Nobody Gets Rich From Labor Alone | ep 141

James
Fun fact, did you know that Oregon was the first state in 1887 to celebrate Labor Day? I did not. I didn't think so.

Cool. And we are going to talk about Labor Day and how that compares to investing in things like that today on the real estate note On the Furlo Capital Real Estate Podcast, where we do dive into the intricacies of passive real estate investing and things like Labor Day and holidays and living and stuff like that. Because our mission is to equip people to invest wisely in both property and people so that together we can build wealth, enjoy Labor Day, and improve housing.

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

Jessi
Yeah, but I you said enjoy Labor Day or I'm thinking or work on Labor Day. It just happens to be like the timing of when students like come back into town and like for work there's there's things happening and so it's like, yeah, this happens to be a great weekend for a retreat or for It's Well, it's also weird Labor Day as well.

James
Because I think it's like it's every six or seven years it shifts. It's it's it's back a year or a week versus what would normally be. So a lot of schools have started this week In Oregon at least, which is before Labor Day. But the other thing is that we're going to be able to do that. Correct.

Jessi
Or the or like the end of August, beginning of September, like that weekend would be the first weekend. The first weekend of September.

James
Which it is the first weekend in September because October

Jessi
Yeah, you're right. So it okay. I understand.

James
Yeah, yeah.

Jessi
It's the first full weekend in September.

James
Correct. Yeah.

Jessi
The timing's weird.

James
Calendars. It's bang. It's a thing. Timing is weird.

Jessi
And I feel like non non-working holidays Is that how you say that? Sure. Days yeah, whatever.

National holidays where you don't work. It's a weird concept anyways. Oh.

Because it's like I yeah, I don't know. To me it is. It's like Well, for certain jobs, I guess it totally makes sense because you're like, you're serving the public, and if the public is taking a break, like you can just take a break and it's fine and whatever.

We've all agreed this is a day off.

James
Okay.

Jessi
But there's certain jobs that are like, no, stuff still has to happen. Like it's not like things stop I don't I don't know. You know, like if somebody's well if somebody's property went kablooey and there was water going everywhere, you wouldn't be like, it's Labor Day. See ya tomorrow That's pretty close. You'd probably go check on it.

James
Yeah, and I'll charge a extra fee for getting called on the weekend. I guess so I I hear what you're saying. I like the idea of it's collectively a society.

We have said, hey, we're going to take a moment to remember something that was important. Yeah. And we're going to do that by stepping outside of our regular routine, which is normally means that makes sense.

So we're not all gonna work. Sure. And we recognize that not a hundred percent of people can do that.

Sure. And it is what it is, but if we can get most of the people to at least recognize, hey, this is a special day, sure. That's cool.

Like that's the win. Right. It's about remembrance.

Not hey, you get a day off.

Jessi
But most people just think, oh, it's a day off.

James
Well, I mean Yeah.

Jessi
But uh the intent is to remember honor something. Yes. Yeah.

James
And given that, that's why we're taking a little bit of time out to talk about Labor Day. And in some ways, there's a little bit of an like I don't know about irony is being the right word, but we are a for low capital podcast talking about labor. And so I kinda wanna compare and contrast the two of them because it just seems um seems right. So a question to you is does hard work actually make you rich?

Jessi
Depends on what you're doing, I suppose.

James
Tell me more.

Jessi
Well, I mean, you could work really hard, like running around the block forever and no, that doesn't make you rich. Okay. Or you could work really hard, like I guess, serving people or giving everything away and That doesn't make sense.

James
We're specifically talking about money. Um But okay, but you okay, what if you work on Wall Street and you get and you get a really big salary? Or let's say that you're a doctor and You have a good salary. Or you're working for a business, I don't know, HP, whatever, and you have a good salary. Does then that make you rich?

Jessi
Well, it depends on your definition of rich, I suppose.

James
You have a lot of money.

Jessi
You have a ton of money? Yeah

James
Well yeah. Sure. Sure.

Oh, I disagree. Okay, cool. Let's talk about that.

That's interesting. Um all right, so again, like you were kind of just like, I think people will conflate working hard with building wealth.

Jessi
Oh. Okay. I d I hm The question is weird.

Okay. Being rich or having a ton of money doesn't necessarily mean you're building wealth or you're you're having like sustainable wealth. And so Like, yeah, I think you could be rich, but that's different than having having like Value that goes beyond just like, oh got this paycheck.

