On this episode of the Truly Passive Income Podcast, host Neil Henderson talks to his co-host Clint Harris about his experience as a real estate investor. Clint discusses his South Carolina roots, medical sales experience, and path to real estate investing. He and his wife began by building a portfolio of single-family rentals before moving on to short-term rentals and self-storage. Clint also discusses the distinction between being a salesperson and an employee as well as his attraction to the concept of passive income.

Time Stamps

[00:00] Intro

[01:29] Clint Harris’ background

[02:30] How sales differs from other hourly jobs as far as the income it produces

[03:42] Were there any other side hustles you tried along the way?

[04:55] How Clint’s vision of where his single-family rental investing strategy was going to go versus how it actually went

[11:26] Making the move from South Carolina to Wilmington, North Carolina

[12:47] The decision to pursue the short-term rental strategy

[15:11] Building the systems to manage a short-term rental portfolio

[16:18] Solving the lack of money problem with short-term rental arbitrage

[20:39] Building a short-term rental management team

[23:50] The challenge of building a business that would then produce “passive income”

[28:42] Realizing the need to diversify into another asset class and location

[34:24] Why not continue to expand his short-term rental business? Why diversify into self-storage?

[37:43] The first self-storage conversion project

[39:02] Outro

Key Take Aways

  • The need to become knowledgeable about real estate investment tactics before taking action.
  • How data analysis can help investors make smarter selections about their real estate purchases.
  • The advantages of having a real estate investment portfolio that is vertically integrated with specialized service providers.
  • Investing in self-storage as a more diversified, inflation- and pandemic-resistant asset class than single-family rentals or short-term rentals.
  • The importance of diversifying your real estate investments across asset class, geography, and operator.
  • And much more…

Links Mentioned

{{support-our-show}}

Coming up on the Truly Passive Income Podcast

  • Neil Henderson’s investing journey
Transcript
Neil:

Most real estate investors when they're starting out, have a goal of acquiring a portfolio of single family rentals, slowly paying them off and living off the cash flow to achieve financial freedom. In reality, it's extremely hard to build financial freedom that way. Our guest this week is our very own Clint Harris, and that's exactly how he started out his real estate investing journey. But as you're going to hear, his journey has evolved from single family rentals to short-term rentals, and now to self storage on this week's episode of the Truly Passive Income. That's just what we're going to talk about. But just before we do that, I need to tell you to give you a little reminder that if you're interested in pursuing truly passive income, you can sign up for our passive investor. Absolutely free at trulypassiveincome.com/freecourse. Now let's talk about Clint Harris's investor journey.

Clint:

Welcome to the Truly Passive Income Podcast. I'm Clint. And I'm Neil.

Neil:

So we wanted to sit down today. I wanted to sit down and interview my partner in crime here, Mr. Clint Harris, and get a little flavor of his background and his journey that he's taken from employee to self-employed to, a business operator, to business owner, to, passive investor. And I think it's a great example of a type of journey that a lot of people are on. it will resonate with a lot of people. a lot of people will see themselves in it, at some point in their life. So, Mr. Clint, tell me about yourself. Where'd you grow up?

Clint:

I grew up in Lexington, South Carolina. one of six kids. My father was a veterinarian, a middle class family, very plugged in with our community and our church and, and had a great lifestyle growing up. We certainly didn't have, a tremendous amount with six kids. I always felt I was the second oldest. Always had a competitive drive that anything I was gonna get, I had to go get it on my own. So I've always had a little bit of motivation there. graduated high school. I went to college at a small Christian school in Arkansas called Harding University. I was pre-med. ended up deciding to get a business degree instead. So I got a business degree with a Spanish minor, but I always really leaned towards the medical field. and so graduating from college. I was pursuing a career in medical sales. ended up at a school training how to implant pacemakers and defibrillators. I had a career in that for 16 years, but coming out of college, my first job was in Charleston for the Charleston Regional Business Journal, selling advertising. As I waited for the process of getting into the school that trained me how to get into medical sales.

Neil:

Okay. So you've been your career, you've often been in sales.

Clint:

Yes. Pretty much exclusively. Yeah.

Neil:

Gotcha. we talk a lot about, when you're an employee, when you're a wage earner, the harder you work, you don't necessarily make more money unless you are somebody who works, hourly wage where you're paid overtime. Sales is actually also a job where, in my view, and I've never worked in sales cuz it terrifies me, that the harder you work. The more money you make there is not as much of a limit to how much someone can make with sales. I mean, there is, but it's a higher ceiling than, someone who's just an hourly employee.

