Use Real Estate to Live an Abundant Life

Mike: Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting Expert Interview, where I interview awesome guests right before your ears and your eyes to help you learn and grow. I’ve got a great guest today, a good friend of mine.

Before we get started, just a quick reminder about the REI Power Summit coming up. It’s going to be the largest real estate investing event ever. It’s 100% virtual. You can join from anywhere. You can watch it at 3:00 in the morning in your boxers if that’s what you want to do. But you’re going to get access to it for 12 months if you’re not able to watch it real time as it’s happening.

So check out REIPowerSummit.com. We have over 50 committed speakers so far, all of which are extremely talented, including actually my guest on today’s show. So check out REIPowerSummit.com

So for today’s show, I’m joined by Shaun McCloskey. Shaun has been a successful real estate investor for many years and has a number of businesses in that space and spends much of his time these days helping others live their life more abundantly through the Lifeonaire philosophy, which he’s going to talk about some more today.

So Shaun is going to talk about how he used to live a very hectic life and now how he teaches other people to really think deeply about why it is they work so hard, what is it you work so hard for and focus more on that. So anyway, it’s an exciting show. Every time I talk to Shaun, I get jazzed up. It forces me to think about why I work so hard.

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Hey, Shaun, welcome to the show, my friend.

Shaun: How are you doing, man? Thanks for having me.

Mike: Good. Good to see you. So yeah, I don’t know if I should tell you stuff like this or anybody, like, “Hey, I really like when you talk.” But I get a lot out of it. Every time you talk.

Shaun: Thank you.

Mike: I work hard, for people that don’t know me. I’ve got a lot of stuff going on. A lot of people listening to this do too. But sometimes you start to forget why you’re working so hard, right?

Shaun: Yeah.

Mike: I think a lot of us get caught up in that. I would argue that real estate investors are kind of the worst at that. You tend to be in a feast or famine business and you’re always worried about the famine and therefore you just constantly try to feast. Does that sound right?

Shaun: And a real estate investor wears all these different hats. When you start up a restaurant, you can be the manager and you can have other people waiting tables and everything else. But most people who are in a real estate business, they’re the accountant. They’re the janitor. They’re the guy who’s managing the rehab. They’re the people who do all the marketing. They have to answer all the live seller calls. They’re doing all this different stuff. Yeah. We wear all these different hats. When things are good, they’re good. When they’re not, we’re trying to get some more things going, it can be tough.

Mike: Even when you say a restaurant, having a retail background myself, you’re looking at the business every day and you’re like, “Hey, sales are up or down 3 to 5%. There are not dramatic movies.” In real estate, it’s like nothing, boom, nothing for long periods of time. And you’re always kind of hoping for that feast because you don’t buy houses every day or most of us don’t.

Shaun: Well, depending on where you want to go with the interview today, I have actually a solution to overcome that. So if you want to get to that at some point.

Mike: Sure, any advice you have on how to improve things, that’s what we’re all about here. Hey, before we get started, why don’t you take a few minutes to kind of tell us about yourself for those that don’t know who the heck this guy is?

Shaun: Yeah. I’m Shaun McCloskey. I live here in St. Louis, Missouri. I have a wife, three beautiful kids. I got into real estate investing going on, I guess I’m going on my 13th year now. In that time, I’ve done a little over 300 deals, which to some of you might sound like a whole lot. To some of you, it may not be so much. But there was a time when I was doing 60, 70, 80 deals a year and I have slowed down considerably by my choice. We’ll talk about that a little bit today.

But the focus of my life today, I do a number of things. I still do deals, although I don’t do anywhere near the volume that I did. As a matter of fact, the deals I do I do a lot through other people now. So we can talk about that today. I have a funding business where we fund other people’s deals for them if they need access to capital.

I have a REA here in St. Louis. We run the Lifeonaire Real Estate Investor Association here. That’s something that I love, although it can take a lot of your time too. So we’ve got that kind of down to a system where that doesn’t take very much time anymore at all. And then I have Lifeonaire, which consists of every once in a while I’ll speak. I usually go out and speak about once every four to six weeks and we have a coaching business. So all of this stuff kind of going on at one time and for the most part, I can run this most of the time.

Now you’re catching me at a time when things went crazy in our business. But in most cases, I could run this, all these businesses, in about three half-days per month and one full day a month is what it requires of me.

Mike: Oh my goodness.

Shaun: That doesn’t come without some planning. Obviously four or five years ago, things did not look that way.

Mike: Right.

Shaun: I’ve been the guy who worked 80 hours a week and then I’ve been the guy where we’ve got it down to what it’s down to today. But all of that came with some planning and it came with taking people through a very specific, even myself included, taking myself through these four stages, which, if it’s okay, we’ll talk about today.

Mike: Yeah. Let’s talk about Lifeonaire. For some reason, I think it’s cool to show you my iPad here. I’ve got a copy of Lifeonaire. I don’t know if you know this. I read this before we ever met. By the way, Shaun and I are in a mastermind group together. So I read that before we met and it was weird. So at the time, I don’t know who the character in the book is. I don’t know if it’s you or Steve or some phantom person.

Shaun: It’s an accumulation of all different kinds of people.

Mike: Yeah. At the time, I was like this guy is 39. I’m 41 now. But I was like, “I’m 39.” I just started reading it and I was like, “That sounds like me.” So literally, I kind of caught it at the beginning. There aren’t a lot of books that I just sit down and read from beginning to end, but that was one of them, actually. It’s a relatively quick read anyway. But I remember it was like a Saturday and I’m just flipping through that thing. It got me thinking about things. Anyway, I don’t know why I’m telling you that again. I’m like in the Shaun McCloskey fan club, I guess.

