BiggerPockets Podcast 293: How to Retire Early With Real Estate & Do What Matters More with Chad Carson

by | BiggerPockets.com

Have you ever thought about retiring early, traveling, and living your best life now? On today’s show, we interview Chad Carson, author of the new BiggerPockets Publishing book Retire Early With Real Estate.

Today Chad shares how he and his partner were able to accumulate 90 units and live purely off the money generated by their portfolio! In this episode, learn how Chad got started and the steps he took to elevate his business and which strategies he used to make $120,000 on one flip!

Chad’s story covers the gamut of flipping, wholesaling, buy-and-hold, and more. If you want to know what it looks like to retire early with real estate (including what you may be doing wrong right now, and how to change that), this is an episode you definitely want to download now!

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

 This is the BiggerPockets podcast show 293.

I didn’t have a really good strategy starting off. I just started buying this, and I bought this little- in the south we had these textile old textile mills, and it’s usually the most rundown areas in town, and you have these old 1920s houses; mill houses. And we bought those because they were cheap and they looked great and the numbers looked awesome on paper; but, especially during the vacancy periods in 2008/2009, we found out that not only do we have a lot of vacancies because we had a lot more turnover, we also had a lot of capital expenses on those old properties. And so, we’re still- I call these my bubble-gum-on-the-bottom-of-my-shoe properties. I guess I still have them. I’m kind of pulling the properties off and trying to, like, throw them in the trashcan, but sometimes they still stick on my shoe and I keep pulling it off. And so, the issue with that is it’s easier to make mistakes on underestimating repairs and cash flow numbers up front. The other alternative, which I was more successful with, this by chance, was buying-

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Brandon: What’s going on everyone? This is Brandon Turner, today’s host of the BiggerPockets podcast, here with my barking dog in the background. Did you hear that David?

David: Oh, yeah.

Brandon: My dog’s going crazy. Here with my barking dog in the background; Mr. David Greene. How you doing, David?

David: That was funny. I’m doing good, man. Just got off the phone with my contractor before this and I have a nightmare property. I bought it at auction and the city’s making me go through this really ridiculous permit process on, but we finally made some progress. So, it looks like six months after buying it we’re finally going to build to start construction in a month or two and I’ll have some good news.

Brandon: There you go. I can’t wait to hear it. Super cool. Well, guess what I’m doing next week?

David: You’re moving to Norway.

Brandon: That is almost correct. No, you know what I’m doing next week. I’m actually- Yeah. So, for those who don’t know, we’ve talked a little bit about on the podcast last few weeks, I’m actually going to be relocating, at least temporarily – I don’t know how long I’ll stay, over to the island of Maui, which it’d be a lot of fun. I bought a triplex out there and I’m super pumped to house hack my way into a beautiful ocean view. I don’t know, I’m going to put that into a book someday; how to house hack your way to live in paradise for free. So that’s going to be fun.

David: Yeah.

Brandon: Anyway, I got a big shipping container out in my driveway right now. We’re loading it up and I’m going to be a Hawaiian resident for a while; which should be fun. And you’re coming out. You’re going to hang out with me.

David: I’ll be there to move you in, buddy. You will not be alone. It’s actually kind of funny you mentioned that because today’s guest is all about retiring early through real estate, which is, alas, very similar. You too could be living in Hawaii and having a good time if you could retire from real estate.

Brandon: There you go. So, that’s very fitting topic of today’s show. Again, today we’ve got an interview with Chad Carson. Chad is one of my good buddies and he is a phenomenal real estate investor. He has been on the show a few times in the past. We’ll link to those other shows if you go to the show notes at biggerpockets.com/show293, but this particular episode we really focused on a topic and that is how to retire early; meaning not when you’re 65 and too old do anything but play shuffleboard, but how do you get out of your job in the next 5, 10 years, 15 years if you want to be conservative, 3 years if you want to be crazy quick; and what does that look like and how do you think about it? And he’s really, really philosophical in a good way about that. Like, how do you kind of approach the whole thing. So, today’s show was unbelievable. I absolutely love this guy and I think you guys are going to like him as well. And it actually leads to today’s quick tip as well, because today’s quick tip is actually very simple. Chad wrote a book on retiring early through real estate. BiggerPockets is publishing it. BiggerPockets publishing put it out; it’s out today. The day this podcast comes out, the book actually comes out as well. So, the quick tip is very simple. Look, if you care about retiring early, even shaving off a few years after retirement, or just want to read a fantastic real estate book; go to biggerpockets.com/retireearly – again, biggerpockets.com/retireearly – and pick it up. You can get it as cheap as 20 bucks on, like, digital or you can get the ultimate edition; which includes physical, digital, audio, bonus stuff, all that. You can get that at biggerpockets.com/retireearly. It’s fantastic. Check it out. With that, we’ll talk more about the book a little bit later in today’s show, I want to jump into the interview. But before we can get to that, I want to hear from today’s show sponsor.

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Brandon: Alright, thanks to our sponsor, as usual. Now, let’s get on with today’s show. Again, we are talking with Chad Carson; real estate investor, world traveller. He just spent like 18 months down in South America doing amazing things down there; you’ll hear a little bit about that today. And he’s going to share with us, again, how to retire early. So, without further ado, let’s bring them in.

Alright. Welcome back to the BiggerPockets podcast, Chad. How are you doing, man?

Chad: I’m awesome. Good to be back with you guys.

Brandon: Yeah. This should be fun today because, you know, the other day you and I had lunch together. We had a really good caesar salad in Denver; even though you don’t live in Denver, I don’t live in Denver. We happened to both be there the same time. We had the best caesar salad of my life there

Chad: Good recommendation by the way.

Brandon: Thank you.

Chad: We were sitting next to a big beer, there was like 50 beers, and we just got the caesar salad.

David: How good are these salads that you guys both flew into Denver just to get it?

Brandon: They are that good. I’m not even kidding. It was the best ceaser salad I ever had. So, I wish I could remember the name of the place, I’d give it a shout out. But anyway, it’s in Denver. I found it. It’s in, like, the RiNo Districts. So, go to every restaurant in the RiNo District and you’ll find it.

Chad: Ask for caesar.

Brandon: Yeah, ask for ceaser. Anyway. Alright. So, while we were there, I was talking to you about your journey the last couple of years and it was fascinating and I thought ‘man, we need to get Chad back on the show, talk to him about what he’s doing’ and it just so coincidentally happens that you are coming out with a book published through BiggerPockets. I believe the day this show comes out, actually comes out today, that book does. I’ve got it, it is fantastic and I’m super excited for people to read it. It’s going to change a ton of lives. So, we’ll get to that later.

So, why don’t we just start with who are you? I mean, like you’ve been on the show before, people can go back and listen to your whole story, but tell us a little about yourself, about your journey and bring us up to today?

Chad: Yeah. So, my real estate investing journey is about a 16-year long journey and if you condense that down; basically, I got out of college and instead of me taking, like, a regular job route; I was a pre-med major, so I thought about going to med school and doing some stuff like that; I just jumped into real estate. That was kind of the crazy route. ‘Let’s see if I can make some money’. And so, I was just flipping houses. Basically, I was doing some wholesaling; buy low, sell higher; and then eventually after a couple of years, a business partner and I; we’ve been doing it together sixteen years; started flipping more; so, fixing and flipping. And so, that was how I put food on the table, and I really learned how to find deals that way, and I was hustling and doing just about every way you can think of to find deals and get good at that.

But then, you know, we sort of had a wake-up moment in 2007 and 2008, I guess that was about three years after we started. And as everybody knows, you know, the market starts going down, things are changing really fast and here we are as new investors who are pretty highly leveraged as well and we’ve been successful finding deals. But we got so successful that we had a lot of deals coming in and we had to sort of step back and say, ‘Alright, wait a second, you know, we need to understand why exactly are we doing this?’ And so, you know, we kind of got honed in on what we need to build some income and have some more income properties instead of just flipping all the time.

And so, that’s been sort of my trend since then as to, you know, let’s flip some to make some money, put some food on the table, but let’s also by these long-term properties, produce income, get them stable to where you can live off of it and do other things. Like, for me, traveling is really important. I’ve taken lots of trips and mini retirements abroad with my wife and my family. And so, kind of mixing that in real estate has been a lot of fun. That’s been sort of my story.

