Ever feel like you’re running in place, both professionally and personally? Regular audits, for both your business and your life goals, can be the key to unlocking true success. In a wide-ranging and candid discussion with Derek Dombeck, Bill Faeth reflects on his personal and entrepreneurial journey, emphasizing the critical importance of auditing both business and personal success. Bill highlights financial literacy and integrates it into his parenting, advocating for a “Life Plan” that considers finances, family values, and desired retirement lifestyle, all while maintaining work-life balance. Bill’s story is one of grit and vision: grabbing chances, bouncing back from stumbles, and conquering the entrepreneurial world.
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Audit Your Way Forward: Transforming Business And Life Success With Bill Faeth
Introduction
We’ve got somebody that’s super interesting. We’ve been talking a little bit off-camera. Bill Faeth, who comes from the Tennessee area but has an incredible background, has started over 30 startups. What I enjoy the most and what we’ll dive into is the conversation that we were having about how to live your vision and how Bill restructured his business and his life with his wife around 2015. Bill, it’s a unique introduction, but if you wouldn’t mind giving everybody the cliff notes as to who you are and what you do, then I’m excited about diving into this one.
Bill’s Background
Thank you. I’m a guy who grew up with a single mom and no father in Bakersfield, California. Probably the most redneck town in the country, to be honest with you. People in California call it the armpit of California. My mom was a teacher. We were not poor, but she probably never made more than $35,000 a year and we were okay.
I was an athlete growing up, and about my sophomore year in high school, if you have any basketball fans out there, there was a guy named Tracy Murray who played at UCLA and had about a fifteen-year NBA career. He scored 57 on me in the first half of a Christmas tournament. I went to my coach Ron Lauria at halftime and I said, “Coach, I think I’m done.”
He said, “What are you talking about? You only have three fouls. You got to play the second half.” “Coach, he just scored 57 on me.” We’re down 71 to 8. I said, “I’m getting pretty good at golf. I think I’m going to quit right now and let Brian jump in for me. I’m just going to focus on golf.” That was the last time I played basketball.
I graduated from high school. I was the third-ranked player in the world in golf. I went to UCLA on a full ride. I joke in my bio and say that I’ve slept with Tiger Woods 51 times, which I have. Not, physically, but, we’ve shared hotel rooms and stuff like that. I’ve traveled a lot of Junior Golf with him and his dad Earl because my mom couldn’t afford to do it, and a couple of other guys, Phil Mickelson and some guys like that.
I started my first entrepreneurial journey when I was a junior in high school, and my mom didn’t have an entrepreneurial spirit. She was a teacher, then a vice principal, and stuff like that. My whole family was in education. I met a guy named Jay Jacoby in LA, and it was a Junior Am, like a Pro-Am or a Fishing Pro Am type of deal where the kid plays with three amateurs.
Long story short, he gave me twenty shirts. He was a t-shirt manufacturer, like Karl Malone, Michael Jordan, and all these basketball shirts back in the day. There were no Lakers shirts. I was a Lakers guy, so I sold all of them. My mom said, “You can’t sell those.” I said, “I made $25. I got them for free.” There were ten shirts. I made $250. She said, “Okay. Give me $50.”
I asked, “Why am I giving you $50? It’s going to my piggy bank.” She said, “Because it’s going to pay for the gas the next time we go down to LA. We’re going to go see mister Jacoby, and you’re giving the rest back to him. Long story short, Jay didn’t take the money. He gave me 100 T-shirts, and he told me, “Sell them for $25. I’ll take $5. You keep $20.”
I can remember vividly, sitting at the dining room table in our small house with my mom with one of those old ledger sheets, running through and teaching me what a P&L is at seventeen years old. I didn’t fully comprehend it. A big thing for me is my confidence in my two daughters. They’re 14 and 18. The oldest one is going to college, but most importantly, financial literacy for them.
You can understand that I’m sure as a father and an entrepreneur. I think that’s one thing that set the tone for me for my 34 startups. I built one company over $50 million, four over $30 million, and about 15 to 20 of them were between $10 million to $30 million. A lot of people would ask, “Why did you why do you stop there?”
It is because I learned early on when I was scaling that $50-million company, I had 700 employees. I hated it. I decided that I wanted to be the small business guy, so I would build to scale. Typically, I would sell within 3 to 6 years. It’d be a very short stint, and I was focused on not only scaling and profitability, but maximizing EBITDA and valuations along the way.
One thing that a lot of people don’t think about when they start a business is what’s the exit strategy. There are certain coaches out there that would say, “Bill, that’s stupid. You’re thinking about the exit strategy. All these people don’t have a plan B and don’t think about exit. Just grow and scale.” I completely disagree. I always want to have an exit strategy.