Clint:

Absolutely, and that's evident in, in the industry that I was in. I started off as a clinical specialist and going into procedures, going into surgery and having a clinical background, which you have to have. Just to start off from there, I went into education and training and training other reps, but eventually the upper echelon is sales as it is with most industries because the people that are generating the revenue for the company and the business are usually the workhorses that, that you wanna take care of. So yeah, the sales is something that obviously was very good to me, but that for anyone out there looking for opportunity, that's generally where most of it's gonna come from, is in a sales role that's generating revenue for the company or for the business. so yeah, that's what I did for 16 years. And a lot of the skills from that have, rolled over into my real estate investing or our property management things like that.

Neil:

Okay, so there's your baseline income that you were making money. Were there any, Side hustles that you did along the way any ways that you started to, work to generate additional income for yourself?

Clint:

Sure. So I start off as an independent sales rep, which means the companies would contract with me to carry their pacemaker and defibrillator. and because I was in that independent role, I could carry sideline products like, there's a product called the plasma blade and different surgical tools that came out that I would carry for a period of time and. Sell those as well and do really well with it generate, sometimes thousands of extra dollars a month. It was limited. It only lasted for so long before ultimately some other company would buy them out or whatever. But yeah, there were some sideline things that I did there to help generate extra revenue. That's the revenue that I took to start my real estate investing career. I always had a drive. At the time, I was like, I'm gonna buy single family homes and these are gonna be the passive income that I'm gonna generate. That's gonna set me free and generate all this extra time and freedom in my life.

Neil:

Okay. So you started your journey away many real estate investors do, which is you started investing in single family homes. And do you have, do you recall having a vision of where that single family investing strategy was going to go?

Clint:

Yes, and I was wrong. Most of the early part of this journey, probably the vast majority of my journey is going to tell you things that I did wrong. One of the few things that I did right early on was my first home purchase was when I was 25, and it was a duplex. Duplex on Wayne Street in Columbia, South Carolina. A lovely neighborhood. And I live

Neil:

Was that sarcasm?

Clint:

No, it's a much lovelier neighborhood now than it was then. it was fine then

Neil:

you gentrified it, you bastard.

Clint:

It's very nice now. I moved into, an upstairs downstairs duplex. I rented the upstairs to a friend of mine. I lived there for, I think it cost me $50 a month to live there. I thought I had invented a new concept and I was a genius. So from there I started buying, this is in the post 2008 housing crash, so 2010 to 2013 my girlfriend at the time, eventually fiance and then, and my wife, we bought nine single family properties.

Neil:

Wow.

Clint:

Well, you say that it's not as impressive as it sounds because you could pick up a single family property for 25 to 30 grand. Put five to $7,000 into 'em. these are small brick style houses. You try to get a brick home with a decent roof, and even if you gotta refinish the floors or throw some appliances in, they weren't section eight housing, but it wasn't much better. and so I sounded like. every other young real estate investor, like, oh, I'm all in on these properties for, you know, at the time, sometimes $30,000 a year. So I'm gonna buy one a year. And then after x amount of years I'm making around $6,000 a piece on each one of them. So after I get five, that's $30,000 a year, I can buy one more a year. Then I get to 10, I'm making $60,000 a year. I'm retired, I'm done This is 25, 26, 27 year old me talking. Right. The reality is with properties like that, it really, like most things depended on the operator. The operator being the property manager. And in properties like that, they're not section eight, but they're not much better. They're not going to appreciate they cash flow. But the second a tenant moves out and you go in there and. The bedroom door, so the kids room is kicked in or windows are broken or the toilets are cracked. First of all, it's sad, and second of all, all that cash flow goes right out the window cuz you gotta fix all of these capital expenditures. On top of that, the property managers in that space, the ones that are very good. Get very busy. And as they get busy, they start making more money. And as they start making more money, they start buying their own properties and their own properties take precedent over my properties and the quality of the management goes down. The ones that are not very good get burned out and eventually drop off. and so I had learned a lesson there the hard way, waiting way too long a lesson that's really served me. Once we got into property management here is that I had to learn at first. I started out being quick to hire and slow to fire and we had to change that and I had to learn how to be slow to hire and quick to fire. But ultimately that was our single family journey. and got us to the point that we knew that was not the way to get ahead.

Neil:

Okay, so before we move on to your next strategy, I just wanna get some clarifying questions there. So these were, you know, 25, $30,000 houses you were buying. You were buying them for cash, correct?

Clint:

That's right.

Neil:

A bank is not going to lend on a property that's less than $50,000. They just, they didn't want nothing to do with it. So you were buying each one of those for cash. So you had no debt on those? Correct. There's no, no leverage at all. You were investing, let's say, $30,000 and you were expecting $6,000 in cash flow?

