Generations Of Wealth

Generations Of Wealth | Jim Manning | Passive Income

A lot of people go into real estate with a vision of building financial freedom through passive income. But there’s nothing passive about flipping properties or owning rentals. All you’re doing is creating a revenue stream, perhaps a recurring one, but it’s never a walk in the park. True passive strategies are out there, and they’re just waiting to be tapped by those who take the time to educate themselves. Jim Manning is passionate about getting the word out there to as many people as possible. Through his incredible wealth of resources, he helps aspiring investors decide whether they at to do real estate actively or passively and what strategies they can employ to realize their vision. Tune in to learn more about Jim and his passion project!

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The Visionary Investor: Unlocking Passive Income Versus Active Income Strategies With Jim Manning

This is the show where, as you’ve been listening in the past we talk about living your vision and loving your life. Today, I’ve got a good friend of mine, Jim Manning, all the way from Sunny Saint Louis to kind of share his journey with us because Jim and I met several years ago. We were in a mastermind together. We became really good friends. I’ve been on Jim’s show in the past. We always have a good time no matter where we are. Sometimes it’s professional. Sometimes it’s not. Jim Manning, thanks for being on the show brother. 

Thank you so much. I just shout out to your audience. I mean the generations of wealth and Derek, your REI circle of trust. What an amazing mission to kind of live your life behind and I can’t think of a better person than Mr. Derek Dombeck to lead you on that journey. You have been a great friend of mine. A confidant as stuff hits the van and it’s been a great ride. I appreciate you brother.

Generations Of Wealth | Jim Manning | Passive Income

I feel like I owe you a beer now. I mean this feels like a setup for me. 

I got paid $10, 000.

Perfect. Checks in the mail. We don’t edit anything on this show. It’s happening live. Jim, I mean seriously, you started out and you are one of the most intelligent men I know. The way your brain thinks, the way you analyze things, and can construct a business out of what seems like thin air, even though it’s not. It’s a ton of work, but you did start out with kind of a mentor that was a self-made billionaire and you saw that. Talk about what that was like a little bit on your journey and then we’ll just keep jamming. 

Absolutely. Yes, so it was my first job out of college was eye-opening on what the benefits of being an entrepreneur can do and how amazing America is. Here was a guy that really had it all on paper. Had millions of dollars of wine, had his own private jet, you name it. It was also at the same time a terrifying example of what all the amazing things of entrepreneurship can get you. Even though on paper he had everything including a gorgeous model girlfriend in her twenties when he was in the ‘60s. 

As I got to know the individual, we worked for him for two weeks. As I got to know him, I realized I wow this guy I wanted to idolize him. Then as I get to know him, he’s not happy. He’s absolutely miserable. As a 22-year-old, it was just such a strange experience to be able to say, “Wow, like America’s amazing. You can get if you were willing to work your tail off. You can get whatever you want,” and to have that cautionary tale at the same time. 

At what cost and to know that hey someone can achieve the pinnacle of business achievement become a billionaire and be more miserable than what just kind of your average Joe middle-class American might be, right? I thought it was a fascinating experience. It led me to entrepreneurship that let me to wanting to start my own business but started in a way that led with vision and led with the priorities of measuring my success by what I gave up to get it and not just by what the success was. 

Measure your success by what you gave up to get it, not just by what the success was. Click To Tweet

That’s incredible for you to have that at such a young age and recognize it at such a young age because many of us don’t learn any of these lessons ever in our lives or we idolize people looking at them through social media or not having the full story thinking they’ve got the world by the tail but it’s the grasses often not greener on the other side of the fence. You got this lesson. You got started in your entrepreneurial journey. How did that build up? I know what you do today and it’s amazing to me like you make my head spin when I hear about everything that you’re working on. What led to that? 

Yeah. Well, I mean, I guess just to fill the gap. I found it now five real estate companies, four running without me. It’s not everything that I do like we have a whole team and everything now. Done over three 3500 deals now in the residential real estate space, but what led to all of that? I think it was just a desire to like I mean that billionaire put up one pant leg at a time. 

