Rachel Richards on The New Age of Real Estate Investors – EP 024

Rachel Richards on The New Age of Real Estate Investors

Today, I’m speaking with Rachel Richards. Rachel and I have taken similar paths in life; she did very well selling Cutco, then took the leap to write a bestselling book and build a business buying real estate rentals. By the age of 27, she had quit her full-time job and successfully created over $15,000 a month in passive income.

At Money Honey Rachel, she provides resources to help female millennials take control of their financial future. She’s on a mission to empower young adults not just to manage, but to change how they feel about money, once and for all. 

In our conversation, Rachel and I talk about how she discovered real estate investing and passive income as a kid, made her financial dreams come true as she became a full-time investor in her twenties, and the work she’s now doing to help people just like her achieve real financial independence.

Key Takeaways with Rachel Richards

• How Rachel envisioned her path to financial independence, graduated from college debt-free, and used savings from her extremely modest first salary to purchase her first rental.
• Rachel’s unique strategies for finding off-market deals before anyone else.
• The dangers of chasing net worth – and why cash flow is king.
• How Rachel is using her time now to help others learn at scale.
• The power of living truly in alignment with your values.
• How mentors can help you get from Point A to Point B so much faster.

Rachel Richards Clip: The Key to Finding Off-Market Deals

Rachel Richards Tweetable

“We're all going to mess up. I just tell myself that was an expensive lesson that I paid to learn. That was my tuition payment. And now I know not to ever make that mistake again.'” - @MoneyHoneyRach Click To Tweet

Resources

• Money Honey Rachel
• Rachel Richards on Facebook
• Rachel Richards on Instagram
• Rachel Richards on TikTok
• Money Honey: A Simple 7-Step Guide For Getting Your Financial $hit Together
• Passive Income, Aggressive Retirement: The Secret to Freedom, Flexibility, and Financial Independence (& how to get started!)
• Passive Income Starter Kit from Rachel Richards
• The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of
• Rich Dad Poor Dad (What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not!)

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Read the Full Transcript

 

Justin Donald: Hey, Rachel. So glad to have you on the show. Thanks for joining us. 

 

Rachel Richards: Hey, Justin. Thanks for having me. 

 

Justin Donald: So, I am thrilled to have you. You have such a cool story that I want to get into. But before we get into the story, I think it’s really cool to share with our listeners how we know each other. And it’s really interesting because we both have a similar path when we were younger and we both have written a book and we both got into real estate. There are so many similarities. But I often like to start a show talking about connecting and how we met. 

 

Rachel Richards: Yeah, for sure. I think our paths crossed way back in the Cutco days. And so, I knew of you but I don’t think we knew each other directly then which I was selling Cutco a decade ago. Oh my gosh. So old. And I think it was Dave Powders, he’s one of my favorite people in the world who said, “Hey, you should talk to this Justin guy. He’s coming out with this book.” And I reached out to you and we hit it off. 

 

Justin Donald: That’s awesome. Well, Dave is a dear friend of mine as well and I love his family and we’ve done a lot of stuff together. In fact, we’re part of Front Row Dads together. 

 

Rachel Richards: Yeah. 

 

Justin Donald: So, it’s just a great group and I just love spending time with especially family-oriented people in that group. It’s men who pick family over business and I think that’s powerful. So, how did you make this big leap then? You went from being in Cutco and you obviously did well to be able to move up to the position that you were in but, at some point, you left and you’re doing real estate. And it’s funny because I had heard about you from Dave Powders and then one of my other friends sent me an article that you were in. This is a dear friend, a fraternity brother, and he’s like, “You should check out this girl, Rachel Richards. I just read a really cool article on her, and I think she should be on your podcast.” And it’s so funny because the timing of which you connecting and my friend sending that article and then me talking to Dave, it was all within a week and a half period of time so it just seemed perfect. 

 

Rachel Richards: Meant to be. I love it. 

 

Justin Donald: That’s right. So, you’ve done great work in real estate and buying real estate rentals. I’d love to know what made you even want to get into that. 

 

Rachel Richards: Yeah. I mean, I was a personal finance nerd from a really young age, still am today. And I remember even being in sixth grade and reading my first book about finance, which was Motley Fool Guide for Teens: How to Have More Money Than Your Parents Ever Dreamed Of, which to me at the time sounded fabulous. So, I read everything I could. I read Rich Dad, Poor Dad in high school and that’s what first turned me on to real estate investing. And I thought, “This is it. This is my path to financial independence.” The first hurdle was, “Okay. I need to graduate from college without debt.” That’s why I sold Cutco and so I sold, I hustled, I set sales records in Kentucky for those four years and I graduated without debt, which even when I was making a really low income after that, it set me up to be able to still save money and then later invest in real estate. So, my first job out of college, I was a financial advisor. I was making $36,000 and saving half of my income living off $1,500 a month. Yeah. It was bare bones and I was not living with my parents, so it was pretty… 

 

Justin Donald: I’m not wowing the 36,000. I’m wowing the 50% savings. That’s incredible. I mean, you’re an anomaly. Most people can’t do that. I mean that’s not normal. Good for you. 

