038: Retiring in Your 30’s From Rental Properties with Chad Carson

On this episode of the InvestFourMore Real Estate Podcast I interview Chad Carson. Chad is an incredibly nice guy, who I have met in person, and an incredible investor as well. Chad was a starting linebacker for Clemson University, which is a pretty big deal, but couldn’t quite make it in the NFL. His father had been a real estate investor and he decided to give it a shot after college. Chad loved real estate and became successful very quickly, even though he started with about $1,000. Chad figured out ways to get started in the business without much money and built an incredible business, that is allowing him to spend a year in Argentina with his family. Chad and I are similar age and he is at a point now where he has enough income from his rentals to retire.

How did Chad get started in real estate with $1,000?

Chad graduated from college with little money, but knew he wanted to be involved in real estate. Chad started by trying to locate deals for his father. Chad started out by driving for dollars. He would drive around neighborhoods looking for run down or vacant houses, try to find the owners, and then try to convince them to sell. It took Chad a couple of months to get the first deal for his father, but found one and earned his first check from real estate. From that point on, Chad was hooked and ramped up his real estate business.

How did Chad Carson’s real estate career progress?

Chad learned how to find deals and he started to make a decent living. He knew there was more to real estate than finding deals so he expanded to fix and flipping. Chad worked with a partner and at one time they were buying 5o houses a year to flip and hold as rentals.  Chad now has 55 units with his partner and has built a business that provides enough income to retire.

How did Chad survive the housing crisis?

Chad Carson started investing in real estate in the early 2000’s. He was flipping houses before and after the housing crisis, much like myself. Chad attributes surviving the crisis to being lucky and in a steady market. When Chad and his partner, bought over 50 houses in one year they decided they had to slow down and make sure all their properties were stabilized before buying many more. That happened to be right before the housing crisis happened. Chad also says that the towns in South Carolina where he was investing in were not hit too hard by the housing crisis. They invested for cash flow with long-term loans in place and that also helped them make it through the down-turn unscathed.

What is Chad’s favorite way to find deals?

Chad finds deals a number of ways, but loves direct marketing. He learned how to find deals driving for dollars and still loves that tactic 15 years later. He has combined driving for dollars with direct mail to get the best results. This is something that Bob Couture from Podcast 37 does as well. Chad warns that direct marketing and direct mail is not easy or cheap. They have to send out thousands of letters to to get deals and sending out that much mail gets expensive.

How has Chad financed his flips and rentals?

Chad has used private money to finance most of his real estate deals. Over the years he has built many connections and got his first private money from one of his old college professors. Chad has structured the private money into long-term loans of ten years or more. Chad attributes his success in finding lenders to proving he can find great deals, proving he can make money with his deals and building great relationships with people.

How can you contact Chad Carson?

Chad has his own blog with a lot of great information. You can find it at Coachcarson.com. Chad is called “coach”, because of his very successful football background and his love to share what he has learned. Chad not only teaches how he has become successful in real estate, but also loves to teach about positive thinking and why he has becomes so successful.

[0:00:58.0] MF: Hey everyone, Mark Ferguson here with InvestFourMore. Welcome to another episode of the InvestFourMore Real Estate Podcast. I have a really cool guest on today. Chad Carson who I’ve known for a little while, he’s been an investor owning rental properties, flipping for many years. He also used to be a football player which I find very interesting as a sports fan. And as a Bronco fan, I’m into football a lot right now. Really happy to have Chad on the show. Chad, how are you doing?

[0:01:28.3]CC: I’m doing awesome Mark, it’s great to be here, thanks for having me.

[0:01:31.0] MF: Yeah, thank you so much for being on the show. I really like talking to investors of course and different investors and how they’ve used strategies to build up their passive income and also flipping. You got some really cool goals but I’d love to start with how you got started in real estate. I know you went to Clemson on a football scholarship. How did you get started in real estate after going through that?

[0:01:54.9] CC: With me, it was kind of a story like, maybe a lot of people getting out of high school or getting out of college, just trying to figure out what you’re going to do in your life and you’re at all these little crossroads and I was actually a biology major in college. Biology and German of all things.

And so kind of the pre med type path but I started looking at it and that was one path, I applied to a bunch of med schools and I started just thinking about the structure and the rigidness of that kind of career you just had to go for eight years or 10 years and you finally start making money and you’re sort of locked into something for decades.

I didn’t necessarily write it off but I said, “You know, I’m just going to put that off for a little while and also had some opportunities like working for some bigger businesses and kind of Wall Street kind of stuff and both of those are really cool and they were kind of the traditional paths because you make a bunch of money and it’s pretty secure. but I was really enticed by the entrepreneurship path.

The idea that you could go start your own business and it was exciting and I knew nothing about it and it was just sort of like that sports feeling of this big challenge and excitement of going after a big goal. And so I plunged in to real estate investing sort of with that much knowledge in it. My father owned a few rental properties growing up, I was familiar with it.

I really just say, I own my car, car free and clear, I’ve got a thousand bucks in the bank. And I just started learning and reading and jumped into it with the business partner with a guy I knew in college and the two of us have been flipping and getting after it ever since then but that was the motivation at the very beginning.

[0:03:26.2] MF: No, that’s great. And I’m curious, did you look at other businesses? Wanting to be an entrepreneur, did you research other ways to make money? What drew you to real estate?

