The Passive Income Playbook -A Build to Rent Strategy Giving You Time Freedom & Financial Prosperity
March 14, 2024 • 34 mins
Unlock the secrets to building long-term wealth with real estate mogul Jim Sheils in this latest Legacy Wealth Code episode. Having triumphed over the challenges of Andrew's heart surgeries, my co-host and I, Michael Notbohm, are thrilled to bring you a conversation brimming with strategies for cultivating a robust portfolio. Jim, a partner with Southern Impression homes, takes us through his remarkable journey from seizing foreclosures to pioneering within the build-to-rent sector, crystallizing why patience and top-tier investments are non-negotiable for legacy builders.
Imagine a world where construction loans are a relic of the past. That's the reality we've created at our firm post-acquisition by Sumitomo Forestry, a game-changer for buyers weary of the traditional hassles. In this conversation, we peel back the layers on our edge in securing favorable mortgage rates for clients, while dissecting Florida's housing market with precision. With insights on rental inventory management and risk assessment, we equip you with the foresight to navigate the housing landscape with confidence.
This episode isn't just about the nuts and bolts of the market; it's a masterclass in investment strategy. From the allure of single-family homes and duplexes to the high-demand quad properties, we lay out the blueprint for selecting markets poised for growth. Join us as our guest imparts the wisdom of balancing the scales between holding power and recognizing market corrections, affirming the enduring rise of real estate as a cornerstone of wealth. For any investor, from the greenhorn to the grizzled veteran, this is your map to charting a course toward a prosperous real estate legacy.
Onward!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is the Legacy Wealth Code podcast helping you
build long term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michael Notbohm,here with my partner and grime,
Andrew Hoek.
Andrew Hoek (00:31):
Hey guys, how are you all?
Michael Notbohm (00:33):
We appreciate the couple week hiatus that you
guys have been patient on a newepisode.
Andrew if you've listened tomany of the other episodes is
fairly stoic and called me andsaid I got a heart surgery
tomorrow and I thought thatseems like a kind of a big deal.
So, needless to say, he's had acouple weeks of healing and
(00:53):
we're back in action and weactually, today, have a guest
with us, Jim Shields.
He's a real estate expert withextensive knowledge in the build
to rent niche, also a partnerat Southern Impression Homes, a
company that specializes inbuilding rental portfolios in
Florida's high growth marketsfor individual investors and
institutional buyers.
(01:13):
In addition, Jim is theco-owner and co-founder of 18
Summers, providing familyeducation services to
entrepreneurs and professionalsseeking to strengthen their
family relationships whilesucceeding in business.
So hey, thanks so much, Jim,for coming on.
We're excited to chat with youtoday.
Jim Sheils (01:30):
Yeah, Michael, Andrew, thanks for having me.
Michael Notbohm (01:32):
I guess we didn't share with you that our
hiatus was due to Andrewnonchalantly having not one but
two heart surgeries Wow.
Jim Sheils (01:41):
We are.
I'm glad to see you.
Andrew Hoek (01:43):
Yeah, I'm definitely happy to be back on
the other side of it all, soit's definitely good to be here.
Michael Notbohm (01:50):
And nothing makes us happier than talking
about real estate.
So here we are today.
We've got an expert with us.
One of the things I definitelywanted to chat with you about is
escaping the rat race.
Kind of just.
People want to get started ininvesting in real estate and
sometimes people think that theydon't qualify.
A lot of people just don't even, frankly, know where to start.
(02:11):
So what is your kind of specialsauce, so to speak, that's
helped you both help yourselfand others around you.
Jim Sheils (02:19):
We just wrote a book called the passive income
playbook and it's about my 25year journey with my wife and my
now part building partner, andwhat I've found is a couple of
things about real estate.
Investing that first propertyis probably not going to retire
you and if you're putting thepressure on to make it retire
you, you're going to bedisappointed.
Now, in the good news is thatfirst property is not going to
(02:42):
bankrupt you probably either.
You know there's that fear aswell.
But what I've learned, reallyyou know 25 years in real estate
investing there is a nurturingto it.
There is a planting of the seed.
You don't feed off a seed somuch in the beginning.
But if you start to really lookat the most successful real
estate investors right is thatsaying don't wait to buy real
(03:04):
estate?
Buy real estate and wait.
When you can get into the rightareas with the right
fundamentals and you have somepatients, that's when things can
really start to kick into deerand by kicking into gear you're
going to have better results.
This is the biggest lesson, guys, that I've learned is I own way
less property numbers ofproperties today than I did,
(03:26):
let's say, 10, 12 years ago, andright now I have way more
equity and cash flow than I'veever had.
So I always encourage peopledon't get wrapped up in the
number, the quantity, getwrapped up in the quality and if
you have some patience, that'swhat I've seen work for.
For the majority of the peoplelike myself and many clients
(03:47):
that I've worked with, that'sbeen kind of the secret sauce a
little bit of patience, choosingquality over quantity and
looking long term.
That is absolutely key, notputting the pressure.
I need to be retired off thesetwo rentals in the next 12
months.
That'd be nice, but it's notnormally the norm.
(04:07):
But I can tell you a lot canhappen in three to five years
with a few properties.
Andrew Hoek (04:11):
Jim, tell us a little bit about what led you
into the build to rent sector.
It sounds like you startedpotentially outside of that.
Is that correct?
Jim Sheils (04:20):
Yeah, andrew, I was actually doing bulk foreclosures
After 2008,.
I was buying foreclosures inbulk for myself and investors
were hiring me to work thoseproperties.
There was a great time at thatpost-2008 to buy properties
cheap.
I was in North Florida, whichhad a great growth pattern.
(04:41):
But by about 2014-15, thenumbers really started to change
.
There was a lot of investorsjumping in and put a lot of
pressure on where you're.
If you're going to buy aproperty that you need rehab,
you had to cut corners or youhad to go where as you didn't
want to.
None of that's good.
(05:03):
So my now building partner wehad done different properties
together and he had just him andhis father actually own a
management company and I hadhired and fired four property
managers.
Where I was in NortheastFlorida and came to them, they
were doing a better job than Ihad on my own.
He said to me hey, what if wethrew in and we just built some
houses, new construction rentals, instead of trying to find old
(05:24):
fixer uppers?
And it was literally thatorganic.
There was no term build to rent.
That's only come along in thelast five years.
So we were doing build to rentway before the term even came.
So it was really entering anecessity where we wanted to
keep doing deals, not only forourselves but investors hired us
(05:44):
and we just we didn't think thefundamentals were still sound
for the old fixer uppers.
They have been priced too high,you'd have to cut corners and we
wanted a better approach.
And now, after doing thousandsof the old properties versus
thousands of new construction,there's no comparison.
You know, the numbers don't liewhen it comes to performance,
(06:07):
length of tenancy, maintenance,repairs, headaches, even value
growth and rental and marketappreciation.
I hung up my rehab shoes aboutseven years ago as we were
transitioning.
I don't seem to be picking themback up, guys, I think.
I think.
Michael Notbohm (06:25):
Andrew is ready to move in with you If you have
your if you have your rehabshoes hung up.
I can tell you we've had manyconversations, just, you know,
dealing with local, you know,just kind of city garbage with
the red tape and just theendless reinspections on things
that were fairly common senseitems.
It's like when you make thattransition, I'm sure that is a
(06:47):
game changer.
So what would you tell?
Because the fewer base that wehave and listener base is really
a mixed bag of people who areseasoned investors and then
there's also those who are justgetting into an investing.
So new construction, you know,build to rent, I think for a lot
of people could soundintimidating.
What are some of the things toworry about and what's some of
(07:10):
the things that you know?
Just, this is the naturalprogression of how things go.
Jim Sheils (07:15):
Yeah, I mean again, I always ask my seasoned
investor friends and I'm in alot of mastermind groups and
different.
I'm always, at events, learning.
Still, I always ask thatquestion about taking inventory
of would it be better to ownless of better quality?
Because there comes a pointwhere a lot of us start in more
marginal properties that hadmore repairs than we knew and is
(07:41):
that the best way to stay longterm?
And maybe some say yes but alot say no because they're
trying to buy back their timeand I found that you know the
new construction model, you cango into less properties but I
think get better results, and sothat's something for seasoned
people I always tell them toconsider.
