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Real Estate Investing School Podcast
123. Mastering Personal Finance in Real Estate with Todd Schwartzman
00:52:44
Welcome back to the Real Estate Investing School Podcast. In this episode, Todd Schwartzman shares his journey from the music industry to tech sales and eventually transitioning into real estate investing. He discusses his first house hack and how he...
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- [00:00]
A
This is going to sound, it's maybe crazy to a lot of people who hear this, and I've talked to a lot of friends about this and it's always a very intriguing conversation, but I track every dollar that comes in and every dollar that goes out.
- [00:16]
B
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Today we've got the Todd Schwartzman. Todd is a musician turned tech sales turn, turned real estate, living his life on his terms. Man, welcome to the show. Glad to have you here.
- [00:33]
A
Thanks for having me.
- [00:35]
B
Sweet man. So let, let's dig into it. So you know, I like your short and sweet bio you sent over. So musician turned tech sales turn real estate. Let's just start with the musician. What kind of music you into? What kind of musician are you?
- [00:49]
A
Yeah, I mean, we could talk the whole podcast about. About music if you want. So that kind of like that bio describes the different phases of my, my life basically spent the, you know, majority of the years of my life focused on music in, in various ways. So I was a music major in college, spent all my growing up years doing, performing and composing, singing, all the whole, the whole deal and all throughout college and then for many years after college, spent a chunk of my life as a career musician just doing professional music from job to job and anyway took a major shift and went different directions.
- [01:28]
B
That's cool. So you, like, you say composing, that makes me think of like Mozart and stuff. Are you like in a band or you like compose? Like, what does that mean?
- [01:36]
A
I did, I mean, I did the whole gamut. So I did, you know, I grew up training classically in music, so I started piano from a very young age and then stuck with piano. So piano was my main instrument. And then I took up jazz later in life and that kind of became a main focus of mine later in life. And then I took up songwriting and that became, that was actually my focus in college was I was focusing on songwriting and producing and so spent a lot of years doing songwriting and then spent a lot of years in different bands doing the business side of bands as well. So. And it's. As a musician you tend to, you tend to have your hands in all kinds of different pots. That's how musicians are. Mm.
- [02:20]
B
So you, you convert, switched over and got more into sales from the musician world, I guess just more for extra capital and leverage in life as opposed to passion, I would assume. But yeah, so. So I'm sure you're still doing music on the side and in your free time you start getting in the sales world. And then what led you into real estate as an investment? What kind of put that on the radar for you?
- [02:52]
A
So I transuride. I did a. I had a whole career transition into tech sales, and so started a whole new career trajectory. And that basically placed me into, like, a different atmosphere. Career atmosphere, you could say. So, you know, I. I started to ramp up in sales and see success in my sales career. And basically I started to. I think it honestly was just proximity around different sales and real estate folks who opened my mind to that entire world. And so I think I just started to become just exposed to it through the people I started to hang around in the. In the sales world.
- [03:33]
B
Okay, awesome. So the lot of the sales people you're around kind of bled into the real estate as they were doing investing and buying and doing stuff. You kind of, like started learning about that as well.
- [03:43]
A
That's right. And then the big. I mean, to jump into it, the big. What set me in motion was purchasing my first house when I got married. We got married and purchased our first house a few months later. So that was like the start of the journey. Right there was just purchasing our first home as a married couple.
- [04:01]
B
That's cool. So, and that was back in 2017.
- [04:04]
A
That's right, yep.
- [04:05]
B
So when you were buying this home, were you buying it just like, with any investment concept in mind, or were you were just like, hey, you know, we're getting married. Let's have a home. Like, let's buy a house. Like, that's what you do. Or was there like, hey, this is an asset that could be valuable? Was there any of that concept there yet?
- [04:22]
A
There was, and that was because of an awesome trusted mentor I had on my side helping me buy this house with an investment mindset. So I had. So I had the right. Yeah. The right coach on my set. So it wasn't. It definitely was not a mindless purchase. Like, we bought it for the purpose of. Of an investment right off the bat. And I'm so glad, looking back. I mean, that really. That really having the right person on my side to help coach something that I had never done was a difference maker for me. So got in that. That first property was a great decision.
- [04:58]
B
Yeah, that's really cool. And I don't think that's the story for most people. Right. I feel like most people, they buy a house because that's what you. A place to live, and then they realize later, oh, it could be an investment, and then they try to pivot, and sometimes it's okay. And sometimes it's like, oh, what have done things different? So when you had this mentor, Todd, and you were going to look at buying this first home, what things did. What things were you looking for? What was different as opposed to if you were just going to go buy, you know, the cute house for you and your new wife, what things that mentor encouraged you to keep an eye open for, and what did you look and do differently?
- [05:34]
A
Yeah, we looked for the correct floor plan and arrangement for a future rental, and we looked for the right area for a future rental. We looked at certain price points for a rental, not just focusing on having, like, the newest and best house at the time, but something that could have future potential. So we actually bought a house that needed a kitchen renovation, and we basically gutted the kitchen while living there and renovated, done that.
- [06:05]
B
That's always fun. Kitchens are a tricky remodel.
