Afford Anything - How I Reached Financial Independence through Real Estate - with Chad Carson

Episode Date: September 10, 2018

#150: Chad Carson's friends called him a "nerdjock." When former college football linebacker Chad Carson graduated from Clemson University, he decided to start a business. But he didn't have any money. He was a 235-pound athlete who attended college on a football scholarship. He graduated debt-free with $1,000 in savings from various odd jobs. He wanted to become an entrepreneur, and he knew he was starting from zero. As Chad viewed it, starting from zero meant he had nothing to lose. He started jogging around local neighborhoods near the university. Whenever he noticed a property in disrepair, he'd ask if it was for sale. If he noticed a 'For Sale by Owner' sign in the yard, for example, he'd dial the number. If he noticed a home with an overgrown lawn and no curtains in the windows, he'd leave a note on the door, or he'd knock on the neighbor's doors to get the owner's phone number. By doing this, Chad started a real estate wholesaling business. He'd find off-market properties, enter into a sales contract with the owner, and then 'flip' the contract to an investor. He earned around $5,000 for each deal. The benefit to a wholesaling business, Chad discovered, is that he could get a foothold inside the real estate industry without much access to capital. He was a recent college graduate without any official employment, so most banks weren't interested in offering him loans. Wholesaling gave him a start in the industry. But after awhile, he wanted to chase bigger deals. He and a business partner decided to start flipping houses themselves. They earned profits of around $20,000 to $30,000 for each deal. While this was great, Chad wanted to transition into something that would provide a steady, stable income stream. He was running an active business; he wasn't accumulating a portfolio of passive investments. He and his business partner stopped flipping homes and began accumulating buy-and-hold rental properties. Today they have 90 units between the two of them. A few years ago, Chad realized that the passive income from his investments made him financially independent. He and his wife decided to enjoy their newfound freedom by moving to Ecuador with their two children, ages 3 and 5. They spent 17 months living in Ecuador, learning Spanish and enjoying a slower pace of life. They recently returned to the U.S. and are considering moving to either Spain or Germany -- or maybe Colorado? -- for their next adventure. In today's episode, Chad and I discuss real estate, financial independence, and international travel with children. Enjoy! Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every choice that you make is a trade-off against something else. And that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention, to any limited resource that you need to manage. Saying yes to something implicitly carries an opportunity cost. And that opens the door to two follow-up questions. First, what matters most?

Sounds like a simple question on the surface, but it's perhaps one of the hardest questions you'll ever. answer. And the second question is once you've identified what matters most, how do you align your actions? To reflect that, how do you bridge the gap between your ideal self and your daily behaviors? Answering these two questions is a lifetime practice. And that's what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. Every September, we do something that I know so many of you enjoy. We pull four of our favorite. interviews from our archives, we've had more than 400 episodes, we pull four of our favorite

interviews, each reflecting a different theme. The acronym that characterizes the month of September is FIRE, which we've rebranded as financial psychology, investing, real estate, and entrepreneurship, FIRE. And so each week during the month of September, we air one of the best interviews from our vault, reflecting each of these four categories. And so, each of these four categories. Today, we bring you the letter R, real estate. And we share with you an interview that we originally aired four years ago with a real estate investor and a good friend of mine named Chad Carson. Now, Chad Carson's friends back in college used to call him a nerd jock. He was a former college football linebacker at Clemson University, a 235 pound athlete who went to college on a football

scholarship. Because of that, he graduated debt-free with $1,000 in savings that he had accumulated from various odd jobs. Out of college, he started at zero. He had no debt, but he also had no assets other than $1,000. And so he started jogging. He started jogging around local neighborhoods near his university. And whenever he noticed a property that was in disrepair, he would look up the owner doing a public record search, and he'd ask if that property was for sale. By virtue of doing this, he started a real estate wholesaling business, which gave him a foothold inside the real estate industry without much access to capital. It gave him his start. But eventually, once he had accumulated some capital, he wanted to chase bigger deals. So he got a business partner. They decided to start flipping

houses. They earned between 20 to 30 grand for every successful flip. And then after that, he decided to escalate into accumulating a portfolio of rental properties. So they stopped. flipping homes and they began buying and holding. In this episode, which originally aired in 2018, Chad and I talk about real estate investing, financial independence, and the adventures, all of this enable, including international travel with children. We talk about that because Chad and I recorded this interview shortly after he and his wife returned back to the U.S. after spending a year and a half living in Ecuador with their two kids who at the time were ages three and five. And a lot of that was made possible with the proceeds of residual rental property

income. So that conversation you're going to hear right now. I hope you enjoy it. I hope you learn something from it. And I will meet you on the other side. Hey, how's it going? It's going awesome, Paula. So I wanted to chat with you about financial independence and moving overseas with your children. You've done some really interesting stuff. So I want to kind of take the audience through your story. That'd be great. Let's do it. Let's just start at the beginning. Let's start at 18-year-old Chad. Introduce us to that guy. Oh man, gosh, I have to go all the way back. A couple different ambitions at 18 years old, but I was a football player. So that was sort of occupied a lot of my time. And it paid for my school. You know, I was a middle linebacker, like one of those 235 pound football players were like a big neck and all that and worked out all the time. And so that was my, that was kind of my ticket to pay for college. And I was at Clemson University in South Carolina. But also, I was always sort of a split personality. Some of my friends called me like a nerd jock or something like that where, you know, I played football. I was good at that. That was. sort of my natural abilities. And then I also love biology and foreign languages and German and

learning Spanish eventually. And so those are my two worlds and sort of my things I was interested in college age. And those I think are important as we go through some other threads later on, because as football died out and finished that, it paid for my school and I was done and kind of left that behind me, some of those other interests continued. And that was, I think that led me on to some of my decisions career-wise, some things I thought about doing and ended up not doing. For example, medical school was something I was interested in with a biology major. The structure of it and the type of career of going into medicine, nothing wrong with it for people who go into it.

But just for me at that time, I'd been through structure and the college experience and playing for a big, for a team, which felt a lot like a corporation for me. And so after that experience, it was like, I just need to do my own thing. I want some freedom. I want flexibility. I don't want to have meetings or times when I have to be somewhere. And so I think I was called, I didn't know exactly what, but more towards the entrepreneurial side of life right out of college. How did you do that right out of college? Because you graduated, you didn't, I'm assuming, didn't have any student debt because you played football through college. Right. So then what? At that point, you're starting at zero. Yes. I sort of looked at it just as a free roll of the dice because I had about $1,000 left over just from working some summer work. I didn't have college debt, which, as we know, is like a really big thing these days. But I sort of saw it as a free roll of the dice because I didn't have a lot to lose.

I had a car, had a thousand bucks. And I was fortunate enough to have some family members. So my father had rental properties. And so I just at least observed that from a distance and understood that real estate was a thing that some people flipped houses. I really didn't know how to do that. But I understood that people did it. The way I looked at it, I said, you know what? For the next year or two, I think I'll probably go back to grad school or I'll probably do something different, more stable.

but I think I'm just going to try this. And the worst case scenario is I fall flat on the floor, but I'm already on the floor. So, you know, what's there to lose? A business partner and I started figuring out how to find real estate deals below value. So we would look for foreclosures. We would look for people who just evicted their tenants. We would look for people who had inherited properties. Usually the properties that needed work, the uglier houses.

