275: What’s a Left Field Investor?

Catch the full episode: https://www.wealthformula.com/podcast/275-whats-a-left-field-investor/

Buck: Welcome back to the show, everyone. Today is the second round of our Wealth Formula Intra-community interviews. And today it is with an interesting character by the name of Jim Pfeifer. And Jim is going to tell us all about his journey and ultimately what led him to have his own podcast, which you probably will enjoy as well. But welcome, Jim. How are you doing?

Jim: I’m doing great, Buck. Thanks for having me on.

Buck: You bet. So, Jim, why don’t you tell us a little bit about yourself to try to give the community a little perspective, a little bit of ability to relate with what you’ve been through and that kind of thing?

Jim: Sure. So I’m kind of on career number four. I first started out in reinsurance, working for a company that was eventually bought by Warren Buffett. So I was in reinsurance for the first 12 years of my career, and I made a transition after that, too. I was a high school teacher teaching inner city kids accounting and finance. And then I went on to become a financial advisor for a few years. And that’s really where things changed, because the more I started learning about money because I’d always been a stock market guy, mutual funds, all that from the minute I had a paycheck, I was putting it all into 401K. And then also all my after tax money was going into the stock market.

Buck: So you were a W2 guy all that time, right?

Jim: Oh, yeah. I was a W2 guy until just a few years ago, just recently. And I was doing what everyone else does. I was doing what I was told was the right thing to do. And when I became a financial advisor, I started learning and understanding money better. And when I did that, I realized that most of the financial products that I was selling were not really the financial products I wanted to be in. I think you said the buy and hope strategy. And it was all about appreciation of these paper assets. And once I became an accidental landlord in 2008, and when we sold our house, we couldn’t. When we built a new house, we couldn’t sell our old one. And so we rented it out for five years. And that’s kind of when the spark was lit a little bit. And then after five years, I managed it on my own, and I was just sick of it. But I still hadn’t figured out that this was the asset. This is the way to go. But when I tried to sell it, my realtor said, Well, why don’t you instead just let me manage the rental for you? And at the time, that house was paid off. So he also said, Hey, why don’t you get a mortgage on that house? And we’ll buy a couple more, and I did it. I followed his advice. And so pretty soon I had three. I turned one cash flowing asset into three cash flowing assets. And again, a light bulb went on. Then I became a financial advisor, and I learned more and more about how money works, the velocity of money, which you talk a lot about. And that made me realize real estate is what I wanted to do. So I started buying single family turnkey properties. And then I realized, well, one door is nice, but what about four doors, 8 doors. So I started buying some multi-family. And I kind of walked into a 22 unit and bought it. I didn’t know that I intended to buy it, but every step of the way, the guy was like, Hey, you can get out of this anytime. And it was just a great deal. So I bought an eight unit, bought a four unit, and realized that this is what I wanted to do until I realized that managing property managers is not fun. It’s not passive. They say turn keys are passive. They’re passive with a headache. And I didn’t like that. But I kept buying. And then I went to a seminar with the real estate guys to learn how to be a syndicator. And when I went there, sat there, learned for a couple of days. When I left, I knew for sure that I wanted to be a passive investor, not a syndicator. And I hadn’t managed those multi families very well. I didn’t really know what I was doing, but I was saved by the market. The market has gone up an incredible amount, so I more than doubled my money, but I sold almost everything. I only have two single family homes left. Those are the original two of the original three. I’ve sold everything else and put it all into passive syndications. And through that, and just through networking and through your group, I learned the lazy 1031, which is using cost segregation to offset your gains. And so that’s what I did with all those multi families. And I just got stuck in a bunch of syndications. And that’s kind of how I got to where I am now, where I’m a full time passive investor. I have a group of left field investors, and we just try to help educate people and have a network for people to discuss. It’s a little less sophisticated than your group. There’s a lot of beginners in it, but it’s similar in that it gives you a community where you can talk about investments and learn about investments.

Buck: Let’s go back to your past as a financial advisor, because I’m curious. Kind of like in hindsight, obviously, you kind of had an idea even while you were doing this. Or maybe you didn’t, that these products were okay, right? That you were selling, whether they’re mutual funds or whatever, what kind of products they were. Tell me what’s going through your mind and then tell me what? Tell me the way your clients were seeing the products that you are selling. I’m curious about that, especially in hindsight, with the perspective that you have now.

