Ep483 Navigating the Journey to Financial Freedom Through Real Estate Investment with Fred Dickinson
Apr 25, 2024
Julie Holly
Ever dreamed of saying goodbye to your 9-to-5 and hello to a life of financial freedom through real estate investment? This is exactly what Fred, a seasoned real estate broker and investor, did, and he's here to share his transformative journey with us. Strap in as we uncover the power of leveraging home equity lines of credit to jump into the market, and the mindset shift that took Fred from transaction facilitator to investment portfolio builder. Our chat is filled with strategies for financial novices and seasoned investors alike, revealing how the right connections can open a floodgate of opportunities.
Navigating the high seas of real estate investment can seem daunting, but with trusty partners and a compass pointing towards shared values, it becomes an adventure of a lifetime. This episode delves into the wisdom of collaborating with both general and limited partners who view investing as more than just a quick buck. We'll dissect the pressures of investing significant sums, ponder the effects of fluctuating interest rates, and discuss the importance of strategic purchases and operational partnerships to stay afloat during economic squalls.
As we chart the evolving currents of real estate trends and strategies, I'll recount my own experiences with managing short-term rentals and the balancing act between profitability and the workload involved. We'll sail past the uncertain waters of office spaces and drop anchor at the promising shores of light industrial and retail spaces. Plus, I'll extend a lifeline to anyone feeling overwhelmed by the prospect of apartment syndication with our straightforward guide at 3keysinvestments.com. Join us as we chart a course to savvy investment tips and tricks that will ensure your portfolio weathers any storm.
Ever dreamed of saying goodbye to your 9-to-5 and hello to a life of financial freedom through real estate investment? This is exactly what Fred, a seasoned real estate broker and investor, did, and he's here to share his transformative journey with us. Strap in as we uncover the power of leveraging home equity lines of credit to jump into the market, and the mindset shift that took Fred from transaction facilitator to investment portfolio builder. Our chat is filled with strategies for financial novices and seasoned investors alike, revealing how the right connections can open a floodgate of opportunities.
Navigating the high seas of real estate investment can seem daunting, but with trusty partners and a compass pointing towards shared values, it becomes an adventure of a lifetime. This episode delves into the wisdom of collaborating with both general and limited partners who view investing as more than just a quick buck. We'll dissect the pressures of investing significant sums, ponder the effects of fluctuating interest rates, and discuss the importance of strategic purchases and operational partnerships to stay afloat during economic squalls.
As we chart the evolving currents of real estate trends and strategies, I'll recount my own experiences with managing short-term rentals and the balancing act between profitability and the workload involved. We'll sail past the uncertain waters of office spaces and drop anchor at the promising shores of light industrial and retail spaces. Plus, I'll extend a lifeline to anyone feeling overwhelmed by the prospect of apartment syndication with our straightforward guide at 3keysinvestments.com. Join us as we chart a course to savvy investment tips and tricks that will ensure your portfolio weathers any storm.
Hello Conscious Investor and welcome back. I'm your host, julie Hawley. For over four years, I've paired my background in real estate, investing, education and coaching to create powerful content for you each week. This podcast is where we take a holistic approach to investing by focusing on three ingredients to a life of personal freedom health, mindset and wealth. We'll talk about everything from passive investing through syndication and how to use your retirement accounts to boost your investing, to mineral balancing and gut brain health, and into topics that cultivate your inner strength and resilience so you can thrive regardless of any of life's current events. And yes, those are all episodes currently available and linked in the show notes below. Join me each Monday for a mindset episode and later in the week for an interview with expert investors and health professionals, so that you can experience your greatest health, strongest mindset and build the wisest wealth. I did to have you on the Conscious Investor Podcast. Fred, I'm dying to ask this question because it's such a great question to launch every show with what do you do and how did you get started?
Speaker 2:
Oh, yeah, it's great to be on too.
Speaker 2:
Thank you so much for your time and look forward to visiting with you.
Speaker 2:
So what I do is I'm a real estate broker and a real estate investor, and I love talking about investing in real estate and everything that is involved around it.
Speaker 2:
And so, yeah, I started about five years ago. I wanted to get into networking and wanted to meet a lot of people that were investing in real estate and didn't really know where to start or what to do. So I started listening to a lot of podcasts and started listening to a lot of YouTube videos and the major consensus was just get out in your hometown and meet people that are doing real estate. And so I just started going to every networking event that I could and meet up groups that were out there and just put myself out and met a ton of good people and just became friends with a lot of people that were investing and I kind of found out who was really investing and who just was talking about investing. So I started kind of gravitating more towards the people that are actually doing deals and just learning from them, hanging out with them, being myself, and made a lot of good relationships that I, then I could start investing myself.