[0:03:35.3] CC: Yeah that’s a good question, I really didn’t and I think a lot of it had to do with observing my father growing up and I knew real estate was interesting, I’d always complained about it when I was in middle school because my dad used to overpay me like eight or 10 bucks an hour but it was totally not worth it as a painter. I would have to paint some of his properties and he would buy a foreclosure at the court house steps.

You didn’t know what was inside, so we’d get it and you have to — sometimes I was cleaning out refrigerators with maggots in it and rats were running after you in the house and I was like, “This is ridiculous, I would never want to invest in real estate.” Then you grow up and you get out of college and you’re like, “Well, dad was pretty smart after all.”

And so that was sort of the reason I looked at it and said, “This is a pretty intriguing business.” He actually had some books and seminars and things on his shelf, I was just thumbing around trying to reading and sitting in his office one day and I got the bug just by reading some of those books and just I got excited about it. I really didn’t look at it in the other ones, any other avenues except for that.

[0:04:37.3] MF: That’s great. Real estate really is one of the easier ways to start a business without much capital and without a ton of experience. That makes sense. How did you do your first deal with a thousand dollars in the bank?

[0:04:51.6] CC: I know a lot of people talk about wholesaling and I’ve done a lot of wholesaling in the past but I sort of took a different attack on that because I didn’t have any money, I just graduated from college, I didn’t even have a place to live because I was just trying to figure it out. And so I actually lived at home in Newnan, Georgia where I’m from, where my father invests.

And so my first year, the plan was, I just asked him about deals, you know, “What do the numbers look like? What kind of properties are you going after? I’d like to learn more about your business.” And as he explained some of that to me, it kind of came to mind that I had read somewhere about a bird dog, somebody who goes out, finds deals for other people and I ask that.

Gave a proposition to my dad, I said, “What if I just hustled, I don’t know a lot at the moment but I’ll go out and hustle, I’ll knock on doors, I’ll talk to every realtor in town, I’ll send out letters? I don’t care what I need to do, but if you’ll tell me what you’re looking for, I’ll go find it, I will sniff it out.”

That was a really good way for me to get started because when you’re nothing at that point, you’re going to have a learning curve and it sort of isolated just one part of the business that I could focus on and that was just lead generation bird dogging. That was it. I didn’t have to worry about the money, I didn’t have to worry about how to rent the properties, I didn’t have to worry about how to fix them up and flip them.

All I needed to know was I’m going to learn, I’m doing the very beginning of the funnel, I’m just going to go out and sniff out deals and it was really kind of learning in motion and I helped him by — it took about four, five months to get my first deal. Then I made a couple of thousand bucks per deal, I passed them on to him, sometimes I helped him along the way flipping on marketing or whatever.

But then at the end of that year I had learned a lot and I decided to then start doing it on my own because I knew how to find the deals. And so then I moved back up to Clemson where I went to college and that’s where my business partner and I got started and we just started buying properties on our own using private money lenders who would just stepped in. Instead of me wholesaling it to somebody else, I just would find the lender who would put up the money and then I would buy it myself.

[0:06:53.1] MF: That’s awesome. I know what you mean about wholesaling, there’s a lot of guru’s out there, a lot of people teaching wholesaling is an easy way to get started in real estate with money and credit. It’s not easy.

[0:07:05.0] CC: It’s not easy at all.

[0:07:07.4] MF: But one thing Wholesaling does doe is it teaches you how to find deals which is one of the most important things of real estate. The way you started was a great way because it probably taught you one of the most important things that you can do, and that was finding the deals.

[0:07:20.2] CC: Exactly. I’ve kind of felt like that ever since then that as long as I can find good deals and they’re truly good deals, they’re not just on paper and they’re the kind of deals that have equity, real meat on the bone, they have real cash flow. You truly can go find the money if you have the deal and that’s been proven over and over again to me that I kind of started in a little bit unorthodox way that I didn’t have the traditional job, I didn’t have credit to go to the bank and get loans.

But because I was able to use that one skill that you’re talking about, I always had something to bring to the table because there are lots of people with money and no time and no expertise but there weren’t that many people and there still aren’t today that, believe it or not, who are willing to go out and hustle and dig and kind of go in the nooks and crannies where nobody else is looking. I mean there’s always this nooks and crannies, and so if you’re willing to take that extra effort, I feel like that’s a really good thing to bring to the table.

[0:08:13.5] MF: Yeah, I totally agree. I’m curious, what do you think was your most successful way to find those deals?

[0:08:20.9] CC: Yeah, I used a variety but I’ve always stuck with direct mail over the years. A lot of my — I did buy a lot of REO’s at that point. I like REO’s, I think you do a lot of those too right Mark?

[0:08:33.1] MF: Yup.

[0:08:35.1] CC: I still like that because it was a really low cost way to get started, I didn’t have to put up all the money for direct mail and have some failed campaigns that never brought anything in. But I guess the combination of that and then direct mail to different list was really helpful for me because it sort of gave me that diversity of leads.

Some years, the direct mail to for example, an expired listing list or direct mail to out of town list, work like gang busters and then the next year it didn’t work at all. I would always have at least two or there different campaigns going and those have been pretty consistent for me.

[0:09:12.4] MF: That’s great. I use some direct mail too but it’s hard for me to focus on it with a ton of different things going on but it has given us some good results too. I think some people get the misconception about direct mail. You just send out one letter and then you get a couple of leads and buy a house from it. It doesn’t work that way. How many letters do you send out to people? How many contacts do you think you have to make before you can get one deal?

