Passive Investing With Sam Wilson
Episode 484: Passive Investing With Sam Wilson
Most people dream of earning money minus the work. One way to do that is through passive investing. Mitch Stephen chats with Sam Wilson, the Founder of Bricken Investment Group, about his methods and strategies for successful investments with solid returns. As someone with a passion for real estate and the experience to back it up, Sam’s wisdom is priceless. He’s here to share his knowledge and give meaningful advice to young and new entrepreneurs out there looking to successfully become their own boss. He also gives the lowdown on what to look out for before making your move.
Watch the episode here
I have Sam Wilson with us and we’re going to be talking about how you get free in this business. We talk about freedom, being able to sit on the beach with an umbrella in our fruity drink but if we don’t be careful, we’ll get trapped in a hamster wheel. I’ve done it before. I continually, as an entrepreneur, have to remind myself not to do it again. You can set up systems and get out of about anything or you can invest in different strategy and there’s no hamster wheel to avoid. That’s what we’re going to be talking to Sam about now. How are you doing, Sam?
I’m great, Mitch. How about you?
I’m doing well. Give us a little bit of your background for those who don’t already know you. I’ve interviewed Sam before and he’s even interviewed me before. You always got to catch people because there might be new people on the line.
I’ve got a diverse business background. I’ve owned several different companies and backgrounds in the trades, food service, laundry business, a variety of assets. The term serial entrepreneur somewhat sticks but more ADD and I can’t seem to stay focused on one thing long enough. Once I figure it out, I get bored. I’ve got to move on to something else. We still own some of those businesses. It’s fine and great but I’m always looking for new challenges. Real estate came my way after the sale of one of those companies. I got involved in real estate in 2013. I did a ton of fix and flip, lease options and owner financed properties. I figured out the single-family side of things then got involved in passive investments, parking lots and parking garages. From that point forward, we’ve started investing in more self-storage, multifamily and doing some development deals and what deals make sense. We’ve aligned ourselves with industry partners I’ve known for years and invested personally with. I have become part of their teams in the asset classes they specialize in. That’s who I am and what I do now. That’s a summary of what my day holds.
You worked your way up through the ranks. Tell me what’s hot now. What are you doing now?
Self-storage is hot. It’s been hot for a while. The money is pouring into that both on the institutional side. Blackstone poured a ton in. Bill Gates bought a ton of it. It’s also a more recession-resistant asset class but even further refined inside of that niche, boat and RV storage are even hotter. Boat and RV deliveries were up 25% to 30% in 2020 and are projected to do that in 2021 which tells me 1 of 2 things. If we have a recession, look out for lots of sales and lots of opportunities to buy distressed assets. If you’re looking to buy an RV, I won’t do it in 2021. You might wait until 2022 or 2023 when we have a correction and then you could probably pick up a note for pretty cheap and harvest someone else’s equity they put in the deal. That’s on the side.
Boat and RV storage, with all those extra deliveries, people have a need to have a place to put these. They’ve got to have a place to store. Most HOAs aren’t allowing it. You’re not going to be able to store it in the city limits. You’re not putting it in your neighborhoods. If you’ve got a giant RV, where are you going to park it? You might park it out in the Texas Sun. How do those roofs perform after nine months sitting in the Texas heat? That’s not a good place to put it and those things aren’t cheap anymore. They’re not $30,000. They’re a lot more than they used to be. People need places to store their stuff.
I had one pull up on my ranch. A guy came over to see me and he was going to stay a couple of days. I come to find out he didn’t need a room or anything because he pulled up in a $1.5 million coach. I have taken my one-time cash events like wholesaling or fix and flip in my temporary cash events like seller financing and toting the note after they give me a down payment. I roll all of the money I make from those into storage facilities. That’s my forever cash play. That’s how I’m going to work myself out of a job is I’m going to buy enough storage facilities and hire a few managers so that I don’t have to be in the daily grind at all. You still got to watch over it.
