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In 2015, Paul Thompson realized that he needed income-generating assets so he decided to try properties. He got laid off from his job in 2017, but now, he has 50 single-family units and is transforming people’s lives through real estate and business ownership.

In this episode, Paul looks back on his foray into real estate, breaks down his very first deal, and shares the steps he took to build his wholesaling business. He includes anecdotes to illustrate how much work it takes to invest in properties, offering advice for people who are looking into the rental strategy.

Listen to the podcast here


 

Starting A Wholesaling Business And Synergizing Your Life With Paul Thompson

Z, what’s up? What are you laughing at?

I’m laughing because you are the only one who calls me Z Money. Now, a bunch of random people messaged me on Instagram, which I love. There are lots of readers who called me Z Money. It always makes me smile.

Now that when people call use Z Money, we know where it is from.

It would always be from Craig’s mouth.

What is up with you in your life, Z? It looks like you are all dressed up and looking fancy.

I don’t think you realize this about me, but every day is an opportunity to costume. This comes from my Burning Man side, but even in my day-to-day life, I’m like, “I’m going to be looking fresh.” Every day, I want to look good. That is something. I’m going nowhere. I’m like, “I need to parade around the block to give this outfit for the time it deserves.”

We are the opposite in that regard. I try to wear the same exact thing every day. Style is not my middle name, but we complement each other so much.

You get more done than I do, so that makes sense. What is so far on your side? Anything exciting? It looks like you have a brand new background, so you must be somewhere new in the world.

We are staying at my grandparent’s beach house, but we are at an Airbnb, not too far away from that right here. This will be the only time you see this background, so take it all in. We are on the East Coast now, spending some time with the family. We always do the tour with the family at our little beach cabin. I’m enjoying some fun in the sun before we head back to Colorado for some more fun in the mountains. Speaking of fun in the mountains, we have got a great guest.

Paul Thompson is an amazing guy. It sounds like he is a mutual friend of ours, even though I don’t think we knew that before the episode. He is great. He started real estate a couple of years ago, and he is crushing it now to the point where not one deal has changed his life, but the principles of real estate investing has. It is cool to have that in the show. He got an interesting and funny story at the end about a family vacation. Some financial independence helps him with a little bit to get out of a bad scenario. Make sure you read until the end.

Paul Thompson, welcome to the show. It is so good to have you here. How are you doing?

I am doing fantastic. Thanks for having me.

Thanks so much for coming on. I remember I was on your podcast a few months back. I had a ton of fun. We have known each other for several years in the FI and the real estate space. Now, I’m excited to dig a little bit more into your story. Why don’t you tell us how you found out about financial independence?

I wish I could remember the first time I heard the word or even the concept. I remember from way back in the early 2000s, when I got to college, I had the framework for it because I was investing in index funds. I had it all mapped out in my head if I could max out these accounts and get this return. I did a VTSAX or the equivalent of that at the time. I put money in the stock market via my retirement vehicles.

Fast forward, a couple of years later, I have a net worth at that time of $500,000 or something. It wasn’t enough money to retire on. It wasn’t enough to consider yourself even probably Lean FIRE for the lifestyle that I was living, but there was a sense of power in that, knowing that I had $500,000 of capital out there. The problem with doing that is that you can’t easily tap into those things without incurring taxes and early withdrawal fees. I wanted to create some way to get out of my day job. I got to the point where I am over with this idea of 40 years of retirement.

Now, I want to retire or create a lifestyle where I control my time. Fundamentally, what happened is I had this trip to the beach and came back from the beach pissed off. I could not figure out why. What I was pissed off about as I was talking out with my wife from way home was that I had to go back to work. The reason I had to go back to work was not because I needed the money, and not because I even needed that job forever, but because I had a job. My wife was a stay-at-home mom and still is. Her schedule was free.

Our kids were out of school for summer break, but I had to go back to work, and we had to leave the beach because daddy had to do it. It hit me hard. I was pissed off about it. I felt like I was small and insignificant because I wasn’t able to spend more time with my family. I had to ask permission from somebody else to spend time with my family. Ever since then, I have changed that dynamic where now I ask permission of my family if I’m going to spend more time outside with them. I spend time with my family first, and then I spend time with my family.

50ITFCaption1
Synergizing Your Life: Land ownership is a venture full of surprises. Don’t believe people who say that this business is hands-free. There are always responsibilities.

 

That is such an interesting way to look at it. Do you have to ask your boss to spend time with your family? Most people’s priorities lie with family first, friends second, and job or employee is third. You say these are what your priorities are, but are you putting your money where your mouth is? You realized that you were not and that allowed some freedom. You say $500,000, and that is not enough to retire off of. I would agree. Do you think that it gave you at least a few years of the runway so that you knew that like, “At least I could start something on my own? If after five years I run out of this, I go back to where I am now.” Was that your thought?

That was part of my thought. It is a wind in your sails when you have access to that capital because I knew the worst-case scenario. I could liquidate, pay the taxes, pay all the fees and not be destitute. It turns out I never even used any of that money. I went and bought real estate and started my own business, but I knew that the safety net was there. That was huge.

