BiggerPockets Podcast 151 with Clayton Morris Transcript

Link to show: BP Podcast 151: Finding Your “Freedom Number” with Clayton Morris

Josh: This is the BiggerPockets Podcast Show 151.

Clayton: Help them understand the power of real estate and building legacy wealth for your family -- that would mean the world to me.

You’re listening to BiggerPockets Radio -- simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place.

Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com -- your home for real estate investing online.

Brandon: Hey, BP nation. It is your favorite co-host, Brandon. I'm hijacking the first 30 seconds of the show without Josh's knowledge of course because I wanted to take a second and let everyone know that we are super, super pumped because this coming Monday the book on rental property investing as well as the book on managing rental properties will officially be launched on BP.

We've been talking about it forever but it's coming. Keep your eyes peeled and your ears open because this thing is going to be epic but more on that next week. Right now, let's get to one of my favorite interviews we've ever done plus you get to learn a cool secret that's happening in my life. Enjoy!

Josh: What's going on, everybody? This is Josh Dorkin, host of the BiggerPockets Podcast here with my co-host, Mr. Brandon Turner. What is going on, man?

Brandon: Not much. Let me tell you something. First of all, how are you doing?

Josh: Wow! That's a great way to start the show. I'm doing really good. We've had kind of a crazy week with a lot of chaos around BiggerPockets -- rebrand, re-launch, a new look and feel. Man, I'm doing good. I'm doing really good. How about you?

Brandon: Good. I'm doing good. I discovered something amazing that everybody else on planet Earth already knew about and I didn't.

Josh: That your wife is pregnant?

Brandon: No! That is an official announcement. I think if we didn't talk about it last week, I'm not sure what order this podcast comes up but Heather is pregnant but that's not the amazing thing I'm...

Josh: Yay! Mazel tov!

Brandon: My first baby I'm having.

Josh: You can send congratulations to Brandon by going to his house at...

Brandon: You can. No. Don't go to my house. Please. I have a pregnant wife who will get angry.

Josh: Shoot you.

Brandon: Yes. She has a gun. The thing I discovered was peanut butter and jelly sandwiches. I think I had one as a kid.

Josh: What are you? Are you four years old?

Brandon: I don't eat peanut butter and jelly sandwiches. Like I said, I think maybe one when I was a kid. The other day I made one and I've not wanted to eat anything else since but peanut butter and jelly sandwiches. That's all I want to eat.

Josh: People try to get away from that.

Brandon: I don't know. They're just so darned good! I don't know. Anyway, that's what the new thing in my life is now.

Josh: Wow! Is that what you're excited about?

Brandon: That and having a baby.

Josh: Yes! Congratulations, man. We are really excited to have baby Josh coming to the family.

Brandon: What if it's a girl?

Josh: Joshina is quite the cutie.

Brandon: Is that a Jewish name? Because Josh is Jewish in case people are wondering.

Josh: Yes. You're a funny guy. Hey, man. Listen. We've got a fantastic show today. Really, really great. Just had a wonderful time doing this interview and we're going to get there in a second. This is a show for everybody. It is uplifting. It's motivating. There's so much to it. Before we go there, why don't we talk about today's Quick Tip. I got today's Quick Tip.

Brandon: I got today's Quick Tip.

Josh: I'm going to do mine. My Quick Tip is we just launched last week the updated BiggerPockets iOS app. We also have an updated BiggerPockets Android app. Yes, we are finally on both Android and iOS. Both of the apps are mostly bug-free and we're really excited about this launch. It's been a while. It's been a long time coming getting these things up and running and working to our satisfaction.

Check them out. Go to the Google Play Store. It's on the bottom of every page on BiggerPockets. There's a link to both apps. Go. Check it out. Get the apps and get going. What's your Quick Tip?

Brandon: My Quick Tip is that we now offer a free video course for beginners on BiggerPockets, an actual video course. I probably maybe mentioned it casually in one of the previous podcasts but officially it is launched and it is out there.

You can get to it by going to BiggerPockets.com/courses or just go to the navigation bar on the top. I think it's under Education. Go down to Free Course and you'll be able to take The Ultimate Beginner's Guide to Real Estate Investing course.

Josh: There you go.

Brandon: Yes, pretty cool. There are a lot of videos. If you're into video kind of stuff, you'll find some good stuff there. That's all I got.

Josh: All right. Cool. Today's sponsor?

Brandon: Let's do today's sponsor.

Josh: Yes!

Brandon: Today's podcast is sponsored by PATLive, the leading provider of call center services for real estate investors. With over 15 years of experience, PATLive's professional agents have helped thousands of people just like you spend less time on the phone and more time making money.

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Josh: All right. Big thanks to our sponsor. We do appreciate it.

All right, guys. Today's guest is Clayton Morris. Clayton is a real estate investor and host of the "Fox and Friends" show on Saturday mornings. No, half of you guys do not disappear.

Brandon: Fox News? I'm out of here.

Josh: Unbelievable!

Brandon: Yes. Unbelievable.

Josh: Yes. He's fantastic, really, really great guy. The show is fantastic. Stay tuned and listen up. There are a few things you'll probably want to bust out your notebook for. Let's bring him in. Clayton, welcome to the show, man. It's good to have you here.

Clayton: Hey, it's great to finally be here. I've been so excited. We’ve been going back and forth over a ton of e-mails for a while.

Josh: Twitter.

Clayton: It's a thrill. Twitter, yes. Some social network. Thank you guys for having me.

Brandon: Yes, yes. This should be fun. First of all, I do want to comment that I think you have probably the best microphone of any guest we've ever had. What is that thing?

Clayton: This is a Rode Podcaster microphone.

Brandon: That's fancy.

Clayton: For years I was using the Yeti Blue microphone, which sat on a desk. I do a podcast. I've been doing it for seven years but I got one of these shock mount things. You guys got shock mount. I can just swing it out of the way ceremoniously when I'm done. I can just swing it off my desk. You got to step it up. I’m wearing a tie today for you guys.

Josh: Yes. Look at this.

Brandon: I'm wearing a hoodie today. That's the most dressed down I've ever been.

Clayton: You got to bring your A game.

Josh: Way to raise the bar for our top guests, Brandon. Really.

Clayton: Yes. Way to shave today.

Brandon: It's been a while for that. All right. Maybe we can start at the beginning. Who are you? What do you do? How did you get in to this game of real estate?

Clayton: I'm a Fox news anchor, number one. That's my main job.

Josh: I'm just getting ahead. Half the audience is probably doing that. We got to get them back.

Clayton: Hey, the thing is with me...on my show, I co-host the morning show. I get to call BS from Democrats, Republicans. I don't really care who you are. That's the way I treat every show. We got a senator saying something crazy, I'm going to challenge him on that. If you have somebody else saying something crazy, I'm going to challenge him on that.

I like to have fun. I'm not a super political guy in any capacity. I just try to be a fun morning show host.

Josh: It is a fun show, by the way. I have been watching the show for a number of years. I never tell them. You guys are definitely entertaining. I think SNL skewers you a little bit too hard.

Clayton: They do the weekday crew on Saturday Night Live. I have the benefit. I get to anchor the weekend version of the show and I've been doing it for almost eight years now on the network. I've lived all over the country as a political reporter up in Montana, as an NBC anchor in West Virginia. I've lived all over the country.

I sort of got in to the real estate game when I lived in Florida right before the bust, right before disaster happened. I bought my first one-bedroom condo in Orlando when the show I that I was working on at the time moved to Florida.

I rehabbed it myself. It was like a 1970's looking condo on the golf course. That's what really got the first sort of bug of real estate and realized I could maybe do something with this. I didn't quite understand it until a few years later.

That's sort of the long and short of it that I've lived all over the country in the news business and wanted to sort of carve out something, take the risks that I don't think my maybe a lot of members of my family didn't take over the years and just sort of break the mold and break the nest, so to speak and try to go out and see part of the country and do those things. That's a little bit of the history.

Josh: Nice. I've got two questions. First is how did that deal go because that was right before the bust? I'm assuming there's a little story to go along with that. Then, you had talked about trying to change the way things were I guess in the family, the history of how you think about things. I'd love to hear a little bit more about that.

Clayton: Sure. That first deal, like I said was a one-bedroom condo. First of all, I bought it with 100% financing. I didn't have any savings at all really. In fact, I think even the 100% financing, it was like 103% financing because even closing costs were rolled into that deal. I bought it for $74,000, something like that and lived in it.

I think I sold it right on the two-year mark. For capital gains that was killer; instead of ending up having to pay the huge capital gains that you pay by holding it longer or shorter amount of time.

I worked on it while I lived there, painted the cabinets and ripped out an old light box in the ceiling and took out some 1970's weird old wood that was in the bathroom. It looked like driftwood. Who thought that looked good? Redid it myself.

