BiggerPockets Money Podcast - 544: 80-Hour Workweeks to Lean FIRE in 8 Years through Real Estate

Starting point is 00:00:00 Delayed gratification comes with some sacrifice, but it can be a powerful victory. Today's guest will show how hard work and a bit of pain will change your financial trajectory. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me as always is my rock star co-host, Scott Trench. Thanks, Mindy. Great to be here. You are in the right place listening today if you want to get your financial house in order because we believe that everybody can achieve financial freedom. no matter when or where you're starting, even if you're just entering your first job or starting to get more serious about that financial journey. Today we're joined by Franklin Zang, a recent Phi Achiever who took his learnings from places like bigger pockets and engineered his way

Starting point is 00:00:46 from the dreaded night shift to financial independence, all before he reached 30 years of age. That's right. We're going to hear how one meetup changed his entire financial future. Why asking questions is a strength if you're starting at. out and how he and his business partner have harnessed their superpowers to help fuel their work optional lifestyle. Franklin, welcome to the Bigger Pockets Money podcast. Thank you. Pleasure to be here. We're so excited to have you here, Franklin. Can you just tell us where you are right now and what your last 24 hours have looked like? Yeah, I'm actually in Paris right now. Last 24 hours, they hopped on a flight, didn't get any sleep, landed in Paris, met up with a friend,

Starting point is 00:01:27 got dinner. Now I'm sitting here at my friend's apartment and recording this podcast with you guys. Awesome. And what do you doing in Paris? I am just digital nomading, I guess. That would probably be the best way to describe it. Awesome. So is it fair to say that your fire journey, your digital nomad journey has just begun because you crossed a key financial milestone and the adventure has just begun or will maybe begin tomorrow when you get some sleep? Yes. I think that'd be accurate. I mean, I've been And, you know, the whole process of building this business has spanned the last six years. So it's kind of, I don't know, it would be right to say that it just began. But I guess in terms of the whole digital nomad freedom to be wherever I want part and exploring the world part, I would say, yeah, that kind of starts right now.

Starting point is 00:02:20 Okay. So let's address the elephant in the room. How old are you? where were you living? What was your job before you quit? And how much money were you making? So I threw four at you. So I'm 29 years old. I was living in Orange County, California. I was a mechanical engineer and I started at a 75K base salary. And over the span of my engineering career, I capped out at 135k for my W2. And you have a net worth of over a million dollars today. Is that right? Yeah, that'd be accurate. Franklin, can you tell us where your money journey begins? I want to hear

Starting point is 00:02:53 exactly how it started and how you got here with those extraordinary numbers behind, you know, underpinning this conversation. So I guess my journey starts right after college. So I went to college at UCSB for mechanical engineering. I got my master's and then I just went to work at a full-time job. First job I got was for this company out in Irvine. And it was a, it was a company that we tested by semiconductor chips, right? And basically, when I got hired, the department I was in was still small and the project was pretty important. So the culture for the engineering department at the time was pretty startupy, which means they relied on a few people to wear a lot of hats and do a lot of work.

Starting point is 00:03:37 So they threw me in a factory out in Asia and there was a small team I was in to keep the systems running out there. And in the beginning, I was working like 80 plus hours a week. I would have to work the graveyard ship sometimes. There'd be weeks where I didn't see the sun, no Saturdays and no Sundays. And I remember the longest shift I ever worked was a 26-hour shift where I went in at 8 a.m. And then I didn't lead till 10.30 a.m. the next day. So it was pretty tough. But the silver lining was that it made me realize that I did not like this line of work. And I needed to find a way out ASAP.

Starting point is 00:04:10 And what year was this? How long did this pattern continue for? So this was in late 2017, early 2018. So it was about six years ago. And that lasted about a year, a little more than a year before I was able to switch into a less demanding office position. And Franklin, were you able to graduate with no debt? What was your financial circumstance before moving into this terrible job situation? No, I had debt. So my family was low income. So we did get some grants and I got some student loans. But I did get a scholarship and I ended up with a little over 40K in student debt. You're working this job making $70,000 a year, working 12 hour days, nights, weekends, all of those types of things. Do you have

Starting point is 00:04:50 high, are you at least having low expenses? Like, is housing? and stuff covered for you. So you're able to just sock away all that cash? Or what does that look like on the expense side during this period? Yeah, I was able to really, really minimize my expenses. So even though I did live in Orange County, because that's where my company was, I moved to Orange County just to work there, which is kind of an expensive area. I was able to negotiate with my landlord for a pretty good deal at the time. So I was kind of basically living in an attic. It was one where like, My bed was right under where the attic slopes upwards.