I have about 14 facilities, 1,300 doors and counting. Everybody owes me about $100 a month. You can do the math, 1,300 times $100 a month, $130,000 a month. I don’t get to keep it all because I got insurance and the grass needs to be mowed in some places. You got to fix a gate, door and electric bill. You’ve got some managers but you’re still good to keep a whole bunch of it. How much do you need to live?Time is your single greatest asset. You can be the richest man in the world, but if you only have one second left to live, what good is it? Click To Tweet
That’s one of the other beautiful parts. I still think multifamily has its merits. I don’t think it’s going anywhere but I do think that you’re going to run into a lot more red tape and restrictions around what landlords can do. You’ve got several risks. You don’t just have economic risk or market risk but also governmental risk. If we have another giant deal where the next administration decides that all landlords are evil and none of them can evict anyone ever and you still owe your note, they’re not picking up the balance if you can’t pay your note. It’s one of those things where you want to take some of that risk off the table. That’s why I like self-storage as well. There are not eviction moratoriums around your crap. If you don’t pay, your stuff goes on the street in 30 days. It’s fast, quick and easy.
Let’s talk about natural evolution. I started out with fifteen little boat storages with dirt floors and chicken wire fence dividers, corrugated aluminum, rusty at that because they’ve been there for fifteen years before I bought them. The guy passed away. The state doesn’t want them. I bought them for $6,000 or $8,000. It was to park your jon or little fishing boat because that’s what boats were years ago. They weren’t as many huge boats as there are now. I opened my eyes and like, “This is a pretty cool form of cashflow because there’s no carpet and hot water heaters.” If they don’t pay me, I capture their boat which to a lot of men is more important than their wives. They might give up their wife but not their boat.
I started there and even though it was a tiny amount of money, I started to appreciate the dynamics of that business. I’m like, “How do you grow this?” I started buying all the mom-and-pops around the lake. I sent the letter to every one of them, every six months. I had a stack of letters to go out. I knew that if every six months I had to do it, I wouldn’t do it. I spent a couple of days one time. I got a stack ready to go every six months for six years. I put them in a closet. They were all wrapped up in twine. All I had to do every six months was grab a bundle with the twine around it, go to the post office and let go of it.
I bought fifteen of them. They were all 18 units, 25 units but that’s where I could play. Once I figured out what are they going to do with the money and I had a conversation with them, they would all seller finance me the balance whenever I work on a down payment. Almost every single time, the old man would die and the old woman that was left wanted nothing to do with those things that occupied all over her husband’s time. Was the husband working? Was he using those storages as an excuse? I’m going to say he is probably using them as an excuse because my experience is they don’t take that much time.
I accumulated all these little places then as I started to come of age and the numbers were rolling in every month. I would either add on. A lot of them I had to tear down and rebuild to the new boat. The new boat now has a few racks. It’s on a trailer. You got to have 12 feet to even get a boat in a stall now then the trucks got longer. The boats are now worth $150,000 to $200,000. Those boat people are not going to let you take their boat. They probably have a mortgage. If you locked their boat up for non-payment and threatened to foreclose, the bank will come in and make the payment so they can seize their assets. I have a backup payer in the bank if they finance their boat. I grew it. In 2020, I built out of the ground at $2.8 million, 283-unit traditional drive-through in your truck storage facility. We didn’t start overnight. What was your evolution like?
For me, it’s been mostly on the passive side. One of the things is learning the business. This is how I’ve learned a lot of the different asset classes I’ve invested in. I’m coming as a passive investor, got to know all the syndicators, learned what they’re doing and how they’re doing it. For us, everything I’ve done has been on the passive side, on the capital raised side or other lead sponsors. I’ve not yet taken down a deal as a lead sponsor, except we bought 70 acres. We’re developing a portion of that into boat and RV storage on the active side. It’s now getting the groundwork laid for a 216-unit facility that we’re building. I’m limited in experience on that side of things but we were rather talking about things where I see opportunity and that’s certainly one of them.
I opened a semi-truck parking place on a major highway, 12 acres, and I got under contract 7 acres for an RV storage parking. The reason why I liked this piece of land so much is it has two RV dealerships right in front of it. You’ve got to drive between them to get to my acres where I’m going to offer for you to store your home. I figured they’re going to fill me up.