Clint:

You gotta remember, this is before Facebook and any kind of networking. The, my resource was one real estate agent that knew a little bit about investing. That, in retrospect was not good, but he was the best person I know. I knew. And then some CDs on tape at the local library, and that was it. But yes, that was my, that was the strategy is 30, $35,000 investment, $6,000 a year cash flow.

Neil:

Okay, so 18% return?

Clint:

Look good on paper. Annual. Yeah. Yep. As long as everything goes perfectly

Neil:

correct. Alright. but the reality was that one, like you said, you're having to, it's a lower income, property, so the tenants are not, they're not the most profitable. they're always on the margins. They, often if something goes wrong, they're gonna stop paying rent. and now you've got an eviction on your hands. they don't take great care of the property. I mean, rental properties in general, but, it just tends to be, they cause a lot of damage. So, any turnover, now you've got, $3,000 to $5,000 worth of repairs every time you've got a turnover, which there goes all that most of that cash flow.

Clint:

Sure. And on top of that, there's no appreciation over time in the areas like that are very, very minimal. and so if you take one of those properties and say you got one or two headaches every. Four or five months, and then you multiply that by nine. It's exhausting. And what I realize is like it, if you, anytime you take on a real estate project, it takes on a certain amount of your mental energy and time and capital to some extent. So you eventually, I grew out of that point to the of just saying like, look, if we're gonna take a bite, let's take the biggest bite that we can of all those properties and to move forward a little bit. We eventually unloaded all of them. I sold them. A little bit more than I bought 'em for, not more. If I was buying a property for 35 grand, I probably sold it for 40 to 45 because they just weren't gonna appreciate over time, and I was happy to be rid of 'em. We had one property that we accidentally did well on, that a Amazon distribution center went in within a mile or two of their, we were, we bought the property for 28,000 I believe, and ended up refinancing and pulling out, I'll take that back. We bought that one for $28,000. We sold it for $123,000. So from $123,000, obviously we have to pay taxes on that. Instead, we did a 10 31 exchange into another, rental property that was a Burr property we could pull the money out of. That's probably a conversation for another day, but a, around that time as we unloaded those properties, my wife and I, we flipped three properties in Columbia, South Carolina. The first one we bought a flip. We were supposed to make $35,000 on. We made $6,000. The next one we were supposed to make. $40,000. I think we made $12,000. And then finally the last one was a live-in flip. We lived in it for two years. And then when we relocated Wilmington we sold it. And part of it was because we timed the market right. We made about $85,000. But ultimately all of those "passive investments" that I had, there were anything but, and it got me to the point of understanding that I don't know what is the right way, but this isn't it. There's gotta be a better and faster way. And then that's when we began our journey here in Wilmington.

Neil:

Gotcha. Alright, so now you're here in Wilmington. you moved here, you didn't move here for real estate. You moved here for your, Day job, correct?

Clint:

That's right. The political landscape of the hospital systems in Columbia, South Carolina was changing. I had a great team of amazing people there, but as that landscape was changing, I was kind of the heir apparent in that territory, and it became apparent that it, the, it was not gonna be the same. So we looked around for other opportunity and, we chose Wilmington, North Carolina specifically based upon lifestyle. my wife and I, we didn't have children at the time. We moved here, six years. July would be six years ago. So we moved to Wilmington, North Carolina for my career medical sales career, and rented at first because we wanted to look around town and understand a lot of different options. There's four beaches within proximity to Wilmington. There's some country areas, there's nice downtown areas, and we wanted to put some time into deciding what we wanted our life to look like throughout that time period. We really started educating ourselves, especially my wife was working in Columbia still and back and forth a lot. She started listening to different real estate podcasts and investing in herself, and then us convinced me to start listening to podcasts and that I didn't know that about you. Yeah, that's really the definition of, what changed for us is she started spending a lot of windshield time educating herself and then coming home and being excited. And up until that point, I'd always been dragging. Through these real estate investments and all of a sudden she's coming home and she's talking about wholesaling and apartments and flipping and syndication and specifically short-term rentals. And we came from an area where short-term rentals were not really a thing, but we were spending every weekend in Wilmington going to the various different beaches. We specifically liked Carolina Beach in the area down here, so we'd come down, we, you can drive on the beach here. We'd let our dogs run around. And in the process, we started learning how to run analysis on short-term rental properties. And so on the way down to the beach and on the way back, we would weave through all these different neighborhoods, and on Saturdays and Sunday afternoons, just cruise around and run analysis on all these different properties, because we decided this is where we would like to try to live. Problem was we couldn't really afford to live at the beach by ourselves, but I always remembered my first investment, which was that house hack, that duplex that allowed me to live there for almost for free. So we explored the idea of can we do this with short-term rentals? And remember when I started my real estate investing career and I got almost all of it wrong, it's because I was trying to figure it out myself through the power of podcasts and education and using a data analysis that comes along with short-term rentals. You can look at the last year of booking, it allows me for the first time to use other people's past performance to try to dictate the success that we were building for ourselves. I had capital to invest. We had some time, but I had no experience in this space. Tapping into that data resource is what allowed me to use other people's experience to guide us in our decisions, is the type of property that we needed. The way we were gonna renovate it, the way we were gonna stage it, the way we were gonna operate it, it was a cheat code to help us get ahead. We ended up buying a duplex, two blocks from the water. it's a three bed, two bath upstairs, three bed, two bath downstairs, separate parking...

