Creating Your Own Wealth
Hello, everybody, Michael Quarles with Michael Quarles Real Estate Show. Today, I have with me J Massey and I’m not going to spoil it for anybody. I’m just going to jump in, say hello, and let him talk to us about what he does. I think it’s fascinating and it’s always fun for me. I just enjoy stretching my brain and learning and meeting people and I certainly hope you guys do too. So here we go. Hey, J, tell us about yourself.
Well, I am just a husband, father, guy who’s out there looking for the best ways to always produce passive income. That’s how the name of the company came to be: Cash Flow Diary. The goal is to create entrepreneurs and to help entrepreneurs using real estate to go out there in business. It took me a while to figure out that I should have been an entrepreneur all my life.
Isn’t it great?
I think so. There are simply more options, more choices. I think, many times, the word ‘freedom’ gets overused, when I think what we really mean is we just want to have more choice between what we do choose instead of choices made for us.
Absolutely. Now, I’m not a passive person. I do have passive investments. However, I always use the word ‘yuck’, and I don’t mean it as a negative word, when I think passively. I like massive investments where I’ll go out, buy something, sell it, and try to make the 35% that I’m buying at a discount instantly rather than over time. However, the passive model, done correctly, is pretty cool. I interviewed a gentleman a couple of weeks ago who has 35,398 passive units and that wouldn’t be a bad day to do that.
So tell us what intrigued you about the passive side, and why you went down that route.
For me, it has to do with how I got into real estate investing. Immediately prior to real estate investing, I was technically homeless and squatting in a bank-owned property. Then it was a series of events. My wife was pregnant and has a condition known as hyperemesis. What that means is that when she’s pregnant, she cannot eat or drink. So, that was a challenge. Then, one day, to blow off steam, I went to play volleyball. I jumped, landed on a guy’s head, punctured my lungs, and then I developed a condition known as pleurisy which, combined with a drug interaction in my asthma, made it impossible for me to walk and talk simultaneously without thinking.
Wait, wait, wait, I have to jump in here because there’s a joke somewhere. I’m not going to say it. She couldn’t eat or drink, you couldn’t walk or talk?
That is exactly right.
Man! As long as you could juggle, I guess that would be okay.
Right. Exactly. And what we were juggling was: do we pay the electricity bill or do we buy food? That’s the kind of juggling we were doing at that particular time. So I started selling our personal possessions on eBay. I would buy Disney memorabilia from garage sales or clean out our friends’ closets and garages and put it on eBay. I would try to find something on Thursday, put it up on eBay on Friday so that it would sell on Saturday so, hopefully, by Sunday or Monday, I’d collect the money and we could eat. If we didn’t and if I wasn’t successful, we didn’t eat.
That’s literally what it was because I had previously been a financial planner and that’s great, except people typically want you to be able to walk and talk and they don’t want to visit you at the hospital when trying to plan their retirement because that’s what I was doing. I was at the hospital trying to support my wife in whatever way that I could and it was around that time a friend said, “Hey, I’ve got a solution for you”. I needed a solution and he said, “You should become a real estate investor.”
You’re like, “What’s that?”, right?
It didn’t make any sense. There was nothing about it, Michael, that made sense. At the time, I was squatting in a bank-owned property, our credit score was 398, we didn’t have $75 to put together, and he’s like, “Yeah, you should provide housing for other people.” I’m like, “Okay, sounds great but how’s that going to work?” and it just set me on this path because here’s the thing: what we needed and what every person reading this right now needs to know is you don’t need a job at all. What you need is a source of income and that was the thought process that began to set me free. I was like, “Well, how many assets do I have right now, today, that are working on my behalf when I can’t work?” I couldn’t walk or talk and my wife couldn’t eat or drink - we made no money at the time.
That was the initial problem. So I have been after solving that problem. I thought, “Well, if I get sick again, I want to be able to still eat.” That means I have to own an asset of some kind and then sell the use of that asset in the marketplace and derive my income. That’s what I have to do and the only thing I knew at the time was real estate. It was the thing that had proof of concept, it’s what made sense, and then my friend said, “Hey, you can do it with no money, no credit.” I’m like, “Good, because I got neither of those. I’m in.”