And for newer people, you knowyou got to look at ROT and
(08:04):
that's return on time.
A lot of the new people that wework with, for example, I'm not
sure you're you're listeningbase, but you know we have a lot
of successful professionals andbusiness owners and they they
want to be involved in realestate but they don't
necessarily want to be in thetrenches with it.
They don't want to benegotiating with the contractors
and subcontractors and learningthe areas and figuring out
(08:26):
their own financing.
You know they kind of.
They want to be exposed to realestate but not in, and that's
where I tell people, you know,look at the models that are
going to be less demanding onyour time and that's that's that
return on time.
And that's something that youknow, I think can't, can't be
discounted, and if you truly arelooking long term, the
(08:49):
condition of the property no onewants to talk about this.
But those older properties, youknow, there's some that are
built well, others that are not.
And if they're in areas whereit's constant turnover.
Is that really going to creategenerational wealth?
Are you really going to staylong, long term in those another
20 years?
It made me change a lot aboutmyself, you know 10 years ago,
(09:09):
and it could do the same forothers.
I'm not sure.
Andrew Hoek (09:12):
Hey, jim, talk to us a little bit about the
financing on the build to rent.
I mean, I think most peoplethat the dabble in rehab know
there's a ton of products forfix and flip loans.
You know they're they're usedto kind of seeing that what.
What do you typically see onthe build to rent?
Is financing more difficult?
Are there a number of productsthat have rolled out?
And especially, as you said,you know you started kind of
(09:33):
before it was an it thing.
What does that look like overtime?
Jim Sheils (09:37):
Yeah, it's like even for good builders out there
with a good balance sheet, rightnow the banks kind of have them
in handcuffs and they'rewanting everything pre sold, you
know.
So you have to usually sell itpre construction, which you know
.
That's fine.
I've done those and we've donelots of those for our clients.
I bought them.
But a lot of people don't wantto wait 12 months for a property
(09:58):
and so that really holds thebuilders back.
For us personally, a part of ourbusiness was acquired last year
by Sumitomo forestry.
Sumitomo is the big financialconglomerate of Japan.
You know they were broken up inWorld War two.
Warren Buffett has investedvery heavily in one of their
other conglomerates, but theynow back us.
(10:19):
We have zero bank debt, whichis very rare for a builder of
our size, and they've given usthe green light.
So for our personal building,having this bigger partner now
and with part ownership of ourcompany, they fund us completely
, which is which is a prettygood thing For other.
For other builder friends outthere they're doing new
(10:39):
construction or even if you'rebuilding a single family family
home or smaller property.
You know you can getconstruction loans but they're
tedious and there are a lot ofpaperwork for our buyers.
You don't need one.
So if you're buying a newproperty with us, we're on a
continual build cycle.
So someone can step into us andbuy a home that's completed or
within 60 days of completion.
(11:00):
They don't need a constructionloan, they just need permanent
financing, and financing is thekey out there right now.
So a lot of builders actuallycome to us right now.
They'll have a piece of landthey'll hire us to build because
we actually can finance theirproject for them as part of what
, what we have in our overallbankroll.
Then we also now have boughtmoney.
(11:21):
So we pre buy mortgages for ourclients.
So someone's buying a duplexwith us, let's say we pre buy
money.
It's not cheap, but it'sworthwhile because where most
people are getting locked in at7, 7.5%, we're locking our
people in at 4.75 right now.
So that's, you know, severaland if someone tried to do that
(11:41):
on their own, they'd be payingtheir lender 10 points to do
that.
So that's financing is.
I don't know about what youguys are seeing, but it is.
That's the issue out thereright now.
We don't have a real estateissue.
We have an interest rates andfinancing issue, and so we're
always trying to solve those andright now, with our building
operation being fully funded byour parent company and us pre
(12:04):
buying mortgages for ourinvestors, that's been a huge
help to keeping us sustain areally good volume.
Michael Notbohm (12:10):
When you make a good point.
So I guess, my question alongthe line of what you're.
You know, totally on board withyou what you're saying about
financing, In fact.
So we're in Tampa and there's anumber of projects that you
know basically were announcedand now they're just kind of in
a holding pattern until rateslower and they, they can move
(12:30):
forward.
And I think that there's just alevel of uncertainty with
everything right now.
Right, I mean, you turn on thenews and one channel tells you
one thing, another channel tellsyou the other thing, and so
there's somewhat of a, I think,hesitation by a lot of investors
.
When you're doing newconstruction and there is a 12
month lead time, you know,obviously, applying your 25 plus
(12:52):
years of experience, like, whatelse are you looking at to know
I want to keep moving forwardand I'm not going to be caught
holding the bag 12 months fromnow?
Jim Sheils (13:01):
Meaning if you're building it yourself.
Michael Notbohm (13:03):
Yeah, because so I mean.
Well, you are, your model isyou're building it and then
you're having an investor's buyit from you and then hold it.
As you're building these, youhave a certain amount of lead
time and an expected exit price.
What kind of metrics are youlooking at to make sure you're
not going to see a hugecorrection by the time you're
done?
Jim Sheils (13:22):
Yeah, this is look.
If anyone tells you they're inthe build to rent business and
they're not concerned aboutvalues or what the rents are
actually going to be or is therental demand still there,
they're just not telling thetruth, they're not really in the
game.
So we're constantly pullingmarket data on how many building
permits are coming out.
You know how many new units arecoming on the market and 12
(13:45):
different markets in Florida.
We're always looking how manyunits are coming out, how fast
is absorption occurring.
You know what are the rentalrates at.
It's really a constant checksand balances.
You know constant research toalways be trying to navigate
that ahead and the good news isI think with the residential
it's a little bit easier.
(14:06):
Residential just seems to be atleast where we are in Florida.
We've had so much growththey're already.
Most of the areas that we buildin are extremely behind in
needed rental inventory,especially small residential.
You know the bigger commercialsand apartment buildings.
They're not, as I'm not seeingthem, as favorable as they were
before the pandemic.
(14:26):
People like to be spread out,have their own yard.
They'll choose the half of aduplex before a unit in an
apartment building almost everyother time, almost every time.
So that's super helpful forwhat we're doing.
But we're constantly lookinglike to see and also we don't
like to take a lot of risk.
So it's a very simple supplyand demand.
(14:49):
If we get like a report fromthe municipality, like Southwest
Florida, fort Myers was weredown there or building in many
of the sub markets of Fort MyersWell before the pandemic even
started, they showed three yearsbehind a needed rental
inventory.
So we like to have that wind atour back and when you look at
that that helps.
You know, am I going to beholding the bag?
(15:09):
Some people just start buildingand they're not even checking
to see how many permits arebeing pulled.
You know how much rental demand.
How quick is absorption?
Are prices staying steady?
What type of inventory?
So we don't just build singlefamily.
What separates us from someother build rents is we also
build duplexes and quads, soother residential investment
(15:30):
real estate that shows reallywell in performance and value
growth and we know there's aneed for those.
So again, we're always tryingto look at the need.
And you know, stability,stabilization can go from five
days to 95 days now but again, areal real estate investor knows
that stabilizing is just thatupfront cost to get the property
(15:51):
going, and then you start toget on your way.
Andrew Hoek (15:54):
Jim, it sounds like you guys stay four units or
less.
Is that?
Is that accurate?
Jim Sheils (15:59):
Yes, sir, and we stay in the realm of residential
Now.
We'll hold quad communities for, you know, for some individual
investors and even some familyoffices or hedge fund groups,
but our bread and butter isindividual single family
duplexes and quads.
Andrew Hoek (16:18):
Do you find that across those the single family,
the duplex and the quad thedemand is pretty similar, or do
you get more demand on any oneof those?
Jim Sheils (16:28):
You know they're all pretty similar in demand.
The quads are an interestingkind of unicorn.
You don't find them out thatmuch.
I mean, you guys are in realestate.
How often do you find a quadcoming up, you know?
Speaker 1 (16:41):
oh, you still get residential financing.
Jim Sheils (16:43):
They're usually older they were, you know, back
in the day and even now they'restill.
They can be very hard to getapproved.