I’m getting ready to make my largest single-family home investment right now which I’m under contract for $3 million, single-family home. That’s crazy. I’m exiting two other pieces of real estate to fund that at $1.4 million cash down to where I don’t have to pull out of pocket of cash. I know this is a long intro, but I’m going to leave you with one thing so that way your followers understand where I’m at on my real estate journey.
Just my personal short-term rental portfolio. We’re not talking about investment groups, multifamily, motels, that type of stuff. I’m at $18.8 million in market value. My debt is 3.3 million. I have built that entire portfolio of cashflows. It’ll do about 1.2 million net this year. That’s out of one investment in 2015. $126,000 investment. I’ve never put another penny back in for upgrades, design, or interior renovation. I’ve grown out of cashflow. Everybody tuning in to this, you can do that same thing if you’re diligent in the underwriting process.
Financial Literacy With Kids
That is a hell of an intro. There are a couple of things to talk about from that intro. The one that stood out to me, first and foremost, even though I love the numbers and the short-term rental portfolio. That’s a great topic in itself that we could spend hours on. You said something that triggered me. It’s the financial literacy for kids. Something I have done with our kids for years is going through our deals and talking about what we bought it for, what we stuck into it, here’s our net profit, and then put it into terms that they can understand.
I love the fact that you’re doing that with your children right now. A lot of people, in my opinion, want to hide all the financial stuff from their children. It’s not that the kids have to see the stress we go through and when things are going bad. Personally, when we don’t give them the details, we let them know when things don’t go well. We had a deal that didn’t turn out the way we thought it would. Can you give us a little more details on what you do specifically with your children?
It starts with our real estate. I don’t hide anything. I’m an open book. We live in a $2-million home on an acre in Brentwood, Tennessee, which is the wealthiest nouveau riche “not the old money” part of Nashville. We moved there for school systems when we relocated from California. Our children have seen every piece of our real estate. Our girls have seen my P&Ls. I’ve shown them tax returns. They know how much money we make. They know where we live.
They understand that they have to work for it. They see how hard I work. They see how hard their mother works. The only reason I’m down at my lake house right now is around the lake in the corner, we’re turning a 76 into a 12-9. This massive family reunion, church retreat type of a deal. She’s been down here for 6 to 7 days today. She hasn’t been away from the kids. That’s a hard thing, so we explained why.
One of the big things for us was when we first started, they knew that Mommy and Daddy bought a beach house. They knew that Mommy and Daddy bought a lake house and a mountain house. We had to sit down and explain because I didn’t want them going to school and telling their friends about this stuff. They understood why.
We have two places in Montana. We’re buying another place, and she hates Montana. How does anybody hate Montana? I don’t know. I haven’t figured that one but she said, “You don’t need another place in Montana. You don’t need another house. You don’t need another motel.” I sat her down and I said, “Here’s how much money we make, and if I don’t do this, then here’s how much I’m going to have to pay Uncle Sam. Let’s open up your piggy bank, and I’m going to give you $100, but you need to give $42 back to me or put it over here for taxes. If you buy this pair of sunglasses for me that is worth $100 and you could accelerate depreciation on that, do cost segregation.” She doesn’t get it, but they’re learning.
The other part of the big thing for me is it started with my oldest daughter. She knew in her freshman year in high school that she wanted to become a surgeon. I have way too many friends from my golfing career and now my 30,000 students who are professionals, attorneys, dentists, anesthesiologists, doctors, and have zero financial literacy, and they get taken advantage of by their CPAs, by their inter attorneys, by general partners, whatever that is.
I made it a huge part of my and my wife’s life plan. The big thing for us is every Friday, she and I meet from noon to 4:00 and we audit what’s happened the previous week. About two years ago, we brought our daughters into this on the back end. My wife and I will usually go to lunch, have a bottle of wine, go to a park, do whatever, and people see that part on social media.
They don’t see that we’re going through our P&Ls. We’re going through our financial statements, but we’re also auditing our sex lives, our intimacy, how we are as parents, and where we’re at on that green line. We’ve all seen that commercial to retirement, to financial freedom. We decided to bring in our daughters, and we wanted to know and had a handful of questions for them.
“How confident were you in yourself this week? How present were Mommy and Daddy? How loved did you feel this week? What did we do? Rate ourselves on how we were as parents.” We go through these questions, and we want them involved because we want them to ask themselves those questions, but they shut down when we ask them as parents.
That all ties into financial literacy. My daughter now has her own AmEx, just small things. I bought her a brand new car a year ago for a pre-graduation gift but most importantly, the smaller Broncos at around $35,000. I put $5,000 down, which typically I would always put 50% down, but here’s why I put $5,000 down. I took her in. She sat with me when I signed the contract. We took pictures of it.