What was the first one? Tell us about the first property.
The first one I actually closed on, or the first one I was writing in? Those stories from the beginning are funny.
Well, hang on. You’re talking to a man that wrote a bad check for his first property. I did not realize when they asked me for my $2,000 deposit check that that meant that they were going to try to cash it. I thought it was a deposit check.
Awesome! So you got those too. Excellent. Yeah, I did all kinds of shenanigans because you said do this, so I did that. I remember when I had my very first one that I ended up closing. It was so bad. I negotiated verbally with the lady. She said, “I’ll sell you the house,” because I was doing a wholesale transaction. Actually, I was intending to do a buy-in home transaction, or wholesale transaction that turned into a buy-in home. I say “Cool, great”, and then I was like, “Now what?” Now, mind you, I’m telling the seller, “Now what? I don’t know what to do.” I had no documentation, no paperwork. She said, “We’ve got to have a contract.” I said “You’re right. I’ll be right back,” and then I had to get a contract and then get someone to tell me where to put my name and where to fill in the blanks. She said yes; I just didn’t know how to put it on this piece of paper. Then I took it back to her.
Okay, was this a relative or someone you knew really well?
No, not at all - complete strangers. I had to build from zero. Note that all of my transactions, especially at the beginning, were all with people who I had never met, I had to get to know. I’m talking 100% cold market, nobody was on my side at that moment, save my life in the Lord, and that was about it. But I guess that was all I needed.
There’s something about burning the boat or having your boat burnt whether you wanted it to be or not and having to actually work yourself out of the hole and survive. You know, I have some coaching students and they always ask me, “Should I burn my boat? Should I keep my day job?” Most people should keep their day job until they can replace their day job because it’s a mentality difference between, ‘Do I want the security and want that reliability?’ and ‘Do I have the wherewithal mentally to say, “Hey, no matter what. I can succeed.”?’ Now I’m more the burning the boat kind of person but not everybody is, and your boat burned by its own.
There were no options. I had tried to get a job. The thing I’ve come to learn is the challenge for most of us is that we are not educated. We are well-schooled but we’re not educated. The purpose of education is to teach you and I to recognize opportunity and most of us have only been trained to recognize an opportunity spelled J-O-B and that was my challenge at the time. I was only trained in how to recognize a job and I wasn’t trained to recognize real opportunity that goes out there, creates value etc, and this was my training.
This began my training, in essence, in earnest and it’s been something that I’ve continually said to students over and over and over and over again because you’re absolutely right. There are some people who say, “Look dude, you may want the benefits of real estate investing but you are not a real estate investor. Let’s be really clear about it. You’re just not the entrepreneurial type”, but that’s okay because everybody’s needed.
When someone hears this, they may think I’m putting someone down but I’m not. We need school teachers, we need truck drivers, we need accountants and attorneys and doctors. If everybody were a real estate investor, there wouldn’t be that thing, right?
There would be chaos in the marketplace.
Oh my goodness. I cannot imagine. Can you imagine a thousand of us going to a football game?
Yeah, there would be riots and everything breaking out.
It doesn’t work that way because somebody’s got to do the paperwork. Lord knows I’m not good at it. A thousand of us wouldn’t make it to a football game because somebody would forget a detail. The paperwork wouldn’t get submitted on time.
Oh, I thought you bought the tickets, right?
Right, I thought you got them. I didn’t get them, you got them. Anyway, there’s just other skill sets that I know I’m not gifted with but that are required in order to make your thing happen.
I’m a very, very, very good juggler. I just can’t catch. I can throw those things in the air and, trust me, I can have 15 different balls in the air at the same time but I can’t catch a single ball.
It is a unique skill and only a few of us have it.
I love it. So enough about us. Say you have a person who may be struggling, who may be in a similar situation that both of us have been in before, and that’s called being poor and they need to get out of that cycle. They enjoy the fantasy of not having the J-O-B, what’s their first step, in your opinion?
