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TRANSCRIPTION
Theo Hicks: Hello, Best Ever listeners, and welcome back to another edition of the Actively Passive Investing Show. As always, I’m your host, and I am again with Travis Watts. Travis, how are you doing?
Travis Watts: Theo, doing great. Happy to be here, as always.
Theo Hicks: Yeah, me too. Today we’re gonna talk about another one of Travis’ blogs, entitled “Simple, but not easy. The Investing mindset.” And talk about really how to simplify things, and essentially not waste time while you’re investing. That’s gonna be the main theme of the conversation today. As always, I’ll let Travis kick it off by explaining why it is he wrote this blog post, where this idea came from.
Travis Watts: Sure. It seems to be a trend right now. Maybe it’s just me, but as I go through different blogs, and topics, and shows, I keep seeing this theme of starting over again, or what advice would you have given yourself years ago, and if you had to do it all over again, what would you do differently – all that kind of stuff, which is really what prompted this post. So I got to thinking — alright, I got started in 2009 in terms of real estate investing, and these are just some things I really wish I had known; it would have changed a lot of different strategies, and trajectories, so to speak…
For those that don’t know, basically, here’s the bullet points to my first six years in real estate – really complicated, really complex; it was a constant “Learn, learn, learn, learn, try something, realize you don’t like it, start over from scratch, learn, learn, learn, learn, try something and fail, start over from scratch…” And I made it very complex; I tried to go too hard, too fast, basically. I wasted a lot of time, I wasted a lot of energy… I almost gave up a couple times, quite frankly, just in frustration… So it was six years of hassle. So what this blog is really about is to hopefully give some perspective, some mindset, which is kind of the title here… It’s simple, but not easy – it’s an investor mindset that’s really helped me overcome these hurdles.
And the analogy that I thought of – I’ll share this and then I’ll turn it back to you real quick… It’s like, if I was tasked to dig a ditch – well, it’s kind of like I just jumped right in and started using a rock; I started digging with a rock, and then I learned, say, a month later, “Oh, there’s such a thing as a hand trowel. Well, that’s a lot easier. Then I did that for a while. Then I thought “Wait a second… There’s something called a shovel. That makes it a whole lot easier.” Then someone finally said, “Look, man, there’s something called a backhoe, and that’ll really cut the learning curve for you.” That’s kind of how I see it in an analogy form; that was my real estate experience up through multifamily. So I guess I’ll turn it back to you, with that said. Any thoughts to that? Has there been something in your life that’s similar, where you jumped in and did a lot of things perhaps wrong, or in an inefficient way, and learned later “Hey, it’s a lot easier if I just did this”?
Theo Hicks: Yeah, I think I have a really solid example. When I first started investing, I jumped right in. I heard about it from a friend and had a property under contract within 2-3 days. That property itself was fine, so the lesson isn’t necessarily from that; but once I was done, I caught that real estate bug and I was obsessed… And I remember — I was living in Cincinnati at the time, and the plan was to start doing off-market direct mail campaigns. So I went to the auditor site, and — again, I didn’t know anything. I had never read any books, I was just like “I need to make a list.” So I start going onto the auditor site every weekend on Saturdays, and I’d spend hours in the coffee shop, in the Excel document, going parcel by parcel, street by street, manually entering in data into this Excel document… Address, owner, property value. I did this for — I don’t know how long… Weeks, maybe even months. For so long. I would do other things as well, that were also a waste of time, but… That was the one that really stuck out to me.
And I remember — this is so frustrating… I remember [unintelligible [00:07:02].10] all these addresses doing this.. There were just too many; there was tens of thousands of parcels in Cincinnati. There’s gotta be an easier way to this. So I start messing around on the website and I realize that you can email them and they’ll give you a temporary, two-week login, and you can have access to the backend — I’m not necessarily sure what you have access to, but essentially you log in, you select their tax list, you hit Download, and you download every single parcel. So what took me months and months to do in part, I could do in two seconds.