Shaun: Thanks, man.

Mike: But yeah, I think the thing about the book, it has a little different meaning for everybody. But I guess we should kind of dive in and I should stop mumbling here.

Shaun: I get different responses from people all the time about the book. We decided to create the Lifeonaire book as a fictional story because Steve Cook, my business partner, I think wrote that book maybe five times or something like that. Every time he’d send it to me, I’m like, “You know, it’s good. It’s very how-to. It’s very much an instruction manual.”

Finally, I said, “You know, Lifeonaire really, there are so many incredible stories that have come out of people totally changing their life as a result of these four stages and a couple of other things. But these four stages are really the fundamental structure of how to become a Lifeonaire.” In case you never heard the word Lifeonaire, everyone wants to be a millionaire but some people focus so hard on being a millionaire that they give up their life in the process.

So we just teach you how to have both. And money is a big part of that. But the thing that people forget is their time. So how do we have both? How do we have it to where yes, we can make all the money we want to make, but not at the expense of the relationships that we have with our kids or our wife or the hobbies that we love to have or all of the things that we said we got into business for in the first place but most people put on the side?

So when we created the book, we decided to do it finally, the last time around, as a fictional story. The characters in the story are an accumulation of all of our students, an accumulation of the struggles that Steve and I had growing up. I think if you go to Amazon and look at the book, the reviews, it’s five stars all the way down. I’m not saying it because we’re such great writers. I’m saying it because we hit the nail on the head of what people struggle with. So when you read the book, you’ll identify with one of the characters in the book because you will be one of those people.

Mike: Yeah.

Shaun: So in the book, then we help the characters overcome the challenges they have and hopefully we’ll help you do some of that on the call today.

Mike: Yeah. Awesome. Let’s kind of go into it. Let’s dive in.

Shaun: Let’s do it.

Mike: All right, man.

Shaun: So basically what we do is we teach these Four Stages to Financial Prosperity. A lot of times when I’m in front of the room and I ask the front of the room a question, I’ll start out my presentation with… I’ll just ask you to do this. I know I can’t see you, but I can see you. Just pretend I can see you. I’ll ask people to do something a little cheesy. That is to close their eyes and think of what the word prosperity and freedom means. So get a good idea of that.

I mean freedom in every sense of the word. Freedom like with your finances. Whatever you do with your money, who you give to, I know a lot of people want to give more than they give, how you spend your time, what you do for your hobbies, when you go on vacation, how long do you get to go? All of these things, how do you spend time with family? What do you do with family? What do you do with friends? Do you have any quiet time? Some people want to have more quiet time and they don’t have any at all.

So these are all the things that I think the word freedom encompasses. So I want you to get a visual right now in your head, this is what I have people do with their eyes closed.

Mike: By the way, Shaun’s talking to everybody that’s listening here, not just me. Now, if you’re driving your car listening to this show, do not close your eyes.

Shaun: Or pull over or be a very good eyes closed driver. But close your eyes and think of what does that word freedom mean. And then while you have that in your head, I want you to think of all the people that you know personally and intimately, not some dude you read a book about, hopefully we’ll meet some day but we probably haven’t met yet for most of the people that are listening to this.

So you don’t know what my life really looks like, just like you don’t know what most gurus lives really look like. So think of the people that you know personally and how many of those people can you think of right now, your Facebook friends and all the people on your phone and friends and family and all this stuff, who do you know that’s actually living this life according to your definition of freedom and prosperity.

Now, when I ask this in the front of the room, it’s interesting. Let’s say there are 500 people in a room. I ask people, “Can you think of at least three people that you know that are prosperous and free in every sense of the word that you just came up with? You define it, not me.” And I ask, “Can you think of three people?” And usually in a room with 500, I might get five hands raised of people that can think of at least three others they know that are living this way.

What’s interesting about that is, there’s no shortage of self-help books out there. There’s no shortage of even real estate investing information. We can learn how to flip houses all day long. We can learn how to make money. But one of the things that it is that we’re seeking more than anything are those two words, freedom and prosperity and yet very few people ever get it.

And I’ll tell you this, since there’s no shortage of information out there, most of the gurus that we’re learning from, by the way, I know many of them. They’re good friends of mine. Most of them are some of the busiest people on earth. And so, a lot of them know how to make a lot of good money, but very few of them have a life also.

As a matter of fact, they get so tied up in their businesses and the more money they make the more they want to make or the more their overhead and stuff goes up, which we’ll talk about today, they’re some of the least free people out there. I’m not saying all of them because there are some good ones too. But if we want to have freedom and prosperity, we have to design a life in business with this stuff in mind first, not just how much money we’re going to make. That’s important, but that doesn’t need to come first.

Mike: Yeah. I think a lot of people obviously tend to say, “Well, I’m going to make money and I’ll worry
” You kind of put off the stuff that matters most, right?

Shaun: Yeah.

Mike: And again, with real estate investors, usually you’re the last person to get paid.

Shaun: Yeah.

Mike: People say, “Oh, I made $20,000 on a deal, $30,000 on a deal.” It’s okay. Then I have an office. I have rent. I have to pay taxes. I’ve got employees, all this stuff. You get paid last. I think people pay themselves probably emotionally or with their friendships and family members and stuff like that last. Like, “I have to work today and if I have time for my kids when I get home, then that’s great. If not, we’ll try again tomorrow.” I’m guilty of all those things.

Shaun: So that sounds simple, but how do you get around it?

Mike: I know.

Shaun: That’s what these four stages are. So let’s just go through those if you don’t mind. Are you cool with that?