 

Rachel Richards: Yes. Thank you. Thank you. It’s a lot of sacrifice and I feel lucky that I had the foresight by educating myself through books that I knew the power of investing at a young age so I sort of had that motivation and that knowledge. So, it didn’t take long for me and then my husband to kind of save up enough money to invest in real estate. So, we purchased our first duplex in 2017. I was 24 at the time and we were investing in Louisville, Kentucky. So, the duplex cost $100,000. Pretty cheap, right? And we both had $10,000 of our own money that we had saved by then. So, that got us to our $20,000 down payment and that’s how we initially got started. 

 

Justin Donald: It’s so cool. And for your husband to be on the same page, I feel like often that’s not the case because you’re going from a normal job being a financial advisor, he may or may not have had a normal job, and then all of a sudden, you’re talking about buying real estate and putting a down payment. And what if you lose all your money? And what if it doesn’t work out? And what if you have to evict your tenants? And it’s just a horrible fit. And so, these are all the things that kind of go through people’s minds. What was it like for you two? Were you both always on the same page? Did you have to convince him? Did he have to convince you? 

 

Rachel Richards: We are both smart, entrepreneurial people and that’s why we’re together. And when we first met, he had already tried to start a different business that didn’t work out. But I loved that about him because I was like, “Oh, my gosh, he’s out there trying. He’s an entrepreneur.” And so, I turned him on to real estate investing and it definitely didn’t take any convincing. It was just, hey, here’s how this works and he was like, “Oh, my gosh, let’s do this.” So, we immediately were on the same page on wanting to get invested in real estate. 

 

Justin Donald: That’s really cool and it’s nice that you don’t have to talk someone else into it. I think that that is a huge key and we’ve got a lot of similarities because I paid for college by selling Cutco, and that was really wonderful for me. I mean, I don’t know what I would have done otherwise and I then got into real estate and it was the first thing that I did as my first alternative investment venture. And I remember getting into real estate. So, I had the luxury of buying real estate as a single person so I didn’t really have to run anything by anyone. But then when I got married, that was the conversation. It’s like, hey, this is what I’m thinking. I know this might sound a little kind of off the wall because this is not normal but at the same point in time, a lot of my life hadn’t been “normal”. I always would say to people that whatever the masses are doing, like, I want to do the opposite. I don’t want to follow the crowd because most of the time the crowd is wrong, at least financially, and so you did that. 

 

Rachel Richards: Oh, my gosh. It’s just so crazy, Justin, because that’s exactly what I’ve always said, is whatever everyone else is doing, I want to do the opposite. It’s so funny that you just said that. 

 

Justin Donald: That’s awesome. I love it. So, this first deal, how did it go?

 

Rachel Richards: It went well. Actually, we got really lucky. Of course, you don’t get lucky without working hard, but we got lucky. It’s one of the best deals we’ll have ever done. So, we’ll kind of back up a little bit. We started looking for properties nine months before we even closed. And I like to say this because it took several offers made. It took even and accepted contracts that fell through on another property to even find this one. And so, this is something where you have to be patient and you cannot settle because at some point you’ll get discouraged, you’ll start feeling desperate, like I just want to close on my first rental, and that’s when you make a poor investment. So, you really need to be patient and confident that the right thing will come along. That’s one thing we did really well. Another thing is I had my real estate license at the time, so I didn’t have it for helping clients buy or sell houses. I had it for my own purposes as a real estate investor, which was great because I had access to the MLS. I could have a slight time advantage among other people. 

 

So, this deal in particular I was looking at expired and canceled listings on the MLS and I was just making it a regular habit to reach out to people to stay in touch with people. I would email some of these list agents once a month and just say, “Hey, I’m still here. If your client ever changes his mind, wants to put the property for sale, I’m interested.” Just super friendly, staying top of mind. And what happened with this particular duplex is I’ve been emailing this agent for probably six months. And so, she remembered me. She knew my name. And when it came time for them to put that property back on the market, she reached out to us first and she said, “Hey, do you guys still want to make an offer because we’re going to list this next week?” And I was like, “Oh, my gosh, yes.” So, I made an offer which to be able to do that is such an advantage. So, we made an offer. It was about a $100,000 duplex. I recognized that it was an amazing price already so we bought it for $100,000 and that’s essentially how we got our first deal. 

 

Justin Donald: That’s awesome. And it’s great. A lot of people maybe they don’t understand the value of finding something off-market. And I talk about this in my book with commandment 3, finding invisible deals, and one of the types of invisible deals is off-market because when you do an off-market deal, there’s either no competition or very little competition and so you don’t get bid up and that is a huge advantage, as you said. I think that’s great. And I want to piggyback on something else you said because I made a mistake in the opposite direction. So, you said you’ve done a good job of keeping up with people. And to a certain degree, most of my career, I’ve been pretty good at that. But there is one property that I wanted to buy and I had put in my calendar to call this owner every six months. We were so close and so many different occasions. And so, it got to a point where I just wondered if it was even going to work out. Well, I ended up not reaching out this last time, which would have been at the six-month mark. And then one of my friends said, “Hey, I am about to put a property under contract, but I can’t afford to do it myself. And I was just wondering if you wanted it? You could pay me an assignment fee and you can take it.” And I looked at it and I said, “Oh, my goodness, this is the property that I have been negotiating for like eight years.” And they ended up selling it six months ago to a group that’s just, I mean, I don’t know how long they’ve been working on it. 