It’s a 60-month finance, which I never do. I said, “Honey, here’s why I’m doing the 60-month finance. It is because you’re going to make a payment every single month for 60 months on this.” She works for one of my companies, and she makes, $3,000 a month. “Your insurance is going to cost you $187 a month. You have to pay for that every month. Your payment is going to be $540 a month.”
Here’s the deal. When you graduate from Belmont University in four years, because I’m buying this at the start of your senior year, before you go into med school, this will be a paid-off asset.” We then pull up Kelley Blue Book and we say, “This is going to be worth between $12,000 to $14,000 if you keep it in this condition and put this amount of miles on. You need to watch your miles, got to do an oil change, you got to keep it clean. If you get a dent, let me know. I’ll help you find a dent repair place. We’ll get it fixed so you have it as valuable as possible.
She asked the right question, Derek. She said, “Why is it worth so little?” I said, “Because this is a depreciating asset. This is why Mommy and Daddy invest in real estate that appreciates versus depreciates.” I’m almost done, fifteen more seconds. This $3 million single-family home we’re buying, my youngest daughter says, “Why are you buying that? That’s stupid. I hate Montana.”
My oldest daughter said, “How much will that appreciate over the next twenty years until you die?” Jokingly, but she wanted to talk about the appreciation. I’m selling a $1 million property that has $350,000 equity in it. I’m selling a $1.9 million property that has $1 million in equity in it. I can cost seg where I can pull cash out. I don’t have the 1031.
I’m rolling it in and I said, “Honey, in 2017, 2018, and 2019, that property appreciated at 7.3% on average. In 2021, which we won’t count, was 21% and 18%. Most importantly, 2022 and 2023 was 6.7%. That’s roughly about 6.65% on average pre-COVID and post-COVID. We’re going to budget 5%. At $3 million, that property should increase to $150,000 a year. If I die in 25 years, how much more equity are you going to have when I leave you this property?”
Those are the things that we go through. I don’t go through every deal with her, but she asked. It’s hard with kids. Mine are 14 and 18. They hook on to what they want to hook onto. If you go past that too deep, then they shut down. For us, it’s these micro doses on a weekly or monthly basis. When they catch on to one, then we’ll teach and emphasize that for them.
Mine are 17, 13, and 6, especially with the age gap between all three kids, but the one thing that kicks in, after you and I get done recording, I’m leaving for Tennessee. We’re going to take our travel trailer and spend almost a little over a week with a bunch of real estate friends. That’s what they get to see. We’re working on exchanging kids among our friends.
We want to send our seventeen-year-old daughter to go live with one of our other real estate investor friends for a month or two and do a kid swap. You know as well as I do that if Daddy tells him to do something, it goes in one ear out the other, but if Mister Chris tells him, it’s the gospel and it’ll be the best thing since sliced bread. “Dad, you should have heard what Chris said.” “I’ve been telling you that for years.” We’re working on doing that with our kids because we’ve grown such great connections with these other families around the country.
That sounds pretty awesome.
Short-Term Rentals
It’s something that not only helps with their business side of things, but it gets them around other kids who have entrepreneurial parents. It’s not what they’re learning at their local schools. I love that. As I said, we could talk about that for hours as well. Let’s dive in a little bit on your short-term rentals. You said you started with a $126,000 investment. You built it up. Walk us through that and what do you think is the future of short-term rentals? In full disclosure, I am not in that business so I don’t have a dog in this hunt so to speak. What do you think is going to happen?
I still believe to this day it’s the number one asset class to invest in because the cashflow is so much higher than midterm rentals or long-term rentals. You get the same appreciation. You can accelerate many times even better tax benefits. I’ve been all in on it. I invest in the multifamily. I love forced appreciation. I love the repositioning strategies.
I’ve got an investment capital fund in Riven Capital. We do motels and hotels and all that type of stuff. I stay in short-term rentals. I started with $126,000 technically with my second property. My business partner in my glow-in-the-dark miniature golf business bought the first one without telling me in Estes Park, Colorado. Mine and my wife’s first venture together was in Fort Morgan, Alabama down by Gulf Shores.
We bought the property. We put a $126,000 down. I think we might have upgraded $10,000 or $15,000 worth of furnishings and stuff like that, and it was doing $44,000 a year. We did 98 in our first year and 112 in the second year. We saved every penny of it. I was not a seven-figure income earner like I am today based on real estate. I think we were probably making $300,000 to $400,000 combined at that time. Even $126,000 was a big stretch.
Here’s what I want everybody to understand. Sometime around December to February of 2024 to 2025, I will hit $1 billion in personal sales. I’ve got plenty of money, but hopefully, as most of you are teaching your kids, my money is my money. It’s not their money. When I make money off a previous business venture, that doesn’t carry over into something else. I live within my means on each business venture, just to clarify.