And you know a lot of builderslike a lot of the national home
builders.
They're like what do you buildquads?
You're nuts I'm not going towaste my time with that and
they're too small for thecommercial guys.
So the quads are kind of aunicorn and they also obviously
give you the most amount oftenants under one roof for one
(17:04):
loan.
So all of them have a gooddemand.
But definitely quads have aninteresting look taken at them
by a lot of investors and a lotof action too.
Andrew Hoek (17:13):
Okay, you mentioned you're in 12 markets in Florida
.
Do you have certain things thatyou're, are you looking at
future growth or you're lookingat existing growth?
What are some of the thingsthat are leading you into those?
And then, conversely, are therecertain markets that you try to
stay out of and what's leadingthat?
Jim Sheils (17:31):
Yeah, great question .
So we, there's five factors,five factors to real estate
growth and and I I don't dependon appreciation, but I do my
best to get in its way that'salways been my motto from a
mentor taught me that over 20years ago and we always look for
these five factors Economicgrowth, population growth, a
(17:52):
good affordability index.
This is super important Becausethis, I think, determines
whether, where, where you'regoing to have cashflow or
whether there's still room forgrowth.
So if you're in the marketwhere the average price of a
home can be afforded by theaverage family income, that's
good, that's a good score on theaffordability index.
You know, go outside to like aSan Francisco, holy cow, you're
(18:15):
not even close.
The average family income for aprice of home not even close.
We still have greataffordability indexes in our
markets, you know, and they'redesirable, and there's healthy
supply and demand there.
Those are our five factorsPopulation growth, economic
growth, affordability,desirability, healthy supply and
demand.
We look for all five of those,andrew, and we got to have all
(18:35):
five and that affordabilityindex.
That's really important becausewe're not in Miami, we're not
in Orlando, we're not in Tampaand I, like all those markets
People are like well, isn't thatall Florida is?
And I said well, I used tothink so, you know, growing up
in the Northeast.
But you know we go to thosemore second tier markets where
we feel the buy-in is stillreally affordable and even with
(18:58):
a new construction in a B or Aarea, we can still get you
cashflow off the bat.
That's something that wefundamentally look for because
if we believe, as we continue todo, that we put ourselves in
our clients, in a good position.
Michael Notbohm (19:12):
So are you guys identifying individual lots
that you're building on, or arethey like a neighborhood that
you're converting into build arent?
What does the model look like?
Jim Sheils (19:21):
Great question, that's so we, I love scattered
lots, so we.
Right now we have over 5,000lots in Florida and we love
scattered lots.
So scattered lots means anexisting neighborhood, you know,
probably built in the 60s and70s, great ratios of homeowners
to renters.
We go in and buy up all thevacant lots in there and we'll
(19:42):
build single family homes andduplexes.
They do really well, valuereally well, high demand, safe
areas.
We'd walk through there at 10o'clock at night, no problem.
We'll also buy entire.
You know land tracks, you know abig piece of land and you know
one thing I tell people too isthis isn't a quick flip.
You know I did a lot of fix andflips over the years, which are
(20:02):
great.
That was how I got started.
But you know these biggerpieces of land sound really cool
but it could take two years toget these things going.
You know that is a long time.
So what we'll do is, yeah,michael, we'll take on whole
communities.
But let's say like we had onein Jacksonville 800 lots.
It was a defunct golf course.
We divided into 800 lots.
We sold off 650 of the lots tonational home builders because
(20:26):
they're going to build theirnice houses there, and then
scattered within.
We kept 150 lots ourselves tobuild our build a rent product.
So we sometimes for largerbuyers will build out a whole
community, like a whole quadcommunity or even a whole
community of single family homes.
They want to own and rent thewhole thing.
But for our individualinvestors we found especially
(20:50):
for single family and duplexes.
We'd rather get them inestablished neighborhoods that
have a mixture of homeowners andrenters.
We think that's the best forthem.
So we kind of ride betweenthose two choices.
Michael Notbohm (21:00):
I like that.
Andrew Hoek (21:01):
Jim, I think you just alluded to it a little bit
there, but your buyer pool is it?
It sounds like it's a mix ofeverything, from one one
individual toInstitutional-sized buyers.
Is that correct?
Jim Sheils (21:14):
Yeah, we have over 950 individual investors and we
work with a couple of the largerhedge funds.
We've worked with Haven Realty,which is JP Morgan's group.
We've worked with Americanshome for rent invitation homes.
All these guys are kind of thebig ones in some family offices,
but I'd still say our bread andbutter is the individual
investors.
You know we really enjoy that.
(21:35):
That's what you know.
I was, and my partner, chris andhis father were, you know, and
so we've really we build a lotof successful smaller portfolios
.
You know our average, you knowclient who's really found
success.
They own between three and tenproperties and they've been into
them for for a few years now.
So they're really producing ata great cash flow.
(21:56):
They're to lower LTV and that'sstill our bread and butter.
And these are some of them arein real estate.
We have a lot of realtors ormortgage people who are in
markets where the numbers justdon't work and so they'll come
to us.
We also have a number ofbusiness owners, professionals,
doctors, dentists that again,they want exposure, real estate,
(22:18):
but they want someone else todo the homework of figuring out
and, you know, be able to putguardrails around their time and
are you all?
you're in Florida only only inFlorida, but the plan is over
the next two years with withSumitomo or a parent company,
there's already some expansionplans We'll go into Texas and
Tennessee, which are two stateswe like, as you had said, is
(22:41):
there's something you avoid,andrew, and I got to it a little
bit like we avoid the biggestmarkets in Florida, not because
we don't like them, we justdon't find that off the bat cash
flow and we feel like they're alittle more priced up.
What we do is we also look forlandlord friendly states and
that's something I reallyencouraged all your listeners.
Things have changed over thelast five years very different
(23:05):
than I had seen the last 25years.
You got to go to a state thatallows you to collect rent and
doesn't penalize you for doingit.
So I always I like Florida, Ilike Tennessee, I like Texas
because their landlord laws arefair and that's important if
you're depending on cash flowfrom, you know, renting property
.
Andrew Hoek (23:23):
Yeah, that's funny, you said so.
I'm a real estate attorney, ispart of my part of my world and
and so right around the COVID westarted getting all these
investors from the Northeast andNew Jersey and New York and
that was their comment.
They're like we got to get outof these states.
It's impossible to get anythingdone.
We're coming into Florida fullspeed, so it's it's interesting
(23:47):
to watch.
Jim Sheils (23:48):
No, and as from the legal side you see that and from
the friend side, I know youguys said you're in Tampa have a
good friend to his wife,reclose, relocated to Tampa in
the pandemic.
They had built up a very goodportfolio in upstate New York
that they worked years on.
It was producing good money,probably 1720 grand a month.
It went from that to losingthem 10 to 12 a month, and we're
(24:11):
not talking for two months,we're talking 14, 16 months.
That's detrimental and for thesmaller.
Our job always, I'm sure, asyou guys educate with our
clients is to take risk off thetable.
So, for example, we we weredoing some things in Georgia.
We liked Atlanta, we like thegrowth patterns.
We've completely pulled out.
We've sold our rental portfoliothere.
(24:32):
We've we've sold ourdevelopment projects we still
had, because the landlord lawschanged so much in COVID.
We can't in good consciouscontinued to build there and
rent there for ourselves or ourclients.
Michael Notbohm (24:43):
So are you guys keeping a good portion of these
, or is most of the model?
Jim Sheils (24:48):
some properties within our, you know, within
every project that we do andthen we manage probably 95% of
what we build okay, yeah, thatwas gonna be my next question
because, like you said, doctors,dentists, etc.
Michael Notbohm (25:02):
That are Interested in getting in the
game but just don't have thetime or bandwidth to manage
everything themselves.
So one other thing, just kindof shifting gears a little bit.
But when we started this littlelegacy wealth code you know to
us was teaching people how tobuy real estate, build a
long-term wealth and ultimatelyleave a legacy that's meaningful
(25:23):
.
It looks like you've started 18summers all these interview
topics that you sent over to us.
I'll have a pretty common themethat you know you share a
fairly Common interest with us,which is invest in real estate,
but do things from a timeperspective that mean the most
to you.