Yay.

James
Yeah, yeah, yeah. And and I think you're you're you're swirling around the idea that I'm trying to get at. So I'm gonna You know, we'll flush it out a little bit.

Um and it's this idea of your labor creates income. Yes. Which is what you're talking about.

Sometimes a lot, sometimes a little.

Jessi
Yes.

James
Your margin Which is the difference between how much you make and how much you spend. That creates capital. And then your capital buys productive assets.

Jessi
Okay.

James
And then those assets create income without another hour of your life.

Jessi
Yeah. Yeah, it's not it's no longer linked to hourly input.

James
It's related. It is related. Your income is related to your wealth, but I think people can fall into that trap of man if I just work hard and keep getting a salary Like, if you spend it all, no, that's not I mean, who knows?

You might like you might enjoy life, but you're not actually building wealth. Those those middle two steps of Not spending all that you earn and then doing something with that delta is critically important. Interesting.

Jessi
Yeah, yeah. And not just having a bunch of money and saving it. Or like I don't know.

James
I mean you can. That's just that's really hard. You have to have uh a huge amount of money.

Yeah, so I think about our story. Right? You and I graduated college and we both got jobs.

I worked for HP, you worked at an elementary school, and we both had income. And through with that income, we spent Less than we earned. Some days or some years significantly less than we earned.

And what we did with that capital after we paid off our student loans was we started investing it. Now we could have just put it in the stock market or into CDs, sure I guess. And and I I'm on the board of a nonprofit and they um somebody passed away and left a very generous gift.

And so like, what do we do with this? And the ultimate answer was we're gonna do a CD ladder. We're gonna we're gonna put them in these CDs where one of them We'll put in for six months, another one we'll do for a year, and then 18 months, and then 24 months.

And I think we took it out of five years, I think. It was a huge ladder.

Jessi
Why was that the the the decision? Because it was super low risk? Yeah. That's the idea.

James
Yeah, cities are purposes guaranteed. More interest than just a savings account. Savings account, definitely more than a check-in account.

Sure. I mean, but the difference we're talking about is in the savings account, it's like you're gonna make your point four percent. And this one we're like, we're gonna make 3%, 2% better.

Technically it's it's you know factors bigger. But nothing is you're still not keeping up with inflation. So you're like, okay, well that's but it's super safe.

And for the nonprofit, totally makes sense, totally fine. Like we're not we're not looking to to do massive investments in growth. Sure.

For your individual self though, that's a different story. Had and we could have done that. We did not.

Instead, we invested in real estate. Specifically, we went for value add deals, things where the properties weren't in the best shape. And so we got them at Good prices for what they were.

We then put in sweat equity, multiplying our more labor labor, right? And that's kind of like that's a magic little place there. Sure.

And making the properties more valuable, both just the absolute value and the cash flow of it. And so, which then created more capital and the flywheel is is off and going. Um, so yeah, so that's the So that was kind of, and again, that was what we did, right?

We again we we had jobs, we then saved, we then bought a duplex and rented out one side. We continued to work, continued to save, two years later bought another duplex. continued to work, continued to save, bought a single family home, turned that other duplex, you know, fully rented it out.

And then continue to work, continue to save, bought an apartment building. And that was kind of like you went, oh, okay, that flywheel's starting to move now.

Jessi
Yeah.

James
And um yeah, so that was that was the path that that we definitely went down. Um you cannot hear this on the speakers, but our dog is going nuts on the door right now and really wants to get out. Uh it's all good.

Um so you can think about two paths, right? You can have your sixty thousand dollar a year earner who owns things, or you could have your two thousand thousand dollar a year earner who consumes all of it. And you this is actually one of the issues they talk about with um professional athletes where they make a ton of money and then they spend a lot of it.

Jessi
Yeah.

James
And and you're just like Yeah so really it's not about

Jessi
It's not about the total amount that you earn. It's about the difference and and what you do with the difference. Yeah. The capital. Yeah.

James
That makes sense. That's the, you know, that's that hamster wheel earner type of person where they're just kind of They're on that track or um, you know, they're they're living in that rat race, you know. Um, that kind of thing.