[0:09:38.5] CC: Yeah. My direct mail has evolved a lot. I’m much more pinned, today and my business is different than it was 10, 12 years ago. When I really get my volume up, you have to send out thousands of letters and my typical response rate is, I might send out for example 1,000 letters and get a 3% response rate maybe. And so you're going to get 30 calls and then out of those 30, maybe 10 of them will be worth going on appointments and maybe one or two of those are going to be good deals. That’s sort of a round number way to looking at it.

[0:10:15.8] MF: Right, those thousand letters aren’t free either, you got to pay for postage and to create them, it can get expensive to do direct mail campaign for sure.

[0:10:24.4] CC: Yeah, you can figure a dollar per letter. I outsource all my letters when I do that but between stamps and paying somebody to do it and the cost of envelopes, it’s a pretty big, or especially for a brand new person, that’s a pretty big investment, especially if those thousand letters don’t work. If you’ve sent it to the wrong list or your letter wasn’t really good or whatever.

I’d say it’s like a second or third level, kind of a little bit more advanced strategy. I think there’s some other ways that I really enjoy and things like today I still do. I’ve never stopped doing like just driving around neighborhoods and bird dogging myself or having other people do the same thing and I really enjoy picking out, in my target neighborhoods, I’ll pick out and make a list of properties that are vacant or that I just take a really cool property that’ll be a good investment.

Or properties where the zoning is kind of in favor of, like if it’s a single family house on a multiunit zoning or something. Just pick out those properties and make a list and send direct mail to those targeted lists of people. I think that sort of an awesome way to do it, you really narrow down your market and then you just continually send letters to that smaller list of people, that’s another good way to do it.

[0:11:31.3] MF: Right. I talked Bob Couture last week, he does the same exact thing in Massachusetts. He said, it’s so much more target, they get so much better results if you put that extra work in to actually drive around or hire someone to drive around and find those houses that look vacant or dilapidated. Not just because you have a better chance but because there’s so many other investors mailing to the absentee owners, the list is just a lot less competition if you put that extra work in.

[0:12:00.3] CC: Exactly. Another thing. Direct mail is an art that people study for years and if you really don’t get your letter right or if you really don’t get your envelope right, I mean there’s so many different tweaks you could do. I think that what you’re saying, they give you a competitive advantage.

Because those big firms that can send out 10,000 letters at a time and they have a marketing person on board. They’re going to really hone their message and they’re going to adapt it better than you are typically, as a small operator. What you’re saying will you drive around and find those properties, that’s the hustle that the other investors aren’t willing to do and there’s always those little things.

Even better, if you can get out in the neighborhood and knock on doors and talk to the neighbors and do some of that. You can never outsource relationships in people and conversations. And so I’ve always found that, that’s the thing that is kind of my moat or my barrier that is competitive advantage around what I do is just have relationships with people. That’s something that people can’t do with 10,000 letters.

[0:13:01.3] MF: Right, no that’s great. That’s something too that people can do that may not have a lot of money but they’ve got time. Like me as I started out. You can go out there and talk to people, drive around, it doesn’t cost you that much money.

[0:13:13.6] CC: No.

[0:13:13.7] MF: If you're just willing to do it and talk to people, it’s a huge advantage.

[0:13:17.9] CC: Yup, that’s right.

[0:13:19.4] MF: Cool, so you start working with a partner, what made you want to work with a partner and get involved with somebody else in your business?

[0:13:27.6] CC: It’s something that other people have asked me that and it’s not like something I recommend wholesale to people to get a partner but it’s worked out really well with us and the original motivation was we combine financial resources a little bit, I had a thousand dollars in the bank and he had a little bit more money for some marketing upfront but we also saw it as a way to scale our business a little bit with a little bit less risk.

I was the acquisitions person, I was the person who was always working on getting money for deals when we started flipping houses. He was the one who would manage the rehab, sort of our project manager, rehab manager, got all the subs out, got all the bids, and then he would also manage in selling it or renting it depending on which one we did.

It was really efficient early on and able to scale to the point where about 2007. So we started at the end of 2003 together. Within three or four years, we bought 50 deals in one year which was just crazy for us but we did that a lot because we were able to be more specialized and once we bought a house, I didn’t even see it for another two or three months until we sold it or maybe not ever see it again.

And so we just sort of had a pipeline going and then I would have some people work with me and some acquisition assistance and he would have the contractors. So I think for that reason it was good and as we’ve evolved, we transitioned where he’s not working as much day to day and the business as I am. So I’ll take a salary in the business.

He’s still an owner but then he’s had capital from some other businesses that he’s been able to invest with us. And so we’ve aligned in a lot of ways but I’m not sure that that’s as easy to replicate for everybody. We’ve got some pretty good consistent values, we have consistent goals with each other and it’s just been a good thing for us.

[0:15:15.0] MF: That’s great it’s worked out so well. I’m curious one thing you mentioned was, how to decide whether to sell or rent and I know a lot of people ask me that question. What parameters or criteria do you use to decide if you're going to rent or flip the property?

[0:15:29.0] CC: Yeah, so early on I was different than it is now but like early on, it was flip every time for us, every single property, if we could sell it, we would. Primarily because we were doing it as a full time business, that’s how we put food on the table and so for the first three or four years it was all flips just because we didn’t have any capital to save for a rental properties. We didn’t have enough reserves and so we just felt like we just needed cash cash, cash.

