1005: Special Guest Interview (Eric Martel)
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0:01
Welcome to Episode Five of Season 10 of the Growing Empire Show. Today I'm here with my special guest, Eric Martel. and we're going to talk about the barriers to achieving financial freedom. So stay tuned.
0:14
Welcome to Growing Empires. Hosted by real estate entrepreneur and trusted investment advisor, Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.
0:34
Welcome, Eric, to the growing empire show. I'm so glad that you're here.
0:38
Well, thank you, Jennifer, pleasure to be here.
0:41
Let's kick off this episode with you sharing a little bit about yourself and how you got into the work that you're doing now.
0:46
Yeah, so I started really, in the real estate a long, long time ago. I was 18 years old, and I bought my first eight unit apartment building there. And you know, my background before that was, you know, just with my parents, you know, just being like a regular lower kind of middle class and living paycheck to paycheck, and not really understanding how the system works. I mean, my parents they knew how to punch for time, they knew how to pay bills. But they didn't financial system work, they didn't know how business works, they didn’t know how money worked, and all that kind of stuff. Nowadays, a little bit different people have access to a lot more information. But still, people are not applying that to the level that they should. So fast forward 18 years, and then I met University, I made this guy, there's just a regular college, community college teacher, and he has this, he built this 36 unit apartment building, that's cash flowing, doing great returns, is planning to do like a shopping center, build a shopping center, nursing homes, and just like, wow, this is amazing. And this guy is no smarter than my parents. You know, he has no special ability. And he's, you know, nothing special. But he doing this, this is amazing. So I have to latch on to him, I have to really kind of like, get as much information as I can. I said, Can you mentor me? Can you you know, I probably didn't use these words at the time. But, you know, can you help me? Like I want to, I want to invest, I want to do that. But I don't have any money. He said, You don't need money. So like a lot of people say that. The back of my mind, I really thought that if I find a deal, he's gonna invest with me. That's what I that was my hope. But turns out that at the end, so I found the deal. It took a lot of effort. And I had to convince my realtor to really get this, you know, there is a deal out there. And he kept giving me deals that didn't work. And so like, don't you understand what I'm looking for? But he was in a different belief he was in he was living in a belief system where this what I was looking for didn't exist. So we kept finding things that did didn't work out. Anyway, I found the deal after analyzing, like hundreds and hundreds of deals I found when deal that worked. And you know, and then we start talking about money as well. Okay, well, I need to get a financing from a bank or credit union. And then whatever the rest of the money and I'm looking at my mentor, and it's like, well, you need to kind of like find like, see if you can do like seller financing on the on the other part of it. And so that's, that's what we ended up doing. And you know, after doing all that cash flowing, and it's a great investment. And I kept it for a few years and then sold it at a profit after that. But it was very time consuming to do this right. Then I graduated from university, I started working as an actuary, destroying people's pension plans, and then converting them their their defined benefit pension plan into 401Ks, and then moved into try to find more real estate deals, but it was very time consuming. It's one thing when you have the time, and you can just go and do it and visit the deals and then kind of crunch the numbers. But I was working full time. And on top of that. As an actuary, you have to take a lot of exams, I was spending a lot of time studying for these tests. So I didn't have much time to look for deals. So that whole idea of getting to real estate was put on the backburner. I did like independent consulting, I was tired of, you know, destroying people's pension plan. So I said, Okay, well, let's move to something a little bit more constructive. So I moved to high tech. And then.com crash happened I moved to California at that time, so the .com crash happened lost millions of dollars on the paper money. And that's when I started looking at passive income again, that kind of looking at that and more real estate rentals and all of that. Andthe numbers really didn't make sense in California. I did a couple of different businesses also like a gourmet sauce company that was also supposed to generate like passive income. It didn't really workout. Then we started looking at out of state where the now it was cash flowing, and my little bit of money was going a long way. And in those states that can Memphis and Cleveland. So as opposed to California, my little bit of money was really not, you know, it was not giving me the deals that I wanted. So yeah, and this is basically how it happened. We started investing in Memphis, it was the first house that I bought. My son was graduating from college, my other son was also in real estate. And then that's when we started investing for ourselves into real estate rentals. And eventually, people were asking questions. We would go to meetups, and we talk to people and say, what are you what are you guys doing in real estate? And so while we do real estate rentals in Memphis, and Memphis, why would you invest in Memphis? Why would anybody invest in Memphis? And so we started looking at the numbers and stuff like that. And now everybody do these friends and these family members and these people that we had met, they say, well, we want to, we want to invest, we want to invest with you. And so that's kind of how I got started. And then we, we realized that this was like this is a business now that we can people, we could probably sell some of these rental properties finished, turn key, with a tenant in place, and all of that and they're cash flowing, and people are happy. And it kind of helps redeem myself from having destroyed so many pension plans in the past, now I help people. I help people generate passive income and maybe retire comfortably now. And that's what we've been doing for last since 2017. So Martel turnkey, to right now we're doing about this year, we're going to do 120 houses. And we're going to be doing close to maybe 200 next year. So that's that's our run rate right now.