Brandon: So, you mentioned mini retirement. I want to pull that phrase out here because for those people who have read the four-hour work week that that would sound familiar, but for those who have not or don’t remember, what do you mean by a mini retirement? And can you give us an example?

Chad: Yeah. And that was sort of- I read that book at the same time when I was having those kinds of step-back ‘Aha’ moments, ‘Why am I doing all this?’ I read Tim Ferriss’s book and there’s this concept that, basically, instead of deferring all of the fun things in life; all the things that you want to do once someday when you know when you have enough money, when you can do this, you know, 30, 40 years from now; that’s sort of the traditional model. A different model is, you know, why not intersperse those throughout your life.

You know, it might start with a two-week trip. It might start with a month. Eventually it might be a year. But you just- you take time away, you kind of press pause on your normal kind of business, your life, your work, and you detach yourself and you do something. And it could be travel, it could be going back to school. it could be spending time with your kids.

In my case, it was travel. We would go- my wife and I, before we had kids, went in 2009 to South America. Brought our backpacks, travelled from Peru, I learned how to speak Spanish, down to Patagonia and Chile, and went to, like, the southern tip of the world where you see penguins and the winds blowing 30 miles per hour; it’s just kind of crazy; and then went up to Buenos Aires. And so, it was just one of those experiences that, like, I’m a go-get-her kind of type personality to make it happen for me. Like, detaching yourself and leaving for four months and like putting it all aside; it kind of drove me crazy at first a little bit, but it was such a good experience; because when I got back in the saddle and I was buying and flipping again and doing the rental properties, I had a really different perspective on reminding myself like, ‘Why am I doing this? This is why I’m actually making money in the first place’.

Brandon: Yeah. You know, I think a lot of times we get caught up in that, like just build a bigger business; go bigger, better; like, make more money all the time. You forget what was that early inspiration that inspired us to get to real estate? It probably had something around freedom or travel or family or hobbies, right? Like most of us didn’t get into real estate to do that, but yeah, when I read that four-hour work week, yeah, the mini retirement thing just, like, blew my mind. I’m like, ‘What a great idea’. Why wait until you’re 70 to go retire-

Chad: Right. Yeah, it is. I mean- Yeah. And so many people, I mean it’s- we kind of get caught in a traditional path, you know, and real estate is different. And so that’s one reason I wrote the book is because you have a lot more control over the timing of how much income you produce, how successful you can be. If you just put your money in the stock market, which has worked for a lot of people, you’re sort of at the mercy of the ups and downs of the market, the timing; and it can work, but that path never really appealed to me. I loved real estate and I think a lot of people at BiggerPockets love real estate because, you know, you do have to get your hands dirty, you’ve got to go build a business around it, but it’s sort of up to you. If you want to build a life for you, take mini retirements every two years; awesome, you can do that. Or if you want to go build the biggest empire that real estate’s ever seen, you can do that too. Like, there’s so much variability, but it kind of starts with, that’s why you see do what matters in the background. That’s sort of the theme of the book as well. as that. You know, you start with that and then you can build a business around whatever, that type of lifestyle that you want, and it is very possible.

David: I love that.

Brandon: So, speaking about empires, how many units have you built your portfolio up to now, Chad?

Chad: Yeah, so my business partner and I have 90 units and some of those are some notes, kind of private notes, and things like that, but we have basically 90 front doors that we have, and we manage some of those and we also have a third-party manager that manages some of those as well.

Brandon: That’s awesome.

David: At what point do you feel like you hit the financial freedom point to where you could start doing all this cool stuff, that definitely doesn’t suck, that you have going on in your life?

Chad: Yeah, good question. Like, some of my earlier trips where I was- I didn’t feel like, ‘hey man, I’ve got this income coming in. It’s never going to stop. I’ve got plenty of it.’; it was coming in, but I had to save up the cash on the side ahead of time; like in 2009, when we went, we had enough rentals on paper to make it work, but I was nervous, you know, capital expenses were going up. I had tons of vacancies and so I wasn’t really confident that that passive income was really where it needed to be. So, I just saved up 20 grands; you know, instead of buying a new car, I saved up 20 grands; and said we’re just going to use that to go travel abroad.

And so, that was kind of one-stage, but recently, like 2018, last year when we went on our trip, it was more about, ‘alright, I feel really comfortable. The income’s coming in. I have management in place, you know.’ It was more like the true stage where you can decide I can just live off my income and just do something else for a little while.

Brandon: So, a lot of people ask that question. Like, I mean, I’ve heard people criticize the four-hour work week for this, and I think unjustifiably – is that a word? – it is now. Like this ideal where people say, ‘well I don’t want to retire early because I’d just be bored’. Like, what am I going to do? Just play shuffleboard all day? Like, that sounds miserable. Like, so how are you defining early retirement or are you just really good at shuffleboard?

Chad: Yeah, shuffleboard and golf and things like that. You know, neither one, I can’t stand either one of those, but I mean, yeah, that’s always the first question I get too because retirement is a loaded word. It’s like all of us have these ideas about what retirement is, and often it means, like, sitting on a beach or doing nothing or retreating from life. That’s really what the word means, but more the definition that I’m trying to put out there is just separate the need to have to work for money. Like, if as long as you don’t have to go into a job and produce income today and everything won’t fall apart, then technically you could do whatever you want. You don’t have to be at that job. The best quote I’ve ever heard is, if you go back to Warren Buffet, he has this quote that says, ‘You know what? I’ve not had to work since I was 27 years old’. He says, ‘Every single morning I tap dance to work’.

David: That’s cool.

Brandon: Imagine Warren Buffet tap dancing as he goes into work. I’m just going to picture that. It’s like he loves it, and so, if you want, I mean most people who are ambitious enough to build up enough wealth to produce that passive income aren’t going to sit around and do nothing like that. I very rarely hear that and that’s where mini retirements come in. If you want to do nothing for a little while or do something different that’s not work related, go, you know. Go take a month off, take two months off, take a year off.

But most of us are going to come back and we want to contribute. We want to use our skills. But the distinction I found is that, you know, for me, like, flipping houses was awesome. I loved it, but I was sort of like a B- house flipper; I was good at it, I can make money on it, I built a business around it; but it was not my passion and all – this is what I really want to do for the rest of my life. And so, as you start building these income streams, you can start asking yourself questions; like, if I had money taken care of, like if money was taken off the table as part of the equation for my decisions, what would I do differently in my life right now than what’s going on?

And when I asked myself that question, it was like, you know, kind of took me a while to think about it and one of the things was I don’t want to be managing all my properties. I don’t want to be going on all the appointments that I used to. I used to hustle and, you know, make 5 or 10 offers a week and do all that. I was pretty good at it. But I want to be a little bit more a passive role in real estate. I want to teach people how to do it. I want to write a book. I want to travel. And so, like, kind of, a more mixed balance life was better for me, but somebody else might make a totally different decision. And that’s the flexibility. And that’s kind of what I define retirement as is the ability to have options and choices throughout your life instead of having your job and your need to work for money dictating everything that you have to do.

David: Love it. So, if that sounds good – which it does sound good, right? – I want to do that. Walk me through how I actually get to the point where I can have that flexibility.

Chad: Right? So, I think there’s two parts to the answer. One part has nothing to do with real estate and the other part is all about real estate because that’s why we’re here. And the non-real estate part is so super simple. Like, it’s kind of like the fundamentals of finance. Everybody knows this, but not that many people do it is you have to save a ton of money. Like, you’ve got to both earn more money; you’ve got to go to whatever; whether you’re in business, whether you have a job; you got to get that income higher and higher and higher; and you’ve got to create this big gap between your income and your savings.

There’s a really cool article that maybe we can link in the show notes from Mr. Money Moustache, that basically shows that the math of how the main variable and retiring earlier is what your savings rate is. So, like, if you make a million bucks a year and you save 10%, it’s going to take you 50 years to retire; because for you to save up enough money, to have enough wealth to pay for your spending, it’s going to take a long time. Whereas, if you had a much, a huge gap, if you had, you know, made a million bucks and you spend 100,000 bucks or you made 100,000 bucks and you spent 50,000 bucks, that 50, 70% savings rate that, you get those huge savings rates, that makes an enormous difference in how fast it’s going to take you to actually get to the point where you can retire.