And so I just figured out one little slice of the real estate business. I didn't know how to manage properties. I didn't know how to fix them up. I didn't know how to do any of that other stuff. But for the first six months or so, I really focused on learning how to find those deals. And we built upon that because I was able to find the deals, I was either able to quickly flip them to somebody else and make a few thousand bucks doing like a wholesale deal. Or eventually, I learned that I could make a bigger chunk of the pie if I brought in some money partners or some private lenders. And they would put up the money.

My business partner and I would bring the deal. and we were able to split the profits on some of those. And so that's really how we got started. We just sort of scrapped along for a little while and door knocked and put flyers in neighborhoods. And I had a car, I mentioned earlier. And I put signs on the car to say, call me if you want to sell your house, things like that. And over the next few years, was able to save up a little bit more money and sort of transitioned

into a more stable rental business as well, which was my big picture that I was looking to move towards. Okay, yeah. So those are going to be my two follow-up questions. One was how did you find the deals, and then the other was how did you finance them? So it sounds like in terms of finding the deals, as you said, physically knocking on doors, turning your car into a mobile billboard. What else did you do? I'm assuming you sent postcards, maybe hung some signs on telephone polls. Yeah, I did it all. I did everything. I don't do all those anymore because they're a little, you know, some of those are a little edgy. The telephone poll sign for one is like, you know, most code officers don't appreciate that. And I can now appreciate that as well. But I did a little bit of that. But basically I just hustled. And I think that's been my theme when I talk to anybody about whether it's finding real estate deals or getting started in any business, you just have to hustle, hustle, and it takes you five times longer. It took me five times longer to do something then that it takes me to do now. But because, I I think the one thing I had, which was not knowledge, but I did have just this, hey, I can, I can work hard.

I can go out and I heard a good idea by networking with somebody. And they said, you know what? Sending a direct mail letter to every vacant house that you find while you're out exercising. Like, I would go out and jog or walk in a neighborhood. And that's when I say door knocking, that's sort of what I was doing. I was just getting out on my feet in a neighborhood. And I would look for for sale by owners, sign. So there's a little sign in the yard.

I would call that. If I saw for rent by owner sign, I would call that. If I saw a house that didn't have any sign, it was just vacant and the grass was sort of grown up where you could see in the windows that there was no curtains in the window, I would do a lot more with that house. I would actually go up and leave a note on the house, leave a business card. I would talk to the neighbors on either side and say, I'm interested in buying, I fix her up our houses in this neighborhood. And I notice this one needs some fixing up. Do you happen to know the owner? You know, nine times out of ten, the neighbors would love to get that eyesore house.

out of the neighborhood. So they would tell you who the owner is. Here's their phone number. Go ahead and call them. And that's the hustle work that I would do, which people who are working a full-time job and, you know, are trying to get into a real estate that way. It's a lot different than the way I got into it because I had a lot of time, did not have a lot of money. And so I had to use the asset I had at the time, which was that space in my day and the ability to hustle and work hard. Right, right. And if a person's working a full-time job, then buying it from a wholesaler, which is, basically what you were in the beginning, right? You were somebody who hustled. And then once you got

that property under contract, you flipped it to an investor who wanted that good find but didn't have the time to put into league work. Exactly. Yeah, I'm a big fan of talking to wholesalers to find those gems. Yeah. And I mean, for me, I had three people, basically, who were looking to me to bring them deals. And so I was a valuable resource for them. They were a valuable resource for me. And it's a very good relationship, which once we got to know each other, once I figured out what they were looking for, and they figured out that I could actually deliver and bring them some deals. Exactly. So how did you finance these?

Because you were right out of school. You didn't have a full-time job. You started a business right away. Where did that financing arm come from? Well, primarily it was not at banks. So I did get one bank loan early on. And it was just a good grace kind of loan in the 2004 when they just said, I will give him one because he had a good transcript at college, I think, you know,

or something like that. But after that, it was not going the traditional route, I was basically viewed as unemployed by most traditional lenders. You know, having, being a person out flipping houses or any entrepreneurial venture is not the best borrower in terms of traditional financing. So what I did, a couple different things. Number one, when I did the wholesale deals that we were talking about earlier, there was no financing required on those because typically I would get it under contract and my contract

was assignable. So I was able to basically sell my contract to that other investor. So let's say they paid me $5,000 because paying my price plus $5,000 was a good deal for them. They would pay me $5,000. I would follow through it until closing, and then they would be the buyer at closing. And so that was no financing on my part. They were the ones who brought the financing. But would you make the deal contingent upon financing when you went under contract?

I usually had an inspection contingency. I had a 10-day typically, sometimes shorter. And during that 10 days, I would inspect it. I would also have my kind of short list of buyers inspect it. And I would know within that time whether they, they were going to make it work or not. After that, they had to commit to it. I mean, I put an earnest money deposit down with the seller. And then after that 10 days, that was, I had to follow through on it. And so I had to have a lot of trust in those buyers as well, because they were the ones helping me follow through on my promise to the seller. Right. Were there ever times that you had to break those

contracts? No, no, there weren't. I would always follow through. There have been times a little bit later on where, you know, if somebody didn't follow through, I ended up just buying the deal because it was a good enough deal. And so there have been some of those, but I can think of one where that happened. And so every other time where I found deals that my little circle of buyers were interested in, I would either know within those 10 days that it was a go or a no-go. And so I did have times during that 10 days, would I have to go back to a seller and say, you know what, we found X, Y, and Z in the basement, these structural issues. I just didn't foresee happening. I wish I would have found them earlier.

But because of those, I can't buy it at that price that we agreed to before. I am sorry. If you still want to sell it, I could do it at this price and it would be a lower price. If you don't want to sell at that price, I understand. And thanks for letting me work on it. Sometimes that happened, but not very often. So you transitioned from being in your early to mid-20s, working at this full-time, hustling, becoming a wholesaler, transitioned from that into a more passive approach so that you could reach financial independence.

tell me about that transition. Yeah, it was definitely not from the wholesaling to the rental property is more of a kind of a stair step. I think my first transition was, you know, wholesaling to me was fine. It paid the bills, but it wasn't what my ambition was forevermore. It was just sort of a tool in my toolbox. And the next step up was to try to use the same amount of time I was doing spending there, but make a larger profit on every single deal.

So instead of me making $5,000 on a wholesale flip, I want to make $20,000 or $30,000 on a on a flip where we actually buy the property and fix it up. So that was sort of transition point number one. And we did that relatively quickly. I mean, it was probably within the first year we started doing deals on our own. And in order to do that, I still didn't have a lot of cash savings. This was where I had to go to some of the same people who had wholesale deals to. I would go to them and say, we're transitioning our business model.

So I would like to fix these properties up. Would you be willing to lend the money to us or to partner with us? And typically I did the lending scenario. For example, I had one guy who was my professor at Clemson, one of my business professor that I took a class with. I introduced him to the idea that he had an old 401k that he could self-direct. He could put it with a self-directed IRA company. And so he could basically be my bank, could loan me the money as a hard money lender or

private lender. And I would just pay him an interest rate. And he would be the first lien on the property that I bought. So for example, let's say I needed $100,000. to buy and fix up a house that was eventually going to be worth $150,000. Well, he would loan me the money to buy it and to fix it up. I paid him originally 10% interest. And so he was able to be a passive investor.