I teach a step-by-step process that helps you transition and everybody’s going through these steps regardless of industry, regardless of what you’re trying to do. But the first thing - which hopefully they already have - is the desire. It’s the only part of the system that I can’t give you. You can’t really train. You just got to come with it and, hopefully, you have it. If you do, great! If you don’t, we’ve got a problem. But you’ve got to have desire.
After that, the second and probably biggest change is to understand that you’ve been squandering. We all squander, to various levels. Our greatest asset is time. We’ve been selling it too cheaply and we squander it.
So once you begin to have that mindset, the next thing you must do is to begin to develop new talents or skills because it is those new talents or skills that you have yet to develop that are the ones preventing you from achieving these new levels of income, these new levels of freedom, these new levels of thought, this new level of reality that is absolutely out there for you and that’s what you need to be doing. Instead of investing your time directly to receive some form of compensation in terms of a dollar, take that asset, take that time, and build an asset that you can sell other than your time. I don’t care if it’s a simple e-book. Then, great, you built an asset. But, in this case, we’re talking about real estate. Great! So build the asset. That means take a piece; if you want to do land deals, great. Take land, change it, transform it. Take the time to learn the skill sets and the team that you need to transform it into what you want. You want to do houses? Great. I tend to like apartment buildings, cell phone towers, and commercial real estate. That’s where I play, specifically commercial retail. That’s my thing. You take that and you take the time and build it into something that is of productive use to somebody and then you sell that use.
That’s what most of us are not yet doing. Although, if you’re reading, there’s more of you doing it than not. But that’s exactly what it comes down to: learning how to build an asset, and the number one skill set in building an asset is delayed gratification. It’s something that is not practiced enough. It’s something that’s not taught.
Wait, wait, wait, that’s not even American, by the way. It is absolutely not American.
No, we’re convenience-oriented. I mean, we want to get our hamburger at a drive-thru and we don’t do anything for ourselves and we want it right now.
Well, of course. It’s okay to want that but, at the same time, we have to grow up a little bit and just understand that it takes time to build an asset. This happens all the time, especially with new real estate. I mean, I’m sure with your students, just like mine, you have the guy who’s like, “Okay, how do I make money in the next 30 days?”. I’m like, “Well, you could if you already possess all of these other skill sets that are going to be necessary to produce an asset that could be sold.” But, to take them and you try to tell them, “Well, you got to take the time to develop you to become the person that’s capable of doing what it is that you need to do” and most people don’t want to hear that. But that’s actually the solution to the problem.
You will never get out of the rat race, the W-2, the employee mindset until you begin to build an asset you own and control and I’m stressing those words intentionally. You build an asset that you own and control. Until that happens, you’re going to always be stuck in the wage, time for dollars.
Absolutely. I’m always amazed - and I know I’m getting on a sidetrack comment here - that people buy these little franchises. Basically what they’re doing is they’re buying that J-O-B. I like the franchise model because it’s all systematized and you can fall forward. I’m just not that person. I just want to go and create it. I want it to be mine at the end of the day.
Well, I’m fine with that. I’m fine with the franchise. The challenge is the thinking is still too small. Instead of buying a franchise, you probably need a minimum of 3 locations, preferably 10. If you can do that, then, okay.
Then you have passive income because you have a business pushing passive income.
In the real estate business, we look at passive as in ‘I have an apartment’. I’m renting that apartment. I have a few businesses and my businesses are passive because I don’t work in them. They push off an asset to me on a monthly and annual basis that I’m not required inside of to fulfill that and it’s great. If you ever have the opportunity to have a business but yet not be responsible in it or it doesn’t require you, have that. That’s a true entrepreneur, right? Most people start off as the technician then they go to the manager. Very few people jump into the world of the entrepreneur and it’s great when we jump off into the green side, I call it.