Once we were able to get a little bit more of a cash base, the rental properties for us were more — we would prefer to after two or three flips a year, we would actually prefer to rent properties mainly because we feel like the tax advantages and wealth building advantages were better. If we just, or example, if we flipped the house and we’d already flip three or four houses before that. The extra flip that we made $20 grand on that flip, our tax bracket was typically higher, we pay more in taxes, they had to pay Fico taxes often on that.

And so if we held it for a couple of years, rented it out and decided to sell it sometimes in the future then even if we did want to cash in on that property we were paying a 15% or 20% or a much lower tax rate, and so we were able to keep more of the money. That was one of the first considerations we started thinking about was just, we did less work and squeeze more money out of each deal and that made sense with rental properties.

But it also made sense kind of long term because our main goal was to have recurring passive income and we didn’t want to keep working and working. I wanted to take trips, we wanted to have flexibility to do other projects. And so at some point we knew we wanted that recurring income that came from rental properties. We sort of saw it like we were farmers and the flip properties were like cash crops, the crop you planted in the spring, you harvested in the fall and you keep doing those to see if you could eat.

Then, the long term, like the fruit trees that we were planting were like these apple trees, these long term cash flip properties that they took a little while to grow, they didn’t produce any fruit in the first few years but after four, five, six years, they start really producing some good cash flow and you get them paid off and then those fruit trees produce money and fruit for you to eat for the rest of your life.

[0:17:44.4] MF: That’s a great analogy and plus, you don’t have to spend as much time with the fruit trees. After it’s been established, the cash drops itsself.

[0:17:52.9] CC: Exactly, yeah.

[0:17:53.5] MF: Great. How many rental property are you guys up to now?

[0:17:58.4] CC: We have about 55 units and a small number of those are like notes that we’ve owner financed properties to people in the past. But most of those, most of what we have are rental property. I’m in a college town so a big number of those now are college student rentals. Close to campus, on the bus lines and that’s kind of a different niche of real estate but it’s been pretty good for us because the university’s been growing and we’ve had basically zero vacancy for the last five, six years on some of those properties. So it’s been pretty good and rents have been going up. That’s been interesting niche.

[0:18:36.7] MF: Yeah, that’s great. I live in a college town as well, most of my rentals are still single family homes not rent to college students but my sister actually has rentals as well and she’s always been into college rental niche. So what tips or advice can you give about dealing with college students and renting to college students?

[0:18:55.9] CC: Yeah so you’re going to need to babysit a little bit more, that’s part of the issue but I think one of the things is just being, having some good systems. I have some single family rentals like you do too Mark and I find those are much more — they can self-manage a little bit better if you get a family in there and they stay for seven years, that’s really an awesome management arrangement because they can cut their own grass, they can do a lot of things themselves.

So student rentals, you’re going to need to have some pretty good turnover system because they turnover every couple of years. We just, having checklist, having operation manual, having some good advertising channels that you can make sure students are able to find out about your rentals, have a good website.

It’s just a little bit more of a business operation than a maybe a little bit more passive rental operation might be. But it’s been a good exchange for us because we have a part time employee who works with us and she can handle a lot of this stuff and operations and it’s made more cash flow for us over the long run.

[0:19:53.3] MF: That’s great. Something I was going to ask is are you managing these yourself or someone on your team helping manage them, how do you handle the management of those properties?

[0:20:01.7] CC: We started off doing — so my business partner did a lot of it himself and then I moved into the role for a while and did it myself. Then we, I think it’s been seven or eight years ago now, we hired a bookkeeper, a part time bookkeeper to just check our mail and do some things like that and just kind of file paperwork and just do some basic bookkeeping.

She did a really good and she’s grown into a bigger role where eventually we started letting her do all of our collections like if somebody was not paying on time, we’d let her call them and text them and track them down to get the money. Then she grew even more into more roles where she’s sort of been our assistant like going out and putting out rental signs and putting ads for our rental properties and then that sort of thing.

She’s helped us do a lot of that and kind of evolved for more of a book keeper into an administrator/administrative assistant kind of role. That’s been a really big help and we sort of lean on her for some of the core administrative task management and I still do the underwriting of our tenants when they come through but sign the final lease and that sort of thing. But then she does I’d say 90% of it and then that allows us a little bit more flexibility and kind of do everything else we need to do.

[0:21:15.0] MF: That’s great. When I started letting someone on my team to handle the management, it made my life so much easier. The more people I’ve hired and handed off the stuff I don’t like doing, the more I get done and the happier I am that’s for sure.

[0:21:30.2] CC: Yeah. You have a lot of system, and I’m reading your stuff too Mark, having those checklist and systems that allow you to hand off whatever you’re doing, that’s a powerful way to kind of generate income while still having some control in your time a little bit right? That’s an amazing way to do it.

[0:21:45.4] MF: Yeah, for sure. I’m not a super organized person all the time, people may think I’m this amazing detailed organized person and I’m more of a big picture thinker and what I’ve done is try to hie people who are more organized than me to do that stuff. So it works out well that way. Yeah, the more systems you can get in place, even for your own personal life and time management and everything you do, the more you’ll get done and the more efficient you’ll be and usually the happier you’ll be to.