- [06:08]
A
Like, where do we keep our food and cook and stuff? Cooking was not pretty during those few months, but most of the things we focus on. And I think going back to your original point, one of the main themes throughout my whole journey is having leaning on mentors and people who are smarter than me and know what they're doing. So like I said, having having this mentor with me from the beginning, I don't think I would have known. I don't think I know I wouldn't have known to look for these things. But it was, you know, it was my coach that basically said, hey, you know, location, you want to do some value add? You want to make sure the. The. The floor plan is the right, you know, for renting out by the bedroom or whatever you want to do with it. So anyway, it was all. All lined up from the beginning.
- [06:55]
B
That's awesome. So when you say floor plan, what would be a different floor plan for an investment property? You know, what you would just buy for you and your wife?
- [07:04]
A
Yeah. So this particular one had a basement rental, which is just such a classic, you know, classic strategy. And then. And then aside from that, we were even. It didn't have a basement rental. We were looking for to maximize bedroom count. Right. So you want to make sure you're. You're maximizing your bedroom count with the purchase price of the property. A lot of. A lot of folks who are doing the same strategy go in and look to see where they can add a bedroom. So that's. So we had all those options floating around from the very beginning.
- [07:38]
B
And were you. You're in a college town, did you end up pivoting and like, renting this to students and stuff like that. Is that what the. All right. Yeah. So that's. Is that after you guys moved out, you. You rented it out to students? Did you have people in the basement while you were there? Because you mentioned they might have a basement apartment.
- [07:56]
A
Yeah. Yes and yes. Yep.
- [07:58]
B
Awesome. Yeah. So I love it. You know, you're going in with a strategic house hack as is. When you move, you're able to maximize it, get cash flow or at least get it to cover. I mean, you were probably cash flowing back in 2017, right off the bat when you moved out.
- [08:12]
A
Yeah, those were the days. Yep. Yeah.
- [08:15]
B
How long, how long were you in the home for?
- [08:19]
A
We were there for probably two years, I want to say. Yeah, cool. Maybe three. Maybe three years. Yeah.
- [08:26]
B
Awesome. So you started now you've done, I mean, in the past, like five or so years, you've done about five or so deals. So kind of walk us through these deals. So you do this first kind of like intentional house hack with a pivot to move out and rent it out and maximize. And I just think that's so powerful. So many people just buy the, the cute house with the, you know, turquoise door and, you know, whatever. Maybe they want a big house and. And then when they go to rent it out, it's just, it's not rentable. Right. It won't cash flow. You know, they can't maximize anything. Then they just have to sell it and then they lost that asset. And you guys, you know, like said, look, hopefully, you know, credit to your coach, but you guys are able to do it right on the first house. What did you guys do? The second house? Was it rinse and repeat or was there any different strategy?
- [09:13]
A
So the next house is. Actually the next investments were out of state investments. Okay. Yeah. So again, using a coach, this same coach, actually the next investments were out of state. And so we certainly could have rinse and repeat this house hack strategy. But at the time it just made sense. We had some opportunity to look at homes. One is in Tennessee and one is in Florida. And it was, it was just a, it was just a very like hands off type of no brainer purchase. And so we decided to go with that instead of doing the primary thing.
- [10:01]
B
I love it. So, so doing the out of state thing, so that's something a lot of people are interested in. A lot of people are intimidated by. You said it's pretty hands off. How did you structure that? Did you have people on the ground? Was this like a partner deal with other groups that are Already doing it or how you structure those deals out of state?
- [10:21]
A
Yeah, this was a, this was with a group who is already doing it. So basically I, I was, I was introduced to this group who is amazing and I can connect folks who are listening to this with this group afterwards if you'd like. But basically they have all of the work set up for you. And I know there's lots of people around the country who do something like this, but they, they have boots on the ground in different markets around the country. And they are the ones who set up the property management relationship. So you just use their local property manager. They have the lender relationship set up who knows, you know, does lending specific to that area. They have people who are out searching for the deals who basically the only deals they present to investors are the ones who meet their criteria. And so I, I, it makes it so easy that I didn't really have to analyze or you know, seek out all the individual components of the house. They just present it to me and say, hey, this is a deal that's already vetted. If you'd like to invest, it's yours. That type of thing.
- [11:27]
B
That's great. Awesome, I love that. So you did a couple deals with them. Is that what you did for all your other deals or was there any other strategies? We've got the house hack, we got the partnership deal thing and just structure on that and you can mention the company if you want to, whatever. Was this like a partnership thing or you pay them like a commission or where are they making money, you know, and where are you, you know, maybe taking a little bit of a haircut. But it makes it so much easier. It's worth it. Like how is that structured?
- [11:57]
A
Yeah, it's structured. So I'm, I'm 100% owner, so it's not a partnership deal. So I, I own the house. Where this company makes their money is they do a one time upfront fee. So it's in the closing cost basically. So I, I pay, I pay a little bit more of closing cost where their fee is basically just a line item in the closing and that's where so they kind of make a commission, you could call it for presenting the deal, but then after that, sure, you know, it's, it's a 100 owned deal.
- [12:27]
B
That's awesome. And I'm sure they're making money, you know, as the agent and as the property manager and all these things. And that's what's cool about real estate. It can be such a win win. Right? It's like somebody's got to do it. You might as well, you know, have someone that can help you all achieve your goals together. So that's cool. So, so you do the, your house hack, you get into this kind of done for you type deal that you, you pay a fee to to be able to play in. What, what's the, what's the next phase? What's the next deal after that? Is that kind of what you keep doing or what goes. What happens after that?
- [13:01]
A
Yeah, the next phase after that was I made an intentional effort to jump up in, in property size. So the next thing I purchased was an eight plex along with. So I have a partner in this one along with a buddy of mine. We did. We tackled an eight plex together as 50. 50 partners.
- [13:23]
B
Cool. Cool. So this, is this out of state or is this in Utah?
- [13:27]
A
This one's in Utah.
- [13:29]
B
Sweet. So you guys are doing this, you know, a little closer to home so you can have a little hands on to it. Doing that as a partnership, tackling an eight plus now you're getting into commercial, um, you know, which for the listener, some people, I mean it's still residential, is that they're. You're renting it out to, you know, individuals who live in it like their home. You're not like a, like a commercial space selling products. But as soon as you get above four units, when you have that five, six, seven, eight, you're now into commercial lending, commercial loans, commercial lenders, and commercial valuations. So tell us a little bit, Todd, about why you wanted to jump into that world and, and kind of the different things that excited you about being on the commercial side instead of just residential.
- [14:13]
A
Yeah. So a lot of people out there say that a medium or large size deal is just as much work as a single family home. And I would agree with that. I would agree with that. So my motivation was I wanted to take a bigger bite of real estate. I wanted to just kind of put some, some fuel to the fire and get, get things moving faster as opposed to smaller bites. And it really does there. Like you said, there's some differences in the commercial world, but I really do think that these larger size deals, I mean, it's not even large, medium size, whatever is, is just about the same amount of work. So that that idea right there kind of like bought me in. I mean, I didn't necessarily know that going into it, but after that I, I mean it was like, all right, I'm not opposed to the smaller things at all. You have to take opportunities where they come. But I just like the fact that you can get more done efficiently. Like, why I feel that, I think.
- [15:19]
B
That'S a really powerful rule and it's actually like a list of like my investing rules. And that's one of my, my rules is like the little deals can take up just as much headache and bandwidth as bigger deals. Like, I remember there was one time I, you know, I didn't have much capital or anything work with, but I wanted to be doing something. I ended up snagging this little like mobile home deal. And, and once it was all said and done, I was like, dude, that took just as much effort and headache and all this stuff as, you know, $1 million home in Hawaii. I was just like, wow, like, play bigger. Play bigger. You know, because, yeah, the rewards are bigger. You play bigger games, you get bigger rewards, but you're still going to run the race way. You know what I mean? And so you might as well. So I love that you kind of point that out.
- [16:08]
A
Yeah, yeah, 100. I agree.
- [16:10]
B
So, so you go and get this. What were some of the differences though? So you're saying it's not like this huge, like 10 times as hard to do, but it is different. There are some nuances that are different and how you vetted out and what were some of the things you discovered like, oh, this is different doing commercial than, than like single family residential.
- [16:28]
A
Yeah. What One of the main differences is obviously the loan process, a commercial loan is just, is, is different. And I'm not sure if I can recall every single detail, but basically the qualifications and just how loan companies look, look at that is, is a different, it's a whole different world. So that's one of the main details. One of the, one of the things I actually like about the larger size properties is that everybody involved in the team, like, you know, agents or lenders or property managers, whatever they are, they are looking at this with an investment mindset as well. And oftentimes single family homes, you're trying to, you're trying to kind of like pivot the perspective. You're trying to use a home as an investment tool where maybe it's not that original. You're just trying to either house hack it or like, you know, turn it into some sort of creative rental that it wasn't originally supposed to be, which is fine and it works. But I really enjoy just the straightforward strategy of like, you know, in the commercial world, this is an investment. This is how we view it, this is how the numbers work out and there's really no like, you know, flip flopping around it. I mean you can, you know, you obviously do your creative value adds to it and you try to raise rents, you do renovations and everything. But it's more of a, it's more of a science with the commercial side. I personally like that, like my organized brain appreciates that about commercial.
- [17:58]
B
Well, and I like what you mentioned because yeah, everybody's on the same page with it because when you go buy an 8 unit, your broker, you know, the agents that are helping you take this down, they are familiar with investment properties because that's what they're, that's all you do. No one buys an apex as a primary.
- [18:15]
A
You can't.
- [18:15]
B
Right. But most real estate agents, you know, even ones that work with investors, a lot of them really don't know much or anything about investing. All they know how to do is help, you know, young couples move into a house. Right. And so just, just on the broker agent side, I think that's really powerful. And then like say on the, you know, the lending side and just the valuation, I always say it's especially for those who are newer and they're getting into something it the bank, the lender is actually going to be one of your best like due diligence partners because they don't want to get into a mess and they're basically going to like make sure you don't into a piece of junk that's going to destroy you financially because then it's going to hurt them. And so like if they're like saying no, no, no, no because of xyz, you're like, yeah, yeah, I wouldn't want to do that anyway, you know. But if they give you the thumbs up, you're probably pretty good. Which isn't necessarily the case on Single Family. Single Family. They're just like, yeah, if you qualify, here's some money and it could be a disaster, you know.
- [19:15]
A
Yeah. So on that note, I go back to the lesson I've learned many times is that I've learned to make sure to align myself with people who have the know how. I mean this is maybe an obvious statement, but not everyone in the real estate industry, or not everyone you come across who says they do real estate or do this is going to have the same perspective as you. Maybe, maybe someone comes from a background of flipping or maybe someone comes from the background of they want to put all of their own money into it instead of using other people's money so they really don't have experience one way or the other. So I've been very careful to align myself with people who make sure that they're seeing things in the same way I am like, hey, this is a buy and hold investment for me. I'm looking at this in a 10 year perspective and you know, if, if that person isn't really aligned with me, it's not going to jive, like, it's not going to work. So I've been very careful with these mentors, agents, anyone. These, these are people that I don't take lightly to be working with.
- [20:21]
B
Man, I love that, you know, there's so much power and when you have clarity of purpose, like you know what you're trying to accomplish, you don't need to know how, but if you know what you're trying to do, then you kind of like the pieces will fall into place and you'll push all the riff raff aside and you'll be able to do it, you know, but if you didn't really know what you were doing, then you get this one person and they have their perspective, this one has their perspective, this and that. And then it kind of can be contradictory and get messy. But the reason that worked, and I love how you point that out, Todd, is like you knew what you wanted and then you're able to kind of like, you know, curate your team and those around you based on your specific goal. Because if you didn't have that, it just, you wouldn't have been able to do it at all.
- [21:05]
A
It's a great point. And that's a good, that's a good way to put it. You really don't need to know all of the details of how get the right people on your team and you're going to figure out how. Just make sure to get the right people on your team that know your goals and will be able to take you there better than you would be able to go by yourself.
- [21:24]
B
Yeah. And if the goal is clear, then, yeah, you'll. The right people will come around to show you how. I love that. Talking about goals. I wanted to talk to you a little bit, Todd, about just kind of your unique approach to managing personal finance. I know you kind of have put a lot of thought into how you manage money and the way you do it. I thought maybe you could kind of share that with us. We can dive into that.
- [21:50]
A
Yeah, this is probably my favorite subtopic within real estate and I would even consider it. For me, this is really personal finance is like my passion. And I think that my personal finance, you know, theories or habits have are really what fuel real estate. Like, real estate is kind of the byproduct of. It's where I've put money into investing. You know, people can invest in lots of ways, but really the, the root of this is personal finance. So, I mean, when it comes down to it, I've. Over the years, I've just really carefully put a lot of thought into how I manage my money. And I. This is going to sound, it's maybe crazy to a lot of people who hear this, and I've talked to a lot of friends about this, and it's always a very intriguing conversation, but I track every dollar that comes in and every dollar that goes out. And the reason I do that is because the entire purpose of my tracking, I track it just like someone would track if you're tracking your diet in MyFitnessPal, you know, every day what you're spending, how many calories you're eating, and how many calories you're burning. And the goal is to be in like a calorie deficit if you're trying to lose weight, right? Well, the goal in personal finance is that you want to have a gap between your spending, what it costs to live, and your income. And that gap right there is what allows you to build wealth. It allows you to go out and invest in real estate if you want. It allows you to create a future that is faster and better than everyone else around you if you can manage this gap. So that's kind of like, personally, that's what I consider to be my cash flow. A lot of people talk about passive income, their cash flow right from their properties. I have that and I focus on that. But I also. My second form of cash flow is the gap between my, my expenses and income. And I am meticulous about making sure that that that gap right there is, is where I need it to be in order to aggressively invest in real estate.
- [24:08]
B
I love that. I like the analogy. If anybody hasn't, you know, use my fitness pal or track their calories or macros, maybe they might miss it a little bit. But like you said, it's like, you know, you need to have a calorie deficit to lose weight, right? And so if you have that, I love that comparison, what do you use then to be able to track all that? Because some people would be like, oh, I could just spend all day, every day, just like, you know, and it's messy. And they're like, what are you writing on, like a stick it note? Like, how do you track every penny you spend? That that seems kind of tricky. And what do you do with it?
- [24:43]
A
Yeah, so I, I use a software program and I've used it for the past few years. I'd love it. I'd recommend it to anyone. The program is called Tiller T I L L E R. Okay. What it is, is it's essentially a software that links all your credit cards, all your bank accounts, everything, and pulls everything into one spreadsheet. And you can then customize the spreadsheet and keep track of everything. You create your own categories. So, for example, like groceries, gas, gifts, vacations, clothes, everything, all your spending. And, and you can, you can track it all right there. So I'm, I'm meticulous about. I mean, I'm. I'm in there every week and I'm, I'm tracking all you can, you know, set it up automatically. And I'm. I'm tracking all of all expenses.
- [25:34]
B
That's cool. So that's actually like, man, I kind of. I'm a nerd. I guess that excites me because I'm like, yeah. Like, the thing is, when you track something, you can see its performance and you're able to adjust it and tweak it and know what you really need to do to change, which is exciting. So, I mean, is it super time consuming? You said you're on it just like every week. It's not something you're spending hours a day on. You just go in and kind of get updated regularly.
- [26:00]
A
Yeah, you go in and update it. And like I said, I've been doing it for years. There's a few huge benefits to doing it that I'm really personally bought into. And again, this is just for me, having done it for years that I've seen, for me and my wife, this works really well. But one is it creates. Well, first of all, it creates awareness. A lot of people don't know what the gap is between their expenses and their income is. A lot of people have no idea.
- [26:32]
B
Sure.
- [26:33]
A
And a lot of people don't even know what it costs. Like, if I asked anyone listening, like, what does it cost you annually to live, you and your family? What do you. Just to live Paycheck to paycheck. What amount do you have to make? And I think a lot of people don't know that. And then it's like, oh, I think.
- [26:53]
B
It'S around 2 or 3,000. Then they run the numbers like, oh, I guess it's more like five or six. It's crazy how off we can be on that.
- [27:02]
A
Yes. And then you know, and then I have a few thoughts here. One would be we, we place such an emphasis on, on, in the real estate world on passive cash flow, right? Like, oh, this property, I can make $500 a month off of this investment. Oh yeah, that's a great roi. I would do that. But then when it comes to our personal finance, how often are we frivolously spending $500 a month where you don't even know where it goes and all of a sudden the $500 that you valued so much over here becomes completely worthless over here. And so this is, this is one of the reasons why I believe in tracking personal finance is because why are we so concerned about adding an extra $500 a month to our income when in reality we really don't care about $500 a month? Because if you cared about $500 a month, you would not be frivolously spending it. It's just that our value system is off where there's certain habits ingrained in, in society and how we were raised in our parents views in habits that have crept in that we just become unaware of our own spending. And so I just, so let me, let me keep. Can I make a couple other points here?
- [28:24]
B
Yeah, no, this is great. I'm loving this.
- [28:26]
A
So some people might listen to this and say, okay, I see the value in that, but I'm not struggling. Like, I'm not poor. I always have leftover money each month. I'm not living paycheck to paycheck. So yeah, we're good.
- [28:41]
B
I don't want to stress about it, whatever.
- [28:44]
A
Here's my response to that, is that when you go to the gym and you see someone who's clearly ripped, they have huge muscles and they've clearly worked years for that. And you see them over in the corner lifting, like doing bicep curls, right? No one in their right mind is going to say, wait, why are they doing that? They're already ripped. They don't need to do, they don't need to lift weights. Well, it's like, yeah, but what do you think got them there? Like, what do you think they've been doing for the past 10 years? They've been lifting weights. They're not going to let go of the very thing that actually brought them the success. So I just think that we have a certain obligation with if you want to become wealthy. I think that it's not just about like, oh, I'm fine. And the rest I don't care about. I think that there's A certain, like, domain and control over your money and your spending that you need to have. And those daily habits that get ingrained in you, those are the things that you need to focus on. So it's not about the $8 or the $13 spent on hamburger. It's about the fact that you're practicing the habit of knowing where your money is going so that you have the control of your money to be able to do the things you want with it. And it's not gone to places you don't even know where it went.
- [30:07]
B
Yeah, and it's funny because going back to the analogy, like I said, of the fitness stuff, I've tracked my. My calories and what I eat before and stuff, and sometimes I'll be okay. I'm just gonna. I'm not gonna worry about my calories or my macros or any of that. I'm just gonna track it, though. I'm just gonna put it in my fitness pal, but with no goal or anything on it. But, man, every time I have to input it, I, like, I don't want to eat that because I'm gonna have to put it into the thing. And, like, I don't want to see that on there. And so just tracking, even with no, like, rule or regulation of what the outcome needs to be, it still motivates me to be smarter with what I put in my body. And I'm sure the exact same thing is going to happen with the bank account. It's like, even if I'm like, hey, I don't care. I can spend however the hell I want. I'm just going to track it. But as soon as you do that, you're like, oh, I guess I'm not going to do that. I'm not going to do that because I don't want to see it on the record. You know, I think people.
- [31:02]
A
I think people would be absolutely shocked at the amount that they are spending in things that don't actually matter to them. And so let me make another point I'm really passionate about. Some people hear this. I've shared with this with friends. And you might listen to this and say, oh, this sounds really frugal. This sounds really like, you know, yeah.
- [31:24]
B
Like, are you, like, poor?
- [31:25]
A
Why are you penny pinching?
- [31:27]
B
Yeah.
- [31:27]
A
Yeah, exactly. So my response to that is, this is not about saving money. This is not about being frugal. This is about investing money wisely. And I'm very, very passionate about that. In fact, this has been a huge theme that as my wife and I have Practiced this strategy over the years. We kind of have like coined this term that we say amongst ourselves. We say high impact versus low impact. So a purchase or an item, we always say, is this high impact or low impact? Meaning how I would define that is, is this experience item thing going to significantly move the needle of my quality of life? If it is, that thing is high impact. And if it's not, it's low impact, it's lower on the priority list. So let me give an example of that. We just had our first baby this year in 2023, three months ago. And thank you. The year. So last year, 2022, we knew that that was going to be our timeline. And so we invested heavily into vacations. We spent more on vacations that year than like lots of years combined. And that's so. So that was not like a, you know, a reckless abandon that was on purpose. Like, that was a clear strategy where this was a high impact memory for us that will always look back at 2022 and consider that one of our most adventurous years. And you better believe, like, I tracked that. Right. Like we said, hey, this is our vacation year where we're investing into vacations we're not spending. So, you know, you have to look back and say, that was really important to me. Where I think other people might maybe fall into a bad habit of, oh, man, we wanted to go on this really nice vacation or maybe multiple vacations, but it turns out we spent thousands of thousands of dollars on crappy restaurants or fast food and also clothes that are sitting in my closet that I actually don't use and I bought on impulse that really make no difference in my life. And now I have to take them to Goodwill. Well, that's not doing anything for you. How is that impacting your life positively at all? So I guess it comes down to the word awareness. It's a very detailed awareness of where you're spending, where you're investing your money and not wasting your money.
- [34:00]
B
Well, and I love that because you're making conscious choices however you want to make those choice. Tim Ferriss talks about this, where he talks about cutting back harshly on everything that you don't care about and spending lavishly on the things you do, you know, but if you do both of those, then you can, you know, but if you just spend mindlessly on everything, you know, nothing really gets accomplished. It's funny because, you know, you're talking about like, oh, some people think this is about being frugal and, and I would say it's, you know, for the person that has very, very little money, you know, obviously it's going to be very important to track and make sure where it's going, but the impact's not actually going to be as impactful as the person that's making a ton. Because if you save 10 or $20 and that's all you have, like, that's good. But when you're Bleeding, you know, 5 or 10,000 extra a month because you're not paying attention, like, whoa. As soon as you pay attention to that and you can put that into somewhere more powerful, that's going to be a really, really, really big impact, you know, so for the people that aren't penny pinching, that aren't worried about money, it's like they'd be surprised how big of a pivot that could be. I mean, they could be buying literally another real estate property every few months just if they pivot a couple habits.
- [35:15]
A
Oh, that, that is such a good way of describing it. Think how many in our, in our real estate world, if you're listening to this, how many, how eager would you be to just find, under the couch cushion, $50,000, $25,000 that all of a sudden goes into your investing in piggy bank, right? And you know, people would. People would go to great lengths to get extra money to invest in their deals, but would they go as far as being disciplined in your own spending? That's the question to ask yourself. So I guarantee this, this strategy is good for beginners when they're building their habits, when there's actually not much of a cushion. But when you get into. You're right. When you get into the bigger numbers, that's where it really makes a difference. And I would say going back to one of the original points, like this is for. This is when it really makes a difference, is you have those big gaps of money and you can intentionally track the gap between your expenses and your income. And also, as you, as your income grows, your expenses tend to grow. But if you can keep a very conscious view of that, that's where you're going to win. That's where you're going to win. Because if your expenses are going at the equal rate of your income, your investing life doesn't change very much. So what good. What progress are you really making other than maybe you have more money spent at restaurants and in your wardrobe? Like, you're not going to make a dent in your investing.
- [36:47]
B
Yeah, Well, I love how you mentioned earlier, it's like the high impact loan pack. Like if you do this right. It's not going to sacrifice your quality of life at all. You're not going to feel a loss. Even though you are cutting out a lot of spending. You're not going to feel lost because, because you're looking at what's important, what's not. And going back, just the fitness analogy. If you're eating the correct caloric intake with the correct amount of protein, you know you're not hungry at the end of the day, even though you know you're being very picky about what you're eating and stuff. But at the end of the day you're like, wait, I'm not hungry anymore. When I used to eat twice as many calories to not be hungry. Now I'm just eating the correct calories and I'm not hungry. And so it's the same thing with the spending. If you're spending it correctly on the high impact items that affect your quality of life life, you're going to be just as happy at the end of the month and be just as comfortable and have the same quality of life even though you spend half as much and then you can do something impactful with that excess.
- [37:47]
A
Yes. And I think going off that, I think we fall into traps sometimes of like, people think it's a flex to like spend money thoughtlessly, you know what I mean? Sometimes that can be as a flex that's just in I, I, maybe I'm so bought into, you know, my mindset but to me that is just not a flex. It's not a flex like it, that, that's just a sign of like, of I don't know, carelessness or maybe just, just a certain philosophy. I just feel like that's a big indicator of where personal finances, where your values lie within personal finances. And maybe that's a little judgmental because I don't think that's 100% true across the board. I just think that the real flex is like having such a large gap between your, having such a large cash flow of excess income that you have, you have choices, you have options. That's the flex to me, that's the ultimate flex. Not like having a bunch of, you know, crap laying around your house that you bought, you know, because it was, it seemed appealing in the moment. That's, I don't feel like that's impressing anyone or anything.
- [39:03]
B
Yeah, yeah, no, I love how it's, you know, it's about designing a life that you want to live and living that life. You know what I mean? And like I said, that's the flex is living the quality of life that you want to live. That's more important than all the rest of it. So what was the name of the software you used again? Tiller Teller.
- [39:24]
A
Yeah, it's Tiller T I L E R. And I would encourage anyone to go. It's actually really cheap software, not expensive at all. So you go. And I would advise people to just to download it and start the first few months by simply tracking what you spend. You don't necessarily have to feel the pressure to make major changes off the bat. Just get a sense of where you sit, right? Get a sense of where your habits are. Because I think every family has different habits. Like, oh man, we really, you know, I didn't realize how much we're spending on our car payments plus our mortgage, plus all of these debt payments, right? Or another family is saying, man, we really go shopping a lot. I didn't realize that every time we go to the mall together we're bringing home hundreds of dollars of stuff. And this really adds up to a lot of money at the end of the month. So get a sense for where you sit and then from there you'll be able to. Because everyone has different habits, you'll start to, you'll start to become painfully self aware of where you need to change.
- [40:26]
B
I think, I think that's great advice. And, and one thing I think is really powerful because I get, you know, I have a lot of students and I'll, we'll set up goals. We're like, okay, what is, what is your goal? And everybody, you know, I asked them like, what's their goal? And they I want passive cash flow. Okay, well how much? And they're like, I don't know, you know, like six figures, you know, like eight or 10,000amonth to be awesome. I'm like, okay, cool, but what if it was 7,000? Well, yeah, that'd be good too. I'm like, well, what if it was 6,000? Well, and it's like we have these arbitrary numbers that don't really create fire in us to go accomplish our goals. And, and this goes on what you were saying. If you're consciously aware of that $500 cash flow, but you're blowing it over here. If you're aware of what the true number is, you're like, no, I need exactly $5,682.58. And then I don't have to work and everything I spend is covered. Now you've got this true, like purposeful, customized personal goal to hit 5682, or whatever that number I just said was. Exactly. And that's when your life will actually start to pivot and shift, because now you're out of the rat race. Yeah, but if it's 8,000 or 7,000 or 10,000, it's too arbitrary to actually light fire under you. And that's where I think the awareness comes in. Like, you're saying all of this is about being cautiously aware, because then it becomes real and you actually can see the impact one way or another. And that's when it's like, oh, this will actually change my perspective of how I do everything. It's like when you're learning to eat correctly. I know we keep going to this analogy, but if you go buy that, eat a thing of ice cream, you're like, oh, I know ice cream is not good for me, whatever. But you plug it into your MyFitnessPal and like, that was 700 calories of straight carbs, and that was all my carbs for two days. You're just like, oh, that's a lot different because it's real as opposed to just like, it's not good for me. You know what I mean?
- [42:23]
A
Yeah. See? And enough times, through that ice cream analogy, you're going to start to train your brain to realize what impact that ice cream has on you. Right? So if you allow yourself, if you just become in the habit of ice cream every day, you know, like, you're gonna. Over time, you're gonna start to realize the. The actual impact of that. So equating that back to personal finance, you're gonna start to see if you get locked into a. A really high car payment, a car that you can't. You don't want, maybe you can afford it technically. Like, again, it's not a flex if you can afford. Sure. If you have the money for it. Do you want to. To spend your money on that? So then you start looking at, like, who. I didn't realize, like, actually how much of my monthly budget is being dedicated to this really expensive car. Now, if you want that, if you value. Great, that needs to be an intentional thing. If you actually didn't want to have that burden on your back, why are you. Why do you have that? You know?
- [43:26]
B
Yeah. So, yeah, I think so many times people are sacrificing so much freedom for things they don't even actually care about, you know, but if you had it tracked, like you're saying, they'd be able to consciously say, I care about this, I care about this. I don't care about these. And that'll cut their freedom and, you know, their, their time to reaching that freedom goal in half just by cutting out things they don't actually care about. You know, but people just, they go to a job and they make money, they spend that money, and they don't consciously think about, like, getting out of the rat race and how quickly they can buy their freedom as opposed to, like, spending on things that they don't care. And it's like when you look at, like, oh, I'm spending some money, that's one thing. But when you say you're sacrificing your freedom for another pair of Lululemon leggings, like, who gives a shit? You know what I mean?
- [44:12]
A
So. So I would say to kind of like, to summarize this. Once you start tracking and getting the habit of tracking, the number you'll really want to pay attention to that you have control over is your total monthly spend, right? That's what it costs me and my family every month to live. That's the most important. That's like the sacred number on my spreadsheet where I know it, like, even to this day, for the past few years. I know that number because I'm focused on that. And so, And I feel like that number is also so important because you have such control over that number. You have control. Like, that needs to be the area of focus. So if that number is X amount a month higher than what you want it to be, you need to start digging into the individual items and say, where is this coming from? Like, what, what is causing this? And also, if that number is going up and up and up and up and up, and you feel like you're losing control of that, that's also a problem because like, we already talked about before. But anyway, that's, that's my real, like, advice there is that number is your absolute sacred number that you need to watch over and guard with such care, because that's. That's the number that's going to either equal financial freedom or not. And again, why does, why does another door of real estate matter if you're, if you're not paying attention to what money is going out the door? And I just, to me that it. Those two things don't match. They both have to match.
- [45:46]
B
I think that's really powerful. And again, I'll just emphasize this and we'll kind of wrap up here. I know we could just chat on this forever. We're obviously both excited. But I would say again, this doesn't have anything to do with living frugally. You know, that number, that monthly number could be lavishly large. And if that's what you want it to be, awesome, just be aware of it and know what it takes to get that number and what it takes to get it passively and what it takes to get it actively. Just know what you're doing. You know, if you want to be spending 50,000amonth, like, okay, that's your number to. It doesn't matter. But be aware of it so that you can fit it into your life consciously and intentionally and, and not on accident, you know?