We are living off $300,000 to $400,000, probably a net worth of $5 million or $6 million at that point, but we never touched it. We invest. We grew out of cashflow for two years, and then we had enough to buy the second property. We downgraded from a $629,000 property to a $200,000 property, and I made a colossal mistake.
I’m sitting at a hockey game in Dallas, Texas, the Winter Classic, with National Predators playing the Dallas Stars, getting their ass kicked. I probably had four of those big 24-ounce beers to maybe three beers before the second period. We were there for an hour and a half ahead of time. I have a junior agent do a FaceTime walk-through, and sign a contract between period 2 and period 3. This is a no-brainer deal.
I didn’t see it myself and didn’t inspect it. I’ve made every mistake that I teach people not to do, and then that ended up costing me about $150,000. That set me back to the end of 2018. I had that one property, and as I said, they stand alone. I had to regrow out of cashflow from ‘15, made this deal at the end of ‘16, and had to wait all of ‘17 and all of ‘18 to generate cash again to go buy the next deal.
What we did is we sold that first property. I’m of a mindset and most people do not think this way, but I think this is what’s allowed me to scale so quickly. When I buy a property, I’m thinking, “How fast can I sell this?” As opposed to buy and hold long-term. I get all my tax benefits, typically, in year number one. If I’m doing 5X, mid-term rental, or long-term rental, I’ve got cashflow, and then I look at my equity build and debt pay down as a huge deal.
When I buy a property, I’m thinking about how quickly I can sell it. Share on XIn almost every deal I do on a commercial loan, 20% down, 20-year amortization, and then I accelerate payments. Paying at least twice a month. I have two banks that let me pay every single week to offset interest. I’m working on debt paydown. If I can get an owner finance, I do an owner finance, but I am not hardcore with Pace and Jerry that we talked about pre-roll, which is to just do sub-twos and that type of stuff.
What happens is I executed what I call a 5/50/250 plan. The key here is the mindset that we want to get to reposition as quickly as we can. I’m taking that multifamily repositioning mindset where I’m either going to cash out, refi, and buy out the investors or I’m going to create an infinite return for myself as a general partner, or I’m going to sell the asset at the highest cap rate available.
You can manipulate NOI and all that stuff, as you guys are very well aware of, to be able to increase NOI to get a higher valuation. You can’t do that in a single family. It’s out of cashflow, debt pay down, and then the tax benefits. One of the things that almost nobody does that I said about that $3 million property in Whitefish, Montana is most people in our space are not looking at appreciation rates.
If they are, they mix COVID in. COVID should be wiped off the planet for a million different reasons, but for us as investors, we cannot factor that in. That’s where people got hammered when they were investing in 2022 and 2023. They’re going off the T12s and they didn’t know any better. I eliminate that, but I won’t buy a property. Here’s the 5/50/250 plan. It’s $250,000 in net income in five years, very conservatively, with one single investment upfront.
You have to underwrite well. You have to look at appreciation, debt pay down, tax benefits, and all that stuff, and your property has to make $50,000 a year net at least, minimum. A lot of people get hung up on the cash flow with that. Especially if they’ve been long-term investors, they’re like, “There’s no way this house.”
This was a $700,000 house when I bought it. It’s worth $1.62 million. I’ve owned it for two and a half years. Sure, I put a $125,000 cash post close into accelerating the appreciation, but we all should be burning and doing that type of stuff. That’s where we all make the money. This property has done an average since I think we launched in February of 2022, so two and a half years.
We have averaged $218,000 in gross revenue on an $825,000 investment. I operate around 40% to 45% net income. Let’s just pull it down to 200 from 212, and let’s look at 45%. We’re talking $95,000. In today’s economy, rents long term at $31,000 a month. That’s gross so I’m netting 3.25 times what the gross long-term rent would be in this property.
That’s where the cashflow is king. You asked about the future of short-term rentals. For people who do it right, who are doing the due diligence, doing the underwriting, doing multiple pro formas, calling sixteen banks to look at different financing options versus going to their one guy at their one local bank who is doing it right, who understand how to force appreciation, who is committed to running it like a freaking business and not a hobby, short term rentals are amazing and they will continue to be.
Now, we’re seeing mass exits because the gold rush is over. Those professionals that got in and bought 5, 6, 10 properties all over the country, sight unseen, and all they had to do was put it on Airbnb and Vrbo and they could do a $100,000 out of a $400,000 property, that doesn’t exist today. The ones that understand the core values of revenue management, listing optimization, and a little bit of off-platform marketing are the ones that are ascending well above that 90th percentile.