Speaker 1:
That's. I love that. It's so powerful when we think about going to events Again, conscious Investor, you hear me say this all the time going to events. They could be local, they could be national, they could be real estate, they could be personal development, they can be lots of different types of events, but when we go to events, we open up ourselves like a floodgate of opportunity. I love that so much. Fred, what was it that drew you into the whole real estate space and specifically the real estate investing?
Speaker 2:
Yeah, I think what initially drew me in is I was, you know, working a nine to five job, had done. Everything that my parents and everyone else told me to do growing up is you know, go get a job, invest in your 401k and you'll be fine. Well, I just knew that there was something more out there and I just wanted to do more in my life than just sit in a cubicle or, you know, work in an office all day. And so I got my real estate license, you know, investing in myself, trying to learn new things and in doing real estate transactions residential. I started working with some investors and I saw them investing in real estate and I said, well, why am I just helping them invest when I could invest myself? So that's what really kind of took me down the road of wanting to get into real estate investment but really kind of took me down the road of wanting to get into real estate investment.
Speaker 1:
Okay, this is so fascinating. I don't know if I've mentioned this to you, Fred, but my husband is a broker partner owner, so he's in an ownership interest of our local brokerage here. Oh, cool, One of them. And what's interesting to me and my background in residential real estate third generation is so often real estate professionals are not investing. They're transacting all the time but they're not investing. So you're such an anomaly that you saw this opportunity and took action to it. So that's awesome.
Speaker 2:
Yeah, I just kept thinking. Like you know, I see these people doing it, why I know how to transact and I'm helping them with all the numbers and you know there's no reason why I shouldn't be doing this as well.
Speaker 1:
Oh, that's so, so, so, so powerful. So what are some of the strategies? You and I were talking off air and you have some different strategies. People pick your some of the strategies. You and I were talking off air and you have some different strategies. People pick your brain all the time and and, of course, it's natural for what we do in our own lives to come just naturally to us. But what are some of the strategies that you use that you didn't realize were? Oh, not everybody's doing this, oh, not everybody's doing this.
Speaker 2:
Yeah. So one of the main barriers at the beginning was you know, I don't have $50,000, $100,000 lying around to go invest in a property or, you know, do a flip house or do a syndication, which usually requires a minimum of $50,000. So that was kind of a mental block. Right out of the gate is OK, I don't have the money to do this. You know, it's not, this isn't for me at this point. I need to save up for five to 10 years down the road.
Speaker 2:
So I started just doing some research to see like I can't imagine that everyone has piles of money just sitting around that are investing. So I just did a deep dive on YouTube and podcasts and just found three different strategies that people were using that whenever I heard them it just kind of dawned on me like actually have all of these things set up? I just didn't realize that this could be an avenue of investing in real estate for myself. So the first one was home equity line of credit. I was very fortunate. I've been on the bad side of buying a home in a bad market, but this time I actually bought a current home in a really good time and, as everyone knows, their homes have gone up in value the last seven, eight, nine years, and ours had it well, so I did a home equity line of credit, pulled that money out and then I used that to invest.
Speaker 2:
And then another strategy was using a 401k. I had two different jobs from my corporate time. I worked 20 years in corporate America and I had 401ks that were just sitting there and they'd go up and they'd go down and then they'd plateau. And so I found a strategy that you were able to after you know there are some technicalities with it and you have to do some research, but I was able to make enough money with my real estate business that I was able to transition from a W2 job to, you know, being my own, being my own boss, essentially. So that allowed me to use a 401k strategy called a solo 401k, and there's a couple of different companies out there that that I know of that do a really good job at it. But you can roll over your, your old 401k from your old employer as long as you're no longer a W2, and then you can use that self-directed account to invest in real estate.
Speaker 2:
So I've done that with two different 401ks. And then I also had my wife. She saw how well it was doing so. Now she's doing that as well. So that's been pretty cool. And then the third strategy is an infinite banking system. So it's kind of like front-loading a whole life insurance policy, paying up a lot faster so that you can accumulate cash value in your whole life policy and then you can borrow against that. And there's so many magical things about that that I could go down a rabbit hole on that. But those are the three strategies that I've used.