Then, the woman next door to me had passed away. She lived there for 30 years and she smoked profusely. This was my first sort of indoctrination into realizing the power of off-market real estate, not using the Multiple Listing Service to find deals.

I heard through the condo complex that the family inherited this property and wanted to sell it. My neighbor thought he was going to buy this two-bedroom condo and he didn't. He thought that I did because I actually thought I was going to move in to it.

This is how it ran then it all came together. I talked to the family and I ended up buying it at a pretty deep discount because she had smoked and all the cabinets even have like a lining of tobacco on the cabinets.

Josh: Could you link them and get a little buzz?

Clayton: Yes. I used to scrape it off and rolled-up cigarettes like American Spirit cigarettes. Hey thanks, lady. You save me from buying all these extra packs. I even had to do a clean out of the furnace. It was just nasty. I bought it at a deep discount.

I was over there. I was doing a morning show so I was up at 2:00 in the morning. I would get home at noon. Then, from noon up to 10:00 pm I was over there working on cabinets. I had to paint them 20 times and ripping up carpet and painting 30 times because of all the smoke.

I literally sold both of them about five or six days before the market crashed and collapsed. I don't know how I managed to pull that off. So much so that the guy that bought my one-bedroom condo from me went back to the realtor and said, "Will Clayton take the condo back?" I said, "Sorry. No, I will not take it back."

Then, it was a few years before I really got heavy in to real estate but that was my first understanding that if you could buy something off-market then there's power there. You could really do something if you know where to look and understand your local market and understand how to know the value of something.

Brandon: Yes. Let me ask you this. You had a job already, a pretty successful job of some kind doing news, a morning show there. Was that the Fox then or was it a different one?

Clayton: No. It was a morning show, maybe people would remember; it was on in 140 cities across the country. It was a morning show called "The Daily Buzz," which was sort of like a younger, hipper version of "The Today Show." It was based in Lake Mary, Florida so I lived down in Orlando.

Yes. I had that morning job while I was...it's not like it paid very much. It's not like I was standing there with a silver spoon saying, "What properties will I buy with all of this money?" It was like a nine-to-five job. It really did not pay that well.

Josh: Is that a perception? I think...let's just kind of go there. That's a perception I think that we all have is you guys are on TV whether it's the news anchor on the local news or whatever it is that you're paid, so to speak. I know the big guys are really, really paid but the average new anchor is probably making a similar salary to any other white-collar worker in the market, yes?

Clayton: Yes. It really depends on the market of course if you're in local news. I'm fortunate that I'm at the network so I'm taken cared of. I love my job and I love my bosses and they take very good care of me.

Oh my God! I was living off of...when I was in Montana as a political reporter, I was covering the governor's office. I lived in Helena, Montana, the capital. I was living in an old Victorian house renting it for $525 a month. I think I made $500 a month.

I'm not kidding you. I was literally going to debt every month that I lived there on my credit cards. I grew up with this, and Josh, you and I were talking briefly beforehand, this fear of money. I grew up with this sort of negative association with money, this idea that we're not the Rockefellers. Money doesn't grow on trees. We can't afford that.

I always grew up with this negative self-talk, this sort of self-loathing as it came to money, not feeling that I was quite capable of that. I grew up with all of these limiting beliefs about money. It really has taken me, it's still a work in progress but it's taken me many, many years of hard mental work to sort of break that, that narrative that I've been taught as a child.

I think that's why it's so important the way we talk to our kids about money because it could have lasting effects so much so that they might never think or want to take the risk associated with breaking that mold, getting in to real estate, taking giant leaps of faith, so to speak. They're just fearful and so you stick to that nine-to-five paycheck job.

You never think you can break that mold or even leverage that nine-to-five paycheck job and start really being smart with borrowing from your 401K to maybe buy your first investment property. You can do all sorts of really creative things. People like, "No, no, no. We can't do that. We come from a place of lack so I can't touch that. I can't do that."

Josh: Yes. We'll talk about the limiting beliefs because I think you're right. One of my big pet peeves is we go through schooling and we get zero financial education. I really do believe that we do an absolutely terrible job on financial education.

Frankly, I think that the media, no offense. I’m not here to bash the media. I'm not running for president. I really do believe that the media helps with that in a lot of ways. For example, we try to get our content out on lots of the major publications. We're told, "People don't care about real estate investing."

They like it from a higher level but they don't want to dig in. They don't want to know the nitty-gritty. That kills me. I'm like, "You're limiting what our society is allowed to know. You’re limiting what's out there," which is why platforms like ours I think are so important. I think these limiting beliefs are inherent in our education, in our society. How do we break that? How do we collectively get out of that?

Clayton: It's such a big topic. First of all, I want to thank you guys for doing the podcast that you do because there are a lot of real estate podcasts out there that are very niched. I love many of them but they're very specific on how to do this type of direct mail or how to do this leveraging this.

What I love about your podcast is that you dive into specific and deep topics but the funnel is wide for you guys. You're accessible for people. That's really been my goal is that I know a lot of things about wholesaling or rental real estate and all of that stuff.

I've done a lot of deals and we have a nice portfolio and my focus is to build that. I know that if I can communicate using what I have as a skill in the world of broadcasting, that's maybe my gift. People like, "I'm great at Math." I can talk for a living. That's my only skill I think. If I can help people...it infuriates me. It actually really makes me upset. I've really been thinking about sort of my mission in life over the past number of months.

I've been really zeroing on this idea of helping people break that limiting belief, break that cycle, help them get this education that we've never had before whether it's inner city schools or not inner city schools that suffer from a lack of education or funding or whatever. We were never taught this stuff. I think it's so important.

One of the things that I want to do with my website and even just coming on here today is just reach out to me. I'm happy to try to help. I will go to YMCAs and talk locally and try to help people.

Even if there were two people in that room out of 100 who don't have the resources or the wherewithal, if I can connect with two of those people and just help them understand the power of real estate and building legacy wealth for your family, that would mean the world to me.

We were so ingrained in this society...we even talked about it from a news anchor thing when we think there's all this money. Look. You play sports. You're an NBA star, an NFL star. You probably are set for life making millions of dollars. Or an actor. That's really it.

Josh: Or, only the 1% of the 1% of the actors. Most actors are broke before.

Clayton: Right. Right. Quite honestly, the smartest of those of have played in the NFL who are linemen that played for a few years...I was talking with a couple of NFL guys we've had recently on the show. One guy started a mortgage company. In fact, he'd be a great guest on BiggerPockets, by the way.

His goal, he wanted to really try to help people gain access to mortgages where it's been so difficult for people to get mortgages. He left the NFL and that's what he's been doing. We were talking off camera about it. I said, "It's amazing to me how many people go in the NFL or they go in these big sports and they blow all of their money." There are a few smart ones that buy apartment complexes.

If their short-lived career of three or four years with this big paycheck, remember at the end of the day it's still just a paycheck. They're not setting up and building legacy wealth for their family. Some of them though will be smart and buy apartment complexes and actually then build legacy wealth for their family. They're getting passive income and they're setting their family up for financial success for the rest of their lives.

I'm really passionate about this because I think we need to do more to try to empower kids and frankly 30- and 40-year olds who are still sitting there with these limiting beliefs.

Josh: Let's get more in to this in a bit. Let's jump back really quick to you. You start with these two condos. How did that kind of roll down the hill? How did this career as a real estate investor start to grow? What happened next?

Clayton: All that money that I made off of those deals I ended up pissing it all away because while the crash happened I didn't understand the crash because I wasn't as constant like I am now to see signs. I just didn't know.

Then, I bought some speculative land deals with a partner of mine. We were going to build houses on these lands. Then, the development went up in flames basically and the contractors backed out. The whole development went down. I went through foreclosure. It was just horrible.

I went through that down period. It wasn't until just a few years ago when I really decided now that I had enough money saved that I was going to figure this thing out. A couple of things transpired for me. One of which was you have this perception of real estate. Call a realtor. You buy a house. That's just the top of it. There's so much more to it.

I was on a flight to New Zealand of all places to take photos. I was going there to shoot photography for a week with a buddy of mine who lives there. It's like a 20...I don't know. It's like a 45-hour flight. I was sleeping next to this older couple. When I say older, they're like maybe late 50's.

After, we were all groggy and all, kind of woke up and then they serve you some random meal. You don't even know what time zone you're in. You don't know if you should be eating dinner. Or, is this kind of a glass of wine with this breakfast?

We got to talking with this guy next to me, nice guy. He said, "How long are you going?" I said, "I'm only going for a few days. I have to come back. How long are you guys going to be in New Zealand?" He said, "Oh, we're going to be there for about two months."

I said, "Two months? What do you guys do that you can be there in New Zealand for two months?" They didn't look old enough to be retired. He said, "Oh. I'm a real estate investor." I said, "Ah. Really?"

For the next two hours I just picked his brain about real estate investing. He wasn't buying properties off the MLS. He and his partner would fly...they would analyze markets, spend a lot of time in markets, dive into it. He told me that the latest market where they were buying single-family residences was in Dearborn, Michigan and Redford, Michigan. I said, "Really?"