And and so what we have done and what we recommend you listening to this do is like don't do that. Uh really try to make that that delta, that margin, that gap, whatever you want to call it, as big as you can. Now am I saying like eat rice and beans and beans and rice?

Like Dave Ramsey says to do? Not necessarily, but you know, for some people if you're into it, cool. Um it is more of a hey, let's be like, let's be strategic about this.

Like, do we need to buy brand new cars? Do we need to get An awesome new house. Do I need to get a new iPhone every year?

Yes. But you know, there's questions like that. Which, dude, I'm not gonna get a new one this year, which Yeah.

Well because you I lost my old one in the lake and they replaced it.

Jessi
And they already replaced it.

James
So like less than a month ago I got a brand new iPhone. Yeah So I'm like, well, I'm not gonna trade it in and get a new new one. So and it's pretty good anyway, so I think I'm gonna hang on to it for a year. This is like

Jessi
This is the first time in Maybe it's time for me to get a new one. Decade. My screen's doing that weird flashy thing still. So sad.

James
Uh there's rumor they're gonna do a folding iPhone. You could be that cool cat

Jessi
A folding iPhone? Yeah. Okay. It's a thing. We're going back to that.

James
Well, it's more like it folds into a tiny tablet. Folds out to a tiny tablet.

Jessi
Oh, gets bigger.

James
Yes.

Jessi
It doesn't get small okay, well. Dude, I don't know.

James
I they haven't announced anything yet. Anyways.

Jessi
This what you were talking about was reminding me of a couple other books. Yeah. That we read like Seems like forever ago.

But it was like guess it was. Ca um, but it's the same concept. I think one is called the five dollar millionaire.

Or the five minute millionaire? Are you thinking about the latte factor? The latte factor.

I don't know. Yes, it's probably that the automatic millionaire? Maybe it's that I don't know the principle.

I don't know. Okay, I really demolished the title. I don't know what it is.

The concept is you describe it, I'll know it. It's probably the latte factor. The concept is that you you make decisions.

The automatic millionaire.

James
The automatic millionaire by David Bach. Who talks about the latte factor in the book?

Jessi
Yeah, because you're cause you you make these decisions and it's like, okay, well, I could, you know, spend this money right here, have this particular lifestyle. And then my capital, that margin, is smaller. Or I find these opportunities to take that difference Like buying a coffee every day or buying a new car every year or whatever it is and just shift it.

So that that would be crazy New car every five years. I don't know. Whatever.

Buying new cars. As opposed to use ones. But you you find those areas that you're like, okay, where am I willing to change my lifestyle a little bit so that my capital can be Bigger am I working?

And you know, I'm not working forever. Um leveraging that a little bit more. And then the other one I was thinking of is uh I think it was something by Ramit Sadie.

And I remember you you doing some saying something about like I don't have to spend a lot on everything. I only spend spend a lot on certain things.

James
Yeah.

Jessi
And I make choices. You know, so it's like, yeah, I love to travel. I want to do that, but also I'm gonna drive a super old car and not get a new one. And so it's like and I'm not gonna spend a ton of money on clothes.

James
I will buy thrift stuff and you're good at that.

Jessi
Yeah. And so it's like You you make those decisions on where you're gonna spend your money as opposed to just I'm gonna spend it all and do whatever I want. And then you have no margin there.

James
Yeah, you want to be intentional or conscious about what you're doing.

Jessi
Conscious spending.

James
And I think like having that margin is is important. And I talked to some people where the issue is like I just don't make a lot of money. All right.

Well I think you need to spend some of your labor on potentially either educating yourself, investing yourself to make yourself more valuable. And then you can either get a raise, which is probably like if you can do that, do that. Or number two, if you need to start up a side hustle or switch jobs, okay, whatever.

Um, yeah, that's the way to do, which we for our investing started out as a side hustle. Sure. That's how it was.

It was all good. Yep. And now it's the main hustle.

Main hustle. Super fun. Um, yeah, so to be clear, labor is not the enemy.

Jessi
Yeah.

James
Laboring is necessary. But it yeah, it's one of those raw materials in order to build wealth. And then as as a matter of fact, You can't just skip over that labor phase.

You actually like you need to do it. Now you can shorten it by creating a bigger margin and investing that capital in such a way that you get outsized returns. 100% can be a thing.

Um, but yeah, labor is labor is a good thing. So here's a question. When did you first feel that we had an asset working for us?

Jessi
Um I I think it was when Honestly I think it was pretty early on when we got the second duplex. Because we didn't live in that one. Yeah.

And there and there was something about that to me that was like, oh, like we can s we can fix it up. Yeah. But Like the who the people living there are paying for the cost of having the building and extra and I'm not living there fixing it up right now.

Yeah. Like that's crazy. Yeah.

And we did eventually. You know, we put sweat equity into it when someone moved out and you know, but R at right at that moment we weren't necessarily. And I was like, oh cool.

James
Yeah, I've always I remember telling people it's the it's the second month that's always magical. Because you buy that first month and you've got projects and you're doing it. And and like and that first month you're just not doing much. And then hopefully you go pretty quick and you get a new tenant and they do that first month's rent at the end of that first month.

Jessi
Yeah.

James
But you just put on a ton of work and so you feel justified. It's that second month rent payment though after you spent a month not doing work. Yeah.

Where you're like Oh, this is great. All right, all right. I could do this.

Yeah. And uh yeah, no, totally. Um, yeah, I agree with that.

Um, what we're describing is It's a lot of work, you know. It's not the normal, yeah, I got a job and I just throw it into and I don't and it's not even just like I'm throwing it into a a retirement fund and calling it good and just living my life. You know, we're describing more work.

So what would what do you think a like a a hustle culture skeptic would say to this?

Jessi
It's too risky. Like too risky. Yeah. Well yeah.

James
What do you mean? So hustle culture so Hustle culture is this like, hey, if you've got an extra ten minutes, like work ten more minutes. If you're in the evening, like work. If you've got because I work on Saturdays and Sundays, I get an extra 104 days a year.

Jessi
Wouldn't Say use the capital.

James
Well no, they would, but they would say like, but just keep grinding. But we're talking about a skeptic, someone who's like, dude, you shouldn't be working all the time. Just I'm trying to like trying to tease out this idea and I'm I'm not doing a good job of describing it.

Jessi
have to do that, but also you should be smart and not just put in the crazy extra hours because

James
Well what I'm saying is yes, you should absolutely work your job and you should work hard on your job and earn as much as you can. Nothing wrong with that. But what I'm also advocating for is during your free time Educate yourself, learn so that you can deploy your capital wisely. And in some cases, you leverage the capital that you've deployed with more labor. Which is what we did when we first got started.

Jessi
Correct.

James
And then you reach a point where you go, well, we're not doing that anymore. We're now going to hire a property manager to do it or we're going to invest passively with someone else. It's less you're not learning leveraging yourself, but you still gotta get educated. You still gotta learn about managing that business and managing assets. It's it's a whole lot different than just Yeah, my employer's got a four and one K and it's just magically just came out of my account and I'm gonna think about it till I'm sixteen.

Jessi
There is a misnomer, I guess, that it's That's passive. You do have to work. True.

It's it is extra work. Yeah. Yeah.

Until you're able to build it up a little bit.

James
Okay. All right.

Jessi
All right, that's cool.

James
Um so again, uh I think I think this four-step model is really important where you've got the labor that creates your income. I think that's like I think that's really really important. Like you like you said earlier, people want to jump straight to the passive income piece.

I'm like, no, like don't do that. Do the labor, create value, get income from that value. That is probably your highest return on investment you could possibly do.

But then don't spend it all. Create margin as much as you reasonably can. And let's be strategic about it.

Yeah, like you said earlier, if you got things that you'd like to spend on. Absolutely go for it. But let's be let's viciously cut everywhere else.

Let's be ruthless about this and try to create as much margin as we can because With that margin, you can then allocate that capital and you can buy productive assets, right? So we're not talking boats We're not talking luxury cars. We're not talking second homes.

We are talking you're buying rental real estate. You're buying businesses. you're investing in maybe something else that you are pretty knowledgeable knowledgeable about.

And if you're not, like go get the knowledge and learn about it. And and then it's that and then eventually those those assets They also start to create income and that's where you get that flywheel effect starting to build.

Jessi
Because then you put that back in.

James
Ideally. Yeah, yeah, yeah. Um Yeah, so I just think that that's um I think that's important.

Jessi
Um where does the model fit if I'm working, I'm creating that margin, uh-huh, and then I'm giving that money to someone else to like to help me.