7:00
Well, that's awesome. So today, we're going to talk about the barriers to achieving that financial freedom that you briefly touched on, and you know how to navigate around them. I've asked Eric to join me to share his wealth of knowledge and secrets that he's picked up over the years. And today, we're going to cover why people don't achieve financial independence, the future of retirement, the best types of investment vehicles and how to get started. So let's just jump right in. Eric, why don't you tell me, what do you believe are the true barriers to achieving financial freedom?
7:30
I think the truth is, most people, we're going to say that the true barriers are, you know, either money, or time. And I would say that it is partially true. But I think it's because there's a lack of alignment between their resources that they have the time and money, and maybe skills and capabilities. But and with their strategy for achieving their goals. So number one, everybody's number one goal should be to achieve financial freedom, right. So that should be everybody's number one goal. Unless you've achieved that it's going to be very difficult for you to potentially retire. It's going to be also when we move into the gig economy, it's going to be very difficult when we have gaps in incomes or reduction in income or stuff like that. So that's your main number one goals. But there's a lot of different strategies that you can use to achieve that goal. Right. Some of them, they're not always in real estate. It could be in the stock market, it could be in all kinds of different meaning it could be a business, it could be, it could be obviously real estate rental. It doesn't have to be single family rentals, it could be multifamily. It could be mobile home, it could be storage, it could be all kinds of different commercial. So that's the that's the idea. But which one, do you choose? Which of these strategies should you choose? And this is when you have to look at your resources, your time and money. And this is where I see the biggest barrier, is that people don't make this alignment. They don't have this realization that I need to pick for this strategy to be successful, I need to pick something that's aligned with the amount of time I can dedicate and the amount of money that I have. And so people say, oh, yeah, I want to do I want to do this brrr. So a lot of people tried to do brrr strategy, right. So which is fine, right? It's a great strategy. But it takes a little bit of effort to get there it is additional info and it takes a lot more money, right. So you have to do this, you go and get the hard money lender for the the purchase price and a portion of the of the rehab. It takes it takes more money, it takes more effort, and you have to do all this work. So that's not the ideal strategy to get started. I'm not saying don't do that in the future. But to get started, I'm recommending a turnkey single family rental. This is ideal. It's small, you can get started and you can get your cash flow going. You trust your turnkey provider to have found the right market. Like for us, for example, all the renovations are done, when you buy the property, there's a tenant in place paying rent. And then you can do all that we have property management in place and you're you're taken care of turnkey. You just put your down payment, we connect you with the lender, insurance, all of them. Build that passive income, and then with using that tool. And then you can move on to you know, to do brrr after that at once you have more time. Now you you've built enough passive income, you can quit your job or be a little bit more flexible on your schedule at work or something like that. Then do some brrr strategy or hire somebody to help you with that. So that's kind of like the biggest barrier. A lot of people are gonna think that's the mindset. A lot of people talk about mindset. That's true. But I mean, you have to think about a little bit strategically, and really pick the right the right strategy that matches your your resources.