If he can do it, why can’t I? Just a belief that we’re going to do something big, we’re going to do something special. We’re going to make a lot of money. We’re going to help a lot of people. 

Starting with that belief first allowed us to just kind of get hit the ground running and work hard. For anyone that’s just kind of babbling into real estate or kind of curious about it, I would encourage you to not necessarily judge me by or try to compare yourself to the five companies that we have going on right now. 

When we first started, we were just doing short-sale deals. It took me an entire 18 months to do my first deal. This business is there’s a lot of information to it. There’s a lot to learn on valuing properties, doing property repairs, and everything like that can take a while. Patience is definitely a virtue. You may not start quickly. I mean Derek, I feel like you did like a crazy amount of deals in your first year, didn’t you? 

Yeah, I mean the first few years, we went pretty fast, but then we also hit the downturn and and got stopped very quickly as well. 

Yeah, so I mean it’s a long game and different people will do things at different clips. I mean we’ve been having a really good time with it and still having fun. 

Passive Income

Well, let’s kind of move into the current day with Mr. Jim Manning, right? You got billed up. I’ve sat in rooms with you and you talked about your quarterly rocks in your one-year goals, and your three-year goals, and oftentimes you’re hitting them well in advance of when you want to but you just said something that’s important, right? You’ve got four companies running without you having to be there day-to-day. I know you’ve got a family. You’ve got four kids, your wife. You got a beautiful family. 

You’re able to be there coaching their teams, being home when you’re supposed to be home. Truly living your vision and loving your life, which is obviously what we’re passionate about here. That requires passive income at some point, right? Can you talk about why it’s important to have that passive income and not necessarily the net worth? Describe that.

Derek, I believe we knew each other when we were on this phase of our journey as entrepreneurs. We started out with one of the main goals was we wanted to do the most amount of flips, and the most amount of deals out of anybody in our marketplace. We started hovering. We built up to 20 flips in a year, 50 flips, 100 flips and then we started averaging about 120 flips, 150 flips at a time. The flip is like you see on HGTV for those of you that the art necessarily has a real estate background.

No, it’s not like you see on HGTV. 

Okay. It’s not as romantic but the concept of you buy it, you put money into it, and then you sell it, and like a six-month window, four-month window, a year window depending on how big the project is. We were doing all these flips. For several years, we started hanging over 100 deals a year, but we wanted to do more deals. We wanted to make more money. What I found out is that a lot of people get into real estate to leave their hands like to get out of the Rat Race and get off that hamster wheel. 

Well, when we were doing those deals on those flips and those that quest for more to do more deals and make more profits and grow our income, what we became was a machine that was very slow moving, and the wheels got stuck in the mud. I think this in 2016 or 2017. We went from 150 deal flips to 300 flips in the same year. We literally doubled them out of properties that we bought. Then at the end of the year, we looked at our P&L and said, “We just made less money this year than we did the year before. What the heck are we smoking? What is wrong? Like what is going on here?” 

We had to have like a knee jerk on it that like, people get into real estate because of the amazing benefits of passive income and here we are just flipping properties, which all flippin is as creating an income source for you. A lot of people will watch HGTV and I think they’ll see, “Men that sounds great to have an extra $50,000 or $100,000,” like a step is skipped though. If you have a job that you’re loving and you’re passionate about like there’s already income coming in, right? 

You have active income coming in. Then you decided to do a flip and maybe you make $50, 000. Well, that’s more active income coming in, but that’s not taking a step toward getting out of the rat race. That’s just creating the income. Derek knows Jason. Jason Courtney, talked to us a few years ago focusing more on recurring revenue and building our net worth. We have been picking up rentals over the years, but we hadn’t like focused on that as our main driver. When we began focusing on the rental properties, and in our case, we have at least a purchase strategy, that’s fantastic that we can get into here in a second if you’d like. 