[0:22:14.2] CC: Absolutely.

[0:22:15.8] MF: Very cool. Now, something that I find interesting is, you started back in the early 2000’s and you’re still going strong. Did your area get affected by the housing crisis and how did you get through that?

[0:22:28.6] CC: Yeah, so it did get affected. I think it was — I’m in upstate of South Carolina and we’re not a major metro area like Atlanta, Charlotte, but we’re halfway in between those major metro areas. And so to some extent, we never experienced the massive growth that a lot of the big metro areas like Denver and Atlanta and Charlotte, and all the big cities.

So we never got the peak that everybody else did but we also didn’t experience the massive drop like everybody else did. It was a little bit delayed and we definitely had some issues and we had the same banking issues, everybody where you couldn’t go get money to refinance or whatever. I think we did some things that were, some of it was a little bit lucky and some of it was being smart and thinking about things.

But I mentioned in 2007, we really had a big growth year where we had 50 acquisition closings in one year. Some of those were flips, some of them are wholesales, some of them were buying whole rental properties and we decided after that year to sort of slow down and say we just need to absorb what we have. That was a good move and I credit mainly my business partner to that and that was another benefit of having a business partner. He was doing more of the management and he said, we really need that, kind of get our heads around the growth we’ve already experienced, let’s just slow down for a little bit.

That was a good move because that was right about the time things were getting ugly but the other thing I think we did which is a little bit luck but is also some intuition about the market was we didn’t have a lot of bank loans. Almost all of — I’d say, I think I calculated at one point there it was like 90% or 92% of the payments we had going out the door on any of the properties we had leverage on were private financing.

They were either seller financing, lease options or self-directed IRA loans from individuals. The benefit of that, sometimes we pay a little bit higher interest, sometimes we didn’t. But the benefit of that was we had a little bit more flexible terms, most of those lenders were willing to give a seven, 10, 15 year terms that kind of let us ride out the storm and kind of get through everything.

But it also gave us peace of mind that in the worst case scenario, even if we did have a balloon or some loan we had to pay off, I would much rather sit face to face over coffee with one of my private lenders and talk about the situation and say, “Hey look, we’re working our tails off to get this right but right now we can’t sell this property, can you give me a little bit more time or can I give you more of a cash flow on the back end? Can I give you a piece of equity in the property?”

Like an individual is going to have that flexibility whereas the stories I’ve heard, kind of the disasters stories from people I knew in town, people I heard on the radio like Dave Ramsey and some of the bigger personalities who don’t like going and invest at all. They all borrowed bank money and when things got bad, their banks weren’t willing to negotiate.

And so I feel like that was another thing that we sort of had to do that because we didn’t have a job and we didn’t have a lot of income to go get a lot of bank loans, we had a few but it was sort of something we ran with once we started doing it.

[0:25:38.2] MF: Right, that makes a lot of sense and I think a lot of people got in trouble with the banks because not just getting bank loans but they were getting short term bank loans with balloon payments where, yeah, if things go wrong, the bank can say, “Hey, pay us all our money or we’re going to take the property,” or whatever. But if you invest with long term bank loans without balloon notes, you’re usually a lot safer. Yeah, there’s a big difference between the type of bank loans we’re getting.

[0:26:04.4] CC: Yes, good point. Yeah a 30 year mortgage at 4% is much different than a 6% or 5% commercial loan with a three year balloon. If you had 20 of those commercial loans, they all burst at the same time, that’s a problem.

[0:26:16.8] MF: Right. Exactly and there’s no guarantee prices will go up or you’ll be able to refinance those and that’s what I think a lot of people banked on was the prices would just keep going up or they could just continually refinance all the properties and when things changed, a lot of that money just disappeared for a couple of years.

[0:26:34.9] CC: Exactly, yeah, it dried up. Even if you were a good borrower, even if you had good credit. I tell people, “Look at what happened to all the big corporations that were like fortune 500 corporations — Goldman Sax and GE and Bank of America had to go to Warrant Buffett because they couldn’t get enough money.”

If those biggest companies in the country are having a hard time getting money during a downturn, you think you and I as kind of a mom and pop investor are going to be able to go to the bank and get money? It doesn’t work that way and the other thing that I found that was sort of fortuitous about using some non-bank financing was the best time to buy deals was 2008, nine, ten, right?

And that was when it was really difficult to get back money but that was actually the time when a lot of the investors who invested with me were also sort of panicking about the stock market and they were getting like zero percent interest in a CD and it was sort of a perfect storm because I had already built relationships with those people, they didn’t have a place that they felt good about to put their money.

Here I was finding really good deals, produced amazing income and I would go to them and say, “Hey look, there’s a good piece of real estate, you’ll be in it for 60% loan to value or 70% loan to value and it produces a ton of income, if I got run over by a bus, you could take the property back and be in really good shape.” And so it’s just a really easy proposition once you’d built that relationship with people to say, “Let’s go buy some properties now,” and you had cash and go do it. Everybody else didn’t.

[0:28:06.6] MF: Right, that’s great. I’m really curious too, you’ve had quite a few units, quite a few flips going on. Obviously you’ve had a ton of private money that you could borrow, how did you find those private money lenders in the beginning?

