Speaker 1 0:01

Welcome to Episode One of Season 15 of the Growing Empire Show. Today I am here with my special guest, Paul David Thompson. And we're going to talk about creating long term generational wealth for real estate investing as well as creating wealth through your passive income. So stay tuned.

0:20

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.

0:40

Thank you for joining us for episode one of season 15. Season 15. I am so thrilled, and this season is going to be the best season yet please don't laugh at me. I know I say that every season, but it is I am on a mission, it is absolutely my mission to keep bringing you amazing content that keeps you invested, keeps you intrigued and keeps you searching for more. And this season is going to be no different than any other before. So season 15 is where I'm going to do in depth interviews all season long. With investors who built their empire. They took the leap of faith, they took the risk. And they have nothing but success to show for it. They have been able to create financial freedom for themselves and their families, they've been able to get their time back and enjoy life. And they've created generational wealth, which is something we should all strive to do. So I'm really excited to jump into season 15. And please make sure you do not miss one minute of season 15 It will be very rewarding and very eye opening. And it might just be the thing to get you up and going in your real estate investing career. So make sure you stay tuned. Today you're going to hear my interview with my special guest, Paul David Thompson. And the reason that I asked Paul to be on my show is because I thought he was really a role model for so many people. He believes in leading life by design. And he's been able to achieve financial and personal freedom by investing in real estate. And I think his story is really amazing. Paul is the number one best selling author. He's a full time real estate investor. He's a coach. He's a hard money lender. He's a husband, he's a father. And he's leading his life by design. I find his story to be really motivating. And he has so much to offer to investors just getting started out. So in a few moments, I'm going to jump right into that interview. But before I do, I wanted to just quickly shout out his podcast as well, in case you're looking for another resource. And it's called my freedom foundry podcast. So make sure you check out Paul, on that podcast. And now we're going to jump right into that interview. So welcome, Paul to the growing empire show. I am so glad that you are here.

3:22

Thanks for having me.

3:24

I'm pleasure to have you. Let's kick off this episode with you sharing a little bit about yourself and the work that you're doing now between your podcast, your real estate investing your entrepreneurial businesses, your coaching, I mean, you're just you're all over the place. So I'm very intrigued to hear a little bit about how you got started and and where you got to today.

3:45

Yeah, I do have a couple of different disciplines. But I once heard someone refer to it as having a common theme, like you have a solar system. And then you have certain orbiting planets. And the orbiting planets that I have is around. It's always real estate based. And I'm a real estate investor by nature by by training now and by discipline. But then I also do coaching around that I have I run my own mastermind. And then I also do investments. So I have my existing portfolio of single family, which is where I cut my teeth, but I spend very little time thinking or operating in that business. I have a property manager in place. So there's not much going on there. And so most of my time now is spent on creating content around the mindset it takes to step out of earning based on your your time exchange of value, and buying equity in properties or building a business that's real estate focused. So the time energy I spend now is around being a business owner and effective entrepreneur and helping other people do the same thing.

4:54

Very cool. So where did you come from? Did you come from corporate America or how did you get into real estate? How did that all start?

5:01

Yeah, I followed the traditional path of, you know, the the age old wisdom of, you know, work hard, you know, go to college, get a degree, get a job, and you know, then I got a mortgage, and I got married, and I got that. So what you know, it's not an entirely all bad life. But I found myself going up the corporate world, kind of climbing the corporate ladder and finding myself having my ladder against the wrong wall. And I realized, Oh, I've put all this energy and time and thought into a, a company that really doesn't care about me in the scheme of things. They weren't necessarily a bad company, but they were a typical Corporation, they, you know, the the cold equations, one day is going to make it so that you just don't make sense in their operation anymore. And they're going to lay you off. I mean, it's just sooner or later kind of situation. So I decided I wasn't going to be victim to that anymore. And then I was going to basically build my own business where I was basically double doubling down on myself, instead of spending all my time and energy and doubling down on this corporation who didn't actually care about me.

6:10

Understood. Actually, that story sounds awful familiar?