Brandon: You know, a lot of people, I love this topic because a lot of people come in from different approaches, but I think I come at it from a little different approach than maybe Scott and BiggerPockets of Money, podcasts. I love that podcast, but they both are very much savers. Like, how do you save more money? How do we live more frugally? I’ve always approached it from the other angle of, like, how do I get so good at what I’m doing that I can demand or obtain a really good rate or income level? Like, how do you balance those two things between savings, scrimping, being cheap and going out there and crushing it in business and making more money?

Chad: Yeah, I mean, I’ve done both. So, for me, like the skill sets I have, I think the thing that makes me the most confident, it’s more what you’re talking about. Like, I know that if I needed to ramp it up tomorrow, I could go buy two houses this year, flip them, make 30,000 bucks, pay for my basic overhead, like, you know, 50, 60,000 a year. My question in my head is like what could I do to go make that money and to be honest, like that money, that ability that I have, my skill set, to make money is more confidence building even than money in the bank. And so, like, I agree with you on that case, but I think hedging both of those as smart. So, why not, like, build up your ability to produce income as an entrepreneur, as a real estate investor? Also, save money, also start paying down some loans on your properties every once in a while; like, reduce your risk.

I think both of those are prudent things to do because, you know, maybe things changed. That’s the thing I like. A lot of entrepreneurs don’t realize like right now I love doing this thing that I do to make money, but what if five years from now I can’t stand it? Or what if it’s not available anymore? What if things change? And so, you know, having just pure financial means, the savings, the wealth is smart. Having the ability to be an entrepreneur and always produce income is something that a lot of savers miss. Like, you know, you cannot save enough money to feel absolutely secure. You’re always going to be panicked when you have to go live off your income and do that, so you really got to have both.

Brandon: I love that. David, what about you? What do you think on that, because I know you’re passionate about the earning more money thing too, right?

David: Yeah, but I’m also passionate about saving money. That was kind of how I was known in the beginning is I was the big saver and what I realized was saving money felt safer, so that’s why I was doing it, and I knew I needed it to invest. Right? But saving money did not make me wealthy, investing money that I had saved is what made- and life is just too short. If we live to be 800 years old, you could get by with either being really good at offense or really good at defence, but it doesn’t, right? We don’t have that much time, so you really need to focus on both. I’m a huge proponent of get your spending under control, like how Chad was just saying he can live on $50,000 or $60,000 a year. Right? That’s important because if you don’t have it under control and you go make a bunch of money, it just leaves and you didn’t get anywhere you spend your wills. But once it’s under control, you can’t get sucked into thinking, ‘okay, I’m done’. Right? I don’t drink Starbucks coffee. I drink Folgers from my house and I drive a Prius. So, there you go. I’m on my way to financial freedom because you’re probably not. If you had 800 years to save, maybe you would be. Right?

You have to actually then say, ‘now that I’ve plugged all the holes, the water that was leaking is not leaking anymore, how do I dump as much water in this thing as I can?’ And that involves what Brandon was saying; getting really good at what you do. So, I feel like controlling your money, it involves controlling yourself; but if you don’t have control over money, you don’t have self-control over your own decisions and you are kind of a slave to yourself. So, controlling your money is a matter of controlling yourself, but controlling what you make is a matter of tackling your insecurities, both sides. You need to go make mistakes and fail and try hard and have people tell you no and leave the job you’re at and go get another job. It involves kind of challenging the status quo of your own life, which is why a lot of people don’t want to do it. So, both of those things, they sort of require self-development in different ways, but they’re both necessary if you want to build wealth.

Chad: Yeah, and I couldn’t agree more because I think something that we have in the real estate world, and if you listen to the podcast every week, you’re going to hear the personal development angle so much because real estate is really- it all goes through you. Like, if you don’t build a system, if you don’t build relationships, it’s not going to work.

And for a lot of people who kind of dipped their toe into real estate, that’s intimidating. Like man, I just want to press a button on a computer and have this thing make me money. Right? I mean that’s really what I want. But the real estate; like the good side and the bad side of real estate; is that it’s up to you, like you’re in control of this and so you have to get better. You’ve got to rise to the occasion and make it happen. And that’s the kind of the differentiator. Like, if that terrifies you and you say I want nothing to do with any kind of investment vehicle that makes that- I have to be like the centre of the whole thing and real estate’s the wrong deal; I think you need to go like buy an index fund and do something else. You can do just fine another way. Real estate has ton of benefits because of that control, because you can do a lot of things you can’t do with other vehicles.

Brandon: Well, let’s talk about some of those benefits to real estate, I mean; and obviously this is the real estate show, we talk a lot about it, but maybe the people here that haven’t heard like ‘why is real estate so powerful?’. I think even in your book you talk about that. There’re some really powerful reasons for investing in real estate. Why do you argue that?

Chad: Yeah, I mean the first one is what we were just talking about. So, like, control. Just think about two different options. Like, you have 100,000 bucks and you’re going to invest it in a passive index fund, this low cost, that, you know, over the next 20, 30 years is probably going to do pretty well, based on- if the US economy does well, you’ll do well.

I invest in index funds as well just for diversification, but then you got the other option which is the real estate investing. So, you go put 100,000 bucks into down payments on four or five houses. Now, you can control the types of properties you buy, you can control like what those properties will give you. You can control- based on, you know, where you buy and the type of property, it might mean that you’re going to go for appreciation. It might mean that you’re going to go for income so that you can pay the loan down faster. But, like, you can decide that. And so, I love that about real estate.

There’s a lot of different options and specifically if you’re going to try to retire early, let’s say like 10 or 15 years from now, you want to get to the point where- you know, I don’t want to have the option to live off my income instead of just having to work. I’m going to leave my job. If you’re investing in index funds, it might work, it could work, but you’re really not in control of that schedule. Whereas, in real estate, in the book I went over, like, three or four of the core wealth building strategies; one of them, you know, is a guy- when you talk about a lot about the diverse strategy, the other ones were, like, a debt snowball; so like you could set up a debt snowball, where you say, ‘alright, I’ve got five properties, I’m not going to concentrate all of my income on paying off these five properties within the next 10, 12 years’, and you can basically do the math on a spreadsheet and say, ‘you know what? I don’t need appreciation. I don’t need things to do better. All I need to do is be self-disciplined for the next 10 years. I’ll own these properties free and clear. They’ll produce a certain amount of income and I’ll have enough money to pay for my bills.’ That’s pretty amazing compared to some of the other ones where you have zero control over the outcome.

David: Yeah, that’s true. So what else did you- the four reasons early retirees should invest in real estate, and one was control, right? What else do you got?

Chad: Yeah. So, control timing. I just mentioned timing, I kind of built that into that one.

Brandon: Okay. Yep.

Chad: Yeah. The other two, though, are tax benefits and the fact that it’s simple and understandable. And so, tax benefits; I think, you know, we kind of had this idea that real estate is beneficial tax-wise, but when you start listing all the benefits in the tax code, they go to real estate, you know, starting with depreciation, continuing to 1031 exchange, even the fact that, you know, when you make rental income, there’s no FICA taxes on it. You know, it’s not like a salary income. Just one after the other, tax benefits are amazing and you know, most of the time, you know, those could go away; you can’t count on them. But in last year, in 2017, we had the big tax change where Congress passed the new tax law; almost all of those were kept intact. There’s not a lot of changes, in fact, there’s a few tweaks that made it a little bit better. And so, real estate is one of those things that is beneficial tax-wise.

Brandon: I wonder how many people, that’d be an interesting study to find out, how many people in Congress, you know, house or senate, own real estate, are real estate investors. I bet you it’s over half, if not more. I mean-

David: -I don’t know most- probably most rich people own real estate as an investment, so like why would they do things to hurt themselves? Right?

Chad: Yeah. Yeah. And I think even more than that though. I look at where most of the wealth in the US is, if you look at all the statistics, like the average wealth for your normal household; as in a residence or maybe like an extra rental property; I mean, most of the wealth- this is stock market wealth too, but yeah, I think the congressman, they listen to their citizens, and there’s a huge lobby of the National Association of Realtors. It is a really powerful lobby. The bankers are really powerful lobby. It is their citizens knocking on their door. So, if you just, I mean, that doesn’t mean it’s going to be around forever, but if you had this kind of place your bets, you think real estate as opposed to some of the other investment vehicles is still going to have some really good tax benefits down the road. So, that’s another one. Instead of having to put it all in your retirement account, you can still invest tax efficiently and grow your wealth really well with real estate in a lot of different ways. That’s reason number three.