[0:28:19.7] CC: It all just started, it’s kind of like I was talking about going out and finding deals and sort of talking to people, sort of like that and the first one I guess is always the hardest one and my first private lender was a professor I met at Clemson when I was trying to figure out what I wanted to do right when I graduated. I went and took a business course and I was a biology major and I wanted to learn a little bit more about business.

I met the professor in class was talking about real estate, kind of perk my ears up and I stopped after class and talked to him and next thing I knew I was riding around in the car with him and looking at real estate deals after class. Eventually he put me on some projects and said, “Why don’t you go research this and this?” I didn’t even have to go to class anymore, he gave me like special projects on the side looking at real estate.

It took about a year but after I worked with my dad and was a bird dog for my dad, that year I moved back to Clemson’s, I went to him and said, “I’m finding this real estate deals but I need the money, I don’t have any money, is there any way we can work together?” And so we worked out a way where he would put up the money and we pay him an interest rate typically, sometimes we’d give him a piece of the equity on the back end as a lender so he would have a participating loan and so he was basically like an angel investor in the venture capital world where he would kind of take a chance on a new, young, upstart investor but he would make a bigger profit by doing that.

Then over time, once I had that one relationship with him, I would meet other people at meetings and around town and I will tell them about what I was doing with him and they got interested in that too. And so I was able to develop a little circle of people who would loan me money that way. I learned a lot about self-direction IRA’s and that helped a lot because I became sort of an expert on how that process worked at least and how to get the loans setup and closed and that sort of thing.

So I could explain that to somebody who had a big 401(k) and wanted to invest in real estate. I would say, “Well you could call this company over here, they could put $100,000 in a self-directed IRA and you could loan it to me and make 6% or make 10%,” or whatever I was borrowing at the time. I would help them figure that out.

[0:30:28.8] MF: That’s awesome. One thing I think that’s unique was what you’ve been saying is you’ve been able to get some long term private money financing. I mean most people I talk to, even for myself, a lot of private money, they might lend you money for a year or two but it sounds like you’ve been able to establish them longer term private money loans, right?

[0:30:47.2] CC: Yeah. It started off short term though, that was the interesting thing. I was doing all those flips early on and this, my professor friend, he just did short term with this for a long time but eventually, especially when the downturn came about, we started saying, “Look, the opportunity is in holding the property and what you’d be interested in just earning a guaranteed, just an income stream instead of having this in and out? How about you have some of your money just sit there for 10 years and make a set interest rate and you don’t have to worry about it anymore, you could just use that income to do whatever?”

So it’s sort of evolved into that and we started showing them some other deals where they would just make income and I think the key for them was that we had already established that trust and so it might be that with private lenders, you might want to do a couple of deals where we pay them off quickly in six months, 12 months. But then, on the next, maybe on the third deal you offer them, “Here’s another deal that’s a rental property, it produces $2,000 a month in income. I’m going to be paying you a thousand dollars and you’re going to be at a 70% loan to value. Would you be interested in that kind of deal if you loaned me the money over 10 years or maybe seven years?”

You just sort of lay it out there and compare it to the alternatives because I know you know this too Mark. When you compared it to what they can do on the stock market, many people on the stock market are expecting 7% over the long run. And so if you can show them they can make 6% with an interest payment and it’s passive, it’s more stable, they already like real estate. To me it’s not a theological proposition for them to go for a 6% return over 10 years instead of 7% in the stock market especially if they’re a real estate person who knows and likes real estate.

[0:32:31.9] MF: Yeah. That makes perfect sense to me because there’s no guarantee the stock market’s going to do that, 7%, might be more, might be less but it could be negative returns too. You got nothing backing the stock market investment either. If you lose your money, there’s no house that you could take back if you lose your money. In real estate it’s backed by a real asset and like you said, you’ve got a steady return coming in. With the stock market, there’s no guarantees at all.

[0:33:00.1] CC: No, exactly, yeah.

[0:33:03.0] MF: That’s awesome. Now, what has intrigued me, we talked a little bit before we started is you’ve got your rental properties, you’re still flipping some homes now but your goals is to retire basically next year, right?

[0:33:17.5] CC: Yeah. And so retire is kind of a loaded word but exactly, I am. My wife and I are planning on a mini retirement trip and really, the goal as a couple of main goals. One is we’re going to go abroad for a year, we have two little girls, we have a three year old and five year old daughters and so we wanted to just settle down in one location in a Spanish speaking country.

My wife speaks Spanish, and is a Spanish teacher. We just want to sort of immerse ourselves and get an apartment down in Argentina, a big city there and just sort of be — live local life, learn more Spanish, have a good time, sort of just take ourselves out of our normal life for a little while. The cool thing about that is I’m a goal person and to do that kind of thing financially and with your business, it forces you to get all your income in place.

So you have to have enough passive income coming in to fund that trip I think the more difficult part is detaching yourself from all the systems and the process you’ve made. My business partner and I are working a lot this year on making sure of our payment systems, so how are we going to pay contractors if I’m abroad in Argentina and how are we going to do paperwork? How are we going to communicate with people?

It’s just forced us to build a better business knowing that it’s time to go, we’re going to be leaving the country. It’s been a really fun process for many reasons first of all because it’s going to be a really cool trip and a family trip and sort of a lifetime kind of experience but it’s also going to be sort of getting us to the next plateau of our business in terms of passive income, in terms of passive systems and delegating and outsourcing things.

