Who says investing is only for real estate, stocks, and bonds? The investing world is just too big not to be creative. And if you can do just that, then you should be able to invest in the stuff you like and understand with a great future to match! How do you do it? In this episode, Lauren Wells interviews Jeff Watson, Ohio attorney and real estate investor, to share with you how you can creatively invest through self-directed IRAs. Adding another perspective to the conversation, they are also joined by our marketing manager turned investor relations coordinator, Toni Shackelford. Together, they dive deep into getting started on self-directed IRAs and planning your long-term wealth and retirement. Win the financial game and achieve escape velocity today!
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How To Win The Financial Game And Achieve Escape Velocity With Jeff Watson And Toni Shackelford
I am joined by not 1 but 2 guests. One is that you have already heard from, actually, both of them if you have been reading the blog long enough. I’m joined by Jeff Watson and Toni Shackelford. Jeff is an Ohio attorney who has had an active trial and hearing practice for many years. His resume is crazy long and crazy amazing. Most lawyers would love to have probably the same resume as him.
As a real estate investor since the early ‘90s, he has been investing in both residential and commercial properties. Jeff has been through full market cycles. He is a recognized thought leader and innovator in the field of real estate and notes investing, wealth building and self-directed retirement accounts. In 2018, Jeff became a member of the Board of Directors with Quest Trust Company, a nationally recognized leader in the self-directed IRA services space.
Toni, I will give you a little intro. You might have listened to Toni in the past. Toni is a member of the 7e Investments team, our marketing manager, and turn investor relations coordinator. She is here to add another perspective to this conversation. We are going to be talking about self-directed IRAs getting started with one, what they are, why they might be important, and how to plan for your long-term wealth and retirement. Welcome, Jeff and Toni. I’m happy to have you both here.
I’m thrilled to be here. I’m looking forward to this.
A little background, we all met at Quest Expo. We have been trying to get Jeff on the show ever since. This is the first time we have been able to meet up. I’m happy to have you. Do you have anything you want to add to your bio?
It is a huge privilege and honor to be on the Board of Directors of Quest Trust. I’m getting a front-row seat at how this company, from 2018 until 2022, has gone from $1.4 billion to $2.7 billion in assets. It is double the number of dollars it now has for its clients and customers. That is an impressive rise. We are not talking million there. I use the word that begins with a B, as in Billion.
I got some responsibility there for oversight and direction. I get to hang out with some of the smartest, most talented people in the IRA space possible. It makes me sharper and better. It is a lot of fun to nerd out with fellow like-minded folks. That is what I want to do now. Let’s nerd out a little bit. Let’s not go ultra super nerd because if you let me, I will forget what forest I’m in and what tree I’m looking at. We will start talking about the texture of the bark on the tree.
It sounds like our co-host is not here. His name is Chris. We are familiar with that. We will keep you on track. To kick us off, we have done an episode with Derreck of Quest. He talked about what a self-directed IRA is. If you are reading and want some education on that, I encourage you to go back and read that episode. It was informative. Derreck is amazing.
From your perspective, Toni, we want to talk about why is this self-directed IRA important. You joined us in July 2022, right out of college, and it is your first job. We are like, “Here you go. Here is all this information. Help us build a marketing plan.” What were some questions that you had when we started throwing out self-directed IRAs? This is important. This is what you can do with it. What came to mind for you?
No one ever tells you what a self-directed IRA even is. They only tell you about investing in your 401(k) and Roth IRAs. It was a brand-new door I had never even heard of, opened or looked at. Quest was my first conference ever out of college. It was a great experience in terms of learning about all of that and meeting everybody. It made me realize that no one my age knows what that is or why it is important. It was unknown that I needed information on it in education, which was why it was helpful having you guys there.
Let me jump in because I completely agree with where Toni is going with this. I’m going to cover this at a high level because if you need more, read what Derreck Long has to say. A self-directed IRA will allow you to invest your IRA dollars, whether traditional or Roth, whichever one you have, into something other than stocks, bonds, mutual funds and ETFs.