And then reason number four is just kind of a catchall. This is another Warren Buffet phrase. If you read Warren Buffet’s Investment Philosophy, he basically says you should only invest in things that are simple and understandable. So, like, if you don’t understand it, if it’s some complicated insurance contract, if it’s some stock that, you know, you just got a tip from somebody at work because this is the next- Tesla is great. I mean, I love Tesla, I’d love to drive a Tesla, but I don’t understand why they make money or, like, do they make money or any of that. But I can look at a duplex and I could run the numbers on the napkin, like in my car, and I could look around the neighbourhood and say, ‘You know what? There’s a Starbucks over there. This neighbourhood’s doing a little bit better. You know, I know this is up on the up and up. This is a local neighbourhood.’ Like, all of us can kind of intuitively know just by going into a neighbourhood, like this is a good neighbourhood, this is a bad neighbourhood. The numbers are pretty simple.

So, I think from- you know, I don’t have to be a math genius to be successful at running numbers and analysing a market, and that’s a good thing. I mean, you don’t have to be brave and say, ‘Oh, look at me. I’m so smart. I can run spreadsheets.’ You ought to invest in things that are pretty simple, that you can understand.

Brandon: Yeah, I could not agree more. I mean, like, I would say, like, I’m not that smart of a guy, which is why I moved into real estate. I do not understand stocks, hardly at all. Like, I don’t understand how 401k’s work or how bonds work. I don’t even know what a bond is. I don’t know that stuff. It’s okay. Like, I accept the fact that I’m a simple guy, you know; midwest guy. So, I thought real estate is a pretty easy way to get into, because I get it. Like, it makes sense. So, I think that’s perfect. So, can you- David, you look like you want to say something?

David: Yeah. I wanted to ask-

Brandon: You are going to make fun of my intelligence. Go on. Go on.

David: Yeah. I think that Brandon is absolutely underrating himself as far as how smart he is. He’s actually smarter than everyone else, so that’s why he pretends to be dumb. It’s one of his smart tricks.

Brandon: Yeah. you keep saying that.

David: Well, one thing is want to say- I’ll say a little side note here. I always wonder, once I learned how real estate works, why do people ever invest in stocks once you’ve seen what real estate can do; and I’m convinced it’s just because it’s just easier. All you just push a button on a computer and you get to think like, ‘I’m smart’, like it feeds your ego. But, I mean, when you compare the benefits of stocks or real estate, it’s not even close. You know, like, we could talk all day about that, so that’s just something to keep in mind if you’ve been calling investing, like stock trading or day trading or something like that, you can make so much more money if you just put a little bit of elbow grease into it and learn a little bit about an asset class that rewards you for being heads on.

What I want to ask you, Chad, is there’s two schools of thought, right? There are people who say, ‘I want to buy a whole lot of properties and they’re all going to cashflow a certain amount a month, and when I get enough of these I can retire’. And then there’s another school of thought, which I tend to be a little bit more siding with, that says, ‘I’m going to build as much equity as I possibly can in my portfolio. Then I’m going to convert that into cash flow later’. Can you tell me about which way you think works better, which way you did it, and help our listeners understand what their mindset should be if they want to follow you in the journey you took?

Chad: Yeah. So, I think I started off taking the first, where I wanted to build a certain amount of cashflow from the very beginning, and I think that’s pretty common that most of us want to buy the real estate deal that has the best cash flow in the very beginning.

And so, I did that. I kind of did everything, though. I didn’t have a really good strategy starting off. I just started buying this, and I bought this little- in the south we had these textile old textile mills, and it’s usually the most rundown areas in town, and you have these old 1920s houses; mill houses. And we bought those because they were cheap and they looked great and the numbers looked awesome on paper; but, especially during the vacancy periods in 2008/2009, we found out that not only do we have a lot of vacancies because we had a lot more turnover, we also had a lot of capital expenses on those old properties. And so, we’re still- I call these my bubble-gum-on-the-bottom-of-my-shoe properties. I guess I still have them. I’m kind of pulling the properties off and trying to, like, throw them in the trashcan, but sometimes they still stick on my shoe and I keep pulling it off. And so, the issue with that is it’s easier to make mistakes on underestimating repairs and cash flow numbers up front.

The other alternative, which I was more successful with, this by chance, was buying properties that still have some cashflow but they’re not the bottom of the barrel; like, they’re not your cheapest properties. They are properties that had good- They’re probably C properties; C+, B-; not you’re A+, like best, properties. But they have some potential to be better. And I’ll give you one example. I bought a quadruplex, that was actually my first house hack, and I moved into one unit. The other three units, I rented for $400 apiece in 2005 when I moved in there. And so, I had 1,200 bucks coming in, 1,150 going out on my principle insurance, taxes insurance. So, awesome house hack deal. I’m burdened as well. So, like, I refinanced and pulled all my money out. Like, it was just an awesome deal. But the thing that really made it awesome, like all of that was okay, but now – how many years later? – that’s 13 years later, they’re renting for almost $600 per unit instead. So, you know, 1,800 bucks a month instead of 1,200 bucks on those. Well, now I have all of them rented. I’m not living there anymore. And so, the rents have gone up because it was a sort of in a path of progress type area.

And so, to your point, David, I think in the first 10 years you should focus on a discipline of cashflow, like you should always have some cashflow, you should be trying to acquire equity, because you can then turn that equity into cash flow later on. You can pay off your properties, you could turn it into a note, you know, sell it, finance it, get more cashflow. Also, it is easier to move your chess pieces around when you have properties that are little bit higher up. So, if you need to sell it, you can’t sell those things. Remember the chewing gum there on the bottom of my shoe, still, it’s really hard to get rid of those. Whereas, if you have a nicer house in a nicer neighbourhood, you can liquidate it to a 1031 exchange, move it to another property, move your chess pieces around, and then you can do what you need to do.

Brandon: You know, what I found is at the beginning of my career, I bought a lot of those as well, like the bubble-gum-on-the-bottom-of-my-shoe-properties, and I still have some, right, and I don’t regret it because, like, at the time that’s all I could afford and it got me into the game, but I quickly realized that my wealth today is not in those properties. It’s once I got out of those ones and I started getting some more. At the time they didn’t even seem like as good of the deals; like a couple in the nicer town, I paid three times more for them and they rented almost the same. I’m like, ‘Well, that’s a horrible deal’. Right? But like I bought them because they were okay. And well those have proven to be much, much better.

David: It’s kind of like when you’re first learning to swim, you have to wear floaties. Right? And so that’s what these houses are. Yeah. But once you’re a good swimmer, floaties are slowing you down; you don’t want floaties on when you know how to swim. Right? Brandon, you’re saying you don’t regret it because it was necessary to get you started, but once you learned it, it’s like I need to get these training wheels off my bike because I can’t ride very fast with it.

Brandon: There you go.

Chad: Yeah. Yeah. And going back to our other equation, our conversation earlier, we talked about, like, real equity, financial equity, and kind of mental equity skills that we have, and buying those properties taught me a ton. I mean, like, I learned how to manage properties. I learned how to acquire them. I negotiated some awesome seller financing and all sorts of great terms on there. So, I learned a lot about negotiating and I’ve learned about how to sell properties because it’s really hard to get rid of them. So, I’ve had to be creative selling them; I’ve had to make sure they look really good. So, yeah, the floaties help out later on when you actually graduate to the big pool, to the deep end.

Brandon: Yeah. That’s cool. Hey, how long do you think it takes to retire through real estate? I mean, like, what’s a reasonable number that somebody, who’s brand new to real estate right now; maybe they have one or two properties; they’re listening to this show and they’re like, ‘man, I want to be able to travel to South America for a year and a half like Chad’. What’s reasonable to assume?