It’s like what’s happening in America today. The gap between the lower class and the upper class, the middle class is getting squeezed. You’re either going down or you’re going up, and I see that eliminating. The same thing is happening. You look at Pace Morby. We talked about him before. I had lunch with him when I was in Montana three weeks ago.
It’s the same thing that’s happening whether it’s RV parks or even self-storage units. Just doing a regular self-storage unit without some amenities to upsell to. I have to go check in and grab a key and get through the lock, and I can only get in between 8 and 5, just stupid stuff like that. You’re going to get $125 a month for an 8 by 8 versus $300 a month when you have all the other amenities that go along with it. A lot of it is about leveling up but making sure that you don’t over-invest and overspend when you’re trying to get there.
I know we have a lot of the same mentality. The only difference between you and me is I’m not a fan of institutional financing. I’m probably more along the lines of Pace where I like dealing with people instead of institutions. That’s not to say I shouldn’t be using institutions or won’t in the future, but historically, I’m not a fan, but you can leverage it in a much stronger way by using the institutions.
What you said, going to a dozen different lenders and seeing all their options instead of just the same one., I see that all the time with people who are talking to me and saying, “I want to buy this property.” I also ran a hard money lending company for ten years. My former business partner bought me out not too long ago.
It was the same old story. People only had one source of funding, and they would have a good deal and it would fall by the wayside because they didn’t have plan B, plan C, plan D, and so forth. I think that 99% of people, as you also said, treat their business as a hobby instead of a business. That’s proof. They only have one source. They’re not treating it as a business.
And nobody asks for owner financing. Even if I’m going in to do commercial lending or whatever, before I submit an offer, every single time, I will ask for owner financing, and I have about five that are on owner finance. I have two that are sub-two. Great salespeople ask every time but the ones at the bottom are typically afraid to ask. They don’t know when to ask. I would advise everybody, even if you’re doing institutional lending to always ask before you submit the offer.
Even if you're doing institutional lending, always ask before you submit the offer. Share on XEverybody who knows me and follows my show knows how I feel about this. Every lead that comes in the door, we are giving them multiple options and we are always asking for seller financing or the ability to put together a structured terms deal. Everyone says, “How do you find creative deals?” You don’t find creative deals. You build creative deals through conversations and through asking questions.
That’s rarely going to happen between two agents representing a buyer and a seller.
Alignment In Personal And Professional Life
That’s right. I do want to segue a little bit here because you and your wife sound very much on the same page with how you run your lives, how you run your business, and how you raise your children. Was it always that way or was there a point in your life or your marriage where you had to take a step back and do some strategic planning?
I think we both thought it was always that way because we had a good eighteen years of marriage which was incredible. I should say really good. I should retract the word incredible, but really good. I never had to sleep on the couch, never had to go to a motel. Her best friend’s father was our pastor who married us in our pre-marriage counseling. Everybody talks about this, and we took it to heart.
We’ve never gone to bed without ending a fight and hugging, kissing, and making it up but because I’ve done 34 startups and she was, I hate to use the term but I just don’t know what else to say, a stay-at-home mom. She’s very active in my businesses. She’s my designer. She manages all the construction. Today in real estate, she works directly with our accountants and bookkeepers and does our books and all that stuff.
She’s a mom and team coach and all the stuff that moms do. Way more valuable than me. With that being said, in early 2015, I joined EO, the Entrepreneurs Organization, which I have a lot of respect for, but I was recruited into a forum, which is one of their small groups if anybody knows what it is, and I had a bad experience.
I had a bad experience because I’m the OCD, ADD, quadruple-type A personality that’s been uber-successful in almost every single thing that I’ve done, and it pisses me off when somebody’s late. It pisses me off when we’re supposed to have our financials and our cashflow reports, and then somebody doesn’t have that ready. Consistently, one time is fine, but when you got a guy or a group of guys that shows up habitually late and isn’t prepared and wasting my time, I get pissed.
After about six and a half months, I walked in one day and did the same thing. We had three A-players and five B-players in this group. You could feel the tension every time we had a meeting. It was like an eight-hour commitment a month to be in these meetings. Three of them walked in late. I just got up. I said, “Guys, here’s my binder. I quit. I can’t take this anymore. You, you, you, and you. You guys suck at business. You should probably hire a CEO. Alan and John, you guys are awesome. We’re in Alan’s office. I’m going to start my group if you want to come with me.”
They did and we started something called Spark. I’m not dogging on EO. I love the organization and all the global events and everything they have, but there’s one major fundamental flaw. I don’t care how successful we are. I don’t care what our personality type is as entrepreneurs. We still need leadership. We need somebody to hold us accountable.