We started focusing on a strategy that has higher cash flow and lower risk than what a normal landlord takes on. Our whole world changed because instead of starting from square one and having to do 300 flips to make the income we wanted. If we had 50 properties that we bought the year before, well now our start lines like we still have those 50 properties so our start line moves forward, right? That has been a game changer for us to be able to do that and I ended up leading us to open up our own real estate fund. We have 130 partners in it. It’s been incredible. It’s been an amazing journey. 

Lease Purchase

Yeah, and I think if you wouldn’t mind just describing a little bit what the least purchase program is compared to what many often would do is just buy and flip and resell and pay the capital gains, right? The least purchase extends things out. There’s advantages. Certainly, if you can describe that a little bit.

Yeah, so basically, it’s a little bit more commonly known as a rent-to-own. There’s nuances there on why we call it at least purchase. We like the least purchase structure better. We think it’s better for the client and better for us as the investor. Basically what we do is we go to someone that can’t be traditionally approved and get a traditional loan. One of our first clients was in a domestic abuse situation. Her husband was so controlling. She wasn’t allowed to open up a credit card. No credit card means no credit score. We crossed paths with her and said, “Hey, you’re a teacher. 

You’re making great money. You have enough savings for a starter home just because you don’t have a credit score because of that thing that’s in the past. Why don’t you be a homeowner?” She’s awestruck. She’s completely excited about it. We’re excited. We’re going to do something good for someone. Then what happens depends on the deal. You might get 10% down from tenant buyers, what we call them. 

You might get 5% down just kind of depends on what your model is and what you decide that you’re going to do and take. What’s nice about it is let’s say it’s a 10% down of a $300,000 house. Well, that’s $30,000 of down payment money, right? That $30, 000 isn’t taxable as income until the tenant moves out or buys you out of the property. In the case of at least a purchase that last five to ten years, that’s a lot of delayed years to have that $30, 000 and not pay taxes on.

The least purchase model is beautiful and there is an influx of capital the way you like a flip creates an influx the capital. Then it also extends the exit strategy to be able to make that passive income and make money over time. One thing I would say guys like an investment tip for you is the amount of time on an exit strategy is critical to the risk profile. If I’m doing a flip and I have six months to do a deal, if that flip takes me nine months that’s an extra three months of holding costs that cost me $1,000.

If a $50,000 renovation budget now turned into an $80,000 renovation budget, that’s more expensive as well, right? When it comes to like a six-month window, everything has to flow perfectly and right for that profit margin to be intact and for you to make money. If you have a 30-year window, things can go completely wrong and maybe you didn’t make as much money as you would have if you would have bought it, right? You dramatically lower the risk profile. 

Not only do we have a strategy where we’re making more money than we were used to making on a per deal basis or risk went from I call like a regular old flip maybe a six and a half out of 10 on a risk profile. The lease purchase structure I’d say is probably like a two or two and a half on the risk profile. We ended up shifting it and creating a win for the client. Offering an opportunity for homeownership and a win for us as investors in a lower-risk way. We absolutely fell in love with the strategy. It’s kind of funny looking back, Derek. We’ve known each other for too long. 

It’s amazing how long we know each other but Jason, he’d always talk about it. He’s talking about, “I’m doing well and I’m doing this lease purchase structure,” and I would say to Jason like, “Are there really that many people that have $20,000 or $30,000 to put down on a property? Like I don’t believe you” and finally he said, “You know what Jim, let’s just do a deal together and I’m going to show you.” I’ll be darned if we don’t get 70 leads, and 70 inquiries on every property that we market. 

There’s been multiple properties we sell before we even have to market it. It turns out there’s an entire segment of the population that there’s demands from this niche so much so that the demand has been pulling us to do more deals rather than us forcing our business to do more deals and try and force more profit the demands have been pulling us to grow. Which has been fantastic. 

Well, of course, watching you go through this evolution has been fun for me. Mostly because when you say there’s a six and a half on a wrist profile with flipping versus two and a half, I know you well enough to know that you absolutely analyze those risk profiles and those numbers you didn’t just pluck out of thin air. I mean that is the type of person that you’ve always been which is really impressive the watch and see from the outside looking in. I guess my curiosity and probably everyone else listening is. How do you fund these houses? How do you take down these houses and then allow people to live in them for these long periods of time on a lease purchase?