Starting point is 00:05:27 So if I sat up on my bed, my head would like hit the ceiling. But, you know, the benefit to that was I was able to negotiate a really good rate, right? And then also I felt like I didn't need, you know, to be to have, you know, I was out of the country most of the year anyways. So I didn't need to be paying that much for like a really nice apartment or anything like that. So, Franklin, you got low expenses. okay income, but great expense profile, at least for Orange County. What are you doing with your cash? And do you know this moment in time? Can you tell us about what was happening? Was it a moment in time or was it a process where you're like, I got to get out and I'm going to start

Starting point is 00:06:10 learning about financial independence. Can you describe that for us? I already knew a little bit about the power of compound interest. So at the time I was already maxing out my 401K, maxing out my HSA and I was still putting whatever other savings I had into an account which I would use for my future real estate investments. I knew that wasn't enough to really get out of my job, you know, or get out of the situation I was in because that was my first job and it was such a grueling experience in the beginning with the field service. I felt that for some reason I felt that every other job I would take in the field would be the same thing almost, you know, even if that's not necessarily true. That's what I felt in the moment. So I really, really had a desperate need to want to

Starting point is 00:07:00 just break out of that cycle, right? And so because of that, you know, I already knew I had to save a lot. So I was saving a lot. But then I was looking for more powerful methods to, so to be able to break free of that cycle, right? And so eventually I stumbled into real estate. I stumbled into Brandon Turner's book on rental property investing, right? That was. I think that was the first book that he put out. And that book, uh, really, you know, it really, it lit a fire under me because it pointed out, well, it gave me a lot of practical steps to, to start on. And it kind of showed, it showed me that it was possible, right? It like, it was possible to actually, you know, do what I wanted to do. Franklin, quick question here. What, what was the,

Starting point is 00:07:46 um, when did you determine your goal, your, like, your five, you. You're, like, your five. number. Yeah, so I was listening to Bigger Pockets Money at the time and, you know, there was a lot of talk about the 4% rule. And so I basically just took that, applied it to what I thought was a decent living in my area at the time, which is like, you know, maybe $60,000. And that came out to maybe $1.5 billion net worth. And that was the goal I tried to achieve by 40. Awesome. Well, we want to hear more about how Franklin and his job motivated him to hit this $1.5 million net worth number. And sneak peek, I think you already know that Franklin has gotten there. Well, before then, we're going to hear how he got there so quickly after the break.

Starting point is 00:08:35 Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop.

Starting point is 00:09:07 Feel aware and in control of your finances this tax season and get 50% off your Monarch's subscription with the code, pockets. What I personally like is that Monarch keeps you focus on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun, calculating quarterly estimated taxes? But somehow, every small business owner ends up doing

Starting point is 00:09:44 it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners who say, found makes everything easier, expenses, income, profits, taxes, invoices even.

Starting point is 00:10:19 So reclaim your time and your sanity. Open a found account for free at found.com. That's F-O-U-N-D dot com. Found is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leaner Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks audiobooks that have been excellent for mental well-being.

Starting point is 00:11:01 What makes Audible so powerful is its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Welcome back to the show. We were just talking with Franklin about his fine number and how he arrived at what he felt was the goal for his financial independence number before he was going to retire. Franklin, how did you go about achieving this once you discovered what your number was?

Starting point is 00:11:48 So the first year I was just learning, listening to the podcast while walking on the way to the factory floor. That's important because it was a huge plus to be able to speak the lingo while conversing with people in the field. Because if you don't know what anything means, it kind of projects that anyone who might be willing to work with you is going to have to spend some time babysitting you or teaching you from scratch. But even if you're completely new to the game and you can keep up and understand the conversations and ask good questions, then people see that even though you're new, you have energy and potential and you have initiative on your own. And that's so important if you want, experience people to believe that you can bring something to the table. So I spent the first year just learning, working these hours. I was learning whenever I could. The other part I was doing was analyzing deals.

Starting point is 00:12:33 I took a spreadsheet from somewhere on the Bigger Pockets website and I modified it for my purposes. and I started analyzing random listings out of state. By the way, I knew I wanted to invest out of state because I can't afford anything in California on my salary. And I saw that out in the Midwest, and other places, there were a lot more deals that were affordable on my income, right? So I remember taking Zillow data at the time to crunch the best rent-to-price ratio to find which area I was going to be investing in.