Neil:

Lovely wood paneling.

Clint:

...at the time. At the time. It's about a block from where we are sitting right now, by the way. we moved into the upstairs. We did a light renovation upstairs and downstairs. We moved into the upstairs. We rented out the downstairs. We tried this Airbnb thing, and our first summer we did $57,000. and we said, wow, this is real money. Now, it was very labor intensive. it was the farthest thing from passive in the world. But

Neil:

Were you doing the cleanings?

Clint:

We were not. We did the first couple.

Neil:

Yeah.

Clint:

Just to know what needed to be done and what didn't. And then we started hiring, cleaning companies. and it kind of reminded me of my experience with property managers early on. The ones that are good, get busy and disappear. The ones that are not good, you don't want 'em. and because we were such, we're just one. So people didn't care, like, ah, if I try to have a high standard, they would rather just go to the other jobs that are easier or work for some of the property management companies, cuz they can give them 30 cleanings or whatever. But from there I looked at my wife, I said, we need to set this property up in a way that we could have 30 listings operating cuz we're going to at some point I just seen the dollar signs and how much more lucrative it was than anything else. Basically what happened is we were living in that upstairs, and outside of the income, the income from the property was covering the mortgage taxes, insurance, utilities, and on top of that, highly seasonal at the beach. So it was more of a bell curve, but over a yearly average, we are getting paid $1,400 a month to live there from just the downstairs as a rental property

Neil:

At the beach.

Clint:

At the beach. Yeah.

Neil:

There's a lot of people hating. A lot of people hating you right now,

Clint:

So from there we were out of money, but we knew we needed more listings. so the short version is we found a triplex that was in really, really rough shape. That, had bad, bad tenants in place and the owner was trying to sell it, but he couldn't sell it, and everybody thought that it's because it was overpriced. My opinion as it expired off the MLS for the third time was that it wasn't overpriced. It was drastically underperforming. So I made a cold call, to dear friend of mine now named Brian. At the time I'd never met before. Just cold called him on the phone. I was like, look, sir I've got a proposition for you. You've got a property over here. Everybody thinks it's overpriced. I think it's underperforming. Here's what I propose. You've got some pretty rough tenants in there. They're all month to month. If you'll get rid of the tenants and spend some money fixing the property up L V P, flooring, paint, mini split, AC systems, things like that, and I'll manage the renovation. From there, you increase the rents. I'll rent all three units from you on a master lease as long as you allow me to turn around and operate it as an Airbnb property. And what I'd like is at the end of the two year time period, I'd like first right of refusal to buy it. If you decide the deal's not working for you and I don't buy it and you wanna sell it to somebody else, I'll give you the rental history. You can turn around and sell it to somebody else and all of a sudden the property is not overpriced where it was, it's underpriced even 50 or a hundred grand higher. I tried to make it a no-brainer for him and that was our next to how we brought on our next three short-term rental units.

Neil:

So had you, were you familiar before that with the concept of short-term rental rental aribitrage?

Clint:

No, a again, I was wrong again. I thought I invented it just like the original House Hack. I was completely wrong and people have been doing it all over the world for years. Yeah, yeah. But I had no idea.

Neil:

Yeah, but you did it. You did it the right way. You made sure the guy knew what you were doing. There's a lot of people who got started doing it, who just started renting a place and then just without the landlord's knowledge started, renting it out, subletting it. don't do that.