In general, how do we personally do it? 

I mean the process. Yes, it’s how you guys personally do it but certainly, you can use bank financing. You can use private capital. What do you feel is the the model that you like the best?

The model I like the best is Derek one of your expertise when you can talk a homeowner in a creative financing in this market because interest rates have gone up. What a beautiful thing. We have a client, Julie, she made over $40,000 after she sold her property in passive income to our team. The reason she was able to do that is because she has some equity in the property and she had a 3% interest rate. We went to her and we said, “Hey you have a 3% interest rate. 

You have some equity. Why don’t we give you passive income every month? Allow you to retain a stake in the property, have a lien on the property and you win we win and we’re going to pay a little bit less per month than what we would pay with the new mortgage and you’re going to you’re going to make some passive income. In her case, it’s a big deal making a couple of grand a month because she’s a teacher. Percentage-wise of her income, it’s become quite a bit. 

That would definitely be kind of the number one favorite that that situation allows for that. It doesn’t make sense for everybody. That’s that’s one of the things that I’m proud of with our three-door company is when we talk with homeowners. We assess like, “What’s your situation? Does creative financing make sense? Does the cash offer make sense? Does just listing it on the open market make sense?” We’re able to put the client first and then help them decide what’s best for them. 

Put the client first and help them decide what's best for them. Click To Tweet

Yeah, and that’s fun for me too. When I deal with people you can go and buy pretty houses. When people have financial distress and you can help them through that financial stress distress, give them a passive income and not having a big rehab project. Certainly, some of them do need to be rehabbed but I love that model of being able to buy something that’s almost turnkey or it is turnkey and then put the lease purchase tenant in there.

Working With Passive Investors

Yeah, absolutely. You know what’s interesting is we started the company in our 20s and we started doing all these deals, right? One of the reasons why we were able to do it was because we had passive investors lending US money to be able to do all the deals. When we talk about different creative finance structures or deal strategies, one of the things I think a lot of people miss is making a decision. Do I want to be an active investor or a passive investor, right? A lot of people don’t understand that you can even do that. Anyway, so that’s something to be aware of as well. Derek, you’ve done a tremendous amount of deals with passive investors as well over the years, haven’t you? 

Yeah, absolutely. In fact, our lending company that I exited recently, which my partner bought me out of, was 100% funded by passive investors and I think one point that I love to make is when you do a deal with a homeowner or a business owner or commercial property, whatever you’re negotiating on, don’t overlook the person that you just bought that property from as a future passive investor. We just recently closed on three houses that I bought for 0 money down and the seller’s carrying financing for 10 years at 0% financing. 

Generations Of Wealth | Jim Manning | Passive Income

It’s structured that way because we were willing to pay him full retail. Our conversation also said in the future when we pay you off, we would like you to come back as an investor of ours. At that point, you’ll be able to get 6%, 7%, 8%, 9%, 10% return on your money. I love the fact that we can build these relationships, you’re building your credit so to speak with these home sellers or business sellers and then after you’ve done business with him for a couple of years, it’s very easy, and beneficial to all parties to turn them into your future passive investor. 

There’s so much gold there with what you did. You are a real ninja.

When I get done being the talent on the podcast here out. Maybe I’ll come beg for a job at Three Doors. 

Anyway, we are growing to a city near you know. No, that’s incredible. I mean, it’s funny is this as we were working with all these passive investors for like over a decade, and then all of sudden I started like adding up like some of the money that our investors were making like, “This person’s financially free.” It didn’t even dawn on me that, as an active investor. Here I was creating all these passive investment opportunities for people. A lot of people skip that stuff and people will say like passive income. I love the idea of passive income.