Well, one of the great gifts I was given was complete ineptitude at how to use a hammer and a nail and those types of things so I never actually got the experience of being the technician from a real estate side. I skipped over that because any time I saw a broken door or tub or plumbing issue, I knew I couldn’t do it. So from the beginning, I was going, “Well, I’ve got to go find somebody,” and I’m now learning that that was actually a gift. I didn’t know that I had avoided a trap by not having that skill set.
Right, I enjoy understanding what side of the nail you should hit first. However, it does slow you down at times, especially in the beginning of someone’s real estate career because they don’t know not to do the skills that they have. They don’t know not to utilize it.
One of the statements that I hear from a lot of people - and they don’t necessarily say it this way but they say a version of it - is: “I’m afraid. I’m afraid to leave my J-O-B. I’m afraid to gamble on marketing. I’m afraid to meet someone I don’t know and talk about something I know nothing of.” How do you conquer your fear?
Well, again, the issue is in the thinking. That fear can somehow be conquered in the sense of obliterated, all done with, and that’s what happens when you conquer a kingdom or you take over a land that the prior person in charge was somehow deposed or, if you talk in Biblical terms, to die and they were no more. To say that that’s possible with an emotion so visceral like fear, sets one up for failure, in my opinion, from the beginning.
Instead of focusing on conquering fear, we need to be focusing on developing courage because fear is going to be there with you all throughout this entrepreneurial life journey. It doesn’t go away and the cool thing is it’s a response and you have trained yourself. Your body is conditioned to respond to fear a certain way. So it’s like Elon Musk doesn’t feel fear. It’s not like Donald Trump doesn’t feel fear, or Obama. They’re human; they feel fear. However, they have conditioned themselves to respond differently to the same stimulus and that’s the essence, the crux of the difference and it starts with the thinking so that you can begin the believing and the habits that are required in order to do so.
So here’s a case in point and it’s a simple example that I think many will get. If you find yourself in a situation where you are lacking financial resources: “I need money for that” etc, depending on who you are right now, you might have said, “Well, I’ll just get a job or a second job.” That was your response. I need money; I need a job because you were afraid of being homeless, not having food, and all these other things. I totally understand that. I’ve been there. I know what that’s like.
However, others of you, when you go, “Hmm, I need more money,” you think, “I know, I need more billable hours. I’ve got to get a client. That’s what I’ve got to do. I’ve got to sell another mortgage. I’ve got to sell another house.” Okay, so that’s a different type of person. Yet still others of you go, “Well, I need more money so I know. I need to develop a service or product and see if I can’t have a thousand people buy it over the next 30 days and if I have a thousand people buy it, my net profit will be this and I should be good”, and that’s what you do. Yet others of you still go, “You know what, I need more money so I know what I’ll do. Instead of spending the money I’ve got, I’m going to find somebody who’s running a system right now and see if they can’t, over the next quarter, two years, five years, ten years, whatever, produce enough income for me or enough dividend so I can go out there and do what it is that I want to do.”
Everybody is responding in that example I just gave you. Four different people are all responding to the same stimulus but they’re all responding differently based upon their emotional make up how they’ve learned to generate value in the marketplace and that’s really what it comes down to. I mean, I feel fear; I’m sure you do too but you’ve also learned how to respond differently.
Even a year ago, probably the most recent funny for me in terms of feeling fear was you mentioned marketing and I had not ventured off into paid marketing a whole lot. So I was scared. I didn’t want to spend money to attract customers and I didn’t understand how that was all going to work so I was very cautious in doing so. Now, I developed some courage and, today, we spend almost $800, $900 in a day on marketing and I’m like, “Okay, cool. It’s fine now”, but I had to learn and step my way through that process.
But wait, there’s more!?
This post has been adapted from The Michael Quarles Real Estate show. Listen to this past episode for more on the inspiring story of J. MASSEY!
Michael is an accomplished real estate broker, contractor and expert specializing in residential real estate. He bought his first property before age 20 and has contracted thousands of deals since then. As an active and current investor, Michael understands what it takes to be successful in today’s market.
Follow Michael on Twitter at @michaellquarles. We welcome your comments.