If you want to do alternative investing, such as you want to do real estate, own notes, lend money, buy into a private placement memorandum, invest in syndication or do other creative things. You are going to need to move your IRA over to a custodian that lets you truly pick what it is that you want to invest in. Get away from the custodians. Those are going to simply be shoving your annuities. Using an IRA to buy an annuity is a rip-off. It is like wearing two raincoats. You don’t need two of them.
Stocks, bonds, mutual funds and ETFs, there is a place for all of that. I push money every month into a big index mutual fund but I also push money every month into a self-directed retirement account. I diversify. I do it both ways. The message that self-direction does, and this is what I think will resonate with Toni and the people of her generation, is that it lets you invest in stuff that you like and understand.
Trying to get a Generation Z individual to enjoy a conversation about mutual funds and dollar cost averaging and indexes versus global versus the non-global index. If there is not a TikTok video on it, they don’t care. Once you realize that you can take your retirement dollars and wisely invest them into stuff that you already understand or that you are quickly learning, it makes a lot more sense. You got a lot more control, and it gives you a lot more security.
You are talking about what it is. That is something important for my generation to learn. I don’t think a lot of us know where to start. When I started working, Lauren helped me set up my 401(k) but no one told you what to do after that. Where to start once you have that, and when? Like, “How much do you need to start it?” All of those bits and pieces are important but no one tells you.
You are right. No one ever tells you. When you are first getting started, and you get a job with a 401(k) opportunity, then you want to push into the 401(k), particularly if it is a Roth 401(k) because the employer match. That is important. You also want to make sure that if you get extra dollars at the end of the month, you are pushing some of that into a Roth IRA.
In the beginning, before you know what to do with it, I have no problem with sticking your Roth IRA in a garden variety index fund of any kind, a money market fund. I’m fine with that because you want to get into the consistent habit of saving money every month. If you are in your twenties and you can get accustomed to the habit of every month, money goes into your 401(k) and Roth IRA. After a couple of years, it is normal like breathing. It is like eating avocado toast or a video on your phone. It is normal stuff.
You are speaking our California language out here.
I’m trying to relate because, let’s face it, the world needs to run out of boring old White guys exclusively talking about this stuff. We need to get some variety in here. I’m trying to encourage that variety. Consistency is monthly consistency. The annual contribution is somewhere right around $6,500 beginning in 2023. We are looking at $500 a month. It is a good program to be on. Once you get between $5,000 and $10,000 into a Roth IRA, it is time to start saying, “What are some alternative investments that I can do with this that I understand and like that I’m comfortable with?”
I never want someone to do something they are uncomfortable with in their self-directed IRA. I never want someone to do something they don’t understand with their self-directed IRA. I want them to have asked a lot of questions and have a high comfort level as to what they are doing and who they are investing with. “How is it going to work, and what is going to happen? If something goes wrong, what do we do? How do we plan for that?”
Once you get that between $5,000 and $10,000 and you are consistently throwing money into it, you can find that perfect type of investment. It may be that you are going to go specialize in doing what I teach, a course on 10 for 12 loans. He loaned $10,000 out. You get back twelve payments of $1,000 a month. That goes to a landlord that needs to replace an HVA system or something like that. You were going to lend your money and wrap it around somebody else’s money on a bigger deal where your $10,000 is going to wrap around somebody else’s $90,000. That is going to be a $100,000 loan.
All of these things are taught inside different trainings that Quest makes available for free. Once you know what you are going to do, then move the money from that boring money market fund over at your bank or credit union, move it over to Quest Trust and do the deal. Make one other little change. Make it change to where then the auto rip out of your account every month instead of going to that bank with the money market. It is now going over to Quest. You continue to fuel that one at up to $500 a month. Those are my thoughts.