So talk a little bit about this18 summers.
Jim Sheils (25:43):
My wife and I started 10 years ago as more of
a passion project and we wrote abook that we didn't even want
to write but, long and behold,it became a number one
bestseller, wall Street Journalbestseller and it just shows
that real estate investors,entrepreneurs, they want to be
successful in business but theyalso want to be successful at
home.
And in the rush up thatinvestor mountain we can all get
(26:05):
wrapped up in in bestintentions, but you can miss the
boat on some really importantyears.
That was something a mentor ofmine told me.
He said they'll still be yourkids after 18 years.
But I'm telling you it'sdifferent.
He's like make the most ofthose 18 summers.
They'll want to come back formore.
You'll never regret it.
You'll be there in the mostimportant times of their life.
(26:25):
And and so it really.
It changed the way I looked atthings many years ago.
And so we work with lots ofdifferent investment groups,
entrepreneur groups, my wife andI both and just say how do we
be successful in business andsuccessful at home?
And that is the theme of 18summers.
(26:45):
And we've, you know, been ableto write some pretty neat books
and have some classes, workshops, which we didn't realize was so
needed until we started doingit.
But there's a lot of ways thatthe three of us can figure out
how to better our business.
There's very few things outthere for investors and
entrepreneurs Clearly laid outof how do you be a successful
entrepreneur and keep yourmarriage and family life strong.
(27:07):
Very few things to that exactniche.
Michael Notbohm (27:11):
Yeah, I'd agree with that.
This whole thing started nowyou've got.
You said, workshops andmasterminds.
Is that something that peoplecan sign up and be a part of?
What does that look like foryou guys?
Jim Sheils (27:22):
Yeah, a lot of.
There's different ones.
People can sign up for a lot oftimes Individual investor
groups or entrepreneur groupswill hire me to come in and
speak or facilitate a workshop.
So it's again more of a more ofa side project.
I don't like to be on the roadmuch anymore.
Again, I have five children, soI really I like adventure.
We work.
(27:43):
Right now I'm in our house inCosta Rica.
I work here three months out ofthe year but I like to be with
my family.
So I do go out on the road formy family consulting talks, but
not as much as I used to becauseI I'm a homebody now.
I'm not afraid to say it.
I don't need that, that roadadventure Nearing down on 50.
(28:03):
I'm like, I'm good, oh.
Andrew Hoek (28:07):
How old are your kids, jim?
Jim Sheils (28:08):
I range two to 20.
So we got the game All rightyou do.
Andrew Hoek (28:12):
Yeah, that keeps you busy.
Jim Sheils (28:14):
It sure does either busy or insane, or both.
Speaker 1 (28:20):
So you know your experience.
I think is is pretty broad.
Michael Notbohm (28:24):
You know started with doing those bulk
rehabs or bulk foreclosures,rather.
Do you see any of that kind ofstuff on the horizon for the
average investor looking atthings?
Is there anything that's a redflag to you?
Jim Sheils (28:36):
I have not seen anything from the people I'd
listen to and I wish I'dlistened to in 06.07.
I don't see anything from thebigger points until very late in
this decade, you know, 2029,2030.
There could definitely be acorrection and that's something
(28:58):
that you always want to look for.
However, what I always tellpeople, is I survived?
2008.
It wasn't easy.
It was painful.
I could have survived it somuch easier, guys I mean so much
easier If I had owned less ofbetter quality with less
leverage.
That's simple.
There's never been a time in Ina seven to eight year span, or
(29:19):
definitely a 10 year when it'sbeen bad to hold.
The three of us could have gonein on a single family home
together in Jacksonville,florida, in mid 2007 the worst
time supposedly in the lasthundred years and within six and
a half years we would have beenabove that pricing with rents
up.
So this is where I like holdingpower, because if you will just
not look six months, but you'lllook at least five, six years
(29:41):
and you have the type ofproperty that Perform it, I
don't worry about things likethat anymore.
My portfolio is probably atabout 28 29 ltv now.
So I'm not saying you have to bethat low again.
I've become an old fuddy duddy.
You know, not very aggressive,but but as you build that, if
you're owning less, you're notover leveraged, it's in good
(30:03):
condition in solid areas, youcan rent your way through.
You know a short correction oftwo, three years, like we saw.
You know eight.
It was only one year in thetougher areas with deferred
maintenance, because no onelikes to talk about this.
But guess what?
Deferred maintenance alwayscomes due at the worst possible
time, when you've got the leastamount of cash.
So I like to avoid deferredmaintenance in my properties.
(30:24):
Um and and again, it's, it's,it's a very, it's a very simple
ah, it's, it's just for me, itliterally.
I know, I repeat myself, butown less, better quality, less
leverage, you'll be able topower through those shorter
things.
But you know, you look at anygraph of, like the fed charts
from the last 110 years, realestate has always continually
(30:46):
gone up.
There's dips and there's thisand we all know about.
My grandfather bought his houseFor this if I had kept it to be
worth this.
I believe in that and unlessour money system completely
changes, I don't think that'sever changing.
Michael Notbohm (30:58):
Well, it's a very sophisticated model that I
know that most of the I wouldactually argue to say all of our
wealthiest friends share, whichis, buy good properties and
don't sell them.
Jim Sheils (31:10):
It's pretty simple.
Michael Notbohm (31:12):
Pretty simple.
Jim Sheils (31:13):
But the problem is you've got to be willing to look
past the nose of six months.
Right, we can only look out,just the end of our nose.
Three to six months, let me,can I do that?
And and that just ruins it, youknow, and that's also.
Or a lot of people get intocrappy properties for their
first few properties and theybeat the hell out of them for
two years.
They throw up the white flag,they says we're out, we're never
(31:33):
doing rental property again andI go dang.
Instead of buying two or threecrappy ones, what if you just
bought one good one?
Michael Notbohm (31:40):
Just one good one.
Jim Sheils (31:41):
You know To stop with the hundred house club.
You know I believed in thatshit and it was just and I
surpassed it and doubled in.
I was miserable.
So you know quality overquantity.
Do your numbers Strategic whereyou're buying, not only
landlord loss but where's growthoccurring.
You know you can do a lot witha small portfolio.
Andrew Hoek (32:01):
I love that message , jim, because one of the things
that we always drive home isthat you know, real estate isn't
easy, but it's simple if youstick to your fundamentals.
Well said, well said and that'sso important and it gets
overlooked.
And Getting back to the basicsand sticking with those is.
There's so much to that, so.
Jim Sheils (32:20):
Absolutely.
Michael Notbohm (32:21):
So I'm going to put a link in the show notes
for uh, for your books, and thenyou know what can we do to help
you.
Are you looking for moreinvestors?
What, what?
Jim Sheils (32:30):
I mean we're always bringing on.
We bring on new investorsweekly.
You know we're at nearly athousand investors and and we're
expanding our operation.
We're very excited about thesuccess we've had for so many
people out there and we'recontinuing to grow Into the
growth markets of florida andthen other states of of good
landlord like, uh, texas andtennessee, and, and we we enjoy
(32:55):
being able to buy back ourpeople's time.
You know that they don't haveto do all the all the grunt work
that we, the three of us, knowcan take a lot of time.
So Read our book, check out ourwebsite.
If we can help you, great.
We're not a fit for everybody,but for the people that, like
our principles and fundamentals,we've been able to build some
(33:16):
real, solid Rental portfoliosthat I do believe have that
ability for generational wealth.
Michael Notbohm (33:22):
Yeah, you've had some super good points.
We're Beyond glad you came on.
I know we had to uh to move ourlast one with everything going
on, but I'm glad we got thisepisode uh recorded and I think
it'll be a very valuable one forour listeners.
Hopefully some people reach outto you and start that journey
of investing in real estate.
Jim Sheils (33:42):
Well, it's good either way.
It's good chatting with youguys.
I appreciate the conversation.
Michael Notbohm (33:46):
Yeah, you as well, andrew got anything else?
Andrew Hoek (33:48):
I don't, jim, really appreciate you coming on
and and, as I said, greatmessage and and kudos to you on
the success of your company andand, uh, yeah, I'm excited to
see where you all continue to go.
Jim Sheils (34:00):
Thank you.