I seriously looked into a program called the Rollover Business Startup called ROBS, where you can tap into your 401(k) and buy a business or a franchise. The more I realized after researching that if I had tapped into that $300,000 and bought a franchise, I was so afraid that I was going to buy myself another job. I thought, “I don’t want to make that extreme of a choice.” I can create an escape plan where I invest in income-producing properties and see if I like it. I can buy one at a time and inch my way into the strategy.

Did you end up doing a self-directed IRA where people buy property from their IRA, or did you buy something with extra cash that you had liquid?

I used my own cash that I had access to, which wasn’t $500,000. It was more like $20,000 or $30,000. I have since gone on to do a lot of self-directed IRA investments, but that is not how I first started the strategy in self-directed IRA when I was 37. The strategy there is long-term wealth building and not income replacement. I was in the income replacement to begin with.

At what point in time or year was this when you realized you were driving home from the beach with your family?

It was in 2015.

That was when you had about $500,000 net worth of index funds. It is the traditional American retirement, the easy way and simple path to wealth type of approach. That was when you decided to get into real estate. What were the next steps after figuring out that real estate might be a good way for you?

I read, consumed, and listened to every podcast, book and conference I could possibly think about to go to. Very early, I took the advice that I hear on BiggerPockets and other places. It is like, “Find a mentor.” I was so lucky that I came across someone who was about an hour away from me. I sent him an email and said, “I’m interested in getting into real estate. I would be happy to exchange my time to help you in your business. What can I do to help you?”

He called me back a couple of weeks later and said, “I will mentor you, and there is no payment or anything, but there are some requirements. You have to get books and read, highlight and write a three-page handwritten essay and mail those to me. That is my test to see if you are serious about this.” It was like wax on, wax off, Mr. Miyagi stuff, and I did it.

One of the best things that he did for me was that he got me into this group of conferences that you can go to where there are zero up pitch at the back of the whole room. There was none of that stuff. It was like these old-school investors who have been known for 20 or 30 years. I followed along and listened to them. Their marketing is terrible. They have no presentation skills, but they know this business. I learned a ton in a very short amount of time. I finally got a Master’s degree in real estate within the first couple of months by going to those conferences.

The conferences are always some of the best things to go to because not only are you getting the academic experience, but sitting in on the presentations. The networking, people, and the years of experience that you can tap into when at a networking event are insane.

It is probably one of the best things you can do because it adds both to your academic knowledge but you also overlap that with the experience level of the people in the room. Still, some of the best friends that I have in this business or my life are some of the people I met at those conferences from very early on.

Same here.

It builds your network. It is great to have those friends that will throw you deals or tell you about a new area to invest in and all that stuff. Most of what happens in real estate for me is through a couple of people I know in that space.

We always say you are the average of the five people you hang out with the most. You want to hang out with these people at the conferences. Those are people that are going to bring you up, and you’re going to be like, “Paul, how many units do you have? Do you have this many? I got some catching up to do. This guy can do it.” It puts you on the playing field with all these people. Speaking of units, let’s talk about your first deal.

I will run you through my very first deal, numbers, and all. This was in 2015. I lived in Little Rock, Arkansas, and I found a deal in North Little Rock, Arkansas for $30,000. Even now, you can’t find that deal in that area because it has appreciated since then. The numbers there worked. We would rent for $650, and now I need to repair, so I needed about $10,000 to $12,000 of repairs. I had never bought a deal outside of my personal house before, but I had done enough research to understand the BRRRR method and private lending.

I had already been to a lot of these conferences, so I felt like I intellectually knew this stuff pretty well. I wanted to do a small deal proof of concept and see if it worked. I found private lenders through BiggerPockets. I met her in Hot Springs. She had moved from Hot Springs from California and was looking to do some lending.

By attending conferences, you are not only getting the academic experience. You also tap into a vast networking and other people’s years of experience. Click To Tweet

I said, “Here is the deal. Let’s take a look at it. If you lend the $30,000 to take it down, I will put in $10,000 to rehab it. I have another friend of mine that I have met through BiggerPockets who is handy, and we will be happy to rehab it for me in exchange for a little bit of a cut of the pie, and we will have a rental property. I will refi it afterward.” I was pretty confident that I would be able to refi it because I had a good income and credit scores. I can rehab easily with that number. This was not conventional. This was a commercial loan because it was a load of $50,000 number. I got to cut a local commercial loan, and they already confirmed it before.

One had asked you about that because I noticed in St. Louis when I was doing properties that were cheaper under $100,000, it is hard to get a loan. It is probably more common in areas where they have more homes under $100,000, but it was interesting that you said under $50,000 has to be commercial.

If you try and get a conventional loan of $150,000, I’m not familiar with the program or a product that would allow for that. Wherever you are, local commercial banks tend to be much more open to those types of loans. In this case, there were several banks that I met, and all of them said yes. I picked between the 3 or 4 that had the best terms.

What was the interest rate like being commercial versus conventional? Was there a big difference there?