6:15

Doesn't do you have a similar story, I have an identical story. It's a very common theme. For most anybody who's working any sort of a job, you find yourself not being really all that appreciate it. Unless you're really lucky. A lot of times you like your initial boss, like you're not, you're like your first level boss, like the first level of management is usually a pretty good person, my experience, it's when you go up the up the corporate ladder, you just become a cold equation, you become a number two, a corporation. And, you know, when the stock price is down, then they do layoffs. And that's that, yeah, that's so true.

So today, we're going to talk about creating long term generational wealth. And we're going to also talk about creating wealth through passive income. And I have asked Paul to join me to share his wealth of knowledge that he's gained throughout the years in regards to real estate and investing. So we're gonna jump right in. And, you know, let me just first ask you like, how did you actually get started in real estate investing? So how did you go from I'm in corporate America to real estate investing is where I'm going to sink my teeth.

7:27

Good, good question. Because I did have this moment, kind of as a wake up call, like, oh, like, I am, like helping somebody else build their dream instead of me building my own dream. But I didn't know what my own dream was, I just knew I wanted to have control of my time. But I needed a vehicle, he needed a bridge to get me there to create enough passive or residual income that would exceed my living expenses. So I could basically buy my time back. And I looked at a lot of different options. I looked at buying some sort of company I started, I started looking at becoming a franchisee, I thought about starting an insurance agency. And everything that I looked into felt like I was buying myself another job. And I sure didn't want to, like, spend money to buy myself a job that I couldn't get out of. So I landed on real estate as a way to dip my toe into an investment vehicle, that allowed me to get some residual income. So instead, now I have tenants coming and paying me rent every so they spend their time going to work. And then their biggest expense is paying me the landlord for the access and the use of the house that I bought for them. And so now I have 40 rental properties, I have 40 people going to work every day instead of me going to work. So it's a much smarter use of my time, it's a form of leverage, right? I'm using other people's money, I'm using other people's time and capital to go earn the money to pay for rent.

8:51

Very true, very, very true. So you are very passionate about financial freedom from everything that you're doing in your coaching to even just a few minutes of talking to you now you are you are very, very passionate about financial freedom. What is it about that in that shift that, you know, just makes you want to not only do it for yourself, but you know, do it for others? Help others like see that? See that relief?

9:20

That's the right word to is relief. It's this feeling of, oh my gosh, I I've been in the shoes of a corporate drone, who has worked so hard, and spends all this time, you know, five days a week, sometimes more 50 weeks out of the year, sometimes more to then occasionally be able to go on vacation, and and then really not be able to make ends meet sometimes, you know, most Americans can't even come up with $400 in case of emergency. We have an epidemic of money management in this country. And if you look at the landscape out there, the information being shared air doesn't really largely talk about how to create sovereignty, or how to create your own autonomy or your own personal mastery, because that's not useful to all the the products and services that are being offered. Right? The products and services need you to be kind of addicted to their products and services. So instead of creating an accepting this default lifestyle of being a consumer, why don't we figure out how to be a producer of value in the marketplace with our own business, and kind of create an economy of one where we are the people who create our own personal financial freedom, and have the autonomy and sovereignty to control our life. That's what I'm about. Okay.

10:44

So you obviously believe that real estate is the means to that financial freedom? Why why real estate versus one specifically

10:52

real estate? Yeah, and it is not the only vehicle but I am not dogmatic or religious that that real estate is the only way to create personal financial freedom, it is a it is a good vehicle. And one of the reasons is, there's so much of it, it's a fundamental need that everybody has, whether unless you're living on the International Space Station, you need land, right? Like, like you need to park the earth, like, like the best part of Earth is Earth itself. That's what we have to have it. So we all need a place to live. And it's a fundamental need. That is also very, very easy to understand. You do not have to have a master's in finance, or some sort of fancy corporate degree or whatever, to understand that I lived in a house, and I wanted to pay some amount for the features in that house. It's a very, it's a very simple, easy to understand business. And we keep making more people in the US our population is growing. And we have a supply shortage of housing. So it's I like something where there's a inherent demand and a limited supply. Okay, very good. So you mentioned

11:55

that you have I think you said about 40 rental properties, and you started from single family. So how did you how did you acquire your first property? How did you get to 40 properties? Tell me a little bit about how you bought them? Who was on your team? You know, how much did you do on your own? I know you did reference it being truly passive now. Now, it was a team of people, and I'm sure it wasn't passive initially. So how did you you know, how did you get started? How did you buy the properties? And then how did you get to where you are today, 40 properties later, where you're, you know, a passive investor and able to then focus your time on some of the other things that are important to you.