If they’re local buyers then yes.
It’s a little town right outside of a big town in San Antonio with two million-plus people. They’re selling hoards of these things a month like crazy stupid. I had to sneak in and buy that land before those two people knew about it because they wanted to expand.
I see upside in the boat and RV storage. I also see upside in RV parks. I personally am an owner of an RV. I love my RV. My wife and I use it. Now that we have three kids living with us and we use it all the time. For us, we’re a little bit more on the road and movers but for a lot of people, they need a place to park or they want to go on vacation and somewhere out West. They’re going to park at one RV park for seven days and explore the area around them. I see opportunities in RV parks as well. I have passively invested in RV parks, not actively but I see that as a spillover to this as well storage and RV parks. All that goes hand in hand.
Talk to me about syndication because it’s one of the things I probably don’t know very much about. I haven’t ever done it or involved in it. I know it’s touched me because I’ve had to compete with those guys when they’re out and buying up the whole town. Blackstone one time was like, “They bought everything.”
What do you want to know about syndication? Your readers may or may not be aware of how syndications work but it’s a group investment where you have limited partners and general partners. The general partners raise the equity from the limited partners. They compile that with their debt sources from their lenders and then they go out and buy assets. They share the profits. Generally, your limited partners take the share of the profits and then your general partners get paid after your limited partners do.
Do the people that invest in those things or put money into those things have to be qualified?
Two options. The term you’re looking for is an accredited investor. It depends on the terms of the offering. You can raise money under a 506(b) regulation which is you can have 35 sophisticated investors in an unlimited amount of accredited investors but the restrictions that come around that is that everyone in your deal has to have an existing relationship with you. Somebody that has to know and has to establish it. If you’re not an accredited investor, I’ve got you on my list. You and I have had phone calls. We’ve established relationships over a period of time before. There’s a holding period. You can’t call me if you’re a sophisticated investor and invest in one of my live offerings. There’s a holding period of at least 30 days before you can get into one of our deals. That’s a 506(b) offering.
I always remember accredited. I’d take the C and remember that’s accredited. The 506(c) offerings are for accredited investors. You could call me, you’re an accredited investor and saw something. I’ve advertised it on Facebook, LinkedIn, all over the internet. “I want to put $100,000 on that deal.” Great. Come on. You have to prove that you’re accredited. There are several different ways to do that. There’s a process. It is administratively, moderately burdensome but it’s not as bad as people think. There are ways of making it easier but once you get the piece of paper signed off by your accountant, CPA, broker, whoever it is then off you go. There are restrictions around what defines accredited but you could probably look up all those somewhere online and get the fine details on what that entails.
Talk to us about your viewpoint on freedom. You liked these because of freedom. Tell me what your freedom looks like and what you look for.
Are you talking about time or mind freedom? There are lots of things. Once I became an adult, I was working for my own brother until I was 25 and I have not worked for anybody else since. I started working for him when I was sixteen. You’d go to work and driving the work van, you’d see these guys out there at 12:00 or 1:00 on a Tuesday afternoon. They’re out riding their bike or running. I’m like, “I wonder what those guys do. How do they have time in the middle of the day? It’s a workday. It’s Tuesday at 1:00. You’re out there in your little skinny tights, riding the fast little bicycle that you paid $10,000. I don’t want to do that but I want to have that flexibility you have. I want to find out how you did that.”
That’s been one of the things I’ve always aimed for is to be able to call my own shots and to define what it is I want to do with my time. Time is your greatest single asset. It’s not money. It’s not anything else. Without time, what are you going to do? You can be the richest man in the world but one second to live, what good is it? Being able to be free, you can say, “We’re going to take the kids and go see my in-laws this Thursday morning.” I’ll clear my schedule for the weekend and we’re gone for four days. Who did I ask? Nobody.Slow down because when you're moving too fast, that's when the mistakes happen. Click To Tweet
You didn’t need to get permission from somebody. That’s one of the things I look for when I go through my students. I don’t want to take everybody. I want to take somebody I can help. One of the things I’m looking for, “Have you had enough of people telling you what you can wear, when you got to show up, what time you can leave, how long you can go on vacation, how much you can afford to pay on vacation, how much you can make? Have you had enough of all that? If you had enough of that then you have a little bit of that angst that it’s going to take to get to a different place.”