Chad: Yeah. I mean, so, we got to make a couple of assumptions. Like, if I assume that you have a good job right now and you already have that savings rate, that we talked about earlier; like if you’re really saving money now and you have the capital and the credit; I think 10 years. 10 to 12 years is a very doable type timeline for a couple of reasons. One, it just takes some time to accumulate capital; whether it’s, you know, recycling your cashflow and buying more properties, whether it’s letting prices appreciate kind of through another real estate cycle – because real estate cycles are a big part of this. Like, you try to maximize your equity in 2007 and 2008; that’s the wrong time. You need to be buying in 2007, 2008, 2009. Like, I had to wait until we kind of got back up out of that depth of the cycle in order to kind of capitalize and move the chess pieces around and produce income like I wanted. So, I think 10 to 12 years, if you’re already saving, if you are really ready to ramp up and start going to get it, that’s kind of the aggressive side of things.

I think for most people though if you just said, you know, ‘I’m happy with the status quo. I’m not that motivated to retire early’, 15/20 years is very doable. Like, you don’t have to wait and pay off a 30-year mortgage to get free and clear properties and have a retirement income. You could semi-aggressively do some things; buy one property per year, go through a couple of real estate cycles, save your money and totally make it work in a much faster timeline, like 15 years, you kidding me. Like, most people, if you could tell them they can retire in 15 years at their normal job, they would jump for joy; you know, if they were 30 years old and, say, by 45 could be out of this thing. I mean that’s pretty incredible. Even on the conservative side, like 15/20 years, I think that’s really good.

Brandon: What if you wanted to do it in three? How would you do it? Let’s do a thought experiment. Like, somebody was to retire in three, four years tops. What would you do, starting over right now, if you wanted to retire fast?

Chad: Right. So, in the book I actually gave a kind of extreme. I said if you want to be super conservative; like, you know, just not use much leverage, super safe; here’s one way to do it. And then I shared some ideas about exchanging, so, trading up. And so, I think I would have to maximize my tax efficiency; probably do a couple of 1031 exchanges, maybe start with a really good deal on a couple of small multi-unit properties, flip those into something bigger, and try to quickly get into some multi-units.

I know you all talk about this a lot, but I love single family houses, I love small properties; but when I traded up into some really big deals, my cash flow, like, doubled or tripled. It was like, ‘alright, I got into the big numbers’. The danger with that though; if you did it in three years, I’m not sure I would’ve been ready to handle all the moving parts and everything else mentally. You know, maybe even if financially I was there, you know, just to be able to handle the closing; to dictate what’s happening, to do a $300,000 remodel on a property and turn that property around; it takes a little bit more confidence and know-how.

So, I’m okay with taking it a little bit slower. Like, I used to play sports; I was a football player in college; and there was no shortcut to becoming a good player. There’s no shortcut to lifting weights in the weight room. Sometimes you have got to pay your dues and you got to do it, and that doesn’t mean you have to wait until you’re 50/60 to retire, but 5/10 years from now, that’s still pretty good.

And the other thing I would say is that you can hit some plateaus along the way; like if you’re so impatient with your job now, you know, save some money, take a mini retirement, make a change for a little while and then go back to the grind again, the climb again, after you get back from that; if you’ve got some itch that is making you want to do it really fast, but doing it fast sometimes can have some repercussions that could make you slide back down the mountain instead of getting to where you want to go.

Brandon: Yeah. I would almost encourage somebody to, like if they really like hated their job, they wanted to retire now, I would probably caution people to consider leaving the job anyway. I mean, if you don’t like your job, quit your job; there are a million jobs out there; and go do something that you actually like doing even if it pays a little less, and then maybe retire. I mean, like, you could still work towards retirement, but why suffer through three years of hell if you don’t have to.

David: Go get a job that you like.

Brandon: It is not worth it. It’s not worth it. Now, we talk a lot about the strategy; David and I both talk about it; a very aggressive strategy, to try to get grow your portfolio quick; which is called ‘the stack’. Right? So, ‘the stack’ is this idea where if you buy one property this year, a year later you buy a duplex, a year later you buy a fourplex, then eight, then 16, then 32; and the numbers specifically don’t matter that much; but if you essentially double roughly every year within, like, six years, you’ll have, like, almost 100 units; or whatever it is, like, 60 some units; and if each one of those units is giving you a couple hundred bucks a month in cash flow, you could retire from real estate in four or five years, six years. If you bought every three months, you could do it even faster, right? If you double every three months, the problem, of course, is you have got to get that experience and that knowledge and be able to pull those things off. So, if somebody wanted to do it, they could do it, but it’s an aggressive strategy where you better know what you’re doing.

Chad: Yeah. The other thing I’ll add to that, just for my own personal experience, like, I was in the growth mode and wanted to do 50 deals a year; and I think that’s cool, like I’m glad I did that as well; but I think I’ve sort of realized that- when I started off with the ‘why am I doing this’ and ‘say how much money do I really need to do the things I want to do?’, and I started looking at like the upside and downside of every single decision. Like, I could have a much simpler business than having to get 100 units and still do what I’m trying to do and have less hassle, less risk. And so, I think there’s, like, a range in there, like when you go to that hundred units during the stack, I think it is awesome.

And there’s some people who are entrepreneurs, who are just going to knock that out of the park, and they’re going to make it happen. But I think there’s a ton of people who do need a validation to say, ‘You know what? It’s okay to have five properties and, like, buy one property a year for the next five years, save your money, pay those properties off, live off 3,000 bucks a month for the rest of your life.’ And that’s awesome. Like, if you do that and you have that old simple portfolio, you’re going to spend, like, 10 minutes a week on your portfolio, you’re going to be living off that money. You’re going to be doing some awesome stuff.

I think the main theme that I tried to help people with in the book was, like there’s too many people who are working a job now who should be, like, a youth pastor, should be like traveling the world, or should be a high school football coach, but they just don’t do it because it doesn’t make money. And so, the sooner you can get to that point where you’re doing something you’re passionate about, you’re doing what matters and you’re using real estate as sort of like the engine to get you there; that’s awesome, whatever that looks like. If it’s five properties, if it’s 100 units, if it’s- whatever it is in between. Like, that’s the main point. Like how successful are you at living the life that was you really want to live. That’s what we should be celebrating even more.

Brandon: Yeah. Yeah. I really liked that a lot. So, with that- I want to actually kind of use that as kind of a transition because that’s a really good ending. It’s like yeah, like what are you doing this for? You know, keep that in mind as you build your portfolio or build your business towards early retirement, and it’s fantastic.

Now, of course, we’re going to go move on to the deep dive here and dive into one of your deals here and then we’ll hit fire round and famous four, but before we do, I wanted to mention the book in case people have not yet picked it up. It is on sale as of today, which they can go to biggerpockets.com/retireearly to pick up a copy of Chad’s new book. Chad, you want to tell us about the book just for a minute? And then we’ll move on.

Chad: Yeah. The idea of the book is to be a strategy guide. So, if you’re somebody who, whether you’re new and you’re just getting into it, or you’re sort of already into the business and you are kind of in the weeds, the metaphor is you’re climbing a mountain and the top of the mountain is financial independence, and along the way, there’s a lot of milestones. So, you use this book to basically help you figure out like your best route up the mountain, so instead of just like wandering aimlessly and trying to, like, pick this strategy up and this strategy up; like by the time you read this book, you’re going to have case study examples from my 24 different investors who’ve retired early with real estate, who’ve done it in a lot of different ways, and you’re going to have some core strategies that are all coherent to help you achieve that goal that you want.

So, it’s sort of brings together a lot of other different specific, kind of in-the-weeds, type of real estate strategies and it gives you the ability to figure out, like, ‘How am I going to put all of this together? What should I be doing?’ Like, ‘What niche should I be in real estate?’ And so, my goal writing the book was that people read it; they’re more confident, they have a plan and then they can go and then come back to BiggerPockets and get back in the weeds to figure out how to find a deal and do all that other stuff once they’ve got the book.

Brandon: Yeah, I love that. It’s one of those no brainer books that everyone should have. I mean, there’s no reason not to. Who doesn’t want to retire early, have financial freedom? If there’s just one idea, one tip, one something that helps you on that journey; it makes it all worth it. There are tons in there. Again, I thought it was fantastic. And yeah, I mean, legitimately you’re one of my favourite writers. So, like, whenever I see a blog post from you, I always read it. So, you know-

Chad: I appreciate that.

Brandon: Yeah. I’m looking forward to everyone getting in this. Of course, if they pick it up, the book. You can get the book right now; biggerpockets.com/retireearly. And if you buy it in the first two weeks, I believe it’s the four – what is it? – September 17th, there’s a whole bunch of bonuses worth throwing in there; including a video interview called Retire Early and Make a Social Impact with Low Priced Rentals – that is a video interview with Lisa Phillips, there’s another one; How Paula Pant Retired In Her 30s with Simple Buy and Hold Rentals – I love Pola, she is awesome –, Rich Carey; another video interview with him and Rich Carey Long Distance Real Estate Retirement Rentals Using No Debt, a video with Erion Shehaj – am I saying his last name right? I never know.

Chad: Yeah. Shehaj. Yeah, he always corrects me as well.

Brandon: Yeah, me too.

Chad: Erion is awesome, though. He’s like the guru of putting a plan together and making it happen just like that.

Brandon: Yes. Very much so. And then one thing that I think is super cool is you’ve got a video you did with John Schaub from- he wrote that book – what was it called? – Building wealth-

Chad: Building Wealth One House at a Time.

Brandon: –Which everyone, like, I don’t know. I would say that’s probably, like, the number two or three most cited book on the BiggerPockets podcast. So, you did an interview with him as well. And then, of course, if you buy before September 17th on BiggerPockets – these are all if you buy it on BiggerPockets – you’re going to get an invite to a special webinar with Chad here. So, Chad, you’re going to be joining- everybody’s sharing kind of your story, walking through your property; like examples, numbers, pictures, all that it sounds like, right?

Chad: Yup. Yup. And I think it’s September 10th, by the way. I mean, I want to double check on that, but I’ve been looking at the launch schedule. I think it was that. Talking about the Webinar, you know, we’re going to take some of the ideas from the book. And so, when people are on the Webinar, we’ll help, like give on how you figured out how many rentals you actually need to retire. So, is it five properties? Is it a hundred? And so, we’re going to take some of those ideas and share examples and there’ll be some people who get on early that I’ll help kind of coach them through it. So, a very practical application of how the book works will be done on the Webinar.

Brandon: Alright. Very cool. Again, go to biggerpockets.com/retireearly to get a copy of that today. And with that, why don’t we move over to the newest segment of our show; the deep dive.

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Brandon: Alright. It sent me to the deep dive. These are the questions that you wanted to hear. We actually had a lot of feedback that people wanted to go deeper on one deal and so, we’re like, ‘Hey, that’d be fun. Let’s do it’. So, we’re going to dive really deep into one particular deal of Chad’s to learn how he found it and how much it was, how did he negotiate it and more. So, let’s dive into that right now. First of all, Chad, you got a deal in mind for the deep dive, right?

Chad: I do. I got it. Yeah. I’m ready to roll.

Brandon: Alright. Alright. Good deal. Number one, how did you find it? Let’s go through that. How’d you find this property?

Chad: So, this was a really interesting niche that we started playing around with, call it tax lien. For those who don’t know what that means, like most counties or local municipalities, they pay all of the bills of the local government with property taxes. And so, it’s a big problem that people don’t pay the property taxes. And so, there’s usually some mechanism and it depends; every state’s a little bit different, so you have to study it state by state on how the local government can basically take the property back at some point if you don’t pay your property taxes. And so, I’m in South Carolina, that’s where I happen to invest. We started bidding on- there’s an auction every fall and we would start bidding on these tax liens. So, we’re basically paying the taxes for people who have defaulted on their taxes. And, in South Carolina at least, the way it works; after a year, they have a chance- they have a year to redeem that and pay you back, plus some interest. In our case it is 12% interest and we assume this property was- we knew it was, like $100,000+ property and it actually had a mortgage on it and so we just assumed we are going to get the interest on the property and we bet on it. I think we bet $2,000 or $2,500, and so we paid their taxes, and little did we know. One year later they say congratulations, please pay the taxes for next year. We’re going to send you a deed.

So, the way it works is if the person doesn’t redeem that, which I assumed they would have; most of the time they do; then you get a deed to the property. And so, we actually got a – what’s called is a – special kind of deed and we could get in the weeds on that, but it’s a special tax deed. But we basically can take the property; we can rent it, we can do a lot of other things with it. There were still some issues with the title at that point, so we had to, like, work on that. But we basically, we could take the property and rent it, which we did. So, we put a little bit of money into it. We rented it out for $795 per month after putting about 7,000 bucks into the property. That’s just rough numbers. We had 10,000 bucks on the property. We rented it for about 800 bucks a month and the numbers were good. We made good cashflow for about five years. So, I don’t know if you have another question about this, but you want to go on like anything else-

Brandon: You kind of hit a few of them there. How’d you find it? How much was it you said? What’d you say, $5,000?

Chad: We bought it for $2,500.

Brandon: $2,500, yeah.

Chad: Yeah. And then we have some taxes we had to pay-. It was around- 10 grand was what we hit our basis in the property after we did all the repairs and everything.

Brandon: Okay. And then how did you fund that? Did you put cash on that one?

Chad: Cash money, yep.

Brandon: Cash money.

Chad: So, usually when it’s 10,000 bucks, right? I mean you can raise 10,000 bucks here.

Brandon: Alright. And then what’d you burry it? Did you eventually pull money out of it? Is it still sitting there as you pay it off? What’s the long-term on that one now?

Chad: No. So, we decided just to kind of sit on it for a little while. One of the issues is the title, that I mentioned earlier. And so, tax liens are sort of a different type of animal. Like a lot of times we look for remodel properties, where the problem is the property itself and it needs remodelling. Well, tax liens; you have to basically remodel the title to the property because if we were to go refinance it or sell it, that moment we couldn’t get a marketable title. Like, a title insurance company would say, ‘You know what? The people who lost it at the tax sale could come back and claim that they own the property.’ So, there’s some risk there; like you don’t want to go in and spend 50 grand on this property; but there’s a legal process called a quiet title action; where basically you hire an attorney to go through a lawsuit that says anybody who has a claim on this property come let us know.

And so, we did that eventually, about four or five years later. The attorney – and this was actually last year, we started that process and our attorney – finished the process and the judge basically gave us a stamp, a judgment, saying you now own this property free, with no other. All these other people you’ve mentioned in this lawsuit do not have any claim on this property. You own it. And so, we can now get title insurance. That gave us a lot more options and we actually decided to sell it because it was a little bit farther from our current core area. It had cedar siding; which is really beautiful, but have you ever seen carpenter bees and what they do to cedar siding? You know, it’s like-

Brandon: There’s a thing called carpenter bees? That’s a thing?

Chad: It’s a thing, Yes.

David: Yeah. We have them out in California too.

Chad: Yeah, they drill these little holes and you can- I mean, they had probably 500 holes in the side of this siding and it’s just not a good long-term rental; it wasn’t low maintenance, it’s a little bit farther away. So, we decided to sell it and we actually have it on the market. It’s about to close as of this conversation in the next week. And we had it sold for 130/133. Yeah. So, we had to put a little more money and we had to put another 10 grand into fixing it up. But the numbers are good. We have a big- we have a new problem for us, like we have not done a lot of 1031 exchanges because the capital gains are usually small enough that we can manage them. But this one has a really big capital gain and we didn’t want to pay taxes on that. And so, we’re going to do what’s called a 1031 tax free exchange where we identified a replacement property. We’ve already found one, a new construction house that- we know a builder, so we’re going to buy this new construction house; it’s a little bit closer to our kind of core area where we have management in place; and then we’re going to take our money for equity from this property and use it to buy this new construction house and not pay any taxes in the process.

Brandon: Perfect. I love it. Alright. Last question of the deep dive; lessons learned. What did you learn on that thing?

Chad: Yeah. I mean, specifically with finding deals; which is always what people ask me about, like how do you find deals; I think you’ve got to go deep in different niches, and it’s different every year. Like, you know when too many investors go in one niche, you know, they’re sending out of town owner letters, like then nothing works. You’ve got to continually be looking outside the box, thinking outside the box, and you also have to try things. We didn’t know this would really work, like in some ways we got lucky, you know. We’re lucky because this deal just fell in our lap, but we were out there trying new things, testing out new acquisition strategies; and when you do that – you always have to be fishing for different ways to find deals – some of them are going to come up empty, some of them are going to work, and so that’s, I think, kind of like a Research and Development Department for a company. Like, you’ve always got to be trying new ways of finding deals otherwise they’ll dry up, you know, next year. You have to keep looking ahead.

Brandon: There you go. That’s a good lesson to learn. So, very cool. Alright, well that is the end of our deep dive, and now before we get out of here, we got a couple more segments to get to; including the world-famous fire round.

It’s time for the fire round.

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Brandon: Alright. Now, let’s get to the fire round. These questions come direct out of the BiggerPockets forums. We’re going to fire them right at you.

Chad: Yes. Alright.

Brandon: Chad. So, number one.

David: Alright. You ready for this? Can you handle the heat?

Chad: Let’s do it.

Brandon: What is the best advice you have for where you’re first starting out before you buy your first investment? Like, what’s your- I guess are just asking what’s your best advice for when you’re first starting out? It’s a good general question.

Chad: I think studying your market. Like, I found the best investors I know, like, really understand like the rents and the values in their market. Because that’s really, when you think about real estate, that’s really what we’re doing. We’re buying low, selling high or we’re renting with a lot of confidence that we know what the rent is. So, like, you can run all the formulas you want behind your computer and run spreadsheets and be awesome at that, but if you can’t go out and with confidence say this property is worth 150,000 bucks, this property is worth 500,000, this is going to rent for this; you’re going to have a hard time translating that theoretical spreadsheet knowledge into something real.

And so, I would say, like, the sooner you can get out in the market and look at real properties, study the market- I kind of look at it like weight lifting or exercising; like if you’re an Olympic athlete, every single day you would be training your body you would be training whatever your skill is. Our skill, our core skill, is value of real estate. So, you should be doing that all the time, from day one.

Brandon: Alright, man.

David: Alright, Chad. How long do you spend each day working on real estate? And I’d like to know when you were building your portfolio and then again now that you’re retired.

Chad: Definitely a big difference between now and when I started. Like, when I first started; and I was wholesaling properties, making offers, learning; at least 60 to 80 hours a week; which is no doubt because I was out there on Sunday afternoons making offers, I was riding around neighbourhoods on Saturday mornings, I was doing bookkeeping in the middle of the night. I loved it too, by the way. I mean, to me, like, that rush of starting something new and learning is just awesome and all of us kind of have to get to that level where you’re overworking a little bit to learn the business.

But I did like this last year. My family and I went to Ecuador for 17 months. So, we were not local living abroad, and it was sort of deliberate on my part because I wanted to step back from my business, and I still paid the bills every Thursday and I still communicated with the people on the ground a little bit, but it was about an hour, hour and a half, per week that it took me to pay the bills, kind of look over the numbers a little bit, you know. I had some random texts here and there, you know, what’s up between me and some people on the ground, but it felt really good that I had competent people and I was not thinking about my real estate portfolio all day. It was an hour or hour and a half a week.

Brandon: Cool. Alright. Next one. Can you retire- I know what you’re going to say here, but let’s talk about it for a minute- can you retire early with just a few paid out rentals? I’d like to have, like, two to four free and clear rentals, renting out maybe 1,300 bucks a month. More just seems like a big headache. Has anyone done this?

Chad: Yeah. When I interviewed 24 different people, that was one of the interesting things I asked each one of them. Like, what’s the ideal number of rentals for you when you are in retirement? And we talked numbers, you know, how many do you really need. Some people said, you know, you too Brandon, I think it was like 50+ or so, and then other people said three or four. And so, I think it depends on your numbers.

One of my recommendations is start with how much are the expenses that you need to cover, like, on a basic level. Like what are the basic, basic things, like your insurance, your health insurance, whatever your housing payments are. Like, just get a basic number without all the frills, without the travel and how much do you need to live. And then also do another number, like, kind of like, ‘alright, what would be the really nice number with me traveling and spending money on, like, fun stuff’, and have both of those numbers in mind. And so, if you can cover both of those numbers with four properties, which is possible if you have a really good cash flow property and if your expenses are really low, then good for you. You know, that’s fine. I tend to lean towards the fewer, the better. Although, right now, my business partner and I have 90 properties, so we’re kind of over the long run. I would be happier with the two of us having about 50/60 units. I think that would be, like, our sweet spot where it’s not a big deal managing those or having somebody else manage them for us. It still produces enough income, but everybody’s got to find their happy medium. And I know tons of people who’ve had 5 to 10 properties and who have done awesome and lived off the income.

Brandon: Alrighty. Good deal. Alright, David. Last question?

David: Is house hacking to early retirement a viable strategy?

Chad: Yeah, I think. I think house hacking is an awesome strategy to start. So, like, it’s like my soapbox; probably you guys, too. You talk about house hacking all the time. Like, if I had to talk to every 25-year old in our world, like, I would say like why are you not house hacking. Like, are you crazy? Like you have got to be doing this. But the other thing that we don’t talk about a lot is that you could do three or four house hacks if you wanted to, and, you know, going back to that three-or-four-property example; like if you eventually turn those into rentals; maybe you, you know, decided to pay them off, live off the income; for a lot of people that can be all you need. And so, house hacking in that way could also be your early retirement strategy. And I really like simple strategies. Like, I’ve done the complex, I’ve done, like, the buy and sell a bunch of properties; but going back to my football days, I like some of these old school coaches, like Vince Lombardi; who was, like, a hall of fame coach with Green Bay Packers. He used to run two plays – it was a sweep left in football, which is that you just toss it to the running back and run left. And then they’d run a sweep right; toss it to the right. And his guys would practice that, like every day, until they were sick of it. And so, I don’t think in real estate there’s anything wrong with, like, taking one or two strategies, make it work, beat it to death, be the best house hacker in your little neighbourhood.

David: And I just helped a client buy a property in San Francisco for $800,000 and he’s going to live there for free because he’s going to house hack it while he’s living in it. Right? So, not only is he saving on his monthly payment, but now he’s working in San Francisco where he can make a really good wage and save even more money that he can now invest into newer real estate. Right? Like, that one decision is going to load him into real estate success of the future because he’s combining like, what you just said, Chad, all these different strategies into one move and it amplifies the results.

Chad: Exactly.

Brandon: Super cool. Alright. And that’s it for the fire around. Let’s move on to the last segment of the show; famous four.

Alright. Let’s get to the famous four. These are the same four questions we ask every guest, every week, and we’re going to hear what you’ve got to say, Chad. I know you’ve answered this before, probably a couple of times, but let’s see if it’s changed. Number one; what is your current favourite real estate book? Other than your own, of course.

Chad: I don’t want to read my book anymore. I spent a lot of time with that. I actually have a good one and I couldn’t remember which one I said before, but this is definitely a newer one. It is called Big Shifts Ahead and I’ve been talking about this book so much, because I think every real estate investor who is thinking about the future and where things are going, like, it is just an awesome statistical book on, like, demographics and how things are changing and what the major population demographic changes are. It’s written by a guy named John Burns. He has a consulting firm for, like, big builders and, like, big national hedge funds that buy properties everywhere, and I think a good strategy is to follow the big money. I like being a small investor but, like, what are they thinking about? Like, they’re always thinking like 10 or 20 years ahead of time, and so some of the trends in this book- what is fascinating, for example, this idea of like a suburban – they call it- there’s like a new term they have coined called – ‘serban housing’. Like, have you ever heard of that?

Brandon: No.

Chad: What that means? So, you take suburban and you combine it with urban. So, a lot of millennials lived in urban areas and loved living in downtown walkable spaces, transportation was easy. Well, a lot of them are forming families, and over the next 10 years the trends are already showing that those people, to find an affordable house, are still going to look in the suburbs even though suburb people thought, ‘Oh, nobody is going to live in suburbs’. Like, that’s where most of the population growth is going to be. The types of housing they’re buying in the suburbs are walkable with, like, little, you know, areas that are more like an urban area, but they’re still in the suburbs. Even if those things don’t play out exactly like they will, you know, 5 or 10 years from now, being ahead of the curve and thinking about those trends, where things go, and there’s tons of those little trends like that in that book. And so, I’ve really profited from studying those.

Brandon: That’s funny because people actually don’t want to live in urban areas, they just want to feel like they live in an urban area. They live in the suburbs and they’re just like your typical, you know, whatever, two and a half kid American family. But you know, they got a tattoo, so they feel cool.

David: Exactly.

Brandon: Hipster.

David: That was good.

Brandon: Alright. Alright. What was your- what is your favourite business book?

Chad: This sort of qualifies as business, but this is another sports guy. So, John Wooden is one of my favourite coaches of all time. He was a basketball coach at UCLA. He won 10 National Championships in 12 years. Like, he’s kind of like the pretty much the best coach ever in terms of his results, but he has this little book called Wooden. He’s passed away now, but it’s just this little small book, and I think I got it here, show people how small this book is, you know, this small, but I pick it up all the time. Like, you can read it, like one page of it, and it’s got these little quips, these little old kind of midwestern farmer kind of quips. Things like, when he started practice with his players, he would tell them, you know, like preparation is the prize, like I don’t care if we win, you know, zero games, like if we prepare really well and we do our best, and like our potential’s here and we almost reached it, the nest, that’s successful.

So, it’s kind of these old fashioned but, like, awesome things that translate to business, that translate to you thinking about your life, and he’s just a super solid person and philosophy. So, I think you would do well in your business, in your personal development life, thinking, studying people like that

David: I heard that he actually had a specific way he’d make his players tie their shoes.

Chad: Exactly. Yeah.

David: That’s where it would start, all the way down to this is the way we tie our shoes on this team.

Chad: I love that story. Yeah. He would bring these big, like, all American 6’10, like, the best players in the country; like Kareem Abdul-Jabbar, you know; like think about these from the 60s and 70s. Like, these guys were awesome; and he would have them, in the first day of practice, spending an hour in the locker room, taking their socks off and putting them back on, tying their shoes, like, 50 times. Can you imagine these all Americans like, ‘Dude. Man. I am not tying my shoe one more time.’? But then he would get them to this point where they’re like completely frustrated and he would say, ‘You know what? Do you know why you are tying your shoes and putting your socks on 50 times? It’s because if you don’t tie them, if you don’t put your shoes on correctly, if you don’t put your socks on correctly, you’ll get a blister; and if you miss, if you get a blister, you’ll miss two practices. If you miss two practices, you’re not going to play as well in the next game. If you don’t play well in the next game, we might not win a championship’ and just on and on and on. He’s like, ‘Therefore, I want you to tie your shoes correctly’ and he just, like, set the stage for, like, do this. This coach is very detail-oriented and that was what it’s all about is, like the little small details, preparation or how you win championships.

Brandon: Awesome man.

David: Yeah. So many business lessons in that and life lessons. That’s awesome. I’m going to have to pick up that book now. I have not read it.

Brandon: John Wooden was an impressive guy. Absolutely.

Chad: It’s good.

Brandon: Okay. Chad, what about some of your hobbies?

Chad: Yeah. I mean, I’ve already talked about travel a little bit. So, my wife is a Spanish teacher and so I like to pick up languages. Like, I studied German in college; I can’t really speak it that well anymore, it’s disappeared on my ear somewhere. But I do speak Spanish now fairly well, and so I like to do that, and kind of explore on my mini retirements. That’s one of the things I do, but also, I like to mix it with exercise. I used to play football but I play some basketball now. So, like when I was in Ecuador, I found a little pickup game where I could practice my Spanish and learn all, like, the cuss words in Spanish while I’m playing basketball with guys and then I was also be able to, like, meet local people and talk and made a lot of friends that way. So, I love being active and playing sports and then also trying something new, learning something new.

Brandon: Habla español.

David: Brandon speaks Norwegian. We recently learned how to throw axes by Norwegian people, who look like Thor right after Viking-

Brandon: That is true. I do not speak Norwegian, but I look a little like Norwegian.

David: You look super Norwegian. They came to speak Norwegian hit him. They’re like, ‘oh, it’s family’. And they all just embraced him right away because he’s nine feet tall and you could ask his hand and it looks like he was born that way.

Chad: I think Brandon could be a stunt double on one of these Norwegian role.

David: Yeah, right? He could play Thor. He could play Thor’s butt double in one of the new Avengers movies.

Brandon: I’ll take that as a compliment. I actually just watched the Avengers movie, the new one, last night. I haven’t finished it; I watched half of it. I can’t seem to finish a movie anymore without falling asleep. Anyway, we did. We threw axes. Actually, I would highly recommend if anybody’s ever in a city where they have axe throwing, it’s a fantastic time. So, we recommend it.

Chad: That’s a thing?

Brandon: Yeah.

Chad: Okay. I have to check that out.

Brandon: Well, let’s go to the last question of mine of the day. What do you think sets apart successful real estate investors from those who give up, ail or never get started?

Chad: Yeah. I’m going to pull one from the John Wooden book. I’m going to say preparation. I think, I am trying to remember what I said on one of the other shot, I think it was hustle. I feel like hustle is like the great equalizer. If you do it, you can make a lot happen just by showing up and going hard; but if you just show up and go hard and you don’t prepare really well, it’s going to be difficult. And so, like, preparation is as an umbrella for things like education, building your skills, building your network; like all of those things go back to, you know, getting ready before you go make an offer. Like, think about all those things like knowledge you have to have, the relationships you have to have, and the people I know who are super successful, like, they are just like researching, like crazy. They’d know what’s going on. Like, they are super prepared. And so, if you take that attitude that you’re going to be the most prepared investor out there, I think there’s going to be an awesome competitive advantage wherever you go.

David: Cool. Alright good. Good stuff.

Brandon: Alright, Chad, where can people find out more about you?

Chad: Well, my home on the Internet is coachcarson.com. That’s where I kind of share my personal stuff and talk about early retirement. Of course, as everybody’s heard, I’ve spent a ton of time on BiggerPockets. I’m Clemson Investors; my handle there; and I write a lot of net blog on the BiggerPockets blog. I’m going to be doing a lot more live streams and different kinds of trainings associated with this book as well. So, everybody, check me out there and, you know, let’s discuss your early retirement plan; how you want to use it. I love hearing your stories about what you have going on and why you want to use these skills to retire early. That’s what’s a lot of fun for me.

David: Very cool.

Brandon: Cool. Awesome. Well, Chad, thank you so much for joining us today. And of course, everyone, go pick up the copy of the book at biggerpockets.com/retireearly; and by the way the official URL was biggerpockets.com/retireearlybook, I was close. But either way they both go there now. I had Mindy pulled the URL magic, so retireearly or retireearlybook or go to biggerpockets.com/store and pick it up there. And, Chad, you recorded the audio book of that as well. Didn’t you?

Chad: I did. Yeah. I wanted to have that conversation. You gave me a lot of good tips. Thanks for that.

Brandon: I think I told you-

Chad: –a week where I did nothing.

Brandon: I think I told you it was the worst thing you’ll ever do in your entire life and it’s miserable-

Chad: You tried to talk me out of it.

Brandon: Yeah, it’s the worst.

Chad: You tried to talk me out of it but after it was done I was glad it was done.

Brandon: Yeah, I was glad I did it, but it was the worst thing ever. Anyway. So, of course, go. Go to biggerpockets.com/retireearly and you can get the ultimate bundle; which includes a physical book shipped to you, a download of the E-book, the audio book, and a bunch of digital bonuses, plus the special webinar invite. Right now, get all that good stuff. Again, biggerpockets.com/retireearly.

Alright, Chad. We’re going to get out of here. Thank you so much for joining us today. Everybody else, we’re just going to take this out with Chad. So, I hope you guys enjoyed today’s interview with Chad, and, of course, my lovely assistant to the host of the BiggerPockets podcast; David Greene. So, I don’t know. Let’s get out of here. You want to take that David?

David: Thanks guys.

Brandon: Thanks everybody.

David: Have a good day.

This is David Greene for Brandon (Thor’s Double) Turner, signing off.

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In This Episode We Cover:

  • Chad’s strategies for retiring early through real estate
  • If focusing on cash flow or equity is the smarter move
  • How to control your budget
  • If offense or defense is more important when it comes to building wealth
  • How Chad made $120K in one flip
  • How tax-lien strategies work — and what Chad did to capitalize on them
  • Why “starter” investment homes aren’t always the best choice to stick with
  • How to transition from wholesaling to other investment strategies
  • How many hours you can expect to work each week once you’ve retired early with real estate
  • How “the stack” can help you grow your portfolio fast and efficiently
  • How house hacking can lead to an early retirement
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Fire Round Questions

Tweetable Topics:

  • “Our core skill as an investor is figuring the value of real estate.” (Tweet This!)

Connect with Chad

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners — without the non-stop pitch prevalent around the industry.

With over 180,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

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