Mike: Do it.

Shaun: So stage one is the most important and the least sexy stage. It’s called establishing your vision. That sounds corny and everybody says, “Is this a goal seminar?” No, it’s not just goals. Goals and vision are two separate things. I can have a goal to make $1 million this year and I can hit my goal. If I make that my goal and make that my number one priority, it’s possible that I might sacrifice many other things in the process of hitting a goal.

Sometimes, I’ve noticed in my own life I hit a goal, but I gave up everything else that was important to me or at least what I said was important to me to hit that goal. So vision is very different than goal setting. Vision is kind of taking a look at your life. We usually help people in 11 different areas. What are you going to have your life look like? That couple be a couple of examples. If family could look any way you want it to look, how would that look?

So obviously if I want to be a good father to my three kids, does it take money to be a good father? Well, yes. They have to eat, right? I’ve got to give them clothing. Hopefully they can do some fun stuff and I’m going to pay for that. So it costs money, but it also costs time to be a good father too. So part of this whole vision process is figuring out how much does it cost for me to live my vision, both time and money, but more important than that, if I’m going to figure out how much it costs and build a business to serve that vision, I’ve got to know what the vision looks like.

So for me, I love my kids more than anything on earth, but if I’m being honest, if I had to spend 24 hours a day, 7 days a week with my three kids, I think I’d probably blow my brains out at some point, right? I like to do other stuff too, I guess is my point. So if I am going to start living this life, I have to identify what does that look like. My kids don’t just get the last 15 minutes of my day when I’m worn out from everything else because that doesn’t make a good father either, but this is the vision part. This is the most important.

By the way, we start with personal vision before we do anything with business because if we’re going to design a business that serves our life, then we have to decide what do we want life to look like. As corny as it sounds, most people don’t do that. Most people say, “I’m going to design the business.” And then someday when the business makes enough money, then I’ll have all the money to have the life that I want to make.

Unfortunately, that’s how most society is pursuing it today and that’s why most of you can’t even think of a single person that’s living the life of freedom and prosperity that you so desire. It’s because they’re pursuing these other things first. We have to say, “What does life look like?” So these 11 aspects are things like family, friends, my own personal hobbies. These could be things like no regrets. Like if I were to die tomorrow, what would I have wished I tried. Some of this sounds a little corny, but we have to figure this stuff out if we ever want to design a life to serve it.

Mike: Yeah. It’s interesting. There’s different people I’ve had on the show, I meet a lot of people in the process of what I do, just like you. It’s interesting to me when I hear a story. So first off, I should give this caveat. I just turned 41. I may be having a mid-life crisis right now. But you get to a point where you start to think about the types of stuff you’re talking about much more.

And what got me recently, I was talking to somebody, it’s actually somebody you know. I won’t say any names here. There are actually a couple stories I’ve had like this, where people say, you knew they were a high-flier once. They made a ton of money. On the outside, people would say, “Wow, they were just killing it.”

And then the market changed. They got wiped out. Either because they got wiped out or because they were working so hard to build it up, they lost their marriage. All that stuff happens. And then you start to think, “Man, you lost it all anyway. If you had never worked that hard and destroyed your marriage and all those things in the process, you’d be so much better off right now if you never rode that.”

So from my perspective, I try to learn from other people’s mistakes. I try to learn from my own mistakes, but I’d much rather have it be somebody else’s mistake I’m learning from. But I think in every instance, people have regrets that they went about it the wrong way. The important people in their life came last.

Shaun: It’s because they did not start with the vision. They may have started with a business plan because that’s what a lot of people do. As a matter of fact, most people that end up having successful businesses, they have a business plan in place. Very few of them have, as corny as it sounds, a life plan, therefore, their business sort of owns them. Most people are so busy serving their business that their business isn’t designed to serve their life or at least it doesn’t come until most people are in their retirement ages, then it’s like, “Well, now what?”

By the way, I should mention too, a lot of young 20-year olds, 25, 30-year olds, they may hear this message and they go, “Well, that’s never going to happen to me. I don’t have to worry about that. I’m just going to do this for a year or two.” When you’re young, you tend to be more aggressive. And that’s cool. This is not about not being aggressive. I want to be aggressive too. The thing is, I want to be aggressive in a way that honors all of the other aspects of my life as well.

I’ll give you an example. So if I’m a real estate investor, this will make sense to the audience that we have watching this, if I’m a real estate investor, there has never been a part of my vision that says that I am a slave to my phone and I have to answer my phone 24 hours a day. But for me in my business, I felt like I had to answer this thing whenever it went off, otherwise I’m going to lose money. I got money going out the door every month for marketing. For me, I was spending about $6,000 a month in marketing. I had this big beautiful office building. I had 17 people on my staff. We’ve got all this stuff.

So if the phone rings and I don’t answer it or somebody doesn’t answer it, then I’m going to lose money because either the people aren’t going to leave a message or they’re going to leave a message but they’re going to leave five other messages to other investors too and somebody else is going to beat me to it.

So I was a slave to this thing all the time. When this thing would ring, I would answer it. It didn’t matter if I was in the middle of doing something else at work or I was on a date night with my wife, which is not a good thing, ladies listening could agree with that, if I’m date night with my wife and all of a sudden my phone rings, I have two choices. Don’t answer the phone, in which case I’m thinking about what I just missed out on the rest of the night, or be a jerk and answer the phone right in the middle of date night and take the call.

My calls average me about 15 to 18 minutes. So if I’m taking a call now and my wife is sitting there at the dinner table, what is she doing for 15 minutes while I’m taking this call? She never really got mad at me because that’s not her, but did it affect our relationship? You better believe it.