It’s motivation to do something different.
I’ve told a lot of people this, “If you’re not pissed off enough yet, call me in a year. You got to be pissed like, ‘I’m not doing this crap anymore. I’m pissed.’”
If that didn’t piss them off, I don’t know what would. You’re giving them the kick or slap on the rear end of the horse to move a little faster.
You’ve got some giveaway stuff. Tell us what you got to give away here to the audience if they wanted to take a part of it.
If you’re a passive investor, one of the things that are always frustrating is vetting deals. When I started out, you’d see all these deals that come across your desk from twenty different deals or sponsors. You’d spend two hours looking at it wondering, “I wonder about this. Does this make sense? Is that a market I want to be in?” By the time you’ve got two hours, you’re not quite sure and you see another one come across your desk. At twenty deals, you’ve spent 40 hours and you still have no direction. It got frustrating. I spent a lot of time getting bogged down with no progress. There’s a checklist I have that you can download. It’s called How To Vet a Deal in Under 10 Minutes. It’s a free guide on our website. You can go to 1000Houses.com/bricken. It will help you refine your criteria as to what it is you want to be investing in either as an active or a passive investor. I use the guide even myself. It’s something I put a lot of time into writing and thought into going, “How does this work?” Even so, there are still active investments that come across my desk. “Do I want to buy this? Is this something I want to deal with? Let me look at.”
If you want to learn how to size up investment in ten minutes to see if it’s worth your time, go over there. Get your hands on it. It’ll be a download. That sounds interesting. I want to have that just to have it because that would be a problem for me to be looking at these syndication things and like, “I don’t know what to look for. How do I know these guys are telling me what’s right and what’s wrong?”
It’ll help you refine your criteria. That’s probably the most useful. There’s a second download on there. It’s a guide to help you figure out how to quit your 9:00 to 5:00 by investing in real estate. That also is an option there as well.
That’s dear to my heart because my show is all about helping people fire their boss or quit their job because it frees up 2,600 hours to figure out who you’re supposed to be, be what you’re supposed to be to your family and to yourself in whatever. It’s hard to be all you’re supposed to be when you’re giving 2,600 hours a year to a job, making someone else rich and letting them go all over the country in becoming bigger and better at what they do. We all need jobs. I’m not running jobs down in Norther Boston. I am a boss but I’m saying at some point in some phase in everybody’s life, they’re like, “It’s time to go to the next level. This job is not working out.” We did the math and 40 hours a week times 50 is not 2,600. It’s less than that. I said, “You got to be the guy that has an eight-hour-a-day job but goes and spends 10 or 12 hours because it’s your name on the job.” That’s the guy that’ll make it in this business. If you’re not that guy, don’t quit your job yet.
Especially starting out, people think, “Isn’t it great working for yourself?” It is. I wouldn’t have it any other way but it also comes with its own set of caveats that if you’re not prepared for, they’re very real.
Let’s do the good and the bad. Let’s start off with what was the syndication that maybe you didn’t look at hard enough, didn’t know the right things and didn’t go the way you want it? How did it bite you? How bad was it?
I’m fortunate and blessed that every end deal I have invested in has performed on the syndication side. I always say this, “If you ask somebody in a given business and especially in real estate, ‘Tell me about a deal where you lost money and they say, ‘I never have,’ then don’t invest with that person.” If that’s the answer then, “I won’t invest with you. You got to tell me when you lost money.” I can tell you personally I’ve lost fistfuls of money. This was on the single-family side and it was all my own capital. I took some bruises early on where I didn’t do my due diligence well enough on the property. You get to a point especially when you’re buying tons of houses, you say, “I’m not paying $500 a house to have some inspector go in there, turn on the faucets and say, ‘The water runs and that water heater is old by the way. Thanks.’” That worked out well but it did bite me a couple of times. Maybe I should have had those inspections done because the times it bought me would have paid for all the inspections that didn’t have done. I did that 2 or 3 times where I was like, “There’s a six-figure price tag attached to that where we lost money.”