This is a good clarification because opening a Roth IRA does not have to be immediate with Quest. You would say, “Open it with your local bank or credit union. Put it in a mutual fund.” That is step 1). Step 2) Making those consistent contributions. In step 2) You also got to educate yourself on what interests you outside of mutual funds and what other alternative investment classes so that education piece, which I feel is important and is what is missing, is within step two of contribute and educate. Step 3) Would be to move it to a self-directed custodian. We all love Quest over here. Start investing in that alternative asset you have gained that education on once you hit that $5,000 to $10,000 mark.
Quest has in its archives a presentation that I did on if you can consistently contribute $500 a month into your Quest Trust account and you do these 10 for 12 deals. You can, in about seven years, turn $10,000 into $100,000. Once you get to $100,000 in a self-directed Roth IRA, you have achieved what the geeks like me call critical mass because now it is capable of earning more every year in interest and profits than you can contribute to it. Once you get to that point, it gets fun to watch the power of compound takeover. Toni is bright for her age group because she already understands the power and magic of compound interest. We had this conversation. Her eyes lit up, and it was a blast there at Quest Expo, but she gave it.
For our readers, who might be Toni’s age because Toni hears this all the time. You look at her eye, and I look at her like, “You are young. You have so much time.” I’m sure people will roll their eyes, and they were like, “I hear that all the time.” Give an example of how that time works in their favor.
I will give you a classic example. It is taught in many different forums. If you begin at age twenty and contribute $500 a month to a Roth IRA, it earns an average of 8% or 9% a year, and you do that every month from age 20 through 30, and you stop at 30. Don’t put any more money in and let it keep earning that 8% or 9% every year. You will have more money at age 65 than a person who starts at age 30, putting $500 a month in and doing it all the way to age 65 because of that ten years at that youthful age with that power, you start a snowball rolling that it becomes the eighth wonder of the world to quote Albert Einstein.
I remember being at Quest and Jeff. That is where I met him. A couple of hours in, there was an extra seat next to me at our booth. He was like, “Do you mind if I sit here?” I was like, “Sure.” I heard you were a big deal. I was honored that you sat here with me. Jeff whipped out his phone with this calculator and started punching all these numbers. He was like, “You start doing this at 24.” He explained and showed it to me physically. I was like, “Everyone needs to know this.”
It seems simple but I would have never seen that little calculator and any of those calculations without having you. Everyone there is nice and willing to help in this industry in general. Having those people have your back, and that is why I wanted you on the show. I was like, “This is simple enough for me to understand but also keep learning from because I also have Lauren to back me up on everything too.
Here is what she was talking about. This is my cell phone. I got an app on it that is a financial calculator. I don’t have a pocket protector but I have two financial calculators with me wherever I go.
Let’s shift to my generation, Millennials. Toni has touched upon, and we are bringing you on this show, is there is a lack of education around planning for retirement in a way outside of your 401(k) and 9:00 to 5:00 job. The younger generation, Gen Z, they are much more aggressive in not going that corporate route and looking at different options. It is awesome.
Millennials are split depending on when you were born, 50/50 on if you have taken the time and looked outside of the norm but there is a lot of us who graduated college and got a 9:00 to 5:00. That is what we will be doing for the rest of our lives or what they will be doing, or people will be doing my age. We are hearing about all these other options, self-directed IRA.
We are in 30 to 40. We will use that age range. We have kids and a mortgage. Now what, Jeff? Let’s put it in my shoes. I have a self-directed IRA and a solo 401(k). I did it, and my concern is that I have two kids. What do I do? How do I help them? How do I educate them? How do I set them up for success? How do I set myself up for success? I’m feeling behind. What would your advice be?