[0:35:01.5] MF: That’s awesome. I love how you have set it up so that you’re kind of forcing yourself to make a business self-sufficient without you being there. It should be the goal of every business owners, is that you create something where you don’t have to work it all year long to make money but actually makes money without you. So that’s awesome.

[0:35:20.6] CC: Yeah, I’m excited. In real estate, it seems like such a local business and a lot of people give you an objection, you might hear this too Mark that you got to be local, you got to be there and look at the property. I’ve done this in the past, I took a little mini retirement in 2009 and with my wife and I before kids went to South America and I remember it vividly being on the Magellan strait in Southern Chile in Patagonia and I was in this little Internet café and I had my little small laptop.

I was checking my email briefly because we were about to go on a tour to look like a penguin colony in the very tip of South America. I’m on Skype talking to a plumber because I had gotten an email about a hot water heater blowing up and it was leaking in the crawl space and so I got on Skype for like 10 cents a minute and called this plumber. I was on the phone for three or four minutes, he said, “Okay, I know what to do, I’ll handle it, I’ll pay for work, we’ll bill you later.” He went and handled the hot water heater. I was off the phone in three or four minutes and I went on to my tour to the penguin colony and had a good time.

So in a worst case scenario, real estate can be very mobile if you can, even in those kind of situation, even if you were handling maintenance yourself, it requires a phone call in a way digital, the technology and internet works these days, this is a really cool business owning rental property to be able to be mobile, to be able to be self-sufficient. It just never been a better time if you want to kind of detach yourself from your normal life and kind of move around a little bit, this is a really good way to do it.

[0:36:53.6] MF: That’s awesome. Yeah, I’ve talked to a number of people who are investing from across the country or even out of the country and yeah because of today’s technology, they can see pictures, they can see videos, they can see properties, it obviously helps to be local, to see what you’re investing in once in a while but you don’t have to be there 100% of the time.

[0:37:15.7] CC: Yeah, exactly. You can come in and out of town and you want to be back at some point, I don’t think you ever want to be detached but the point is if you can venture off in a new greener pastures for a little while and to me that’s part of the fun of life. Trying new things, having new adventures. Real estate kind of gives you that bedrock, that foundation that allows you to venture off and if you compare that to other life style that people have, grinding away at a job for 50 years or 30 years.

Or having to get up every morning and commute and do the same thing with somebody else’s schedule, that gets old. This always requires work but it’s a kind of work that’s flexible, and that has plateaus that you can take time off, has flexibility to do other things, to grow, it’s a really — I’m obviously sold on the vehicle of real estate investing but I’m kind of evangelical about it almost telling people about it because it’s just such an amazing way to build your life around it.

[0:38:15.6] MF: Right, that’s one thing I was going to ask you about too is you’ve been in real estate about 13, 14 years or around there?

[0:38:24.0] CC: 13 years now.

[0:38:24.9] MF: Yeah, so how long have you had taken the biotech route, you think that would have taken you to be able to take the trip for a year to another country like this?

[0:38:35.3] CC: I can’t even imagine Mark, I don’t’ know that it would have happened. I think the way it works is you get momentum in your life and you go down a certain path and you start acquiring debt to go to medical school and just one thing leads to another. I don’t know that I’d be doing it. I would like to think that maybe I’d make a lot of money as a doctor and save that money and kind of jump out of that ship eventually.

But I feel like if you put off getting in entrepreneurship, the longer you do that, you don’t get to taste that flexibility and sort of taste the Kool-Aid so to speak, you might keep putting it off for another decade and I don’t think I’d be doing what I’m doing if I would have gone that path.

[0:39:14.3] MF: Right, that’s one reason why I love real estate as well. That’s great. Do you have any plans after Argentina or are you just kind of taking it as it goes and see what happens?

[0:39:25.1] CC: Yeah I’m just taking it as it goes. I mean I sort of see it like I knew shift for me, even right now we’re looking at bigger deals than we’ve done in the past in Clemson where I am. I’m sort of like a big fish in a small pond, it’s a small town but it’s really growing fast and so we’re looking at some venture capital deals where we put some money in deals with other people where we buy maybe a little bit bigger apartment units.

We’re looking at some maybe doing some development deals if the numbers are right. So I think we’re kind of shifting and looking if we have a good base of rental properties, we can then pick and choose some really interesting opportunities that are kind of a bigger deals. And I think that’s kind of on the horizon for us.

Also, I like doing some of the same things you do as well, I like to write, I like to think, I like to share ideas with other people. The Internet real estate world has been interesting for me to be able to exchange ideas with other people, to share ideas, I write a weekly newsletter, which is as much therapy for me because I think my wife got tired of me just explaining all these ideas and there’s cool things I read in the book. She like, “Why don’t you just write it down and share it with other people?” And so that’s what I’ve been doing that for a while as well. I think I’ll venture off into that in a bigger way.

[0:40:38.5] MF: Right, and you have a great site. Yeah, tell people what your blog is and you’re welcome to tell us a little bit more about what you write about and what your plans are.

[0:40:46.6] CC: My blog is called CoachCarson.com and that’s sort of originated. I used to do a little bit more consulting with people where locally but I played sports, always liked the idea of your old school coach was about fundamentals and who is about kind of teaching you the core parts of the business and keeping you motivated and what I write about on Coachcarson.com is very much about real estate, real estate investing and building wealth.