So my vision never said I’m a slave to my phone, but I felt like the only way to tackle that part, nobody is as good on the phone as me, so I have to answer my phone all the time. If I’m building my business based off my vision, I would have had something else planned for the phone time. I would have answered it when I could, but when I can’t, I would have it go somewhere else. But I didn’t build a business with my vision in mind. I built it with money in mind. So I was a slave to my phone.

Granted, I’m doing 60, 70, 80 deals a year and I was that guy like you said, everybody’s looking up to in my area. “How can I be just like him?” And then I go on vacation for a week and I can’t even relax because I’m wondering, “Is everything getting taken care of while I’m gone? Are the phones getting answered?” To give you an idea, I have $34,000 a month in expenses before I’ve got to pay $1 to myself, which to some people, that might not sound like much, to some people that might as well be $1 million.

But when you’re in the real estate business and it’s finicky like you mentioned and it goes up and down, if you go one month without doing a deal, now I’ve got $34,000 to make up next month and I’ve got another $34,000 coming next month. So I’ve got to make $70,000 now next month just to break even if I don’t do a deal this month. These things start to add up. By the way, I was doing everything the way gurus were teaching me how to do. I was spending my money on good things like marketing, staff, like trying to do more deals.

But I created a business that forced me, now I have to do more deals every year. Even if I want to slow down, I can’t slow down because I’ve got this big operation going every single month. So that brings us to stage two. Once you have your vision figured out, stage two is all about getting your needs met. So the higher your needs are in stage two, the more difficult it is to get beyond stage two. When I say needs, I mean financial needs.

So for me, when my needs are $34,000 a month, think about this for a second. Let’s just say for me I want to have a little security and I want to put a year’s worth of expenses aside. $34,000 a month, that’s almost $400,000 I’ve got to come up with and put in a bank account just to buy me a year. Whereas just a few years earlier before I started listening to all the advice of all the other gurus, my expenses were like $5,000 a month. So if I wanted to put a year’s worth of salary aside, I only had to put $60,000 into a kitty.

By the way, I had a pretty decent life. Now, I wasn’t where I wanted to be when my expenses were only $5,000 a month and that’s all I had to make. But it seemed like as my income grew, so did my expenses. Sometimes that can be a good thing. But if you’re not doing it the right way with your vision in mind first, you can wake up one day and say, “I would love nothing more than to not have to do 70 deals this year, but I have to do 70 deals this year to be profitable.

Mike: Right. It’s difficult. Like we talked about, the feast or famine. You assume, “If I spend more money, I’m going to grow. It gets to a point where you can’t get off the treadmill because then everything stops.

Shaun: Yeah.

Mike: So I get it.

Shaun: So the key is until you’re beyond stage two, if you’re taking notes at all, you might want to write this down, in stage two, you are trading time for dollars. So until you’re beyond stage two, you still have to go to work to make money. Now, the idea, to be fully free, obviously you would like to not have to do that. But you can even be more free trading time for dollars if you only have to trade this amount of time for this amount of dollars. What I mean by that is if you keep your expenses low in this stage, it’s a whole lot easier to get beyond stage two.

Sometimes I share a story about there was a day where literally I closed a deal. I made $102,000 on this real estate flip and it was one of the worst days of my life. People are like, “Are you mental? What’s wrong with you?” I got home that day. It was the first realization. It was the biggest deal I had ever closed in my life and I wasn’t happy about it. I realized that day that just bought me three months to live, three. And I’m in a grumpy mood. I shouldn’t be grumpy. I just made $100,000, right? I should be in a great mood.

Mike: Yeah.

Shaun: But I get home and my wife is saying, “Why are you so grumpy?” And I said the whole three months thing. “I just bought three months to live.” That’s it. Three months. $100,000 to me five years earlier would have been $1 million and now it’s only three months. She just looks at me and goes, “Wow.”

What a far cry from when we started our business. We’re both on our knees and we’re praying to God, “God just let us make $5,000 on a deal and we’ll be set.” And here we are, this was only maybe four or five years into my real estate business. I make $100,000 and I’m pissed about it.

Mike: Yeah. I felt that before. There was a time where you make a deal. My wife and I were high-fiving. We’re excited. And then it got to a point to where it’s just something you do in the wheel of everything else and you start thinking more about overhead and expenses. Back to that feast or famine thing, something really good happens and in your mind, not that you say this out loud, but subconsciously you’re like, “That’s not going to happen again tomorrow.”

Shaun: Or, “Oh, what if it doesn’t?”

Mike: Right.

Shaun: So for me, I got to the point where I was like, “Well, if I just had six months’ worth of expenses in my account, then I’d be fine.” So I got $200,000 in my account. I’m like, “Okay, now I’m set.” But then the little part of me is going, “What if six months comes and I don’t do a deal? What if I run out of this?” I thought, “What if I just get a year’s worth?” And then I get a year’s worth in there. That wasn’t enough. I started freaking out even more. By the way, as I was doing more deals, then my expenses were creeping up even more.

Again, it sounds like I’m bashing doing a lot of business and I’m not at all. My problem was is that I did not have stage one figured out. I didn’t do the vision. So for me, I just kept making decisions on what I thought would make me more money. Now, I’m going to fast forward a little bit because today, totally different situation. I can basically run my entire vision, my whole family. I can pay for everything I need to pay for, maybe $5,000 a month. I’ve got a pretty good life if that’s all I make.