Michael Notbohm (34:01):
I am a little jealous here in Costa Rica, I'm
not gonna lie.
Jim Sheils (34:04):
but it is what it is Carry on maybe next year I'll
be there with you.
Didn't happen when I first camehere 24 years ago, but now I'm
able to spend time here.
Michael Notbohm (34:13):
That's, that's the power of lag right there,
yeah living, every living,everything you teach, which is,
uh, one of the one of the thingsyou very rarely see these days.
So appreciate, uh appreciate,you coming on.
So all right guys.
Well, this has been anotherepisode of the legacy wealth
code podcast.
Until next time on word.
Speaker 1 (34:31):
Thank you for joining us for another episode of the
legacy wealth code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode.
Until next time On word.
This is the Legacy Wealth Code podcast helping you
build long term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michael Notbohm,here with my partner and grime,
Andrew Hoek.
Andrew Hoek (00:31):
Hey guys, how are you all?
Michael Notbohm (00:33):
We appreciate the couple week hiatus that you
guys have been patient on a newepisode.
Andrew if you've listened tomany of the other episodes is
fairly stoic and called me andsaid I got a heart surgery
tomorrow and I thought thatseems like a kind of a big deal.
So, needless to say, he's had acouple weeks of healing and
(00:53):
we're back in action and weactually, today, have a guest
with us, Jim Shields.
He's a real estate expert withextensive knowledge in the build
to rent niche, also a partnerat Southern Impression Homes, a
company that specializes inbuilding rental portfolios in
Florida's high growth marketsfor individual investors and
institutional buyers.
(01:13):
In addition, Jim is theco-owner and co-founder of 18
Summers, providing familyeducation services to
entrepreneurs and professionalsseeking to strengthen their
family relationships whilesucceeding in business.
So hey, thanks so much, Jim,for coming on.
We're excited to chat with youtoday.
Jim Sheils (01:30):
Yeah, Michael, Andrew, thanks for having me.
Michael Notbohm (01:32):
I guess we didn't share with you that our
hiatus was due to Andrewnonchalantly having not one but
two heart surgeries Wow.
Jim Sheils (01:41):
We are.
I'm glad to see you.
Andrew Hoek (01:43):
Yeah, I'm definitely happy to be back on
the other side of it all, soit's definitely good to be here.
Michael Notbohm (01:50):
And nothing makes us happier than talking
about real estate.
So here we are today.
We've got an expert with us.
One of the things I definitelywanted to chat with you about is
escaping the rat race.
Kind of just.
People want to get started ininvesting in real estate and
sometimes people think that theydon't qualify.
A lot of people just don't even, frankly, know where to start.
(02:11):
So what is your kind of specialsauce, so to speak, that's
helped you both help yourselfand others around you.
Jim Sheils (02:19):
We just wrote a book called the passive income
playbook and it's about my 25year journey with my wife and my
now part building partner, andwhat I've found is a couple of
things about real estate.
Investing that first propertyis probably not going to retire
you and if you're putting thepressure on to make it retire
you, you're going to bedisappointed.
Now, in the good news is thatfirst property is not going to
(02:42):
bankrupt you probably either.
You know there's that fear aswell.
But what I've learned, reallyyou know 25 years in real estate
investing there is a nurturingto it.
There is a planting of the seed.
You don't feed off a seed somuch in the beginning.
But if you start to really lookat the most successful real
estate investors right is thatsaying don't wait to buy real
(03:04):
estate?
Buy real estate and wait.
When you can get into the rightareas with the right
fundamentals and you have somepatients, that's when things can
really start to kick into deerand by kicking into gear you're
going to have better results.
This is the biggest lesson, guys, that I've learned is I own way
less property numbers ofproperties today than I did,
(03:26):
let's say, 10, 12 years ago, andright now I have way more
equity and cash flow than I'veever had.
So I always encourage peopledon't get wrapped up in the
number, the quantity, getwrapped up in the quality and if
you have some patience, that'swhat I've seen work for.
For the majority of the peoplelike myself and many clients
(03:47):
that I've worked with, that'sbeen kind of the secret sauce a
little bit of patience, choosingquality over quantity and
looking long term.
That is absolutely key, notputting the pressure.
I need to be retired off thesetwo rentals in the next 12
months.
That'd be nice, but it's notnormally the norm.
(04:07):
But I can tell you a lot canhappen in three to five years
with a few properties.
Andrew Hoek (04:11):
Jim, tell us a little bit about what led you
into the build to rent sector.
It sounds like you startedpotentially outside of that.
Is that correct?
Jim Sheils (04:20):
Yeah, andrew, I was actually doing bulk foreclosures
After 2008,.
I was buying foreclosures inbulk for myself and investors
were hiring me to work thoseproperties.
There was a great time at thatpost-2008 to buy properties
cheap.
I was in North Florida, whichhad a great growth pattern.
(04:41):
But by about 2014-15, thenumbers really started to change
.
There was a lot of investorsjumping in and put a lot of
pressure on where you're.
If you're going to buy aproperty that you need rehab,
you had to cut corners or youhad to go where as you didn't
want to.
None of that's good.
(05:03):
So my now building partner wehad done different properties
together and he had just him andhis father actually own a
management company and I hadhired and fired four property
managers.
Where I was in NortheastFlorida and came to them, they
were doing a better job than Ihad on my own.
He said to me hey, what if wethrew in and we just built some
houses, new construction rentals, instead of trying to find old
(05:24):
fixer uppers?
And it was literally thatorganic.
There was no term build to rent.
That's only come along in thelast five years.
So we were doing build to rentway before the term even came.
So it was really entering anecessity where we wanted to
keep doing deals, not only forourselves but investors hired us
(05:44):
and we just we didn't think thefundamentals were still sound
for the old fixer uppers.
They have been priced too high,you'd have to cut corners and we
wanted a better approach.
And now, after doing thousandsof the old properties versus
thousands of new construction,there's no comparison.
You know, the numbers don't liewhen it comes to performance,
(06:07):
length of tenancy, maintenance,repairs, headaches, even value
growth and rental and marketappreciation.
I hung up my rehab shoes aboutseven years ago as we were
transitioning.
I don't seem to be picking themback up, guys, I think.
I think.
Michael Notbohm (06:25):
Andrew is ready to move in with you If you have
your if you have your rehabshoes hung up.
I can tell you we've had manyconversations, just, you know,
dealing with local, you know,just kind of city garbage with
the red tape and just theendless reinspections on things
that were fairly common senseitems.
It's like when you make thattransition, I'm sure that is a
(06:47):
game changer.
So what would you tell?
Because the fewer base that wehave and listener base is really
a mixed bag of people who areseasoned investors and then
there's also those who are justgetting into an investing.
So new construction, you know,build to rent, I think for a lot
of people could soundintimidating.
What are some of the things toworry about and what's some of
(07:10):
the things that you know?
Just, this is the naturalprogression of how things go.
Jim Sheils (07:15):
Yeah, I mean again, I always ask my seasoned
investor friends and I'm in alot of mastermind groups and
different.
I'm always, at events, learning.
Still, I always ask thatquestion about taking inventory
of would it be better to ownless of better quality?
Because there comes a pointwhere a lot of us start in more
marginal properties that hadmore repairs than we knew and is
(07:41):
that the best way to stay longterm?
And maybe some say yes but alot say no because they're
trying to buy back their timeand I found that you know the
new construction model, you cango into less properties but I
think get better results, and sothat's something for seasoned
people I always tell them toconsider.
And for newer people, you knowyou got to look at ROT and
(08:04):
that's return on time.
A lot of the new people that wework with, for example, I'm not
sure you're you're listeningbase, but you know we have a lot
of successful professionals andbusiness owners and they they
want to be involved in realestate but they don't
necessarily want to be in thetrenches with it.
They don't want to benegotiating with the contractors
and subcontractors and learningthe areas and figuring out
(08:26):
their own financing.
You know they kind of.
They want to be exposed to realestate but not in, and that's
where I tell people, you know,look at the models that are
going to be less demanding onyour time and that's that's that
return on time.
And that's something that youknow, I think can't, can't be
discounted, and if you truly arelooking long term, the
(08:49):
condition of the property no onewants to talk about this.