After learning all this, about a week after I got from New Zealand, I booked a flight to that area, flew in. At the time I didn't know better but I met with a distressed property realtor and looked at 26 properties. I bought two of them and they need a lot of work.

I sort of built like a great team there with a property management team and all of that in the days that I spent there. Those properties are still doing great for me. Those were my first rental purchases that I rehabbed and kept. They still do fantastic for me today.

Josh: Those are in Michigan, my favorite place of course. Have you continued to buy in that market or was it just these first few deals?

Clayton: Those were the first two. I haven't bought anything yet. I'm considering going back in to that area again. I was just recently looking at it again because it's been so great. Considering it but most of the properties that I ended up now buying are in Indianapolis.

Once I bought those two properties, I took some time back because I kind of used my savings. I just saw the rent checks start to come in. I did some things wrong in the beginning. I sort of maybe didn't anticipate the amount of repairs properly with my contractor.

He's a great guy and family friend, which was also helpful. He was meticulous. In fact, he went to Home Depot to buy certain supplies or whatever and he bought a soda. He even itemized it and had it written out. He's like, "Please do not pay me for the soda."

Josh: Wow. How nice.

Clayton: I'm like, "We're buying you soda." When I look at my spreadsheet now of properties, those certainly were the ones I spent the most on, most in repairs, not understanding my numbers properly. I've learned quite a bit since then. Now I have my strict guidelines and I sort of call it my "freedom number," figuring out my ROI plus how many houses I want in the long run to give my financial freedom. That's my overall goal financially.

Then, I started learning about wholesale investing and how to find properties and do it on my own. Then, that whole thing started snowballing. Once you dive in, it's just a tailspin and you just start learning everything from sandwich lease options to everything. It can become overwhelming and then I think you start going off the deep end a little bit, too which is a huge problem.

Josh: Sure. Right on.

Brandon: How many deals have you done total now approximately?

Clayton: Approximately 50.

Brandon: Those are all rentals, wholesale? You said you did some...

Clayton: What I do in New Jersey is I wholesale in New Jersey. I don't buy anything and keep it here in New Jersey because it's just prohibitively expensive from a rental return unless you're buying multifamilies and if you're in certain areas. Look. That's not to say you can't find deals. Of course you can. If the right deal presents itself, I would definitely keep it but heretofore I haven't.

I used that money from wholesaling to buy my rental properties out of state. Yes. In Indianapolis is where the bulk of my portfolio. I wholesale a lot of deals here and then I buy a lot deals out of state. Then also what I do is I found that a lot of people were coming to me, just friends, family, co-workers who have a lot of money. They didn't know what to do with it. I started building a turnkey business.

I have my wholesale business here and I started building a turnkey business for real estate out of state. From top to bottom, find the properties, rehab the properties, put tenants in place, the property management that's handled not by me but by a third party. They're fantastic.

I've got doctors, lawyer friends and who knows what else and we just sold three this week. They're not going to go in and spend time analyzing repairs and have to build their own team and they're going to get 12%, 13%, 14% ROI. It's a no-brainer. That's been a nice little sort of ancillary business that I've built up over the past two years as well.

Brandon: Yes.

Josh: That's awesome. I love how it all kind of comes together. You don't have to stick to just one niche. As you get better at the business, you can learn different ways and methodologies and use one to build the other which is what it sounds like you're doing.

I want to circle back to you had mentioned your guidelines and your "freedom number." Do you mind telling us, I don't need the exact number but what does it mean and how did you come about it?

Clayton: Yes, a couple of different ways. The properties that I buy I want to make sure I'm getting at least a 12% return of my investment for rent. That's my goal.

Brandon: Is that cash on cash or is that your spread out your internal rate of return or whatever you call it, your overall return?

Clayton: It's cash on cash. If I'm doing a turnkey property for somebody, I want 12% for them. That's my goal. Many of them are much higher than that, one in Pennsylvania that was 28%. It depends on where you find that and what kind of deal you get. That being the baseline that I want as my ROI, just my personal...I know some people are 8%, 10%.

Brandon: Is that leveraged or without a loan?

Clayton: Without a loan.

Brandon: Okay.

Clayton: All the properties I own right now I own free and clear. This is all new to me. I'm still learning the private money piece. I'm talking to a number of different private money folks in different markets and I want to start to be able to do that so not just using my own money to do it but to be able to provide and 8% return for someone for a year or six months or whatever it is to pick up those properties and then to refinance out of them.

That's the next step for me in this grand scheme is to really understand more deeply the private money side of things which I haven't yet. I've just been using my own money. At some that well's run dry.

Josh: As Brandon holds up the book on "Low (and No)," I don't really know the title.

Brandon: “The Book on Investing in Real Estate with No (and Low) Money Down." Sheesh! Sheesh!

Josh: Whatever. You had to make it really easy to say.

Clayton: That piece of it can be intimidating especially coming, like I talked about the fear of money thing. It's like to ask for money, I've never been comfortable with it. I don't like talking about money. Overcoming that fear of it is something I've been having to face head on. It's been a good learning thing for me to know that I have to face that.

Brandon: You know for me, and I'm sure you've figured this out but I'll say it for the benefit of the listeners. The thing that works for me most in changing how I thought about that because I have a definite limiting belief about that as well. I came from a family that you didn't talk about money. Money was not discussed at the table. Of course, I'm not going to tell my uncle that I needed money for a deal because that goes against everything I was raised.

What helped for me a lot was that transition, my mindset shift from I need money to I have an opportunity. When all of a sudden I realized that...I remember that day...I remember thinking that it clicked in my head. I have the opportunity. They want to invest with me. If they want in, I'm happy to let them in on it.

It was just a different way of thinking about it. All of a sudden I wasn't afraid anymore to have those conversations because I had something that they wanted not the other way around.

Clayton: Yes. When you have the deal and then you're not really selling it, you're not pitching someone on something. That's why with my turnkey deals I don't have to send e-mails to anyone. I just have people ask me, "Hey, I want another house." I don't have to go out with a sandwich board.

When you got a deal and you talk to people about money I think you're so right about that is to say, "How would you like to earn 8% return or 7% return on your money for about six months? How does that sound to you?" "Oh great because I'm only making 1% right now or maybe 3% if I'm lucky in the stocks or 4%. Yes. 8%? Sure for six months of doing nothing. It's just sitting there in a Roth IRA doing nothing for me right now. Absolutely."

To circle back to answer your question, I'm sorry I went off on a tangent, which my wife teases me about. The "freedom number." I have a little free cheat sheet I put together because I had a lot of people asking for it like friends and family. It's not really publicly on my website.

My website, claytonmorris.com/freedom. It shows a PDF you can download and do it yourself. It walks people through exactly how I do it. This is not to say it's right but I'll give you kind of the generics so you don't have to write it down if you're driving right now and listening to this. It's there. You guys can download it for free. You don't have to make notes. It's all right there.

Basically, what I tell people to do is take the average of six months of the money you spend, your household expenses. Take six months that aren't around the holidays. Don't include one of those good months in the holidays because it's always going to be odd with the holiday months. Just take six months of your expenses.

I'm talking the electric bill, your cable bill, groceries, gas, car, Netflix. Don't leave anything out. Mortgage, rent, a few dinners out, movie, whatever it is, don't leave anything out. Don't even cut corners on it. Like I said, skip the holidays because it's going to throw everything out of whack.

You want to take those six months worth of expenses and you want to find the average of those months. Let's say for the sake of argument that your number is $4,500 a month. Great. You want to pad it a little. I always add about 10% in just to give you a little extra freedom. You're not just covering your expenses but 10%...with this example 10% of $4,500 is $450. You just round it up. Now we have an even $5,000 for the sake of this podcast.

$5,000 is your "freedom number" for this example. If you had an additional $5,000 coming in your house then that means you would have everything covered. That means that you would have achieved financial freedom.

When I started thinking about it, you could really straw out these terms. "I want to be a millionaire." Really? Why? You have to ask yourself why do you want to be a millionaire. What about being a millionaire? Wouldn't it be nice if you everything that your family needs and wants during the month of your life? Kids' schooling, diapers, whatever it is, is all taken care of. That's freedom.

That's freedom where you don't have to worry about the paycheck or the boss saying, "You know what? We're going to have to lay you off because things are tight right now." Now what? It's knowing that you've got that freedom.

What I do is the "freedom number" for me is I usually take a house, $600 to $900 a month. When I look at my houses that I have in Michigan or Pennsylvania, I own some rentals in Indiana, anywhere from $600 to $900 a month in rent, I want to figure out what number of houses I need and that's my "freedom number," to reach that.

Josh: Got it.

Clayton: This is my favorite part of it. I call it the fun part because this where I figure out how many rental properties it would take to cover that $5,000 a month. Most of the properties that I fix and sell to investor friends or myself are three-bedroom, one-bath houses or one and a half-baths in states like Indiana, Mississippi, Pennsylvania, et cetera.