Starting point is 00:13:05 And that's also why I picked up David Green's book on. long distance real estate investing. But nothing was penciling in, even out of state, and I was stuck in a little bit of analysis paralysis. By the way, I just want to chime in there with a shameless plug here because that's been such a popular request and the people want to get that data about where the cash flow is. If you go to biggerpockets.com slash resources, you can download a document spreadsheet that we update every couple months with the top 100 cash flow markets in the country.

Starting point is 00:13:33 So that's now a new resource that's available for everyone there updated for 2020. So sorry, quick plug there for BP.com, biggerpockets.com slash resources. Go ahead, Franklin. So confined cash flow, a little bit of analysis paralysis. And then I remember, I don't remember it was Brandon, but I think it was David. It was when they were co-hosting the main podcast. But one of them said on the show, hey, if you are stuck in analysis paralysis, you don't know what the next step is. Here's the next step.

Starting point is 00:14:06 Just go to a real estate meetup. Right. And then they were, you know, go to a real estate meetup and then, you know, see what happens, right? Talk to people, network with people and see what happens, right? So I took that to heart because there was, I didn't know what else to do. So I went to this local meet up in my area. And, you know, first time I went, you know, I met, I networked with some people, you know, mixed results. Same thing. Second time I went. I will say that because I was kind of like the curious. You know, I was really, I was genuinely curious about other people's deals and how they were able to, you know, make their deals cash flow and like what they were doing with their business, like how they were doing value ads so that I could kind of learn from them that I did catch the eye of like some experienced people, you know, kind of in, in that meetup, right? I was kind of just like raising my hand asking questions, you know, during the, the presentations and stuff. And then people, you know, there was like a land. There was a, I remember there's a, a couple of different people who, who, who noticed me. Like one was like a landbroker who wanted to, he was interested in doing self-storage deals out in Joshua Tree. And, you know, he saw that I was kind of young and energetic and curious.

Starting point is 00:15:24 And he was like, hey, you know, we should do a deal together in self-storage or something like that. What really, I think, what I really learned from that is, if you're genuinely curious, you're genuinely, you know, passionate about the subject and you bring the energy. There's people who are experienced in that field who are looking for people like you, right? People who can, you know, help bring some sweat equity in exchange for some mentorship or some experience or, you know, stuff like that. But, you know, so those are good experiences. That guy, he was a really cool guy, but that partnership kind of ended up fizzling out.

Starting point is 00:16:02 And it wasn't until maybe the third or fourth time. I went to that meetup that I met my partner, Layton, my business partner, Layton, who I've been working with for the last six years. And it's like a partnership made in heaven. Like me and him work really well together. We match each other's, you know, strengths and weaknesses perfectly. We basically talked like for three hours during that meetup and just clicked. And we were like, hey, you know, Leighton was like, hey, you know, we should do a deal together.

Starting point is 00:16:33 And I was like, you know, heck yeah, right? So love this, right? The meetups and these networking events can completely change your life. Like just the, and they're like casual and typically free. This was a free meetup, right? For real estate investors in your local area, right? It was, I didn't have to pay a little bit. How much did you have to pay?

Starting point is 00:16:50 It was like 20 bucks. It was like, yeah, small entry fee. And you get fed. Like you get, you get some charcuttery, you know. Those are the best types of meetups, right? It's like, like, like, free or like this very nominal fee that just like says, okay, you're actually going to like, I can actually plan ahead and count on people arriving, maybe get like a drink or like a little bit of food with the ticket.

Starting point is 00:17:10 Like those are the things that really can just totally change your life as a real estate investor. And another plug, biggerpocket.com slash meetups has a list of tons of these things all around the country, many of which are exactly like that. Yep, exactly. That 20 bucks was like the best 20 bucks I've ever spent, you know. Like 20 bucks is nothing for, you know, you consider that an investment into, um, you know, a huge milestone in your real estate investment career, right? It's, it's really nothing. So I totally agree. Um, yeah, so basically, um, after I met my business partner, uh, we clicked

Starting point is 00:17:45 really well and he already had some experience investing, um, in the Midwest area, because that's where he grew up. And, um, you know, he had, uh, 10 or 11, uh, properties at the time. and he was like, hey, if I find a, you know, we find a deal, I'll send it to you. And then if you like it, maybe we can partner together. And I was like, you know, definitely. And so shortly after he sent me a deal, and it was a, it was a lawyer's office out in the Midwest. And I took that, took the numbers on the, you know, the OM. And then I plugged it into my little sheet. And I was like, oh my goodness. Like, It's crazy. Like how like this is impossible.