It is about a point higher. The ongoing rate was probably 4.5% or 5% for conventional. I paid close to 6% at that time and I had to refi that loan to something much lower because the market has been helpful to us.

Paul, can you explain the difference between a conventional and a commercial loan?

It is a very important distinction. A lot of people don’t know this, but a conventional loan that we get on our primary residence is backed by Fannie and Freddie. This is referred to as the secondary market. Fannie and Freddie are big quasi-government organizations that buy these loans up. All these mortgage brokers that you are talking to for the conventional loans are not a banker. They are a mortgage officer qualifying you for the loan, and then the organization they are with packages these things up and sells them to the secondary market.

This is the 30-year fixed rate interest rate that we tend to think about loans and mortgage loans in the US. You can also get a commercial loan from another bank institution that tends to hold the paper. Those portfolio loans, sometimes referred to as commercial loans, can be for apartment complexes and doing any business. You can buy farms with them and residential property with it. You are buying into a little small business, and that is the way they look at it. They underwrite it the same way. They look at you a little bit as far as, “Are you bankable?” They don’t look at you as much as when you are using a conventional loan.

That is an amazing explanation. That is better than I could have ever explained it. I want to make the distinction super clear. Just because the loan type is commercial does not mean you need to buy a commercial property with it. They are two different things. It can be confusing. I wanted to make that clear.

This first house you bought for $30,000. It sounds like you put $10,000 or $15,000 into it, so you are all in about $45,000. You can get $650 a month in rent, which is well over the 1% rule. The rule of thumb says that would work out pretty well. What did the numbers truly look like after the refinance and all of that?

I got a loan for $42,000 afterward. All told, I was probably in for $43,000, and some change, including holding costs the most of my money back. I could pay back both the lender plus interest and get most of my money back. I had a property that I was into for $42,000 and rented for $650. It is a property I still own now. It was recast because I hit the balloon level. When that happened, we got better interest rates because of the market. I got lucky. I had 3 or 4 tenants in there in the last few years, but it still rents for $700 now. Now, it appreciated about 20%.

What is the monthly mortgage on it now? Do you have any set for reserves and all that stuff?

The balance of that now would be probably $35,000, and I’m still paying the mortgage payment, which is $358 if memory serves.

You are making $350 a month or so.

It is not going to change my life as far as the cashflow that I have there, but it will be paid off in fifteen years from now because it was only a twenty-year loan to begin with.

That is the good thing about these smaller markets. You are not going to be getting $1,000 a month in cashflow, but you can buy these houses and new units quicker.

I’m curious why you kept it. I don’t know your portfolio, but you have done a lot in the real estate space. I’m wondering if you got a lot of places now. For myself personally, once you start buying a quad or more expensive properties and realize you can have less properties but higher dollar amounts. I find the little ones annoying.

I have been lucky. It has not been annoying. It has been an easy one to manage. I have a property manager in place, and I don’t think about it at all. I had to go back and figure out the mortgage payments are automated. I get a statement. It takes care of itself. I will do rehab to it sooner or later. When I do, I may second guess what I said. I keep a punch list of all of my inventory.

I now have about 50 units of single-family. Of those 50 units, I keep my punch list of my most favorite to my least favorite. These changes about every quarter, depending on what changes weekly based on what was happening with the tenant. If there is a tenant or something about the situation that is hard to deal with, I think of that as something that I’m going to sacrifice because it’s not worth the headache. My return on equity of that property is very low because it is taking away from my time and energy.

About once a year, I look at my list of 50, and I’m like, “Which one of these do I want to sacrifice?” I think of it as the golden goose and the golden eggs. If there is a golden goose not producing a lot of eggs or causing me a lot of hassle, I will sacrifice that golden goose and have Christmas dinner, and I will keep the remaining. I’m sacrificing something that will produce cash in the future, but it is not producing as much cash as easy as I want it to.

50ITFCaption2
Synergizing Your Life: A very good confidence booster when you’re starting is just getting those checks. It’s a little bit harder now than it used to be but it’s nice to get an easy layup.

 

When you say sacrifice, do you mean sell?

Yes.

Do you find that you have to sell it at a discount because you are paying someone to get rid of your problem or not?

These are not so problematic that they can’t be sold. They are of my least priority. They are not my favorite. Why would I sell my best and favorite property? Those are the ones I want to cherish and keep. That is my true golden goose. I want to take care of that. If this other one of number 50 in line is not acting very well, I will sell it to cash in on my equity, take the equity, and put it someplace else that is smarter and less work. With the level I have got now, cashflow was great, but I have enough cashflow. I don’t need infinite cashflow. What I need is a return on my time and less headaches.

We are getting ahead of ourselves a little bit. I want to hear a little bit. If you can remember how you were in this first deal, were there some big headaches that came up, drawbacks, or lessons? A lot of our readers are either in their first deal or trying to get to the first deal. It is so great for them to hear that from other people.