He was able to have a safe position on the property because he was at a low loan to value. And then I would flip it. I would make good money on the property. He would make good money. And then we would just recycle the money and do that again. I don't like flipping in terms of just how much time it takes. It's not a good passive strategy, but the thing that I love about it is that you can keep recycling money and just take that same pocket of money and use it again and again and again.

Yeah, that was my strategy. We had kind of a pool of money and I said, let's use that. This was definitely not real estate investing and it had nothing to do with being passive. This was a job. That's all it was. And so flipping is sort of a misnomer because it's the person who's lending the money might be investing, but the person who's entrepreneur buying the property, fixing it up is definitely just, they're just an entrepreneur. And so I still knew at that point that, like, we were successful with some of that, and that was probably three or four years under the business that we decided that we would also like to have some properties that would continue paying us without us having to do the work over and over again and flip another house and flip another house.

And so we started buying primarily as kind of a sideline to our flipping, started buying a couple of rental properties. And we again had to use creative financing, had to use kind of think outside the box. And so I got good at doing things like negotiating with the seller and trying to find properties with a seller and would finance the property to me. Instead of, for example, there's a landlord who's owned a property for 30 years. She's kind of let the property run down a little bit and she's just kind of tired of dealing with it. It needs work.

It needs repairs. And so I would go to that landlord and say, I'll put the money to fix it up. I'll spend $20,000 fixing it up. If you will allow me to make a small down payment, so $5,000. and if you'll finance the balance to me, if you'll be the bank basically for me. And so I was able to get seller financing from a few people. And that allowed me to start getting some rental properties, which, as you know, of course, you can start building those.

They don't make as much cash flow at first. But as we stabilize those and start stacking some of those up, that was really what kind of my long-term strategy was to get more of those long-term rentals. So how many long-term rentals do you have right now? We have 90 units. You have 90 units. 90 units, yeah. Holy moly. Too many, too many. But yeah, and it's also, again, I have a 50-50 partner, so that's one thing to consider. It would be more than what I would do on my own. But even then,

I have equivalent of 45 units for myself. And part of that is that we kind of got stuck in the place 2007 and 8, which was the downturn in the real estate market, downturn in the financial markets where it was an advantage and a disadvantage that we were also, we were a full-time investor flipping houses and we also were trying to buy rental properties for the long term to eventually become financially independent. That was always like parallel goals. I had put food on the table, eventually buy enough properties where I don't have to flip anymore or do any active work. And so 2007, some of those properties that were originally going to be flips or maybe short-term holds where we're just kind of selling them every year or two became keepers, became long-term

keepers because we either didn't buy them correctly or just the market for that property in that little location where we were wasn't really good for flipping. And so we ended up keeping more than we wanted to. And we've been selling off some of those since then. I mean, we've not sold off a lot of those, but we probably have two or three that I wouldn't have wanted to keep in 2008, seven and eight that we still have. So that's sort of where, you know, long run, I would like to be, have fewer properties. And so we've sort of been in the decision point where do we buy more properties or do we sell some of ours and use that money to pay off the debt on the rest of them? That was sort of a decision point we had three or four years ago.

And the decision sort of made itself for us because we were still finding a couple more good deals. And we bought a 28 unit complex that might make us a million dollars one of these days, just an equity and those sorts of things. So that took us sort of from that 60 unit number up to 90 back in 2016. And where are these located? Are they all in South Carolina? All in South Carolina. Yep. I live in Clemson, South Carolina, which is a small college town. And most of ours are either, we have some, you know, a big chunk of college rentals, but then also just single family houses and a few mobile homes kind of in and around Clemson, probably 20 mile radius of where we are. So it sounds like in terms of the type of

properties that you buy, you range from single family homes to mobile homes to apartment complexes. So you work in both residential and commercial. Yeah, almost all smaller residential, though. So, The only unit building we have that's not a four unit or below is a 12 unit building that we bought. So everything else is like single family, duplex, triplex, quadruplex, or a single mobile home on a piece of land. So at what point did you reach that crossover point at which the income from your rental properties made you financially independent? And I suppose I should perhaps preface that question with, was that an original goal? Did you have a number in mind as you were beginning all of this? There's two answers.

there's like the theoretical on paper answer. And then there's the actual answer where I said, all right, I think we're in a good place. And we can really know that we're confident that we have enough money coming in. The theoretical answer was even back in 2007, eight, and nine, when we were sort of in the downturn and the real estate market was in a downward pace, we had enough properties. And we had, I say on paper had enough money coming in and that we had some really good rental properties that produced cash flow. But we were still probably for three or four years, in that period dealing with sort of the mistakes from the past. So just like to make it simple, we had 10 properties, like seven of them were doing really well. Three of them were the mistakes that we

shouldn't have done when we were being too aggressive and buying too much in 2007. And so some of those, for example, had they would go vacant and we had underestimated the amount of repairs that we thought we had to do when we bought the property. So we would feed that property $20,000 to get it fix back up to the level it should be. And so there goes, you know, a lot of cash flow for that for that one property. You can eat up a lot of monthly cash flow on a $20,000 repair on that one bad deal. So that was the kind of the stage where on paper, yes, we had some good rental properties, but we had to sell off some of those properties. We had to refinance some. We had to sort of eat through some of our mistakes for the three or four years after that to get to the point by probably

2011 or 12, where we thought, all right, it looks good. I've got a couple years of records showing that we have enough cash flow. And that's actually what led me then to say, I like to take trips and travel and take some mini retirements. And so that was reason enough to celebrate and say, let's start planning another mini retirement, kind of take off for a little while. So it sounds like the point at which you hit financial independence was the point at which it was almost retroactive. You were able to look back on the previous several years and say, hey, we've had enough passive income consistently over these past few years that I am now comfortable. Yeah, that's right.

And I guess maybe my accounting was it current or maybe I'm just conservative. And I'm just, all right, I really want to make sure this is okay. I'm not bleeding money anymore. The recession's over. I feel pretty good about this. But yeah, it was at that point we could more clearly say that we're in good shape. Has there been a lot of consistency since then in terms of the both gross revenues and net after all expenses, including debt servicing? in terms of your properties?

Yeah, it's been consistent in growing. So we've been fortunate in some respects. Maybe this is pretty consistent in a lot of places in the country, but our rents, our gross rents have just grown organically because of the market. So, for example, I had a quadruplex that I bought in 2005 is actually one of my first residence that I moved into one unit, did the house hack and rented the other three units out. And when I first started, the per unit rent on that was $400 a month.