Now, that doesn’t mean I get to vacations very month and all this stuff. But I could still. Camping and fishing doesn’t cost that much, believe it or not. It doesn’t mean you have to go to Disneyworld every month. The reason I bring this up is today, fast forward, now I’m to a point where I’ve paid off all my debts, which by the way, any debts that you have increase your potential needs in stage two. Any expenses that you have increase your needs in stage two. So now I don’t have any of that stuff anymore.

By the way, running this by in a real estate business, I don’t spend $6,000 a month in marketing anymore. As a matter of fact, I spend zero dollars in marketing. Now, I run my business largely based off referrals now. So I don’t have to pay for marketing whether I do a deal or not this month. Now I only pay out marketing money when I make money.

So my expenses now, if it only costs me, let’s just say it costs me $5,000 a month to run my business and my household and everything. That’s nothing compared to $34,000 a month. So that doesn’t mean I only make $5,000 a month. It just means now I only have to make $5,000 a month and everything I make on top of it, I get to do whatever I want with. It’s a whole different life than it was. By the way, this is just five years ago. I was at $34,000 a month. So it’s a whole different deal.

So once our stage two needs are met, it’s important to keep them low initially, then we jump up to stage three. In stage three is where we create excess income. So once our needs are met, now if we go out and do some flips on a house or rehabs or whatever it is, now we’re making above and beyond what our needs are in stage three and now is when you can really start to have some fun.

So now if you want to go buy that new car or whatever it is. I just went out and bought a Jeep last year. I remember looking when I’m stroking this check at the dealership, $35,000 for the Jeep. I remember when I was writing this check I was thinking, “This just a few years ago was my expenses for one month.” But now the stage three, since it was excess, I don’t need that extra money.

Now if I want to buy stuff with it, I can. If I want to reinvest with it, I can, which we’ll talk abut here in a second. But now’s when you start to enjoy some of the fruits of your labor, of your fun. You’re still not totally free yet. Remember, you’re still in stage two where you have to trade time for dollars. At least in stage three, now you have some extra money and you can start to do with it whatever you want to do.

Mike: Sure. Just to clarify Shaun, I know some people listening to this and this was some of my concern early on when I started reading Lifeonaire and it kind of became clear, what you’re not saying it just batting down the hatches and get as lean as you can and therefore let the top line suffer. Some of what you do is find ways to be creative. Well, instead of paying a sales guy a salary, let’s just pay him a percentage of a profit on the deals, where your costs are more variable and not fixed, right?

Shaun: That is going to largely be determined by what your vision says. So if my vision says, like for example, there were a lot of things, when I wrote my vision, there was a lot of stuff in there that really didn’t cost that much. I was a guy that thought, “Well, I need to make like $10 million a year to live my vision.” I’ve got some pretty expensive hobbies. I like boats. I like skiing. I’m into music and recording. All this stuff is expensive.

But when I started to really look at my vision, this is something we go through over the course of three days, so forgive me for going fast here. When I really started to look at my vision, what is it that I really want? Well, instead of me having to go out and buy the 38-foot boat that I want right now and spend $500,000 on the boat that I want, is there a way that I can experience the boat right now without having to have $500,000 so I can start living now rather than someday when I have $500,000?

When I started to look at that, I started to go, “Maybe instead of me buying a boat like that, maybe I could go rent a boat like that.” I know that doesn’t make sense to rent sometimes versus buying, but I don’t want to have to wait until someday when I can afford a boat to go experience a boat. What we really want is the experience. Sometimes whether or not we own it isn’t as important as the experience.

Mike: Especially with a boat, by the way.

Shaun: People do this with vacation homes too. They say, “Man, I really should buy an investment vacation home,” and they buy another home. What they don’t realize is that yes, they do own the home now. But now, they don’t ever want to vacation anywhere else because, “Why would I go somewhere else when I have this home I’ve got to pay for?”

Then they get to the home and they use it maybe twice a year. Then the first half a day they’re there they have to clean it. They have to change the light bulbs that are broken since the last time they’re there and they’ve got to fix all the stuff that’s been laying around since the last time they were there. They don’t get to end up enjoying… then when they leave, they’ve got to clean it and they’ve got to redo the sheets and they’ve got to do the blankets and all that stuff.

Mike: It’s become more of a burden. Yeah.

Shaun: When you rent or you go on a vacation to a hotel, you leave that there for them to cleanup. It’s done by the time you get back. Same with the boat. It doesn’t mean I can’t have nice things at all. It just means that I don’t want to wait to experience life until some day. There might be another way I can accomplish the exact same thing and still be able to do it today without all the expenses attached to it too.

Mike: Awesome. Great. So step four.

Shaun: Yeah. So now that we have excess income in stage three, now if we want to go buy a boat, buy a boat, but do it with your stage three excess. Don’t go get a payment for a boat which will increase your stage two needs, right?

Mike: Right.

Shaun: So in stage four, now’s when–

Mike: But Shaun, it was zero percent interest for 12 months.

Shaun: You know what? That’s the biggest lie we jump into. As a matter of fact, some people do this and they’ve heard from a guy named Robert Kiyosaki, right?

Mike: Yeah.

Shaun: Everybody’s read “Rich Dad, Poor Dad.” And they hear there’s a difference between good debt and bad debt, which is true because he says that, “All right, bad debt is debt to go buy a boat.” Even if it’s zero percent interest, it’s not making you money every month, right?

Mike: Right.

Shaun: And he says that good debt is debt used to buy things like rental properties. Rentals are great because the tenant is paying for the mortgage and the tenant is basically paying off the mortgage and a little extra. So that’s great debt because that’s how you acquire assets. There’s only one challenge with that approach. I learned a lot from Kiyosaki too. So I’m not busting it. As a matter of fact, I speak on their stages.