Clint:

Yeah, exactly. And violating HOAs and different things like that. That's not what this was at all. But the short version was, we took a triplex. I ended up spending $4.99 on whitepages.com to get his phone number when I first called him. Besides that, we used a interest free credit card to stage the units after they were done being renovated, and then he was kind enough to offer to defer the rent. For the first three months. We started operating as a short-term rental. At the end of two months, we had made enough. It was right at the beginning of the summer we had made enough that we. The interest rate credit card off and paid the two months of deferred rent and the upcoming third month and continue to operate from there. And then, we ended up doing $125,000. In gross rents on that property, paid the rent and the cleaning fees and everything else, and had a net of around 54. And then we took the money from that. And then the money from the money we were saving from not having a mortgage payment and the $1,400 a month we were being paid on top of that from our downstairs, along with the 54 from that, that triplex. And from there we went on and we partnered with my parents and bought a quadplex that needed a full renovation. And then from there we took the money from all those investments and we bought. Ocean access Quadplex, that's right on the, it's not ocean front, but it's about 40, 50 feet away. and that's that's how we scaled and we just took the money from one to the other. And so essentially our first investment was the duplex we bought for ourselves. The money we sunk into that, the $5 I spent to get Brian's phone number. And then we just snowballed that forward.

Neil:

Gotcha. So you, you were still working your W2 job, correct? You working your and on top of that, was this all at, was this all your wife? Doing all this work?

Clint:

a tremendous amount of it. Yeah. she did the lion share. So I was building a medical sales territory at the time. and unfortunately I was not as busy. I had hoped that I would be, and it took a while to build that up. So I did have time. A lot of this was done on the weekends. A lot of it's my wife at this point, we were having success so that she quit her job in medical sales and started as a. Specifically focus on building our rental portfolio and using that as a springboard to help her business. and that's what we did. And so we, she specifically, but together we really dialed in those. 14 units total. knowing that we were living in the upstairs of that duplex. Since then, we have moved out, so that's a rental unit as well, but basically dialed in those units to operate as smoothly as possible. By the time we streamlined them, we automated, we started using management software and things like that. By the time I added on the triplex onto the one unit that we started managing first, I would say those four units and probably all the way up to 10 units to manage them from your phone was way easier with a management software and automated messaging and automated scheduling with the cleaners than it was to do one property and just do it manually and messaging back and forth every time somebody booked. The other thing that happened is that we started to formulate what eventually became a mindset for vertical integration, where once you have 10, 12, or more listing, your cleaners start paying a lot more attention to you. You can get people that specifically will work just on your listings. They will follow your instructions. They will hold your high standards because you are a big enough chunk of their book of business that they don't wanna lose it if they can't afford to, and they'll turn down other listings just to take care of ours because. we can, we can feed them essentially just off of that small portfolio. Same thing with handyman, with air care, with plumbers, electricians and things like that. and then fast forward what happened? We got that to the point, it certainly was not passive, but it was that getting to that level two business operator that we talked about in the last episode of getting to the point where it looked easy to the outside people looking in because we had streamlined and we'd auto automated a lot of things at that point in time, my wife was a realtor and having success, specifically selling investment properties, and a frustration was that we would. An investment property to someone coming to the beach, and a lot of times it was people that want to short term rental it when they're not using it for their family. And so we can run the analysis and look at the numbers and show you the data as to what that property should be doing in terms of performance, but it all comes down to the operator, and that's why it's so important who you partner with, whether it's a passive investment or an active investment or anything else. It comes down to the operator. So we would sell them the property, my wife would, and then turn them over to one of the traditional property management companies in the area. And the numbers were coming in flat, very flat a lot of times. And so they were coming back to her with frustrations and she's like, look, this is how we operate it. If you wanna operate it yourself, this is how we do it. Long story. After saying no for probably about a year and a half to two years, she, along with some other real estate agents, partnered together to form going Coastal Property Management. We basically took the backend systems that we had built for our listings along with our partners, Sean and Christine, who have their own portfolio of listings. We merged a lot of those systems together to form a property management company, that at this point in time has 75 listings under management, vertically integrated. Six cleaners, six cleaning teams, 16 cleaners that are vertically integrated, only allowed to work on our listings. We do all of our linen in-house. We have our own linen facility because you have to control every part of the business to maintain the quality. Otherwise, you fall in the trap of what everybody else and the market did is you have to start making up for with quantity, and then the quality goes away and you become what you were trying to replace.

Neil:

Okay? So what you had figured out, you had generated the money from your W2 income and your previous real estate investments in order to buy your first, what turned out to be a house hack, that allowed you to live extraordinarily cheaply, cuz most people's largest expense is their home.

Clint:

Mm-hmm.