Speaker 1:
Those are super powerful strategies. Conscious investor, if you are looking to self-direct your old 401ks or you want to learn more about that, just look back a few episodes. Matt Sorensen from Directed IRA was on the podcast and goes into detail as to who qualifies, who doesn't qualify, what qualifies what doesn't qualify and some of the other implications and nuances, and just such a great company to work with. So I just want to give a plug there and just say more information on that episode and, like I was on Infinite Banking. Conscious Investor, there are other episodes in past years on that topic. We'll try to link those in the show notes. But what is your favorite? What was the strategy that you use that you felt like really gave you that initial, you know, running start, if you will.
Speaker 2:
Yeah, I think the being able to use my old 401ks like I said, they were just kind of sitting dormant and not really doing a whole lot was my favorite strategy in the beginning, because it allowed me to be able to put money into an investment that I didn't think that I even had access to at that point.
Speaker 2:
And then, luckily, because we invested in this property it was a 54 unit apartment complex. That was a value add, needed a lot of turnover and the market at that time was just insane. So we were able to purchase that and then go full cycle on it in three years. So I was able to own more than two and a half times my money in three years, which allowed me to get into two more deals in that third year. And so then you see that and you're like, wow, this is pretty amazing, pretty fun, and I want to do more of this. So that's when I started doing those are the first strategies I used, but then I wanted to double down and just use every strategy I had available to now be able to be in as many deals as I am right now.
Speaker 1:
Wow, that's really exciting and powerful. As you speak, with a lot of active and passive investors as a broker and such, what are some of the elements that you think would be helpful for new investors to understand so that they can make strong investment decisions?
Speaker 2:
Yeah, I would say it's hard because when you're just starting out, you don't know who to trust. You don't know if you're going to give your money to somebody and you never see it again. I mean it's so stressful when you go to the bank and you wire that money again. I mean it's it's a stressful when you, when you go to the bank and you wire that money or you do it online and you just see a big chunk of money go out, like that is very stressful and you're just hoping that it's in good hands. So, um, what I did is I I just kept going to the local meetups, meeting people that were actively doing real estate and you know, I knew that they had a track record. I talked to the people that were invested in the GP, the general partners in deals, became very close with them and then became close with the limited partners that were invested in multiple deals. And you just get to know the people know their track record, know who you're working with, because there are.
Speaker 2:
In the past couple of years it was so easy to find an investment, it was so easy to turn it over and you know, it was just a ridiculous time. Now we're beginning to see who the true good investors are, and I think throughout the next 18 months or so, a lot of things are going to happen, and the people that persevere and get through this are the ones that you're going to want to go to to invest in the future. Like yourself, you've created a community where people trust you, and you're doing this for a purpose bigger than yourself. So, whenever I talk to people, if their purpose is just to make make a ton of money which everyone likes to make money but that's a that's a byproduct of someone that has a purpose, that's actually there trying to make other people's lives better, and that's what I look for and who I invest with.
Speaker 1:
Yeah, that's so true, Money is really great, but it is a byproduct and I appreciate that you pointed that out. On the broker side of things, you have a very interesting perspective because you are an investor and you're a broker, and so it's a beautiful opportunity to make an observation. Opportunity to make an observation. You mentioned the next 18 months. I released a podcast episode about my predictions for 2024. I've never done that before. Conscious Investor. I just figured why not? So lots of different concepts floating around about there as to what we think the horizon looks like In your opinion, what do you think that next 18 months looks like?
Speaker 2:
It's hard to say because there's a lot of people that are talking about interest rates going down and so we don't know how much they're going to go down. There are projections of that, but it's kind of scary because if they go down too much then prices are going to be elevated. Then everyone that's been sitting on the sidelines you know that's going to be good for sellers because they're going to want to sell. But then you're going to have a flood of people coming into the market that have just been, kind of, you know, sitting on the sidelines waiting to jump on a property and then you know it could cause the prices to be elevated.
Speaker 2:
And there's a lot of properties in the past year or two that once they hit the open market and you've got 30 different offers coming in on it, it doesn't really make sense as a good investment. And there's people out there that just try to force things in just so they can say that they took one down or they've got a property under contract. But yeah, I hear so many different things and the last year everyone said the world was going to end and it hasn't really hit rock bottom yet. So who knows, hasn't really hit rock bottom yet.
Speaker 1:
So, who knows, it's so interesting about so many people sitting on the sidelines. I always say invest in every market cycle. I mean, that's true Truly diversifying your portfolio. And your point about this is what my husband and I talk about this regularly is how are these people making these deals work? These deals don't work. Why are you overpaying? What do you think the ramifications are going to be for in the marketplace, with people overpaying for these different assets?