The first thing I’m going to tell you is, “Take a deep breath.” For anybody in your generation that is reading this, I want you to take a deep breath. The fact that you are aware of the situation puts you ahead of most people. The fact that you are going to do something about it puts you in front of even more people. Let’s get down to the fact of the back end of the Baby Boomer generation, which is where I belong, and the front half of the Millennials, we are in what I call the Sandwich Generation. We get squeezed on both sides. Let me explain what I mean by that.The fact that you're aware of the situation puts you ahead of most people. The fact that you're going to do something about it puts you in front of even more people. Click To Tweet
We have come out of college, and I went for eight years. I got four years, a year toward a Master’s degree and three years of law school. I got eight years. You come out of college. You get a decent job. You are paying for your school. You got kids and taking care of your older parents. You are getting compressed on three sides. Your lifestyle, kids, and parents are hitting you. You are getting boxed.
You got to do something where you see the light at the end of the tunnel. You got to be able to say no to your present self about the $50 bottle of wine and grab the $15 bottle of wine. Put the extra savings off to where it is going to go matter somewhere. If you can do these things consciously, it will help. Where I want to go is that it is not how much money you accumulate. It is the cashflow that comes off of that money. It is the knowledge that you have to determine what investments are going to give you better cashflow.
I’m going to go back and say this word because I want you to sink into this. Cashflow, you can have $1 million in the bank earning 1.5%, and you don’t have enough cashflow to buy dog food or you can have $1 million in a self-directed retirement account that owns a combination of notes and real estate. It is generating $25,000, $30,000 or $40,000 in cashflow on a regular basis.
The first metric was escape velocity. By controlling my living expenses, driving an older car with higher miles, and not having certain other things, I could keep my living expenses down and have more money to invest. Once I got to where now my monthly quasi passive cashflow exceeded what I needed to live on, I hit what I call escape velocity. I get to do the stuff I want to do.
When you are living in that compressed lifestyle of, “I’m still taking care of some kids. My kids are all still young adults. I’m still helping them and my mom. I still got some of my own things in my own. I’m still getting compressed on three sides but because I have hit escape velocity, it doesn’t pressure me so much. I’ve already found my outlet.”
I’m going to go back to Toni’s generation. Pay attention to some of the stuff that Gary Vaynerchuk is saying. If you are who he is talking about, that you are a Gen Z, you have said screw it to the corporate world, and you are going to do your own online entrepreneurial thing. God bless you. I love you. Quest Trust is going to have a solo 401(k) product for you that is going to be fantastic lights out for you. It is coming out in January 2023. You, in that Gen Z category, are my huckleberry. You are who I want to talk to because you figured it out. You are not swapping hours for dollars for the rest of your life.
I love Gary Vee. I heard that sandwich generation analogy. I’m not part of that generation but I have heard and seen it with some of my friends who are a bit older that are taking care of their parents. They have young kids. When I’m looking at it from an outside perspective, the ones who are doing what you are saying versus not do feel a lot less stressed about their life.
For people who are in the Millennial generation and may not have the Gen Z mindset, what would your action items be for them? A lot of Millennials and my peers I talk to I love my friends but some of them, I’m going to call you out. Those lifestyle choices will catch up with you. You said, “Grab the $15 bottle of wine.” You don’t need a new car and phone all the time.
My action item for my generation is don’t live within your means, live below your means, and put money away so that you can live that life later that you want while everyone else is probably still working there from 9:00 to 5:00. Maybe that was your action item. I summarized it and stole it from you. What would your other action item be?
I’m going to take your action item and flash it out a little bit more. I’m going to be flat out and hurt somebody’s feelings with this, and I don’t care. The easiest person for you to lie to about money is yourself. I don’t care if you are a Baby Boomer, Millennial or Gen Z. You are lying to yourself about your money. You need to become accountable to yourself about money, which means you need to borrow a well-known guy’s name or phrase. You need to make sure every dollar has a job assignment every month. You should have an idea of how much money you are going to make every month.The easiest person for you to lie to about money is yourself. Click To Tweet
Every dollar needs a job assignment. Some of those job assignments are going to be like, “Lauren needs a fun day. Toni needs to have a good evening. Jeff needs to enjoy Chick-fil-A.” or something like that. Some of those dollars are going to be that way but some of those dollars are going to be like going to work for building your generational legacy and wealth. That is a big thing.