So that’s my example of a complete waste of time. And the biggest problem there, too – I was actually talking to someone about this yesterday – is that not only was I wasting my time, but I also wasted that initial zeal you get when you first get into real estate and you’re super-excited, and you have so much energy… And instead of directing that energy towards something productive, I directed it towards something which was a complete waste of time.
Travis Watts: The classic example of that analysis paralysis to a point, and then also — that just reminded me of one of the first jobs I ever had, which was a call center job… Again, just to use the example of “Simple, but not easy…” Simple task – we need to track the attendance of all the employees. Pretty simple, right? It makes sense. Yeah, but it wasn’t easy. They had no software to do it. So one of my first jobs was to manually, to your point — like, I had all these spreadsheets, and these real-time analyzers, and I’m constantly having to move stuff around all day long, like a manual labor person, trying to track in real-time the attendance, and who’s late, and who’s a no-call/no-show… It was like, “What a joke…!” [laughs]
Theo Hicks: I totally understand… And as you said, analysis paralysis is the perfect example of that. You’re just constantly underwriting deals, and you don’t know why you’re doing it, you don’t know what the end goal is going to be, you’re not even at the point where you can even do a deal… And there’s so many examples of this.
So now that we’ve kind of given both of our examples, do you wanna go into what’s the right way to do this, what’s the right mindset to have when you’re approaching these types of things, whether it be regarding your job, or personal life, or more importantly, passive investing?
Travis Watts: Yeah. I see this all the time too on Bigger Pockets; I’m a fairly active member on that platform. And there’s a lot of confusion, quite frankly, especially for folks getting started, which again, is kind of what this blog was all about. So what I mean is there’s a lot of complexity in the modern world, as you well know. There’s so much marketing, and so many different programs, so many different points of view; in one scroll of Instagram, or Facebook or something, you’re gonna see Bitcoin trading courses, flipping houses, buy and hold; “No, forget about buy and hold. Do the short-term stuff.” “Oh, never do short-term stuff because of taxes. Do this.” And it can be very overwhelming. Without a doubt – I point this out in the blog – you’re always gonna come across people who have extreme points of view, on anything. So the question is then how do you sort that out? How do you not fall for the trap of getting caught in analysis paralysis, so to speak?
So I love this – this is like a 2,000-year-old quote by Marcus Aurelius, which we talked about on stoicism and real estate… He says “Everything we hear is an opinion, not a fact, and everything we see is a perspective, but not the truth.” And I love that, because it makes you kind of zoom out a little bit and just think — because sometimes people are very persuasive, very salesy, and you can just get drawn right into that, that it’s a definite truth; it’s just an opinion, and it’s just one approach. So that’s one thing, from a high level, from the mindset of an investor that can help a lot.
To simplify that, just avoid extreme points of view. If somebody comes out and says “Look, avoid real estate at all costs. It doesn’t work. It’s the worst asset class.” Well, that’s way too extreme. There are endless examples of millionaires and billionaires who are in real estate. So it does work. It works for some…
And then on the flipside, if someone comes out and says “Look, real estate is the only thing to be in. There’s no other asset class. Forget about everything in the world except real estate.” Well, there’s probably not a ton of truth to that either. Maybe it’s a balance of a multitude of things that you invest in, and real estate being just one aspect of that.
So I love this about Robert Kiyosaki – we talk about him all the time; author of Rich Dad, Poor Dad and The Rich Dad company… Listening to Robert speak in modern times — I don’t know when he came out with this (maybe 2019 or something through today) he always talked about the tree sides to a coin; most people obviously think two sides, heads or tails. Well, there’s the edge. And I love this concept. Because if you can learn as an investor to view things from the perspective of standing on the edge of a coin – that allows you to peer over both sides. To listen to the guy saying “Real estate is the only thing in the world to be in”, and to listen to the guy or gal saying “You should avoid real estate at all costs”, and then you can make an opinion yourself based on the facts of looking at both sides and making a decision… I think that’s critical.