12:34

Right. So the way I started was, this was 2015. I live in Little Rock, Arkansas, where the values of properties are fairly low compared to most other parts of the country. And I just happen to live in a market that was inherently a cashflow market. And so just just luck, really. So I went and looked for properties near me, and I found some wholesalers who had some properties for sale, I did a lot of my own studies and research to figure out kind of how to run the numbers. I am an engineer by training, I have a master's degree. So running numbers, and and due diligence on a rental property didn't really scare me, it's kind of in the scheme of things, the math isn't that hard. And I bought a property for $30,000, it was a three bedroom, one bath house, that market rent was for 650. And he did a lot of repair. And so I put like 10 or 12, maybe 15, I can remember exactly, let's call it 15 To be safe. I put $15,000 repair into it. So I was into it for 45. And I refinanced it out, I think it was worth 60, I was able to pull that 45 back out, pay my private money partner off, and with this new mortgage, and then pay back some my own cash that did for the rehab. And then I had my first rental unit, you know, you know, it was like 115, if you run the numbers, I think it was $115 of net cash flow per month if in the performance. So $115 isn't going to change your life. But it's this idea of this owning an asset that now is out to work. And I did the product manager myself at first. And I've learned that that was a proof of concept that that idea of doing the burr method effectively using private money to buy getting property fixed up, getting it rented and then doing a refinance worked. And it's all like well, proof of concept is viable. Let's do it again. And so for the next two, three years, I would just buying on average one property a month, and I would just binary five binary five binary five, and I didn't actually buy it every single month but on average and worked out that up. Sometimes I would buy like a six Plex in one in one shot. So that gave me a little bit of a head start. So the next six months I would get the get stabilized and then get reified. And then then I learned along the way that I was fine to buy from wholesalers but if I was going to do this at scale that I needed to be able to control the deals myself so I needed to be able to cherry pick the deals that I wanted and be able to flip the ones that I wanted to flip, or sell or assignment, the kinds of properties that really didn't fit my criteria. So I got into this game of, you know, the We Buy ugly houses sort of thing where you, you mark it direct to seller, hey, do you want to sell your house, that kind of thing. And I still do a little bit of that today, but I don't do it nearly as aggressively as I used to. I used to have like a $30,000 monthly budget where I would mark it, and then we were doing 10 deals a month at one point, but I'm not really at that place anymore. Now I've jumped into commercial. So that's, I think I addressed most of the questions you asked there. Was there anything else that I didn't cover?

15:34

No, I think that was great. So you started hard money, right and private money to begin private money. Yep. And then you said that you were funding though some of those renovations out of your own pocket, right,

5:45

the original probably five or 10, I did out of my own pocket, I had about $3,000 of kind of fun money that I wanted to play with. And I will just repeat that around a few times. And then you do this a couple times you do the bird method a couple times, you know that it doesn't always work out or you're able to pull 100% of your money back. Sometimes you have to leave 510 $7,000 Whatever into the deal, which is still not a bad thing, you bought a property for $5,000. But that starts to eat into your your capital. So then I got a little more aggressive and creative with the private money. And so what I would do with private money, sometimes hard money is I would create 100% financing scenario with the financing.

Unknown Speaker 16:27

The episode will continue in just a moment.

16:31

As an investor, we know it's important to stay on top of market trends and real estate opportunities that add value to your portfolio. We also know that having a trusted source of reliable information to help you stay a step ahead of other investors is critical to your success. If you're interested in having these types of resources, as well as access to me and my team, I invite you to join the Empire Investment Club, a free service that gives you an easier way to make sense of today's and tomorrow's real estate opportunities. As a member of the Empire Investment Club, you'll get access to relevant resources and investment focused experiences such as live interactive webinars, market trend presentations, and investor socials designed to equip you with what you need to succeed. So whether you're an active investor, passive investor, a combination of both, or just starting out the club is where you'll get what you need to build a portfolio you love. To join, just head over to Jennifer to Hey soos.com Sign up, and we'll see you in the club, where everyone's on a journey to becoming a better investor. At what point did you bring on people to your team?