That makes that $500 inspection seem pretty cheap. That’s a lot of inspections. I’m laughing with you because I’ve had the same. I haven’t lost on a ton and thank goodness, the ones that I lost on, they didn’t all happen in 1 month or 2 years. Tell me if this is why it happens to you. You get moving too fast and you don’t slow down. You cut a corner because you’re anxious to get to the closing. You’re ready to do. That’s the one thing I see about a lot of young investors. They’re so anxious to make a deal that they feel they’ll sign their name on anything. I’m like, “We’re only signing if this thing makes money. Let’s slow down. Let’s run our traps and figure out why this thing is cheap. It might be another reason. We need to figure out if there’s some reason that they’re not telling us.”
“Slow down because you’re moving too fast,” and that’s when the mistakes happen. Earlier on, I was probably more of a deal junkie than I am now where it was like, “I want to get more deals in the pipeline because the more we’re doing it, the more fun it is. The more fun I’m having, the more money we’re making.” At this point, I’ve refined that to where it’s like, “You got to sell me on why we’re doing this because there’s a ton of stuff that comes across my desk now and very little of it makes it past five minutes of review.” That’s me writing checks that I didn’t ever need to write for mistakes speaking.
Do you offer coaching? Have you ever mentored anyone or no?
I don’t. This is not where I am in the cycle of my business. We’ve got enough things going on and we’re launching enough initiatives that that’s not something I have the bandwidth for.
I want to make it clear. You don’t have anything to offer as far as selling anything. You’re here strictly for the content and to give back to the community which is a great thing. I like it. I admire that. You’re even giving away some free stuff so people can help. There’s no funnel attached to this. Go ahead and get that free stuff over there. Don’t expect Sam to be calling you in the middle of the night trying to talk to you about anything because he’s not going to be calling you.
I’m always welcome to chat. If there are investors with questions about any asset class, I’m happy to talk about it. I’m happy to always talk about what it is that we do here at the Bricken Investment Group and talk about the deals that we’re investing in. Outside of that, I won’t pester you. It’s free resources and free content. I’m happy to help in any way I can.Take whatever money you have and put it into income-producing assets. Click To Tweet
I’ve always loved the parking business. I see parking garages where you got to pay to go in and everything. What a business that is but how did they hold up in COVID? I could see where they might have had a slow down because people quit moving.
They got hammered. There’s no other way to put it. We liked parking because it’s a fairly recession-resistant asset class.
This wasn’t a recession.
I’m clarifying my comment here. It’s recession-resistant but it’s not pandemic-resistant. Who’s going to ball games, bars on nights and weekends, concerts, courthouses or jail? Your courthouse and jail lots are goldmines. They’re there for an hour and then they pay $10. They turn over six times before 2:00 in the afternoon, a gold mine. Even that got weird. The whole thing took it on the chin. This is shifting. As the country reopens, there’s becoming more opportunity and we’ll go back into buy mode in that asset class.
What we saw happen was net operating income fell off a cliff but yet asset prices remained the same because you still had people out there doing construction. The building didn’t slow down that much so sellers still want top prices. They were tough to underwrite. Those assets were difficult to underwrite pre-pandemic. In the pandemic, they were impossible. No bank was going to lend against an asset. For instance, there was a deal in Houston we were trying to buy. We had offered them $3.7 million in February of 2020 based on revenues and then in March of 2021, we offered them $2.7 million. Even at $2.7 million, it wasn’t even covering taxes. The revenue was gone. We were still overpaying for something. We were being a speculative land play on that deal but that shows you where a lot of the assets had performed. It’s turning a corner and I see great opportunities that are going to be coming our way in that asset class. That’s how it survived or performed in the pandemic.