 

From talking to them, it sounds like they hadn’t known about it long and it was just the right time at the right place. I didn’t do my check-in call. They end up doing a seller finance note on this. And so, it gets even worse, though, because these are all the things that I had negotiated. So, it was like all the terms that I had negotiated that he wouldn’t pull the trigger on just quite yet. He just wasn’t ready to let it go. And so, I ask what the price was. And within six months, they’re listing it for twice the amount he paid for the park. 

 

Rachel Richards: Oh, my gosh. 

 

Justin Donald: So, this is 100% profit with virtually nothing added to it inside of six months and now I have it under contract at that higher price because it’s still worth that price. 

 

Rachel Richards: Wow. 

 

Justin Donald: And so, that was a great lesson for me to just even if I think that someone’s not going to or even if I’m unsure if I even want to play in that space anymore, that I just need to follow up once you get permission. Because one of the things I like to do is follow up with people and say, “Hey, is it alright if I reach back out after a period of time?” Because when you’re trying to get off market deals, the key is the relationship with the owner. That’s the key. 

 

Rachel Richards: One hundred percent. 

 

Justin Donald: And it’s a personal thing. They get to know you. They like you. In this case, I guess I didn’t do a good enough job. 

 

Rachel Richards: It’s a painful lesson. It’s a painful lesson and I think investors make mistakes no matter where they are at or how good they are or how long they’ve been doing this. And so, one of the things I tell myself now, because I’m not going to stop making mistakes, we’re all going to keep messing up, but I just tell myself now, “Well, yeah, that was an expensive lesson that I paid to learn. That was my tuition payment. And now I know not to ever make that mistake again.” 

 

Justin Donald: Yeah. That’s so good. It’s just such a funny thing where you know what could have been and that’s penalty enough. It’s learning that hard lesson. So, at this point, it’s more comical than anything. And it’s such a great teaching point but at the end of the day, it’s like, “Ugh, I was so close.” And so, that’s where persistence pays. 

 

Rachel Richards: Yeah. 

 

Justin Donald: So, you just told us about your first property and it’s going to end up being one of your best. 

 

Rachel Richards: Yeah. I can go in some numbers if you want. Do you want me to kind of talk numbers? 

 

Justin Donald: Yeah. Give us the numbers. 

 

Rachel Richards: Yeah. So, when we bought this duplex, one unit was rented. It was under-rented but it was rented and then one unit was completely uninhabitable. So, we had to do a total renovation. We put some money into it, which we had actually negotiated with a seller’s concession so we weren’t even putting our own money into it. It was something we negotiated at closing, which was also a smart thing that I did. And so, we did this renovation. Because we don’t have money at the time and we hardly had enough money to help with the down payment alone, let alone a 10K or 15K renovation. We wouldn’t be able to do that. So, we basically said, “Hey, we’ll pay you a higher purchase price if you do the seller’s concession.” So, that’s what we did. The property was immediately cash flowing after we renovated, $500 a month in profit and now it is cash flow and closer to $800 a month in profit. We bought it for 100 and it’s now worth 175 just three, four years later. And our cash on cash return I believe is about 25%. So, it’s just one of the best deals we have ever done. 

 

Justin Donald: So, that’s incredible. And so, this is the thing that I want people to hear is like $500 a month doesn’t, I mean, to some people they’re like that is incredible. And to other people they’re like, “Oh, I’d want a better return,” but it’s all about the dollars that you put in. So, you were earning between $500 and $800 a month, right, from what it was to what it is now in profit. This is above and beyond any of the costs. This thing’s cash flowing but you did it off of what? $20,000 down. That is fantastic. So, 25% in your returns, you had probably larger than a three-point spread, probably closer to four-point spread between the interest rate, the cap rate, and the interest rate you paid for the mortgage, right? 

 

Rachel Richards: Oh, for sure. Yeah. 

 

Justin Donald: That’s awesome. I mean, what a great first deal. What a great first way. And what’s awesome about this, Rachel, is you are a person who has walked the talk. You had a normal job and you were able to transition from that normal job into being a real estate investor. And once you do it once if it gets exciting and you get the itch and you have confidence that you can do it again and eventually, I know the story already but I’d love to hear it because you eventually transitioned into a full-time investor. 

 

Rachel Richards: Yes. So, 2017 is where it all began for me and Andrew, my husband. Before that, we didn’t have any passive income. We didn’t have any side hustle. We were both working 40-hour weeks at our jobs, working our butts off and 2017 is the year where everything started. So, we got our first rental and then later that year I wrote my first book, Money Honey. So, we had these two passive income streams, rental income and royalty income. We basically focused on growing those as much as we possibly could over the next few years. So, fast forward to 2019. By then, we had grown our income streams to $10,000 per month in profit and I was able to quit my job and retire, which I put in quotes because I’m still working, obviously. I’m just financially independent now. But that’s kind of the high level of what we did and how we did it and I’m happy to dive deep into whatever you want to talk about. 

 

Justin Donald: We should because you are very young to be financially independent. So, at what age did you hit financial independence? 

 

Rachel Richards: When I was 27 is when we were making $10,000 a month in passive profit, which was more than enough to cover our expenses. So, that was financial independence for us. 

 

Justin Donald: That’s exciting. I talk about this in my book because so many people are chasing net worth. And it’s one of those things where it’s like if you are focused on net worth, net worth is kind of a fictitious number because a lot of it is based on maybe a value that you give your business that other people won’t or it’s based on where the stock market is if you’re heavily invested there at that time but that can change in a moment. And really, it’s paper money until you get a chance to utilize it, right? So, you have no utility on most of what people consider their net worth until there’s some sort of exit scenario or you retire and you can actually draw down those funds. So, I love the idea of building cash flow because when you build cash flow, you’re also building your net worth at the same time but the emphasis is on the portion that allows you to live life today and not wait until you are retired. 

 

Rachel Richards: Exactly. 

 

Justin Donald: And you figured it out young. Wow. 

 

Rachel Richards: Exactly. Yes. Well, I’m so glad you bring this up because there’s this emphasis in our society to focus on wealth accumulation, building up your nest egg, working for 40 years so that you can have a million or 2 million by age 65 and retire. And that used to work well but times have changed so much. The cost of college has ballooned, which has placed an enormous burden on our generation. Social Security trust fund is projected to be fully depleted by the year 2034. I mean, that’s terrifying. Pensions are a thing of the past. So, this whole nest egg theory, it just doesn’t work the same way that it used to. And that’s why I love talking about passive income and cash flow because to me, generating five, six, eight thousand dollars a month in passive income is a lot more attainable than trying to save up $2 million by age 65. And to your point, it allows you to live your life now and actually retire at a young age. So, I think everyone needs to move towards this cash flow is king concept. That’s what’s going to help you achieve financial independence young. 

 

Justin Donald: Yeah. And that’s the thing is what other way can you achieve it that young? There are very few ways. Unless you have a big exit or you maybe had wealth in your family, there are very few ways. The odds are not really in your favor to do it outside of that but they’re really in your favor inside of it. And I think that’s cool. But I also love that you come from the financial services industry. And so, your method as a financial advisor and being in that space is very much that of wealth accumulation. It’s the nest egg approach and it’s investing in qualified plans and deferring taxes to an unknown time where we don’t even know what it’s going to be, though it’s likely going to be more than what it is today just based on where our debt is as a nation and the fact that our government’s going to need to figure out ways to cover that. So, it’s interesting that you went through an education that, in my opinion, really steers financial advisors to one path. And it’s not like, hey, here are all the options. It’s like, here’s what we want. Here’s what Wall Street wants you to communicate so that they have access to your money and they can invest it however they see fit. And I’m curious how you were able to see past that. 

 

Rachel Richards: You know, that’s a good question. I only lasted for a year as a financial advisor for a few reasons. First of all, when you start out, you’re not helping people with their money. You’re prospecting and you’re cold calling. And I didn’t see myself cold-calling people for the next ten years. I wanted to actually help people. And the second thing was I just had this instinct that even when I was able to sit down with clients and help them invest, just felt like I wasn’t really helping them. It wasn’t really adding value to them. And there are so many financial advisors that are mis-incentivized because the way that they are paid and they push products onto their clients that are not in their best interest. Sometimes they do it with good intentions. Sometimes they do it with bad intentions. But the problem is the pay structure doesn’t align their interests in the correct way. So, I just saw a lot of things that I didn’t feel was right and I’m just so passionate about teaching financial literacy and truly adding value and helping people. That’s why I didn’t last that long. I thought to myself, I need to find a different way to make an impact and a different way to help people manage their money. 

 

Justin Donald: I love hearing that. And you’re so spot-on in so many ways. I do want to make the disclaimer that there are great financial advisors out there. I’ve got a lot of friends that do it. 

 

Rachel Richards: Absolutely. 

 

Justin Donald: Unfortunately, it’s a small percentage based on my experience and what I have found in asking the tough questions, and this one I found out I was just flabbergasted, is when I would ask, well, are you invested in the same product that you are recommending me to invest in? And almost every time it’s a no. And I just didn’t understand why I was being offered things that they wouldn’t invest in themselves. But you answered it earlier. It’s a lot of advisors are incentivized by the kickbacks and the commissions and offering certain products and higher commission products. And then the other thing that to me always has stood out and I had read this before, but then I did my own research. And so, you can double-check the facts on this. If you go back to the there’s a report done, I don’t know if the 2020 report is done yet but the 2019 one is done for the last 15 years of what is the S&P 500 index, what did that perform compared to actively managed funds, so having your money with someone that actively manages it, and 95% of the time in the last 15 years was an active manager outperformed by just having your money in the S&P 500 index. So, in other words, only 5% of active managers, active fund managers were able to produce a return that beat a simple index, which a simple index is the cheapest way to have exposure to the stock market. That’s your lowest feed opportunity to get in. And the 5% that beat it are likely at such an extraordinary, just such a high-cost threshold that most people don’t even have access to them anyway. So, that was just really eye-opening to me. 

 

Rachel Richards: Right. And yet we pay these active managers so much money, but we’re not even outperforming just the stock market index. So, yeah, a huge eye-opener. I mean, I tell people, “Invest in index funds, invest in ETFs, invest for the long run and look for the lowest fee funds you can get.” Like that’s the most surefire way to get a good return on your investment. 

 

Justin Donald: Yeah. And that’s a good point because so not only are you 95% of the time and it’s probably even more like 98%, 99% of the time not outperforming the S&P 500. But you’re also paying a fee to them to not outperform it. 

 

Rachel Richards: Yes. 

