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PODCAST EDUCATION

How to Transition from 9 to 5 to Full Time Investing

Episode 066

John Larson and the Real Estate Cowboys talk passive income real estate investing.

Hear new episodes every Sunday morning at 8 a.m. The Cowboys talk about ways to transition from a 9 to 5 grind to full-time investing.

Keep the #CowboyCoffee hot while listening to John, and the Cowboys talk about how to #BeACowboy and earn passive income in real estate.

Episode Transcript

Keith Weinhold: Hey, this is Keith Weinhold from the Get Rich Education podcast. You are listening to my friend John Larson and the Real Estate Cowboys. Don’t quit your daydream.

Robert Helms: Hey everybody, it’s Robert Helms, host of the Real Estate Guys radio show, and you are listening to the Real Estate Cowboys.

Announcer: Have you thought about becoming financially free through real estate investing, but don’t have the time or knowledge to get started? Welcome to the Real Estate Cowboys podcast. Each week we discuss passive income investment opportunities in the red hot Texas market. John Larson and the Real Estate Cowboys will show you how to leverage their team to build wealth in real estate through passive investment opportunities. And now here’s John.

John Larson: Hello. Hello. Welcome to another edition of the Real Estate Cowboys. This your host, John Larson. This week we’re going to be talking about how to transition from a nine to five, to full time investing. A lot of people ask me that question. A lot of people are sick of just working in the nine to five rat race. You know, a lot of people I feel like they’re, just feel like they’re stuck in corporate America because of the insurance benefits and things like that. But I believe everybody, you know, who’s on the one side of the fence who’s working the nine to five position, wishes they could come over to the investment side of things and start earning passive income so they’d have more freedom with their family, friends, you know, more freedom to take vacations and do the things that you want to do. I myself started in corporate America and it just, I found out really quickly that it was not for me and I had five different managers overlooking everything I was doing.

Um, you know, I had to be right in work, right on time, right at nine or you know, you’d be getting a write-up or whatever it may be. You had to stay there until five and a lot of times just see, find yourself at four o’clock just staring at the clock, you know, waiting for 5:00 PM to hit so you could get out the door. I just feel like that’s really no way to live. It’s just a really, really tough way to live your life. And I feel like there’s a lot of unhappy people out there who are working those nine to five positions. So today we’re going to talk about how we can get you transitioning from that nine to five into full time investing where I feel like, you know, trust me full time investing comes with a lot of trials and tribulations and a lot of heartache and a lot of anxiety and a lot of, you know, a lot of work.

But I feel like a lot of that groundwork starts in the beginning and once you start to build a portfolio of passive income properties and things of that nature, you’ll start to see that you’re relying less and less on having to work to bring in money each day, your investments just to start, they start making money for you. It’s everyone’s goal really to get their money working for you. And that’s why real estate has been such a popular investment option for and made a lot of people wealthy in America, is because of the fact that your dollars are going into a physical asset, which has then spinning off a cash flow to you each month in the form of a rental payment or whatever it may be. And hopefully, you’re able to purchase those assets at a time where it’s a good time to buy. And there’s room for appreciation, right?

So coming out of the recession of ’08, you know, people were buying properties in ’08, ’09, 2010, 11, 12. Uh, those people are sitting in a very, very good position. Many of them have probably already sold off their properties. Many of them would probably sold them and taken advantage of 1031 exchange so they didn’t have to pay any capital gains tax on the profits that were made from that investment. So lots of different ways to make money in real estate. I talk up to six ways a lot on the show through cash flow, through tax benefits, tax savings, appreciation, principal paydown by your tenants. Many, many ways to make money on your investments with real estate. Also hedging against inflation, locking in 30 year fixed finance at you know, say sub 5% as inflation continues to increase year over year.