So it was a two-bedder in one bath apartment, $400 for each unit. And today, I think one of our new leases that we had for August 2018 was 550. So that's been nothing we've done to the building other than just maintaining and keeping it nice. But that's just been growth in the rent. Primarily, and this has been college town related because the university where we are, Clemson University, is increased enrollment. And there's been a lot of building to sort of compensate for that increase in enrollment. But it's also, interestingly, like,

the new buildings, they've all had a lot higher rent levels than what we've had in the past. And so it sort of pulled the entire market up. Most of my rents are on the sort of lower end of the student rental market. Both the lower end and the higher end have both moved to higher numbers. So that's certainly benefited us because our expenses have not grown at that pace. So we've increased our sort of operating margin. But then as I mentioned earlier, we also made a couple acquisitions. And as it turned out, and I guess this is the way it should be, is that every acquisition we've

made has been a lot better than the previous ones. And so the big one, the big 28 unit property we bought in 2008 is cash flowed a lot better than all the previous ones than each of the previous ones. And we've added cash flow every time we reinvest our money into a new deal, it's been a lot better. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size. But they also have the fintech hustle that got them named one of America's most innovative

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off on her own, traveling to Guatemala for several months, just by herself and her family from St. Louis, who had never traveled abroad, thought she was kind of crazy, but that's what attracted to me to her when we met. So we always talked about doing that on our own. And so in 2009, which is a little bit before I realized we were, you know, set financially independent, the two of us went for four months to South America and the sort of backpacked and traveled around. And we had to save some money to do that. Like it wasn't all 100% passive income. But that really gave us a taste of. of it. And so we had kids in 2011 and 2013. And so we put it off a couple more years from there. But we knew even when they were young that we wanted to travel abroad and let them learn Spanish,

become fluent in Spanish, me to rekindle my Spanish, Carrie to teach there as well. And so we went last year in 2017, the beginning of the year in January, went to Ecuador and has found a place to live in Quenca, Ecuador, got a rented apartment. Our kids went to local schools there. And we originally planned on staying for 12 months, but it was just going so well that we ended up staying another five months after that. So 17 months total. And we actually just got back from that trip. So tell me more about that. How old were your kids when you and your family moved to Quenka?

So my youngest daughter was three and my oldest daughter was five when we started that. So they were just at the age, the younger one could go to preschool. And language development is so interesting that if anybody who has three-year-olds, those have three-year-olds knows that's sort of the where they're even in English, they're learning a lot of words and they're sort of coming into their own and don't have a huge vocabulary. And so it was a perfect time for her to the point where you can actually have more of a native accent. So your tongue is a little bit more malleable. So it's so much fun watching her learn and pick up little words. And my seven-year-old was just a sponge as well. She was in the equivalent of kindergarten when we went there. And we felt sort of

apprehensive about it at first because they had about 20, 25 words in Spanish. And, And when we enrolled them in schools, it was 100% Spanish in class. And we just sort of threw them in the deep end. And they just had to learn how to swim. But it was the best thing, big picture, because after, you know, it doesn't happen overnight. But after, you know, four or five months, they start coming home and are really sort of processing it and talking in Spanish with their friends.

And to the point where after maybe six to nine months, here I was, I had been taking Spanish for a while. And it had a pretty good level before that. were correcting me and saying, Papa, no, say this is so, and telling me all the vocabulary that I got wrong. And that was one mistake that I, I love making mistakes and seeing how they were correcting me because it showed me they had been, you know, they were immersed and they were making a lot of progress. So that was just a lot of fun. Were they excited about the move before you went? Yeah, they were. I mean, it's kind of hard to tell, like, because we've been building it up

for six months to a year saying, this is what we're doing. We're going to, here's a place. And it was just all sort of abstract at that point. They knew that no matter what they're going with mom and dad and they're going to be with us and nothing like that was going to be happened. But my older daughter had a little, a couple points in school where she came home and she always loved going to school. And so she came home where she was not having fun. And she explained that, you know, I tried to tell my friends that I wanted to just go play this game instead of playing that game.

And she couldn't explain that in their language. And so just like frustration. And so I think she, it was not at the beginning, but kind of in three or four months into our trip, she experienced sort of a downtime. time. But we talked to her teacher and asked her to give her some extra help and extra kind of pull her aside sometimes and kind of give her some extra support. And probably two or three weeks after that, she sort of made some more breakthroughs and did even better. So I don't think there was any, there was no major points for the kids. I think mom and dad, like, we had some

points where we were like, I don't know if this is going to work, but we also got through them and just one of the best experiences we ever had because of just the, I think a lot of a couple different reasons, but one is the juxtaposition of our life beforehand in our life, being in Latin America and being in Ecuador, just the pace of life. You know, when, you know, speaking for myself, but somebody who is an entrepreneur and who works and who's kind of organized and always going after things, you know, I've always known having that physical like separation where I plant myself in another place. I'm separated from where people can't meet me. I can't, I can't go do something like I'm in another continent. So having that detachment was really nice physically,

and it allowed me to sort of look at everything I'd done before then, both with my business and also finances and sort of observe it as a little bit more detached person and see it for what it is and see the good things, the bad things, the things I want to improve, and just have that kind of stillness and that separation that really allows growth to happen. So that was, for me, that was one of the awesome parts of the experience above and beyond the specific. of being an amazing country and meeting amazing people. And I think I hope the kids, you know, the kids didn't have maybe as much to compare that to. But our hope is that them being in another culture and also learning another language sort of embeds in them that, hey, you know, there's different

ways of doing things. There's different ways of saying things and just have that be part of their experience as kids. How did you meet people while you were there? How did you create a social network? Part of it was a lot easier being parents. So because we went to a school with, you know, just people who were, who worked there in Quenka, we went to a private school. So, you know, socioeconomically, it was, you know, they were definitely like on upper middle class or higher. But every birthday party were able to talk to parents and meet them that way. And so we developed friendships with two or three sets of parents and their kids would come over and we'd get to talk and hang out. And so that was, that was one way. The other way was just doing

everything we'd all, you know, whatever hobbies we had anyway, like I like to play basketball. And so I was just walking through the park one day and there was a guy shooting baskets. And I just started rebounding for them and, you know, shooting around a little bit and talking. And he mentioned, hey, there's a pickup game on Saturday mornings over in this park nearby, which happened to be two blocks from my apartment. And so I just started showing up and, you know, learning all the, the normal Spanish words and every, all the words they won't teach you in class as well. That's always fun. playing pickup basketball a little bit. For me and my wife, we both just did things like basketball and yoga. And my wife did a, it's kind of the equivalent of like, what we call it, jazzercise,

it's bioterapia in Spanish, where you just, they'd have it in the park, which is so awesome, like in the morning's free, you know, public dance. So she would go out at seven in the morning and have this loud music in the park and all these 50 people are dancing, doing dance exercise. And so we both did that and got involved and were able to meet both local people, which was awesome. And then also there's a great expat community where we were. And so we were able to meet them and hang out with them as well. Tell me about managing your business, managing your rental properties from Ecuador. What was that like? It was something we built up to. Like I think if I would have jumped into 17 months abroad just right off the bat, it wouldn't have happened. But, you know, over a several

year period, going all the way back to the recession and sort of what we were dealing with then, my business partner and I, I think we read a book called the E-Miths revisited when we first started. And one of the main things I took from that book was that while you're working in your business, you always simultaneously work on your business. Meaning like if you're taking a maintenance call, simultaneously think about if somebody else were doing this, what would be the protocol? How should they respond? What would be the right thing to say?