 

Justin Donald: That’s the craziest part about it. So, I love that you are able to see that and say, you know what, I want to get out and I want to do things differently and on my terms and I’m going to figure it out myself and then I’ll be able to help and teach people along the way. So, let me ask you this. What is most exciting and inspiring to you right now? Like what’s making you get up each day with energy and passion for the day? 

 

Rachel Richards: There’s a few things. I’m a very curious person. I get bored easily so I’m always kind of looking for the next project, the next thing that I’m doing. I’m obsessed with learning about real estate syndications right now, as you know, that’s my obsession. And then my other thing, though, is that I’m hearing a lot from my platform that they want to learn more about real estate investing from me. So, they’re like, “Rachel, when are you coming out with the course? When are you doing this?” So, I’ve been doing a lot more content about that, which is fun because it’s something I’m so passionate about. And it’s so great when your passion aligns with being able to solve someone’s problem and with what other people want to know. So, that’s where I’m headed right now is probably creating a real estate investing course. 

 

Justin Donald: That is cool. I love it. And so, I have done the same thing because I love just building products and content. And the course has just been such a huge game changer and it’s easy to have extra passive impact. There’s a nice passive income aspect to it but at the smaller dollar points that I have for these, it’s much more about just getting the word out so more people can have access to it. And I know that you get that and believe in that but I can’t even tell you how many people have been reaching out just because of going through that course and the mental mind shift like that they have had, these shifts of total opinions or beliefs based on it. And so, I think that that is an awesome path for you to pursue. You and I have been having some fun because I run a mastermind, an investor club series, and you’ve been joining us on a lot of these calls. And so, I was really curious. I wanted to ask you, what have you thought about this? Because this is a different world than what you have done for the most part. Now, we do some real estate syndications because I’m a big fan of that too and you know that but you’ve gotten exposed to some other stuff too. I’m really curious what are some of the things that have stood out to you since you like to learn and you like to get outside of your comfort zone? 

 

Rachel Richards: Yeah. It’s been so fascinating to me because it’s also just the right timing. So, we have 38 units now. They’re all in Kentucky. We moved to Colorado last year and we mostly self-managed, which I know we could have a property manager, but ever since we moved away, it’s been out of sight, out of mind. We’ve been lazy. We haven’t done a great job. We’re not making as much money as we could be making. And there’s definitely a level of liability with directly owning real estate. And, of course, people have things like LLC as an umbrella insurance. But I just was starting to think maybe it’s time for us to start selling these. The problem that we had, though, is like, well, there goes our cash flow. How are we going to keep generating cash flow? Plus being a real estate owner, so many benefits. It’s the best hedge against inflation. You have tax benefits. So, we just couldn’t figure out what to do. Once I started learning about real estate syndications, I thought, “Oh, my gosh, this solves all of our problems. This solves all of our problems.” It’s such a cool thing because as an investor, you travel along this time versus money spectrum. 

 

Normally, when you first start out, money is scarce, time is abundant. You’re willing to self-manage. You’re willing to go down there and fix toilets because you have more time than money. But then as you progress and you scale, then it kind of flips and you get to the point where you have more money than time. So, it’s wait a second, how can we protect our time? How can we make money without having to invest so much time? Even if it’s less money that we’re making, we would rather have that and protect our very valuable time. So, we’re at that point and the real estate syndications, again, it just solves all those problems. So, we’re actually starting to sell a couple of our rentals and we’re going to transition all of that money into syndications and different opportunities. 

 

Justin Donald: That’s cool. That’s really fun. Now, here’s the interesting thing about real estate. So, when you own your own property, you have deeded property, you own the deed. And so, what ends up happening is if you want to do a 1031 exchange where you can roll or defer the taxes to a later point in time when you sell that new property, as long as what you’re buying that’s new is equal to or greater than what you are selling. And there are few other rules. But just to keep things simple, you can roll it into a new investment. You can defer that tax liability and you can ultimately do that in perpetuity even until you die and never have paid taxes. So that’s pretty cool. Now, what a lot of people don’t realize is that in a 1031, you can’t typically take deeded property and roll the proceeds into a fund or into even a syndication that you don’t own outright. And so, if you do that, you’re going to lose the 1031 opportunity and you’re going to have to pay taxes on that. But if you’ve held it over a year, then you’re going to pay long-term capital gains versus under a year short-term capital gains. Now, there are some unique structures that are out there, fund structures, and most people have no idea about this. You can actually roll your 1031 proceeds into a fund so you don’t do it directly. You do it indirectly. You do it directly into deeded property because that’s one of the IRS criteria but then you can transfer the deeded property into the fund so you have exposure to all the assets to mitigate and minimize risk. And then whenever they sell that asset, you would then be directed back into the deeded property and then out to sell and you could do it all over again. And so, I don’t know if you looked into that at all but that’s a great way to really game the system, hack the system. You’re all within IRS code and guidelines but this is kind of like it’s a not well-known little niche in the market. 

 

Rachel Richards: Yeah. Definitely not well known because I just learned about this recently, so I’m trying to figure it out. The problem I’m running into is that you normally have to have a capital gain of like five hundred to a million to make it worth their time because it comes with all the paperwork and the fees and the legal and everything. So, still trying to figure that out, but I have some learning to do so I’m excited. 

 

Justin Donald: Well, I have a handful of contacts that I can put you in touch with for people that I know do this. 

 

Rachel Richards: Oh, thank you. 