It’s another great way to earn income from your real estate investments. So basically if you dream of kicking back on the beach and running your investments from your smartphone, passive income looks a lot like that. You know, you just into your property management portal, seeing your rent checks coming in. Or maybe you just have a private lending deal where every month you’re getting a check like clockwork, just like you would pay Chase Bank for your mortgage, sponsors of private lending opportunities like us are paying you a monthly dividend. So you could just track that literally from your smartphone seeing money hit the bank. That’s a great way to get money working for you. But for many, passive income means earning effortlessly 24/7 but continuing to work nine to five on the weekdays. It’s tricky to transition from a nine to five full time, uh, or it’s very tricky to transition from working nine to five to full time investing. But it’s definitely doable. And so here’s the tips that I have that can make it happen sooner rather than later for you.

And the first thing, like I’ve already mentioned before, is you gotta figure out the insurance angle. If you’re going to go from working a nine to five for a corporation to be an entrepreneur, you’re going to have to, and you have a family. I’ll say you have to figure out the insurance angle first. In my opinion, you want to make sure that your family’s taken care of. And so for many, the sole reason I would say to retain a full-time job is to keep all the important insurance benefits, right? Kids get sick, whatever it may be, you need to make sure you have insurance, right? Cause that kind of stuff can get costly. So you want to talk to your insurance representative to find out what the minimum amount of hours you need to work in order to stay on the company policy. And you may be able to work as few as 10 hours without losing benefits. A second option is to have your spouse keep their job for the insurance while you quit and transition to full time investing, right? Or another option is to look into private insurance for entrepreneurs. You’ll pay more per month, but if your investments are successful, the extra cost may be worth it, right? So an insurance broker will be able to provide several quotes for you. Whatever you decide to do, don’t forego insurance altogether and don’t let your current policy lapse despite what existing insurance mandates are, you don’t want to put yourself or your family in a position where you’re uninsurable for the future. Okay? Okay. So I think that that’s a good option. Maybe your, your wife is in a position where you can use her insurance for some time and then you go on, start to become a full-time investor and then hopefully your investments turn into huge successes and then your wife could take off of work and not have to work either. And then you now are making enough money to where you can afford insurance each month. Even if you’re paying a premium for it by, you know, having some sort of entrepreneurial type of plan. It’s not gonna matter if you’re making good money from your investments. Okay.

Another thing you could do is you could look into working part-time. So the fear of losing that steady paycheck is another big obstacle for many people, right? Who want to transition into full time investing. You know, it’s tough to leave that steady paycheck. You have a mortgage payment, you have kids in school, whatever it may be, you need to make sure you’re bringing in income. You to keep food on the table. Right? So the steady paycheck definitely keeps cash flow healthy. Whereas investing can produce unpredictable income results. Trust me, I know that. So to wean yourself off of a steady paycheck, talk to your boss about working part-time before you quit altogether. The reduced income will enable you to evaluate whether or not your investment income is enough to sustain you from month to month. Okay. But working part-time will also help you see if you’re really comfortable earning less steady income and relying on your investments to earn money. Okay. It’s kind of like dipping your toe in, not fully jumping into the pool, starting to work part-time, still bring in a decent amount of steady cash flow from the part-time job, but it also frees you up with more time to go do your investments and so you can kind of almost have the best of both worlds at that point. So that would be my recommendation there.

Uh, another, another thing that you’re gonna have to do, you’re gonna have to save up some cash before you decide to make this move. Okay? At least a year before you hand in your resignation, you should begin saving cash. If you have already been a saver, increase the percentage you put away each week. While that Monday rolls around and you don’t have to commute to work ever again, you’ll be relieved looking in your bank account. Cash on hand will also give you the leverage to go after opportunities with investing without having to rely on financing. And also cash will help put you in the game when you can no longer qualify in the future for conventional financing with W-2 income, right? So it’s very, very important to save cash if you’re going to make this transition from the nine to five to full time investing.