I started Spark with Alan and John. We recruited six other guys. We had nine guys but the fundamental difference is we found a gentleman named John Bairdon, who was a retired two-time Fortune 500 CEO, now an Angel investor. He was what we all aspired to be. He was about probably in his late 60s or early 70s. I’m 51. He was retired.
We said, “John, we would love for you to lead this group if you will hold us accountable.” We had lengthy conversations with him. He said, “I’d love to.” He walks into the very first meeting, brings three-ring binders for all of us, throws them down, locks the door behind him in the conference room, and says, “1) If anybody’s late, it’s a $500 fine that’s going in to pay for our annual retreat. 2) If you’re not prepared, it’s a $500 fine. If you don’t have your financials, don’t even bother walking in the door. I’m the CEO of this organization. I’m going to treat you guys like my direct reports. All of you are GMs, COOs, whatever title you want to give to yourselves. You are going to directly report to me because that’s what you’ve asked for.”
The air is tense. We thought we were going to dive right into business with John. What he did was he opened up the binder and said, “I know you guys are ascending to try to be like me.” At the time, the company I was working with was only about $2 million. The other John and the member had a $5 million pasta manufacturing company.
The highest-end luxury real estate builder in Nashville is doing about $25 million to $30 million a year. We all wanted to build these $300 million to $400 million companies that John Baird had built. He said, “Do you know what? I’ve been divorced three times. My oldest son, he’s the president of a bank now and hasn’t spoken to me in 3 or 4 years. I’ve sacrificed a lot of family to ascend to where I got to professionally, and I can tell you I would give every single dollar back to move back 35 years, restart over, and not sacrifice family.”
That’s where the Life Plan started. It took us about three months to understand it, go through it, and build it out. When we were embargoed, we couldn’t say anything about what we were doing to our spouses. We had to go through it first, then we went through and implemented it with our spouses. John asked me, I think I was the first one, “How’s your marriage?” I said, “It’s great. It’s awesome.” “Really? Would your wife tell me the same thing?” I said, “I think so.” He said, “That means no.” My confident answer for me speaking for my wife just came way down.
Long story short, we put together an SLA, basically a Sales Letter Agreement that we combined. I went through mine. She went through hers. Define retirement/financial freedom for the younger kids out there. We old people still call it retirement. It’s not just where you want to live. What do you want? What are you going to do? How are you going to travel? Are you going to go do a world tour every year at $100,000 each? Are you going to fly Southwest? Are you going to fly private? Are you going to have multiple homes?
We have to define that. We have to forecast that just like we need to forecast revenue and customer acquisition and any type of business. We then broke it down. We went through all those business components. How much debt do you want to have? How much cashflow? How much income? All these things. Have you maxed out your 529s? Are you going to spend $100,000 on weddings? I have two girls. Things that I wasn’t thinking about at that point.
It then got down to the personal side. How many times a week are you guys intimate? Define intimacy. What I found was intimacy for me meant sex. Intimacy for my wife was completely different. That could have just been a shoulder rub or a hug while she was cooking, and she and I are not touchy-feely people at all. What we found is that we weren’t intimate enough.
We weren’t having sex enough. We were having sex one and a half to two times a week, and sometimes we’d go weeks without doing it but then we went in and we decided a minimum of three times a week. That’s in our contract. I’ve talked about this publicly at my big 3,000-person conference and all that type of stuff and people laugh. You think it’s funny. It’s not a joke. This is the reality of how we want to build our relationship.
It’s going back to bringing our kids on what we call Faith Fridays when we meet every Friday. That meeting is non-negotiable. She’s going to miss the meeting. That’s why I drove down here two and a half hours to meet with her and be with her for two days while we’re working so we know we can get a couple of hours at night in the hot tub, here at the kitchen counter, whatever it is, talking about the last week and what we’re going to do next week while we’re on vacation.
It’s that audit that’s critical. I think that’s a fundamental component that most people miss. They’ll talk about things with their spouse and their family, but they don’t nail it down individually, and then come together to have a written plan of what they want. Even if they get to that step, they don’t audit it every single week.
The audit every week is what has been crucial for us. We live south of Nashville. We typically go to a place called North Italia or Lewogo. One of our restaurants will have lunch. We’ll have a couple of glasses of wine, and we’ll take our laptops. We go there so often. They know exactly what we’re doing. They leave us alone. They put us in the very back, and we go through them.
When we’re done, we might come, sit up, and talk to people we know. Sit at the bar or have our kids come and join us for dinner. We then go through their portion of the audit but that’s something that we can’t miss. It’s like if you want to get healthy or lose weight, you can’t miss at least two days. I’ve had a rule as I’ve just lost 80 pounds in the last sixteen months.