Most of them rent between $600 and $900 a month. Each of these houses cost approximately $29,000 to $40,000 after they've been rehabbed. For now we're only concerned with the rent. For the sake of this example, let's use an easy, average rent of $700 a month. That's a good cross between all the houses.

Take 700 and I want to account 40% for vacancy and repairs. 700 times .6 is $420. In a worst-case scenario, I'd be making about $420 per month on the house. Then, I want to basically take our expenses number and divide it by 420. 5,000 divided by 420. We get 11.9. That's 12 houses.

When you think about it, "Wait a second. It's going to take me 12 houses to reach financial freedom?" It kind of blows people's minds. I remember sitting back on my white board when I did this for the first time a few years ago. I said, "Holy smokes. That's my number? That's it?" It's not like it's that easy to achieve. It still takes a lot of focus.

Brandon: Of course, that's free and clear, correct? Because there's no mortgage in there.

Clayton: Right. Free and clear. These are free and clear houses. Obviously, your number would change...Gary Keller's book "The Millionaire Real Estate Investor," the first stage really is buying to real estate or you have the cash flow later but if you can acquire it first to get to that number then the cash flow comes later when you paid those down, too using leverage.

Brandon: Sure.

Josh: Expenses may vary. The big argument on BiggerPockets is that 50% rule. Is it 40? Is it 50? You’re going to get a fuzzy number whether it's 12 houses or 15. That's great. I love it. I think people should be doing this.

One of the things that used to drive me crazy was again, the perception of what are real estate investors. They're greedy, rich SOB's. Actually, they're not. There are a few. Most people are just trying to do this to achieve some semblance of financial freedom.

That's why BiggerPockets is here. That's why it's part of our mission is to help people achieve that. We want people to find that. I think you put it really well with this "freedom number." Figuring out, calculating what is it that you're getting in to this for.

What is your ultimate goal? Do you want to be a millionaire? Fine. That's cool. There's nothing wrong with it. Go get it. Most people don't. Most people want exactly what you're talking about which is that freedom. They want their bills covered. They don't want to have to worry. They want to be able to go out and maybe add a few houses on top so they can go do the trips and things that they want to do.

That doesn't necessarily mean you have to go out to make a million bucks. You don't need to. It may mean you get there. For everybody listening, just think about that. Go. Take the time. Get the download from Clayton's site or just do it on your own. You can do the math. It's not super complicated. Brandon's going to talk in a second about it. I think he's going to pitch something in a second here.

Brandon: I wasn't. I wasn't.

Josh: Do this. This is really, really important especially for those of you who are dreaming about this, who are thinking, "Hey, real estate is so cool but I'm just so afraid." I think if you put pen to paper and realize that you don't need 500 houses to be able to retire. You don't need 50 houses to retire. It's probably a much smaller number. You'll get pretty excited and motivated.

Brandon: Yes.

Clayton: One thing you said there I think bears repeating which is the idea of real estate investors being nasty. People sometimes have this idea that they're taking advantage of people. One of the things that I wanted when I set out on doing rental real estate or the turnkey piece for me was I grew up doing martial arts. I don't know if you guys...do you know what aikido is, the principle of the marital art?

Brandon: Yes.

Clayton: The symbol of aikido is like a circle, just a circle with a dot in the center. The idea of that symbol is that it shows balance when that dot is in the center that you're balanced. If you're doing one thing eight hours a day then you're going to be off balance. If you're training for a marathon and that's all you're doing then you're probably not the most balanced person at the time right now. People get a little crazy. You're not living a balanced life.

That's the way I've really tried to look at my rental real estate business which is I want everyone in that circle to be taken care of and happy. I want the property management company to feel confident and good with the relationship and well paid and taken cared of.

I want the buyer who buys the property and who owns and gets the rent check every month to feel they got a great property. I want the tenants, there are my favorite things, I want the tenants to be able to come home at the end of a long day and feel like this is their home.

They could sit down with their husband and have a glass of wine at the table and talk about their life and feel like this is their home and they've made it their home. Maybe they have a five-year lease like some of my tenants do. I want them to feel like it's theirs.

That whole circle is complete. When one of those things is off, when you've taken advantage of someone or you're cutting corners then that center is not in the center of that circle. That's kind of how I try to run everything and to maybe not give real estate investors a bad name I guess.

Josh: I love that. I love it. You've mentioned a five-year lease. Talk about that. That's kind of unusual.

Clayton: It is. A couple of my tenants in Michigan have five-year leases. I said, "Great." It's a great school district. They've got a daughter and they want to raise her in that school district. I just said I'm not a greedy person so the rent I was happy with.

What, am I going to raise it $25? I don't know. To me, $25 I think I blow at Starbucks refilling my Starbucks card. To let someone know that I value you as a tenant and I'm going to sign a long-term lease with you says something.

In fact, two years ago they had requested through our property management company there were some bushes in the front. They didn't like them because they were a little thorny. They asked if they could remove them at the front porch.

My property management company had said, "Usually, we wouldn't allow this at all. It's easy for you to say no if you don't want this." I said, "No. Absolutely. You know what? It's their home. They want to remove these bushes because they care about the house and they want the front porch to look even better. Go ahead." They ripped out these gangly shrubs. I'm like, "Great."

That just goes a long way I think to showing your tenants that you care about them. You're not greedy. You're not out for money in this way and you want them to be happy with the relationship. At the end of the day, you're still making money from them of course. You're providing a roof. It's your house. You don't have to be mean about it.

Josh: Yes.

Brandon: Yes.

Josh: That's great. Yes. It's service all around. It's taking care of everybody. I think the more that people do that I think the more, again we talk, the more the show goes out there and we see...because I do think there's a trend amongst those that are successful in this business.

Correct me if I'm wrong. Brandon and Clayton, you've listened to a lot of our shows. The people who tend to thrive really well, that's what they do. That's what they do. They're not the guys who are doing the half ass job. They're not guys who do a crud job, pass it on, and say, "Whoops. I didn't do all this work for you. Sucks to be you now." It's the people who care and really stand by everything that they do who are sustainable and I think it shows.

Clayton: Yes. I got sick and tired with working with some buyers here in New Jersey who would hold up deals or do different things. I just said, "Fine. You know what? I'm going to work with the people who are doing quality work and who don't play games and who return phone calls and who are honest and straightforward. They don't try to pull the wool over your eyes or go around your back. That's the way I try to conduct my business and I sort of expect the same from other people who do the same." I agree.

Josh: Yes. Awesome.

Brandon: I think that's great. Like you said, Josh, those people are the ones that tend to stay in the game the longest especially we talked a little about the wholesaling. It's not really a wholesaling show. When we're talking about wholesalers, I see that all the time especially wholesalers. They just want to make some money quickly. They'll screw anybody they can just to get that. They never last.

Josh: That's that guru mentality.

Brandon: It is that guru mentality. Get rich quick. Make this money fast and make a lot of money. We get that.

Clayton: Yes. I think that's so important because I know so many people who listen to your show. I'm not sure. You guys probably do meet ups and things like that. You know your audience through surveys and polls and questions, of course probably more intimately than anyone, of course.

I'll be at real estate meetings on a regular basis. I still go out to two or three a month. There are so many individuals in those rooms who are just getting started. One of the things that they say is that they listen to BiggerPockets and they're thinking about taking the plunge. They've been listening for a while.

I think you guys really help get to top part of the funnel for people who are thinking about taking the plunge and who are learning and learning and learning and who want to make the first move in to real estate. It's impressive to me to be out in these groups and hear people who listen to this show and see it as an entry point.

That's really what I wanted to try to do is just I don't have a course. I don't sell anything. I want to help as many people as I can get started in real estate investing. I'm really passionate about it. When I say that, I really mean it. I jump on the phone with people. People send me their phone number and I'll just get on the phone and talk to them for 45 minutes just to try to help them out.

I'm no expert. You guys have had guys who have many hundreds and hundreds of properties. I'm not anywhere near that. I just try to see if I can help in any way that I can to give back because I know how important it is for people to come out of that fear place and actually make a move in their life.

Josh: Yes.

Brandon: I love that. I love that. Before we move on to...I want to talk a little bit more about specifics on the deals. I wanted to touch on something you...about the "freedom number" you talked about. Just kind of add a little bit more of my thoughts to it because I know you guys care about my thoughts. Number one...Josh is giving me a look.

Josh: Hey, Clayton. How about those Phillies, man?

Brandon: First of all I want to say that's exactly what I did when I got started. I set for me it was $3,000 a month. It's what I needed to survive. I looked at it a little bit differently in I wasn't going to buy them for cash. I was going to use leverage. I said, "What I want is $100 per month per unit. What is the number? How many units do I need to get to $3,000 a month.That's 30 units I need."