James
That's the buying productive assets of it.

Jessi
So so it's not necessarily me having to go out and find these productive assets is working with people potentially to invest with and or finding that person who finds the productive assets.

James
Yeah. No, totally.

Jessi
Because it's like the learning curve for some of that stuff. can be pretty steep, I feel like. But if there's an investor who's pulling deals together and knows ball.

Keep it going. Right. Keep selling it.

I love it. You know? They they just they know how to utilize the capital to make a better return than I would.

Yeah. Like I'm good at my job. I can make this money, but I don't know how to leverage, you know, this capital that now I've saved up, this margin that I have.

And so I can partner with somebody.

James
Yeah, no, totally. I yeah, I that's a very viable strategy. I think and and and I think thinking of it in terms of a partnership is a really good way to think about it. Yeah. Um because yeah, that's that's essentially what you're doing.

Jessi
Which again is not fully hands-off. You're not just like Here you go. And now give me a check, you know, in the mail.

I you could, I suppose. But if you put in the effort and energy into finding those good capital deals and work with a partner who knows what they're doing, then That's good. Yeah.

James
I love it.

Jessi
Works for you.

James
So here's some here's some actionable takeaways as we head into Labor Day. Because, you know, who wants to just do barbecues and hang out? Let's do some work.

That's what's working. Uh I think it is worth it to take a look at your spending patterns and and genuinely be like, hey, where am I pursuing consumption versus pursuing ownership? And maybe there are some opportunities to tweak there.

Um as well. Again, you don't have to be ost austere. I don't know what the word um You don't have to be don't be crazy.

You don't have to be cheap. Don't have to be cheap. Yeah.

Yeah. Um, yeah. And then I also think it's good when you do decide to allocate that capital to ask that question, right?

Does this build permanent ownership Is this going to build income to ask those things like and like we were talking about to like to learn about it? And again, I also and I think this is huge, and this is something that you and I started from the very beginning. is you reframe the goal.

The goal isn't to earn more, the goal is to own more. And we used to talk about all the time where I was like the reason why I had a job was to buy assets. That was it.

And and that was what we did. And I was borderline. I could do any job.

The one I had happened to pay pretty well and I was good at it. So that's what I did. But the entire goal was to buy assets.

Yep. And I think it's just reframing that. Um yeah, reframing your goal there.

And um yeah, yeah. I I thought another an interesting way of thinking about it was What survives the work matters more than the work.

Jessi
Mm-hmm. Yeah, I guess. Mm-hmm.

James
It's that idea of When you um yeah, it's not just hey, I had to put in the time and energy and I got paid for it, but it's like what are you what are you doing? Like what are those artifacts, what are those permanent things, what are those valuable things that continue to last? Again.

Building assets. Like I think about this podcast, right? It's an asset.

Yes, we're putting in the time and energy and the labor and we're doing it, but it's something that is gonna live out on YouTube. People are going to watch it. They're going to continue to go back to it and reference it.

And it helps build up that library when someone goes, Oh wow, they've done over 140 episodes, you know. And And and in the future, like this gets us a stepping tone, stepping stone to 200 and the 500 or whatever. And so we'll make that long.

I don't know. And um But you know, and it's just part of that, that's an asset that we're building. And um I think that's that's good stuff to focus on.

Um Yeah. Though I do like watching YouTube, so, you know, that's a PT. That's allowed.

That is allowed. So One last question to think back, and this is for uh for you, dear listener, to consider is what did your labor build this last year? And will it be working for you next year without you?

So there you go. That's my challenge. Interesting.

What did your labor build? There it is. Alright.

Let that just kind of steep in that idea. With that, man, I hope you have a happy Labor Day and you're not like Jessi working. Which she's she's like another retreat.

It's fine. And she's not like working hard. I'm not working hard.

Yeah. You're not hustling. You're not grinding.

You're off having fun with friends, but or new friends, I guess. Which is really cool. Um but I hope that you get a chance to actually relax and to take some time to be reflective and to think about like yeah, how are you spending your time, how are you laboring, and what are you building with that labor?

I think it's good. And if you would like to learn more about laboring with us, I mean partnering with us, you can absolutely do that. You can check us out at Furlo.

com. We got all sorts of information there about our investing thesis and how we roll. And so with that, thanks for listening.

Have a great day.