Neil:

but you're out of money at the time. So then you went in, you discovered the idea of Airbnb rental arbitrage, and you used your experience in real estate and sales to cold call someone. and then, convince them to a, allow you to basically get into that property for little to no money. And then you used your credit to furnish it with a zero interest credit card. that then allowed you to generate more income there. so now you're sort of up and running and now you're having to build. now you're very definitely a owner. You're learning how to operate a short-term rental business. so now you get up to about 14 units and now you're having to really figure out those systems and processes to hand off cuz speaking of someone who's run a short term rental, one unit, That's pretty easy. But once you start getting up to 10 to or more units now you're really starting to depend on a team and your processes and things like that. And so now we're talking about the real work, which is, building those processes and then building the team that you can then hand those processes off to. And now you're off to the races of getting to that what you said is that level two owner.

Clint:

I think that if you listen to the way that you just explained that back to me and what I went through, I think you'll understand why I am so attractive to the idea of truly passive income. Because everything that I did was an unbelievable amount of work. And it wasn't by choice, it was by necessity because we were taking investments that standalone were incredible investments but depending on who operated them, they could or could not be good investments. And if they weren't being operated, connect correctly, then we needed to unload them. But I couldn't afford to do anything else, so they had to work. so it wasn't by choice that we started a property management company or a linen company or a cleaning company. That's all you know together at this point. It was by necessity to get those to the point that they were performing. And then, Hire myself out of the company. I had a transitional moment where I read the book Who Not How, and I had the revolution of, as you're going through the process and my wife is going through the process of building out this business, the question is how do we do this and how do we do this and how do we do this? The real question was, who do we have that's better operator and me and her that at every. with all of the things that need to be done. And once we got to that point we started replacing ourselves with people that are better than us, that's when it got to the point of being a level two business owner, where for us it became mostly passive. We still have to make a few business decisions here and there, personnel decisions, but the vast majority of the time, we have more faith in the other people in the company's ability to do their job than we do in our ability to do their job. So at that point, the real lesson was, Careful what you wish for when you get into "passive investments." the revenue certainly made it worth it. I definitely would not want do it with single family long-term rentals. The revenue is three to four x on a short term in the right location, and that turns around and allows us to start investing into other asset classes. But let me bring up another thing that we haven't talked about yet. We live on an island. It's called Pleasure Island, right outside of Wilmington, North Carolina. Kure Beach and Carolina Beach are the two beaches on this island, and I have investment properties in both of them. And we have been hit at one point in time. We're hit by four hurricanes in three years now. We've dodged some big ones, but we've had some pretty serious storms come through as well. And if I. Or my wife owns a business with 75 listings, and then we own and operate another 14, 14 rental units as well as live here in our house. That's a lot of eggs in one basket, so it got me to the point number one. It is fairly passive now for me. to have the properties that we have. Anytime I take on a new property, I still have to manage renovation staging and it's time consuming, it's residual income, but it's certainly not passive income. It's very front-loaded work. But in the long run, it pays off because I can drop it into the management of our company. And I usually, it's six months before I have to think about that property or go over there again, but it's very front loaded work. but it's fairly high risk. everything is in one spot, one big storm could WA wipe out my entire portfolio as well as our business. So that got me to the point of, okay, the question is the same as it was before. What's the highest and best use of the dollars that I have to invest? So in the answer to that question of what's the highest and best use of the dollars that I have to invest in mitigate risk the best for me, it was diversification across asset classes, across operators, and across geography. And certainly I've got one asset class. We are the operator in one geographical location. It's not ideal for long-term sustainability. I was willing to roll the dice for 3, 4, 5 years to get. But eventually I need to make the transition to other geography, other asset classes, and it needs to be into something that is passive. and so that kinda, that's what led up to the point of going in a different direction.

Neil:

Gotcha. And that's where, around the time that you and I crossed paths. and I, I found you through, an infamous BiggerPockets post where you told everyone very publicly that you were selling all your long-term rentals and going all in on short-term rentals. And at the time my wife and I, Brittany had a podcast called The Road to Family Freedom. And I was like, Ooh, this guy would make a great guest, for our podcast. It's a great story and so that was how I first met you. I reached out to you, said, Hey, come be a guest on my podcast. and here's a problem that you run into when you're a podcast, host, is that when you talk to all these different people about their different real estate strategies, you get a lot of shiny object syndrome. It's like, Ooh, ooh, that sounds good. Ooh, raw land. Let's sell some raw land. ooh, self-storage. Airbnb rental arbitrage. you're like a kid in a kid in a candy store. And I remember listening to you talk. I was like, Ooh, God, he lives at the beach for free. He gets paid to live at the beach. And I remember I was like, oh, that sounds really good. And at the time we'll get into it in another episode. I had experience doing short-term rentals, and then we stayed connected. I think you became a listener of the podcast.