I had a goal, a number to go and acquire and I went out and got it. I hit 30 and I quit my job. I said, "I’m done." Then, of course I jumped back because I realized very quickly at that point you can't live very well off $3,000 a month. You can scrape by and live in Grace Harbor, Podunk, Washington. You can't grow.

That's why I'd find more ways to earn money now. That was huge for me. I like having that goal. This is my number I'm going to go towards. Then, if you take a Grant Cardone methodology or thinking of 10X rule, that's what we did today, right? 10X. Why should I want 300 units or a thousand units?

Josh: Because you're a greedy prick, man.

Brandon: Because I'm a greedy prick now.

Clayton: That's what my wife wrote right above my iMac here talking to you guys is I know what my "freedom number" is but it's literally 10X right above my head because I know. You expand to meet those goals.

Brandon: Yes, you do.

Clayton: I have a friend in Florida who was doing deals and his accountant had told him that he's on pace to do this number this year. Let's just say for the sake of argument it was $800,000 this year. It was in his head that he was going to hit $80,000.

He said, "Wait a second. That's what my accountant’s telling me. There are still three months left in the year. I know. I want to do $2 million by the end of this year." 10X-ing that goal and then boom! Wouldn't you know it? He's already exceeded the $800,000 by just placing your intentions on doing it.

I also can hear people sitting there, driving right now saying to themselves, "Yes, this is all great for you guys but I have no money."

Josh: I thought they were going to say your math of 10X-ing $800,000 to $2 million is completely crap.

Clayton: Yes. That's why I was never good at math [Inaudible][46:45]. The idea of money I think it's so important because this is the thing that holds people back the most is "How can I get money to do this first deal?" You've got your 401K plan for instance. I know this can be a touchy subject.

My wife writes extensively about this as a financial expert. We have done it to great effect. I know a lot of people, for instance at my company do this on a regular basis and a lot of people do this.

Simply borrow out of your 401K, not withdraw out of your 401K or take a penalty but to borrow from it. Almost all plans allow you to do that. Fidelity, for example, it's like three clicks. You can borrow up to whatever it is like $50,000 a year depending on your plan. You’re borrowing it from yourself. If a rental property is $30,000 in the Midwest, you borrow that amount.

Then, it comes out of your payroll and you can set it for however you want to pay it back, 16 months. It comes out of your payroll. Ensure you're taking that payroll hit every week.

Nevertheless, it's still your money that sitting on a 401K that chances are you'll probably not going to touch or ever get much use out of. Why not put it to work for you now to help you start earning like and extra $700 a month in rental income by being able to buy your first property?

Then, it's the snowball effect. It's that first and second ones that are so hard because then now you can perhaps have you free and clear. You can get a loan on them. You could leverage them to buy more properties if you do it smart. That's where you really start to expand your mind around the money piece.

For people who are listening, think, "I just can't do that," you can do it. There are so many ways. There's so much private money out there right now. People are clamoring right now to try to help people to make that first move. There's so much money out there.

There are people who are doing 100% financing. I got a text today from a guy who's a private funder. He's doing 100% financing for rehab deals, which you think normally, is 80%. No, 100%. He's doing it multiple states across the country. They're out there. You just need to know where to look for them.

Josh: Where is that besides BiggerPockets?

Clayton: BiggerPockets is a great place. Honestly, go to your local REA meetings. We sit behind a computer so much. Get out there. I try to have lunch or coffee with somebody in the real estate world once a week.

Those people end up being individuals that I end up being my buyers, end up being partners, end up being contractors, whatever they happen to be. I end up making these relationships with individuals and they've become multi-year friendships.

I end up doing multiple deals with these individuals because we have a trust and level of rapport that we built by just meeting face-to-face away from sitting in front of a computer half the time. That's how you're going to find private money as well.

Josh: It's all about relationship. The entire business is a relationship business. I think a lot of people don't realize it. A lot of people, wholesalers for example, "How do I build a buyers' list? I need 10,000 people on my buyers' list or I'll never sell anything." Most experienced investors are selling to five buyers. There's no buyers' list. It's literally like you said, click, click, text. Got a deal. Let's do it. That's it.

Clayton: Yes. You just get on...use text for instance. Wholesalers that are worried about buyers' list, really? Just go on Zillow. What county are you targeting with your mailings or what you're doing? Look at the realtors who are most active in that territory and just get on the phone and call them.

If they're active and they're doing deals, chances are they have cash buyers and investors that they're working with on a regular basis. Ask them, "Do you have any people who would be interested in this property? Here's the situation." "Sure." Then, you partner with that realtor. There's your buyer. Done.

To spend all this heartache and moaning and not being able to do deals, there are so many excuses out there for people that don't want to take action. You begin to believe your own narrative. I'm the victim of this.

You start telling yourselves stories why things are hard and then you start to find ways to affirm that life is hard and things are difficult. If you flip that around and you really start focusing on what can be done, it's crazy what limiting beliefs we place on ourselves. It really is disheartening.

Brandon: There's a quote on "The ONE Thing," my favorite business book that says, "If you argue for your limitations, you'll always win." I love that. People do. They argue with people. They argue for their limitations and why they can't and they always win. I love that quote.

Clayton: There's something else in that book, too that stands out for me personally is procrastinator. I'm a big procrastinator. One of things I love in the book "The ONE Thing" is he talks about the idea of we know that there's a point in the day when we are at our most bulldog.

Maybe it's 10:00 am after the kids go off to school and you sit down with your cup of coffee and nothing is going to keep you from getting this work done for that hour. You are just like a bulldog. Some people are bulldogs 12 hours a day like Grant Cardone. Most of us aren't.

You know what? Focus on that one time, that one hour that you have that you can commit to being a bulldog. That's the time if you're trying to build a buyers' list, spend that hour on the phone with ten real estate agents. You’re going to have ten probably awesome new connections or five after an hour or whatever it is in your Rolodex. You're going to feel so energized because you took that action for that hour.

You know what after that hour? Get off your butt. Shut it down. Then, come back tomorrow and do that same bulldog attitude in that one hour.

Josh: That's great.

Brandon: You know people do those. They set goals and they design their business cards. Then, they go out, read the BiggerPockets forums which is great but it's not enough. They do a hundred other things in the world that aren't actually picking up the phone and making a phone call.

Josh: That's scary.

Brandon: Yes. I was scared to do that.

Josh: It's scary.

Clayton: Like I said, I love your podcast. I'm a podcast guy myself. Sometimes we educate ourselves to the point of paralysis where we just don't shut it down. I try to now reward myself with podcasts. My reward for having done work is listen to a podcast on a walk. I don't do any of that stuff until I've taken action.

We know. We already have the education. You know you know what you're doing. Just do it now. Stop educating yourself over and over and over again and keep piling it on. You know why? Because I suffer from the shiny object syndrome.

The problem is you're not getting the education in the same specific thing that you're interested in. You're going to be like, "Oh, wait a second. This guy said to do it this way. Maybe I should go follow this path." You’re doing 80 things poorly instead of one thing greatly.

Josh: Yes. That's right.

Brandon: Yes. That's right. I'm very guilty of that.

Josh: Yes. WE all are.

Clayton: We are.

Josh: All right. I've got one more question before I'm ready to go to Fire Round. My question is on where you're finding your deals. In the beginning, you talked a lot about off-market. I'm assuming that you probably find majority of your deals off-market or maybe not. How do you find your deals?

Clayton: A number of different ways. Number one now because I've made those relationships, I get a lot of referrals. That's number one. You'll find that as you're building these relationships and you're out there and you're sort of owning your territory, if that's what you're doing whether it's wholesaling or flipping, people are going to call you because they know that you're the person. That's one way.

If you're doing a deal on the street, chances are the homeowner might know that Gladys just sold here house to you. That's happened to me a number of times.

The other way is people often say that there are no deals on Craigslist. They're full of it because many of my biggest deals have come from just picking up the phone and sorting through Craigslist and finding actual homeowners who are putting their properties up on Craigslist. I've done a number of deals off of Craigslist.

Josh: You're just scouring the FSBO's.

Clayton: Yes, just for sale by owners. Now a lot of realtors are putting their properties in the for sale by owners section. You can tell by the way it's written if it's an investor or not. Who care? Even if it is, get on the phone and talk to these investors because you're going to be building relationships anyway.

Brandon: Sorry. Before you go on, another tip for Craigslist is you can also call the for rent people because every landlord is giving you their phone number. It's right there. Call them. You say, "I'm not interested in renting it but are you interested in selling it?" maybe 10% of them are going to say, "Yes. I'd love to sell this property. I hate this property. I hate being the landlord." Just another tip.

Clayton: Yes. Direct mail. We'll do direct mail. I spend a lot on that. Realtors. Again, I spent one week a few weeks ago just on the phone with realtors in my area non-stop for hour after hour after hour talking to realtors. Wouldn't you know? I get a deal sent to me that they just got in the office.