Another thing that you could do, uh the final thing I would recommend is leverage retirement savings. Put your retirement savings to work for you, where you can earn steady double-digit returns that are almost guaranteed. And private money lending, our opportunity that we have through private lending allows you to act as the bank, lending to private developers or sponsors. Your earnings will help you pad your retirement account, typically with higher returns than you can realize in the stock market or the mutual fund market, right? Uh, historically most people are gonna make about 6% of their money messing with the stock market, whereas we’ve had private lending opportunities that have paid as high as 12% returns. And if you’re loaning that money out of your IRA or 401k, you must self-direct that account first. So you can do these nontraditional investments like private lending, but those dividends are going to come back into your account tax-free or tax-deferred, depending on the structure that you have. If it’s a Roth, these payments are gonna be coming back to you tax-free, right. Knowing that your retirement fund is still growing will add you, add to your confidence that you’ve made a wise choice in transitioning from nine to five to full time investing. But definitely, definitely, definitely take advantage of self-directing the retirement account; partially so you can start doing some, um, what we call Main Street investing, not Wall Street investing.

Okay. And typically with Main Street investing, that’s where you’re going to find your higher returns. And with private lending, as many of you may know, uh, you know, you typically are gonna hold first lien position on these opportunities, which helps minimize your risk in case the project fails or whatever it may be; a sponsor doesn’t see the property through, you have the opportunity to foreclose on that project. And we all know that real estate never goes to zero. So here even if it’s a half-finished project, it’s still something that you could sell on the retail market to another investor or another developer, another group that will come on and take on the project and at least recoup some of your funds. Whereas with the stock market, you know, company could collapse, whatever may happen. Um, some big announcement could or some change in regulations could have a huge effect on your stock and that money can completely be evaporated.

That’s not going to happen with Main Street investing and doing equity syndications, debt syndications because of the fact that real estate never goes to zero. And so many people like the debt syndication side of things because it earns passive income immediately. So your money starts to increase interest while it sits in escrow until the project is closed, until enough funds are raised to close on the project, and then as soon as that project is closed, you’ll receive your accrued interest and your first month’s payment and then it’s just a monthly payment and monthly dividend to you. Like clockwork. A lot of our investors invest cash as well. Even if you’re in that 40% tax bracket, if you’re invested in one of our projects where you’re earning 12%, you’re still making 8% fixed after taxes. That is still a very, very solid return. Still better than what a lot of people are seeing with traditional investments.

Um, but if you do decide to go that route with the self-directed IRA or 401k, which I recommend, as I said, those payments are then going back to you tax-free or tax-deferred. So it’s a huge, huge bonus and in my opinion, one of the best ways to leverage your retirement savings and to increase those savings overtime on a relatively a safe investment opportunity; especially if it’s in a market like DFW, which is where we’re doing a lot of our deals. And then we also are in the CBD industry as well because it’s such a booming industry. And so a lot of our investors, we’ve been placing funds on equipment, uh, large extraction equipment we purchased too, ourselves, that spin-off such a high predictable cash flow that it just makes so much sense for the investor to come in and lend on that piece of equipment because the money that, that, that, that equipment generates is just so much more than what the actual loan amount is.

The loan amount is almost insignificant. And so we like to also lien up that equipment in the form of a UCC-1. So the investors actually hold claim to that equipment until the loan is paid back, right? That’s also how we help minimize your risks. And let’s say one of these borrowers defaults on their loan. We’ll go in and take that equipment. I have my own CBD extraction facilities where we do extraction as well, and I can take that equipment and plug it in somewhere else, turn it back on and start processing hemp biomass and still get my investors paid back. So not a big deal there if they wanted to fall, but I just really can’t see these borrowers defaulting on this type of machinery that just generates millions and millions of dollars, especially in today’s, I would compare it to the gold rush, of CBD. So with real estate deals right now, a lot of the deals are pretty tight and we have to be very, very careful about the real estate opportunities that we put our investors in, even though we’re still minimizing risk through the fact that we’re collateralizing that loan with a deed of trust.