Starting point is 00:18:28 I've never seen this, you know, crunching my, you know, my little Zillow, you know, listings that I've just been doing for practice, right? The cash flow numbers were amazing. And so I was like, hey, we got to do, let's do it. Like I'm, I'm on board. And, and so we partnered to, you know, we did it. You know, we formed our, our little partnership. And then we went and, we went and purchased it.

Starting point is 00:18:51 You know, we half, half, 50, 50. and then we delegated our responsibilities, you know, like, it just was a natural fit. Like all the stuff that he liked to do, I was not either didn't want to do or just wasn't good at and he was really good at. And then, you know, the things that he didn't like to do, I just happened to like to do and and was good at, right? So he was doing all the operations. I was doing the bookkeeping, the financial analysis, you know, things like that.

Starting point is 00:19:21 And yeah, the first deal actually, on paper, you know, the cash flow numbers looked amazing. It actually didn't turn out as we thought. It pretty much cash flow neutral. And then after one and a half years, we exited the property. But we got a little fortunate. And then the property did appreciate even though we had, I think, more vacancy than when we purchased it. but we didn't make a decent profit just off of the appreciation on that one. But the important part, I guess the more important part than the profit to that deal

Starting point is 00:19:58 was that we proved that we worked really well together. Right. And so we built that trust. We built that rapport. You know, so yeah, we, after that, we just, anything in the future, you know, we could hit, you know, hit it stronger, basically. Yeah. I wanted to point out that on a first deal with a new part,

Starting point is 00:20:18 partner that you don't really know all that well. Breaking even is absolutely perfect. I heard you say that you were renting to attorneys and attorneys are not a protected class and I use attorneys a lot, but I would never rent to them. I'm wondering what your experience is renting to these attorneys. Did that have anything to do with you exiting the property after a year and a half? Yes, it did because they weren't just lawyers. There were divorce lawyers, so not the sunniest bunch. Went to visit the property after we first acquired it. We drove, you know, we were supposed to land, I think, in North Texas,

Starting point is 00:21:00 but we got rerouted to South Texas because of a storm, and we had to end up driving, like, all night. So we drove all the way there to Kansas from Houston. We had an appointment early in the morning to meet with the tenants, but we were a little bit unkempt because we're driving all night and running on no sleep. And when we came in, you know, we're both relatively young at the time. I was like 24 and my business partner was maybe a little over 30.

Starting point is 00:21:23 And all the lawyers were in suits and they were like, you know, who are these young kids from California who are now our landlords, right? And so they were giving us a little bit of a tough time. We were really trying to be good landlords. We asked them, hey, what can we do to improve the property or make it a better working environment for you? You know, we actually did keep their rents below. market because, you know, we wanted them to be happy and we, we wanted them to stay. But they gave us

Starting point is 00:21:51 a tough time. I think they ended up, they ended up appreciating us in the end when we exited. But in the beginning, you know, I don't blame them for trying to get the most out of their lease. When we sent them the first lease extensions, they were like, they came back with all these amendments that they wanted us to agree with. Like everything was like crossed out. And they were like, no, we, we demand this and this and this. So it was tough. There was one guy we really liked. A lot of the others gave us a tough time, but we don't blame them. But we did end up breaking even on the cash flow. It was a lot of stress.

Starting point is 00:22:21 And after that, we said, like, no more Class C rent by the room, office building ever again. You know, the good thing was me and my partner build up a lot of report and trust and mutual respect. And that helped us to move forward with our other deals. So it's a home run because you found a business partner. You recognize that you would work well with him. you understood what you didn't want after experiencing it, and you didn't lose money. So that is a grand slam home run, in my opinion, for a first-time deal with a partner that you don't really know.

Starting point is 00:22:58 We are going to take a quick break, and when we come back, we're going to talk about how you were able to set your business goals and build a portfolio while working full-time and what superpowers you were able to leverage to grow so quickly right after this quick break. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch.

Starting point is 00:23:35 Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code Pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle.

Starting point is 00:24:01 Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at monarch.com for half off your first year. That's 50% off at Monarch.com code. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need.