All of us, if you’re fat, we go like this. Now, the new rule that I went back to when I played professional golf is I couldn’t go in two days without practice. Now, I can’t go two days without working out. We can’t go two days without doing that Friday meeting. That means we either have to do it ahead of time on Wednesday or Thursday, or we have to do it on Saturday or Sunday.
Twice since 2015, I’ve been gone, and we haven’t been able to get together. We’ve had to do it on Zoom. We do it on Zoom, we record it, and we archive it, but then we go back. As soon as I get home or she gets home, then we meet in person because that in-person interaction is completely different than doing something on Zoom.
I love everything you’re talking about and quite honestly, this is something that many entrepreneurial families struggle with. My wife and I both are very vision-orientated. We have written visions for what we want in our lives but we do not audit the way that you do. Not even close.
Here’s the thing that John taught me. He said, “Bill, you should’ve known this from ascending to the very top level in golf.” He was a golfer, but he was no good. If anybody plays golf when you’re just a weekend golfer, in a golf course, they have 100-yard markers in the middle of the fairway, 150, 200, 250 on a par 5 tipple.
You look at it. I’m about 230. When you ascend to that top level, you are 137 to the front edge. You’re 141 to fly the bunker on the right to that back right pin. You’ve got six steps to the right and seven on the back, and you want to hit it four and a half yards to the left to take the bunker out of play and have an uphill right-to-left breaking putt.
That’s the specificity that a good player executes with that knowledge base. It’s the same thing. We determined exactly how much cash we wanted and how much debt. Remember what I talked about way back at the beginning? Currently, just in the short-term rental portfolio, I’ve got $18.8 million, netting about 1.1 million to 1.2 million this year on $3.3 million in debt.
Critical data because we’re retiring, our definition of retirement is all triggered by a life event. We are financially free today, but we’re waiting for our youngest daughter, who is halfway through summer, or just ended summer. In 3 years and 2 months or 3 years and about 5 weeks, she will start college. That’s when our retirement starts.
We can become empty nesters. We had to determine how much debt. Why is that $1.1 million to 1.2 million critical? Because that’s paying off the $3.3 in debt. That $3 million acquisition I’m making, there’s a reason I’m going to put $1.3 million down on it as opposed to 20% or do a sub-two or whatever it is because I want to pay my debt down.
I was Robert Kiyosaki twenty years ago. I now want to be Dave Ramsey in three years and be completely debt-free. That’s all part of the plan. The decisions on whether we’re going to have a $500 bottle of wine at dinner on Friday night or we’re not going to drink wine or we’re going to have a $50 bottle of wine all tie into that plan.
If we don’t audit that, just like if you don’t have your P&Ls on every business and every property, I don’t care if it’s a motel, a single-family home, or an RV park, every 5th of the month. Not the 21st, the 5th of the month, then you are not financially literate because you’re not executing at the high level of a business. You’re turning that into a hobby.
If we don’t know those financials, if we don’t have an intimate relationship with what we want as a couple, for our kids, and as a family. If we don’t have an intimate relationship with what we want financially, we’re not going to achieve it. John taught us to be very specific. I wanted to retire when I was 60 financially.
I thought that’s how long it was going to take me in 2015. I’m 51. I did it at 48 for financial freedom. Now, it’s just about those life events. It’s about planning. My oldest daughter had her graduation three weeks ago. At lunch, 30 minutes after graduation, my father-in-law tripped over a threshold. He’s 75. Fell straight head-first into a wall, broke four vertebrae in his back, and has a 9-inch gash. He’s wearing a neck brace.
He’s the one that’s going to go first, and we’re going to have to take care of my wife’s mother. Planning to take care of that financially, time-wise, and even logistically of what we’re going to have to do for her, we don’t want to get caught off guard. You learn that from experience. I got caught off guard when my mother passed away and didn’t know where her stuff was.
One of the biggest things that I’ll share with you that came out of the outside of the planning is John taught me to build the packet. In my safety deposit box, I have a packet, and the packet has photocopies of every life insurance policy, term, whole, universal, whatever you’re into. It has copies of all the mortgage statements. It has copies of everything, and there is a 7.5-page document for my wife or my kids on what to do.
“Here’s what you sell. Here’s what you invest in. Here’s where the stocks are. Here’s everything but most importantly, I’m sorry I left you guys alone, but you’re going to be fine. Here are the steps that you need to take, here are the people that you need to call, here’s who you don’t trust, and here’s who you do trust.” Nobody has a packet. There are two safety deposit boxes. There’s a $100,000 in cash in the second one.
The safety deposit box key for that one is in this envelope. She knows not to open it until I have passed away. She knows what’s in there, but I don’t want her going through that emotional component. She’s asked, “Do I need to make a packet for you?” I said, “No, I’m good.” The life insurance and just everything that’s in there, every single thing that she knows, from the builders to the properties. Just everything. We don’t have an everything packet.
