On this episode of The Passive Income Attorney, Seth talks to Adam Adams. Adam explains some of the pros and cons of passive and active investing, as well as some great tips that any passive investor should follow. Enjoy!


“We got out of the rat race and I was just thinking to myself, this is what life’s all about, is collecting passive income, when you don’t actually have to hunt for that next paycheck.”



0:00 – Intro and background on Adam
2:44 – Adam explains his two “aha” moments where he realised he should invest in alternative investments
5:02 – Seth asks Adam to go into more detail about his passive investments
9:41 – Adam dives into the difference between “return on” and “return of” investments
12:13 – Adam shares some tips on vetting the sponsor, the market and the deal
18:12 – People flock to areas with good jobs and good schools
20:10 – Adam has a 4-step, easy process for sponsors
24:47 – Seth asks Adam how people can decipher between fear and a gut check
27:45 – Seth asks Adam about the pros and cons of active investing vs. passive investing
35:05 – Conferences and podcasts are the best way to find deals for passive investors
38:01 – Seth asks Adam for 1 last golden nugget of advice
40:10 – Adam gets outside to keep his mind and body healthy
40:58 – Adam would be working out the second best thing if he was in an alternate universe without real estate
41:26 – Adam explains where he was 5 years ago and where he’ll be in 5 years
43:09 – Finally, Seth asks how has passive income changed Adam’s life



Adam’s Giveaway: Text the word ‘vetting’ to 41404.
Adam’s Podcast: Creative Real Estate Podcast
BlueSpruce Holdings: http://bluespruceholdings.com/
Creative Real Estate Podcast: https://podcasts.apple.com/us/podcast/creative-real-estate-podcast/id1285094279

Adam A. Adams, also known in the real estate community as Triple A, has educated thousands of investors through real estate conferences, radio & podcast interviews, his coaching program, and his thriving Meetup group. Adam hosts the Creative Real Estate Podcast, a podcast listened to around the world, with hundreds of thousands of downloads. His efforts to educate and inspire other investors has earned him the prestigious title “Master Investor” by Think Realty magazine and he is also a three-time Hall of Fame winner from RE Mentor for his successes in multifamily syndications. Meetup.com recognized him as one of the top 6 MeetUp organizers in the world (2018).

In 2005, Adam took the plunge into part-time real estate investing, but it quickly became his full-time passion! Today Adam is partnered in 7 multifamily syndications with approximately 1,400 doors valued slightly over $100 million. His company, BlueSpruce Holdings, focuses on finding and managing apartment communities to allow passive investors diversification, cash flow, tax benefits, and freedom of time. Adam’s primary role in the company is to attract capital, successfully raising millions of dollars from private investors. He continues to grow his company’s brand as one of the top syndication teams in the United States.



Seth: What’s up law nation. Yet another great day to be alive. Thanks for joining us. If you’ve ever thought to yourself, man, I’d love to get involved in real estate or to invest in real estate or to diversify a little out of wall street, but I just don’t know where to begin. Today’s episode is for you. Our main of the hour is Adam “AAA” Adams, a full-time active and passive real estate investor, founder of Blue Spruce Holdings and host of the Creative Real Estate Podcast, and a master educator in all things real estate, event hosting, podcasts and marketing. Now on with the show. Adam Adams, welcome to the show, man.

Adam: Well, thank you for having me brother.

Seth: Yeah, of course. Excited to have you on.

Adam: I am looking forward to it.

Seth: Yeah, man. So, our listeners who, somehow haven’t heard of you tell us a little bit about yourself, you know, what’s your story?

Adam: Great. In a nutshell, I grew up in a family that did real estate investing. So unlike, I would say most people was always really normal for me to be involved in real estate investing. I think the first time I collected rent, I was about nine years old, which is kind of interesting. And I used to snowplow our self-storage units at 15 years old, I think it was the first time I legally did that. But other than that, the only other two things that I’ve been focused on myself is I’ve, it’s either been real estate investing. I’ve worked in restaurants or I’ve done construction. Most recently, I was a project manager for a reconstruction company. We did multi-million-dollar roofs and sightings and things like that. And my sweetheart’s actually an attorney. So that’s the only one way that I think I can relate to your listener. I’m not one myself, but I am together with one.