11:00
Do you think it's also a lack of tolerance to take risk, right? Because anytime you take your money, right, your salary out of your out of your nest, right, and you do something with it, I think people are sometimes afraid of the risks that they're taking. But you know, in real estate, there's so many different levels of risks. So when you're talking about, you know, pick your path, you're talking about, find out what works for you from a time perspective. Find out what works for you from a financial perspective, I think you also have to think about them finding out what you can tolerate as far as risk. Right. And and those have the the makings of a good roadmap to be successful.
11:38
Yeah, absolutely. I think you have to increase a little bit your tolerance for risk. And, you know, when I was 18 years old, and I was about that eight unit apartment building, I looked at the risk, and I say, what, I don't have money. So what are they going to take away? So it was I didn't mean that I'm going to go and do some crazy, crazy stuff. I still run the numbers, it still made sense. It was still cash flowing. And, you know, it worked out. But yeah, it's about building that tolerance of risk. And I think that, again, this is why I think the turnkey rental is a great idea for that. Because you're starting small. You’re starting with one single family home that is relatively inexpensive. I mean, the houses that we sell, for example, around, you know, 90 to $120,000. So you put a down payment on that you're about 25 $30,000 down payment, and then you know it's cash flowing. You don't have to figure out the risk about the market. Well, you don't have to figure that's taken care of because the turnkey provider found a market where these things cash flowing. So you're trusting that. The renovations have been done that the rental and finding the tenant and all of that, well, there's already a tenant in place, there is you know. So all these things have been taken care of. After that, once you start building, then you can go to something a little bit bigger, then you have Okay, now I can go and do a brrr strategy and say, Okay, well, I'm going to take on the renovation risk myself, and I'm going to find a market and I'm going to do this, and I'm going to do that, and I'm going to put more money at risk for these things. So I think this is why I think it's very good that people have that risk. And people feel uncomfortable about about taking the risk. But you have to kind of get get used to that. It's kind of like earlier today I was talking about diving to somebody to illustrate that. I mean, when you start diving in a pool, I mean, you don't start on the platform and doing all kinds of tricks. I mean, you start on the lower board, and you do some simple simple dives, and then you do some, you know, then you go backwards, and they do some flips and stuff like that. And then you get to the next level. And you kind of raise, raise the bar a little bit. And then when you look back and say, Wow, I can't believe that, you know, a few few years ago, I was I was just learning to dive on this on the lower board, right, so. So that's the kind of thing that you have to do. In my book, I also have a tool that basically helps you with the risk management. So you basically list all your risk and then kind of categorize them. And then really say, Well, I have this risk of, you know, the house going to, you know, catch fire and then I'm going to lose everything. Well, now you're going to have fire insurance, you know, I'm simplifying. But you know, that kind of stuff, say oh, the tenant moves out and I don't get paid for my rent doesn't get paid for six months. Okay, well, so you put a reserve for six months of the mortgage payment and utilities and stuff. Because a lot of people have these risks floating around and they get scared because they're kind of like floating around and the kind of like pop and all of that. We should list them and say well, yeah, I already talked about that. And this is a plan for that. There's a plan for that. There's a plan for the fire, there's a plan for the tenants leaving, you know, so I'm good. And as long as there's no red flag, then you can go ahead and move with a transaction.
15:12
The episode will continue in just a moment.
15:16
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16:14
So what do you think is the future of retirement?