Generations Of Wealth | Jim Manning | Passive Income

I want to replace my income and then they’ll go out and they’ll buy a rental property and realize that when you own a rental property, there’s not much just passive about it. It’s more of a recurring revenue business model and owning a rental property and starting your own business. It gets confusing because people say they want passive income and then they don’t invest in a passive way like the investors that invested, Derek, with your team and with our team. I guess it’s an awareness thing. Like do you think just people don’t understand that there’s other options out there? What do you think Derek? 

When you own a rental property, there's not much that’s passive about it. It's more of a recurring revenue business model. Click To Tweet

Yeah, 100%. It’s all about education and spreading the word but there’s so many scams out there in this day and age that in my opinion, you need to really protect your name, your business name, and your personal name. Do right by others. Do what you say you’re going to do. It’s a snowball effect, right? Everybody that watches you and your team at three doors being successful for years. They’re going to want to approach you. They’re going to want to get involved. How can we become an investor of yours? You didn’t build that overnight. 

We didn’t build what we have overnight but as that snowball rolls down the hill and gets bigger and bigger and bigger, the opportunities present themselves. Then you have a new problem. Actually Jim, I think you’ve probably run into this before as well. You get to a point where you actually have more money than deals and that is a problem because you don’t want those investors to go somewhere else. This is a vision question at this point because now well, if I raise more capital and I can keep busy, does that mean I need to take on more work? Which may take me away from the personal life that I want. 

You and I have been involved in working with each other to I guess hold each other accountable on our visions over the years. I think it’s fair to say without divulging any personal information that you and I have both had large aspirations that maybe were the right choice or the wrong choice given the time, right? How do you curb your vision is my question, Jim, right? I mean I know what an awesome father you are and how much you enjoy being with your family. Anybody that knows predictive index testing, you and I are both Mavericks. How do you pull back on the reins to keep your family life and your vision in check?

Life And The Vision

I can only answer for me. The first thing is that this vision stuff isn’t just surface-level fluff. It’s a big deal guys, and I know you hear it from other people too. When you take the time to write down your vision and then go after it and live it, magical things happen. I recommend getting a mentor or a coach, Derek Dombeck, that can help guide you through it. It’s another shameless plug again. He’s paying me a lot to be on now. He’s not paying me at all. I truly believe it. For me, to answer your question it didn’t and I think it’s why the billionaire story we shared at the beginning is so important because to me it’s not an either-or, it’s a both.

Vision isn't just surface-level fluff. It's a big deal. Click To Tweet

My vision has that God, family, and then business, and then work. Okay. Those are my priorities. I’m very clear on that. The goal that I’ve said has been okay, well, how do I achieve the pinnacle of business success without the opportunity cost that the billionaire example that I had experienced? If becoming a billionaire cost me my family, I am not willing to pay that cost. I am clear about that. My business partners know that and I’m not going to do it. I don’t believe, I have to make that choice. I believe I can do both. Now, there’s been times in my life where a weekend with the kids. 

Man, I’m not present with the kids because I’m still kind of working in my head and then there’s been times where I’ve been at work where I’m like man, I should be doing something for the kids or being a better dad. What has helped me is I started really focusing on the weekends as if it was another extension of my goal like a business goal. This is an entrepreneur. I’m sharing my deep dark secrets here. Some people listening that are entrepreneurs are be like, wait, what? Like what is this guy like demented or something, but I had to start acting like my weekends were like I had to like run it like a business. Okay. My goal is to be the best dad and the best husband I possibly can be. Okay.

My wife needs me to do these two things. What can I do with the kids to make some like a special memory? I write those down and then I would try and achieve those goals with the same intensity, the same focus that I would set out for a business school. Then I am not as like the muscle gets trained and it’s like I don’t have to like to write down to-do list in the morning anymore when I’m with the kids, but when I was starting to get out of balance that’s how I reeled it in and how I was able to make that work. 