I don’t ever hear from any podcast, author, landlord, or investor you ever listen to. They tend to talk about how easy it is in the good things or tell stories forever about all these headaches. These are the two extremes. The reality is most of it is in the middle. It is sometimes a little bit annoying and sometimes okay.

It is a boring, lonely business because you own property and take care of problems when they come up. Some of those problems might be, “Did you know that the drainage pipe for the house is going to collapse?” The North Little Rock does not take care of that. If you happen to be in Little Rock, they have a replacement program for Orangeburg pipe, but you are on the other side of the river, so you have to pay for yourself an extra $3,000 to replace your pipe that goes down. The least sexy $3,000 check that you will ever write is writing a check to have a pipe for people’s crap pipe.

You got to have it right, or you are not going to be on making money on it. That is the one example that happened. It is a big surprise. I had gotten the rehab down to $8,000, and then this came up, and I had to pay another $3,000. Surprises will happen. I have not ever heard from this business that it is ever hands-free. There are always responsibilities. Even if you have a property manager, your property manager is going to say, “We found out that there is a new roof. The roof that you put on there doesn’t work the way you thought it does. We are going to have to do another $1,000 worth of work that has happened before.”

This is anything. If it was so easy and all unicorns and rainbows, everybody would be doing it. There is a reason why only a certain subset of the population are real estate investors because you choose the problems in life that you want to solve. When those problems are solved, you get paid for them. We like solving the real estate problem for a lot of people. That is why we get paid fairly handsomely for it in many cases. We liked that real estate asset. At the end of the day, you want to get paid to do something. Pick your problem and solve it. We have all had our problems with real estate.

Also, with crap pipes, we all got a sewer pipe story.

Paul, we have got a pretty good understanding of your first one. How do you parlay that into 20, 30, 40, or 50?

In the first two years of moving the business, I was, on average, buying about one property a month. That was in spurts. I bought ten properties within the first two months. I thought, “It is time to slow down and make sure that I know what I’m doing and I’m not getting in over my head.” One of those came from a six-unit. It was technically six single-family properties, but they are all the same parcel, so they come by all at once. That got me up there very quickly.

I bought a sub-to and did the owner financing here. I was into about ten units pretty quickly because I had armed myself with all this information. I was out there making offers. I still do that nowadays. I go and learn something and make offers. I was slinging against the wall and see if it sticks. Sometimes, I lose money, but most of the time, I’m going to be able to figure it out. If you ever want ten, that is fine. I bought my first ten from wholesalers, but I wanted to grow and own a lot of property.

I realized very quickly that if I’m going to do this at scale, I need to control the deals myself. I need to be the wholesaler effectively. I went and figured out how to market. That is the part of the business that you don’t have to learn if you just want to buy 5 or 10 units and create financial independence with ten units, which you can do. I wanted to become a real estate entrepreneur effectively. I have not had the term for the time, but I wanted to be more than an investor.

I wanted to be a business owner, own properties, and do cool things in real estate. I started figuring out how to market for properties. I started hiring VAs and learning and building systems to make offers at scale. I have gotten to the point now where I have saturated my market. I’m doing somewhere between 10 and 12 deals per month in Little Rock. We are running out of inventory, and this is true wherever else. Now, I’m at the point where I’m expanding and doing the same system in other markets.

What does it take to start up a wholesale business?

I quit my job in 2017. I was laid off from my job. 2017 is when I went into it. Earnestly, it was a lot easier then because there were less people doing it, and it was a more favorable market overall. Fundamentally, you got to be willing to put some money down for some marketing. You hear about all this stuff, bandit signs, yellow letters, Facebook, pay-per-click, SEO, hiring VAs, sending blast texts and blast RVMs or voicemail. There are lots of different strategies that you can do to be a marketer, and you have to figure out how to do all of these so that you can make sense of all of them.

I would attack one and figure out what worked. I would do yellow letters for a while and get some return, but not much. I would do driving for dollars and get a little bit of return, and figuring out takes a lot of time. I walked around knocking on doors for a while, saying, “Would you be interested in selling your house?”

I almost got arrested doing that, but I got deals doing each of these things. I figured out the systems that scaled. When I figured out that I could hire virtual assistants and have other virtual assistants going out there making offers on my behalf, that is when I started growing and doing two deals a month, and it was 3 or 4 deals a month. Within 2020, it was close to ten. Now, I’m close to twelve deals per month.

When you say virtual assistant, do you mean you have the virtual assistants cold calling, taking and screening the lead, and if it gets through their filters, it then goes to you, and then you are the ultimate decision-maker type of thing?

Exactly. The virtual assistant would do some offline scraping of data and I would use the data and the calls. I would hire a virtual assistant to call and do some lead-up to say, “Are you interested in selling your house?” If they said yes, there would be like, “Paul, now you do it.” I have salespeople who take that call, and I’m the guy pulling the puppet strings behind the scenes, owning the business.

It sounds like cold calling is your strategy. Did you go out at this point, or are you still doing the direct mail and texting?

