How to Overcome 4 Barriers to Passive Real Estate Investing | Ep 34

James: Welcome to the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing. And our mission is to equip people to invest wisely in both properties and residences, residents, residents, so that people, those folks who live there, so that together we can build wealth while improving housing.

I'm James and this is my wife, Jessi.

Jessi: Hi. Hey. You know, I, I was just pondering, our kids have been doing swim lessons. Yeah. So you and I have been. Jumping in and swim, attempting to swim laps. Jumping

James: in.

Jessi: Funny. Yeah. You know, and I found myself the other day as I was swimming some laps and dying, like watching some of the other lap swimmers and trying to like, pick out like, what is it that they do that like lets them like go and go.

And I saw this guy who had like, every possible swimming Gadget, I felt like. Really? It was like he had a nose plug. He had things in his ears. He had the goggles He had little things on his hands. Yep. Yep. That's what I was like. Did

James: he, was he wearing a cap, obviously?

Jessi: He was bald. So I was like, okay, it doesn't need a cap.

Did he have fins? Yeah, that's fine. Didn't have fins. Okay, but like, you know had all these things and I was just like, are all of these good? Gadgets. So

James: mine, I also spy on swimmers, but it's because I'm a bad swimmer and I'm trying to figure out how to do it better. So today there was this guy who he was back in the pool and he was there another time that I was swimming.

And this kid, I kid you not, would do three

Jessi: laps for my one. That's amazing. And today I've,

James: I injured myself, so I can't go swimming right now. It's super lame. So I was just out there, but he started swimming. I was like, okay, I'm going to study him.

Jessi: Watch.

James: And I did notice that he did something different than I do with his arms.

And so just to go down the rabbit hole. So like he puts his arm out and he keeps his arm out and then his other arm comes down and does the full rotation. And there's like a Superman moment. It's very quick. And then the other arm goes, and so it's this very like very slow, whereas I'm more like I'm already.

I'm trying to think when I'm swimming, when my, my hands are always like 180 degrees apart.

Jessi: So when I

James: have a hand up in the air, I've got my other hand down low and then I'm back. And so it's not quite that, but it's pretty darn close. So he was more like only moving one arm at a time. It's like the

Jessi: full glide and the full pull.

And I noticed too, like

James: he, he cause another lady who was beside him who swims more like I do, where her arms were always slightly bent and she was like chopping into the water. Whereas when he would do it. He would fully extend and almost lay his hand down on the water, where she was like, diving, like she was diving in.

Jessi: I'm more of a

James: diver in. So, take a note, so next time I swim, I'm gonna try his method, and keep that arm steady until the other one comes around, so only one arm at a time. I wonder if that

Jessi: would like, help with breathing too, cause it's like, okay, you're gonna leave that, and then this one's like, straight, while you're, Breathing?

I don't know. That's the part I struggle with is like, when do I breathe?

James: So here's the deal with swimming. It's in order to do it effectively, you can't, you shouldn't just jump into the pool and go for it. I mean, you can, but there's a huge learning process. And in order to do better at it, it's really helpful to have specific tools and resources to help you do it.

Like from an education standpoint, or just like you're talking about tools, like Things. Different things. Gadgets. Different resources to help you learn. All that sort of stuff. So that's what we're going to talk about today. If you are interested in passively investing, what are some of those tools and resources that you can use to not only get you started, but to do it successfully going on and on?

Jessi: Makes sense.

James: Cause that's like me with swimming. I'm out. I can do it, but man, it's slow and it's painful and it's not fun. And I, and I know that if I can learn the right way, use the right tools, get the right resources to teach me, like I will actually do it. Cause you see these guys who are 60 plus years old and they'll swim for like an hour nonstop.

I'm like, I'd like, I do one lap and I got to take a break. I don't understand. So the question is, how do you become that swimmer who can just go a long time? How do you become that investor that's in it for the long haul to win? And there definitely are some tools and resources to help you do that. And I want to talk about that.

Jessi: Cool.

James: There you go.

Jessi: I like it.

James: Boom. So, in order to get started or to do it well, there are some barriers. And so I kind of want to, that's how I was thinking about it when I was taking my notes and I kind of thought of four different barriers

Jessi: and

James: I was going to put them to you to say like, you know, if you were, what do you think stops someone from getting in?

Jessi: I'm

James: just going to pick them off as you, I

Jessi: think, I think one is just like, you know, The fear of the unknown, almost. Where it's like, yeah, like I just, I don't know anything about this and I don't like, why would I put my money into something that I'm like, I don't understand it. Yeah. I don't know it

James: for me.