They haven't maybe put it out there publicly yet. I know that I can move on it very, very fast. You build those relationships with those people. That's how you find deals.

I would say don't do 80 things. Find two or three that work. If they don't work after the first week, don't get discouraged. If they don't work after the second week, don't get discouraged. You have to stay consistent with it. You also have to know after you've spent money or you've spent your time and you know that okay after a thousand phone calls that I'm just throwing this out there.

A thousand phone calls or a thousand mail pieces that you got two deals or you got one deal. How much did that cost you? What was your cost of acquiring that customer? What was the cost of acquiring that deal? Then, you know going forward that I'm going to need to spend about a thousand going forward to get my next one.

Don't be discouraged when you've only done 200 or 300 or 400 because you haven't even hit your CAC yet, your cost to acquire that customer. Until you're at your CAC and you can...you need to analyze these things and build systems in your business and understand and monitor all of it.

If you don't have any idea how many phone calls you're making or how many mail pieces you're sending out or how many realtors you've met this week then you're not running a business. You're just kind of doing it as a hobby.

Josh: Yes. Agreed.

Brandon: Yes. I love that. Everything you just said, right on. I love it. Before we go on, I have another question for you. You have a job. You work. You're a weekend news anchor.

Josh: By the way, what time do you have to get up for you weekend show?

Brandon: I wake at 3:30 in the morning. Yes.

Josh: Ooh, joy.

Brandon: How do you do that? How do you do all these things you're talking about, the systems and the processes and you're buying rentals and properties and wholesaling? How do you all that with a job? That sounds tough.

Clayton: Let me just say poorly. Over the past few months, much, much better. I've written about this on my blog. In fact, I've talked about it on my blog publicly like how I've had a bit of a breakdown. It always comes back to the fear of money. We're always chasing things. Throughout my life, "All these guys are doing this so maybe I should go to try that." All these little things working over here has nothing to do with real estate, let me try that.

There's a graveyard of bad ideas that I've had and things that I've tried or gone after and just because maybe it would provide some sort of financial stability for my family. It always came from a place of fear. I write about this on my blog about this idea that ask yourself why are you chasing these things.

For me I realized that I loved real estate and it's something I can really sink my teeth in to. I've loved it for many, many years. All that other crap and chuff that I was fitting in to my life and chasing and never really being present in any one thing where I could just sit back and enjoy my life.

My wife had said to me and wrote this on the post about this was, "What are you chasing? Look around you. You have everything you want. What are you chasing?" That really switched everything for me to focus back on what's most important so that I'm not doing things out of fear and I'm not going after the things that don't matter.

I'm building this lifestyle business. I'm building everything around the life that I want which is I want to be able to take my kids to school in the morning. I want to be able to have breakfast with my kids when I'm not working on the show. I want to be able to have dinner with my family.

I don't want to have random office hours or constantly on my phone and my wife's mad at me where I'm never really present even if I'm just sitting there staring out the window, maybe my mind is racing to 80 things I've got to get done.

No. Slow down. Be present. Figure out what life you want to have and then reverse engineer it. That's kind of over the past few months just...I'm all in that now and still work in progress. Boy, it's a world of difference than I was last year. I'll tell you that much.

Josh: I love it. I love it. I hear you say that and I think about the 11 years that I've been building this business. I used to work from home. I now have three kids. I worked at home while I had my kids. I used to think I was there for them. I used to think I was present.

When I finally got an office space and moved out of the house and stopped and looked at my life and really evaluated what the hell I was doing, I realized I was home all the time. I would give the kids five minutes here, five minutes there but I was never really focused on them.

I was always thinking about six other things with business and things like that. I realized that I wasn't present. Nights and weekends, I wasn't present. I was always thinking of work. I was always on it until I stopped and said, "This is insanity."

It's interesting a lot of people give me a hard time because I run BiggerPockets and I'm not active currently today building a real estate portfolio. They're like, "Whoa. That's crap. How the hell do you get away with doing that?"

I say, "For me, that focus has to be on BiggerPockets." We're growing. There's a lot going on. I personally, for me cannot be doing six other things. I can't do three other things. I can't do two. I could do one thing at a time.

The other thing I do is my family. I get up. I focus on my family. I spend time with them. I'm devoted. I'm committed. I go to work. I clock in. When I clock out, dinner with the family, time with them until my kids are asleep. Then and only then can I kind of check back in to work mode.

I keep them separated and it's been so powerful for me. I've realized the kids are happier about it. I'm happier about it. My family life is better, not that it was ever bad. Everything feels better.

I challenge people to think about that. Really what are you doing this for? Most of us are doing this for our families. Most of us are doing this so we build wealth for our own futures. If that's the case then try and design this business whether part-time, full-time around that because that's what matters at the end of the day.

Clayton: I had a quote on my board. I took it off recently though. It was up there for a long time. It was, "If you have more than three priorities then you don't have any." It's really true. The family has to be a priority. Then, you've only got two left.

When you're saying yes to something, you're saying no to something else. You can't say yes to everything. When you do, everything suffers. It doesn't come from a place of authenticity. It comes from a place of fear and it comes from a place of lack because you can't say no to things.

Josh: Yes. Yes. I'm reading a book now called "Traction." It's an interesting book. You had talked about marketing and focus, how do you do it and really stay focused on one or two things. They talk about that as well. It's become an expert on that. There are one or two techniques. There are tactics.

Once you've done that, okay then you could spread out and go and do other things. If you're kind of half doing this, half doing that, half doing something else, you're not actually wholly doing anything at all. Get focused. The same applies to the business itself. Keep your head down and focus.

Brandon: Awesome. All right. Why don't we shift this thing over to...

Josh: That's so deep and heavy for a second there.

Clayton: I know.

Brandon: It is deep and heavy. That's good stuff. I felt this whole episode is stuff I needed to hear and hopefully a lot of other people maybe hear. I think we know these things. We hear these. We read a book and we're like, "Oh yes. I know these things." Then, you get in a conversation. "Oh yes. I haven't been doing this all the time. I need to get it right." Yes. I've been thinking about ten things I need to shift in my life already.

All right. Let's move over to the world-famous Fire Round. Today's Fire Round is sponsored by FreshBooks.

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All right. Big thanks to our sponsor. Let's get to the Fire Round.

It's time for the Fire Round.

Brandon: All right. Number one question on the Fire Round is: "Is wholesaling a good way to get started?" I hear this all the time, by the way. "Is wholesaling a good way to get started in real estate if you don't have a lot of money?"

Clayton: It's an excellent way to get started in real estate. I think the problem though that people make or the mistake that people make when they think that they don't need a lot of money. You need money to market.

Yes, you can jump on Craigslist and find deals but at the end of the day you need some money to get started with wholesaling. You can fly by the seat of your pants and do it with nothing but then you're not really going to be doing it right.

Yes, you can start by just jumping on Craigslist and maybe finding your first deal. What I would argue for people to do is to take that first deal and put it all back in to marketing. Throw out sort of the Michael Michalowicz Profit First mindset and take profit out of that and start living high on the hog.

To me, it's the foundation of everything I do. It's not a wholesaling but I find deals this way with the skills I've acquired from wholesaling to go out and get my rental portfolio to help my family out, help other people out. To me, it's the foundation and from there you don't have to do it but I would learn it so you know how the foundation is poured.

Josh: Right on. Right on.

Brandon: Yes. I love that.

Josh: All right. Next question: "When looking to get started in real estate, should I put together a website for the business?" I think I'm going to know your answer.

Clayton: No. Unless you're doing pay-per-click advertising or something like that and you really know what you're doing with SEO and driving people there through ads and all of that then no.

It's so freaking simple to create a website. You could go to Squarespace and create a website in five minutes. You could use one of their cover page features on Squarespace and just put up their cover page that says the name of your business with what you do and your phone number so that when someone looks you up, they actually find your website and see that you're somewhat legit.

It kind of acts as a little bit of billboard and a calling card. It takes five minutes to do it but it's not necessary. Actually, there was quite a long period where my website was down. I just took it down. I was doing more deals then than when I was without it.

Don't waste your time on the business cards and all of that other stuff. Look. It does take five minutes this day in Squarespace to sign up and do one of their cover page features, not even having multiple tabs.

Brandon: I did a blog post a while back. It's two years ago now called "How to Build A Lead Gen Website Using wix.com," which is just like Squarespace. That thing has got I think 200,000 or 300,000 views.

Josh: Hundreds of thousands of views.

Brandon: It was the most popular video I ever did. Anyway, I'll link to that in the show notes for the show, too. Under an hour, five, ten minutes, whatever...

Josh: It's free.

Brandon: It's free or at least low-cost than Squarespace.

Clayton: You can even use Lead pages which is a cost per month. Yes. It's one page with a little button. At least it validates your business in a way.