But the challenge that I have there is what if the tenant doesn’t pay this month? If the tenant doesn’t pay, do I still have to pay the bank? Of course I do. If the tenant doesn’t pay this month, I can’t just call the bank and say, “Hey, can you give me a few months to get another tenant in there?” It doesn’t work that way.

So now I have to make the payment while somebody else is living in my house for free. Does that increase my stage two needs this month? You better believe it. Does it happen? Of course it happens all the time. So the whole good debt/bad debt thing, they forgot one part of it. That is good debt is good debt when the asset is performing. When the asset is not performing as it’s supposed to perform, it doesn’t feel so good anymore.

If you don’t believe me, go talk to the hundreds of thousands of investors who have gone out of business in the last five or six years. It wasn’t because they were all debt free. It was because they had what, in many cases, was good expenses and good debt. And then when the market shifted a little bit, they weren’t able to handle that good debt and those good expenses how they once thought and all of a sudden now they’re robbing Peter to pay Paul and crazy things are going on.

Again, I’m not saying debt is like evil. I’m just saying none of us, I’ve done this now with thousands of people all over the country, I have not met one investor that ever said, “Man, I sat down and I wrote out my vision, Shaun, and you know what’s included in there? Lots and lots of debt.” No one ever says this, but we think that’s one vehicle that’s going to give us everything that we want. Sometimes there are vehicles that are going to get us the same thing without actually having to have the negative side effect to go with it. Does that make sense?

Mike: Absolutely.

Shaun: You mentioned stage four before.

Mike: Stage four.

Shaun: Stage four, now that you’ve got excess income in stage three, you can either buy the fun stuff, the boat and all that stuff that you want or what you’d be really smart to do is reinvest that stage three excess into stage four, which is like wealth-producing assets. Stage four is what we call building a pipeline. So now if you want to go buy some rentals, go buy some rentals. But a lot of people try to start with rentals and I think there’s an inherent danger built into that unless you’ve got a huge nest egg set aside.

If something ever goes wrong with the rental, let’s just say for example, let’s say you have ten rentals. Is it possible ever that two of them might go vacant at once?

Mike: Sure.

Shaun: And what happens with most investors is when those two go vacant, they spend all the profits on the other eight to cover the two that are vacant. And that’s just if they’re vacant. Sometimes people on their way out the door, they trash the house a little bit, now you’ve got some extra expenses. This happens all the time.

Mike: Absolutely.

Shaun: I see it where I evaluate a rental portfolio and somebody says, “I’m making $10,000 a month on my portfolio,” and when I look at the net, net, net numbers, they’re making like $1,500, really when they factor in vacancies and fix up and all that stuff.

And again, it sounds like I’m crapping all over rentals. I’m not. Do it in the proper order. Rentals are more of a stage four investment that if you use your stage three excess to pay for those rentals, as crazy as this sounds, if your rentals are free and clear, if it goes vacant one month, it’s costing you an income, but it’s not money going out the door in a payment also. So you can actually afford and wait for the right tenant and put them back in there or rather just put in anybody who has a pulse, which a lot of people do too.

So stage four is about building that pipeline. Now, your investments are actually spinning off money for you so that you’re not having to go to work every day to make money. Now your stage four investments are spitting out the money for you and now your vision is entirely covered by your investments, not by you having to go to work. Does that make sense?

Mike: Absolutely. So how do you advise people, Shaun, to kind of have a tune up? You go through this process and you document all these things. It’s super easy to get off track in everything we do, right?

Shaun: Oh, yeah, even with me, man.

Mike: What should people do every once in a while to check in with their plan, their vision?

Shaun: I think first of all, get yourself in an environment where the vision is the most important thing to you, but to other people too. Your friends and family, they probably haven’t gone through something like this. Most people that come to our Lifeonaire event, I tell them, “You have to get yourself in an environment, even if you have to start your own environment where other people are making this a priority, you’ve got to do it.”

Listen, most people, when you share this four stages with them, they’re going to tell you you’re nuts. They’re going to tell you, “You should go get a job,” which is fine. A lot of people have a job and that fits their stage two needs, but if I ask a room, most of the time when I’m in front of a room and I ask, “How many of you guys have a job that you would stay at if money was no object?” Almost every hand goes down. Most people would not stay there, but they have to because they’ve created what I call the golden handcuffs.

What I mean by that is their stage two needs are right at the same amount they make at their current job, so they can’t leave even if they want to because they’re handcuffed in. They can’t really spend time focusing on starting their new business if they want to because if they spend too much time away and if affects their current job, then they’re going to lose their house and their car and all the other stuff they’ve built up too. I think environment is a big key, big answer with that.

Mike: What do you mean? Getting into a group? I know you have Lifeonaire groups and stuff like that. But you’re saying get yourself surrounded with people that have the same mindset?

Shaun: Yes. If you’re not automatically surrounded by people like that, then you go create the environment yourself. So when I got started, I didn’t have enough money to be a part of this $50,000 mastermind group or something crazy like that. I didn’t even know anything like that anyway. So I went home and I started my own little mastermind group. It was me and five other people. We met once a week and we decided we’re going to go through our visions together, all six people in this group are going to know their visions inside and out and each other’s.

Every time we try to pursue something new that’s outside of that vision, we get a smack on the hand by one of the other people that want to hold us accountable. It’s very powerful. It’s one thing to have a business accountability group. That’s one thing. But when you have people holding you accountable to your own vision, it’s a completely different deal, totally different deal.