It was lack of knowledge. Yeah. It was one of those. Yep. Keep going. Kind of, I guess before we dive into the solutions,

Jessi: other, other barriers maybe you don't have a lot to invest. Yep.

James: That's one of my first ones. You,

Jessi: you just. Have a minimum amount that's like, well, I don't know. Yeah,

James: high capital requirements to get started.

Yeah, right Talk about that too.

Jessi: Apps like one of them is I want to say I don't know if this is on your list, but I want to say like If you're if you're married or in a relationship like having that spouse buy in

James: Yeah,

Jessi: you know is that could be a barrier. Yeah, which is not on your list. It's a lack of

James: knowledge Yeah side of the piece kind of true

Jessi: cuz you yeah, you both need to learn I think

James: I'll address that indirectly Yeah as well.

Jessi: I think all of mine kind of stem from that whole, like, I don't know what I'm doing. So lack of knowledge. So there's

James: a, so the, I don't know what I'm doing. There's there's two parts to it, right? There is the whole, like the, like the lack of knowledge, but then there's the also, okay, I do want to do it.

This is a good idea. How do I actually like do it?

Jessi: Yeah. Okay. Which

James: is. It's slightly different, different.

Jessi: Yeah. You're convinced of this particular type of investment, but it's like, where do I start?

James: Yeah, yeah, yeah. Now what? Yeah. So I think those are like, those are two different categories. And

Jessi: it's like, related to that.

It's like, okay, I don't really know where to get started, but even if I find like a person who's doing this, like, how do I know I can trust them and build that relationship up?

James: Oh, that's perfect. We're going to talk about that. And then the last one. Perfect. Is just limited access to opportunities. And there's a reason behind that.

You may be like, I'm all in, I know exactly what to do.

Jessi: There's just nothing to, nothing

James: to invest in, but I mean, seems kind of rare.

Jessi: There are things. We're going to talk

James: about that. So so yeah. So, so that was awesome. That was cool. Yeah. Good job. High five. All right. So let's start with a high capital requirement one.

Yeah. And eventually we'll just assume that you have enough, but to get started and I do, I, and I do guess I do want to say, yeah, let's assume that you have enough, but it is a high capital requirement and that is kind of a big deal. So my first piece of advice. is start small, like do whatever their minimum is.

Don't be like, I'm throwing my entire net worth into this thing. Start small. That's okay. Learn from the process. And through that, one of the other things you want to do is you want to determine what your goals are. And that's where, like, if you're working with a spouse, it's really important to know that.

And there's basically, there's two different types. There's income and longterm appreciation. Okay. You got to decide. Which one is more important to me? Cause that will influence the type of investments that you go for. And so yeah, so I think those are some of the

Jessi: difference between income and longterm investment,

James: no longterm appreciation,

Jessi: longterm appreciation.

James: Yeah. Yeah. So let's say, I know you're like, Hey, this is money that I want to live off of.

Jessi: Yeah.

James: You're like, man, I gotta, I want to earn, you know, whatever, 50 bucks a month from this investment. Like that's something you're going to aim for ones that if it is debt, they're paying you monthly payments. If it is an equity ownership, they've got regular distributions that are doing versus longterm appreciation, which is really more equity.

is saying, I don't want to get paid out, but I know that in 5 7 years we're going to sell, and that's where I'm going to double my money. You'll make

Jessi: like a big chunk of money. Yeah,

James: yeah. Which is often what happens in Oregon because it's hard to find stuff that cash flows in the area. Okay, here's another really, really big one, is you need to assess your risk tolerance.

Jessi: Huh.

James: Okay, and so I've got some tips. On how to do that. I went and I actually looked up a bunch of questionnaires from different investing sites and they all kind of boiled down to these ones. So first one you want to do is you want to reflect on your past experiences. And you know, like when you think about, okay, how much money, how nervous, I don't want to say it.

What's the amount of money in my bank account that makes me nervous? for some people that might be, you know, three weeks makes me nervous. For some people it's three months. For some people it's a less than a year makes me nervous. So you just got to figure out like, where do I fall on that spectrum? And, and just like just other situations in general, you know, like how do you feel about people who, I don't know, ride bikes without helmets and things like that.

How do you feel about. Yeah. Some of those more extreme types of just activities that people do versus not, cause that kind of all give you an idea. And I think we all inherently know, but that's it. Some other things that you can ask yourself, and I think this is really important is what's your level of knowledge.