- [46:26]
A
Yes, yes, yes. 100%. I couldn't have said it better. This strategy is, is, is, is great for investing wisely and even big spenders, because those, those are intentional decisions at the end of the day. Yep.
- [46:43]
B
I love it, man. This is exciting. And I think he, like, said it's like, it really is sometimes actually the heart and soul in that foundation to the real estate investing. Some people, oh, why are they talking about budgeting? That's not real estate investing. It's like. But it really is in so many ways. You know, for me, it was huge. That was exactly what I did when I got into it. I started budging every single penny just to see exactly where I was at. And then I knew what I could do. And then every door was literally life changes. Oh, that means I can go. Now I get this door and now I've got this payment covered. Now I get this door and I can get a boat and I get. You know, it all has something and I'm. But I still have my freedom. You know, I'm not getting caught up in anything. So it's all. Can be very, very impactful once you start tracking it. Anyway, I want to bust into our final four questions and then we'll let you go. You've got a young kid, you got a wife, you got a life to live. We won't keep you forever. But if people do want to kind of reach out to you or follow you or, you know, kind of see what you're doing, is there a good way to keep in touc.
- [47:44]
A
Yeah, Instagram. My handle is at Todd Schwartzman. Just my full name and my email is the same thing. Todd schwartzmanmail.com.
- [47:54]
B
Awesome. I like your quote on there. Shout out to the office. I was looking at your Instagram. Yeah. You had to make a quote from Michael Scott. Like, don't ever do anything to anyone for any reason at all or something like that. I was like, that Was good. I like that. All right, so we'll dig into your final four, Todd. Okay, number one, what. What's your dream deal or. Or a deal you would hope to be able to tackle someday?
- [48:25]
A
I would love to. Well, this is going back to lifestyle. I would love to have a personal home in, like, a dream area. And maybe that's kind of a roundabout area. Roundabout answer. But again, the investments allow you to do certain things in your personal life that you want to. So I would love to eventually own, you know, like, a vacation home in just a dream type spot. And I would say the deals allow you to get that. So that's like my roundabout answer there.
- [49:00]
B
Cool. All right, question number two. What's been one of the most pivotal books you've ever read?
- [49:07]
A
Oh, you already know what I'm gonna say based on my whole finance spiel. Atomic habits. No doubt about it. Atomic Habits is. I mean, I. I feel like that's. If you pick one book in all of, you know, personal motivation, I feel like that would be it. I'm just such a believer in small habits create big outcomes, and not just personal finance, but other things. But I've applied it really heavily in personal finance, so Atomic habits all the way.
- [49:36]
B
Love it. Great recommendation. All right, what is one of the most expensive or interesting mistakes you've made in real estate investing?
- [49:48]
A
Oh, I lost a. Some earnest money on a. On a house before. Backed out of a deal when I didn't do enough, you know, didn't do some. So enough due diligence. Early moves on it and backed out and lost. Lost money. I wouldn't say. Yeah, that. That would. That would be my. That would be my. Yeah.
- [50:13]
B
So just to dig into that a little bit for any listener just so they can learn the lesson. So you put the earnest money down, and then you waited till after your due diligence deadlines, and it was too late to back out, but you still backed out and you lost the earnest money. Was there a reason why you backed out post the due diligence deadlines as opposed to before?
- [50:34]
A
You know, I don't remember all the details of that one, but I remember there was enough built up that we hadn't caught that was just. All right, either you, you know, you lose the earnest money or you do a deal you don't want to do. And so we said, you know, let's walk away.
- [50:50]
B
Cool. I think that's wise. Sometimes that's. That's what you got to do. You know what I mean? Anyway, that's cool. I think That's a really good example of a simp way people could lose, could lose money that they don't have to lose if they maybe did a little more due diligence. Leave it a little previously or. It's also really good advice. I said it's like, sometimes you need to cut your losses early. Don't jump into a deal and lose fifty thousand or a hundred thousand or just have this mess on your hands that you don't want because of a couple thousand dollars of earnest money. Like, don't let the tail wag the dog, you know?
- [51:24]
A
Cool.
- [51:24]
B
Good lessons to learn there. All right, last question. Then we'll let you go on your way. This one's easy. Everybody's been listening lately. They know. My new question. Well, what's the purpose of life, Todd?
- [51:35]
A
Purpose of life? You know, I think the purpose of life is to achieve the maximum amount of personal capability that you can offer to the earth. I think that everyone comes with a different set of strengths and talents, and you have your unique thing to offer the world and people around you. And I think the purpose is to figure out what that is and then achieve it to the very maximum you can with the amount of years that you're gifted on this earth.
- [52:13]
B
I love it. Anybody listening? I would click the little rewind button and just listen that one or two more times. That was. That was concise but powerful. That was actually money, dude. I appreciate it. Well, sweet, man. This has been a treat. We'll let you go. Thanks so much for being on the show.
- [52:29]
A
Yeah, of course, Joe. Good to talk to you.
- [52:32]
B
Yep. This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to be aware and act intentionally.