Speaker 2:
Yeah, it's gonna be interesting this year. There are a lot of people that I've already seen and heard of that when they come to us to look to sell, they've already had to pause distributions, they've had to put a Band-Aid on their investment. It's kind of like a mezzanine loan where they bring money in to cover their shortfall and so now they're paying other investors to come in and cover that shortfall and pay them, you know, an 8 percent pref or 9 percent pref, and then the people that originally invested in it are being paused, and so there's been a lot of interesting ways that people have tried to put band-aids on these right now. So, yeah, it's going to be very interesting to see what the future holds.
Speaker 2:
But the deals that I've invested in, luckily with people that I trust and kind of knowing how everything was set up, they've continued to operate flawlessly. I've not had any that have had to pause on distributions and they always say you don't make your money when you sell the property, you make your money when you buy it. So it's getting in with good investors that are smart general partners that know what they're doing have been through cycles. I think that's another really good question to ask someone that you're going to be going into a property with is? Have they gone through different cycles and have seen how everything ebbs and flows? Because, like I said, anyone that invested in 19, 20, 21, you didn't necessarily have to be a rocket scientist to come out, you know, looking pretty on the other side, but so now is it definitely going to be very eye opening.
Speaker 1:
Very eye opening and I'd even go back to like 2017, 2016, 2017. Like it was easy. It was so easy. Interest rates were friendly, prices are friendly, like everything was very friendly and easy, quick to you know and light value adds. Every three years, no problem.
Speaker 1:
Yeah, it's definitely a different market cycle now and I will double down on your sentiment as to understanding the markets. This is one thing where I take for granted. One of the things I take for granted is being raised in real estate. Third generation Like this was. This is what I was raised around all my life.
Speaker 1:
So I've lived through like a lifetime of market cycles and and it just makes sense. That's why I can easily say invest in every market cycle Like that it makes sense, just just keep doing it and do it because you make your money when you buy buy correctly, regardless of interest rates. That's not the only you know switch in the in the machinery there. So I I think that's really interesting. I'm interested to see what happens because there are so it was, it's been so easy and people look like geniuses and it's like that's because it was a really nice market. So I'm excited about the shift in the transition just to you know kind of clear the field a little bit and make sure that you know the professionals are are really running running things, running the place.
Speaker 2:
Yeah, absolutely.
Speaker 1:
Yeah, so um, with that, as you are thinking about, uh, with that, as you are thinking about, just the type of investments you're invested in, not just multifamily, but you are also invested in short-term rentals and I'm very fascinated. That market is also experiencing some growing pains and some fluctuations across the globe. What are you loving about that asset class and what are some of the pain points and where do you see that headed? You know over the next, you know 18 months.
Speaker 2:
Yeah, it's been really interesting. Especially in Kansas City, there has been local jurisdictions that have really wiped out a lot of people that were doing short-term rentals. So in Kansas City there were people that were operating short-term rentals in neighborhoods where other people that lived in those neighborhoods did not like the fact that there were short-term rentals and so if someone didn't have a permit on their home for a short-term rental, they basically gave them a timeline where they had to shut down their business. So there's a lot of things. You just have to be careful, check with the city that you're investing in.
Speaker 2:
In the Airbnb I purchased like a small multifamily and converted it into Airbnb so that I own the whole building and it's more of in a commercial setting than in a residential setting. So I wasn't affected by that. But yeah, there is. It's a very challenging market. It's I manage them myself. So in every day is a, is a fun new story, and there's always something that's going haywire. So it's it's a. It's a lot of fun, but in the future I mean, as long as you operate them right and you know what you're doing and on the day-to-day basis, it's just managing it day-to-day there's a lot of back and forth with guests and there's a lot of strategies that can use. If anyone has any questions about short-term rentals, I'm happy to you know, help answer any questions and the pitfalls and there's. You know, there's a lot of good times and a lot of bad times. There's, you know, when you have people staying in a short-term rental not treating it very nicely, there's always something that goes wrong.
Speaker 1:
Oh, that's so frustrating. I know the. You know I mean. Short-term rentals can be extremely lucrative, which is great, but it does seem very high maintenance in every which way. So do you feel like it's a wash, or is that something you're going to add more of into your portfolio?
Speaker 2:
I don't think so I think I'm happy with what I have on those. It is very high maintenance. Now, if you decide that you want someone else to manage it for you, a lot less maintenance on your part. But the numbers just didn't quite work for me because the Airbnb manager most of them typically charge about a 20% management fee, which is well-deserved because it is a lot of work and it's day and night. I mean, there's people that will reach out to you one, two in the morning with any type of problem that they have. So, yeah, I do think it's very profitable.