Jessi: If

James: you don't know a lot about the investment you're walking into, it's risky and so treated as such. But if you are like, Oh no, I've done this kind of investment. I know what these returns are. I know what they mean. I know how they're going to get there. That's a way you can take on things that are more risky because you're offsetting it with knowledge you already have.

Jessi: Well, one of the things that I'm thinking though, is like as a passive investor, I'm trusting my sponsor.

James: So how well do you know how to do the thing? It might be one of those things. So it's,

Jessi: it's, it's slightly different, but it's, but you're right. I need to know something. Yes. I need to at least trust the person who's.

Yes, doing the property and have asked what types of properties have you yeah, you know deals Have you done before and how did it go? And yeah,

James: another thing is to look at like previous investment risks that you've taken and how you've allocated some of those funds Oh, great thing to look at is what type of investments, what type of investments do you currently own?

Like, is it primarily stocks? Is it bonds? Are they blue chip? Big companies? Are they international stocks? Are they individual stocks? Are they index funds? Those kind of things. That all kind of speaks again to, How you think about risk. Yeah, which again will kind of influence how much you're willing to invest just to begin with from your portfolio.

If you are primarily in bonds, you're going to be really interested in doing debt type of funding. Like the recent flip that we're currently involved in. That kind of thing. If you are like, man, I just do blue chip, index, dividend, index fund, dividend paying types of things, like, man, that's pretty low risk type of stuff.

I don't know if doing a syndication is for you. You might be like, yeah, you know, do a REIT. Something like that. Finally, I like this one. You can do some like mental scenario planning. Imagine that you own stocks and the stock market drops 25%. What do you do? What's your reaction? Do you freak out? Or are you just like, Oh my gosh, I can't breathe.

Or are you like, It's okay. Things come back. It's temporary. Like, and there's no right or wrong answer. What you're trying to do is get a sense for where you land and how you perceive risk.

Jessi: Which I kind of feel like risk your risk tolerance can change over your lifetime.

James: Oh, I'll do my very last one.

How much time do you have to recover? Yeah, well cuz

Jessi: cuz I was kind of like, all right Like currently we might do it one way, but 20 years down the road We might be like, ah, we want to retire or kids have different needs or you know I don't know healthcare changes and it's like a risk that we're willing to take is So

James: those are kind of my thoughts for how you how you think about your capital requirements and how much you're willing to put into it.

Think about it. All right, the big one. Lack of knowledge or and or a fear of loss. I think is a huge barrier.

Jessi: Mm hmm.

James: So step one, you got to understand the basics of real estate investing and how it all works. And there's two books that I recommend. They're long. Sorry. I got other resources. Don't worry.

The first one is called the hands off investor by Brian Burke. It's like a 350 page slog of a book, but it really goes into the details. I don't know if you have to read the entire book, but like the intro and like skipping through a few things that pique your interest, I think is really good. Same thing with, there's a book called the book on rental property investing by Brandon Turner.

And there are specific passages in there again. Read the intro, get the good overview for it. And then they have, he has sections specifically on passive investing strategies. And so it's worth reviewing just that part of it. Other things you can do is you can listen to podcasts just like this one. And you can, you can read the books, you can read other articles.

And I think a really good one is to get on a phone with other professionals like myself. Let's talk about it. Let's, let's, let's have multiple conversations. I got a guide. I'm pretty sure he's listening right now, who we hang out and we have coffee every once in a while. We just kind of talk and he's doing some of his own stuff.

He wants to invest with us and,

Jessi: and we

James: just talk about different strategies and where we're at. And it just kind of helps fill in some of those knowledge gaps that he has. And He doesn't have a lot. He's a pretty smart guy. But I, but like those are things that you can do. I love, I tell people all the time, I love talking about real estate.

I could talk about all day long. It is never,

Jessi: it's true.

James: It's never in a position to be like, Hey, can we set up some time to talk? Yes, absolutely. I'd

Jessi: love to do this.

James: And so. So those are just, those are some resources and tools and you gotta put in the work to do it. And I've, I got a couple others that we'll talk about in a little bit that will further speed up the things.

Okay. Next barrier, limited access to opportunities. So here's the deal. There is. There are different types of investment types. There are some that are I wrote 501 C and I am absolutely 100 percent certain that that is the wrong number. And I cannot think of what it is right now. And I don't have my phone to just ask chat GPT what the answer is.

I have no idea. Essentially there's There are a lot of like almost all syndications are like a B class type of syndication, which means the only way that I can tell you about it is that we have a prior relationship, which means you've got to be on my email list, which means I got to know who you are.