17:34

Good question. So very early, I guess I had somebody helping me like a friend that we were part owners of hidden minority share, but he was a part owner. And he did the rehabs. He was comfortable with doing rehabs. And I wasn't I hadn't, I had zero interest in swinging a hammer. But he was handy and he wanted to do it. So that was part of it. I also used realtors to bring deals to me, that's a lot. And then I bought from wholesalers originally, but when I started building my own team, so to speak, it was it was really with partnerships. rarely did I ever bring in like an employee. In fact, I mean, even today, I don't technically have an employee there everybody I work with his somehow a contractor or a fractional officer, so to speak, or a partner. Because I like the flexibility of not having to have an employee that that comes to my office. And I have to deal with every day like I like those type of responsibilities aren't necessarily what I'm after. I want to be a business owner and then a business operator. So I intentionally set myself up to not be a business operator that had employees and HR problems and so to speak.

18:51

Okay, tell me about these partnerships a little bit more you are we talking multiple people, just two people because you did mention, you know, you're the kind of the numbers guy, right, because you're talking about your engineering background and running numbers. And you referenced one of your other partners, being the contractor doing the actual renovations. So was your partnerships always structured? Where like everybody brought something to the table, like a different skill set that the other did not have?

19:17

Exactly. Yes. And especially when you get into commercial operations, you need somebody else to be on your team with you like a partner, because it becomes a team sport when you're talking about like right now I'm doing land development in Texas, and we're doing multimillion dollar projects. It's just not something that you can take down by yourself. Even if you had the liquidity take it on yourself. You just don't have the experience and the know how and the kind of the the acumen to do it all yourself like you need somebody else that has some sort of discipline different from what I specialize in. So I tend to be the numbers guy. I tend to be the guy that structures deals I tend to be the guy that does stuff Financing. I need someone to be the sales guy. Because I'm not a classic salesperson. I also need someone to be like an investor relations person. For example, I need someone who knows how to actually build a house I have, I can repair house, I sure can build a house.

20:16

Definitely two different things. So how did you find these partners?

20:23

Good question. The first one I found through bigger pockets. So when I first started a long time ago, bigger pockets was all the rage I still is. And it's a great place to learn. And I met somebody who lived in my local city, you know, I mean, we're still friends, and we still be sold, we still own a couple houses together. And so we met and had lunch and talk shop, and I said, Hey, like, I'm looking to buy houses, and I have good credit, I have the financing lined up. And I can find deals, I'm pretty sure. But I, my gap is that I don't want to go into house and be the guy having to figure out how much the house needs and repair. And I'm, I mean, I'm still not good at that to be honest. Because it doesn't interest me. It's important. And I recognize it's important, but I don't I don't want to be that guy. I'm like a computer engineer, not a a structural engineer, you know, I like they're very different disciplines. But he was handy. And so he said, Oh, yeah, I actually quit my corporate job to do things with my hands because I enjoy doing that stuff more like I used to program and do code. And I don't wonder that more I want to be handy. So it's perfect. So yeah, you find somebody who's, who's a mix in another my current business partner and the stuff in Texas, we become really good friends. And we met through mastermind, I'm really big on growing your personal network and uplifting yourself by being around people who are always trying to rising tide lifts all boats scenario. So you want to find the rising tide scenario, right? So I met a really good friend of mine, that that through a mastermind and he was doing land, I was curious and doing land. And we just hit it off. And he's like, hey, you know, do you want to do this? Like I have deals, I have access to deals in Texas. You seem to know how to structure things. Let's do it. And we ever go off to the races.

22:11

And you said you initially started investing in? Was it Arkansas?

22:14

Yeah, I'm from Arkansas. I live in Little Rock, Arkansas. Yeah.

22:17

Okay, now you're in Texas, what other states have you touched on?