 

Justin Donald: On a regular basis so we can have something fun here. This is really cool. And then in a worst-case scenario, one of the things I like to tell people, whenever you do a 1031, you have to declare the properties that you are going to do the exchange into and you’ve got to do it ahead of time. So, there’s a period of time where you have to declare it. There’s a period of time where you then have. So, let’s say that I declare a property. It doesn’t end up working out, but my window for finding it is gone. Well, then, you kind of have a lot. But one of the things I like to tell people is you can list a DST, a Delaware Statutory Trust, as one of your identified properties. And if you can’t end up making one of the other two, generally, you declare three, you can do more but if you can’t make those ones work, you at least have a backup plan to roll it into this entity. And that one’s actually easier one to do. There are just some costs associated with it. So, it could be something to look into. 

 

Rachel Richards: Awesome. Well, thank you. I’m going to look it up. 

 

Justin Donald: Yeah. This is fun stuff. I mean, this to me is where it gets really cool, where you’re finding all these cool little tricks of the trade. 

 

Rachel Richards: Yeah, exactly. 

 

That’s awesome. Well, that’s cool that you’re looking to move into another aspect of your life professionally and do some new things. That’s awesome. 

 

Rachel Richards: Yeah. Thanks. It’s a really exciting time. A lot of people look at me and they’re like, “Well, you’re not retired. You’re still working.” And I’m like, “Well, of course, I’m still working. I’m 28. I mean, I have the rest of my life. What am I going to do? I get bored very easily so certainly we have plans to travel. Certainly, I could go to the beach but I get bored very easily. So, it’s not that I don’t want to ever work again, it’s that I now get to work on what fulfills me and I get to work when, where, and if I want. And life just becomes a lot more exciting and fun when you get to be in that position. So, I’m very fortunate and very grateful. 

 

Rachel Richards: Well, for the record, I want to share with our audience that when we first we’re connecting to get a time in, you had reached out at a time that was busy for me because I had just put the book out and I was a bit overwhelmed with the response that I got. And so, I was not quick to respond. But when I did get through to it, number one, I was connected to you. Number two, you had an assistant that helped set everything up. And number three, you had a time frame that you had already committed to taking off that you didn’t break and that was probably I think it was closer to the holidays. And it was really cool that even though, you know, we wanted to connect and we wanted to do something, you had that in place. And so, to me, I was like, “Great. She’s living a lifestyle that is focused on that first,” and I thought that was cool. So, not only do you have someone that can help protect you and be a gatekeeper and help set you up and do some of the things that you don’t really need to do, but you honored this time. And so, we got in the books for probably a month-and-a-half or two months later once you are back to working again. And so, I want people to know that you walk the talk when you say that you have retired. Of course, you are working because who is going to fully retire at age 27? I was able to by age 37. So, you beat me by a decade and there’s no way on earth I was going to fully retire. The idea is to just work when you want, however you want with who you want for as long or short of a period of time as you want, with as many sabbaticals in between as you choose to take. And so, you’re a walking, talking, living, breathing example of that that I hope people will follow. 

 

Rachel Richards: Well, thank you. And I really appreciate you saying that, Justin, because I do sometimes feel guilt over saying no to somebody or saying, “Oh, we’ll have to wait two months to connect because my schedule is booked,” and maybe you feel this way, too but there are so many people that message and they have financial questions. And it’s this mindset, it’s this constant struggle of like, well, yeah, I want to help these people. This is what I’m doing now. I’m passionate about this. But then also realizing that if I spend all day answering the one-on-one free questions, then I can’t create more content and more books and more courses that could potentially impact thousands or tens of thousands of people. So, maybe I don’t know if you’ve experienced that or not, but there’s a lot of guilt that comes with, I don’t know, being a retired, financially independent entrepreneur. I just want to help everyone I can, but not always in the way that I think I should. I don’t know if that makes sense. 

 

Justin Donald: It does. And I can relate to it more than you probably realize because I was not prepared for the onslaught of what kind of happened after I put my book out. I just I guess naively thought that when you put a book out that some people may be interested and that’s kind of it. 

 

Rachel Richards: Not when you’re a Wall Street Journal bestseller. 

 

Justin Donald: Yeah. I mean, it was really a pleasant surprise on that, too. I mean, that garnered some attention but I wasn’t prepared. I didn’t know that it was going to be. I’m friends with a ton of authors and this has never happened to them. And so, I built my business, this Lifestyle Investor. This was a hobby. This is like, you know, me as a practitioner and then my friends wanted to know what I was doing. So, I started teaching people what I was doing. And I really built this business because it was fun. I wanted to teach people how to do it, but it was to teach them on my time how to do it. And so, I didn’t anticipate that it was going to scale. I didn’t have the infrastructure set up. We were talking about this before the call. I had an executive assistant for years and the different businesses that I’ve been part of. And I’ve got this amazing person, Mary Ortman, who I have worked with for 17 years now. She’s been involved in every business I’ve ever done, and she’s just been tremendous. But I put her in charge of all of our real estate. And because at that point in time, I had “retired” I didn’t have any need for an executive assistant, at least I didn’t think. 