Brandon: We have a partnership with or not a partnership but a whatever relationship with leadpropeller.com which is gaining us some insights. Anyway, BiggerPockets Pro members can get a discount on that by going to BiggerPockets.com/perks. Actually, that's who runs my kind of "I buy houses" kind of website and I get calls on that. Anyway, it's another easy way to do it. Check it out, BiggerPockets.com/perks. Next question.

Josh: That's you.

Brandon: Oh. Me. "How should I find appliances for my rental property? Where do I get them? Where do I buy them?" New or used? I think that was kind of the gist of the conversation in that thread.

Clayton: You know it's so funny. I guess maybe I'm just...I don't know. I don't care about that. In Indianapolis for instance it's uncommon to provide appliances, which you wouldn’t know until you start really understanding your territory. Michigan, yes you do.

I bought my appliances from a local warehouse style place. It's not Home Depot or something but just Appliances Freight or something like that. Again, I want my tenants to have good appliances. You don't them breaking. I don't want ones that have big dings in them and they're all banged up and they look like crap. What kind of business are you in?

Appliances are relatively inexpensive. First of all, know the market. Know if you even need them, number one. Just don't cheap out on them.

Josh: Yes.

Brandon: Yes.

Josh: I think you could say that across the board, right?

Clayton: Yes.

Josh: Yes. All right. Last question: "As a wholesaler, what happens if you get a property under contract and you cannot find a cash buyer?"

Clayton: Then it probably isn't a deal. If you can't find a cash buyer...first of all, there's no way you can't find a cash buyer if you have a deal. Cash buyers want deals so badly right now. I get texts from cash buyers everyday. "Do you have any deals? Do you have any deals? Do you have any deals?" They're constantly looking for deals.

There are not a lot of them. They are but you need to know where to look. If you have a deal and you've hit the pavement then get off your butt. Go to every real estate office you can in your local market. Just knock on doors. If you've literally exhausted your energy and then go on to local real estate meetings and stood up at the back of the meeting when it's people's turn to talk and say, "I've got this particular deal. Is anyone interested?"

If no cash buyers at that meeting come and talk to you then there's something wrong with the deal. Probably you locked it up too high. That's an opportunity for you to talk to a buyer and just plead total ignorance. Don't try to puff yourself up and be somebody you're not.

Sit down with this buyer and say, "You know I'm new to this business. I literally locked this deal up. Tell me what you think about it. I’m just learning. Why wouldn't you want to buy this property?"

"It's $50,000 too expensive. I buy properties on that street any day of the week but that one, that's a three-bedroom, two-bath, I could buy that for $50,000 cheaper. There's no way I'd do that." "Oh, really?"

Just don't try to puff yourself up and be fake. You'll get real answers when you humble yourself to people who have a lot more knowledge than you do.

Brandon: I love that. That's a great quote.

Josh: Fantastic. Tweetable. My God, man. This guy, this Clayton guy he knows how to talk to people. My goodness. Oh, ya-yay. All right, man. Great stuff. Great stuff. I think it's time. I think it's time. Yes, let's do it.

Famous Four.

Josh: By the way, we actually used to sing that thing.

Brandon: We used to sing it. Now we don't sing anymore. I still sing sometimes. Famous Four. All right. Question number one of the Famous Four: what is your favorite real estate-related book?

Clayton: Real estate-related book. It's the book that's changed the way my whole family business runs. It's the way that we set up all of our...in fact a lot of real estate investors that I know and I'm very close with that have very, very high level, who do high level real estate investing have all changed their business around Michael Michalowicz' book "Profit First" in structuring their business.

That book, he's written "The Pumpkin Plan," which is a great book. "Profit First" really is about taking profit out of your business first so that you know what your expenses are in your business.

If I know that I've got $10,000 to do marketing or this and that in our expense account then that has nothing to do with our taxes because we have a separate tax account set up so the taxes are taken care of in a separate account. The profit is taken care of in a separate account. Our expenses are right here.

Wow! I've got this amount that I can go and buy marketing. I can hire this individual. I can pay this assistant. I can buy appliances. All of those things. It's really a dramatic shift in your thinking about your business. I would encourage all of you to check it out.

Even Mike Machalowicz, his website has certified CPAs you can talk to who understand the "Profit First" methodology. The book is a game-changer. Read it and see if it fits for you. I think it absolutely is the best real estate-related book you should read.

Josh: Right on.

Brandon: That's great. I have not read that one.

Josh: First time I've heard of it. Thank you. Thank you. All right. What about favorite business book, non-real estate?

Clayton: Non-real estate business. I love Edwene Gaines. This is one of the most profound books I've read this year, "The Four Spiritual Laws of Prosperity." I would encourage any of you starting out in real estate or just starting out your business, read this book because one of the four laws and you have to read it to get the four law.

I'll give you one of them, which made me the most uncomfortable. One of them is going to make you the most uncomfortable. Whatever one of those four spiritual laws makes you the most uncomfortable is the one you need to do immediately.

Her first one in the book is tithing. Obviously, the word "tithing" is ancient. It means a tenth. Once you start building in giving to someone who gives you spiritual food in your life, whatever it is -- it's the waitress who sat down with you and talked to your for 20 minutes because she saw you're having a terrible day and you leave her a huge tip that day but it has to be a tenth of your overall income.

It has nothing to do with church. It literally is those that feed your spiritual soul on a regular basis. Once you start giving and realizing that your money isn't yours, that it's just flowing through you and you just started giving on a regular basis and you build that in, as uncomfortable as that may be for you, even if you have no money, you will be shocked and astounded.

You got to read the book because she talks about her story and how just money, abundance starts to come to you. Prosperity just starts to come to you. For me, tithing was the hardest because the fear of money. You want to clutch and hold on to it.

Once you start giving, your phone will just ring. It's just amazing. Just stop holding on to money. Just let it flow through you and it will change your life. That book mean more than any other business book this year. It really rocked my world.

Brandon: That's great. I love that.

Josh: Thanks. Awesome. Yes. What about hobbies? What do you do for fun when you're not working and real estate-ing?

Clayton: You can see my home office here. I've got tons of nerd stuff. I'm a big nerd. I've got Marvel figures over there, Secret World figures, Star Trek. I've got Mystery Science Theater 3000. I love nerd stuff -- Walking Dead or any of that Marvel stuff. I've been a comic book reader my whole life.

My best friend and I have been doing a podcast for seven years now. We grew up side-by-side. We're huge comic book fans. Every week, no matter where we live in the country we would just talk for an hour on the phone. We'd just say, "Hey, did you see the new Jessica Jones trailer? The new Marvel show on Netflix? Hey, did you see the new Star Wars trailer?" This and that.

Seven years ago we were like, "You know, maybe we should record this and put this out as a podcast." I look forward to that podcast. Every week, it's one of my favorite hours of the week when we record; it's called the "Grizzly Bear Egg Cafe." It's a random weird name. I just love nerd stuff. It's like a labor of love for us to do that podcast.

Josh: Do you dress up for Comic-Con?

Clayton: Actually, last year I took the kids and my wife. We went to Comic-Con in New York. We shot a whole video piece on it with the show. The joke was I'm not going to get dressed up and I ended up getting dressed up at the end of the piece. My kids dressed up. He went as Captain America and my little girl went as Wonder Woman.

I think my wife even dressed up as well. I think she went as Catwoman. What did she go as? Oh, she went as Wonder Woman also. We got to sit down with William Shatner and do an interview. He just wants to talk to the kids in the costume the whole time. He didn't want to talk to me.

Josh: If she was Catwoman, what were you?

Clayton: I dressed us as a Stormtrooper.

Josh: Oh, okay.

Clayton: Yes. Did you guys see Iron Man, the guy that made that Iron Man costume this year Comic-Con?

Josh: No.

Clayton: He made the Hulk buster armor. It's like ten feet tall. He's walking through Comic-Con with a giant...you have to look it up. Just do a search on YouTube for the guy wearing the Hulk buster armor. Then, we had him bring the armor in to our studio. I got to meet him. It took him about a year and a half to build this thing. It's incredible. That's true. I love dedication from that guy.

Josh: We were nerd-ing out today. We're watching the SNL Star Wars auditions sketch from this weekend.

Brandon: Oh, I missed that.

Josh: It's really funny. It's really funny. Go on YouTube and look up SNL Star Wars audition and you'll get a good laugh.

Clayton: Did you read the Wired magazine piece this week with J. J. Abrams?

Josh: No.

Clayton: Director of Star Wars. Oh, it's fantastic. If you're a nerd and you like Star Wars and you like this kind of stuff, you'll love J. J. Abrams. You got to read that piece and his vision for the whole series and handing if off to the next director. See? I could talk about this forever.

Josh: It's going to be the biggest movie ever.

Clayton: Did you guys buy your tickets yet?

Brandon: Not yet.

Josh: No. I was hoping you'd hook me up. You know what? It's crazy. I got invited. I shouldn't say this because I don't know if I'm going to be able to do it. I literally got invited to George Lucas' ranch to an event. Yes, your mouth just dropped. It's literally a week away. I need to figure out how I'm going to do it.