Being a landlord is being between the extremes of annoying and boring. Click To Tweet

I’m doing it all and in priority. There is the online side where you are doing SEO, Facebook ads, and pay-per-click. I’m doing all that as well. I have either hired that out or brought in somebody who is an expert and works in my team for doing that. They are a pro in pay-per-click, and they do that in my market and a few other markets where they have other real estate investors they work with, which pay-per-click strategy needs that expertise like that. It is hard to find that off of Upwork without any effort.

I also do this hierarchy of reaching out and saying, “Do you want to buy our house?” Now, I do that bandit signs in yards where I own them. I have enough yards now. In houses, I own the yard too. I put a sign there. I don’t put it on poles anymore, which is illegal in those markets. I put that in properties that I own.

I also do this thing where I reach out and say, “Do you want to sell your house?” I reached out to them via a phone call, text message, Facebook message, or an email if I can find that, or I will send them RVM or ringless voicemail, if that works for them and if they have a cell phone. I will also do a yellow letter. I do it in that hierarchy because I want to get on the phone and say, “Do you want to sell your house?” I try and get ahold of people however I can. I do it in the hierarchy of how it is easiest to get them on the phone.

Do you have your VA doing this now?

Yes. I’m not doing any of this. I’m reviewing the deals in our daily huddle like, “Do you have a deal or not?”

At first, you did it because you needed to get the systems in place and the documentation down, and you’re able to offshore and offload that to the VA.

We got into a big wholesaling tangent, which is awesome information and we have not spoken about on the show. Thank you, Paul. I’m also curious about the startup part of it. It sounds like you did ten deals in that first month or two. It sounds like you were getting the confidence from the very first deal but already starting the other ones. How was that happening timeline-wise?

About my first couple of properties in August, I bought the six in September, and I bought number 9 and 10 in the first couple of weeks of October. To your point, I got the sticking suspicion. I don’t know if I’m right or not on this because we are in the middle of our rehab on that very first property, and we didn’t know if what we were doing would make sense. I say we because I had a business partner helping me do the rehab. We did get a property at the very end of August. We got our first rent check in September.

When I saw that rent check come in, I thought, “This is what we are after.” It is my first mailbox money. I was like, “What can we do?” Each month, you would see the rent come in on a couple of properties, and you see a little bit of money trickling back in. You are like, “This does work. You can collect rent, and you do the numbers.” It makes sense sometimes when you are first getting started. If you can buy a property, that is an easy property. My second property turns out easy. It was a tenant that was already in place. The property was in okay shape. It is not perfect, but it didn’t need anything at that moment to rehab.

She was already living there. I bought it from a wholesaler. It was already in decent shape and there was a renter there that was paying. I confirmed that with payments. In the very first month after I bought it like a week later, she paid rent. That can be a very good confidence booster when you are getting started getting those checks. It is a little bit harder now than it used to be. If you are getting started and you are trying to get cashflowing properties, it’s nice to get an easy layup.

It doesn’t have to be so convoluted as doing a BRRRR and private money flip. You can buy a property that is good enough. That is why some people will buy turnkey properties because they have been rehabbed already, and there is a property management solution in place. You tend to pay a bit of a premium for that versus what I do buying things at a discount. There is nothing wrong with buying a property for what it is worth as long as you are getting the cap rate and the return on investment that you think is reasonable.

I buy almost all my properties turnkey because my time is spent building this real estate agent team, doing content, and stuff like that. It doesn’t align with finding off-market deals. Your synergistic daytime thing is we find off-market deals. If you don’t have a cash buyer, you get rid of first refusal and every one of your deals.

I intend to buy all my properties. I happen to wholesale some.

You are synergizing your life. If I was in your shoes, 100% I would be finding off-market good discount deals. For the readers, what is your life? What do you do for the most 40-plus hours a week to make money, and synergizing your life will allow you to get a lot further?

That is interesting about real estate. There are so many strategies and it is an investment in a business. There is this whole continuum across the board. You can go as far as managing Airbnbs or you can be a classic landlord and do turnkey properties where you are qualifying for a loan and letting everybody else take care of it. There is a whole range in between those two extremes.

I also love turnkey properties. It is great that you are saying that people need to realize that you are paying a little bit of a premium because of its ease. Somebody has found and rehabbed that property. Sometimes, there is a tenant in place, and they have a management company, so all you are doing is qualifying for a loan, getting a little bit of due diligence in there, and getting an inspection. There is no shame in that, especially if you are working full-time and you are trying to make a transition. Even if you are getting a smaller return and got time in the game, that is going to turn into a better return year after year based on rents going up and the mortgage thing mostly the same.

Oftentimes, at least in Denver, when I’m doing rehabs, I find that I get a higher return if I don’t do the money and buy the property already done because you are putting 20% down. Usually, we do less than that if it is a house hack rather than fronting or rehab because I would pay my rehab cash. It ends up being less of a return on my investment.

Here is an interesting idea. This is what you are talking about. When you are looking at a property, you think about the exit strategies and don’t assume that every property has the same strategy. I try to go into every deal with no preconceived ideas. I’m looking at the different types of ways to acquire property. Can I house hack it? Can I buy a subject to, owner financing, lease option, or cash? What am I trying in the backend? Can I flip it, hold it long-term or sell it on a contract?