Starting point is 00:24:23 That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term. contracts. You only pay for results. And speaking of results, in the minute I've been talking to you,

Starting point is 00:24:47 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your job's more visibility at Indeed.com slash bigger pockets. Just go to Indeed.com slash bigger pockets right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash bigger pockets. Terms and conditions apply. Hiring, indeed, is all you need. When you want more, start your business with Northwest Registered Agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest, today.

Starting point is 00:25:26 Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They're the largest registered agent and LLC service in the US with over 1,500 corporate guides, who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data and all services are handled in-house because privacy by default is their

Starting point is 00:26:01 pledge to all customers. Visit Northwest Registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. In communities across Canada, hourly Amazon employees earn an average of over $24.50 an hour. Employees also have the opportunity to grow their skills and their paycheck by enrolling in-free skills training programs for in-demand fields like software development and information technology. Learn more at About About. Amazon.ca. Welcome back, everybody. Franklin was just telling us about his first deal in an office

Starting point is 00:26:50 property investment that broke even from a cash flow perspective. Franklin, can you tell us how the deal went from an equity growth perspective and how you began building your wealth towards financial independence? We did not cash flow, or we did break even on the cash flow, but when we sold it, We made a pretty good chunk of money, which we used 1031 into a dollar general. And that dollar general is generating us some pretty good cash flow right now. So, Franklin, let's talk about this. Wouldn't you buy the property? It did, it did help a lot.

Starting point is 00:27:25 Yeah, it did help a lot. The partnership was, I think, I would say that's the main part of it. Because the cash flow from the dollar general was great. but the thing that really boosted our business was the single family homes. So that was less a direct result of the office, but more direct result of the we work well together part of it. Okay. Let's spend like one minute just going through the numbers. What did you buy it for?

Starting point is 00:27:56 What did you sell it for? Net neutral cash flow. 1030. And then let's talk about the 1031 exchange deal and the single family rentals and focused the rest of the time on that. Okay, so we bought it for $181,000. And then when we exited, we sold it for, it was close to $215. I can't pull. That's what I remember.

Starting point is 00:28:18 It was close to $2.15. So we $10.30 won that into a dollar general. And that dollar general was a really good deal because we had a rock star agent working with us at the time. And then my business partner told her, hey, we want, can you please call, all the owners of dollar generals in this vicinity and see if they're willing to sell. And she was able to pull through for us and found us a really, really, really good deal. And so we we left on that. We sold our, when we sold our office building, we took the proceeds and we put it towards

Starting point is 00:28:52 that dollar general. And it's been a pretty good cash flow booster for us ever since. Can you give us kind of rough picture about how much you were able to 1031? want to exchange into this and how much cash flow the property produced or produces? Oh, yeah. So, um, we, all the proceeds pretty much went, because they have to go to the, uh, the new, uh, property. And so whatever the, the profit was, let's say, uh, 2215,000, like, like, yeah, around like,

Starting point is 00:29:21 $29,000, $30,000 of it went into the down payment for the dollar general. And that dollar general was, uh, it was close to, um, it was close to half a million we put a 20% down on it. So we covered the rest from our savings after, after, you know, putting in the 1031 proceeds from it. Was this a purchase of a franchise or are you buying the property that they're renting out from you? Buying the property that that franchisee is renting out from us. Okay, okay. Great.

Starting point is 00:29:58 And so what, this is a triple net investment. investment property, right? What was your cash flow on this deal after debt service? So it's not a true triple net I want to clarify. It's a double net plus. We're responsible for some other maintenance items like the landscaping, roof structure, obviously. If we're talking about cash flow, with the maintenance budget for the roof structure and landscaping and after debt service, it comes out to about $528 and $0.60 a month cash flow after debt service. So let's keep rolling and walk through how you, how, what happens next? How do you build up your rest of your real estate portfolio? And what does that look like? What does that journey look like? Yeah. So after that,

Starting point is 00:30:39 we decided, me and my business partner, Layton, decided that we were going to go back into single family homes. He's done a lot of them before meeting me. And we both agreed that it was a really good asset to try to stock up on. And so basically we ended up after that dollar general, We still dabble in commercial, CRE here and there, but we ended up buying a couple of SFRs after that. The first one we bought with just a down payment, and then we just expected it to cash flow after putting in a down payment. But the one after that, we decided to bur it, and we were really successful in burying that one. And after that successful burr, we were just like, we're just going to burr all of them. So me and my business partner, we call a particular prospect a unicorn if we're able to burr it,

Starting point is 00:31:38 take all the money out that we put in completely. So the total cash outlay is less than zero. And it cash flows more than $100 a month. At the time, that was our criteria for a unicorn. Cash flow right now, these days, we accept little less cash flow just because the interest rates are higher to pull the trigger. By the time, that was our criteria, quantitatively, to pull the trigger. And then my business partner, Layton, he's really familiar with the market.