You can't just blast it out to the interwebs. And that's the C type, but if it's a C type, it's really, it's only for accredited investors and there's requirements for

Jessi: it, yeah,

James: things like that. And so but for all those B ones, They're just never publicly stated. So we can do things like this, right? We can have podcasts.

We can talk about in general concepts, but I'm not going to tell you about a specific thing in this type of forum. Now get in my email list. Very different. That's what I can tell you about it. And so the ways that you find out about people who are doing syndications or who are doing flips, looking for loans, there's a couple things to do first.

There's a local real estate group somewhere near you. I'm pretty sure of it. Go there and don't just, I mean, you can talk to people, but go talk to the leader specifically because they are the ones who are going to be in the know of, Oh, here's the person who you want to talk to. They're doing stuff.

They're trustworthy, whatever. And then once you've done that, get to know that person, sign up for their list, listen to their podcast and get to know them because they're the ones who are gonna be sponsoring the deal. That's, that's a huge one. Another thing that you can do and the keywords that you want is.

Syndication and private money

Jessi: lender.

James: If you, if you ask about those types of things, you will then find people who are offering those types of projects. And a local group is a fantastic place to start. And, and that's how it is. It's a start and you might have to ask around a little bit. If you've got another friend who's, you know, talked about investment they've done, talk to them, Oh, I'd love to meet whoever your person is.

You could start with some real estate agents. They tend to not know as many, it's the local real estate group or their Facebook group or something like that. That's going to be your best in,

Jessi: in

James: my opinion. So that's how you find out about them. And it's just cause they're all kind of hidden. Cause the way the rules are written, this

Jessi: is like kind of a side note.

I

James: love side notes.

Jessi: I mean, let's say someone is in a different. State or country or whatever. Yeah. Like they could still invest with you, right? They don't have to be mobile. The country's an

James: one, but Correct. Anywhere in the country is fine. Alright. If someone is a foreign individual, Uhhuh, , real estate rules get complicated, quick, you can do it, but they just get complicated complic really, really quick.

But if you are a US citizen living in another country, you can still invest. Interesting. That's not a problem. But yeah.

Jessi: But it's like somewhere from a different state. If they, if they happen upon our podcast or something. He lives in Maine. Yeah.

James: So yeah, super far away. Okay. I've got people in California, Idaho.

Yeah. Oregon, Washington. Okay. Yeah. State doesn't matter. That kind of makes sense. Yep. Yep,

Jessi: yep, yep.

James: And I can invest in anywhere in the U. S. as well. I primarily focus on Oregon because that's the market that I know. Yeah. And so it works for me.

Jessi: Mm hmm.

James: Okay. Last barrier. You're not really sure how to get started on it.

And again, these are, I'm just trying to give some very specific tools and resources to help people get in or be successful. And as you can tell, the big theme here is like got to do some reading. Got to talk to some people and just get to know them and start to get steeped into it. But now you're like, I'm in, I'm convinced I want to do this.

Now what I, so the basic structure is once you've made your contacts, you're going to find out about a deal. Like for me, I'm going to send an email that has all the highlights and then it's going to be linked to another webpage that has all the deal details. So you're gonna go there. And then what you want to do is you want to review and do your due diligence.

Is this a good deal? Does it make sense for me? Does it align with my goals? Does it align with my risk tolerance? Does it You know, does it, does it make sense to me and am I qualified for it? Right? Is it a one that can be publicly stated? Is it a B or is it a C? You know, that kind of stuff.

Jessi: Does it answer my one question?

Yeah. Do I make money? Yeah, yeah,

James: yeah. And once you decide, yes, then you commit, you tell that person I'm in. That stuff's really important because it's usually a first come first serve situation, so you want to tell them right away. That's how it works with me. First people who tell me I'm in, they're the ones who are in.

And then finally. You got to transfer the funds into an escrow account typically. So first word of advice is when you're going through that due diligence, that is the critical time period to decide. And I have a 196 due diligence question vault. You don't have to ask all 196 questions. I recommend you read through them all.

And I definitely highlight the ones where I'm like, these ones are super important and they should be addressed in whatever that offering prospectus is. I know that's what I do. I try to look at all of them and really what you don't want to have happen is you don't want to get fooled by the big top line numbers because they might be like, Oh my gosh, you're going to earn 27 percent return on this.

Wow. That's awesome. That sounds really good. But how do they know? What is the construction budget look like? Who's the team who's going to be doing it? Like there's essentially there's eight different areas to look into. I talk all about that in my vault. Super important. Just don't get sucked into the top line numbers.

Ah man, that happens.

Jessi: Hmm.