Seth: Nice. So, you’ve been hustling for a long time then?

Adam: Yeah. Yes, sir. Yes.

Seth: So, have you ever really had that aha moment where you started looking at, you know, alternative investments? I know you said you were in real estate for, you know, since the beginning, but you know, when did you kind of have that mindset shift?

Adam: I’ve had two aha moments. The first one was after I was doing a lot of fix and flips. So, what my partner and I would do is we would try to wholesale. We didn’t do very well at that, but we did several fix and flip, some scrapes and things like that. And as I was doing this on houses and condos and land, I thought that I was investing in real estate. Like I literally was thinking to myself, I’m investing in real estate, I’m invested in real estate. And, but as soon as I would stop working, as soon as I would sell something, I’d have to go and kill that next deal. And it was not at all what I wanted it to be. It wasn’t what I was hoping that it would be. And so, it wasn’t until 2018, that first aha moment came where I just said, I have to collect passive income where I’m not even operating the deal. Before that I owned, I even owned an apartment community where we had past investors and things like that, but I had to still work to get money. And so, it wasn’t until 2018, my sweetheart and I jumped into one deal that a friend of mine is running. And then in 2019 we jumped into two more deals, completely passively. And the second little aha moment was just a couple of weeks ago as I was playing the game cash flow with my sweetheart and her kids and her oldest daughter. And we got out of the rat race and I was just thinking to myself, this is what life’s all about is collecting passive income, you know, when you don’t actually have to hunt for that next paycheck.

Seth: Yeah. Gotcha. So, a little bit less transactional where you’re not just hunting for the next one, the next deal, the next deal, the next wholesale, the next flip, whatever it might be. So, tell us a little bit more about those passive investments. You know, what kind of deal was it? You know, what market you know, what asset type?

Adam: Yeah, the first one was a B class asset in DFW. Joe Fairless is the operator on that deal. He does something where he raises more money than is necessary for closing the deal. He does that for a couple of reasons. One of them is so that no matter what he can pay you a monthly dividend, it’s 2% a quarter, eight-ish percent per year. But as he pays that, it’s return of capital instead of return on capital, which is kind of interesting. I think that’s something that the listener ought to be able to read in the private placements when they’re getting into one of these. Because I didn’t understand it when I was reading it. I just expected that it would just be my return on my money. I didn’t think about it, but what was really happening is they were giving me some of my money back, like, you know, 2% per quarter. I thought that was interesting. Not everybody does it that way. But it was a little over 400 units. And then the second one was a deal that actually somebody in the mastermind that Seth and I are part of, Prashant Kumar asked me if I wanted to jump into a deal that he had. And I really trust him. I like him a lot. And so, I didn’t do a whole bunch of vetting, but I reached out to my sweetheart and I said, hey do you want to jump into another deal? This one’s like 458 units. And she said, let’s do it. What is the return? And actually, that one should return more than a normal deal, like around double our money back in less than three years. Most of the deals we jump into and look for double money in about five to six years. And so, this one was pretty compelling. And so, we jumped into that one and then there was one more in Atlanta. Oh, the second one was in Huntsville, Alabama, which is kind of cool because I didn’t know a lot about Huntsville before jumping into that. And so, it helps me to be able to be diversified across, you know, DFW, Huntsville and Atlanta. The other ones about just under 200 units. And that’s the most recent one and it’s probably underwritten the most conservatively. So, which is approximately 14% IRR over six years. We’ll pretty close to double our money in six. But they’ve all been fun. They’ve all been exciting. We’re not getting cheques for all of them, which is another thing that the listener might want to know is that some of them are, they over raise like the first one I told you about, the second one I told you about in Huntsville, they’re not doing any distributions at all until they either sell it or refi. And the main reason why is because they want to make sure that the property has enough cash flow. And so, they actually told us that ahead of time. And so, it was something that we wanted to be, that I think that the listener needs to be completely aware of that you’re not going to get dividends for every deal. This one’s a heavy value add. And so, it has a bigger backend, but nothing kind of, to kind of, you know, no carrot to keep you going. And the last one is in the middle. We skipped the first two quarters. They didn’t pay out yet, but then they’d been giving a modest two-ish percent per quarter since then over the last approximately a year now.