At least I didn’t. Almost everybody that I talk to thinks they have it, but it’s not specific enough. You think about it. If you are the alpha in your relationship, if you are the breadwinner in your relationship and I’ve looked at my in-laws. My mother-in-law uses the term, “I’m a kept woman.” She doesn’t know where the bank accounts are. She doesn’t know how to read anything.
She doesn’t know how to interpret anything. That’s why we’re going to have to take care of her. Rod, my wife’s father did everything. My wife is way more in tune with what we do because we do everything together now, but she wouldn’t know which property to hold and which property to sell, and then somebody else is going to influence her, and I want to make sure she knows. Does that make sense?
Absolutely, and you’re right. We’ve talked about this in our circle of friends, and most of us have a starter package amongst my circle of friends, but certainly not as detailed as it should be. Even if you have it as detailed as it should be, go back and update it as necessary as your assets change and as things change I would say annually at least.
Every time that we add a significant asset, we update it. I had this discussion with Pace. Pace said, “I’m buying twelve properties a week.” I said, “You don’t need to do that.” We probably do it quarterly, to be honest with you, but here’s the other important thing. Our attorney knows what’s in that packet. He has a digital copy, and our CPA knows.
I have two attorneys, and I have a CPA, and two tax consultants. The tax consultants don’t need to know but my CPA who files our taxes needs to know, and they need to be in communication with the attorney, and the attorney needs to know, and the executor of that will. If we both pass away, which would be bad, and my kids are left behind, the executor knows exactly what to do, and they have a PDF copy as well.
It’s that preparation. As I told you earlier, I’m going to Europe on Sunday. We photocopied our passports. We photocopied our driver’s license, all of our prescriptions for our supplements, medicine, and that type of stuff. All of that stuff to plan. We’re planners and there are a lot of carefree people who don’t plan like that. We also took that same stuff, put it into a packet, and left it on our kitchen counter for the person who’s taking care of our house and her parents in case something happens to us.
Does that make sense? I think a lot of us don’t like to think about negative outcomes in the past. If you don’t, just go take Gary Broca’s 10x health gene mutation test, and you’re going to find out when you’re going to die within 90 days with 95% accuracy. I’m that guy who took the test and has changed my life and expanded my life. I want to know so I can plan to take care of my family, not necessarily myself. Honestly, I want to spend a lot of my money before I die too doing some cool stuff.
Offer To Listeners
I love it. I guess we have to start winding this up. I hate to do that, but I could talk to you for a long time. You have a stacking master class and another training that you were looking to give away. Is that right?
It’s the 5/50/250 plan that I mentioned earlier. How you make one investment generates $250,000 in net income. There’s a free master class. It’s very short. It’s not like a two-hour master class. It’s like 30 minutes. I break down how you can execute that at a very high level, very valuable. I think I also gave you my pro forma. There’s a pro forma that I use to underwrite all of my real estate, single-family homes, multifamily, or whatever that is.
A lot of people aren’t doing that. They’re just going to these online calculators and doing simple stuff. There’s training with the pro forma as well on how to do that. I run a minimum of three pro formas, good, better, and best. I run multiple banking scenarios through it as well. The ironic thing is is I probably evaluate personally between 30 to 50 properties a week, and I’m running between 20 to 30 pro formas after I narrow that down every week.
The last thing that I’ll leave your investors with is that most of us have this mindset that, “I’m not going to be ready to buy for 3 months or 6 months. I need to save this or get this, whatever.” You still need to be practicing, folks. You can’t wait until you get into this buying zone. You need to be searching. You need to be underwriting. You need to be doing the Gator method. You need to be doing the 5/50/250.
Whatever it is, you need to practice, find the markets, and find the deals, especially if it’s your first one because every deal and Derek will nod his head yes. I promise you. Every deal Derek and I have done in our lives, whether they’re good or bad, we’ve learned from and we become better investors. The more you go through this practice, the better you’re going to be prepared whether it’s deal number 1 or deal number 37.
Closing
Everybody can go to TheGenerationsOfWealth.com/Familyfirst and get that masterclass and that pro forma. Bill, I can’t tell you how much I appreciate it. We went over a bunch of different topics, and not everybody is willing to talk about some of their personal stuff the way you are. It is appreciated. Again, thanks for giving us your time. Beyond that, for the next show, check out TheGenerationsOfWealth.com to get all the updated shows. Follow us on social media at The Generations of Wealth Facebook group, and everywhere else that you find us, and we’ll see you on the next show. Until then, live your vision. Love your life.
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About Bill Faeth
Bill Faeth has been an entrepreneur and real estate investor for almost 25 years with both commercial and residential investing.