Coach Carson – The Simple Way to Retire Early with Real Estate

Coach Carson – The Simple Way to Retire Early with Real Estate


Mad Fientist: Hey, welcome to the Financial
Independence Podcast, the podcast where I get inside the brains of some of the best
and brightest in the personal finance space, to find out how they achieved financial independence. You’ll be familiar with my guest today if
you read my last article. It’s Chad Carson from CoachCarson.com. Chad was kind enough to publish an incredible
guest post on my site, all about the tax optimization strategies when investing in real estate. It’s a phenomenal article, and it’s an
article I was hoping to write over the past few years. But since I didn’t have the expertise to
do it, since I’m not a real estate investor, I wasn’t able to. So when Chad came along and offered to write
it for me, I took him up on the offer, and I couldn’t be more pleased with it. So if you haven’t checked it out yet, head
over to the blog, and check out the most recent article, and I will also link to it in the
show notes of this post, in case you’re listening to this far in the future. But once Chad delivered his post to me, I
knew I had to get him on the show to talk to him about his own story, and how we was
able to accumulate 90-plus rental units with his partner, and how he got started, and what
he learned along the way. So I wanted to get him on the program because
he and his family just moved to Ecuador for the year. And that seems like quite an adventure. They have two small children, and they just
uprooted their entire lives, and just landed this past week in Ecuador. And that’s where they’re going to be for
the year. It seems like it’s going to be a really
cool experience. So I wanted to dive into that as well. Speaking of Ecuador, the Chautauqua has just
opened for booking this week. So if you’re listening to this near the
release date, there should hopefully still be some slots left. So, if you’re interested in joining us down
in Ecuador for a week, definitely head over to AbovetheCloudsRetreats.com. It’s AbovetheCloudsRetreats.com and see
if there are any tickets left. I’m pretty sure I just talked to Chad into
going, so if you like this interview and wanted to chat more with Chad, hopefully, he’s
going to be there too since it’s only going to be a short flight away for him, since he’s
living down there this year. I’m excited to dive in, so Chad, thanks
a lot for being here. I appreciate it. Chad Carson: Yes, I’m glad to be here, Brian. Thanks for having me. Mad Fientist: So before we dive into all this
good stuff, I just realized something today. I may have actually watched you play football. For the people that don’t know, you actually
played college football for Clemson. Is that right? Chad Carson: That’s right. I feel like it was ages ago now because I
played football in 1998 through 2001 or so. But yes, I was actually a middle linebac­ker
[…] I was about 48 lbs. bigger when I played. I had a big neck and I was kind of a muscle
man-looking guy. Mad Fientist: That’s awesome. Chad Carson: That was another lifetime ago. Mad Fientist: That’s really cool. So I went to UNC Chapel Hill. My buddy went to Clemson. I actually came down to Clemson to watch your
football game one time. I was in college from 2000 to 2004, and I’m
thinking that I possibly went down there in 2001 to watch that game. It’s possible I watched you play football
which is pretty crazy. Chad Carson: That’s pretty cool. Yes, Chapel Hill. I love Chapel Hill too. It was actually one of the schools I looked
at going to when I was going to college, but they didn’t offer me a football scholarship
and Clemson did. So that swayed my decision-making. Mad Fientist: For people in the audience that
aren’t familiar with you, can you just tell a little bit about yourself, and tell a little
bit about CoachCarson.com? Chad Carson: Sure, yeah. My hometown is in Clemson, in South Carolina,
the same place where the university is. Since I’ve graduated from college, actually,
I’ve been a full-time entrepreneur. I had the decision matrix of going to like—I
was a biology major in college, and I was leaning towards medical school, and I was
actually applying to medical schools. I also thought about going to the NFL, but
[…] that fell off the cliff at the end. Right before I went to NFL, I had a bad senior
year. Our team was bad, and it just didn’t work
out, which is probably for the better, given concussions and things like that in the NFL. My third choice was I went into entrepreneurship
as a real estate entrepreneur, meaning I figured out how to start buying and selling houses
and finding good deals on real estate. I thought it would be a short-term thing. I would just figure out how to do that and
then I’ll get a real job after that. But about 15 years later since I started that,
I’m still rolling with it. And that transitioned from being just buying
and selling properties just to make a living and putting food on the table, it transitioned
into also being a real estate investor where I bought rental properties and notes. I’ve pretty much done it all, in terms of
residential real estate since that time. So, that’s been my business finance story. Other than that, personally, my wife and I
like to travel a lot and learn foreign languages. My wife is a Spanish teacher, and so I picked
up Spanish, learned Spanish, and took German in college. So that’s our hobby—it’s to learn new
languages, travel, and do things like that. Mad Fientist: You’re speaking to us from
Cuenca, Ecuador. Chad Carson: Exactly, yes. You caught me at a time, at a cusp of a big,
new transition in our lives. We’re going to Ecuador for a year. We’re living here with two daughters, a
three-year-old and a five-year-old daughter. They’re going to go to school here locally
like a local elementary school. Hopefully, they’ll become fluent and speak
Spanish here which is something we’ve been planning for a while. We could talk about how that happened maybe. It’s been a year in the making when we actually
uprooted ourselves, get out of town and go to this trip to Ecuador. But it’s a cool, big moment for us in our
lives. Mad Fientist: I know! And I appreciate you taking the time to talk
with me because you literally just got to Ecuador in this last week. Is that right? Chad Carson: Exactly, yes. We’re getting over jetlag and we’re at
8500 ft. altitude. We’re like walking zombies for a couple
of days. But I think we’re finally on the up-and-up
now. Mad Fientist: Cool! We’ll definitely talk about that. I definitely want to hear that story of how
you made that move and how you made that decision to do that. But let’s get back in the day. How did you pick real estate? How did that decision come about? Chad Carson: I was fortunate enough. My father owned rental properties. My mom was a dentist and my father is an entrepreneur. I sort of just observed it that way. I never thought I wanted to get into rental
properties because when I was in middle school, my dad would, in the summers […] in Georgia—super
hot summers. My dad would buy these houses at foreclosure
sales or something. And typically, when that happens, somebody
abandons the house. So their refrigerators are full of food and
meat. He’d drop us off and say, “Hey, boys. Go ahead and clean up this refrigerator. I’ll be back in an hour or two.” It was nasty old refrigerators, and houses
with clothes piled everywhere and rats running out the back door because it’s been abandoned
six months ago. I was like, “This is ridiculous. Who in the world would ever want to buy anything
like this or do anything like this?” So, we kind of hated real estate just because
of the personal experience of nasty houses. But after I got out of college, when I was