Really Derek, I mean, I think the key is to make your vision about both to not overlook your personal to make it about your relationships, about your family, and I was just sitting down with someone that has a billionaire friend himself and he told me that the billionaire would literally give away all his money if he could take the problems that his kids have a way. Yeah, and the lack of the relationship that he has with this kid. I hear that time and time again, I have multiple stories like that that I’ve heard. To me, one of the things, Derek, I’m hoping our generation of leaders can do is kind of leave that stamp like let’s work hard. Let’s play hard. Let’s have a family. Let’s achieve it all. Let’s not sacrifice any of it. 

I love it and I think that’s such a great way to wrap up this episode Jim. You and I, we could talk for hours and we’ve got so much history that it never ceases for me to believe how incredible the mind is in what we put in front of us and what we focus on we can achieve. When I watch you and your team, that’s just proven over and over again. How can people get a hold of you? Or just if they want to inquire a little bit more about passive.

Absolutely, if you just remember my name, Jim Manning, yes, I was that guy. I bought a URL with my own name on it. Jimmanning.com. On it, Derek, I have some freebie gifts for your listeners of The Generations of Wealth. I have two real estate courses and then I have a white paper on what the single-family real estate markets doing. I spent hours and hours researching this. The first course is about generating passive income. 

What I did was we generated $10 million of passive income in 2022 and 2023. It was $10 million of passive income through three strategies. What I did in that course, as I said, “Okay, let me break down what the strategies are. In case anybody wants to do, at least know what they are, right? I teach on those strategies and how we did that. Then in the second course, I spent a lot of time wanting to educate around investing into real estate funds. It’s called passive profits. 

A step-by-step guide to your first real estate fund investment. Within that course, there’s a tool called the Clarity Compass. What the clarity compass will do is it will helps you make a decision. Should I be a passive investor or should I be an active investor? It walks you through a series of questions. Then the course, if it turns out you should be a passive investor, what are the qualifications? What do you need to do? What are some of the risk factors? 

How do you assess the different risk profiles on different real estate deals? It’s a comprehensive course. Derek, I don’t know about you but I mean I’ve spent $100,000 of dollars on courses in education over the years and obviously 3500 deals, there’s a lot of experience that’s in this brain of mine. I don’t make money on these courses or stuff. I know there’s a lot of people that will charge you money for it. What I want to do is just provide you and your audience value. 

If it turns out at some point our past can cross, if you have an interest in one of our real estate funds and investing in it, and we have the property to be able to connect with at the right time. Fantastic. Let’s talk. Maybe we can do a deal together. If not, hopefully, I’ve made you a more student investor and you’re able to take that knowledge and go do amazing things. The podcast is called The Passive Well Show and it’s become a passion project of mine because I had a conversation with my dad and he can fight in me that he was afraid of running out of money before he died. 

That just completely took my breath away because he worked his tail off and then my Mom worked her tails off. They save their money and has become self-made millionaires, which is fantastic. Right? I was like, “Well, why are you free to running out of money before you die? This doesn’t make sense to me,” because I’m 38 years old and like I have enough real estate that I’m good. When you invest traditionally and you have a nest egg and when you’re in your 70s, you have to start depleting that nest egg taking out distributions for a month. 

That nest egg gets shorter and shrinks and shrinks and shrinks because the distribution is taken out. When you own real estate and you have passive income that covers all of your monthly expenses, that real estate appreciates and gains value over time, right? Even though I’m half the age of my parents, I could call quits and and be just fine. This is become a passion project of mine. I want to get the word out to more as many people as I possibly can. How do you invest in real estate and do it in a risk-averse way? Should you do a passively? Should you do it actively? If you just go to Jimmanning.com, I got a tremendous amount of resources on there for you, 100% free. Hopefully, I can provide you with value. That’s all that’s all I’m trying to do.

Well, I already know you will provide value. You have provided value here in the last half hour or so, and I appreciate you being my friend. Can’t wait to be able to see you in person again soon enough. As we wind this showdown, I just encourage all of our listeners to start spreading the word Generations of Wealth. Go out and wherever you’re listening to this, like it, share it, love it, all the things in social media. As always, go out and live your vision. Love your life. We’ll see you at the next show. 

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