Clint:

Yep.

Neil:

And at one point, I was investing in single family rentals in North Carolina. I was living in Las Vegas at the time, and at one point finally you called me and you said, Hey. You know, for somebody who lives in Las Vegas, you sure do invest in North Carolina a lot, and that opened up a conversation about why I was investing in North Carolina so much and why, you know, in self-storage. And I think that piqued your interest and that's where you first got interested in the whole idea of self-storage and you met. my friends Eric and Levi Hemingway. Correct?

Clint:

That's right, yeah. That's really how this all tied together, is that we connected through a bigger pockets post You invited me on as a guest on your podcast, and that really started everything. So I applaud you for your lack of judgment. Appreciate that And from there,

Neil:

paying, paying the price now.

Clint:

As we had open discussions about what we both wanted in terms of investment strategy, I think you found out that a lot of times your single family home investing was not as passive as you had hoped it would be. You were learning some of the lessons I had learned before. By failing at what I did, you certainly did it better than I did because you had a better team, and I saw the value of the operation and the team and the management that you use as opposed to the way that I did it the first time. So it's not that people can't have success with that, it's about the way that you do and it comes down to the operator. At the same time, we were, struggling but continuing to have success with short-term rentals, but, Man, it was labor intensive. And that's what led to you mentioning that you had friends in the market that had invested in self storage facilities, also invested in hotels. I met them through, some of the local real estate meetups. We had, mutual interest in some of the hotels that they had in our market were doing okay. but a little bit of room for improvement and I know a lot about very little when it comes to short-term rentals. The only thing I know is this island, but I know it really, really well. So we, got together and had some great conversations that was mutually beneficial to, to help them tighten up some of their hotels, help me get a better idea and think bigger and some of the ideas and projects that they took on. And ultimately when it came down to when I was talking to them specifically, but also the conversations I had with you and with them was, it opened my eyes to, okay, the people that I look up to and the people that have the truly passive income that I'm looking for, what are they doing? And for the most part, it came down to three things in this area. And I'm not talking about nationwide, just the people that I came across. It was. it was note lending and people willing to lend money to house flippers, and just sit back and get a paycheck. But it does, you ride the market and there is some calculated risk involved there, and it was mobile home parks, which I really didn't have an interest in that at the time, and it was self-storage. And those were the things that specifically most people were sitting back and you have more of the quote unquote mailbox money. And some of those, if you're doing development, it certainly can be, residual income from Frontloading, the amount of work that goes into it. But from the investor's standpoint, people putting money in. Those are the three strategies that really jumped out to me. And I jumped onto the self-storage bandwagon because there was opportunity for me to put money in and invest in a strategy that was actively being operated by partners that had experience. And by definition it is. Diversifying me across geography. We invest across the southeast, into a different asset class that is inflation resistant, recession resistant, and as we come to find out pandemic resistant. So I was looking for diversification. and those conversations, the relationships is what led me to that point of, and that's where I am now. I'm to the point now, I'm 40 years old. I'm taking my active investments that I have on the company that we own, taking the money out of that and investing it as fast as I can into safe, secure, long-term, relatively low interest rate debt that's locked into land and asset classes spread across a geographical area that are safe and secure with a different operator.

Neil:

So it's a great point you just brought up there. So why not just keep, expanding the short term rental business? Why get out of, let's say you don't, continue to expand here in this locale and we live near the Smokey Mountains. Why not expand the operation to the Smokey Mountains and make more money that way?

Clint:

Because a couple different reasons to. Continuing to go all in on one asset class. That is, it's certainly having success and it's gonna continue to have success for a long time. And short-term rentals have been around for decades and decades before Airbnb was ever around, but it's, in my opinion, continuing to go all in on that asset class. In some ways, to me feels like buying a property in a flood zone that eventually, Something's gonna happen. There's always gonna be some issue that comes up. You can mitigate it as much as possible, and I'm willing to take that on for a certain amount of time because the returns are so high. But in most investment strategies, the returns. Are tied to the risk. So the higher the return, the higher the risk. And the idea is to find something in the middle where hopefully there's an inverse relationship and the income is higher than the risk involved along with it. So for me, again, it comes down to time. The question became over time, what strategy is gonna allow me to spend? Three to four months out of the year traveling with my family, or in Costa Rica or Dominican Republic, or Europe or wherever. It's not short term rentals, I can tell you that. So for me, the question, it came down to time. And time is the one thing that I can't generate more of. I can always generate more money or leverage and things like that to, to move on to bigger and better projects. And I still have ambitions of taking a hotel and converting it to an invisible service. A la carte location, independent lifestyle, traveling hotel, that's something that I would take on and I'm not avoiding that space, but it doesn't do anything to gimme my time back. So for me that's the point. I think we've short-term rentals, investing in different areas. I've seen a lot of people get distracted and have properties here and here and here and all over. We wanted to do one thing and do it very well in a small geographical location that we could control that helps us put our best product out there. It also inherently puts us at risk. So yes, I could diversify to the Smoky Mountains. I would argue that appreciation has gone up so much in the last year or two. And also interest rates are up now that it cannibalizes a tremendous amount of the cash flow. The only way to get past that is with larger multi-family properties, and that's okay. But the same comp, the concept that makes multi-family properties work is that you got one set of fixed overhead mortgage taxes and insurance, but 30 units, well, you can do the same thing with a self storage unit that has 600. and you're not dealing with tenants. So for me it was a shift, because that gives me my time back.

Neil:

Gotcha. So the, the smartest, truly passive income investors I know, say to diversify across asset class, geography, and operator. and so you're your own operator. the asset class that you were in was short term rentals and the geography you were in was Carolina Beach, was coastal. What you sought out was a different asset class, a different operator, and a different geography. and you glossed over this, I wanna make sure people understand. You invested passively the first time you did, you invested passively in a self-storage syndication, correct?

Clint:

Yeah, that's right. So it was a little over a year ago. It actually opened up, last week. We, some partners, Erik Hemingway, Levi Hemingway, myself and a small group of investors, bought a Kmart in Reidsville, North Carolina a building, been sitting empty for 8 to 10 years. we bought the building for, I believe, $1.5 million. Put $2.5 into it. I invested $80,000 as a passive investor into the deal. They purchased the deal, bought the building, renovated, cut a hole in the front and converted to a drive-in climate controlled self storage facility in a high residential density area. Got the building for pennies on the dollar because big box retail is pretty much dead. Thanks Amazon. but that there's still a need in that area for storage. And so the same reason that made it a good location for people to go buy their things out of that building for so many years is the same reason. It's a good location for them to go put things back in, in a safe, secure building that's been there for a long time, which mitigates my risk. So I was a passive investor with them and put $80,000 into that building. And, yeah, that's a five year project. It just opened up. And, we've got people lined up moving in there, and that right there, it's in Reidsville North. I'm not there. I haven't been there. I'm here, I operate here. They operate there. So the best thing is for me to take my capital and their time and experience and put those things together.

Neil:

Okay. thanks for telling your story, man. And I think it's such a great example of the journey of someone from employee trading your time from money into sort of a active investor who thinks it's gonna be passive and then into a business operator, business owner, and then ultimately someone who is, investing for truly passive income. I think you're just a great example of that, of many, you're a great example of many things, of high care and quality. but that in specific, so...

Clint:

well, thank you for that. I think the one thing that's constant is that what I was going for, the goal never really changed from the time I bought my first properties and bought 'em the wrong way, with the wrong analysis, like the goal of passive income and what you and I have come to refer to as truly passive income. Has never wavered along the way. I've done a lot of different things. I've flipped houses. I did, multi-family, single family. I did a BRRRR property basically on accident. we've done Airbnbs, we've done arbitrage management. Everything that we've done has had the same goal, and that's why I think it's so important to really get down to the brass text of what is and what is not truly passive income. Because up until now, the only passive income. Investments that I have are my 401k and. Investments into the self storage syndication deals that I've done in the last year, and everything I've done previous to that in almost 14 years of real estate investing that I thought were all going to be passive, are not. Now, some of them are residual and I, it feels like passive income now, but it's from a lot of work that went into it. So that's why I really am attracted to the concept. One of the things that really attracted me to the idea of doing a podcast with you is to really get down to what that is, to try to save other people that 14 or 16 years that I had to invest to learn the lessons to get where we are.

Neil:

Great. Okay. Well thanks again for listening. next week we're gonna sit down and Clint's gonna get me to tell my story. long, sad tale. It is. And, we thank you for listening. Take care.

Neil Henderson:

Thank you so much for listening to this episode of the truly passive income podcast. If you liked the show, if you think it would be useful for someone else the greatest compliment you could give us would be to share the episode with a friend and leave us an honest review wherever you listen to podcasts. If you have any questions, please don't hesitate to let us know on Twitter @trulypassive. And remember with truly passive income comes freedom of time, place and the freedom to pursue your higher purpose.