Starting point is 00:32:07 And so he does a qualitative check too. So, you know, combine the qualitative and quantitative check. And after that, I think you have a pretty, well, it's been proven for us so far. It's been working well for us that that combination has served us really well in filtering out what deals that, you know, what deals are good for us. Are you still finding unicorn deals? It's been tough. This last year, we had a couple that we projected to be unicorns and we pulled the trigger

Starting point is 00:32:40 and then the actual numbers came out and they were off the mark a little bit. But yeah, because of, you know, we were, when we started, the rates were like less than 4%, right? Or just around 4%. And we only, to clarify, we get commercial loans because we have more than 10 investment properties. So we don't do Fannie Mae, Freddie Mac conforming loans. But at the time, we were getting really low, really good rates on those. Nowadays, since rates are higher, we have to take concessions on the cash flow if we wanted to keep buying.

Starting point is 00:33:19 What market are you in for these single family homes that you're burying? We have them scattered in the Midwest. So all these single-manly rentals are in the Midwest. You're burying remotely out of state. Yes, all out of state. Can you give us an illustrative example of a deal, right? Maybe one of the ones that you've tackled recently, whether it's worked out or not. How are you finding these in 2024 and still making this work when I think that's impossible these days is what they say?

Starting point is 00:33:48 Here's an example. So we bought this place over $119,000. We spent about 6,000 to renovate it. This one, we identified that it was underpriced. And when we purchased it, got it like, you know, just a little bit of makeup on it. It reappraised at 141. We got 119,000 back, $119,850 back. So this wasn't a unicorn.

Starting point is 00:34:14 It's harder or harder to get unicorn nowadays. But we ended up just outlaying 5,000, which wasn't so bad. So out of pocket for the whole property was about 5,000. And we're cash flowing about 72 bucks a month on that one. Yeah. So I will agree with you that 100 units in one and a half years is a big stretch goal unless you just have piles and piles of cash. Even with the burr, the burr process takes some time. So Burr stands for buy, rehab, rent, refinance, repeat.

Starting point is 00:34:45 So you're buying a house. You're rehabbing it and renting it out. And then you're refinancing it to pull out some or all of your money. so that essentially you are $0 into the property, which is what it sounds like you were doing with the unicorn property. How many units do you currently have? We have 38 total units. Are they all single family? No, not all single family. We have 36 single family, two active commercial properties. All these are in this Midwestern market, right? Yes, they're all in the Midwestern market. So actually, let me pull back. Let me see if I can

Starting point is 00:35:23 summarize the situation as I understand. You got started five and a half years ago, making $70,000 a year in pretty terrible work environment. You saved your pennies, obsessed over real estate investing, met a partner, broke even, but used that partnership then to get into this dollar general store, and then now the 36 single-family rentals and one additional commercial unit over the last four years. And that. And, And during that same time, I presume you continued to live fairly frugally, progressed your career to up to $130,000 a year in annual income. Were there any other key leverage points in your finances that we should know about to understand your success so far? Or are those the main themes?

Starting point is 00:36:10 Like, did you have a side hustle, for example? I want to say those are the main themes. As for the side hustle, we were always thinking of what else we can do with the business or, I guess, I'll talk a little bit more about that later, but that didn't really start until afterwards. So I guess, yeah, I guess that was pretty much an aggressive savings. And then really both of us put a lot of effort into our real estate. Yeah. Awesome.

Starting point is 00:36:38 Now, what, again, today, literally today, some of the benefits from a lifestyle perspective of this five and a half year period of self-sacrifice, aggressive risk taking. and expansion for your business are going to start paying off here. What is next? What is the next year or two look like for you? And what are you looking forward to here? Yeah, so I'm looking forward to, one, traveling and kind of living on a budget while traveling and working while traveling. And then the cool part about the business is that, you know, I didn't like working a

Starting point is 00:37:15 nine to five, but the business is getting pretty fun for me at least. And so I am really looking forward to growing both the investment portfolio with my business partner and also working on our new business with Laten, Gemstone Commercial Mortgage. So we're helping a lot of people find commercial loans right now. And that's been pretty exciting for us. So looking forward to that. Just a quick tip on that one, right? We've compiled list of hundreds of lenders around the country at biggerpockets.com slash lenders

Starting point is 00:37:46 to help begin that search. You should start there, call up a bunch of those folks, and then continue down the list and look for other folks as well in that pursuit here. I think that's fantastic advice. And I had never heard that before today that you're absolutely right. It's very obvious now that you've said it. But that is an enormous competitive advantage in today's market, right, if there's that much variance among these lenders. Exactly. Especially when you're trying to find, like, say, you know, the unicorns, right?