Clayton: Do it.

Brandon: I'll go for you. It's okay. I got this.

Clayton: Once in a lifetime. When you get a call like that to go to George Lucas' ranch...

Josh: It's not to hang out with George Lucas. If it's to hang out with George Lucas, the phone would have dropped. My wife would be just watching me take off and she'd have to figure it out. It's like, "Hey, you're going to do something cool on a piece of property that was once used for X, Y, and Z." Okay. Like, Brandon, "Oh, cool." I'd go on to Brandon's Nirvana houses. It doesn't make me any closer to Kurt Cobain although...

Brandon: You can come stay in my Nirvana house. I'm having problems with the tenants. You can come take their place.

Josh: All right. Last question.

Brandon: Last question from me: what do you believe sets apart the successful real estate investors from those who give up, fail or never get started?

Clayton: I think it's the same thing that separates winners from losers in this world. It's the ability to learn from your mistakes. I remember J. Abraham once said something...I don't know if it's Chet Holmes or J. Abraham. They're both talking about this.

For instance, building in the knowledge that you're going to fail, when you build that in and you know that you're going to then you don't quit when the first failure happens.

With my son, he's five but a year or so ago we started teaching him to ski. He kept falling. He said, "Dad, I keep falling." I said, "I know. Buddy, I want you to fall a hundred times today." He said, "Why?" I said, "Because the more you fall the better you're going to get." He just kept falling. He says, "Daddy, I fell again." I'm like, "Good! Keep falling. Keep falling. Keep falling."

An hour later after the ski school, he was going down without falling. It's amazing to sort of build that in. I think for a lot of us we're taught with self-loathing and negative self-talk our whole lives. We've got to work through that. At the first sign of failure, don't give up.

That's the key I think for real estate investors. They send out their first mail piece and they don't get any calls and they think they just wasted money. No. The real winner sends it out again and again with failure. Then, they're going to get a deal on the fourth time. That's the difference I think.

Josh: Right on. That's great. All right. Before we let you go, I'm just curious. By virtue of your career, you've got to meet a ton of people and interview lots of folks. What was the coolest whether it's nerd or whatever it was, interview that you've done?

Clayton: Coolest nerd interview that I've done.

Josh: Or non-nerd. Any type.

Clayton: A couple stand out to me. When I was first starting out in TV in Los Angeles, I was a production assistant at "Good Day, LA." I was a huge "Monty Python" fan growing up as a kid.

To get to meet Eric Idol from Monty Python, to come in to the studio and as an intern got to stand over on the weather center while he played "Always Look on the Bright Side of Life" from "Monty Python," I got to sing-along to that song live on television and to meet him. He was the nicest guy in the world. That was a crazy awesome moment.

Josh: That's cool.

Clayton: Most recently though, it had to be William Shatner. I grew up such a Star Trek fan and to be able to sit down and talk for 20 minutes with William Shatner and just kind of nerd out on things. It was really great. Yes. I'm very fortunate I get to...I'm humbled and I always have to pinch myself the people that come through our studios.

The other day, Sean Astin walked in. I didn't even know he was there. "Hey, Rudy!" I went, "Oh, hey." Then, Evander Holyfield's on the hall. Then, Mary J. Blige was there the other day. I'm just...as a kid from Redding, Pennsylvania, I'm humbled and I never forget that. Yes, there are some cool people.

Josh: That's awesome, man.

Brandon: That's great.

Josh: All right. Before we let you go, where can people find out more about you? You've got the blog, the podcast. Let everybody know.

Clayton: Yes. Just come over to my website at claytonmorris.com and just like I said, click on the "Contact me" thing and just literally e-mail me. I will e-mail you back. I'll jump on the phone with you.

For people who are thinking about taking the plunge in the real estate or just wants some kick in the butt to kind of get started like the people I meet at these REA meetings that are like, "Yes. I listen to BiggerPockets. I'm thinking about getting started. I listened for two years." I'm like, "Two years?" Just go to my website. I'm very accessible there.

Where else? Oh, yes. If you're a nerd and you like podcasts, listen to "Grizzly Bear Egg Cafe." You'll find us all over iTunes or wherever fine podcasts are sold. Also, I almost forgot to mention this but I just launched two days ago, I'm so excited about this. It's my new podcast called "Empower." My goal with the podcast was to help people identify what's holding them back in life.

I think it's very relatable to real estate. In fact, we're going to be talking to people who have created enormous wealth through real estate but also personal empowerment, individuals like Deepak Chopra, Byron Katie.

If you've been inspired by people like Dr. Wayne Dyer, those types of individuals although sadly, Wayne Dyer just passed away so he won't be on the podcast. That would be an awesome guest though if I could get Wayne Dyer. I'm still working on that.

Brandon: Good luck.

Clayton: Yes. Good luck with that. I'm excited about that podcast because I think it can really help people. I get to go so deep with individuals for an hour on how to break through our limiting beliefs and negative self-talk and really help people. I really want to try change people's lives with this podcast. Check "Empower" out. It's on my website, too. It's live on iTunes and everywhere also.

Josh: Fantastic. All right. Clayton, it's been a pleasure, man. I really, really do appreciate it. Thanks for being part of the show.

Clayton: Thank you, guys. It's been a real treat.

Brandon: All right. Thanks.

Josh: All right, guys. That was Clayton Morris. Wow!

Brandon: Yes.

Josh: That was serious, Brandon.

Brandon: That was some serious podcasting going on right there.

Josh: Yes. Yes. I've got nothing to say. You know what's funny? There was a moment when we were talking I think it was before the Fire Round where we got in to something heavy and then we all just stopped. It was kind of an awkward moment but it wasn't awkward. I think we all just were like, "Oh. Yes, that was heavy."

Brandon: That was heavy. It's good.

Josh: Yes.

Brandon: The good stuff. Again, every podcast I do this but especially this one, there are so many things now I want to go and change and do and think differently just like...I am so guilty of that trying to do everything at one time, trying to approach everything. I don't know.

I really like his approach of focusing on what really works, focusing on one at a time. You see the success in his life. He's doing a ton of stuff in his life. He's got family and everything. Yes, he's crushing it. It's great.

Josh: I would say to anyone listening still, get out there and find your "freedom number," if you don't know it. That may not be your goal but I think over the few years of doing what I do, I think the vast majority of people, that's really what they want. That's all they really want.

There are others who want to be rich and famous or whatever. Most people just want to be financially free and not stressed out and kind of have a good life, spend time with their families. Finding your "freedom number " is I think the key to that.

Go do that. Make sure you stop and do the math and figure out what it is. Once you've done that, jump on the show notes. You don't have to share how much it is but share on the show notes at BiggerPockets.com/show151. That's Show 151. Share your "freedom number." Let other people know about it. Let's talk about it on the forums. I think it's a good phrase to explain what it is that people are looking for.

Brandon: Yes. Yes. I agree. I'm a big believer in that. I talk a lot about that in the book on rental property investing which comes out next week. I have an entire chapter on how do you find that number basically that's going to matter for you.

How many rental units do you need or do you want to calculate it with return on investment? There are a couple of ways to get it. I think it's a good way to look at getting out of your job or getting secure or getting whatever your financial goal is. Just break it down like that and check it out.

Josh: Yes. Very cool. Awesome. Cool. I do have a couple of announcements before we go. We are hiring at BiggerPockets, guys. Go to BiggerPockets.com/jobs. If you're listening to this way down the line, we may be hiring for different jobs and we're all right now.

Right now, we're looking for developers. We're looking for somebody to come in and take over on HR. We're looking for somebody to help us build out our publishing business. We're looking for a growth hacker.

What is that last job? We need a product manager. We need somebody to come in and help us not project manage butproduct manage, somebody who could really take the lead on all the various development projects that we've got here at BiggerPockets.

If you are looking for a job, go to BiggerPockets.com/jobs and apply today.

Brandon: Does this have to be in Denver?

Josh: Most of them, we would prefer Denver. We're really trying to build a cool company. We've got an awesome culture. I just finished reading an amazing book called "Delivering Happiness" from Tony Hsieh, those Zappos. There have been very few books that have rung with me like this one.

It's all about how do you build this unbelievable company with an unbelievable culture. I think we've done that. I want to continue to do that. I think it helps to have folks nearby although obviously we've got amazing people like Brandon and Jared and Ed and others who are overseas. Yes, we're looking primarily in Denver but we're not going to discount folks that are out of town.

Brandon: All right. All right. Good deal. Let's get out of here. I got to go eat a peanut butter and jelly sandwich.

Josh: Do it. Do it. All right, guys. Hopefully, you enjoyed it. We'll see you next time on the BiggerPockets Podcast. Definitely jump on BiggerPockets. Set up your account today and start networking.

We'll talk to you next week. I'm Josh Dorkin, signing off.

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