Speaker 2:
The ones that I have are probably two times or two and a half times what I could get for rent for them, and so it is definitely more profitable than if I were to just rent them as a normal long term rental. So there are some other strategies that people are using to. Now they're kind of going to midterm rental. Now they're kind of going to midterm rental, you know, going for nurses or you know more business professional. They're looking for a furnished apartment. So you can kind of play around with the short term rental and do more of a midterm. So yeah, there's some unique strategies you can implement for that.
Speaker 1:
Yeah, a lot of unique strategies. Not everyone is positioned well, you know, such as yourself, where you can, you're in a commercial setting, you own the entire building and such. I do know some investors that are transitioning, even just transitioning them back to long term rentals. By nature of it is is high maintenance and I make more money For some of these investors. They're like but at the end of the day, I'm really not making more money because it's high maintenance, so I'm just going to go into this long-term rental. So it's interesting to see how many people jumped into the arena and it's going to be interesting. I'm noticing that more and more people are exiting that arena, and so that's also nice. The field is getting cleared out in that regard and I think that's going to be helpful so that we have really high quality, you know, short term rentals out in the marketplace.
Speaker 2:
Yeah, absolutely. And when you see a trend and everyone going into one thing, that's kind of when you want to go the other way. You know it's like it's just you can kind of see the writing on the wall it just got too saturated too quickly. So, yeah, it's just one of those things.
Speaker 1:
It is. I thought light, but I thought light industrial was going to be kind of the next sexy trend out there. And it still may be and I haven't decided if I'm going to stick with that one. Um, what do you think the next? Because there is always the the, it, the asset class and multifamily has run its course. I feel like mobile home parks ran its course. Self-storage is maybe in its prime right now short-term rentals is fading out. What would you say? The next it asset class is going to be.
Speaker 2:
Well, here I am seeing a lot of industrial, a lot of people, and even with the brokerage I'm with, what they've been specializing in is they kind of went away from multifamily and they started doing syndications with industrial, which is a very interesting play because you can buy, you know, six, seven, eight different industrial buildings, get them leased up and then package them together and then you've got an industrial portfolio that has historically performed very well on all of the, on all the ones that they have done, and so that's, that's one segment. I'm seeing a lot of people get back into, kind of strip mall, more retail. That's been a really good space right now. So those are the two that I'm seeing. You know, everyone's still pretty leery of office, and it's. You know, any office building you go to it looks like they're almost all vacant still, even around.
Speaker 1:
You know Kansas City, where I'm at, so you think office is going to make a comeback at some point, Like I think it has to.
Speaker 2:
I think everything ebbs and flows and you know like it's, you know like clothing, there's some, there's some unique trends that are coming back that I never thought would. So, yeah, I think it'll all come back at some point.
Speaker 1:
Yeah, yeah, I love that. This has been a lot of fun. We've covered a lot of territory and I really appreciate, you know, just your willingness to talk, walk us through your different investment strategies, how you got started and what you're seeing, you know from your professional side as a broker in the marketplace. It's just this has been a fun conversation because we could cover so much, so many different topics. So I really appreciate you know just running the gamut with us. The conscious investor I know is going to want to ask you questions or reach out to you just because you're. I mean, this is very fascinating. What's the best place for them to contact you?
Speaker 2:
Yeah, you can just reach me by email. My email is fred at fwdpropertiescom and that's probably easiest way. I'm also Instagram and that's you can reach through my website at fwdpropertiescom. You can reach me through there or click the Instagram or Facebook link on the website.
Speaker 1:
Love it. Conscious investor. Make sure you connect up with Fred, especially Instagram. And hey, while you're there, if you haven't already, I have been spending more time on Instagram than LinkedIn. I know that is a big shock. So if you haven't already followed the handle, the Conscious Investor Podcast, take a moment, go follow it. I'm adding more content there on a regular basis. I'm really enjoying the conversations that are taking place over on Instagram right now, and so you will notice that I am becoming more and more present over there, and I would love to connect up with you on the Insta Also, remember, adventure belongs on the trail, not in your investing and certainly not in the mental space between your ears.
Speaker 1:
So if you need support taking your first or next step towards investing, or if you want some clarity, you know, in your mindset and such, make sure you head on down to the show notes and click on the link so that you and I can have a time to talk. Let's have a brief conversation and see. You know, maybe I need to connect you up with somebody else, Maybe you and I want to partner up in some capacity. I'm not sure what that looks like, but it is a safe space and most often people say oh my gosh, this is just like talking to you. It's like you. Yes, it's me, because I'm authentic and I'm consistently me. It's the easiest person to be and I absolutely love serving and supporting you. So until next time, cheers to your health, your mindset and your wealth.
Speaker 1:
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