There are all these different angles that you can do when you look at the properties. Don’t necessarily go into each property with one preconceived idea. I’m buying some of my very first midterm rentals, which are not necessarily Airbnb. They are not short-term, but they are mid-term, like furnished finders strategy. You can do it on Airbnb as well, but it is 30 days or longer. I’m going to furnish these properties, but I know good and well about the way I’m putting my numbers into it. I can turn around and sell the thing at a fire sale, flip the property, and still make money.

You mentioned a whole bunch of words that we are not going to have time to get into fully. Those are all your tools, strategies, and ways to dispose of a deal or your exit strategies. Brandon talks about this a lot of times in BiggerPockets. You want to add tools to your toolbox, and all of those tools allow you to build a house. If you have one tool and a hammer, all you are going to be able to do is knock things over. You are not able to build anything. By having all of these tools, you can get a lot farther and almost make any deal work in one situation or the other.

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Synergizing Your Life: There is a lot to from the range of managing AirBnBs or just being a classic landlord.

 

I love hearing that you are doing mid-term rentals or medium-term rentals. I wonder if you heard about that from me, but I’m not going to take all the credit. It is a strategy that I love because when you are out there looking at the market because a lot of people buy right off of the MLS. Very often, it is not going to make sense. Where we live right now in Boulder, it doesn’t make sense.

You barely make $100 or $200 a month over the mortgage if the mortgage is even less. Sometimes, it is more, but all you have to do is furnish the place. Sometimes, you can charge double. It is a crazy town. It is interesting how you can make most markets work if you are willing to furnish and have talent in that, or at least somebody that you can outsource.

This requires a little bit of extra work. You have stepped into the hospitality business, which I’m terrible, and I know that. I know my strengths and weaknesses. My strength is not going to be managing someone turning over a property every 2 or 3 days. No way. However, I have enough people talking to me saying, “Paul, catch on already.” You were one of the people that mentioned moving back because we have talked about this off-camera and off microphone quite a bit about real estate.

We get real estate nerves together, and we can’t stop talking about this stuff. One of the things that I keep hearing is you can make two and a half times what you would normally make for a long-term rental, doing this mid-term rental. It is not that much work because these traveling nurses or executives tend to stay 3 to 6 months on average, and you can get a very high return for not much additional management.

I am curious about your single-families. It sounds like the majority of your portfolio, if not the entire thing, is single-family homes. I hear many people go from one to a duplex, a quad down the line, and then apartment buildings. Why was that not your route?

I have considered looking at apartments, and I was still buying an apartment for the right scenario. The real big thing for me is I have to have a management solution in place. If you are going to have a management solution in place, I don’t want to be it. I don’t have a property management answer in Central Arkansas that I’m blown away with. I have a couple of viable and good enough answers now for a scale of 50 units, but I don’t want to add another 50 units of that solution. It would not scale well.

I don’t want to take the same solution and apply it to a 128 unit apartment complex because they would crash and burn. They don’t have the capacity for it, and I know I don’t. The other challenge in Central Arkansas, and this has been true ever since 2015, is the cap rates for apartment complexes in my market are stupidly competitive in a way that doesn’t make sense. There are other markets that are much more favorable markets that have even better cap rates.

Why would I buy a five cap in Central Arkansas if I could buy a seven cap in Louisville, Kentucky? That’s the thing that I’m thinking about. I’m always looking for the opportunity, but if I buy something in Louisville, Kentucky, I want to have a built-in solution so that I do not have to worry about the management. I don’t want to do the management. I’m much happier running the back-end business of finding deals at a discount.

As we wrap up and move into the second segment of the show, I want to hear where to now? You have built a portfolio that’s big enough. At this point, you are wholesaling most of it so that you don’t have to continually add to that portfolio. Do you think there is a point where you are going to fire sale at all?

I don’t have any interest in getting rid of my portfolio because it takes care of itself for the most part. It is not that much work in the scheme of things. Managing my existing portfolio is I’m sitting in the investor seat. Whereas, I have a lot more fun sitting in the business owner seat where I’m running a business that happens to buy and sell real estate. That is still a vehicle to help transform people’s lives. I am not necessarily a real estate investor first.

I happened to do real estate investments, but that is my vehicle to connect and help other people create the same or similar outcomes where they can control their time instead of having to exchange their time for money. My motivation now is connecting and serving other people who can live their lives differently because they have a little bit of a mindset shift.

You pretty much got your portfolio. Is it the rinse and repeat of what you said? You are finding these off-market deals. You are getting some private money, or there is some financing, but you are not doing a house hack or many conventional type loans. There were all kinds of commercial things.

I’m no longer qualified for conventional loans. I have a small hard money lending business myself. That serves as my source of private money in many cases. I have a few private lenders I use. When I buy a new property, I turn around, and I will refi into commercial if I need to. My primary answer for holding a new property these days is, “Can I do it without conventional or commercial financing. Can I do it with somebody else’s financing or owner financing?”