So you hold first lien just like Chase Bank or any bank would. And so if they’re not receiving their payments, they foreclose. You do the same thing. Same thing goes on the equipment side. That UCC-1 protects you. That loan is not paid back, we’re seizing that equipment. Okay. So I feel really, really good about the opportunities we have in the CBD space, loaning on this equipment. Um, just because like I said, it spins off such high cash flow and the cash flow is predictable, right? Keyword, it’s predictable cashflow. These processors have contracts with farmers to process biomass. You know that that biomass is going to be ran through. Most people are charging anywhere between $20 and $25 an input pound to process this, this biomass, and we expect that to be the same, same situation in this year’s harvest. The bottleneck is definitely still on the extraction side.

More and more hemp has been grown since the farm bill was passed in December of last year. So we expect a ton of biomass on the market and not enough extraction capabilities, which is going to keep that price per pound per input pound at, I believe somewhere in the neighborhood of $20 to $25 an input pound. So imagine processing a hundred thousand pounds of biomass, that’s $2.5 million right there. And with our equipment specifically, our equipment can do, if were running 24/7, can process 10,000 pounds a day each. Well, you’re talking about, you’re going to, you’re able to process a hundred thousand pounds of biomass in five days. You can make $2.5 million in five days and that’s typically what the loan amount, that’s pretty much what the loan amount was on those two machines. Very, very easy to pay the investors back when your equipment is spinning off that type of cash flow.

Right. But that’s all the time that we have this week. I hope that you found the information from this episode insightful. I hope it motivated you to start trying to make that transition from your nine to five to full time investing. And if you’re interested in finding out more about the investment opportunities we have at American Real Estate Investments and the Real Estate Cowboys, uh, just feel free to go to our websites. AREIUSA.com, RealEstateCowboysDFW.com. We got a really cool quiz on there that tells you what type of investor you are. You know, we still have access to single-family rentals. We still have access to some vacation rentals right now. I would say that the private lending opportunities is our most popular option, uh, because of all the reasons that I just gave. But if you’re interested in learning what type of investor you are, I recommend taking that quiz, put your information in on either of our websites AREIUSA.com, RealEstateCowboysDFW.com and a member of our team will reach out and kind of explain what investment opportunities we have available right now.

Give you a consultation call, find out what your goals are. Um, and if you’re an accredited investor looking to get involved in one of our private money lending opportunities, we can share that a private placement memorandum with you so you can read over the deal and see if it’s something you’re interested in moving forward on. We’re about to close our most recent raise, which is a CBD extraction equipment raise. I believe we’re only about $250,000 short of finalizing that raise. But we also have another real estate deal that we have under contract here in the Dallas Fort Worth Market in South Dallas. So if you’re just interested in loaning on a real estate deal, that real estate deal, we’ll pay 10 and a half percent. The CBD raise, we’ll pay 12 so if you’re okay with taking a little bit less return on your money to go ahead and invest in real estate, we have a great option there as well.

And also if you found the information on this show, insightful, we have all of our old episodes on the real estate cowboys website, RealEstateCowboysDFW.com. You can also subscribe to us on iTunes and all the other podcasts, you know, options that are out there. We’re, we’re, we’re pretty much on everything and so if you have not subscribed yet, please subscribe, leave a review on the page if you like the show and you know, if you want to brush up a little bit more on different passive income opportunities that are available in real estate, go on Amazon and pick up my book, the Passive Income Guide: What’s Your Return on Life. That’s by John Larson, foreword written by Keith Weinhold of Get Rich Education. It’s a really quick, easy read but it will definitely brush you up on all of the great opportunities that are available and it’ll give you some good insight on how to get started earning passive income through real estate. Okay, so that’s all we have this week. Once again, everyone, always remember what your return on life. Have a great week. Everyone. This is John Larson signing off.

Announcer: All opinions expressed by the host of the show are the opinions of American Real Estate Investments LLC and do not reflect the opinions of guests or sponsors. No personal or professional advice on this program should be considered an endorsement to follow a real estate financing or investment strategy. Before acting on any information, seek advice from your financial tax, mortgage or real estate advisor, as the information is not guaranteed and investment strategies have the potential for profit or loss.