sort of in that decision time, just thinking about what I wanted to do, it popped back
in my mind. I was like, “Wow, my dad was a pretty smart
guy, doing some of that.” And so I started picking his brain and asking
about it. He had some books on his shelf, and so I just
started reading some books about it and thought I would give it a go. Just try it out for myself. Mad Fientist: That’s fantastic. Quick aside, did you have air conditioning
in Clemson? When I was at UNC for freshman/sophomore year
in the dorms, we didn’t have air conditioning. And like you said, it was ridiculously hot
in the summer. And it’s still ridiculously hot in August
and September when you’re moving in, and having your first two months of classes. So did you guys have air-conditioning down
south? Chad Carson: I think we have one thermostat
in a five-story building. And I think the thermostat was in the basement. So the first time I went to the basement,
I was like, “Man, it’s cold in here.” If you’re in the third floor, it’ll be
like 90° and sweating. I don’t know. Maybe that was part of the hazing of freshmen
or something. I’m with you. It was totally hot all the time. Mad Fientist: So nasty, yeah. That was terrible. Anyway, you graduated in 2003. And I think you said you had $1000 in the
bank at the time. So how did you start your real estate career
from having a grand in the bank? Chad Carson: I was fortunate. I had about $1000 rather early in my bank
account. And I owned a car free and clear when I got
in high school. I didn’t have any debt on that. I was also fortunate I didn’t have any college
debt because I played football, and that paid for my school. So, I was in the position where I didn’t
have a lot of—I think that was really the thing that pointed me towards being an entrepreneur
because I think that if I would’ve had $40,000 in debt, I would be more inclined to go get
a job that paid me some money that I could actually use to make those payments. Because I didn’t, I felt really free to
be able to make different choices. The choice I made to just start a business—I
had a friend who also wanted to get into real estate. And so, the two of us talked about it. And his father had been in real estate too. I actually got my start just by bird-dogging
houses. So, I didn’t have any money and I didn’t
really know the business. I read somewhere that the idea was finding
an experienced investor and trying to figure out a way to bring good leads and deals to
them. So, I might walk around the neighborhood and
just see “for sale by owner” houses or find a vacant house in the neighborhood. I’m going to knock on the door of the neighbors
and say, “Hey, do you know anything about this vacant house? Who owns it? Why is it vacant?” All I had was energy and time. I really didn’t know anything. And so I would just knock on the door. If you knock on 10 doors of 10 vacant houses,
you might find a couple where they say, “Yes, so and so moved out of town for a new job,
and they’re just making payments on this house. They’re probably just going to get rid of
it.” And so I would find those stories. And then, I didn’t know what to offer on
the house. It turns out, my father was the one I ended
up buying houses for the first year I was in business. And so I would bring that lead to him and
say, “Hey, what would you offer for this house?” And then he would buy the house, and I’d
make a small mark-up on it or something—a couple thousand bucks—every time he bought
a deal. And so that’s how I learned the business
and saved a little bit of money. And then, my second year in business, my friend
from college and I decided to do it on our own. And so, I moved back […] to Clemson, South
Carolina. And we started doing the same thing. We would find deals, and then we went to other
individuals. I didn’t have a job, so I really wasn’t
bankable to be able to go and get a regular loan. And so I would just find other people who
had money or had the credit. And then we would partner on the deal. I would find the deal, they put up the credit
or the money, and then we’d split the profit somehow when we sold it. And it was as simple as that. As long as I could find a good deal, […] And
then I’d save the money up. Eventually, I started using our own money
to do some deals as well in addition to that. Mad Fientist: That’s amazing. That’s called bird-dogging? Chad Carson: Yes. The first year when I first started, I was
just bird-dogging. That’s a southern term […] When people
go hunting for birds or something, they’ll bring a dog who will point out where the birds
are in the bush. And so the dog will point to it and say, “There’s
the bird.” That’s all the dog does. The dog can’t get the birds. So, that’s pretty much what I was. You just sniff out good deals. It’s really handy though because I learned
how to find good deals. And that’s one of the most important parts
of real estate, being able to evaluate and find these diamonds in the rough because there
are a lot of properties that aren’t good deals. You’ve got to figure out a way to sniff
them out and figure out where those ones that you can actually make a profit on are. Mad Fientist: So, what did you learn over
those years, just the fact that you need to really hit the streets, and start talking
to people, and form relationships? Was it the relationships that was the most
important thing? Or was it just the hustle? Chad Carson: I think it was both. I think you hit the nail on the head. First of all, hustle. I can’t tell you how awful I probably was
when I first started. Think about the disadvantages. You’re 23 years old. I’ve never even owned my own house. I’m living in the spare bedroom of my business
partner. And so I really had nothing and no experience. And so what do you bring to the table when
you’re talking to people about buying their house? There’s a couple or a retiree or somebody
who owns this property, and they’re going to try to sell it to you. And so what do you have other than hustle
and sincerity? When I first started—and this really applies
to any business—I would just say, “You know what? I’m brand new, but I do know people who
have money to buy properties like this. If you’d give me a chance, I’d like to
make you an offer to buy it.” It was as simple as that. You’re just honest about it, and you hustle. And then the relationship part—just like
what you said, you have to have relationship. It’s like a puzzle. You have people who have money, you have people
who have their property, and you’re the hustler in between. You’re just trying to bring these people
together. If you can arrange it the right way, you can
find a way to make a profit doing that. You could really get complicated with real
estate, but it really comes down to properties and money. And so if you’re doing the business yourself,
if you’re just buying a rental property on the side, you might be going and getting
a loan yourself, and then you’re going to have to go find the property. But you might hire a real estate agent to
help you find the deal or you might find a bird-dog like me. Find a young college grad and say, “Hey,
go bird-dog some houses for me. I’ve got money. Go find me a deal.” Mad Fientist: That’s fantastic. So you focused on residential real estate. I’ve read on, I think it was Bigger Pockets,
whenever you’re guest posting on Bigger Pockets, just promoting residential real estate
because you said it’s simple and understandable. You live somewhere, and you know what you
like about where you live, so it makes sense that other people like those things as well. It seems like you’re happy that you fell
into residential real estate. But it sounds like you got into it just because
that’s what you’re walking around and seeing. Is that how it worked? Chad Carson: Yes. I’m a big fan of Warren Buffet. You probably read some of his stuff too. I like one of his maxims for investing was
to always invest in something that’s simple and understandable. That transitions perfectly to real estate
because there’s a huge universe of real estate properties. You could buy skyscrapers in Downtown Manhattan—that’s
real estate—or you could buy a piece of land out in the country or you could buy mobile
homes or single family houses or apartment buildings. But really, if it comes down to it—I read
a book that you might want to link to in the show notes called Building Wealth One House
at a Time by John Schaub. It’s the book I always recommend to people
when they start because the point is— He’s bought all sorts of properties, and
I have too, but single family houses, when you come down to it, are the simple and understandable
parts of real estate. They’re simple because there are lots and
lots of people who need to live in them whether they’re renters or buyers. And they’re understandable because most
of us have lived in a house. We know the things that make a house good
or bad or a neighborhood good or bad. When I first started bird-dogging, it wasn’t
like you had to read a book to understand that this neighborhood is a little bit sketchy,
and you need a gun to walk around this neighborhood at the end of the day. “Alright, I don’t think I’m going to
buy in that neighborhood.” Or you go to another neighborhood, it’s
trendy, and there are people who are remodeling houses, you get the feel that there’s a
buzz and excitement in that neighborhood. And that’s as intuitive as it is. If you shopped for houses renting or gone
on AirB&B to shop around, you understand the fundamental part of real estate, which is
it’s got to be a good location, it’s close to parks, it’s close to public transportation,
or if you’re in a more suburban setting, good […] neighborhood that’s in a good
school district. It’s safe. It’s got nice amenities. And so really, you don’t have to learn a
whole lot in terms of the principles of real estate. The thing that might not be as intuitive is
going back to the other side—the money, the finance. That’s a little bit more complicated. But you can keep that simple too. I know people who paid cash for every single
real estate property they buy, and that’s pretty simple. “The property is $100,000. Do I have $100,000 or do I not?” And so, you’ve got to keep the whole business
super, super simple, or you can make it more complicated if you want to and there are advantages
to that as well. That’s one of the main things I like about
real estate. I didn’t have to go learn how to read a
stock and analyze a report about this certain company. I didn’t have to figure things out. As a business, I could get into it pretty
quickly, and be up and running within six months, being a semi-expert on my little niche
within my market. Mad Fientist: That’s really cool. And you said, obviously, residential real
estate is understandable and simple, but you can complicate it quite easily with financing. So do you want to talk about a little bit
about all the things you’ve gotten into? At the beginning of the show, you said that
you’ve done every sort of residential real estate deal possible. So could you talk a little bit about wholesaling
and all these other things that people may have heard about? Chad Carson: Sure! There are different niches that you hear about
in real estate. The niches are either in the property type. It’s a single family or multi-unit building. That’s one way you can divide the universe. The other way is the types of deals you do
depending on the financing. If you have this single family house, it’s
$100,000, maybe that number is too low. For somebody in San Francisco, it might be
a million dollar for a single family house. And you have to come up with the money somehow
to buy that house. So, really, the question is: “Who is going
to come up with the money?” The simplest scenario is, “I’ve got $100,000
in the bank. I’m going to be the person that puts up
the money.” That’s super simple. On the other end of the spectrum, when I first
started, again, $1000 in the bank, how do you buy a property? You’ve got to use some sort of leverage. There are a lot of different kinds of leverage. The most common kind I think most people are
familiar with, go get a mortgage at the bank. And so you can put 20% down, get a conventional
mortgage if you can qualify for that. And it’s a good loan, 30-year fix, […] these
days. That’s your standard leverage. But that’s not the only way to do it. I was unlucky (and lucky) in that I started
and I couldn’t go get a conventional mortgage because I didn’t have a W-2 income—meaning
I didn’t have a regular salary. Banks giving you loans want to have a regular
salary. That’s a lower risk profile. I was basically unemployed, so how do I buy
properties and find the money? So, what I did was go to alternative sources
of financing. And all that was I had to find an individual
who had the money. The individuals I typically used to put up
the money was—the first one I found was a professor at Clemson. I took some classes for fun. He was a business professor. He happened to have some money in a self-directed
IRA account. So he had his retirement money. There’s a little niche within the retirement
community where you can actually make loans on real estate. He had $100,000 in the bank, I found a good
deal, he understood real estate. He knew that this $100,000 property that I
was buying was worth $150,000, so he might say, “All right, Chad, here’s what we’ll
do. I will loan you the $100,000 to buy this property. My IRA will loan you the money. And then we’ll figure out a way to split
it on the backend.” And so, the simple scenario might be that
I pay him 50% of the profit, and I get 50% of the profit. That will be a venture capital deal. But then, what I evolved to over the years
was paying that same lender, just paying them interest just like I would a bank. When I first started, I paid all my investors
10% interest. I would borrow money from them for six months. Let’s say, the $150,000 house that I bought
for $100,000, I will borrow $100,000 for six months at 10% interest. And so $5000 would be my cost of money. But when I sell the property, I might make
$20,000 or $30,000. That was just the cost of doing business for
me at that time. Mad Fientist: That’s really interesting
stuff. So let’s go back to your progression. Bird-dogging led to you getting your own property. And then did you flip that property in that
manner you just described where you’d take on a short-term loan, and then fix it up,
sell it, make the profit, and then pay back the interest? Chad Carson: Exactly! So my bread and butter for several years was
just buy/fix up/sell, buy/fix up/sell. You mentioned the wholesaling. Instead of fixing it up, just like wholesalers
for any other product, I would just make a small mark-up. So, instead of me making $30,000 on a house
and fixing it up all the way, and selling it to an end customer, I might take that $100,000
house and sell it to a rental property investor who just wanted to keep it as a rental. I might sell it to them for $105,000 or $110,000. You just make some quick money like that. So, that’s one distinction. You can wholesale the property, you can retail
the property. If you’re flipping properties, that’s
one whole business model of real estate—flipping houses. But then my progression was, at some point,
I didn’t want to just have a job. Probably a lot of your listeners started reading
books about financial independence, and how, at some point, you need to build wealth. And in real estate, a lot of the focus is
on passive income. You want to have income coming in, so that
you don’t have to flip another house with your money. You actually have some money coming in every
single month. And so really, the natural progression was
to start buying rental properties. And so that was the next step-up for us. After we had saved a little bit of money,
and learned how to flip some houses, we also started—we might flip two houses, and find
one that we could keep. That was our next step. Mad Fientist: So, how many years into your
real estate journey was this, do you think, that you started actually keeping some of
the properties? Chad Carson: I think it was about two and
a half or three years into it. Mad Fientist: So you guys really hustled to
build a bit of a nest egg to invest. Chad Carson: Yes. I think some of the principles that you talk
a lot about like living frugally, and saving your money—I really lived in a spare bedroom
of my business partner. He had a house. It was just sitting there with storage. I said, “Hey, can I sleep on that bed over
there in your house?” He’s like, “Okay, I guess that’s fine.” My business partner and I kept our overhead
super, super low. You might flip a few houses and make a bunch
of money for the first six months of the year. The second six months, you might not make
any money or the deal might go bad. And so I think the progression was, those
first three years, we got really good at keeping our expenses low, living cheap. That way, when we didn’t make money, all
that cash just went in the bank, and we were able to save that money. And they gave us a nest egg or reserve fund
which is really important with real estate or any business. Have a good reserve fund before you start
owning rental properties. Rental properties are wonderful for building
wealth, especially if you buy leveraged rental properties. They’re not going to produce a lot of income
on the front-end—at least not consistently because you might make $200 a month on a rental
property, but then what happens if a year and a half from now, the heating and the air
system goes out on that rental property? That’s a $4000 to $5000 hit. And so it takes a lot of $200 a month to make
up for that kind of hit. And so really, the rental property game, as
opposed to flipping properties, is all about generating big chunks of cash that you can
use to pay your bills, and hopefully, to save money. Basically, my job was flipping houses. But then, the wealth-building came in when
I started using a chunk of that money that we had flipped and investing that as a down
payment or a reserve fund for a rental property. In my mind, the game of rental properties
is eventually getting it free and clear of debt, so that you have a very low risk, high
income investment that allows you to go to Ecuador and do whatever else you’re going
to do with your life—leave your job or have a little independence to do other things. Mad Fientist: Right, absolutely! So you’re flipping a couple of houses a
year, and you’re now starting to accumulate these rentals as investments. Over time, these rentals are going to start
being able to pay for houses themselves and things like that. What was the progression? Did you just start slowing down on your flipping? As you said, it was your job. Slowly, you just transitioned into just managing
these rentals as an investor? Now, you own over 50 properties. So what was the transition? How long did it take to accumulate all this? Chad Carson: I wish the progression would
have been nice, even curve on a graph. But unfortunately, real estate markets and
financial markets happen. Just to give everybody a context, I started
buying houses—I learned the business the start of 2003. And we really started growing in 2004, 2005,
2006. Anybody who knows the financial story can
see that coming—2007, 2008. What happened then? You’ve got a global financial meltdown led
by the US real estate market, which we were in. And so it’s amazing for me to think about
it now. But in 2007, right before everything hit the
fan, we had 50 closings that year where we acquired 50 deals, 50 properties. Mad Fientist: You did 50 deals in 2007? Chad Carson: Fifty deals. That was acquisitions. We sold some other ones. We were really, really ramping up in 2007. And so, the story is, a lot of those, we flipped. We had some deals that we made $60,000 on,
these $300,000 that we bought, fixed and flipped. They were huge chunks of cashflow. Then we had other properties. We were getting into rental properties at
this point too. And going back to the financing part of the
story, I still was a little bit leery about getting bank loans even though we had a couple
of years of history. So, most of our rental properties, instead
of going to the banks and getting the loans, […] like the guy I told you about, we had
a private investor. We might pay them 6% interest instead of 10%
because we’ve been going steady for 5 years or 10 years. So, we started buying it with private investors,
or we started buying those properties with self-financing where I would go to a motivated
seller who was a landlord who’d owned the property for 30 years, he kind of let the
property run down and he couldn’t get any good tenants anymore. I would make him an offer to pay him $10,000
down cash if he would finance the balance of the property to me at $500 a month or something. And so, the positive side of that […] were
most of the deals were bought with private money. They have longer term balloons on them or
longer term buy-outs, so we didn’t have a lot of loans coming due 2008, 2009, 2010. And that’s where most of the people who
had a really tough time was hit—when they had to pay off loans when they couldn’t
get a loan from anybody else. So, what we did, we went through it because
out of those 50 properties we bought, maybe 90% were really good deals, but then 10% were
horrible deals where I bought in the wrong location or they had negative cash flow or
we had to spend $20,000 more in repairs than we thought we were going to spend. It probably took—I’d say 2007, 2010 or
2011, where we had to sell off some bad properties, we had to figure things out, and just eat
off of our reserves, to be honest, on some of those, because we weren’t just making
a lot of money flipping properties at that point. And so, I go back to the frugality, the fact
that we were super frugal, we can live off $20,000 a year or something, made it a lot
easier to go through the downturn and to make it through. And by the time, 2012, 2013 came around, we
had sold off some of the bad stuff, and made it through it. And flipping houses is a little bit easier
at that point. And so, we got back into the progression of
climbing like we were before. We’re in 2016/2017 now, so that was three
or four year ago. And it’s back to the point where we’ve
been able to clean up our portfolio. We actually have about 90 units right now. We just bought a bunch last year that were
just good deals. We’re and better-positioned with our portfolio,
our debt portfolio where we paid down some properties, we paid off some properties. And the ones we’ve kept, we have longer
term, low interest financing that […] cash flow really well. We don’t mind keeping some of that leverage
on the property. It’s just a hedge long-term for inflation
and other things. Mad Fientist: That’s an amazing story. Was it ridiculously stressful? I can’t even imagine doing 50+ buying deals
and let alone however many other deals you were doing that year when all of that stuff
was going on. Was it just insane? Chad Carson: Yes. I got too good at buying properties. People call me left and right. I was just making offers and people were buying. So yes, I think it got stressful at the end
of the year when my business partner, he’s probably the smarter guy than me, he was like,
“We need to slow down a little bit.” And I said, “Yes, you’re right. We need to slow down.” We just sold what we had. And I don’t know. We weren’t smart or anything in terms of
seeing the future. But when you’re in the business, you can
notice things. It’s harder. The houses take longer to sell, things are
happening. You can at least get a three or six months
headway on what things are coming down the pipe. And so we saw that, and we kept on saving
more money. I think the thing that I learned as much as
anything is the resilience and adaptability that we have as entrepreneurs. When you’re an entrepreneur, […] And so
when things are going well, people are going to pat you on the back and say, “Hey, you’re
great.” When things are going poorly, they’re going
say, “Hey, you suck,” either way. And so, it forces a little bit of responsibility
to yourself to where you go back to hustle. Right when I started, I had to hustle just
to put some food on the table. In 2008, you can complain about it, and fight
it, and resist it, or you can just say, “You know what? I’m going to hustle to make this work because
that’s what I got to do.” And so, we just hustled a lot. We worked really hard to sell some of the
properties that we had that weren’t that good a deal. We had tenants in a lot of these properties,
and we would go talk to the tenants and say, “Hey, do you want to buy a property? Do you want to buy this house instead of rent
it?” And some of them would say, “Yes, but my
credit is not any good.” And so I would help them and coach them along
on how to pay off this debt, or this thing. I found that no matter what you’re up against,
it’s given me some confidence to know that as an entrepreneur, and in real estate in
particular, a lot of your success depends on your own ability to build relationships,
to hustle, and to learn, and to get better. That might be why real estate might be for
some people, and it might not be for other people. If that thing totally scares you, and you
say, “That’s crazy! I never want to get into that all,” there
are plenty of other alternatives like Jim Collins […] Do that. Do something else. If you’re making a bunch of money in your
job, and you just don’t want to get into this, fine. But if you’re somebody who wants a little
bit more control over your destiny, and you have some fun, you love challenging yourself
to see, “What can I do, buying a couple of rental properties on the side to see if
I’m up for it if I can meet the challenge of buying a property, and financing it, and
making some really good returns in the process,” that’s I think the profile of people who
are more attracted to real estate. Mad Fientist: That’s really cool. And don’t lose your frugal roots because
I am sure there are lots of real estate investors with similar portfolios, similar skills, who
probably—I imagine you’re making pretty good money at that time if you’re doing
that many deals in a year. They probably bought themselves a huge house
and a fancy car. And then 2008 happened, and then their whole
business and their whole lives were flushed down the toilet. But you guys, luckily, didn’t have that
happen. Chad Carson: It’s amazing. It really does come down to—when I look
in the rearview mirror to look at how we made it through it, the fact that we lived super
frugal is number one—both when we were making money and when we weren’t making money,
both at the same time. I just kept on driving my Toyota Camry that
I had in high school. And it wasn’t an issue for me. There were other investors that were doing
a lot better than we were actually, and making more money, who bought a bigger house, a bigger
car. You get caught up in it. They also were more aggressive with their
financing. They were using like more commercial loans. They had short-term balloons. They were just getting well and beyond their
capacity to handle what they had financially. And so that was a big lesson for us too, that
you’ve always got to have reserves, no matter what business you’re in because you can’t
predict exactly how things are going to go. You’ve just got to build some big cash,
money on the side, just to make sure you can withstand the uncertainty of what’s going
to come. Mad Fientist: That’s a great lesson. Were you still living with your business partner
at that time? Chad Carson: No. I moved out after a year. I kept the same philosophy financially. One of my favorite niches in real estate—I’ve
written an article on this too—is called house-hacking. I had some articles that I can send to you. But house-hacking basically was a way—I
moved out of my business partner’s house. I bought a house, a quadruplex that had four
units. I lived in one unit, and then I rented the
other three units out. And so I was basically living for +$200 a
month by getting $400 a rent for my three tenants. So that’s $1200 coming in. And my mortgage, taxes and insurance were
about $1100. So, I was living positive by using my skills
as a real estate investor, and by living in an apartment that kept my overhead super low,
even when I went and bought my own property. That was my progression. In addition to buying houses as an investor
as a business, I think house-hacking—or another way of doing it is called “live
and flips” where you move into a house, and don’t try to make this your forever
home. Make it a home that you’re going to live
in for a couple of years, fix it up, turn around and resell it two years later and make
a big profit. In the US (and I think UK and Canada too)
have similar laws where, if you live in a property, you can make 100% of your profit
tax-free (up to a limit in the US). And so that’s one way or the other. Whether you house-hack or whether you do live-and-flips,
my main recommendation to everybody, whether you get into real estate investing or not,
is if you’re early in your career, or if you’re growing your wealth, there’s no
reason—you either need to do the house-hack, do a live-and-flip or rent somewhere because
those are your three most financially-viable ways to treat your residence. If you just go and buy the nice pretty house
and a pretty neighborhood and pay retail prices for it, it’s costing you a ton of money
to do that. One way or the other, you got to figure out
a way to reduce your housing expenses. Across the board, if you read any financial
blogger, other people who talk about building wealth and getting financial independence,
figuring out the housing expense is such a big deal. Mad Fientist: Absolutely! Just as you’re talking there, I realized
that we actually did a live-and-flip, and I’ve never realized that until right now. I know Mr. and Mrs. 1500 from 1500Days.com. They’ve built great wealth from doing live-and-flips
over the years. But I really didn’t realize that that’s
what I did unintentionally right back in—I graduated in 2004, moved over to Scotland
since my wife, that’s where she lived (or my girlfriend at the time lived, now wife). We’re like, “We’re adults now. I guess we have to buy a house.” So, we stupidly got, I think, a 95% mortgage,
and then borrowed the $10,000 off of her parents to buy a car that we could use to get to work
from our new house, and then covered the rest of the down payment that we couldn’t cover. And so, that was really stupid. But it ended up working out great because
it was a live-and-flip. We did it up every two years. We just did room by room as we lived there. We picked one and did it up, and then we picked
another one. And then luckily, we sold it in 2007 for over
15% more than we bought it for. That was a huge boost to our financial security
and put us on this path to financial independence eventually. I wouldn’t have called it a live-and-flip
because I don’t think that was what we intended. But yes, it was two and a half years, so that’s
probably a good live-and-flip timeframe. Chad Carson: Challenge your listeners to put
it in the calculator and just think about it. If your first seven years of investing or
building money, if you bought and flipped three houses, and you just really, really
optimized it, and you make $50,000 per flip, two years, two years, two years, put that
in your retirement calculator to figure out how much […] that puts on your plans in
terms of retiring early. It’s unbelievable how if you start compounding
that tax-free money, how much that can do for you. I think you had Mr. and Mrs. 1500 on the show. They’re friends of mine too. That was a big momentum for them, moving forward. They saved a bunch of money and had good savings
rates. The fact that they had these huge chunks of
money from real estate, and it was a big factor in being able to do what they want to do it
as early as they’ve done, if that’s something you’re inclined to, or if you accidentally
do it like you did, either way, it’s something you could at least just do once or twice. You don’t have to be a lifetime homeowner. But if you want to take advantage of that,
that’s one of the best angles on the tax code, to take advantage of a live-and-flip. And then you can rent for the rest of your
life if you want to. But you take advantage of that for a few years
while you’re willing to do that and able to do it, and then move on to another strategy
after that. Mad Fientist: Absolutely! And yeah, your guest post on my site with
all the different tax advantages of real estate is just phenomenal, so I’ll obviously link
to that in the show notes of this show as well. There are just so many different tax advantages
to the whole real estate game as well that can lower your costs dramatically and increase
the amount you can save. So, looking back, you’ve learned a ton over
the years, I’m sure. If you were starting from scratch, and early
retirement, financial independence was your goal, how do you think that would look? What would you do? Chad Carson: If you […] me down, and I found
myself a good job with steady savings, really good, high savings rate (I’ve got all of
that to figure out first), I think I would look at the whole financial world. I would say, number one, I’m going to have
some retirement savings, like my 401K, and do all the stuff that Brandon teaches you
with the HSA’s and the 401K’s, and all of that stuff first. But that’s one whole chunk of your retirement. And whether you invest in real estate, stocks
or index, or whatever, that’s your personal preference. But then I would look at real estate as a
side hustle, as a side business, that you can do. And so you might take a chunk of that savings
that you have. And maybe you put a chunk to 401K and do all
that, and then you put another chunk into this little business you’re going to start
in the side— And that little business could be—my preference
would always be to start off with a live-and-flip or a house-hack if you could. The only downside of it is the fact that they’re
a little more uncomfortable with your living arrangement because some people would complain
[…] living in a quadruplex. There’s “Oh, my God. You’ve got to have to live next to your
tenants? That’s awful. I don’t want to live next to my tenants.” But for me, it was awesome. I became really good friends with my tenants. To this day, I still communicate with some
of them. And so if you could buy a good property and
you treat your tenants well, it’s just a non-factor. They might knock on your door on a Saturday
to say, “Hey, my toilet is leaking.” I am not handy at all. People need to know that. I don’t fix those stuffs. I make a bunch of lists and I call handymen
and contractors who do fix stuff. So, it was never like— I could be in Ecuador. At one time, my wife and I were traveling
to Chile in Patagonia. I remember Skyping on this little laptop I
had where one of the tenants called and said, “The hot water is leaking. It’s not working.” I literally got on Skype for two minutes. I was sitting on the Magellan Strait in this
little internet café, looking out over the water, and we were about to go on a tour of
a penguin colony. So I made my call to the plumber over Skype,
and they went and fixed it. I went off to my tour of the penguin colony
after that and went on my way. I got started on that story because house-hacking
seems uncomfortable because you’re living in the property that you’re renting out,
but the benefits of that are way beyond that. It’s not a forever thing. It just might be two or three years of you
living in the property, and then you move out. And now, you’ve got a built-in rental property
that you can keep for the rest of your life, pay the thing off, and use it to produce income
for you forevermore. I would start off with house-hacking. If you’re in an area that doesn’t have
small multi-units that are affordable or if you live in an area that has some single family
houses, you found a neighborhood that had a lot of older homes that needed work, that
would be where you would do the live-and-flip. You can do that in one of these older houses
where the kitchen is completely dated and the bathrooms are dated. The worse it smells, and the worse the carpet
is, the more awful it looks, the better. That’s really what you want. You want the ugly duckling. And then your job is then—you’re willing
to live in the ugly duckling and deal with some saw dust and some sheetrock dust for
a couple of years until you turn around and sell it. I would start with those. But then, you could also get into—I know
a lot of people who, if they’re not in the position to do the house-hacking or live-and-flips,
you could just buy a rental property on the side. There’s a lot of thinking about where that
location should be. If you’re in California, or if you’re
in the UK, in certain locations, the prices might out-pay the rents by a good bit. And so you’ve got to choose a location where
it really makes sense to rent the property and actually be able to make some income either
to pay for the loan or to pay yourself. So there’s a whole science of analyzing
locations and rent-to-price ratios and that sort of thing. But I think that’s a pretty good progression
to the people who wanted to save up their money for a down payment and buy a rental
property or two on the side. That’s also a good way to go. Mad Fientist: That’s fantastic. You mentioned one book, which I’ll link
to in the show notes, but you also offer a real estate investing toolkit on your site. I can link to that. I’m assuming that’s free for anyone to
get and do something? Chad Carson: Definitely, yeah. On my site, I have some basic tools on how
to analyze niches. If you’re looking at all these different
niches of real estate—buying duplexes, or buying single family houses or being a private
lender—I have some core information on my site. I have these ideas on how to get started and
think about that. This is so personal. You might hear this stuff I’ve done and
say, “That’s crazy. I would never want to buy all those houses.” And I wouldn’t recommend it either. The majority of people are going to have different
niches than I have. And you might be on a different part of the
country. So, part of the game of real estate is getting
in and trying to find a match between your personality, your financial stage, and what’s
a good opportunity in your market. And so, I think that’s a big part of what
I focus on on CoachCarson.com. I just try and break it down to the simple
parts of real estate. Don’t try to over-complicate it and try
to figure out that little niche that works for you. It might be rental properties like I’ve
been talking about, or for some of you who are a little bit further along in your wealth-building,
you might just want to be a private lender. I don’t know, Brandon, if you’re written
anything on this or talked about it with people. I haven’t got into a lot of this. But there are people who do crowd-funding
sites where they get into real estate by being just basically a passive investor with somebody
else who is the active investor. That’s something you definitely got to do
your due diligence on. I don’t recommend that for beginners because
I think the problem with a lot of people that get into that is when you’re a private investor,
when you’re putting your money and you’re depending on some other active person to do
it, you need to do as much due diligence as that active investor does to make sure that
they know what they’re doing, that the property is good. And so, you need to be able to be more involved
than they make it out to be sometimes. I think it would be better to start off by
owning one little rental property by yourself to learn the whole business and then get into
private lending down the road. Once you’re a little bit more savvy, once
you figured that out a little bit more, because when you’re loaning $100,000 to somebody,
or $200,000, that money can disappear. They’re using leverage. There’s a lot more risk that you’re taking. That’s why it’s a little bit more of an
advanced strategy to understand what it is you’re getting into. There are a lot of opportunities there, but
that’s the next level of control. You have a lot less control than you would
have in this one little rental property on the side where you have 100% control over
that. Mad Fientist: Yes, definitely. That sort of stuff always never sounded appealing
to me. That always scared me. So yes, I’m glad to hear you say that. I could talk to you about this stuff all day,
but we haven’t even talked about your move to Ecuador yet and also the fact that you’re
not renting. So, you own all these properties, but your
own personal residence will be a rental, presumably, yeah? Chad Carson: Yes. Part of our preparation to leave for Ecuador
last year was to get our primary residence rented out. We’re kind of up in the air. We’re probably leaning—because we liked
the elementary school where we are. But we can move back into that house afterwards
if it made sense. But we’re also open to the fact that we
can just own 100% of our properties as investments, and then spend a lot of time just renting
properties. This year in Ecuador, there’s no way I want
to buy anything anywhere in a foreign country. I’m totally a local investor. I like to look at it and understand the market. I can’t understand enough here—the political
system, everything else—about buying. Some people do, but it’s just not my thing. And so I’m totally okay. It makes sense to rent a property, and then
own that rental property that you live, and then own a bunch of investments. There is no problem with that at all, in my
mind. Mad Fientist: That’s really cool. I had Millennial Revolution on, and there
was a lot of backlash to their interview just because they’re saying don’t buy a house
to live in. And a lot of the comments were more focused
on investing. In my mind, I see two very different things. Do you agree? Chad Carson: Absolutely! Mad Fientist: Buying a house to live in versus
buying an investment property to rent is a whole other world. Chad Carson: Exactly! You really have to separate those two things
in your mind. The only way they cross over is the live-and-flip. If you live in a flip, or you have a house-hack,
that’s the hybrid world between investing and residence. I totally think those are something to look
at. But otherwise, most of the time, a residence
is not as good an investment as you could do just going out and buying properties on
your own. One of the biggest benefits of real estate
is it produces income. The long-term appreciation rate for a real
estate as a whole is 3%. It keeps up with inflation. But the big horsepower is that it produces
really good income if you buy it right. And so when you live in a house, yes, if you
own it free and clear, you might not have any mortgage payment. But you also have the opportunity cost of
that huge amount of money you used to pay off your house that you live in. You could have invested that in another property
and made 6%, 8%, 10% in income instead of having that mortgage payment. In my own mind, I separate those two out. Real estate as an investment, it’s clearly
got some really good advantages. You can make a lot of money with that. Real estate as a residence, I could see at
some point where you say, “I’ve got enough money. I’m not that worried about growth. I like to live in this neighborhood. I like doing my own house.” As long as you’re making that decision with
an open eye, and you say, “I guess living there is not the best investment,” that’s
fine. When you make enough money, you can start
making those decisions. But the thing that you need to know about—and
if you don’t mind linking this article in the show notes too, I wrote an article showing
the opportunity cost of living in a— The title of the article is How to Get Rich by
Living in Ugly Houses and Embarrassing Old Cars. It just went over the math of showing— Particularly,
in your first 10 years, if you make mistakes of buying emotionally on your residence as
opposed to buying in a very calculated manner by making your residence a house-hack or a
live-and-flip or just renting and investing that somewhere else, the magnitude of that
mistake is huge 20/30 years from now. It’s like $700,000, a million dollar difference
for somebody 20/30 years later who made the choice to make their first home a nice home,
a great neighborhood and being in the top high school as opposed to making a decision
to treat your home like an investment or just rent. It’s a major, major difference. And so if there’s one message I could leave
people with whether they ever invest in real estate or not is when you’re first starting
in your early years of your wealth-building, make the most of your residential decision
[…] If you can make that decision right, if you
can be boring with the rest of your investments, you’ll still do pretty well over the long
run if you just take care of that part alone. Mad Fientist: That’s fantastic! That’s exactly what I’m looking for, so
I’ll definitely link to that in the show notes. And then hopefully, that will make people
understand where Millennial Revolution was coming from when Christy and Bryce were both
saying similar things. I just didn’t have the link to give anyone
to explain it, so that’s perfect. I appreciate that. Chad Carson: I loved that interview because
I like how they took it a step further and said, “We don’t really want to own a car. We’re just using car-sharing.” I was like, “Wow! That’s really incredible.” So I thought that was so cool. Mad Fientist: Good! So, briefly, before we end the interview,
I’d love to just hear more about why you’re in Ecuador and how that came about. Chad Carson: My wife and I, on our very, very
first date practically, we talked about we both love traveling and studying abroad. And I had some good studying abroad experiences
in Germany, learning German in high school and college. She’s a little bit more ambitious and brave
with her study abroad experiences than I was. She took off to Guatemala by herself and wandered
around for two or three months. She’s been to Spain, El Salvador. She’s been all over in the Spanish-speaking
world. And so it’s really exciting to both of us. Pre-kids, we took some trips, back-packing
trips to South America and Spain together, and just really loved it. We took some mini-retirements for four or
five months. Once we had kids, we put it on hold for a
little while. We have a five-year-old and a three-year-old,
so we’ve taken some smaller trips. But we really had that itch to get back out
there and do something a little bit more ambitious. There’s a book I really love by Rolf Potts
called Vagabonding. Some people might appreciate that book. It’s about long-term travel, but not travel
in terms of just like going and seeing some sights, and checking them off your list and
doing everything really fast. But more like really slow, enriching way. You might not make it past one city or another
country. You just go to one place, and you’re really
going to soak it in and travel slowly. That appealed to us, to my wife and I. And so that’s what this trip has been about
for us. We want our kids to have that experience of,
number one, learning a foreign language. We think that’s a pretty important thing
in today’s world, and it just opens your mind to another way of thinking when you learn
how to use another language. But also, just the experience of us coming
together as a family and just the crap we’ve got to go through to get out of our house. We just had stuff in the basement. For six months, my wife and I were doing yard
sales and selling stuff. It was such an eye-opening experience to learn
how embedded we were in a good way and a bad way. We were so invested in our community. We had a lot of friends and had a lot of things
that we were contributing to which was awesome. But then we also had these things like, “What
is this baggage we have?”—literally like the stuff, but then also these activities
we were doing that really weren’t that helpful. And so by us detaching ourselves from our
normal lives just brought all of those things to light and to show us, “Wow! Do we really need that? Do we really need that?” That Vagabonding book is a lot about that. Travel is a mindfulness exercise where you
learn about yourself and you learn about other cultures, of course, and you’re immersing
yourself and opening your mind to different places. And so Ecuador, we didn’t have our sights
on Ecuador originally. We were looking at Argentina because we had
been there on a big trip and really loved Argentina and the people there. And I think we were just looking at the cost
of living and the fact that the flights there are really expensive this year and the housing. And so, we started looking around other places, I think we saw the statistics in some article
that the happiest countries in the world—Ecuador is one of the happiest countries in the world
by whatever this rating was. This seemed to be a really interesting place
for us that had different culture. I was a biology major in college, so I really
enjoyed the different rainforests and learning about that and the Galapagos Islands, part
of Ecuador. So, it just had a lot of personal stuff for
us that was interesting in addition to the fact that we were going to live in a place
that our girls can learn Spanish, and go to school somewhere safe and interesting. Mad Fientist: That’s really cool. Chad Carson: That’s what it came down to. Mad Fientist: I’m glad you picked there
because I hopefully talked you into joining us for the Ecuador Chautauqua in October. So I’ll hopefully see you there. I’d love to chat more in person and have
a few beers. Chad Carson: Exactly! I’m sold on it. I think it’s an easy flight, like a $75
flight to get from here to where Chautauqua is. If I can get in, I’ll be there by all means. Mad Fientist: That would be great. This has just been fantastic. I really appreciate you taking the time. And I appreciate the guest post. I’m so excited about that guest post. I’ve been wanting to write that for years
ever since I started writing about tax minimization and tax optimization. I just didn’t have the knowledge to do it. I’m so thankful that you came along and
offered to do it for me, so I appreciate that. Chad Carson: I loved it. It was fun. The information on your site, I recommend
it so many times to other people, and I said, “Look at this! Look at these strategies.” Your HSA article, I think people get sick
of me, hearing about it. “You’ve got to read this Mad Fientist
guy.” “The Mad who? What is that?” “Hey, you’ve got to read this. Read it!” The fact that I got to share and write an
article for you and help you out is awesome. I was happy to do it. Mad Fientist: I appreciate it. Thanks for those kinds words. So, I usually end all my interviews with asking
if you had one piece of advice for someone who is hoping to achieve financial independence,
what would it be? Chad Carson: It sounds boring, but I just
think that you’ve got to keep it simple. I think keep it simple in a couple of different
ways, just the personal finance stuff of just increasing your savings rate and keeping your
life simple, that’s really what it all comes down to. Whether you invest in stocks, index funds,
or real estate, there’s really no changing the basic formula that you have to save money
and you’ve got to keep your expenses low. So, that simplicity is really important. But then, also the simplicity of your investments. If you’re listening to me talking about
my portfolio, I might sound a little ironic, buying 50 properties here and there. But I think part of the lesson we took from
that whole experience was that we don’t need to be crazy ambitious, and we don’t
need to be doing a bunch of deals, and owning a bunch of properties to accomplish all of
our goals. You can be really, really simple. I think in real estate if you chose to go
that route, all you have to do is work it backwards from if you need $5000 a month to
pay for your expenses, work it out, how many properties do you need to own free and clear
to pay for $5000? It’s super simple. For many people, it’s like, “I need 5
properties or I need 10 properties.” And so then that’s a really simple plan. Go buy five properties, save your money, pay
them off, you’re done. There are many sophisticated analyses in the
financial world. And if you get overwhelmed by those, real
estate is super simple. You don’t have to be a rocket scientist
to do it. Even if you are a rocket scientist, maybe
that might even be a handicap for you getting into real estate. You just need to keep it simple, get a simple
plan, pay off the properties, and then live off the income. It’s really as simple as that. So, that would be my recommendation… keep
it simple. Mad Fientist: That is fantastic. Most things in life are better when they’re
simple. I’m obviously going to link to all the stuff
we talked about in the show notes, including the Vagabonding book that you mentioned. Hopefully, you can send me over some of the
other links from your site that you wanted to slide in there because I know you have
a lot of great stuff there that probably covers a lot of the things that we talked about in
even more details. I’ll link to that. But how else can people get in touch with
you? Chad Carson: My home online is CoachCarson.com. You can check me out there. I think I have my links to my social media
profiles on there as well. But that’s the main place you can click
and contact me if you want to e-mail me from that site. I’m [email protected] That’s my e-mail. It’s pretty simple. Yes, if anybody who wants to say hello to
me and ask a question, I’m happy to talk to you. I’d love to hear from you. Mad Fientist: Awesome, Chad! Thank you so much again. Have a great time getting settled there in
Cuenca. And hopefully, I’ll see you down in Ecuador
soon. Chad Carson: Sounds good. I really appreciate you having me on. Mad Fientist: Thanks, Chad. Bye.

2 thoughts on “Coach Carson – The Simple Way to Retire Early with Real Estate

  1. Gents, revisiting some of my favorites while I do my first live-in flip. Thanks for the motivation. Will sell in two years and avoid capital gains taxes. Hopefully do it one more time over the next 4 years before I retire from my 'day job'. The next one may stay a rental depending on the market at that time.

Leave a Reply

Your email address will not be published. Required fields are marked *