We can head off into the final part of the show. Paul, do you want to give any parting words of wisdom before we head there?

One thing I want to leave the audience with is this whole conversation is intended to help serve and add to your Rolodex of options. There are a lot of different investments that can be out there in real estate that might be a good choice for you. Understand why real estate works for you, your personality, and what problem it is solving for you. If you need cashflow to replace income, there is one or a few strategies for that.

If you are trying to build wealth, there may be a different strategy for that. It may be better to do the self-directed IRA thing we talked about before. Figure out the Rubik’s cube answer of what you need versus what the market is offering now, which is a different thing than it was a few years ago. You figure out what you want, what you are good at, and what the market allows you to do now. The Venn diagram of those overlapping circles is where you need to find your niche.

I know you do a lot of teaching, but you have got your lines down.

It is true. Find out what you are good at and what you would like to do. That is what you make your career in. You read the episodes of this show or any other show, and every episode sounds interesting. The thing they are doing is good and making a lot of money. It is because a lot of things make a lot of people a lot of money. Pick what works for you and run with it. I love that. Let’s head into the final four. Z, kick us off.

Always invest in yourself so you may have the strength to serve others. Click To Tweet

Paul, I wonder if you are all full of knowledge. Are you still reading books these days?

I’m an avid reader. I have got lots of books that are in my repertoire at any given time.

What are you reading now?

I usually have 3 or 4 to read. I knew this question was coming, so I had to bring them with me. I’m reading Deep Meditation – Pathway To Personal Freedom by somebody named Yogani. I don’t know anything about this book. I have read a lot of it, and it is quite good. We got it from the library, and it has been good. I do a lot of meditation, and I have liked their approach to it. If you are looking for a lightweight introduction to meditation, it is Deep Meditation – Pathway to Personal Freedom.

Speaking of podcasters, John Lee Dumas came out with a book called The Common Path To Uncommon Success. I’m not necessarily his fan. I don’t dislike him by any stretch either, but I thought, “He got a decent podcast.” This book is amazing. It is one of the best, most well-thought-out roadmap books that you can follow to apply to your life that I have ever read. I highly recommend that one. I’m also reading True Companions by Kelly Flanagan. He is a Christian-based psychiatrist and psychotherapist. It is about how to create companionship in your life.

Do you read three books at once?

There is a fourth one. I forget what it was. I read a lot, and when I read, I read a couple of chapters in whatever book struck my fancy at the time.

That is unlike me at all. I am one at a time.

It is great that you can do that, Craig. For me, it depends on my mood. Sometimes, I don’t want to be learning, and sometimes, I want nothing to do with real estate. I have to have a few.

Paul, what is the best piece of advice you have ever received?

I still believe this, but there is an extra answer to it now. Always invest in yourself. Tim Ferriss asked this question like, “What are the few words you would put on a road sign or a billboard if you are driving by? If you had a message to give to the world, what would it be?” I always thought if I were asked that question, it would be to always invest in yourself.

I still believe in that, but what I have read, heard, and come to believe is that if you are only doing that for your own personal gain that you are going to get in that, then the universe or the powers is not going to align with that as well. If you are thinking about investing in yourself, think about investing in yourself so that you can serve somebody else. Who are you going to have the strength to help? That is a message that doesn’t fit as well on a billboard, but it is always investing in yourself so that you may have the strength to serve others.

It is like in the airplanes where they say, “Put your own mask on before you can help other people.” Before you can help other people, you need to help yourself.

There is an element of that, and you are spot on. That is what I would have said about it as well. There is another layer of nuance there. The powers of the universe, God, or whatever you call it, there are powers that are beyond us, but something about our energy connects to it. When our goals and intentions are pure, that power resonates with you better, and the universe lines up better.

When you say invest in yourself, does that mean, “I’m going to invest in myself by buying a new car because I deserve a new car?” What do you mean by investing in yourself?

That is exactly the distinction I’m trying to make in investing in yourself, “I drove a Tesla for the first time, and I’m going to go buy a Tesla soon because I can’t help it because it is so cool.” That is not investing myself. I want to mention that is going to like, “I can fill my ego with buying a mansion.” That is not what I’m talking about.

I’m talking about buying a mansion so that you can host students to have people come to your residence and do that house hacking and transform their lives. That is investing in yourself so that you can serve others. It could be the same thing, but if your intentions are different, it is a completely different outcome and vibrational energy that you are going to put out into the universe.

I thought from the south that you would be a little more mainstream. I love that you are pulling from all these places, and maybe that is the meditation part of you. You are full of surprises, Paul. What is your why?

I have alluded to it a little bit now already, but my why is very clear. It is to transform people’s lives through real estate and business ownership so that they can change their family tree. It made a profound difference in my life. I have the financial means now to make a bit of a splash in the world. I want to take that and feed it right back into the universe to connect and make a meaningful connection with people looking for answers. I’m not the answer. The answer is already within them, but sometimes, it takes a guy to ask the right question.

You were passing this interview, Paul. I love every answer that you are giving. Number four. Have you ever had a family vacation go terribly wrong?