I got news for you. You are going to look at this thing, and it is going to be YOLO or YOYO. YOLO is You Only Live Once. YOYO is Your On Your Own. Nobody from the government is going to come and give you a comfortable retirement. You are on your own for that. You better do something about it. That means being honest and live brutally honest with yourself about money. Live on less than you make. Give every dollar a job assignment.
I’m going to tell you the other thing that I do that was painful at first but I finally got used to it. I get paid once a month out of the law firm that I run and operate. After that check hits my account, two things happen every month. All my charitable giving is automatically yanked out of my account. I don’t have to do anything. It happens. Everything went to my church mission organization. It is gone. The next thing that happens without me doing anything to happen is that money goes into my retirement savings. It is not dependent on me to do anything. It is not what mood I am in. It happens automatically. I’m left to live on what is left over, and I got to make it work.
Something you said is important because when people say, “Live below your means and budget. Know what you are bringing in.” My husband and I have a financial meeting every month. We look at our finances. We have always been weird like this. When we started dating, we had that even before we knew we were going to get married. We knew right away. That is another topic. We have always had this Excel spreadsheet. He is a total Excel nerd. We know the burn rate and all of this. If something were to happen, how would we adjust?
This is important because people are like, “You budget.” Do you know what I love? You love your Chick-fil-A. I love my lattes. Not every day. It is happiness in a cup for me. I’m not going to cut something like that when I would rather cut in other areas. It is not only about budgeting. You can still live and have fun. I’m not going to cut the latte. At the end of the day, it is not going to crush my bank account. It is all of the other things that accumulate that aren’t adding value that will make or break it. That is what you are saying about the fun money.
Here is the thing that a lot of people seem to forget when we use that big bad B word called Budget. They are making their own budget. You got to live according to your own plan. If you can’t plan for yourself, why do you have a driver’s license? Why do you think you are an adult? Please tell me you are not trying to rear children if you can’t plan for yourself. I’m sorry. You haven’t made that adult threshold in my eyes. That probably will offend somebody tough.
It is important that you said, “You get to make your own budget. You get to stick to it.” For a long time, Millennials we are getting bashed on their avocado toast and lattes. Even Gen Z spend money on all these things but they also do a lot of innovative things that the older generations do not do.
Baby Boomers spent way too much money on automobiles as a category. Gen Zs have figured out that in a lot of places, cars are completely optional. They are not falling into that same trap Baby Boomers got hooked in, and that is great for them. I want to circle back on this one because I’m not trying to beat anybody up. I’m trying to share with you a plan to where you can achieve escape velocity faster, which is live beneath your means, and push the money aside into your Roth 401(k) with your employer because you are going to get a match. That is always a good thing.
Once you get $5,000 to $10,000 in that Roth IRA, begin educating yourself as to what it is that you like and understand in the alternative space, real estate, notes, loans, and all sorts of different creative things that are out there. When you find something that you like, understand and are comfortable doing, pull the trigger and do it. You would make more money if you got access to a financial calculator.
It is different from a regular calculator.
I will try and do this calculation live. I’m going to do it this way. Let’s say that we take over the next ten years, which is 120 months, and we put money to work at 8%. We start with nothing. We have $500 a month going into it at 8% consistently. $500 a month, starting with nothing. After ten years is $91,473. We change that interest rate to 12%.
Why 12%, Jeff?
It is the number I grab. I’m now up to $115,000. Let’s change it now to 18%, which is still less than what credit cards are charging you. At that same time, we are at $165,000. If I can use my self-directed IRA to invest in something that I like and understand and get an 18% rate of return instead of the 8% conservative rate of return, I’m going to get on most of my mutual funds. How much further ahead am I? I’m going to nerd out. We only did that for ten years. Let’s go for twenty years instead. You are not going to believe this. You owe twenty years at an 18% rate of return on $500 a month every month for twenty years. We are at $1.15 million.