What Shaun is talking about here that type of stuff of who you surround yourself with. A lot of people listening to this probably felt it when they told their friends and family that they were going to be a real estate investor, like, “What? This is a terrible time to buy. Why would you do that?”

Shaun: Or, “You don’t have any money. How are you going to flip?”

Mike: You heard all that before, like, “Why would somebody sell you their house at a discount?”

Shaun: Some people would support it, “I’d like to do that with you,” and then they never do anything at all that it takes to even get started.

Mike: Awesome. That’s great stuff. Kind of bring this all together, how do they get started? I’m not intending this to be a plug for your Lifeonaire groups, which are fantastic, but aside from buying the book and just understanding this process, the book is not, I don’t mean this in a negative way, it’s not rocket science. When you read it, you’re like, “Wow.” It’s almost like you just need to hear it again. You know these things already. But you just need somebody to tell you again.

Shaun: It’s kind of like if you’ve ever had experience where you know something but somebody finally said it in a way that makes sense. We get that response a lot. They’re like, “I somehow inherently knew this stuff. But it’s not what everybody is teaching me to do, but it’s not the path I was getting ready to go down or the path I already did.” It’s not rocket science. If I can, can I give you a couple of practical applications maybe that I’ve done in my own life and maybe that will give you some ideas on how you can start to implement some of this stuff?

Mike: Sounds great.

Shaun: Obviously the first step is if you don’t have the book, go get the book. It’s $12 or whatever it is on Amazon. It’s cheap. That will give you the whole thing in a format that I think you’ll really understand it and it’s dumbed down in a way that anybody can read it. Most people sit down with the book and they read it in a day.

Mike: Even a dummy like me.

Shaun: Me too, man. I’m the kind of guy that when I sit down and read, I’ve got about 15 minutes in me to read and then I fall asleep somehow. My mind has absolutely no focus whatsoever. But how do you apply this in real life? Well, let me give you some examples.

So when I started going through this stuff, I had a real estate brokerage that I owned. My wife was the broker. I was the owner. We had 16 different agents that were working out of our office. I started this because I wanted to have a brokerage that was investor-friendly. I wanted to make money with some investors and I really liked brainstorming people’s deals with them and helping them through their deals and everything else.

And I started to create this brokerage with all of that stuff in mind and thought, “This is going to be really profitable,” because investors were doing multiple deals. “If I have investors that are in my brokerage, I don’t have to find somebody to list and sell their house. These investors will list and sell the same ones over and over again. That will be a great moneymaker.”

That isn’t how it worked out, exactly. What I found was investors are pretty smart, for the most part. And they’ll figure out any way that they can figure out to not have one of their deals go through the brokerage where the brokerage gets a dime. So a lot of these guys were flipping houses but they weren’t putting them through the brokerage, so I was getting paid nothing.

But what I was doing was I was offering these mini, they’re really coaching sessions. They were just meetings back then. I did these two meeting a month. It was like the first and third Wednesday of every month where I had all the agents come into the office and they would share their deals. Remember, these are all investors. They would share their deals, share what went well and what didn’t work.

I would help coach them through how to close them and make more money on them and so on. It was my favorite thing on earth to do because it was like every deal was different. I was helping these guys make a ton of money and I got this huge sense of self-worth out of it. I felt great about it. They loved it. No one missed my meeting ever. Unless their grandmother died, they’re there.

What I found is and when I started going through my vision, I was like, “Wait a second, does the brokerage fit my vision?” This was where I had to have somebody help me. My business partner now, Steve Cook, was not my partner at the time. He was a friend of mine. I sat with him and I said, “Steve, the brokerage is not really fitting my vision, but I don’t want to give it up now.” He says, “Why don’t you want to give it up?” I say, “Well, because it’s making money.”

So I’m trying to reduce my expenses and I’m trying to make more money. I don’t want to give up any of the money making stuff because I’m afraid if I give that up, then I’m going to find another way to make that money. He said, “How much is it making?” I said, “Well, each agent pays me $75 a month to be in my office.” So let’s just do the numbers real quick. That is 16 agents times $75 a month. That’s $1,200 I’ve got coming in. That’s just for doing nothing but doing those two meeting, which I would do for free I love them so much.

He goes, “Well, are you really doing nothing?” I said, “Well, kind of.” He goes, “Who’s responsible for all the paperwork on their deals?” And I go, “As the broker, really I’m responsible.” Even if they go do a deal that’s not included in the brokerage, if they break the law, they’re agents in my brokerage and I still have some legal responsibility.

He says, “How much do you enjoy paperwork and structure?” And I was like, “I think I just puked in my mouth a little bit just hearing you say that.” So he’s like, “You don’t like paperwork. You don’t like responsibility. But you like being with them and helping them through their deals.” I said, “That’s fair.” And then we looked at some other expenses like my office and so on.

He’s like, “Why do you have your office?” I was spending about $5,000 a month on my office by the time you pay the triple net lease and all the expenses and internet and all this stuff. He said, “Why do you have an office?” And I said, “Well, I need the office for the brokerage.” He goes, “Okay, so let me get this straight. How many deals are you closing through the brokerage?” I said, “Getting commissions and stuff? Not many. Every once in a while one will come through and I’ll make $1,000 or something.”

He said, “Okay, let’s put pen to paper for a minute. You’re spending $5,000 a month to have an office, which you have to have to have the brokerage and the brokerage is really bringing you in $1,200 a month. So it really costs you $3,800 a month to have the brokerage. Am I hearing that right?” I was like, “No, no, no, that office is for my other employees too.” I’m trying to fight him, you know.

Mike: You don’t want to admit.