But those older properties, youknow, there's some that are
built well, others that are not.
And if they're in areas whereit's constant turnover.
Is that really going to creategenerational wealth?
Are you really going to staylong, long term in those another
20 years?
It made me change a lot aboutmyself, you know 10 years ago,
(09:09):
and it could do the same forothers.
I'm not sure.
Andrew Hoek (09:12):
Hey, jim, talk to us a little bit about the
financing on the build to rent.
I mean, I think most peoplethat the dabble in rehab know
there's a ton of products forfix and flip loans.
You know they're they're usedto kind of seeing that what.
What do you typically see onthe build to rent?
Is financing more difficult?
Are there a number of productsthat have rolled out?
And especially, as you said,you know you started kind of
(09:33):
before it was an it thing.
What does that look like overtime?
Jim Sheils (09:37):
Yeah, it's like even for good builders out there
with a good balance sheet, rightnow the banks kind of have them
in handcuffs and they'rewanting everything pre sold, you
know.
So you have to usually sell itpre construction, which you know
.
That's fine.
I've done those and we've donelots of those for our clients.
I bought them.
But a lot of people don't wantto wait 12 months for a property
(09:58):
and so that really holds thebuilders back.
For us personally, a part of ourbusiness was acquired last year
by Sumitomo forestry.
Sumitomo is the big financialconglomerate of Japan.
You know they were broken up inWorld War two.
Warren Buffett has investedvery heavily in one of their
other conglomerates, but theynow back us.
(10:19):
We have zero bank debt, whichis very rare for a builder of
our size, and they've given usthe green light.
So for our personal building,having this bigger partner now
and with part ownership of ourcompany, they fund us completely
, which is which is a prettygood thing For other.
For other builder friends outthere they're doing new
(10:39):
construction or even if you'rebuilding a single family family
home or smaller property.
You know you can getconstruction loans but they're
tedious and there are a lot ofpaperwork for our buyers.
You don't need one.
So if you're buying a newproperty with us, we're on a
continual build cycle.
So someone can step into us andbuy a home that's completed or
within 60 days of completion.
(11:00):
They don't need a constructionloan, they just need permanent
financing, and financing is thekey out there right now.
So a lot of builders actuallycome to us right now.
They'll have a piece of landthey'll hire us to build because
we actually can finance theirproject for them as part of what
, what we have in our overallbankroll.
Then we also now have boughtmoney.
(11:21):
So we pre buy mortgages for ourclients.
So someone's buying a duplexwith us, let's say we pre buy
money.
It's not cheap, but it'sworthwhile because where most
people are getting locked in at7, 7.5%, we're locking our
people in at 4.75 right now.
So that's, you know, severaland if someone tried to do that
(11:41):
on their own, they'd be payingtheir lender 10 points to do
that.
So that's financing is.
I don't know about what youguys are seeing, but it is.
That's the issue out thereright now.
We don't have a real estateissue.
We have an interest rates andfinancing issue, and so we're
always trying to solve those andright now, with our building
operation being fully funded byour parent company and us pre
(12:04):
buying mortgages for ourinvestors, that's been a huge
help to keeping us sustain areally good volume.
Michael Notbohm (12:10):
When you make a good point.
So I guess, my question alongthe line of what you're.
You know, totally on board withyou what you're saying about
financing, In fact.
So we're in Tampa and there's anumber of projects that you
know basically were announcedand now they're just kind of in
a holding pattern until rateslower and they, they can move
(12:30):
forward.
And I think that there's just alevel of uncertainty with
everything right now.
Right, I mean, you turn on thenews and one channel tells you
one thing, another channel tellsyou the other thing, and so
there's somewhat of a, I think,hesitation by a lot of investors
.
When you're doing newconstruction and there is a 12
month lead time, you know,obviously, applying your 25 plus
(12:52):
years of experience, like, whatelse are you looking at to know
I want to keep moving forwardand I'm not going to be caught
holding the bag 12 months fromnow?
Jim Sheils (13:01):
Meaning if you're building it yourself.
Michael Notbohm (13:03):
Yeah, because so I mean.
Well, you are, your model isyou're building it and then
you're having an investor's buyit from you and then hold it.
As you're building these, youhave a certain amount of lead
time and an expected exit price.
What kind of metrics are youlooking at to make sure you're
not going to see a hugecorrection by the time you're
done?
Jim Sheils (13:22):
Yeah, this is look.
If anyone tells you they're inthe build to rent business and
they're not concerned aboutvalues or what the rents are
actually going to be or is therental demand still there,
they're just not telling thetruth, they're not really in the
game.
So we're constantly pullingmarket data on how many building
permits are coming out.
You know how many new units arecoming on the market and 12
(13:45):
different markets in Florida.
We're always looking how manyunits are coming out, how fast
is absorption occurring.
You know what are the rentalrates at.
It's really a constant checksand balances.
You know constant research toalways be trying to navigate
that ahead and the good news isI think with the residential
it's a little bit easier.
(14:06):
Residential just seems to be atleast where we are in Florida.
We've had so much growththey're already.
Most of the areas that we buildin are extremely behind in
needed rental inventory,especially small residential.
You know the bigger commercialsand apartment buildings.
They're not, as I'm not seeingthem, as favorable as they were
before the pandemic.
(14:26):
People like to be spread out,have their own yard.
They'll choose the half of aduplex before a unit in an
apartment building almost everyother time, almost every time.
So that's super helpful forwhat we're doing.
But we're constantly lookinglike to see and also we don't
like to take a lot of risk.
So it's a very simple supplyand demand.
(14:49):
If we get like a report fromthe municipality, like Southwest
Florida, fort Myers was weredown there or building in many
of the sub markets of Fort MyersWell before the pandemic even
started, they showed three yearsbehind a needed rental
inventory.
So we like to have that wind atour back and when you look at
that that helps.
You know, am I going to beholding the bag?
(15:09):
Some people just start buildingand they're not even checking
to see how many permits arebeing pulled.
You know how much rental demand.
How quick is absorption?
Are prices staying steady?
What type of inventory?
So we don't just build singlefamily.
What separates us from someother build rents is we also
build duplexes and quads, soother residential investment
(15:30):
real estate that shows reallywell in performance and value
growth and we know there's aneed for those.
So again, we're always tryingto look at the need.
And you know, stability,stabilization can go from five
days to 95 days now but again, areal real estate investor knows
that stabilizing is just thatupfront cost to get the property
(15:51):
going, and then you start toget on your way.
Andrew Hoek (15:54):
Jim, it sounds like you guys stay four units or
less.
Is that?
Is that accurate?
Jim Sheils (15:59):
Yes, sir, and we stay in the realm of residential
Now.
We'll hold quad communities for, you know, for some individual
investors and even some familyoffices or hedge fund groups,
but our bread and butter isindividual single family
duplexes and quads.
Andrew Hoek (16:18):
Do you find that across those the single family,
the duplex and the quad thedemand is pretty similar, or do
you get more demand on any oneof those?
Jim Sheils (16:28):
You know they're all pretty similar in demand.
The quads are an interestingkind of unicorn.
You don't find them out thatmuch.
I mean, you guys are in realestate.
How often do you find a quadcoming up, you know?
Speaker 1 (16:41):
oh, you still get residential financing.
Jim Sheils (16:43):
They're usually older they were, you know, back
in the day and even now they'restill.
They can be very hard to getapproved.
And you know a lot of builderslike a lot of the national home
builders.
They're like what do you buildquads?
You're nuts I'm not going towaste my time with that and
they're too small for thecommercial guys.
So the quads are kind of aunicorn and they also obviously
give you the most amount oftenants under one roof for one
(17:04):
loan.
So all of them have a gooddemand.
But definitely quads have aninteresting look taken at them
by a lot of investors and a lotof action too.
Andrew Hoek (17:13):
Okay, you mentioned you're in 12 markets in Florida
.
Do you have certain things thatyou're, are you looking at
future growth or you're lookingat existing growth?
What are some of the thingsthat are leading you into those?
And then, conversely, are therecertain markets that you try to
stay out of and what's leadingthat?
Jim Sheils (17:31):
Yeah, great question .