Who would have thought of that? It was never even on anyone’s radar, a pandemic. We’ve planned for all kinds of things. It never showed up anywhere as something you should even think about. Hopefully, you survived or had enough money to put away. That’s one reason I keep telling myself and my partners, “Don’t get too many things running at one time. Get 1 or 2, completed, up and running, home and then move on to the next.” When you’re completely spread too thin, if something like a pandemic happens, it could cost you everything that you worked for your whole life if you’re not careful. Try to tell me that when I was 24. It’s like, “Slow down here. Don’t be running so fast. You’re going to stab yourself in the eye with a pencil. You’re going to fall.” I sound like an old man now sometimes. Do you do things all over the country or just in a certain region? Do you go wherever the deal is?
We go where the deal is but passively, I’ll go anywhere if the deal pencils and it will almost anywhere. It needs to be in states that still believe that you can buy stuff and own it without too much interference. Passively, I’ll go to a lot more places than I will actively. Everything active that we have is from Tennessee, East and Southeast. That’s what our geographic area looks like.
What’s your advice to some of the young entrepreneurs out there who are trying to figure out how they’re going to quit that job and how they’re going to find their freedom?
Take whatever money you have and put it into income-producing assets. A lot of people have made a lot of money in the last few years on the stock market but I don’t have one red cent in that casino because I want to buy income-producing assets. The sooner you can wrap your head around the idea that income-producing assets is wealth, buy those things. Put your money in those things. Find anything that can produce an income and then go buy it then reap the rewards from that for as long as you can and keep compounding that. That’s the fastest way out. Otherwise, you end up hoping and praying that someday the stock market goes up and there are no fundamentals involved in that. I try to tell all my nieces, nephews and everybody else in their early twenties like, “Go buy a rental property or something.” I’ve got businesses that throw off very healthy income streams and I’m not involved in it. It’s an asset that produces income. Look for that. Put your time and effort into creating that stream of income.
I remember reading Kiyosaki defining what an asset is. An asset is something that brings in more money than it cost every month. All of a sudden, your banker’s application for a loan makes no sense. The list of assets, boat, car, house is not making me any money but they’re all under the asset column. We’ve been trained wrong from the beginning. It’s simple. The asset that you want makes more money than it costs every day. I don’t care what anyone else calls it. It has to produce more than it costs every month. Go find that stuff to buy. If I’d have started at 20, 21, 22 even 25, I didn’t find my butt with both hands until I was 34.
When I had had enough then I started reading, trying to figure out starting at age 34 like, “How come they’re doing all that and I’m not?” Try to put one together. That was one of my first decisions. I’m not buying crap anymore. I’m only buying assets. I don’t care until I can get enough to have some fun, I’m not buying anything but assets. I don’t care if it’s fun or not fun. I’m not buying anything else. My friends were buying boats, motorcycles and I’m like, “I bought this little acre over here.” “That doesn’t sound fun at all.” I said, “It’s not.”
I want you to stop by and learn how to analyze an investment deal in ten minutes, a little free booklet or you can go over there and learn how to escape your job. Go to 1000Houses.com/bricken. Check it out. I would like to thank everybody for stopping by to get you some Sam Wilson. I appreciate everything you’ve been doing and your being on the show. I liked being on your show sometimes. We’ll keep it up. Check-in with each other every now and then.
When we come around next time, I want to show some people some new things that I’m in. I don’t have time to talk about it now but when they have these big booms in these economies, you got to take a left turn out of the herd somewhere. I’m trying to find where it is and I figured out where it was for me in 2021. We’ll talk about that sometime. Sam Wilson, my pleasure. We’ll talk to you soon.
Thanks, Mitch. Appreciate it.
About Sam Wilson
I am passionate about Real Estate. I focus on acquiring and syndicating niche commercial assets that cash flow with super stable returns. I love helping others place money outside of traditional investments that both diversify strategy and provide solid predictable returns.
I’ve invested in real estate in just about every way possible from auctions, foreclosures, fix and flip, rentals, hard money, syndication, subject-to, lease options, brokerage, self-directed IRA purchases, commercial assets and more. I love all the opportunities that investing in real estate can bring.
Love the show? Subscribe, rate, review, and share!
Join the Real Estate Investor Summit Community: