) So scenario one, you're left with $50,000 at the end of six years. (8:19) And no car or a car and no money, however you want to look at it. (8:25) Okay.(8:25) So what about the example number two, where we go and we buy the asset? (8:29) Yeah. (8:29) Yeah. (8:29) So we bought a half a million dollar building.(8:31) We got a $400,000 loan. (8:32) We put $100,000 down. (8:33) We went through that after five years and just putting.(8:39) We did 3% appreciation a year. (8:42) That's a, that's a tiny number. (8:44) It's a tiny number.(8:46) We, we see a lot bigger than that. (8:49) All the time. (8:50) Well, the last two years have been way higher than 3%.(8:52) Yeah. (8:52) So I just want to emphasize that it could, the building could be worth significantly (8:59) more than I'm about to say, but let's just say after six years, it's only worth $578,000. (9:03) Right.(9:04) Could easily be a $700,000 building, but let's just forget about that. (9:08) $578,000. (9:09) We also, it's, it's paying off the excess cashflow, paying for our car, paying for whatever, (9:13) our vacation fund, whatever.(9:15) It's paying us an extra $1,200 a month. (9:17) Isn't that it? (9:17) Yeah. (9:18) $1,250 ish.(9:18) $1,250 a month. (9:19) After five years, we're paying down our mortgage every single month. (9:23) So our mortgage went from $400,000 to now we only owe $359,000 when we get the payoff (9:27) statement after six years.(9:29) Six years. (9:29) I keep doing that. (9:30) That's okay.(9:30) That's my notes. (9:31) Okay. (9:31) After six years, we only owe $359,000.(9:33) So it's appreciated up to $578,000. (9:35) We only owe $359,000. (9:37) We have a net, net dollar amount there of $219,000 plus the car is still paid off.(9:44) So you can keep that or we could sell that, get the same $50,000 and now we have $269,000 (9:49) and no car or- (9:51) Guys, so yeah, scenario one, you have $50,000 after you sell the car. (9:55) Scenario two, you have $269,000. (9:58) You 5Xed your net worth as far as this example goes just by buying the real estate first (10:04) and letting it buy the liability that you want.(10:07) Which is immediate. (10:09) Guys, it's immediate. (10:10) Like the first month, the first month after you buy the commercial deal, I swear to God, (10:15) like day one, day one, it's paying that first day's car payment.(10:21) The first day. (10:23) Like if you could break up the car payment and the mortgage and the daily cash flow, (10:26) it's monthly. (10:26) Okay.(10:27) But like the first month it's making enough money for you to go buy the car. (10:30) Like you don't have to be patient. (10:31) You don't.(10:32) Once you have the money, you don't have to be patient. (10:34) You just have to invest it. (10:35) Okay.(10:36) And so, but it gets even better. (10:38) Not only have we 5Xed our money from 50 to 269, but at the end of the six years, right, (10:44) we still have the cash flowing asset. (10:46) And after six years, the cash flow on the asset is going to be even higher.(10:50) How much is it? (10:53) 18,000, I think. (10:55) Yeah. (10:55) So if we didn't sell it, it would be popping out 18,000 a year, our car would be paid off.(11:00) Guess what you get to do? (11:01) You can go buy another $100,000 car because you have $18,000 in cash to make the payments. (11:08) And so in the next six years, you're going to pay off another car, right? (11:12) This building's going to go up another 100,000 and you're going to pay off more debt. (11:18) And so at the end of 12 years, you're probably like, I would guess over 500,000, 600,000 (11:26) in cash.(11:27) You also have an asset that you can borrow against, right? (11:29) Yeah. (11:30) And so you can buy a brand new car every six years for free. (11:35) The investment's going to buy you a brand new car every six years.(11:38) If you don't go pay your cash and buy the liability, you go and buy an asset and let (11:44) the asset buy your liability. (11:46) This is a life hack, guys, and I wish everybody would get it. (11:50) Start seeing money as how it can grow, not how you can spend it, and it'll change your (11:55) life.(11:56) Yeah. (11:57) And I think the biggest thing, how do we get the $100,000? (12:00) How do you start saving money? (12:02) I think everyone has these opportunities for a big, what I would call a big hit. (12:08) I think you used to call it a big shot in the arm or something.