So we, there's five factors,five factors to real estate
growth and and I I don't dependon appreciation, but I do my
best to get in its way that'salways been my motto from a
mentor taught me that over 20years ago and we always look for
these five factors Economicgrowth, population growth, a
(17:52):
good affordability index.
This is super important Becausethis, I think, determines
whether, where, where you'regoing to have cashflow or
whether there's still room forgrowth.
So if you're in the marketwhere the average price of a
home can be afforded by theaverage family income, that's
good, that's a good score on theaffordability index.
You know, go outside to like aSan Francisco, holy cow, you're
(18:15):
not even close.
The average family income for aprice of home not even close.
We still have greataffordability indexes in our
markets, you know, and they'redesirable, and there's healthy
supply and demand there.
Those are our five factorsPopulation growth, economic
growth, affordability,desirability, healthy supply and
demand.
We look for all five of those,andrew, and we got to have all
(18:35):
five and that affordabilityindex.
That's really important becausewe're not in Miami, we're not
in Orlando, we're not in Tampaand I, like all those markets
People are like well, isn't thatall Florida is?
And I said well, I used tothink so, you know, growing up
in the Northeast.
But you know we go to thosemore second tier markets where
we feel the buy-in is stillreally affordable and even with
(18:58):
a new construction in a B or Aarea, we can still get you
cashflow off the bat.
That's something that wefundamentally look for because
if we believe, as we continue todo, that we put ourselves in
our clients, in a good position.
Michael Notbohm (19:12):
So are you guys identifying individual lots
that you're building on, or arethey like a neighborhood that
you're converting into build arent?
What does the model look like?
Jim Sheils (19:21):
Great question, that's so we, I love scattered
lots, so we.
Right now we have over 5,000lots in Florida and we love
scattered lots.
So scattered lots means anexisting neighborhood, you know,
probably built in the 60s and70s, great ratios of homeowners
to renters.
We go in and buy up all thevacant lots in there and we'll
(19:42):
build single family homes andduplexes.
They do really well, valuereally well, high demand, safe
areas.
We'd walk through there at 10o'clock at night, no problem.
We'll also buy entire.
You know land tracks, you know abig piece of land and you know
one thing I tell people too isthis isn't a quick flip.
You know I did a lot of fix andflips over the years, which are
(20:02):
great.
That was how I got started.
But you know these biggerpieces of land sound really cool
but it could take two years toget these things going.
You know that is a long time.
So what we'll do is, yeah,michael, we'll take on whole
communities.
But let's say like we had onein Jacksonville 800 lots.
It was a defunct golf course.
We divided into 800 lots.
We sold off 650 of the lots tonational home builders because
(20:26):
they're going to build theirnice houses there, and then
scattered within.
We kept 150 lots ourselves tobuild our build a rent product.
So we sometimes for largerbuyers will build out a whole
community, like a whole quadcommunity or even a whole
community of single family homes.
They want to own and rent thewhole thing.
But for our individualinvestors we found especially
(20:50):
for single family and duplexes.
We'd rather get them inestablished neighborhoods that
have a mixture of homeowners andrenters.
We think that's the best forthem.
So we kind of ride betweenthose two choices.
Michael Notbohm (21:00):
I like that.
Andrew Hoek (21:01):
Jim, I think you just alluded to it a little bit
there, but your buyer pool is it?
It sounds like it's a mix ofeverything, from one one
individual toInstitutional-sized buyers.
Is that correct?
Jim Sheils (21:14):
Yeah, we have over 950 individual investors and we
work with a couple of the largerhedge funds.
We've worked with Haven Realty,which is JP Morgan's group.
We've worked with Americanshome for rent invitation homes.
All these guys are kind of thebig ones in some family offices,
but I'd still say our bread andbutter is the individual
investors.
You know we really enjoy that.
(21:35):
That's what you know.
I was, and my partner, chris andhis father were, you know, and
so we've really we build a lotof successful smaller portfolios
.
You know our average, you knowclient who's really found
success.
They own between three and tenproperties and they've been into
them for for a few years now.
So they're really producing ata great cash flow.
(21:56):
They're to lower LTV and that'sstill our bread and butter.
And these are some of them arein real estate.
We have a lot of realtors ormortgage people who are in
markets where the numbers justdon't work and so they'll come
to us.
We also have a number ofbusiness owners, professionals,
doctors, dentists that again,they want exposure, real estate,
(22:18):
but they want someone else todo the homework of figuring out
and, you know, be able to putguardrails around their time and
are you all?
you're in Florida only only inFlorida, but the plan is over
the next two years with withSumitomo or a parent company,
there's already some expansionplans We'll go into Texas and
Tennessee, which are two stateswe like, as you had said, is
(22:41):
there's something you avoid,andrew, and I got to it a little
bit like we avoid the biggestmarkets in Florida, not because
we don't like them, we justdon't find that off the bat cash
flow and we feel like they're alittle more priced up.
What we do is we also look forlandlord friendly states and
that's something I reallyencouraged all your listeners.
Things have changed over thelast five years very different
(23:05):
than I had seen the last 25years.
You got to go to a state thatallows you to collect rent and
doesn't penalize you for doingit.
So I always I like Florida, Ilike Tennessee, I like Texas
because their landlord laws arefair and that's important if
you're depending on cash flowfrom, you know, renting property
.
Andrew Hoek (23:23):
Yeah, that's funny, you said so.
I'm a real estate attorney, ispart of my part of my world and
and so right around the COVID westarted getting all these
investors from the Northeast andNew Jersey and New York and
that was their comment.
They're like we got to get outof these states.
It's impossible to get anythingdone.
We're coming into Florida fullspeed, so it's it's interesting
(23:47):
to watch.
Jim Sheils (23:48):
No, and as from the legal side you see that and from
the friend side, I know youguys said you're in Tampa have a
good friend to his wife,reclose, relocated to Tampa in
the pandemic.
They had built up a very goodportfolio in upstate New York
that they worked years on.
It was producing good money,probably 1720 grand a month.
It went from that to losingthem 10 to 12 a month, and we're
(24:11):
not talking for two months,we're talking 14, 16 months.
That's detrimental and for thesmaller.
Our job always, I'm sure, asyou guys educate with our
clients is to take risk off thetable.
So, for example, we we weredoing some things in Georgia.
We liked Atlanta, we like thegrowth patterns.
We've completely pulled out.
We've sold our rental portfoliothere.
(24:32):
We've we've sold ourdevelopment projects we still
had, because the landlord lawschanged so much in COVID.
We can't in good consciouscontinued to build there and
rent there for ourselves or ourclients.
Michael Notbohm (24:43):
So are you guys keeping a good portion of these
, or is most of the model?
Jim Sheils (24:48):
some properties within our, you know, within
every project that we do andthen we manage probably 95% of
what we build okay, yeah, thatwas gonna be my next question
because, like you said, doctors,dentists, etc.
Michael Notbohm (25:02):
That are Interested in getting in the
game but just don't have thetime or bandwidth to manage
everything themselves.
So one other thing, just kindof shifting gears a little bit.
But when we started this littlelegacy wealth code you know to
us was teaching people how tobuy real estate, build a
long-term wealth and ultimatelyleave a legacy that's meaningful
(25:23):
.
It looks like you've started 18summers all these interview
topics that you sent over to us.
I'll have a pretty common themethat you know you share a
fairly Common interest with us,which is invest in real estate,
but do things from a timeperspective that mean the most
to you.
So talk a little bit about this18 summers.
Jim Sheils (25:43):
My wife and I started 10 years ago as more of
a passion project and we wrote abook that we didn't even want
to write but, long and behold,it became a number one
bestseller, wall Street Journalbestseller and it just shows
that real estate investors,entrepreneurs, they want to be
successful in business but theyalso want to be successful at
home.
And in the rush up thatinvestor mountain we can all get
(26:05):
wrapped up in in bestintentions, but you can miss the
boat on some really importantyears.
That was something a mentor ofmine told me.
He said they'll still be yourkids after 18 years.
But I'm telling you it'sdifferent.
He's like make the most ofthose 18 summers.
They'll want to come back formore.
You'll never regret it.
You'll be there in the mostimportant times of their life.
(26:25):
And and so it really.