22:22

So I guess I've technically done deals in like eight or nine states. But I think that was more of an ego play than it was an actual need. Like I know, I felt like a hotshot because I was doing deals and other states. And don't do that stuff. Unless you know what in the world you're doing, and be very careful dabbling in other markets, like you're much better off becoming a master in one market. And then once you truly become a master in that one market, if it makes sense to diversify, go to another market. But the dabbling in four or 569 Different states is complicated in its unnecessarily complicated. I was fine. The same kind of deals in Georgia that I was in Arkansas, the same kind of deals in Arkansas was in Mississippi, just do deals in Arkansas, where I have my network already.

23:11

Right. Yeah, that makes a lot of sense. Yeah. So what got you into the How did you transition from the, from the residential side of the business to you know, more of the land developers or partial sides?

23:23

You know, why did I go into commercial, I was afraid to go into commercial because the, the just you add a couple of zeros to every deal, right? So I was very careful that I wanted to avoid the the risk of ruin. So it didn't make sense for me to do my first commercial deal. And then it bankrupt me. And I would undo everything that I've done. Up to that point. But at the same time, I also felt like I was playing way too safe by just continuing to buy another rental property that became so pedestrian to me, and not interesting that I really wasn't going after it seriously anymore. So I needed another horizon to cast my gaze on and conquer, right. And so that horizon i thought was something to do his land. I thought that would be interesting. I thought that the market was setting itself up to be a good deal for that I was having trouble finding multifamily projects that I could buy myself because they they're either outside of my my capacity, or our and or the rates that multifamily were trading for which is preposterous, like, you know, like a three cap. I mean, like why would I buy a three cap on or an apartment complex? When I realized that apartments were trading for well above replacement cost. I thought, Well, why don't I just build these projects that there's a housing shortage? And there's lots of land out there. And if I can just learn what it takes to get land and titled and find people who can build properties, then maybe I have some I have an angle there that I hadn't thought about before. And that's what I've ended up doing is that's what I enjoy doing now is being good at understanding how to take land down and get it entitled, and get the permits and ready so that it can be built by a builder.

Speaker 1 25:14

So how did you learn all that? Because you didn't inherently know it. So no, I did not. There was a gap big time. How did I learn entitlement? Entitlement is like one of those things that there are very few courses out there on it. I did buy one was okay. But you kind of have to just start doing it a little bit like you. You can learn a little bit online. But it is not like single family where pretty much every answer is out there. Entitlement is like this dark magic that you have to kind of like sift your way through. And once you do it a couple of times you realize, okay, I see there's an approach here. But it's very much about playing the local jurisdiction and understanding how reasonable the local jurisdiction is. And the big lesson I learned there is you just you don't buy land and until you know that you can get it entitled. That's it, nobody is in the business is thinking about it. Get land entitled, before you buy it, because you don't want to buy it and hope you can get it entitled at the moment, it makes no sense.

26:17

So let's break that down a little bit, though, for my listeners that may not understand what land entitlement is, what does that actually mean? How would you describe that?

26:24

So I'm laying it inside of cities, and even the county needs some sort of like permission to do certain things with so in my case, I'm taking farmland agricultural land, typically, that's adjacent to a nearby city, and I'm getting it zoned and annexed to that local city. I'm getting it so that I can get as much density into that. And you know, how Inca new development you see, now all the houses are crammed together. And you're like, I would never live there. Like why do people live so close together? Because that's the only way that developers can make money doing it. Fundamentally, that's why this idea of like having houses that are on these, like half acre lots in the middle of town is just not something that's done very much anymore. So that cities want the reverse they want. They don't want it too much like the cities have an opinion of how they want things to run in their city. And you have to kind of go to these boards and say in the zoning committee and say, Can I please have single family here? Can I please have multifamily here and you should get their permission to do so. And that's the entitlement process. And so when you get a piece of property annex, the city is typically much more amenable to that because that gives additional kind of footprint to their to their city, and it gives them a higher tax basis for them to collect taxes.

27:42

Okay. Thank you for listening to part one of my interview with Paul David Thompson. As I'm sure you already know, Paul has been a very successful real estate investor. And his passion to helping people is just second to none. So make sure that you stay tuned for our second episode, where we jump back into our interview, and I'll continue with part two with Mr. Paul David Thompson. And until next time, take care.

28:11

For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit growingempires.com