What would be the right thing to do? Would you need a list to help you do this job? And so we built basically an operations manual from the time we first started our business and we sort of added to it and add to it and add to it. And slowly over time, we started having things like we hired a bookkeeper to help us do some of the sort of going to the bank and checking our mail and doing some of the basics of bookkeeping. She did such a wonderful job. And we just happened to find a gym of a person. She was just wonderful that she sort of grew into other roles within our business. And she started helping us with collections, like if there was a delinquent. rent one month, she would help us do that, and we would pay her extra for that. And then she would also start helping us with leasing as well. So I still, even when I was in Ecuador, I was the one who did the underwriting for most of our leases, but I would say 90, 95 percent of the work and the process and our entire management business for the properties that she helped us manage. She did. So she would take maintenance calls. She would, when we had a vacancy or turnover, she would be

the one to do the walkthrough and go and make sure everything was okay and get the people on there to paint and clean. And then she would also advertise it and take calls from tenants and then collect all of the screening, you know, the application and the background checks. And then we have a software we use called Buildium. As you get more properties, it's a pretty good, robust kind of online management system. And so we use that and see all of our documents and systems would be there. And I am from Ecuador. I could then look at the tenants if they were qualified or not. not, and then I would just approve them or not from there. Kind of long story short with all that is that every Thursday for about an hour, I would come in

and pay bills and then help out with some of that kind of thing. But then the rest of the week, she was handling most of that. And we had done that for a year or so before I left. And so that was something we had been working on for a while. I don't think I'd realized until you told me that story, I don't think I'd realize that you and your partner were managing these properties in-house. I guess hearing your story, I'd assume that you had outsourced it, to a property manager, but it makes sense the way that you describe it in that you're doing it in

house, but with a member of your team who is also in house. Yeah, and I'm not sold on like, that's the only way to do it. Like, it just sort of organically grew into it because we had the right person and we sort of built our management business around that. But I've also built some redundancy just because we outgrew her capacity. We didn't want to put any more on our plate. And so when we bought that 28 unit building, we actually hired a third-party manager to take that on. So we have some redundancy in that if she ever decided that wasn't what she wanted to do or wanted to just start transitioning to doing something different,

you know, it's not the only way we could do it. So I'm sort of experimenting with the third party management, and I like that. There's some benefits and there's some drawbacks to that. But I think having an in-house is nice because you can sort of put your, if you want to do this, you can put a little bit more of your touch on it. For example, this year, we're just trying to figure out ways we can add extra customer service to our tenants and differentiate ourselves.

We worked on, for example, of having the idea of having tenant gifts in a welcome package when they move in. So, like, her daughter is really good at knitting, and she's knitting pot holders in the Clemson colors because a lot of the students go to Clemson, and then we'll have some basic things, other little housewarming kind of things.

And I think we'll spend probably $10 for each little package, but it'll be something we can add our own little kind of personal touch to the tenant experience. And right now in this market, honestly, it's not really, necessary because it's a landlord market where we are in a lot of the places. But I think my experience has been over time, if you can build that kind of brand and that kind of loyalty and customer service, then that gets your referrals. That makes your business easier. And maybe when things do

get tougher and it kind of flips, and it's more of a tenant market at some point, which it always does. That will hopefully help us have good customer relationships where it helps us keep our units full longer. So how much time does this take you? You mentioned every Thursday for about an hour you would look over everything that had accumulated from the previous week. Was there any other time that you were spending on this or was it primarily that one hour every Thursday? I split up in my own mind and also in my activities, two different general real estate activities. One of them is sort of managing the management process. So I'm the manager of that our kind of in-house team and I'm the manager of the third-party managers. And that process takes, I would say when you add in some

bookkeeping and other things I do, average is two hours a week, long run. But then there's the other part of the activity is asset management. When I am in town, that's going and inspecting the properties every once in a while, like once or twice a year, and writing down deferred maintenance and things that need to be done. That's managing the process of selling properties and maybe acquiring different properties, which we're doing right now, like we're selling one property that's just not an ideal location for us. It's a little bit too far away. It's not in our core kind of management area. And so I've spent more than two hours for sure managing people to sell that and then finding a replacement property and doing a 1031 exchange to move our money tax free from that one

property to another property. It ebbs and flows. That goes up and down. While I was in Ecuador for 17 months, I still didn't spend that much time on that part of the business. But now that I'm back is sort of like, all right, I want to accumulate. I want to do some things. I want to clean up kind of tidy house a little bit. And so I'll probably spend a day or two a week sort of catching up on some of that stuff. And what about your partner? He's more passive at this point.

So when we first started, we basically split up activities 50-50. And when we were flipping houses, for example, I was the one who found the deals and worked with our private money lenders or other lenders. And he would manage the remodel process. And he would manage either selling it or renting the house. And so we did that for a while. And as we kind of transition from the flip business and we're just more in the full time just having rental properties, he has another successful business that he's done as an online business. And so he spends more time probably on that. But he and I kind of converge again on the asset management part of it. So when we do our annual tax returns and we talk to the property manager or we think about strategically, all what's our next move? Do we want to sell these properties and pay off some debt or do we want to acquire another property? We still talk. a lot about that kind of thing. I don't know the actual hours. I know it's probably less than I

spend because he doesn't do some of the day-to-day management stuff, but he's still, you know, involved from a distance. Does he live in South Carolina also? Yeah. Yeah, he's right nearby. We graduated from college at different times, but we met each other through the university and just hit it off and has been a really awesome relationship and we've benefited from each other's strengths. And I can't say that everybody is the right situation for them to get a 50-50 partner like we did. But in my case, it was certainly a positive. And I've done much better because of having that sort of inner mastermind that we were always able to work together and do things together. It's been a big benefit. You mentioned earlier that when you moved to Ecuador, there were a couple

of moments where you weren't quite sure if it would work out. What were the triggers to those moments? Yeah. When we first moved into our apartment January 4th of 2017, the backstory to that is even like all of December and all of November and October, we had sort of been nomads even before we left. We actually rented our house in July of the prior year because we found a really good tenant to rent our home for two years and we didn't want to lose them. And so we moved into one of our apartments that we have locally. And then we moved out of that apartment and then we spent time with my family and then spent time with my wife's family. And so by the time we got to Ecuador, we were staying in Airbnbs and hotels. So it'd been like six months of just like, oh my God,

going, we're just traveling and living in different places and we don't have any roots. And so we finally found a location and an apartment we liked that was in our budget. And so we moved in, the landlord was supposed to have it cleaned. And it wasn't that clean. We got in there. You know, we're going to give the girls a bath that night. And there's like, you know, the bathtub's kind of black around the bottom of it. And, you know, there's hairs all on the floor and the kitchen smell bad. And all right, all right, we're just going to go to bed. We're just going to put the kids to bed. We're tired. Forget about it. We'll deal with this in the morning. And then we, we lay down in bed. And my wife, after five minutes, like sits up straight up in bed. It's like, look on the bed.

I looked over and there's hairs like all over the bed as well. And so we're like, oh, it's one of those moments you look back on it. And like, she was crying. And I was just like stressed. I'm like, this is, you know, middle of night. We just want to rest. And looking back on it and talking about now, it doesn't seem like that big a deal to me, I guess. Because when you travel, we've had worse experiences than that. But I think just a culmination of all that, and we had this little mini-crisis moment that night. But by the next day, we got into a routine,

we did our exercise, we ate some good breakfast. We realized that for $20, we could pay somebody to clean this apartment top to bottom. And so we solved it was not really that big a deal, but it seemed like a big deal to us at the time. That was the moment where we realized, all right, we can deal with this. This is fine.