 

So, I put her in charge and she is just doing such a great job with a real estate so much better than I ever did, so much better than my wife and I as a team ever did. And so, she belongs in that role but after the book came out, I mean, so what is it? We’re literally almost two months to the day of the book launch, and I’m still getting over a thousand pieces of emails, DMs, some form of correspondence communication a week right now. And I did not anticipate that. I have been trying to figure out how to properly handle that and so I brought on an executive assistant. I’ve got a couple of virtual assistants. I mean, I have a team, but I was never planning to scale this business. This was just my fun business. So, yeah, it’s been an interesting ride, to say the least, Rachel.  

 

Rachel Richards: Well, for sure. For sure. And that’s amazing. Go ahead. 

 

Justin Donald: I was going to say it’s a wonderful thing because there’s true impact but at the same time, in order for me to be authentic to the brand that I’ve created, I actually have to create and put in place some better systems to protect my time, like you said, to put out more content and to focus on, you know, to give my mastermind and my private clients the time that they need. But also, at the root of all of it is to make sure that my family is getting the lion’s share of my time and that I’m focused on living life in a way that is very fun and inspiring and using my gifts in a way that allows me to serve the world. 

 

Rachel Richards: Absolutely. I really think it’s about knowing your values, living to them, and Hal Elrod always says living in complete alignment with your values. And I think it’s an important lesson for anyone listening that if you want to get on someone’s radar or if you want to ask them a question, find a way to stand out, find a way that you can actually add value first. Can you leave them a five-star review on their book? Can you buy their book and read their book and then leave a five star review and share it on your Instagram? And then you reach out and ask a question. Because I promise you, as an influencer, I’m 100% responsive to those people or a lot more at least to those people than the ones that might just kind of ask me a question about reading my book. And I don’t mean that in a mean way, of course, but I think the lesson is just add value first and then ask for something afterwards. 

 

Justin Donald: And you walk that talk as well because the first real interaction we had was instead of you saying, “Hey, I need something from you, Justin.” It was, “Hey, your book’s out. I got it. It’s great. I’m going to leave a review. Your podcast is great. I’m going to leave a review on that.” I mean, you really went out of your way to add value. And then ironically, just yesterday, I got a card from you, which is really kind just as a thank you for just a connection that I was able to make and for having you join some of our Lifestyle Investor calls and investment deals. And so, I just thought, “Wow. What a thoughtful person that is doing the right things to be memorable and to add value and so other people will want to show up in their life.” I think that’s so cool. 

 

Rachel Richards: Well, thank you. I feel so affirmed. You’re building me up so much. Thank you. 

 

Justin Donald: Well, it’s easy when it’s what you’re doing. So, I think that’s cool. I’m curious, who are some of your big mentors? I know that you had talked about reading some Robert Kiyosaki books early on, and he was a huge mentor to me, too. You know, he probably doesn’t know it. Maybe he’s listening to a podcast or maybe he’s read the book. Who knows? In fact, I need to get it in his hands because I give him a shout out because he was a huge mentor to me and I’ve read virtually everything he’s written. I’m curious, who all have been there in your world to impact and influence you, whether it be in-person or whether it be from afar? 

 

Rachel Richards: So many people. One that comes to mind immediately is Hal Elrod. I mentioned him earlier but being an entrepreneur, a lot of us feel burnt out, a lot of us deal with stress, and for me, at least in my journey a couple of years ago, it led to anxiety and then depression. And I’ve been very public and open about that because I think there are still so many stigmas against mental health but it’s very common. Nothing wrong with it. But the Miracle Morning helps me through that in a way that nothing else did. So, like I am eternally grateful to Hal. I also got to interview him in my second book, which was fun, but he’s just amazing. He’s an amazing person. And then another person is actually Honoreé Corder. Do you know Honoree? 

 

Justin Donald: I do. Yeah. I just had a call with her last week. 

 

Rachel Richards: Oh my gosh. Too funny. Yeah. So, she is actually my mentor right now. I’m in her mastermind and she partnered with Hal to expand his Miracle Morning series. She’s written over 50 books. She’s a book coach. One of my mistakes in growing and scaling my business is that after I quit my job, I remember kind of looking around and being like, “Okay. What do I do now? How the heck do I get from point A to point B?” And just having this realization that I don’t know what the heck I’m doing. And it took me way too long to realize I need to pay money to an expert to help me get there, because, yes, I could probably figure it out on my own, but it would cost me a lot of money and would take me a lot of time, whereas I realized I needed to surround myself with people who are already five or ten steps ahead of me and learn from them. And one of the ways to do that is to pay them, to be in their circle. So, that’s who Honoreé is for me and she’s really helped me develop things like online courses and doing webinars and scaling and growing my business. So, it’s just another lesson I learned, another mistake I made about being too frugal, being too cheap, and how that can cost you in the long run. But she’s definitely one of my biggest mentors. 

 

Justin Donald: That’s so great. And you hit the nail on the head. It is so important that you are intentional with who you spend time with. Number one, your peer group is going to influence you more than you probably realize. I’ve talked about this a time. It’s part of my 10 commandments. But mentors and coaches, they really operate at a level that is kind of working on the business or on their clients versus in the business or in life. And so, there’s a different perspective. There’s also I always talk about whenever you hire someone to make sure that they’ve done what it is that you want to do. So, it’s not just like a life coach that is giving you life advice that they’ve never done. And by the way, there could be good perspective there. I’m not saying that that’s not right but if you have big goals and there are things that you want to do, you should coach the people that have done the exact same thing that you want to do. And you should pay if you need to pay to gain access to these people. The only foot you might get in the door is to get lucky enough to interview and get accepted into their mastermind and pay to be a member of that group. And then you can develop a relationship, but you get exposure to them, you get exposure to their mindset, their beliefs, the community that they’re in. I mean, that’s the game-changer. And I love that you’re doing that. 