16:18
I think for most people is going to be very bleak retirement. As you can see, I mean, if you start seeing some of the statistics, but uh, you know that right now, the people age 55, around 55 years old, the level of savings that they have the median savings is around like $100,000. I don't need to tell you, you don't need to be an actuary to figure out that that's not enough. And these people don't have, they don't have a defined benefit pension plan. Because we've destroyed them a long time ago. Unfortunately, so that's one thing. For the younger generation, I think it's going to be even bleaker, because they have way more debt student debt than then the Gen X sort of boomers had. We're also moving more and more into this gig economy. So that means they're going to have a lot more gaps in income. They're going to have much more flexibility, you know, up and down in terms of how much they're getting paid. And because they're going to be independent contractors, they're not going to have any kind of 401 K's with the company they're working for. And also, now that people are going to be working from home more. That means that once you work from home, you're on an open market for anybody. And but by that I mean if I'm, if I have a company in Silicon Valley right now, and then you're telling me that you want to work from home in Texas, or Florida and stuff like that, you know, this is fine. And you're charging me $100 an hour to work there. But then I have somebody else that's in the Philippines and stuff like that, that's charging $20 an hour, and it's like, I still have to work outside my regular hours. It may be a little bit more convenient in Florida. But now when you're working from home and you're an independent worker, you're competing internationally. So that's, that's the other thing that's going to I think is going to put some pressure on the rates downwards, if we go more and more to that. So that means you need to really focus even more on on having a strategy in place to, you know, to mitigate that and be able to achieve financial freedom.
18:30
I think that there's a very small population of people, very small in the context of everybody, that actually achieves true financial independence. Why do you think that is? Why do you think so many people just never get there in life?
18:45
I think people don't get there in life because the they're being distracted. I think on one one hand, there are a lot of distractions in life. So obviously, you know, kids, house, travel, work, TV. Advertising, I mean, we all want to have the good things in life and all of that then, you know, spending we'd even a consumeristic society. But I think people need to focus on that. And I think one of them too, is this American dream to owning a home. And I think yeah, it's good if you want to own a home. But first start by instead of doing that, start working on buying houses that you can rent. Single family rentals or other rental real estate. So you're still investing in real estate, but you're getting some positive cash flow and you're getting some tax benefits that's going to help you reduce your taxes that you're making on your W2. You also leveraging your W2 to get better mortgages on these single family rentals or your investment. So start with the rental if you're going to instead of buying a house and then go into once you feel you've achieved financial freedom or you've done something, a significant amount of passive income, then buy a house.
20:08
That was actually going to be my next question for you is what what investment vehicle would you start with? But it sounds like you would recommend somebody starting with real estate, but not necessarily the primary home real estate to invest in? You brought up a really good point about the tax benefits and things that change when we're talking about an investment vehicle versus a primary home.
20:27
Exactly. I mean, your primary home is going to take money away from you. And you know, yes, of course, there's a saving component is an appreciation component. But it's if you do a rental property, you have positive cash flow. You have money that's coming into your bank account, you had all the tax advantages, the house pays for itself, and it appreciates over time as well. So that that's where I think this is where people should, should get started. If I had to think of the perfect investment to invest, that will be a rental real estate. Not necessarily single family rentals, but rental real estate, definitely the best asset class for investment better than than stock for the long term or anything like that. Because of the ability to leverage. And as we mentioned, you know, the tax advantages, inflation, protection, appreciation, and all that.
21:21
So how would somebody get started investing?
21:24
So yeah, so for me it is you have to save a little bit of money, you know, to put a down payment. But I would recommend the smallest investment you can find in a rental real estate. So whatever it is, so it could be a single family rentals. That's, that's good. You can also invest into there's also, if you have, if you don't have to 25 to $30,000, there's also the crowdfunding. That's a some markets that, that have that so you can invest like $1,000 in some properties. There are also some sites out there where you can invest as little as I think $100 in some rental properties, if you want to get started. So start as small as possible, I would say and then kind of like build from that. Everything that you do is is a step towards actually your goal. So that's, it's always good.
22:16
Yeah, you brought up a good point about how much money you have to invest, right? Because there are different resources out there like to crowdfunding and different syndications and stuff like that, that, you know, potentially could be less costly of an entry point than that even real estate. So when you talk about starting small, and then building up, how do we take that next step? How do we get from the small to the next step? What are we doing?
22:38
So once you start to small, you mean, like you start with, let's say, a small investment in a crowdfunding or something like that and then you have accumulated enough?