But also I get in to a lot of the personal finance and early retirement and how do you balance your business and your life? And use real estate goals to accomplish some of the life goals that you have. So I get into some of that and some of the — I’m really interested in positive psychology and mindset and how you think about things and ideas you put in your head. So I touch on a little bit more, I definitely have a lot of real estate but there’s also some more of that kind of thing as well.

[0:41:40.9] MF: That’s great. I’m saying, I’m a huge believer in positive thinking and using our own self-conscious to help us succeed more. I think people don’t realize how much control we have over our life if we really put our mind to it.

[0:41:53.9] CC: Exactly, yeah. It’s amazing, it’s kind of like that garbage in, garbage out analogy that if you put garbage in, if you were eating food, if you start eating Cheetos every day for breakfast, lunch and dinner, eventually you’re going to turn into a Cheetos. That’s just not good for your body. Well, the same thing goes with your mind. I mean there’s a quote, I think it’s a quote by Marcus Aurelius who talks about your mind back in the roman days and he was a roman emperor, the guy from gladiator.

He was a philosopher as well and he said that your mind is kind of like a cloth that gets died by certain color and the more you soak your mind in a certain kind of thought, you’re going to actually, your mind’s going to turn into that. If you’re always thinking about negative things or you’re always thinking of being pessimistic, if you’re always thinking about whatever it is, that’s the way your mind’s going to naturally be that way.

And so a big part of the entrepreneurship and real estate I think is controlling that information that goes into your mind and deliberately thinking about the kinds of things you want to build. Listening to podcast like this where you have people who are optimistic and building their own lives. That’s part of it, you have to kind of hang out with people whether it’s virtually or in real life who shares some of the values and some of the aspirations that you do. That’s bound to rub off on you if you do that enough.

[0:43:09.7] MF: Right, that’s awesome man. We’ve been going a while here but that just reminds me of people who think about starting investing in real estate or thinking about becoming a real estate agent. They listen to people who never have been in the business or have never done it and they get discouraged because they tell them it’s a bad business to be in. But if you’re going to get involved in something, make sure you listen to the people who are actually doing it and not somebody who has never done it before and is negative about everything.

[0:43:35.5] CC: That’s right. That’s right. Or somebody who has crashed and burned and is pessimistic for the rest of their life about how that doesn’t work. There’s plenty of those people but there’s also people who crashed and burned, who have come back. You can find examples of whatever you want to find. Find somebody who had done what — there’s always somebody who has done what you’re trying to do or has overcome what you’re trying to overcome. That’s the beauty of the internet and there’s millions of stories out there. Find your story. If you resonate with Mark, that’s why you listen to him, you keep going with somebody like that who inspires you and who can show you a different way of thinking about life.

[0:44:15.5] MF: I appreciate that, thank you. Great, well, I think those are all the questions I had for you except for one last one and I think you got started. Many people want to get started in real estate without a whole lot of money, maybe not great credit, which I think the more money you can save, the better off you’ll be. But if someone has a thousand dollars in their pocket, they wanted to get involved in real estate, what do you think the best way for them to get started is?

[0:44:41.2] CC: Good question. There’s a lot of personal situations but I love the idea of house hacking and what I mean by that is using your personal residence somehow as a way to learn about real estate and there’s a couple of ways you can go with that. And my first, well it wasn’t my first but one of my first residences was I moved into a multi-unit property, a quadruplex and I had to live somewhere.

And so I got the loan to buy the property and lived there and I learned more about rental properties by living there at the unit and I could sort of live through my mistakes that I made because you’re always going to make mistakes. I was also — I learned a ton and I also was able to live positive cash flow by renting out the spaces next to me and I was actually living positive two or $300 bucks a month instead of having a thousand dollar mortgage payment, I was getting paid to live in a rental property. If you’re young and you’re willing or young at heart and you’re willing to do that kind of thing.

I think that’s a really cool way to do it and there’s so many ways to kind of hack your rental property, you can do air BNB and rent a couple of extra bedrooms. You can build an apartment unit over a garage, you can do — there’s all sorts of ways to get started with that. In rental properties in particular, I think that’s one I recommend a lot to people because you already have to have a place to live and its’ a really low risk way to get in to the business.

[0:46:04.3] MF: I totally agree, I think that’s an awesome way to get started and a lot of people think there’s some magic, secret formula but really, like you said before, if you learne the fundamentals well, that’s where the success comes from and one of those fundamentals is using low down payment, owner occupant loans if you can.

[0:46:21.1] CC: Yes, exactly. That’s the way to do it.

[0:46:24.3] MF: Awesome. Very cool, Well Chad, thank you so much for being on the show, if people want to get a hold of you, it is Coachcarson.com the best place or is there another way to get in touch with you?

[0:46:33.5] CC: Yeah, that’s it, go to Coachcarson.com and if you go on the front page there, I have my newsletter, you can subscribe there and I have some free information that you can get when you sign up and I also have a contact form there if you want to ask me a question or get in touch, you can hit contact and it will go directly to me.

[0:46:49.1] MF: All right, awesome. Well again, thank you so much for being on the show, love talking about your journey and I hope you have continued success and a lot of fun in Argentina, that will be exciting and yeah, thank you again.

[0:47:00.9] CC: Yeah, thanks Mark, it was a pleasure being on.

[0:47:03.5] MF: All right, you have a great day.

[0:47:04.6] CC: You too.

[ Inside Real Estate Investing ]
[ Inside Real Estate Investing ]