Seth: Interesting man. Yeah. It’s all about setting expectations up front. I mean, as long as you’re transparent and you know, or the sponsors transparent, you know what you’re getting yourself into, you know what to expect going forward. Could you kind of dive into that return on versus return of investment and kind of just walk the listeners through that because that’s a pretty interesting concept that people don’t know a lot about.

Adam: Yeah, of course. And very, very, very important that we read it correctly. And for any sponsors who might be listening to the sponsor, meaning of the deal operator, who might be listening to the show it’s critical that it’s your job to be honest and upfront about this one thing. Because a lot of us have a misunderstanding, even me as somebody who’s operating deals, I completely misunderstood it. It wasn’t clear when I was getting into that deal. And so basically return on capital is a, you put in a hundred thousand, for instance, on one of these deals, it’s a hundred grand or some of them are smaller, but if you do that and you’ll get a return on your money, then your hundred is still sitting in the deal. And let’s pretend like you’re getting an 8% return that year. So, I would have gotten eight grand that year, but my full investment would still be there. All of the principal would still be there, but with return of capital, these other types of distributions, it’s going to be that I put in a hundred grand, but if they give me like an 8% return of capital, then I’m actually just getting eight of my thousand back. So, I may as well have put it in a closet and just like went to the closet and said, I got a dividend, you know, cause it’s not making money on my money. At this point, if I got an 8% return of capital, excuse me, yeah, return of capital. Then I would have gotten 8,000 that year. And my investment into property would only be 92. And so, we need to look at the difference between those two, because some operators go one way, and some go the other way. And we want to know would it have been better for us to just keep the money and pretend like we were getting a dividend or give that extra capital to the operator and just have them give us our money back.

Seth: And if you’re getting a return, you know, in the first month after you invest, it’s probably a return of capital, not on capital.

Adam: A hundred percent.

Seth: So, what are some other tips on vetting, the sponsor or the market or the deal wherever you want to go with that?