He obviously does a much better job at explaining this concept, but hopefully that makes sense just from a high-level, that you have to be able to see both sides of the coin. You have to be able to hold opposing thoughts in your mind to be able to make a decision there.
I’ll pause there just for a minute. Do you have any thoughts on that? Have you heard of that before, or does anything come to mind?
Theo Hicks: Yeah, I think I’ve heard the coin idea before, but I really like what you said. I say this all the time, it is the truth; I talk to people all the time on the podcast, I interview people every week, and every time I talk to someone, they’re doing something different. They’re investing in a different type of asset class, they’re implementing a different strategy – and again, this is just in real estate – and they’ve all reaped some level of success. So you can be successful in any asset class as a passive investor or as an active investor. The possibility is there. The thing that makes one person successful and someone else not successful kind of comes down to a lot of things, but it kind of just comes down to the strategies and the tactics, and as you said, doing the simple things that work.
That brings us to the other thing you’re talking about, which is the coin analogy… Because again, it’s not like the person who says “Real estate is the only thing to invest in”, or someone that says “Never invest in real estate” – it’s not like every single thing that they say is going to be that extreme, or something that you want to ignore; there could be something good that you can get from what they’re talking about. So you don’t want to be someone that is of the mindset of “Real estate is the only thing to invest in”, so someone who says that you shouldn’t invest in real estate, I’m not going to listen to anything that they say; everything that they say is wrong… Right? No, you can’t look at it that way. You have to realize that you’re gonna be able to find something valuable in really anyone you talk with. Even something really small, or something huge. So you don’t need to automatically just discount someone just because they’re like that.
But at the same time, on the other end, it seems that the people that are like that, that are those extremes – they’re very attractive to people, because “I wanna be on that team.” And again, I’m trying to avoid that, and saying okay, I can think that real estate is good, I can maybe only invest in real estate, and even think that I should only invest in real estate, but at the same time still realize that this person who’s investing maybe in something else might have some technology or software or some mindset tactic, or maybe something in their personal life that could help you to be a better real estate investor.
So I think that’s totally true… And what’s nice about some of the things we talk about on this show is that they obviously apply to passive investing, but if you think about it deeper, it applies to a lot more than just your business or real estate. You can apply this to fitness, or your personal life, or relationships, or really whatever. So that’s what I had to say about that.
Travis Watts: Yeah, it’s perfect. And totally, with the title of our show, “The actively passive show”, most of what we’re talking about on all these episodes are the active components to being a passive investor. When we talk about passive investing, what we’re not talking about is just “I’m gonna throw a bunch of money in a 401K, not look at it, not think about it, not really understand it, and just hope for the best… Because I’m passive. I’m hands-off.” It’s being the educated, intelligent, actively pursuing passive investing.
So to your point, this can apply to passive investing, active investing, anything in life really… But these are the active components that I feel are most important for people to pick up on. So let’s dissect it a little bit further – simple, but not easy. If you have a goal – and let’s use a simple goal; I’ve put this in the blog… “I want to build wealth.” Period. That’s my goal. It’s not a very good goal, because it’s not very definable, but if that’s my goal… So here’s the thing – it’s easy, right? It’s easy in the sense that “Well, make money, spend less than you earn, and invest the difference.” There’s your formula.
It’s the same thing with “I wanna lose weight. That’s my goal.” Well, pretty easy, right? Diet, exercise. End of the story right there. But it’s not that simple, because “How do I make money? What do I invest in? How much do I need to save?” There’s a lot of other components to that, and that’s kind of to our theme. So consistency and self-education is the next segment of the blog that I talk about, because there’s other elements that are necessary to reaching your goals.