Shaun: “I like working there.” He goes, “Okay, would you have it if you didn’t have the brokerage?” I said, “Well, I certainly wouldn’t have an office that big.” He goes, “Okay, could you find an office that meets all your needs for $500 or $1,000 and then you’re saving instead of spending $3,800 a month. Now you’re saving $2,800 a month by not having the brokerage?” I said, “You don’t understand. I’ve worked hard to build this brokerage. I’m not going to give it up.”

I didn’t want to give it up because I’d spent two years building it. I had agents in there. I had built a name for ourselves. We were a decently known brokerage here and it was starting to grow. The fact of the matter is it didn’t fit my vision. The only aspect of the brokerage, the entire brokerage that fit my vision were those two meetings a month.

So Steve looks at me as a guy who understands Lifeonaire and has some accountability. He says, “Why don’t you turn those students into coaching students? Instead of having to have an office and being responsible for all their deals, just have them pay you and maybe you can do deals together or not. Have them pay you just to be a coaching student.” I said, “Steve, that will never work.”

He said, “Why not?” I said, “I would have to charge them too much. They’re only paying $75 a month right now. If I’m going to spend time with them, I would need to charge them a lot more.” He said, “Go charge them $400 a month.” I said, “For what?” And he goes, “For two meetings a month.” And I said, “Steve, they’re never going to pay that because they’re getting it right now for so much cheaper. It’s the same thing.”

So Steve says, “Well, you’re going to find out how much value you provide. They either absolutely love those meetings, you tell me they get a lot of value out of it, that they’re making a ton of money off of your knowledge. You’re going to find out really quick how much they really value it. If they’re not willing to pay for it then they don’t value it so much, then do a meeting for free. But you don’t need to have an office to do a meeting. That meeting is costing you $3,800 a month.”

Mike: Yeah.

Shaun: So I changed it around. I went into the next meeting and I said, “Guys, we’re going to change the brokerage.” I said, “I’m shutting the brokerage down in a month. You need to find somewhere else to hang your license. If you would like to stay on board and still do these two coaching meetings a month,” I went way out there. I did something I never thought would work, but I said it because I thought they were all leaving anyway, I might as well say this.

I said, “From now on, it’s $400 a month to be a part of that program and we’re going to split the profits on your next three deals.” And it was like I thought everybody was going to leave and be angry. I said, “If you don’t want to do it, I totally understand. But this brokerage doesn’t fit my vision anymore, doing deals with you does.”

I couldn’t believe it, 13 out of the 16 agents stayed with me and my revenue changed overnight. I now had, what is that? Thirteen times $400 is $5,200 a month I now have coming in instead of $1,200. I also got rid of my office I didn’t need and I got a much smaller office, which was next to nothing. My office right now, I have a beautiful office here. I have two office spaces, I spend $300 a month. It’s not $5,000 a month anymore.

Mike: Wow. That’s incredible.

Shaun: Now, I have this income coming in. By the way, the very first deal that I ever split with a student, we closed, we made $86,000 on that one deal. I got half of it. I never would have seen $1 of that through the brokerage and I got half at that time. I even went back and I asked my student. His name was Kevin. I said, “Kevin, you had to split half of $86,000 with me. I might have had two hours maybe wrapped up in this deal at the most. Do you feel like you get ripped off?”

And I learned something big. Kevin said no. He said, “Shaun, based on what you knew is the only reason I got that deal closed.” He said “I might have gotten it closed on my own, but I might have made $20,000, maybe, if I was lucky if I closed it on my own. Because of you, we went back and renegotiated and got $86,000. So I got $43,000, half of that because of you, Shaun.” He said, “I might have made $20,000 before, but I wouldn’t have made $43,000.” So half of $86,000 is better than all of $20,000. Does this make sense?

Mike: Yeah. Absolutely.

Shaun: This came as a result of establishing the vision. Before, when I was only focused on the money, I was focused on building the brokerage. The brokerage did not fit my vision not one iota. That’s why the vision is the least sexy part of this. Most people want to say, “Just jump right to the money making part,” but the vision, even though it’s the least sexy, is the most important because when you honor your vision, the money will come, as corny as that sounds. But the vision is the most important step. Otherwise, I still would have that brokerage today.

Mike: That’s a great story. That’s a great lesson. I think a lot of people tend to sell themselves short on what they’re capable of in your example there, what somebody would pay for something or what they’re worth, for sure. It’s pretty common.

Shaun: And of course, that’s my story. Your vision is going to look somewhat different than mine. Maybe you don’t start a coaching program. I don’t know what you do or don’t do. All of it starts with that vision. Since everybody’s vision is different and then the vehicles of how we get there, some of you might say, “I don’t want to do coaching. I really do want to have a rental business.”

But the vehicle for you to get there doesn’t necessarily have to include debt if you don’t want it to. You can take on a joint venture partner and have the joint venture partner put up the money. You guys could split rents. And then when the property goes vacant, there’s no payment to make. You guys just both don’t make money that month. There are all kinds of different vehicles which are ways to get to your vision, but you want to get to your vision in ways that honor all aspects of your vision, not just the business aspect.

Mike: Right. Awesome. Well, guys, we’ll add a link to how to get to Lifeonaire down below here and how to pick up the book if you want it. I’d recommend it. It’s a great book. It kind of opens your eyes as to why you work so hard and how you can do things differently. Shaun, I definitely appreciate you spending time with us today.

Shaun: You’re welcome, man. Thanks for having me on.

Mike: Good to see you, my friend.

Shaun: I appreciate it, brother.

Mike: We’ll see you at the REI Power Summit.

Shaun: Oh yeah, I’ll be there.

Mike: Awesome. Take care. Have a good day.

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