Here is my question because I know people reading might think, “Eighteen percent, how realistic is that?”
It depends. There are deals that I have done where I didn’t make 18%, and there are deals that I have done where 18% was only half of what I made. It depends on how much you learn and how well you build a network of other like-minded individuals, which that is another thing. We could spend a whole episode talking about that. Increase your skillset.
Rates of return are curious. Have you ever looked at the price of a bottle of water? You could go to Costco, Sam’s, DJ’s, Walmart, and Target. You can buy a big package of water. It is $0.24 or $0.20 a bottle but you can get into certain environments like inside of an airport, where that same bottle of water is now selling for $3. Did somebody have a nice markup on that? Yes. Did some local government authority get a nice hefty sales tax off of that? Did they also collect nicely off the rent? You better believe it.
There are different ways of making a rate of return. You are not going to find it on the MLS and Wall Street. You are going to manufacture it out of finding good opportunities that you see that no one else does. My favorite thing, and I have filled an IRA account with this, is I will take $5,000 to $10,000 of my money, and I will wrap it around somebody else’s $90,000 to $100,000. We will lend it out. My rate of return is well north of 18%. The borrower is paying anywhere between 9% and 12% on their money but because of how I structure the deal, I make over 18%.
The key takeaway there is the education aspect. Adding that $500 a month, don’t get me wrong, is better than doing nothing. To maximize and increase your potential, you need to educate yourself outside of what is taught, even though it is not taught outside your 401(k), stocks, bonds, mutual funds and fidelity.
Let me give you one more thing, and Toni, I want your feedback on this. All human beings have what I call a greed gland. We can see FOMO kick in, the Fear of Missing Out. It causes us to not pay attention to things we should be paying attention to. Hence now, we got some guy that has been on Shark Tank for how many years talking about how he, because of FOMO, not doing his due diligence, lost how many millions with FTX. You cannot invest based on your greed gland. You got to avoid FOMO. You got to do your due diligence. One thing that Gen Z is going to be good at is due diligence because you guys were born skeptical.
I agree with being born skeptical but I also think my generation was into the crypto stuff, probably up until now. There needs to be more education on the other things because the FOMO was real. I remember talking to my more financially savvy friends. They are talking about all their different investments but a lot of them were extra risky, in my opinion. After all of that crypto stuff went down, the due diligence will set in and kick in fully because they are going to have to educate themselves on how to be a little bit more conservative in terms of their investments.
Since we are not taught, especially in my generation, you only think your only investments can be in the stock market and things like that. People are going to have to shift gears with how the market is going and teach themselves all the other investments they can get into. Off of that planning for the future being my age, you talked a lot about different tips but is there any big piece of advice that you would give us for financial planning?
What I would give you is the most important thing. I’m grateful to a friend of mine. I consider him to be the godfather of self-directed IRA investing. His name is Lyle. He is out of Colorado. I don’t want to embarrass him by giving away all the details but Lyle has forgotten more about this stuff than I will ever know. He taught me many years ago. He said, “Jeff, know your burn rate.” Lauren mentioned the same term a little earlier. Toni, what I would say is, what do you need a month to live on? Know what that number is and begin building systems, investments and processes that give you that money on autopilot, whether you get out of bed or not that particular day.
I’m to the point where I got to get out of bed at least a couple of days a month to get my autopilot money to show up. Other than that, it is good. Once you get to that point, you get to know what your goal is. If you don’t know what your goal is, you don’t know what you are chasing. As you can start measuring your progress towards getting there, and you are going to get your progress because it is going to come in two ways.