Starting point is 00:38:14 Like we're looking for higher LTV on our purchases because we we don't make a lot. Like the two of us, we don't make a, we didn't make that much money from our W2 jobs, right? Like we needed to, if we wanted to expand aggressively, then we needed to, you know, get 85 LTV, right, off of some of our purchases. We couldn't just settle for 80. And so we needed to call everybody. But yeah, anyways. We, you know, he had this list of thousands of lenders and their rates. Thousands?

Starting point is 00:38:49 We now have thousands. So Texas alone has over 700 banks and credit unions headquartered there. And that's not counting the branches. But yeah, the spreadsheet ended up nucleating our other business, gemstone commercial mortgage. So right now we're spending a lot of time on it, helping others to find competitive commercial non-conforming loans. And we also spend a lot of time on our other business too because, remember, it's not completely passive when you have the amount of property. that we have, which is 38 right now, even though we do utilize property managers, it's not completely passive. I do a lot of bookkeeping, financial analysis, and Layton does

Starting point is 00:39:24 probably even more work on the maintenance and operations because the portfolio is just so large. Are you a mortgage broker? Yes. Like you get paid to help people find non-conforming mortgage loans. I always recommend that everybody, when they're looking for a deal and they're looking to finance it is to call as many lenders as they can in the area that they're trying to lend in. I would recommend don't contact two, three, four, contact 10, 15, 20 lenders because there's so much variance in what lenders can give you. That's how you're really going to get your best rate. People don't want to do that. If you don't want to go through all that work, because it is a lot of work, what we do is we provide that service for you. So we'll help you call, contact all those lenders

Starting point is 00:40:06 and bring you what deal, you know, what deal we think is best for you. So at what point, what was your financial position when you decided I can leave my W-2 and focus on real estate full-time? So we were generating not a huge amount of cash flow from our properties, but a pretty decent chunk, right? So the initial goal, like I mentioned, was like 60,000 passive, and that's just for myself, right? it didn't quite reach that in terms of the real estate investment portfolio.

Starting point is 00:40:38 It was more like a little more than like half of that, right? At least for myself, right? But that combined with I had $35,000 in savings. And also we started to get clients from our commercial mortgage business, which we had just started, but we were already getting like a lot of interest. and like we already you know got a lot of a lot of some leads you know from that we decided with that projected income and the you know the you know 35,000 or so cash flow from the rental properties it was it was okay keep in mind i still consider myself more lean fire so i do have to keep my

Starting point is 00:41:26 expenses in check and one thing that the travel does allow me to do is is it does allow me to keep my expenses low, right, depending on where I'm traveling. And we do, because we pay for a lot of expenses with business credit cards and stuff, we do turn a lot of credit card points and that helps pay for some of my travel. So that offsets some of that cost. I think the most important thing for me was the work life balance that I had right after I finished school was completely awful, right? And while I was in hell, my friends were all, you know, they were,

Starting point is 00:42:01 taking a year off after school to go on these big trips. You know, they were going to New Zealand. They were going to Africa, South America. And they came back with all these stories of them just living it up. And I guess without any baggage that comes with work and the daily grind and stuff, for me, I felt like, wow, I really wanted to do that too. And I never got a chance to do that. But I heard a quote on a podcast about this book, The Regrets of the Dying.

Starting point is 00:42:31 And they had mentioned that people on their deathbed, what they usually regret isn't, you know, like I regret that I took that risk or I regret that I did something. It's usually I regret that I've always wanted to do something and I never actually ended up doing it. And so that stuck with me a little bit because I've always wanted to do all these things and the security of having a job and the security in knowing that you're going to get a paycheck every month was hard to let go of. But I needed to if I wanted to do some of these things, right? That's part of the reason why financial independence is important to me.

Starting point is 00:43:11 That I really wanted to do this year was shoot a bow off of a horse in Mongolia. I'm a big history geek. Mongolian history is one of my favorite parts. Yeah, I want to do that. I want to shoot a bow off a horse in Mongolia. So hopefully I get to do that this year. Well, Franklin, thank you so much for coming on the Bigger Pockets Money podcast. Congratulations on the Heardtons.

Starting point is 00:43:30 huge real estate portfolio, the millionaire status, the financial freedom. And I hope that, you know, you're able to just realize a magical journey over the next year. So reaping the rewards of that and continuing to build your business as a digital nomad. So thanks so much for sharing it and inspiring a lot of people. Thank you, Mindy and Scott. Appreciate you having me. Thank you, Franklin. And we will talk to you soon. All right. That was Franklin Zing. Millionaire through real estate investing at 29 and now traveling the world. Mindy, this is why we do this so wonderful that BiggerPockets was a small part of his journey and just wonderful to see the huge success that he's had here.

Starting point is 00:44:07 He took action and attended meetups. Didn't spend 10K on some freaking mastermind course, but spent 20 bucks to attend a meetup and met a business partner that changed his life. And this is where I want to shamelessly plug Bigger Pockets again is because you go to BiggerPockets to Com slash meetups. There are tons of meetups, almost all of which are free. A couple have that $20 entrance fee. that are being put on by various people.

Starting point is 00:44:30 Two, you go to BiggerPockets.com, such resources, and you can download all of the top 100 cash flow markets in a spreadsheet, completely free. And third, you can go to BiggerPockets.com slash lenders and interview all the lenders you care to take a look at, again, also completely free. So those are three super easy steps you can take today if you're trying to repeat some of the success

Starting point is 00:44:53 that Franklin has had here. And I think it's just a wonderful example of just taking action on the, obviously correct things and getting going. What do you think, Mindy? I absolutely agree with you, Scott, except for the part where you said we're a small part of his success. He took the advice of going to a meetup, met his business partner, and now is this huge success. So I would say we're like 98% of his success, Scott. All right, fine. We'll take all the credit for it on there. We just take a fee of, I think, 50% of his wealth for all that success. So he can just write us a check for, I think,

Starting point is 00:45:27 $750,000. Yes. And Franklin, it's J-E-N-S-E-N. You can just write it out to Mindy Jensen. I'll be sure to share with Scott. I promise. No, he obviously did it all. We're super, we're super happy. Yeah, we're super happy that some Bigger Pockets content was inspiring. But congratulations to Franklin and anyone else that's accomplished similar success. And if you're looking to get started in real estate, those are three super easy, obviously correct things to get going on today. Yes. Super easy. But also. you have to actually do the work. I think that we need to highlight Franklin not only went to an event, but he didn't meet his business partner at the first event. And he went back again. And then he went back again. I think he said it was the third or fourth time that he went to this event that he met this partner and they hit it off. They started talking. If you're not going to

Starting point is 00:46:23 the events, you're not going to meet the people that are at the events. If you're not in the Bigger Pockets forums. You're not going to be able to ask questions in real time of people who are doing it all the times. That's another one that I'm going to throw out, biggerpockets.com slash forums. The bottom line is if you want to invest in real estate, if you want to become a real estate millionaire, you're going to have to put in the work. So not only did he take the advice from the real estate show, he put it into action by actually attending, he went back again, he decided to connect with somebody. He made a partner with somebody who had all of the things that he didn't and he brought to the table all of the things that the partner didn't have. I can't tell you how many

Starting point is 00:47:06 times I've seen people who are like, oh yeah, I've got a lot of money and I don't have any time to run the real estate investments. So I met a partner who also has a lot of money. Well, that's not a real good partner then. You need somebody bringing to the table what you don't have. So it sounds like this is a really successful partnership and I'm super excited for his future because when you can find a partner that that meshes well with you, you're kind of going to take over the world. Pretty soon the earth is going to be called Franklin instead. Just draft a partnership agreement, please. That spells out what will happen in the event of the partnership terminating. Absolutely key. All right. Scott, should we get out of here?

Starting point is 00:47:45 Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. Of course, he is the Scott Trench. And I am Mindy Jensen saying, got a swish, goldfish. Bigger Pocket's Money was created by Mindy Jensen and Scott Trench. This episode was produced by Eric Knutson, copywriting by Calico Content. Post-production by Exodus Media and Chris McKin. Thanks for listening.

BiggerPockets Money Podcast - 544: 80-Hour Workweeks to Lean FIRE in 8 Years through Real Estate

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.