James: Another thing that I think could be super helpful is knowing where you can get funds from. Obviously, cash is nice. You can pull it from existing equity in a home. You might just have it sitting in a savings account. Oftentimes there are a lot of people who have it just sitting in an IRA that maybe they've just saved in or they had an old job and now they've moved to another one.

And now that is just sitting there.

Jessi: So

James: you can do what's called a self directed IRA and that's where you can invest with that and just really goose your retirement returns, which is super cool. And I wrote an entire article, I'll link to it. So you can really, it's like, it's the nuts and bolts. Here's what you can invest in.

Here's what you can't invest in. Here's how you do it. Like

Jessi: with, just specifically with your retirement account? Yes, correct. Um, where would you start if you were like, not sure what money you should use? What do you mean? Like let's say I did have some savings, but I had some in retirement and I had some that was like, I know I'm going to inherit this later or like, you know, I don't know.

Where would you What's the

James: savings for?

Jessi: Retirement.

James: Oh. Just in a

Jessi: bank account. Then start with

James: that. Start with the stuff that's easy. That's not as critical.

Jessi: Start with the liquid things. Yeah.

James: If it's sitting in like a 401k, sorry, you're kind of stuck where that is. You have to be able to convert it into a self directed IRA.

Has to be an IRA. IRA. Yeah. One that gives you what's called checkbook control, which essentially lets you write a check, and then it comes from the account. There are self directed IRAs, but that's not the case, because you have to call someone and ask for permission, like a little kid to invest, and they may be like, whoa, yes or no.

Whereas like checkbook control lets you do it. The service that I recommend, the specific resource is called you, the letter, you direct IRA. com. That one is like best in class in terms of gives you full control, lets you do it. And has minimum fees, all that fun stuff. And so that's the, that's the place where I would start if I was super interested in it.

And. I read my article because you can't invest in everything. There are definitely limitations. One of the biggest ones is that if you invest in real estate through an SD IRA, you personally cannot benefit directly from it. And that's a big one. That's actually been a stopper for my family. So like my parents are like, Oh, we would love to invest with you.

And I'm like, I love you guys. It's so awesome. But I would benefit from it. And so they can't interest from that particular IRA account. Yeah. Yeah. Now they just got money sitting in the bank account. Who cares? No big deal. They can do whatever,

Jessi: but

James: yeah.

Jessi: Question.

James: Yeah.

Jessi: If, if there's someone who's wanting to passively invest in one of your deals and they're not sure.

You know what they can actually do. Should they reach out to you or should they do some of this other due diligence first?

James: What do you mean by they're not

Jessi: sure? Well, let's just say like, I'm like, I have this retirement account. I think I can pull the money out of it, but I don't know.

James: Yeah.

Jessi: Like. What I call you and be like, I would really love to invest with you, but I have no idea how this works.

James: I could, yeah. Someone like me can definitely help you answer those types of questions. Yeah, exactly. Like I was talking with a friend today, he's got some money sitting in an IRA and, and he actually did an investment with someone else who used their IRA, a self directed one. And he was like, Hey, like.

What can we do? Can I use it for this and that? I was like, yeah, here, let me tell you what you can and can't do. And and he was like, oh yeah, that's super helpful. So so yeah, you can definitely start with me and if I don't know, I'll just tell you. I'm like, yeah, this is a weird situation. But but also the internet is pretty cool and we can look stuff up and I know enough of the key terms to like, okay, here's the direction you want to head in.

It makes sense. Go from there. You know, you can always, Just talk to an accountant too. They're usually pretty good about that kind of stuff, but yeah, so there you go. Those are some very just specific tools and resources to get you started. If you're like, I don't even know where to begin. And if it's me, it's like, Hey, just do some general reading, figure out your goals, figure out your risk profile, find someone who's doing it and then get ready to.

Analyze and pull the trigger. So you can transfer funds. And then after that, you're like, dude, just hang out, wait for the returns to come in, super cool. Or you could just marry

Jessi: in, that's what I did. Yeah. That's also what I got. One point on my list. There you go. Find someone who's into real estate. Marry them.

James: Done. Yeah. But I still, true. But I also made you read a bunch of real estate books. That's true. I had to do my due diligence. Yeah, yeah, exactly. And you figured out your criteria. So it's all good. You did it. You did it.

Jessi: I did.

James: It's all good. So there you go. Hopefully you found that helpful. And if you did, we would love it if you left a comment or review wherever it is that you listen to podcasts.

And if you are interested in investing with us, you can check us out at furlo.com and yeah, thanks for listening. Have a great day.