We talk a ton about self-education on our show, we talk about reading, and podcasts, and books, and finding mentors, and keeping up with industry-related news… That’s seld-education; it’s being a student of your own life, and it doesn’t’ stop when you get your college degree or your high school degree. It continues on. That’s something that you just have to implement to be successful long-term.
The consistency – this one’s kind of interesting, because we don’t really talk about this a whole lot… But I hear all the time by talking to investors of all types and sorts and ages, I like to ask people about their goals… And one I hear all the time on the passive investing front is “Well, I wanna have -” and they’ll just drop a number. “I wanna have $10,000/month passive income. That’s my goal.” Okay, fine. Fair enough. But here’s the thing. Too many folks try to get there too quickly, kind of like I did. Everyone, of course, would love to get rich quick, except – here’s how you should probably look at that. If your goal is $10,000/month passive income and you’re sitting here today at 0, learn how to make $100/month in passive income. How do you do that?
Let’s use a simple number example… So if you put $15,000 to work passively in any kind of deal – I’m not specifying anything in particular; any kind of real estate, or a real estate investment trust (REIT), high-dividend-paying stock, whatever. Let’s say you get an 8% annualized return. So $15,000 at 8% a year is $100/month in passive income. There’s goal number one. You’ve gotta take this in steps; learn how to do that, master that process. Understand the philosophy, and why you’re doing it, and all of that. Then you step up to the next level. “Okay, I’ve made $100/month. How do I make $1,000/month?” And you’re continuing learning the same process; it gets quicker, and quicker, and quicker. And then you step up from $1,000/month passive income to $10,000/month passive income. Believe it or not, even though that seems like a big jump, it actually gets easier and easier to do this stuff. But the trick is staying consistent. Self-education combined with consistency.
The famous quote I use all the time on podcasts is Tony Robbins’ famous quote that most people overestimate what they can achieve in one year, but they underestimate what they can achieve in a decade. So you have to set realistic timeframes for things.
Again, back to weight loss – everyone wants to lose 50 pounds in one month, but hold on a second; what if you just said 50 pounds over 18 months? That’s a lot more reasonable and achievable. So just be patient, take your time with it. Any thoughts on that?
Theo Hicks: Yes, I’ve got three things I wanna say to that. The last thing you said, the Tony Robbins quote about you can accomplish more in a decade than you could thing – something that I remember Joe and I talked about back when we used to do Follow Along Fridays is this idea that I think is very helpful, and if you can do this, you’ll accomplish everything we’re talking about… If you can just make this one tweak to your mindset, which is when you’re doing things every single day and taking action, think in terms of decades as opposed to weeks, or months, or years. I’m not saying don’t set weekly goals, or have an agenda for the day, or to set yearly goals; what I’m saying is that whenever you’re doing something, for example as you mentioned, working on getting $100/month in passive income, or whatever it happens to be, attempt to convince yourself that you’re not going to realize the fruits of these things for 10 years, or 15 years. So if after a year nothing happens, you’re not at $100 or you’re not at $1,000 or you’re not at $10,000, then you’re not gonna freak out and just stop. You can say “Okay, well, I’ve told myself I’m not gonna accomplish this for 10 years”, or whatever.
I know that it could possibly make you not really do anything and take action and be slow, but it’s for people who have a hard time with that patience and really want to get there faster and faster and faster; it’s just not gonna happen, and even if it does, it’s not gonna work out, because the perfect example would be you win the lottery and then you lose it all. You need to have a mindset built up slowly over time to handle that much weight, in a sense.
So a way to tactically do this is the same thing we’ve talked about, which is the concept of 50/50 goals, which we have a blog post on and a couple podcast episodes on. Really quickly – whenever you’re setting a goal, whether it be a yearly goal or a monthly goal or whatever, 50% of the success is based off of actually achieving whatever that number is. So if the goal is to make $100 in passive income in the next six months, then half of that goal would be getting $100 in passive income. The other half of that goal would be learning some new skill, some new tactic, finding some new software… Something that you can take away from that process that will help you achieve something similar in the future. Maybe you’ve found a really good blog that analyzes high-dividend stocks, or something; maybe you don’t have the money to invest, but now you know “Okay, I’m gonna go to this website to get information.”