 

Rachel Richards: Thank you. Yeah, I often hold myself back in so many ways. One of them is not investing in myself when I need it. One of them is not outsourcing stuff to other people. So, it’s this lesson that I learned over and over again. But it’s an important one. 

 

Justin Donald: Well, it’s some of the best money you ever spend. I put in my book that I’ve spent right around a million dollars, I mean it’s over that at this point, on coaches and events and seminars and training and everything else just to make sure that I’m feeding myself first so that I have the health and the vitality to be able to learn and grow and get exposure to the other things in life that I want exposure to. And I think a lot of people underestimate the power of a strong network and they underestimate the power of education. And when I say education, I don’t mean formal education. I don’t mean going to college. I mean, like your ongoing education, that you’re a lifelong learner and education should never end. And the best education you get is the education you choose to get once you’re done with formal education. And so, I’m just such a huge proponent of that. I love seeing you do that and live that, and I’m really excited for you to build more products in your world around that. I think that that is just such a cool next step for you, Rachel. 

 

Rachel Richards: Thank you. Thank you. Couldn’t agree more. 

 

Justin Donald: And you’ve got another book that I’d love to talk about as well. And you haven’t mentioned it at all so I’m going to pull it out here. So, what’s your newest book? 

 

Rachel Richards: Yes. My second book, Passive Income, Aggressive Retirement came out in 2019. And it’s because that was the year that I quit my job and retired. And so, once I started telling my readers I’m about to quit my job, and at that point I had $10,000 a month in passive income and they were like, “You’re 27. What do you mean? How are you doing this?” So, I could tell there was this thirst for this knowledge of what is passive income. How can people create passive income? Passive income, to me, it’s one of the most brilliant things you can have because it’s money that is earned with little to no ongoing effort. So, it’s residual income. It’s literally money that you make while you sleep. It sounds too good to be true, but it’s not. And it’s definitely no get-rich-quick scheme. It takes time or money to create. But I became obsessed with passive income, so I wrote a whole book about it and it basically shows 28 different passive income models. So, trust me when I say that there is something out there for everybody. 

 

Justin Donald: That’s awesome. And what else? You have other projects that you’re working on. Don’t you have another book as well? 

 

Rachel Richards: I’m thinking about writing a third book about real estate investing because that’s what people want right now from me. But I do have an online course called Get Your Financial Sh*t Together. So, as you can tell, it’s sassy and fun and it’s just about the basics of money management. It goes along with my first book, Money Honey. But really the epiphany I had there is that there is a lot of emphasis on learning and consuming knowledge. And, yes, I think my book is great, but it’s not great unless it’s implemented. So, a lot of people will read a book but then what do they do? What action are they taking from that book? So, I thought, “Well, what if I could create something, an environment where I can give people the structure and the support and the accountability they need to actually take action on what they’re learning and really ensure success?” So, that’s what I wanted to do with my online course and so far, that’s been so much fun for me and I’ve helped a lot of people. But that’s fine. I’m going to have that real estate investing course coming up. I have a mastermind for women, so I got a lot, of stuff going on. 

 

Justin Donald: That’s awesome. Well, I love hearing about it. Where can our viewers and listeners get a chance to find out more about you online? 

 

Rachel Richards: Thanks, Justin. Yeah. My Instagram handle is MoneyHoneyRachel. And what I would love to do for your listeners, if anyone wants to download my passive income starter kit for free, I will give that for free so you can go to MoneyHoneyRachel.com/bonus.  

 

Justin Donald: Awesome. Well, we will get that in the show notes for sure. And I just want to thank you so much for your time in joining us here today and for sharing your story and opening up about what it was like, what it was like before passive income, what it was like having the idea to start and I guess move down this path that is kind of scary and out of the norm to now being at a point where you have all the passive income that you need and you’re even at a place you’re like, “Hey, I could sell these properties, I can roll this into something else where I still have passive income, but I have even less responsibility.” And I think it’s cool watching you continue to up your game. 

 

Rachel Richards: Thank you. Thank you so much, Justin. It’s a pleasure. I really appreciate it. 

 

Justin Donald: And I want to leave all of our listeners and our viewers with one last thought and this one is so important. I talk about this every single week, and that is this. Take some sort of action towards financial freedom. Just one step. It can be a small step but take that action today. And instead of living a life by default, live a life by design, a life that is exciting and is exhilarating, that you have a lot of passion in. And I can guarantee to you when you have more money, you can solve your financial problems much easier. And so, money doesn’t solve all your problems, but it’s going to solve your financial problems. And when those are solved, life gets a lot easier and a lot more fun. And when financial freedom is the crux of it all, it’s amazing what you can accomplish. And I think that you are such a great walking testimonial of that, Rachel, because you’ve done it and you’ve been in the position that a lot of our listeners either have been in or are currently in today. So, you’re inspiring people to know that they can do exactly what you’ve done. So, thank you. 

 

Rachel Richards: Thank you. Thank you, too. I really appreciate it.

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