Adam: Yeah. Well, I will say that when I got into Huntsville, I didn’t spend enough time even looking at the market. I trusted my operator and he’s just a really good guy. And so, because of that, I made a mistake where I didn’t, I was so busy at the time that I never really looked at the market. However there’s a lot of things that we do as operators that we, when we look at a market before we’re willing to go in there, and those are the same things that I think that it’s critical for, you know, a passive investor attorney who wants to be able have their high paying job, but also make their money start working for them. If you’re going to get in with an operator, whether they’re new or established, here’s a few things that you can look for in a market that will help you to be able to know that you’re going to make your money back. And I’ll go through them kind of fast, but also make sure that if there’s something that needs to be explained, I’ll go through it. The first one is population, and you can look at, you can look at a costar report or go to usa.com for free to understand the population. And the things that you really want to look for in a population is number one, it must absolutely no matter what be larger, the MSA, they call it a metropolitan statistical area must be larger than a hundred thousand people in the MSA. That means DFW, maybe there’s parts. Maybe it’s not the D or the F maybe it’s the W, but every single part of that larger MSA where it’s all kind of lumped together, needs to have at least a hundred thousand people. My team, when we do this, what we want to operate, we want to make sure that we’re getting a market, an MSA that has a million people. So, it’s 10 X that, but just for the listener, no matter what, don’t go under a hundred thousand people in the MSA. And it’s pretty easy to find that on usa.com. Another piece of the population that is important to look at is that it has, it is growing 1% year over year, and that will continue to grow 1% year over year, and the best place to see if it’s going to be growing in the future is usually costar. And it’s hard to get those reports sometimes, but if you have a broker or if your operator has already got a costar report, you want to look to see if it’s projected to grow 1% year over year for the whole time. So for instance, if your operator says, I’m going to be holding this for five years, you’ll look at those reports and you make sure that it has been growing for the last few years, at least 1% on the population size each year, and that it’s projected to continue to grow. So, population is critical when getting into a new market. The next one is jobs. And there’s three things to think about with, in jobs in the first one is you want to have job growth where it’s 2% year over year. So, remember I said population growth, at least one, job growth is at least 2% annually. And you also want to make sure the second thing about jobs is to make sure that there’s no industry that provides to your tenant base that’s larger than 20% of that area. And so that it’s like if you’re in an area that has 25% that revolves around oil and gas, it doesn’t mean that it’s one company having that oil and gas, maybe there’s five different companies that actually make gas, but also if the other jobs are like trucking, where they move the gas and haul the gas or refineries where they create the fuel and all of those combined need to still be less than that, 20% within the job diversification, if you want to make sure that you’re protecting your assets. And the third thing is just making sure that those jobs will be around at least for the duration of the whole period. For instance, if you’re thinking about the jobs that are in one market, and you think about kind of where technology is going, and you want to be able to say to yourself, if Tesla and all these electric cars come out then, and I’ve got a lot of people here that are dependent on oil and gas, for instance, then you might ask yourself, should I invest here or not? Or if most of the jobs are in the malls or whatever, and you might think to yourself in the future, people might just be buying things on Amazon and getting them delivered. That kind of seems where the trend is going. You might want to be weary of getting involved into that market right away, quite a bit of other things that I could share, but I wanted to kind of make sure that we’re moving it in the direction that you want to go. I could talk about income, home prices, schools, crime, rents, occupancy, demographics to look for, desirability, affordability or, or whatever wherever you want to take it.

Seth: Yeah. I mean, there’s tons of things you can look at and you just named a ton of them, but really it comes down to jobs and population. I mean, populations also follow the job. So, wherever the jobs are, the population follows.

Adam: I agree with that a hundred percent.

Seth: Yeah, man. And anything on the sponsor?

Adam: You know, right before I jumped into the sponsor, there’s one piece that’s pretty critical, that it’s the schools. I think it would be important to mention that as well. Because a lot of people they’re talking about, Hey, let’s go to Tennessee, let’s go to Ohio, let’s go to Mississippi or whatever. Because the prices are cheap, the cap rates are high or whatever it is that really attracts them to those areas. But in a lot of these markets, the school system is, you know, 3 out of 10, 4 out of 10, 5 out of 10. And what we have found is if you’re looking at crime, because crimes also important, but schools are a precursor to what will happen with crime. And really the metric to look for is if it’s a 7 out of 10 on the schools that are around your area, if all of them are 7 out of 10, 8 out of 10 or 9 out of 10, maybe even 10 out of 10, but if they’re all seven or above, you’re looking at a place that’s probably going to continue to have a lot of people moving there. It’s going to regardless of where crime is now today, crime is probably going to get better and better and better if those schools are 7 out of 10. So, I would say to the listener to make sure that you just go onto either www.neighborhoodscout.com or www.niche.com, www.neighborhoodscout.com is awesome. And you can just jump on there usually for free and just kind of search and make sure that the schools are solid enough. But as far as vetting a sponsor, I’ve got just a four-step easy process. And the first one is a gut check. Absolutely the first thing is we believe that we are a good judge of character in general, and a gut check, a negative gut check. It means that you just look away automatically, a positive gut check doesn’t mean that you’re going to certainly invest. It only means that you’re going to go to the next three levels. And so that gut check, if something’s feeling off, you definitely want to pull out. If everything’s feeling pretty good, you feel like your sponsor, your operator is authentic, genuine, they are who they say they are. Then you can go to the next step. The second step of vetting a management team is understanding their track record. You might want to call some references, people that have worked with them in the past. And it’s also important to mention that a zero-track record doesn’t necessarily mean that you don’t invest. I’m just saying that you must understand the track record, because there was a time in my career where I had never done an apartment deal before, and I did well on that first deal. So, it doesn’t necessarily mean a bad thing if they don’t yet have a full track record, but you want to go into it with eyes wide open, understanding that completely. And if you feel comfortable with that operator, you talk to references, you see what they’ve done, you can verify it. Then you go to the third step, which is doing background checks on the operators. And you don’t want to do this too early, because it costs like 30 bucks a person to do a background check. And you don’t just do a background check on just one person on the team. My way of working with teams is to do a background check on everybody that I see on the general partnership, the operating team. And it’s fairly easy to do that. There’s a lot of different websites that you can go to. You can, if you want ask for the social security number and you go and plug it in, another way to do a background check is to go on social media and just search for people and look to see if there’s good reviews, bad reviews, and you can do that for free. You can hire a private investigator, which most of your audience understands very, very well. But within the background checks, you just want to make sure that they are who they say they are, that they have not ever completed what we call a securities violation that would put them into, I think it’s called a bad boy clause, something like this. But the point is if they have, if they’ve stolen money or if they’ve gotten trouble, then you don’t want to be getting involved with them. If they have a terrible credit score or something like this, you just want to be able to know if that’s something that they’re talking to you about, or if they’re trying to hide it. And the fourth and last thing is just to make sure in my opinion, that they use costar. I’m not trying to get people to buy costar. I don’t make anything if you do. But the point is when you are, when you’re a passive investor, the most clear way that you can know that your operator is getting real debt is if they’re either paying for, or they have good connections with people that have access to these costar reports. So, if you ask your operator, Hey, do you use costar? Or can I see the costar report for this market? And they don’t understand what you’re saying. I would say that’s a huge red flag just to turn and run away. But if they’re like, oh yeah, I’ll show you the costar reports. These ones we pulled last month. I can pull a fresh one if you need, if they say something like that, then you know that they care a lot about the data that is going to be kind of like the reason behind why you should invest.

Seth: Gotcha. That’s all gold, man. I love the gut check thing. So, you know, many of our attorneys are, many of our listeners who are attorneys are conservative by nature. How do they decipher between the gut check and maybe just general fear of something new of investing in something outside of stocks and bonds.

Adam: Well, this might be self-serving, but like, I believe that this is the best type of investing. I believe that it’s the strongest. If you look at the sharp ratio, it says, you know, that the S & P 500 scores a 1.0, blah, blah, blah, which basically means that the S &P 500 kind of makes you money. And SB 500, they’re trying to diversify. So, they take those 500 top companies. I believe that multifamily is the best asset, because they’re five times stronger than the S & P 500 when using the sharp ratio. So even though it sounds self-serving, I believe apartment communities are the way to go. And so, if your listener is thinking to themselves, should I invest in apartment communities? The answer is absolutely. You can keep doing your research, or you can pull the trigger, but it is a very solid way to invest. I believe that it gets you higher returns than almost anything else. And with less risk, which is why the sharp ratio shows it being five times stronger than the S & P 500. So now, the attorney who’s listening is thinking, you know am I uneasy about getting my money out of wall street? Or am I uneasy about this operator? If you’re uneasy about the, about getting out of wall street, just bite the bullet, do it. It’s the way to go at least diversify and have some into this, get your feet wet with maybe like 50,000. But as far as that gut check, it’s not about you doing something new. Everyone feels a little bit of apprehension, a little bit of fear, even when we do something that we have not yet done before, they might feel conservative. The point is this gut check isn’t about the investment. The investment is solid. It’s about the operator. It’s to know if you resonate with that operate, if you feel like you have a good relationship with that operator. If it’s somebody that you literally don’t like, you don’t like their attitude, you don’t like how they talk. You think they’re too pompous or arrogant, or too conservative or whatever, then that gut check is telling you not to invest with that person, but I still think you need to invest in the asset class itself.

Seth: Gotcha. Yeah. So there’s definitely a difference between the gut-check and then that other kind of feeling in your stomach when you wire that first 50 or a 100K that you get in your feeling or getting your stomach, a little bit different. Let’s dive in a little bit to active versus passive investing. Since you do both, you went over some of your passive investments that you do, and you’re obviously an active investor and operator yourself. What are some of your thoughts about it? You know, the pros and cons and you know, where you see yourself actually going in the future?

Adam: Definitely see myself in the future, I’ll keep running the team that I have at Blue Spruce Holdings. We have a pretty solid team, and I don’t want to stop doing the active. I feel like I get the most value truly with my passive investments. The active is kind of like w what I feel like we want to do, what we need to do to kind of get enough money to go passive. I’m only a passive in three deals, right. And I have a little bit in the stock market right now, and that’s about it. My goal is to have my passive income just grow and grow and grow and grow. So as far as the pros and cons or the benefits of either, the most clear benefit to active investing is because you can make infinite returns or at a minimum exponential return. So there’s a lot of our deals where we’d, I don’t have to put my own capital in my own deal because we’re able to, we have so many passive investors that want to invest with us that it’s not necessary for me to do it unless the lender requires it. And so that way I can actually make what’s called an infinite return on my capital, because I have no money in the game. It’s just my time in the game. And so, I’m able to really leverage OPM, other people’s money and get into these deals. And that’s the most clear benefit. There’s a lot of drawbacks to being an active investor. You have a fiduciary responsibility, you got to take it seriously. The market could change at any moment. You’ve got a lot of work to do, to communicate with passive investors, a lot of work to do, to communicate with your property management team, a lot of work to look at your KPIs.

There is annual. There are semi-annual, there’s quarterly KPIs, there’s monthly, there’s even weekly things that you look at every single Monday. And when you’re operating a deal, that’s in a place where it needs to, you’re adding value to it. You even have daily KPIs that you have to track every single day. That’s a lot of time and attention. And if you have a full-time job as an attorney or whatever, you’re not going to be able to actually operate one of these deals efficiently. You’ve got a full time as an operator to be able to do it efficiently. So that’s a huge, huge drawback as well, as far as passive investing, there’s the same thing is both a pro and a con at the same time, in my opinion, when we are passively investing, there is no way that we can be the operator.

We can’t micromanage that being investing in private placements is very similar to investing in stock market, where I might own like a few shares of Coca-Cola. I can never call them up and say, you got to make a different version of Coca-Cola. I want cherry lemonade Coca-Cola; you can’t do that. You can never be the operator. You always have to trust in them. And so, part of that makes it so you kind of feel, you could feel uneasy. It’s like, well, I’m such a smart person. You know, I’ve been in school a lot. I know kind of how to run business. And I want to have my fingerprint on what’s going on here. However, at the same time, that drawback is a huge benefit, because I’m currently invested in Atlanta and DFW and Huntsville, Alabama, and I don’t have to lift a finger ever. I guess you have to lift your finger to click a mouse. And that’s really, all I do is I check in on it when I get my monthly updates, I just click the mouse, see kind of what’s going on. And I love it because I’m making basically 20-ish percent when you kind of average all of them together on my money per year. And I’m not doing hardly anything. If you got $300,000 out and you’re making 20-ish percent, what is that? That’s a $60,000 a year without doing anything, clicking a mouse.

Seth: Yeah. And I’ve heard time and time again, you know, even if you’re interested in being an active operator, everyone always says, invest passively in a deal first, get the feel for things, you might just like doing it passively and just keep doing it. Or, you know after you’ve kind of got the experience, then go into active investing.

Adam: We have a couple of attorneys, doctors, and engineers that have said that exact same thing. Their plan initially was to be an operator. And when they kind of started getting educated and they put their first money in as a passive investment, they decided that they just, they love their engineering job for instance, they just want to keep being an engineer. They love what that takes, and they don’t want to have to be involved. And so, for instance the engineer that I’m thinking about Siva, he did that first, and now he’s involved 3000 different doors, which is about 15 deals for him. And he’s making tons of capital enough that he wouldn’t have to be an engineer. It’s just that he loves it. So, I agree with you 100%. I did it backwards. I did it backwards because I didn’t have enough money to be a passive investor until I was an operator for some time. And then we were making pretty good money and it was like, Holy cow, should I buy a Ferrari? Or should I put this money to work for me? The Ferrari sounds really good to me right now, but if we put it to work, maybe we can, you know, buy more Ferrari’s 10 years from now.

Seth: A little delayed gratification.

Adam: Exactly. Exactly.

Seth: I mean, if you’re a high income earning professional and you can put 50 or 100K every year into these passive deals, I mean, it adds up really quickly and you can be retired before you even know it.

Adam: Oh, yeah, for sure.

Seth: A lot of our listeners are just getting started, you know, they don’t know if they want to go active or passive first, but, you know, let’s say they want to go passive. And you particular, you’re a master of creating meetups and podcasts. So, you know, how are, what are some of the best ways that passive investors can find deals?

Adam: My thought on a passive investor finding deals is step one, they listen to podcasts and they go to conferences. It’s probably better that they go to a larger conference than just a meta up in my opinion. But the interesting thing is when you saw, if you’re listening to a podcast, for instance, let’s say that the listener resonates with you, Seth, the listeners, like I really like Seth, I’m getting a lot of value from him on the show. Each and every episode, I’m learning more, it’s time for me to go passive, I’m ready. So what they would do is they would literally just try to contact you, try to get ahold of you and then go through those steps of vetting you and vetting the market that you’re in. And that’s going to help them to be able to say, I’m ready. I like this person. Maybe they search for your name. They find out that you’ve never broken securities law, all that kind of stuff. Now they’re ready to go passive. The other route is to go to conferences, but you don’t just jump in two feet with the first person that you meet. What I think is a good hack to allow you to be able to start getting these relationships is that you’ll shake hands with lots of different people. You’ll connect with people, maybe grab a drink with a few different people. And you’ll always ask them the same question. It’ll say, you’ll say who here do you know is a good operator, a solid operator where if I have 50 or a $100,000 to invest that they would, that you know, that they would protect my capital and you want to get actual references. You don’t want them to just say, well, I can do that for you. You want to actually have people speaking of that person, without them asking for it. And so, as you go through, you’re going to find that there’s two or three people that are in that room of let’s call it 400 people. And there’s going to literally be two or three people that most of the people point out. It’s kind of like this common ground. Now step two is just is to start vetting them the way that I shared earlier, where you do the gut check, the track record, the background checks, and then making sure that they use costar. I think that’s a silly one, but it’s interesting. Nobody else would ever say it, but it’s a powerful one at the same time.

Seth: Yeah. I haven’t heard anyone else say that, but it’s interesting. I mean, you’ve got to have access to the data, and you’ve got to utilize the data to make some competent and intelligent decisions. Before we get into the freedom four, what’s one last golden nugget for our listeners.

Adam: Good question. I love it. Okay. One last golden nugget is, I’ll bring up something to the effect of housing prices in the markets that you are looking at. And what’s interesting is you’re going to want to know a few things about how housing prices, you’re going to want to make sure that they’re going up. Basically, it’s getting more desirable, etc. But one of the most fascinating metrics is this. You want to make sure that it’s cheaper to rent than it is to buy. Oh my gosh, nobody thinks about this, but if it’s cheaper to purchase a property, because rents are out of this world, your tenant base is going to turn over too quickly. Your tenant basis is just saving up their money so that they can get into the house because it’s cost-prohibitive for them to rent from you. But if it’s the opposite of that and you actually have where it’s cheaper to rent than it is to purchase most of the time, what you’re going to find is more of your residents, your tenants will stay for longer period of time. And that turnover when they move out is one of the most expensive things for the operating team, for the property, you got to revamp it. So, I would say making sure that it’s cheaper to rent than it is to buy in the markets that you’re investing in is a huge golden nugget for any passive investor.