Jim: Yeah, it’s interesting, because part of my practice was life insurance and the Wealth Formula Banking is kind of where I ended up at, but I started selling different types of life insurance, and like you said, mutual funds and other things. But even the life insurance, it was the way they train you to sell. That is. And this sounds bad. It’s not as bad as it sounds, but it’s to maximize commission to the agent. Right. So the first couple of policies, even that I sold myself, we’re not optimized for what I was going to end up doing, which is real estate. They are optimized for retirement way down the road and a death benefit. And those are still okay policies, but they’re not structured like Wealth Formula Banking. They’re not structured in a way that helps you out. So that’s where I learned. I was learning the velocity of money we were talking about, Hey, get this life insurance, and then you can use that to create other assets and do all this other stuff. But the other assets they were talking about, we’re putting it in the stock market or putting it in these places where you’re just kind of hoping that you get appreciation

Buck: So your training and you don’t need to be sorry about it or feel guilty about it. This is just a reality. But your training back then was ultimately okay, how do you maximize commission on this product? Which obviously, that’s a fundamental difference. I remember when I first started looking at these policies, too. I realized it wasn’t just the concept, but it’s the actual structure that was being put together on these policies. But that wasn’t really what you were trained to think about, right? You were trained to think about, well, you have a business to run, too.

Jim: Yeah. And it wasn’t done in a way, like we’re trying to get as much money from the customer as possible. It was done in a way where it was just cookie cutter, like all the other products. Everyone sold the same thing. And it just happened to be the thing that we were all selling was the thing that maximized our commission. And now when I talk to people about whole life insurance or whatever you want to call it, infinite banking, Wealth Formula Banking, the key is to find an advisor that, you know, like and trust and one that is willing to realize that to do what we want to do, meaning generate a bunch of cash so you can put it into other things, the advisor is going to have to necessarily take a pretty severe cut in Commission compared to what they would the standard way. So I think the problem that I have with the financial advising industry, I guess, is that they kind of treat everybody the same, and everyone gets a cookie cutter product. You get this life insurance, you get these mutual funds, and it doesn’t. Unless you find a really creative or the right advisor, they might not even know that there’s a different way to do it.

Buck: Not malicious necessarily, just don’t know any better, right? That’s the moral of the story, I think. Like, I think that that’s been my experience, especially when I look back, the people who were selling me insurance before or were trying to get me to invest in various conventional products they didn’t know. I don’t know that they really knew that there were other options out there. I don’t even think that they understood that if you did an IRA, you could self direct and invest in other things. So a lot of it is just sort of benign neglect.

Jim: Yeah, it is. And it’s a hard job. And you got to learn all the stuff that your company wants you to sell or your company wants you to understand. So learning about the other stuff that just makes it even more complicated. And so I think now that I know what I know, I’m glad I went through that. It was very important to me, the whole time to only sell to my clients things that I was buying myself. So I never put a client in something that I wasn’t doing also. But I realized after a while that I don’t get paid when I put someone else in real estate. I’m also not licensed for it. So there was a conflict. And so at the end of my advising career, I was really going into the office, and about 80% of my time, I was using on my own personal real estate. I really wasn’t advising much anymore. And I was really starting to tell my clients, hey, you should look into this syndication stuff, the passive real estate. And so it just didn’t make sense to be an adviser anymore.

Buck: So from the standpoint of advising and having clients that were following what you might call conventional financial wisdom, you obviously had a following, which I presume in part, is your initial group. The Left Field group is made up of. Do you feel like there was a lot of resistance? There was a lot of general sense that, Hey, this isn’t the right thing to do, that somehow they were doing maybe something that was riskier because they were doing something that was not necessarily on their radar and their entire financial life. Did you feel that kind of resistance?

Jim: Not really. Because most of the people were seeing what I was doing, and they were asking me about it, getting excited about it. And some of the hesitation was, Well, I’m not sure my spouse will understand this or getting into the alternative space. And the alternative space, that word drives me crazy.

Buck: Like purple hair and nose rings.