As you increase that autopilot income and get rid of expenses, such as if you get your student loans by paying them off a little early, you get rid of expensive rental property and get a little more savvy about how you rent and house hack. Another little trick you can do is to keep lowering your expenses at the same time. Every expense escaped is the same thing as increasing your income. Once you see that goal coming there, by those two things happening, the expenses are going down, and your autopilot income is going up. It gives you more energy and wind beneath your wings and sales. It drives you for it.
What did you call it? What was your word for it?
Escape velocity. When I was young in law school, business owners would call it too money. They could walk away. I’m like, $2 million no longer qualifies for that.” The cashflow that you could get off of $2 million may qualify for that because you can put $2 million in a certificate of depression and not have enough to buy dog food. If you put $2 million into the right deals, pick up the right notes, maybe buy the right rental properties, and do a combination of those things, you are going to be fine.
I have a question for you because I see and hear this a lot speaking with investors who maybe this is their first alternative investment in our fund. Setting expectations because partly to blame is the last few years of anyone could throw money into the real estate market in the last several years and make money.
You heard me call it buy and breathe.
It is a product of that and social media that I have made people think they can become an overnight investment millionaires. I hear it a lot when I’m speaking with investors for who this might be their first investment, “Is that it? That is all I’m going to make?” Eight percent to start is good but it’s all about how much you are putting in. What advice do you have around expectation setting for people because it is a big mess?
What I would say is that someone who has that unjustified expectation is either 1 of 2 things. They have not done enough overall research or they think way too highly of themselves than they ought to think. Mortgage rates nowadays are finally close to what they have been on average for the last several years.Someone who has that unjustified expectation is either one of two things: they have not done enough overall research or they think way too highly of themselves than they ought to think. Click To Tweet
You give away to how old they are.
How new or how inexperienced they are. I’m looking at them going. “You weren’t around in the Resolution Trust Corporation era. You don’t know who Jimmy Carter was and is. You never heard of Paul Volcker, did you?” I’m like, “You don’t know enough.”
Do you let that stop you? As you mentioned, for people who are looking to get started and are hesitant about rates or whatever the state of the economy, when is the right time to start?
There are two perfect times to do a good deal. Several years ago and now. It is that simple. I don’t know about anybody else but I haven’t found a time machine yet. That DeLorean has shown up in my parking lot with those features. The best time to do a good deal is now. You got to make sure it is a good deal. What some people don’t understand is that 8% compounded without having to do any work.
That is a good deal because I don’t know if you knew it or not but some of the folks are reading this, several months ago, there were hard money lenders on the West Coast charging only 8% on their money, and they were doing a lot of work to make that 8%. Eight percent with not have to do anything except check a quarterly statement, which is a good thing. Don’t complain. Be patient. If you are going to get into a fund or invest in syndication, don’t you dare put any money into it that you need for the next five years.
Don’t put all your eggs in one basket, in general.
I got this large deal on my desk, and it has had some performance issues. I represent the secured lien holders. Out of all the secured lien holders that I’m advising and representing, the people with the smallest amount of money in it are the ones chirping the loudest. Don’t be that person.
Toni can attest to that. We have our reggae offering. Our minimum investment is $500. For people who invest $500, $2,000, and $5,000, we hear them more. That’s a bigger investment for them.
My response is that maybe they are not grown up enough yet as an investor. They haven’t done enough of their own grinding it out. The thing that teaches the most maturity as an investor is watching an IRA go from zero. You are opening an account balance or your initial $500 contribution. Every month, it moves up. You are seeing that slow growth until you can finally turn it into double digits. When you get three digits in front of the comma, that is when it gets to be exciting.
Once you get to $100,000 or more on a self-directed IRA, you hit what I call critical mass. It takes a while to get there. You got to grind it out. Some people don’t have that grind because face it, they have been indoctrinated by a bunch of videos for a bunch of marketing phenoms that don’t have 2 or 3 market cycles under their belt. They think it is because they have decided to look at it, that is why it has gone up in value, and it doesn’t happen that way.