22:47
Yeah, or even even if we went strictly to, like you started out with, you know, with a really small single family home, right. So when does that next step happen? What has to happen? Do we have to just raise more money? Do we have to, you know, wait to the equity builds up? So what are we doing in that situation that allows somebody to get from one to hundreds or, you know, whatever their goals are.
23:08
So one of the ways to do that, the, obviously, the easiest way is to continue to save. So now you have that cash flowing property. So that puts money into your bank account, and then you continue to save on your job, right. So you work nine to five, to save more and more money. The advantage of this, also is that it's more motivating. You see that now this investment that you made, the $20,000 investment that you made, is now putting $200 in your bank account every month, so you see it, you physically see it. As opposed to you know, the 401k Saving when you're trying to save like $2 million, so that in at age 59 and a half, you have the ability to to take it out. So now you're seeing it every day. So it's a little bit more motivating than to kind of save some money and say, You know what, instead of buying this new car, I'm just going to do this instead. And I'm going to, I'm going to put that $20,000 towards another house. Now, instead of having a car payment for $500, I have an extra $300 that's coming into my bank account, you know. And then you kind of add up out of that. The tax benefits also they're going to offset your, you know, you have to talk to your CPA and all that. But, it depends everybody's situation is different. But, you know, this, these tax benefits can also offset, you know, your normal, your ordinary income. You can also do like bonus depreciation and some of these single family houses to again, offset and take on a bigger hit and reduce your taxes that year as well. So there's a lot of advantages. So now you're reducing your tax bill on top of that. So you pay less taxes, you say, Well, I've saved like $10,000 in taxes. I'm going to put that towards my next house and I only have saved $10,00. And you know, and that's kind of how you build.
25:04
Great, that's great points. So how would somebody find their very first investment property?
25:09
So I would say, again, I'm very focused on the single family rentals. If you have some special skills, if you really like the mobile homes, you're very familiar with that. Or if you really like self storage, I would look at, you know, self storage obviously needs a little bit of more money. But you could look at self storage, syndication or something like that. But if you're looking for single family rental, you just look to search on Google for turnkey single family rentals. If you're looking at turnkey mobile homes or something like that, or syndicate mobile home syndication. So these are the kind of the keyword that you have to look for syndication, crowdfunding. If you're looking for to buy a single family rentals directly, then look for turnkey single family rentals. And hopefully my company should come up right at the top.
26:00
Perfect. So how would somebody get in contact with you?
26:02
So on Instagram, EMartell. On tick tock as well tick tock the thing now, E_Martell as well and my company is Martel Turnkey. So Martelturnkey.com. And also have my own personal website MartellEric(.com) where you can see all my podcast and my book.
26:24
Fabulous. So is there anything that I didn't ask you that I should have?
26:30
No, I think that's this is good. I think I think the main thing is for people to realize that they have to take action. It's very different from like, 50 years ago, where like, when my father was at work, the company was taking care of them. You would work for that company for 25 years and taking care of them, quote, unquote. But you know, and then they would have a pension plan at the end and a gold watch. And all that is this is not like that right now. This is the this is the wild west now. And we're going in a direction where the individual is going to have to take a lot more responsibility for for saving, investing, figuring out their taxes and figuring out their retirement.
27:13
I completely agree. Well, I think you gave my listeners a wealth of information to consider and I really like your kind of your summary is take action, right, take action. That's the key step, the first key step. And you did point out before that, you know, a lot of what led to your success was your networking, right. Surrounding yourself with people that already were doing it right, that had some insight. I think that's a key point to taking action to sometimes is being able to surround yourself with people that just know what to do. So I will definitely make sure all of your information is on our show notes page so my listeners can reach out and contact you if they're interested in learning more about Martel Turnkey. But I certainly appreciate your time and your wealth of knowledge. And you know, thank you so much for participating.
28:01
Well, thank you, Jennifer. It was a pleasure.
28:03
It was absolutely. I hope you enjoyed everything that today's show had to offer with my special guest, Eric Martel, and until next time, take care.
28:13
For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit growingempires.com