And then the third thing I wanted to say is something that I learned recently; you talked about being consistent, self-educating… What happens if you tell yourself “Well, I don’t have time to do any of this stuff”? One thing that helped me was looking back — you can go as far back as you want, but think back to maybe when you were in college, whenever you weren’t investing, and you wasted a lot of time, and tell yourself how you had no issue spending five hours watching Netflix in a row, or staying up until 3 o’clock in the morning playing video games, which is completely unproductive work. But then when it comes to that end of the night, “I’m tired, I don’t wanna read/I don’t wanna do something” and I make an excuse and I go to bed, why didn’t I make that same excuse when I was doing something stupid back in the day? So if you could spend a couple of hours watching a movie, or like me – I’d spend way more than multiple hours playing video games at night – then you can spend an hour reading about passive investing, or reading about actively investing, or reading about whatever, or starting a meetup group, or doing something that’s actually going to get you closer to your goals. That’s really helped me out.
So now at night, when a voice starts talking in my head and is like “You can just go to bed, or you can do something else” – like, no, I used to stay up till three in the morning. So if I have not accomplished what I needed to do for the day, then I’m gonna stay up and finish it, even if it’s until three in the morning… Which never happens, of course, but the idea of it is very helpful to me.
Travis Watts: Accountability. I love all three of those points. Number two, what came to mind is that — I couldn’t agree more; what we’re doing on this show, hopefully, for our listeners, is helping you build a foundation, a particular philosophy and a mindset. The foundation is key. You mentioned lottery winners who win and then lose it all; that’s such a classic example. Why? There was no financial foundation. They never took the time to learn about investing, or about personal finance, or about budgeting… So what happens when you take an individual like that and say “Well, here’s ten million dollars in your bank”? They go and blow it. [laughs] Pro athletes, and actors and actresses – so many people that made this incredible amount of money; we’ve talked about this before, about billionaire frugality, and all this… All these examples – the Mike Tysons that make 300 million dollars and go broke, and the Johnny Depps that make even more than that and go broke, and the pro athletes, endless examples…
You have to build a foundation, and this is why so many successful, high net worth individuals, when they’re asked “What happens if you lose everything and start over?”, which is the theme of this blog, “Well, I’ll be back in ten years, don’t worry about it.” Why? They have a foundation; they know what to do. They’ve just gotta put themselves back in the game, and then re-grind and rebuild the connections and the team; they already know about investing, and ROI, and risk tolerance, and all this. So it’s so important…
My closing thought here is to ignore the overnight success stories that we all hear in the media. This thought that you’re gonna be the next Mark Zuckerberg, that you’re just gonna hone down in your dorm room and create a new software and sell it and become a billionaire… Yeah, sure, it happens; statistically though, it’s not gonna happen to you. [laughs] That’s the thing. Not to be a Debbie Downer or a big discourager, but don’t bank on that as your ultimate success plan. At least maybe have a backup plan if that doesn’t work out, and learn a little bit about investing along the way.
That classic saying, “Shoot for the moon and even if you don’t land there, you’re in the stars”, or whatever… At least your along the journey… That’s my closing thoughts on this.
Theo Hicks: Yeah, I don’t have anything to add. I think this was a very helpful episode. Most people, if you’re at the point where you can passively invest, you may know a lot of these things already… But still, as you said earlier, you might learn something new. That’s all I have.
Travis, again, thanks for writing this blog post and coming on here today and dissecting it and going into more detail with me on it.
As always, Best Ever listeners, thank you for listening. We’ll be back next week. Until then, have a Best Ever day. We’ll talk to you tomorrow.
Travis Watts: Thanks, Theo. Thanks, everybody.
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