Seth: I love that. Yeah. You hit the nail on the head, man. The turnover is where you just lose a ton of money. All right. Let’s jump into the freedom four. So, Adam, you know, me, I’m all about health and fitness and I own a gym and all that. So, and I know you’re getting into a lot of new hobbies, so what’s the best thing you do to keep your mind and body healthy?

Adam: I get outside, I’d say the best thing that I do to keep my mind and body healthy is get outside. Every morning I do practice gratitude. And I try depending on the weather, I try to get outside and get some vitamin D, some natural vitamin D. And basically, that always gets your heart rate up. But it also kind of, I believe that for us as humans, that there’s something about the sun that gives us more energy and helps us to be able to sleep with the melatonin levels and all that kind of stuff. Sleep better at night as well. So, get outside.

Seth: Got it, got it. In an alternative universe where you weren’t involved in real estate, what would you be doing?

Adam: I would be searching for the, what is it called? The sharp ratio that I already mentioned, and I would get the second-best thing since multifamily passive investing is the best thing. Then I would just like go to that sharp ratio and get to the second-best thing on the list. So, there’s that.

Seth: I love it. I love it. Where were you at five years ago? And where do you see yourself and your business five years from now?

Adam: Five years ago, I was flipping properties off of tax deed sales, living in Colorado with my two sons. And actually, I doubled our money three times at the end of that year, doubled my money three times. And the longest period of time that it took to double the money was eight days. And so, I remember thinking that this flipping thing was the best thing since sliced bread. That’s what I was doing five years ago. And there was a reason by the way, why I decided to do apartments and more passive investing than that. I was chasing that shiny object, that was five years ago. Five years from today, I will probably still be in Colorado. I will probably still be trying to get outside and exercise and play with the kids and enjoy life one day at a time. And most likely I will still be investing in apartment communities. I’m partnered in 1,400 apartment doors, which is about a hundred million dollars of real estate that I’m partnered into. And I assume I don’t need to get there, but I assume that I’ll probably be around double that in five years from today.

Seth: Nice, nice. I know you’ll get there, man. So last but not least, how has passive income made your life better?

Adam: Honestly, the only thing that I would say, well, two things that has made it better, COVID just happened. So that’s the second thing is COVID happened and business, all types of business changes, the things we’re doing for active income change, sometimes for the better and sometimes for the worse. But when it happens for the worst, if you don’t have this passive income, then you’re going to struggle. You’re going to have to think on your toes. You’re going to have to think quick. You’re going to have to make some changes. But when we have that passive income coming in already, my expenses are completely covered by passive income. And that to me is amazing. And so, there’s that, when stuff hits the fan, we’re going to be okay. But the first reason going backwards, the first reason is literally because I know that if I want to stop working, if I want to take a vacation, I’m fine. I’m fine. I’ll be fine. And the passive income, it just keeps growing itself because I don’t have to work for it. So, I see a huge retirement account, you know, for me, I see being able to help other people by investing in their deals, by supporting their charities, etc., etc., etc. So, yeah, Passive income, that’s honestly where it’s at.

Seth: Yeah. I mean, some people are, they think of real estate is a little bit risky, but that’s really just the fear of the unknown because they haven’t done it yet. But you know, one source of income is what’s really incredibly risky.

Adam: Oh yeah. For sure.

Seth: Yeah. Adam, man, this has been incredible. Where can our listeners find out more about you?

Adam: Ah, perfect. Well, I have a little giveaway and they can just text the word vetting to the number 41404. Vetting to 41404.

Seth: Nice. Nice. All right, Adam, it is great having you on brother.

Adam: All right. Thank you for having me.

Seth: All right. Adam always brings the fire. He knows a lot about a lot. Adam is a champion at breaking down a complicated topic into just a few killer takeaways. Man, I love that guy. All right. Get over to www.passiveincomeattorney.com right now and download the absolutely free guide to passive investing in alternative assets. And for now, signing off, celebrate the journey.