(12:11) It's that large sum of money, whether it's your annual tax return, refund, or you've (12:20) been living in your house for 10 years. (12:23) And so you've paid it down and your house has gone way up in value. (12:27) What do most people do? (12:28) They sell that house and they go buy a bigger house.(12:30) But if you didn't sell the house and buy a bigger house, you sold the house and got a (12:34) slightly cheaper house. (12:35) Or the same size house. (12:36) You could take that $100,000 of equity right then.(12:39) You bought your house for $300,000 and now it's worth four. (12:42) And then you just go find, I mean, you got to downsize a little bit, but you buy $300,000. (12:45) You just generated that $100,000 that you can go buy the asset with.(12:49) Now you're making $15,000, $16,000 a year in passive cash flow year after year while (12:55) it's going up in value. (12:56) But people just don't want to make those decisions. (12:58) Once again, going back to it, they see money as the means to get the stuff that they want (13:03) and support the lifestyle that they want others to see them living.(13:06) But if you can separate that and look at money for what it can do for you, how it can grow (13:10) your net worth, how it can buy your freedom back, then you're going to approach spending (13:14) a whole different way. (13:16) Yeah. (13:17) Buy assets.(13:19) I mean, it's just... (13:20) It's pretty much that simple. (13:21) It's literally that simple. (13:22) Buy things that go up in value and pay cash flow while you own it.(13:25) Yeah. (13:25) And we're sitting here doing a podcast on how to buy cars. (13:28) You know, it's almost inherently dumb, you know? (13:30) You have to drive a car.(13:31) So that's why we're doing it. (13:32) And people want to drive cool cars. (13:34) Since we have to drive a car anyway, you know, you might as well drive a cool one.(13:37) I get the concept, right? (13:39) But let's do this example when you're not buying a car. (13:41) You're taking that $1,500 a month and every year you're just buying a new house. (13:45) You're buying a new house.(13:45) You're putting $20,000 down on a new rental house, you know, that's making an extra couple (13:48) hundred dollars a month. (13:49) And then the next year you're buying another rental house. (13:51) Now you've got two.(13:51) Now you've got your commercial deal. (13:52) And then the next year... (13:53) It builds and builds. (13:55) You can see after five, seven years, you can amass a million dollars pretty easy.(13:59) Like we did this 219 and we were blowing money on a car. (14:02) With that $100,000 car, it cost us $120,000. (14:07) So there's easier ways to do it.(14:10) I think the hardest part is amassing that big lump sum of money. (14:14) And it's literally just hustling, you know, until you've got that first 50, 75, 100K through (14:20) saving up five, $7,000 chunks or whatever it is, like that's the necessary start is the (14:28) hustle and grind until you get that first 50, I think. (14:31) What's just last comment on this.(14:33) What's even worse guys is that people don't have the $100,000 for the car, but they still (14:37) want to buy the car. (14:38) And so they go and they put the $20,000 down and they borrow 80. (14:41) They don't buy an asset.(14:43) And now they're making payments on that for six years while that thing's shooting down (14:46) in value. (14:47) Guys, there's no more destructive plan than using negative leverage. (14:51) We use positive leverage to grow our wealth.(14:53) Negative leverage robs you of any potential wealth. (14:57) I know that you say, well, I got high income. (14:59) I can afford the payments.(15:01) I know you can, but you should be borrowing on assets that are going to double in value. (15:04) Not buying liabilities that are going to be worth half in five, six years. (15:08) So anyway, I think that's pretty much it.(15:10) Uh, money is not made to be spent. (15:12) Money is made to be invested so it can grow itself and you can buy back your freedom. (15:17) Yeah.(15:17) If anything, money's made to be borrowed. (15:18) Like give me money. (15:20) I love borrowing money.(15:21) Yeah. (15:22) Yeah. (15:22) Well, all right guys till next time.(15:24) Okay. (15:25) Thanks.