It changed the way I looked atthings many years ago.
And so we work with lots ofdifferent investment groups,
entrepreneur groups, my wife andI both and just say how do we
be successful in business andsuccessful at home?
And that is the theme of 18summers.
(26:45):
And we've, you know, been ableto write some pretty neat books
and have some classes, workshops, which we didn't realize was so
needed until we started doingit.
But there's a lot of ways thatthe three of us can figure out
how to better our business.
There's very few things outthere for investors and
entrepreneurs Clearly laid outof how do you be a successful
entrepreneur and keep yourmarriage and family life strong.
(27:07):
Very few things to that exactniche.
Michael Notbohm (27:11):
Yeah, I'd agree with that.
This whole thing started nowyou've got.
You said, workshops andmasterminds.
Is that something that peoplecan sign up and be a part of?
What does that look like foryou guys?
Jim Sheils (27:22):
Yeah, a lot of.
There's different ones.
People can sign up for a lot oftimes Individual investor
groups or entrepreneur groupswill hire me to come in and
speak or facilitate a workshop.
So it's again more of a more ofa side project.
I don't like to be on the roadmuch anymore.
Again, I have five children, soI really I like adventure.
We work.
(27:43):
Right now I'm in our house inCosta Rica.
I work here three months out ofthe year but I like to be with
my family.
So I do go out on the road formy family consulting talks, but
not as much as I used to becauseI I'm a homebody now.
I'm not afraid to say it.
I don't need that, that roadadventure Nearing down on 50.
(28:03):
I'm like, I'm good, oh.
Andrew Hoek (28:07):
How old are your kids, jim?
Jim Sheils (28:08):
I range two to 20.
So we got the game All rightyou do.
Andrew Hoek (28:12):
Yeah, that keeps you busy.
Jim Sheils (28:14):
It sure does either busy or insane, or both.
Speaker 1 (28:20):
So you know your experience.
I think is is pretty broad.
Michael Notbohm (28:24):
You know started with doing those bulk
rehabs or bulk foreclosures,rather.
Do you see any of that kind ofstuff on the horizon for the
average investor looking atthings?
Is there anything that's a redflag to you?
Jim Sheils (28:36):
I have not seen anything from the people I'd
listen to and I wish I'dlistened to in 06.07.
I don't see anything from thebigger points until very late in
this decade, you know, 2029,2030.
There could definitely be acorrection and that's something
(28:58):
that you always want to look for.
However, what I always tellpeople, is I survived?
2008.
It wasn't easy.
It was painful.
I could have survived it somuch easier, guys I mean so much
easier If I had owned less ofbetter quality with less
leverage.
That's simple.
There's never been a time in Ina seven to eight year span, or
(29:19):
definitely a 10 year when it'sbeen bad to hold.
The three of us could have gonein on a single family home
together in Jacksonville,florida, in mid 2007 the worst
time supposedly in the lasthundred years and within six and
a half years we would have beenabove that pricing with rents
up.
So this is where I like holdingpower, because if you will just
not look six months, but you'lllook at least five, six years
(29:41):
and you have the type ofproperty that Perform it, I
don't worry about things likethat anymore.
My portfolio is probably atabout 28 29 ltv now.
So I'm not saying you have to bethat low again.
I've become an old fuddy duddy.
You know, not very aggressive,but but as you build that, if
you're owning less, you're notover leveraged, it's in good
(30:03):
condition in solid areas, youcan rent your way through.
You know a short correction oftwo, three years, like we saw.
You know eight.
It was only one year in thetougher areas with deferred
maintenance, because no onelikes to talk about this.
But guess what?
Deferred maintenance alwayscomes due at the worst possible
time, when you've got the leastamount of cash.
So I like to avoid deferredmaintenance in my properties.
(30:24):
Um and and again, it's, it's,it's a very, it's a very simple
ah, it's, it's just for me, itliterally.
I know, I repeat myself, butown less, better quality, less
leverage, you'll be able topower through those shorter
things.
But you know, you look at anygraph of, like the fed charts
from the last 110 years, realestate has always continually
(30:46):
gone up.
There's dips and there's thisand we all know about.
My grandfather bought his houseFor this if I had kept it to be
worth this.
I believe in that and unlessour money system completely
changes, I don't think that'sever changing.
Michael Notbohm (30:58):
Well, it's a very sophisticated model that I
know that most of the I wouldactually argue to say all of our
wealthiest friends share, whichis, buy good properties and
don't sell them.
Jim Sheils (31:10):
It's pretty simple.
Michael Notbohm (31:12):
Pretty simple.
Jim Sheils (31:13):
But the problem is you've got to be willing to look
past the nose of six months.
Right, we can only look out,just the end of our nose.
Three to six months, let me,can I do that?
And and that just ruins it, youknow, and that's also.
Or a lot of people get intocrappy properties for their
first few properties and theybeat the hell out of them for
two years.
They throw up the white flag,they says we're out, we're never
(31:33):
doing rental property again andI go dang.
Instead of buying two or threecrappy ones, what if you just
bought one good one?
Michael Notbohm (31:40):
Just one good one.
Jim Sheils (31:41):
You know To stop with the hundred house club.
You know I believed in thatshit and it was just and I
surpassed it and doubled in.
I was miserable.
So you know quality overquantity.
Do your numbers Strategic whereyou're buying, not only
landlord loss but where's growthoccurring.
You know you can do a lot witha small portfolio.
Andrew Hoek (32:01):
I love that message , jim, because one of the things
that we always drive home isthat you know, real estate isn't
easy, but it's simple if youstick to your fundamentals.
Well said, well said and that'sso important and it gets
overlooked.
And Getting back to the basicsand sticking with those is.
There's so much to that, so.
Jim Sheils (32:20):
Absolutely.
Michael Notbohm (32:21):
So I'm going to put a link in the show notes
for uh, for your books, and thenyou know what can we do to help
you.
Are you looking for moreinvestors?
What, what?
Jim Sheils (32:30):
I mean we're always bringing on.
We bring on new investorsweekly.
You know we're at nearly athousand investors and and we're
expanding our operation.
We're very excited about thesuccess we've had for so many
people out there and we'recontinuing to grow Into the
growth markets of florida andthen other states of of good
landlord like, uh, texas andtennessee, and, and we we enjoy
(32:55):
being able to buy back ourpeople's time.
You know that they don't haveto do all the all the grunt work
that we, the three of us, knowcan take a lot of time.
So Read our book, check out ourwebsite.
If we can help you, great.
We're not a fit for everybody,but for the people that, like
our principles and fundamentals,we've been able to build some
(33:16):
real, solid Rental portfoliosthat I do believe have that
ability for generational wealth.
Michael Notbohm (33:22):
Yeah, you've had some super good points.
We're Beyond glad you came on.
I know we had to uh to move ourlast one with everything going
on, but I'm glad we got thisepisode uh recorded and I think
it'll be a very valuable one forour listeners.
Hopefully some people reach outto you and start that journey
of investing in real estate.
Jim Sheils (33:42):
Well, it's good either way.
It's good chatting with youguys.
I appreciate the conversation.
Michael Notbohm (33:46):
Yeah, you as well, andrew got anything else?
Andrew Hoek (33:48):
I don't, jim, really appreciate you coming on
and and, as I said, greatmessage and and kudos to you on
the success of your company andand, uh, yeah, I'm excited to
see where you all continue to go.
Jim Sheils (34:00):
Thank you.
Michael Notbohm (34:01):
I am a little jealous here in Costa Rica, I'm
not gonna lie.
Jim Sheils (34:04):
but it is what it is Carry on maybe next year I'll
be there with you.
Didn't happen when I first camehere 24 years ago, but now I'm
able to spend time here.
Michael Notbohm (34:13):
That's, that's the power of lag right there,
yeah living, every living,everything you teach, which is,
uh, one of the one of the thingsyou very rarely see these days.
So appreciate, uh appreciate,you coming on.
So all right guys.
Well, this has been anotherepisode of the legacy wealth
code podcast.
Until next time on word.
Speaker 1 (34:31):
Thank you for joining us for another episode of the
legacy wealth code podcast.
If you enjoyed this episode,click subscribe now and never
miss an episode.
Until next time On word.
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