We have covered so much in this episode. Usually, I’m like, “Here is the one key takeaway.” I have four key takeaways I have come up with. You guys can tell me if you agree with them. For people who are looking to hit that escape velocity point, I have four steps. Set realistic expectations and goals. Write out, map out, and budget out a visual of how you will hit that and check in. You educate yourself on all alternative investments. Educating yourself outside of stocks, bonds, and mutual funds. The fourth would be to start now and stay committed.
The second item that you shared there is the component of tracking your progress. You had it in there but it wasn’t overtly stated. What is important is to track your progress on a monthly or quarterly basis as to how well you are moving. I got a client. He is a successful business owner and business coach. He teaches, “Check your balance sheet once a month. Update your balance sheet monthly to see how you are moving.” That is good advice.
Being patient was a good point that you had, Jeff, because it is true. In our generation, there are many videos out there about get-rich-quick schemes. Your way of saying it is by grinding it out. That is a good key takeaway for people my age getting started and not understanding that it takes time and holding money into something is a good thing.
I will put it like this. You are going to need to look at 100 business investment opportunities and sort them down to twenty that makes sense. Out of the 20, you will probably only invest in 5. Out of the 5, 1 is going to be subpar, 1 is going to be above average, and 3 are going to be about what you predicted. In there, you have diversified, managed your expectations, and done your due diligence research because you have kicked 100 tires, test-drove 20 cars and only bought 5 of them. That is the way you grinded out and succeeded. If you are going to jump on the first shiny object that comes by, you are no better than the fish in the pond. You got hooked and hauled in.If you're just going to jump on the first shiny object that comes by, you're no better than the fish in the pond. You just got hooked and hauled in. Click To Tweet
Any final thoughts, Toni and Jeff?
I thought that was a great final thought.
I’m going to say one last thing. I may have come across as a little edgy. I’m fuzzy, warm, and likable but I am serious about you being responsible for yourself. You are on your own and take care of yourself. Do yourself a favor. Work for yourself, not for somebody else. You are going to work every day for yourself, not for bill collectors. You are going to work every day for your future. The stuff you need to do now must be building for your future. I’m already thinking about the stuff I’m doing for my granddaughters. I leave it at that.
Jeff, as always, a pleasure to see, talk to and hear from you. We are happy you joined us on the show. We hope to see you at another expo or something in the future. Toni, thank you again for joining us on your second episode in several months. You are a hit. Thank you, guys, both. Thank you to all our readers for reading this episode. If you enjoyed the show, share it with a friend, subscribe or leave us a review. Thank you.
Peace. It is my pleasure.
- Jeff Watson – LinkedIn
- Toni Shackelford – LinkedIn
- Quest Trusts Company
- Quest Expo
- Derreck Long – Past Episode
About Jeffery S. Watson
Jeffery S. Watson is an Ohio attorney who has had an active trial and hearing practice for over 30 years. As a trial lawyer, he has a unique perspective on real estate investing, wealth building and asset protection. He has tried over 20 civil jury trials and has handled thousands of contested hearings. Jeff has changed the law in Ohio 5 times via litigation or legislation.
As a real estate investor since 1994, investing in both residential and commercial properties Jeff has been through multiple market cycles. He currently represents established real estate investors in commercial and residential matters when the transactions involve self-directed retirement accounts. He is a recognized thought leader and innovator in the field of real estate and note investing, wealth building and self-directed retirement account transactions. Thousands of investors have used documents created by Jeff to invest in notes or properties.
Jeff is a nationally-recognized authority regarding regulatory concerns with wholesaling. In his home state of Ohio, he has worked with the Ohio Division of Real Estate and nationally with ARELLO regarding the legality of wholesaling.
About Toni Shackelford
Toni is our marketing manager turned investor relations and is a fresh college graduate 5 months into her first job. She comes to us with her generation’s perspective on real estate, investing, and finance. In this episode, Toni chats with Jeff and Lauren about self directed IRAs and where to start when financially planning for the future.