And from that day on, it actually almost turned 180 degrees the other direction. We said, all right, we're just going to make this good. And so that was that was it. Yeah, the hassles of travel that nobody ever talks about. Everyone discusses the glamorous side, but not the fact that it's sometimes a huge pain. Yeah, we didn't have bedbugs. That was good. We'll come back to the show in just a second.

But first, you earlier had mentioned that the point at which you realized you were financially independent, it was almost, retroactive in nature. It was a point at which you looked back over the previous several years of what you had made and said, you know what? I feel like the income is consistent enough now that I feel financially independent, essentially. Is that accurate? Yeah, it was. Yeah. That sounded like it happened right around the same time that you had your kids, because you're the first in 2011 and the second in 2013. How did that change your definition or interpretation of when you reached the point of FI? Yeah, that was a good notice, Paula. You picked that one up. Yeah, so part of that sort of discussion in my own mind and with me and my wife at that point was, yeah, it was definitely kids. And I think that changes a little bit of my perception of security and my wife as well. We've done a lot of camping. We love taking our tents, going out in the woods and camping or hiking and having everything on your back. It just feels, we feel at home doing that. But even after when we had kids, like, we would go camping with them as well. And for whatever reason, there's just this, you know, the ship of like, hey, I didn't hear that. I didn't think about that, you know, bear coming and getting our tent when I was, when it was just me and you, you know, the two of us, the feeling of security and having to take care of another person and it was just a little different. And so like perception of risk and security and what I'm willing to take on in terms of risk was changed for sure. There's another level of responsibility, I think. And probably every parent has a little bit different perception of what that is. But for us, there was the practical reality of it just costs a little bit more to have kids. So there's just extra. expenses, extra health care, extra food, things like that. So that changed the formula a little bit, but we sort of prepared for that. But it's also just wanting to make sure there's enough of a cushion. And I think that delayed it a couple of years just with personal decision making.

But the other thing I think that some of your real estate listeners might be interested in will be, if they've been in the business for a while, we'll also nod their head, is that I think part of the thing I was dealing with was how to deal with capital expenses. And what I mean by that is when you own a rental property, you have the normal maintenance. You have things like fixing a leaky toilet or there's a turnover. You've got to do some touch up pain in the apartment. Those are sort of normal things that you expect. But the abnormal things, the thing that got us a lot.

And then also I found get a lot of other investors is not allocating correctly for the big things. Like the heating and air unit going out, the roof having to be replaced, the driveway crumbling, you needing to repave the driveway. So a lot of those big expenses that I talked about earlier, those big $20,000 chunks, some of them were capital expenses finally screaming and saying, you have to fix us, this has to happen. And then other times, that's realizing like, all right, what kind of landlord are we going to be? We're not going to be a slumlord who lets our properties deteriorate and just kind of wear it down over time, because I'd seen, I bought properties from those kind of landlords.

And, you know, maybe they made money from that, but I just, I couldn't sleep at night knowing that, you know, those kind of things are just not taken care of. And so it was partly getting a handle on how much does it actually cost, with these properties that we have to do the ordinary stuff, the ordinary maintenance, the taxes, the insurance, the vacancy, and then how much are we going to have to set aside and actually allocate for to handle these periodic every five to 10 year type big expenses? That was a delay, sort of a learning process trial by fire. And that was a big part of why we stabilized because maybe before we had thought we were

making $5,000 a month. but then when you have a big $10,000 expense, that eats up, you know, a big chunk of that. And so it sort of throws your budget into haywire. And after having some history and having some, we keep really good bookkeeping records, we're able to see where we're able to separate out the ordinary maintenance and the capital expenses and start allocating when we do our annual inspections saying, okay, that roof probably has 10 more years. Let's make sure we're setting aside this much money every month. And I actually have a spreadsheet where I budget a certain line item for all the capital expenses that we have for

all of our properties. That was about to be my follow-up question is, did your strategy ultimately end up involving reducing each property to its components and then figuring out the lifespan remaining on each component? I thought about getting that nerdy with it, but then I thought, I thought against it. So, like, I'm halfway there. Like, what I decided was there's sort of a cost benefit analysis and, you know, having the most accurate way to do it. And I sort of took an approximation and just said, okay, I think if we set aside this much money based on prior experience based on sort of some rough working it backwards from all those numbers, this number seems to be right. So instead of like breaking it down by each property and each item, I just sort

took each property and said, based on this property, this is how much we need to set aside for the whole property. And so far it's worked out. I think maybe there's some areas where you have some plus or minus, you know, maybe you're off by 10% or 20% here. But I think the main point of contingency cash flow planning is just not being like completely caught off guard to where you just run out of That's the worst thing. So as long as you're setting aside a big chunk, it's going to depend on how conservative you are, how much you really want to set aside. But as long as you're, I think, if you're 90% right, it's going to be hard to be 100% accurate on those numbers anyway. As long as you're 90% right, you're pretty much accomplishing most of the goal.

How much do you keep in cash reserves? We have about $100,000 set aside. What does that represent in terms of gross income or net income? What timeline does that represent? That is about, let's see, and I think the way we calculate, It's sort of like personal, personal calculations. We wanted to make sure we had at least three months of like our replacement of all our gross rent. And so from, I think we had $40,000 in gross rent from kind of our core properties, our core rental properties. And so we were getting kind of close to it was like two and a half months, three months.

I think we at one point said, let's get $120,000 and it just seemed like too much, even though that was like the right number. I said, you know what? we haven't ever eaten through this even during a recession. I think $100,000 is just a warm and fuzzy number for us. And that doesn't include some of the money we're setting aside for other capital expenses. So that's a separate cushion. It's probably a little aggressive on the cash reserves. Maybe you can tell me what you think, Paula, but it makes us feel good. I'm totally with you. I think that three months of gross rent is a good rule of thumb number. Yeah. Especially if you're operating expenses are about 50% of gross rent. It gives you about six months of expense. At runway. Yeah, runway. I think that's approximately what we thought about it as well. And again, getting to that exact number, like should you be four months, two months, three months, I mean, I think the fact that we have a lot of reserves certainly proved itself helpful.

And when we had all the problems of having negative cash flow and things in 2008 and nine, it was sort of a learning experience that that was a smart thing to do. We needed that and we used it. And so that was sort of informed my own decision making going forward. So you mentioned negative cash flow in 2008 and 9. Was that because of a different analytic framework when it came to buying the properties? I mean, I guess the other way that I'm asking this question is, if there were a recession in the future, is the way that you analyze properties today, a strategy that would make your properties recession proof in the future? Yeah. So that's a good, another good question.

And I think the biggest mistake we made, I mean, and again, we started in 2003 and 2007 was when, when the, this started to get bad. So about four years into our business, we were still learning a ton, and I'm still learning a lot. But I think the mistake, the biggest mistake we made was underestimating how many repairs of property would need long run as an older property. So we were buying properties like 1950s properties, some cases, 1920s, 30s, like old mill houses in the South. If anybody lives in the South, you know, we'd have these little textile mill neighborhoods. And a house that was built in 1925, even if the cosmetics are pretty good on the house, like there are some big things that can go wrong.

And I'm thinking one specific example, we spent at least $15,000 on adding some extra structure, like supports underneath the house because the Joyce were just too far apart. I don't know if in 1920 they weren't assuming that people would have these massive refrigerators and, you know, there would just be as many people living there and this many big TVs and furniture. But for whatever reason,

that support on some of these houses was not built to the structure it should have been. And so that's something I didn't estimate. As a young investor, I didn't look at that and say, hey, if we hold this property for a long time, we're going to need to spend $15,000 bucks on additional joys and digging out part of your foundation so you can build those joys. And it just was an underestimation. So I think going forward and new acquisitions, we've been much more conservative on estimating up front what kind of repairs will spend cosmetically, but also, hey, we're going to have to replace this. This roof is less than if the. roof, for example, is less than 10 years old. I'm assuming pretty soon, I mean, it's older than 10 years. I'm sorry. I'm assuming I'm going to have to replace that at some point instead of just say, oh, it's fine.

You're like, no, I'm going to be keeping this rental property. I'm going to have to replace that roof. You discount it to now and say, that's going to be part of my purchase price. Like, I have to replace that roof at some point. I have to replace that heating and air and being more conservative on my acquisition numbers up front. Yeah. I actually enjoy making big cap X layouts because I know that that's over. and done with, and I don't have to worry about that for the next 25 years. So putting on a new roof on or putting on new siding, I'm like, all right, cool, that part of my property is I can check that off the list. Yeah, it gives you a piece of mind, too. I mean, I think that's one of the biggest surprises that we all, is landlords you can have. And so if you, if you've covered that base, then there's not a whole lot. I mean, you have some tenant issues here and there, but those are usually the things that people panic about and they have these big, huge checks. And if you've already estimated that at front and built a spreadsheet for it, hey, hey, that's just. you're just eliminating problems, like you said, for the next 20 years, 25 years, and that you can go on and do what other activities you want to do and worry about other things. Exactly. So tell me about now that you have reached financial independence through rental properties, how does that affect the way that you see your future? You've come back from

Ecuador. What's next? And I don't mean what's next in terms of rentals, but just what's next broadly. Hmm. Yeah. I mean, family is first in the forefront of my mind just because I have, you know, My kids are now five and seven. So the little three and five year old are growing up. And at this point in my life, this is this is a stage where kids, they still want to hang out. They still want to play Legos with you. They still want to go and run around with you. And so I don't want to miss that.

That was a big part of the trip to Ecuador as well. And this aha moment was like, hey, we're eating meals together. We're having slow time together. We're getting exercising and riding bikes together. I mean, this is just amazing. I don't want to miss this. So I want to keep getting that right. That's kind of number one.

But beyond that, I've also, I love the game of real estate, but I don't want to, this might sound funny saying that we have 90 properties, but I don't see myself getting bigger and taking over more territory or anything like that. Like, I'm just not, I'm not ambitious in that way in terms of syndicating or going out and getting outside investors for my real estate business. But what it does excite me is that I think what I've learned and the things that have been insights for me and been helpful for me and the mistakes I've made, I think are very helpful. for other people. So I've had a lot of fun just sharing those in different ways and being on this

podcast and getting to talk to people about it and some mistake I made helping somebody not make the same mistake. And if they can buy two rental properties and use the income from that to supplement their own kind of financial independence plans, that's been sort of a new fun realization for me is that they're having this knowledge and having this strategies can be helpful for other people if real estate is something they're interested in. Nice. Do you think you'll move abroad again? Yeah, I think so. I think that's sort of just a matter of when and where. I think we can go back and visit Ecuador just because we have a lot of friends now.

We have friends in Spain as well, and we've really enjoyed going to Spain in the past. So I think we're going to spend some time there. I studied German in college. So I think I have some friends there as well just from when I studied abroad in Germany during college. So I'd like to perhaps go there. But I think the most fun part about it for me, like asking about what's next, is that going back to the 18, year old me. That was sort of that age where you're thinking about your future, like, what do I want to be when I grew up? What don't I want to do? And so much of that, at least in my experience, has been like, all right, what's the next step in terms of a career and college and going doing this?

And even financial independence could be looked at as a kind of next step up the ladder, you know? What I like is the unknown. Like, there's this total, like, beyond a year, I really don't know. Like, we could be in Spain. We could be here in Clemson where we are. We could be in Colorado. I don't know. And that's really exciting. And that spontaneity is something that I think is missing so often to be able to make a decision later on. Like, I don't have to have my whole life planned out because I've done a lot of planning financially and gotten some of that stuff in order. But personally, let's just figure out what's the best thing for us and follow our nose. That's sort of a novel concept. Excellent. Well, thank you so much, Chad. Where can people find you if they'd like to learn more about you? I hang out on Coach Carson.com. I write a blog there and love for people to connect with me. I write a weekly new article and also hang out on Instagram, Facebook. If you just look up Coach Carson, I'm there as well.

Nice. And we have a link to all of that in the show notes. Awesome. Thanks for having me, Paula. It's a lot of fun. Chad, thank you so much for spending this time with us. What are some of the key takeaways that we got from this conversation? Here are five. Number one, great deals don't just fall into your lap. You need a hustle for them. If I saw a house that didn't have any sign, it was just vacant and the grass was sort of grown up where you could see in the windows that there was no curtains in the window, I would do a lot more with that house. I would actually go up and leave a note on the house, leave a business card. I would talk to the neighbors on either side and say, I'm interested in buying, I fix her upper houses in this neighborhood. And I notice this one needs a fixing up. Do you happen to know the owner?

You know, nine times out of 10, the neighbors would love to get that eyesore house out of the neighborhood. So they would tell you who the owner is. Here's their phone number. Go ahead and call them. And that's the hustle work that I would do. I often get messages from people who say, hey, you know what? I poked around on Zillow and I don't see any good deals. Well, you're probably correct.

It's hard or at least quite a bit harder to find good deals that are publicly listed on the MLS. But if you are willing to do the hustle work, as Chad talks about, if you're willing to go out and create deals rather than expect them to find deals. you, then you'll be on the path to scoring great rental properties. Above average results require above average measures. Now, if you don't have the time to do something like this, then you can always pay somebody to do it. And that's essentially what Chad did when he was a wholesaler. He was on the receiving end of that. So he had, in his early 20s, he had more time than money. So he went out and found the deals and then sold those deals to other investors who had, more money than time. They had the money to invest, but they didn't have the time to go out

knocking on doors themselves. So the five grand that they would pay Chad for sourcing the deals was the cost of getting that extra person on your team who will find those deals on your behalf, who will get out there and pound the pavement and do the dirty work. That's core takeaway number one. Great deals don't just fall into your lap. You need to go out there and find them, or you need to work with somebody who will go out there and find them. Key takeaway number Two, work on your business, not just in your business. While you're working in your business, you always simultaneously work on your business, meaning like if you're taking a maintenance call, simultaneously think about if somebody

else were doing this, what would be the protocol? How should they respond? What would be the right thing to say? What would be the right thing to do? Would you need a list to help you do this job? And so we built basically an operations manual. As Chad described, through a every step that he took within his business, he simultaneously systematized. So as he was executing a particular task, he was also building standard operating procedures around that task. Part of the reason why he is financially independent today, part of the reason why he does have somebody on his team who can do the work on his behalf so that he and his family can hang out and play basketball and move to Ecuador is because he has built systems inside of his business.

And so that is core takeaway number two. It's not about trading hours for dollars. It's about building a team and setting up systems. And the way that you do that is by working on your business, not just in it. Core takeaway number three. At the risk of making an obvious statement, passive income can be a heck of a lot more valuable than active income. And when I say valuable, I'm not referring to monetary benefit.

I'm referring to the impact that passive income can have on your life. Every Thursday for about an hour, I would come in and pay bills and then help out with some of that kind of thing. But then the rest of the week, she was handling most of that. And we had done that for a year or so before I left. And so that was something we had been working on for a while. As Chad described, because of the passive income that he has built, he was able to move to a foreign country, work just a couple of hours a week, and spend the rest of the time learning Spanish, playing sports, being with his kids, being with his wife. And so, sure, could he theoretically be making more money if he were still flipping houses and wholesaling and syndicating deals and

going bigger and taking on outside investors? Yeah, I'm sure he could. But then he wouldn't have the lifestyle that he does. And so if you choose to, it makes a lot of sense to build your investments and structure your financial and work life in such a way that passive income becomes the priority rather than just maximizing income. In other words, there's a difference between accumulating riches in the monetary sense of the word versus accumulating enough passive income that you can have a good lifestyle with your family in a way that is satisfying and meaningful to you. So that is the third key takeaway number four.

Everything is deal withable. Chad described the story of moving to Ecuador and having a moment where he thought, eh, was this a mistake? We finally found a location and an apartment we liked that was in our budget. And so we moved in and the landlord was supposed to have it cleaned. And it wasn't that clean. We got in there. You know, we're going to give the girls a bath that night.

And there's like, you know, the bathtub's kind of black around the bottom of it. And, you know, there's hairs all on the floor and the kitchen smell bad. And I was like, all right, we're just going to go to. bed. We're just going to put the kids to bed. We're tired. Forget about it. We'll deal with this in the morning. And then we, we lay down in bed and my wife, after five minutes, like, sits up, straight up in bed. It's like, look on the bed. I looked over and there's hairs like all over the bed as well. It's one of those moments you look back on it. And like, she was crying and I was just like stressed. I'm like, this is, you know, middle of night. We just want to rest. And looking back

on it and talking about now, it doesn't seem like that big a deal to me, I guess. Because when you travel, we've had worse experiences than that. But I think just the culmination of all that, and we had this little mini-crisis moment that night. But by the next day, we got into a routine, we did our exercise, we ate some good breakfast. We realized that for $20, we could pay somebody to clean this apartment top to bottom. And so we saw it was not really that big a deal, but it seemed like a big deal to us at the time. There are some things that at the time seem like a big deal, but when you pause to think about it, when you remove the emotion from it, and you take a step back and say, all right, bigger picture, what are the solutions here? You'll find that a lot of things that seem like a big deal are really not that big of a deal.

And everything is deal withable. Everything is figure outable. Do you remember, if you're a longtime listener, do you remember the podcast interview that we did with a poker player by the name of Billy Murphy? In that interview, Billy explained the concept of variance, which is that things are going to go up and down. But in poker, you can survive that variance as long as you don't stand the risk of ruin, which is the risk of being wiped out of the game. And Chad expressed very much that same sentiment in our conversation. As long as he's protecting himself against the worst case scenarios, he's protecting himself against the worst of the downside, then otherwise he's going to be okay. Yeah, some things are not going to be ideal, but so long as something doesn't break you,

you can deal with it and move on. So that's core takeaway number four. Everything's deal withable. And finally, core takeaway number five, financial independence can lead to the joy of spontaneity. Going back to the 18-year-old me, that was sort of that age where you're thinking about your future, like, what do I want to be when I grew up?

What don't I want to do? And so much of that, at least in my experience, has been like, all right, what's the next step in terms of a career and college and going and doing this? And even financial independence could be looked at as a kind of next step up the ladder, you know? What I like is the unknown. Like there's this total like beyond a year, I really don't know. Like we could be in Spain. We could be here in Clemson where we are. We could be in Colorado. I don't know. And that's really exciting.

Oftentimes as kids were spontaneous, but as adults, we can lose that. We can get so caught up in planning and future tripping that we forget that there is some joy. There's some excitement in not knowing what's next, in letting the days and weeks and months unfold as they will. And so regardless of whether you are financially independent or you're working towards it, regardless of where you are in your life and financial journey, embrace a bit of being in the moment, letting that spontaneity excite you rather than scare you, and holding on to the glimmers of wonder and excitement that that can produce. Those are the five takeaways from today's episode. I hope you enjoyed that episode. Again, we originally aired this interview back in 2018. This is an interview that we did with Chad Carson, real estate investor. And we are airing it again now in September 2022 as part of our September sabbatical series. The September sabbatical series is a month in which we air some of our favorite episodes representing FIR&E, financial psychology, investing, real estate and entrepreneurship. We have aired three out of those four. Stay tuned next week.

You're going to listen to one of my favorite episodes representing the letter E, entrepreneurship, a topic that is near and dear to my heart. Speaking of entrepreneurship, I don't know if you've tuned into Netflix lately, but I have a new movie out on Netflix. That feels very weird to say. I never imagined myself saying anything like that, but I have a movie out on Netflix. I'm part of the cast, and I'm also a consulting producer in the film. The name of the movie is Get Smart with Money. It is the storyline of four financial coaches, each working with a protege, to help that particular protege improve some element of their financial life.

And so when we talk about entrepreneurship, the protege with whom I worked, Lindsay, I helped her become an entrepreneur. She was working in the restaurant industry as a server and a bartender. She was making about $1,000 a week, about $50,000 a year, living paycheck to paycheck. And I helped throughout the span of the movie helped her. create side hustles that she eventually scaled into Lindsay Incorporated, a business of her own. So entrepreneurship I see as crucial to helping people reach the next tax bracket, live a life that's better than the one that they've been living or the one that previous generations have

lived. Entrepreneurship is so powerful. That's why I chose to focus on it in my coaching of Lindsay, which you can see on Netflix. And that's also why next. next week's episode is going to be devoted to that topic. So if you're not yet subscribe to this podcast, please hit the follow button in whatever app you're using to listen to this show. Open up Apple Podcasts or Spotify or Pandora. Open up whatever app you're using. Hit the follow button. Make sure that you are following this show so you don't miss any of our amazing upcoming episodes. You can sign up for the show notes for free at afford anything.com slash show notes where you'll get a synopsis of every episode. Again, that URL is afford

anything.com slash show notes. And don't forget to check out our movie on Netflix. If you enjoy it, please give it a thumbs up on Netflix. Please leave a review on Rotten Tomatoes. We're all super excited about this project. It feels a little surreal. And I'm thrilled to be able to share it with you. Thank you again for being part of the Afford Anything community. My name is Paula Pant. This is the Afford Anything podcast, and I will catch you in the next episode.