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Deep Meditation: Pathway to Personal Freedom

I have an interesting story that happened. We went to Puerto Rico for the first time. It was fascinating to go to the territory of Puerto Rico because it felt like we were in an alternate version of the US where everything looked the same. The roads are made like we made the roads. The signs look the same. There is a US postal service truck going by, but everything is in Spanish and everybody was using US dollars. It was so bizarre and fascinating. We were in old San Juan, Puerto Rico, the capital. We are staying in an Airbnb at dinner one night and the power goes out.

Thankfully, the place we were staying had a generator, so we were able to finish having the rest of our dinner. We would go out into the street, and it was nighttime by 8:00 or 9:00. It was pitch black outside, and all the lights were out everywhere. We got on our phones and got a message from an Airbnb host that says there has been a fire someplace and half of the island of Puerto Rico has gone dark, not just the little city we were in, but half the island has gone dark. We went back to our Airbnb. It was hot and we don’t have power. Our phones have a little bit of charge left, but they are not fully charged.

Deep Meditation: Pathway to Personal Freedom

We are wondering, “How long is it going to last?” The more we read and search about that on our phones in power save mode, the more we find out that this problem might be there for a while. We have children. It is technically not, but it feels like a foreign country. We don’t know how long we are going to be there. We decided that we needed to go to another hotel that has power and a generator so that we are not in this three-story and wake up with no AC, air, and fans. If we lose power on our phones and have no way to charge them, we can even call an Uber.

We were like, “What are we going to do?” We are running out of time. We are calling drastically and trying to find a place to go. We finally find one Marriott in the entire city of old San Juan that is still available, has an openingm, and has power. It was $1,000 a night. We said yes. We went and ended up staying there for two days, paying $1,000 a night. It was a party hotel. I was at a casino, which is not our vibe at all. There were very few kids there. It was mostly young 20 or 30 something vibe kids. Our children are 10 and 13 and there were women that were scantily clad, to say the least.

It was not a family dynamic, and we were happy to pay it. Honestly, I’m in a place financially where I can do that. That is why I like having various sources of income and options, so when these things come up, you can take the lemons, turn it into lemonade, and have this interesting part of the story to tell about these $1,000 a night hotel, which was nowhere worth a $1,000 night. Maybe $300 a night. The reason it was vacant is because it was too expensive.

It was probably $150. The moment the power went out, it was $1,000.

Paul, where can people find out more about you?

The best place to get ahold of me or find out about me is my website, PaulDavidThompson.com. You can find me on Instagram and Facebook.

Paul, thank you so much for coming on the show and sharing your story. It is an inspiring one. Keep getting out there and crushing it. I’m upset that we are not going to see you at FinCon or BP Con this 2021, but I’m sure we will see you at some point semi-near future.

I’m looking forward to it.

See you, Paul.

That was Paul Thompson. Z, what did you think?

Aside from his beautiful accent, which I could listen to all day, I was enjoying how he could lay out the concepts. It was like a real estate education that Paul explained things well, and he got a lot of experience in that. One thing I love is that he came from a place where he was going to networking things and getting all the education. Now, he is turning around to give it to everybody. That is such a cool full-circle idea.

The more you give, the more you get. Life and the world are like this flow of giving and getting. If it ever stops and stays stable, that is when things stagnate. That is why charitable giving, philanthropic giving, and all that stuff are so important because the more you can give, the more it flows. Money flows, life flows, and you got to go with the flow.

I have been trying to figure out a way to pay for my nephew’s college. I’m like, “Give, and the universe is going to give me more back.”

We all believe in karma. That is a big thing in Paul. It is hard, especially at first for some of the new guys. Maybe you don’t have a lot to give. I remember being in the position of a super newbie real estate investor. I don’t know how to give back because everyone knows more than me. I would get on BiggerPockets and try to help people that were in the mindset. I felt like I had a good mindset, so I was going to help with the mindset. I got my first deal and started helping in the real estate space. More and more, you keep trying to give back, and you become more and more successful. I love that.

The great thing to point out is, generally, even if you know a little, you know more than most people. You can always give something. I like supporting people on Instagram that I have started these new accounts, and they are giving education. It is like, “If you know a little, why not share it?”

You learn more along the way. Thanks again so much for reading. I hope you enjoyed this episode. If you could, please leave us a review and rating on iTunes, Spotify, or all the places that you. It is much appreciated. If you have any special requests for guests or anything like that, feel free to shoot us a message. We will try to do our best that we can to get the people that you would like to learn from. Z, anything else you would like to add before we kick-off?

No. I will see you all next episode.

We will see you all next episode.

 

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About Paul Thompson

Paul-Thompson-headshot My name is Paul David Thompson and I’m a full-time real estate investor that no longer depends on a day job. I show busy professionals how they can follow a simple plan to build wealth with real estate.

I’ve guided numerous beginners through the process of doing their first real estate deal. I work with investors from California to New Zealand. The best part of my life is helping others build extra sources of income so they can lead a life of their design.