Jim: Right. Alternative investments. It’s where you live. It’s where you go to work. It’s where you should buy stuff. It’s real estate, right? It makes no sense that they are called alternative. But the spouses were the ones that might have been hesitant. But you’re right. I had built up some clients who knew me. They trusted me. And so when I started doing this, they actually asked me, Hey, how can I invest alongside you, or how can you help me get into this? A little bit to it. They didn’t jump all the way out of the market or whatever. But a lot of them were interested in dipping their toes into this and seeing how they like it. And the more you kind of talk about it, and people start asking about it. People want to be involved. There’s barriers. The minimums are pretty high for normal people. And so there are barriers. But people are really interested when you start talking real estate.

Buck: There is a little bit of a resistance in general, because I think you talk about the spouses. I get a lot of that, too, where I get investors who are really interested, and then all of a sudden they say, well, my wife doesn’t really want to do this. She thinks it’s risky, whatever in my own. It’s up to you guys, whatever you want. But it is interesting. We are so conditioned to believe that somehow stocks, bonds and mutual funds, these kinds of things are the, quote, unquote safe thing. And it’s the conservative thing. And it’s not alternative. Alternative inherently has this crazy sound to it, right? Alternative is different, and it’s outside of the norm. And if you go outside of the norm, who knows what could happen? And I feel like that is a major hurdle, you know, especially like within doctors. And I don’t know if you have physician clients, but I never try specifically to target doctors. And the reason is that a little bit of knowledge in the hand of the doctor is pretty dangerous. And a lot of times because they tend to be pretty smart people, and they start sort of rehashing what they may have heard on another podcast or somebody else. It’s a very difficult thing, I think, for people to realize that this alternative pathway is actually not unsafe.

Jim: Right. I think it’s not unsafe. It’s just illiquid for me. In the stock market, you’re betting on what other people will think the price will be in the future, and then you can sell it to someone for more. And in real estate, you’re betting that you can maintain and increase the income that the asset produces. And then you pocket that income, and that since the income from the asset is increased, you’ll probably have appreciation in the asset. You forced the valuation to go up. You know, the way I look at it is the stock market. That’s where the risk is. That whenever I want to have some fun investing something, I’ll go find a small stock or a pre IPO or something to a little bit of money in that. But the real estate stuff that’s just boring. And it just goes right. It puts money in your pocket, and there’s appreciation on the backside. And the only risk is that you’re tying your money up for a long time. That’s how I see it.

Buck: Boring is good. And I think that’s a mantra that we have on the show frequently. So tell me, let’s elaborate a little bit on that change from active to passive investor, because you said some things that I think are important. I think a lot of people when they have their initial aha moment from real estate about the depreciation, all those benefits, tax benefits. A lot of times it comes following a purple book. It usually comes from, like a Kiyosaki book. And Robert has just an incredible ability to inspire people through his words, as simple as they’re written, is a genius that he has. But, you know, people get inspired with that, then their takeaway is okay. Well, then I just need to buy houses and, you know, then live up the passive income and game over. But it’s not that easy, right? I mean, at the end of the day, what I found was that if you really want to make money in real estate, you probably a got to pay a lot more attention to the assets. It’s not a hands off thing. If you’re going to do it yourself. If you really want to squeeze out the profit potential profit on these things, you really need to push it. You need to be managing these things. But on the other hand, that’s what creates the profit. Right. And then the second thing, I was just I don’t even remember what the second thing was. But the bottom line is that it’s not easy. And the issue is that how do you transition from letting go to that and saying, hey, I might make as much money, or even more, potentially or maybe less. But if you took the value of my time and incorporate that, I’m probably better off going past that. Tell us a little bit about that journey, because I think that’s an important one.

Jim: Yeah. The property managers were a lot to manage, and I was looking to be more passive, less involved. And you can’t do that on turnkey properties, maybe a little bit. But on the multi family, it was constant battle with the property manager to renovate units. And how much is that going to cost? And I was looking for cash flow. So every time you renovated a unit or evicted a tenant, I didn’t want to do that, because then I’d have to have cash out of pocket. Just didn’t understand how it worked. And not really until Western Wealth, when you connected me with them, that I understood that if you renovate a unit, it’s not how long does it take to pay back the cost of that renovation? It’s how much does that push the value of the property? I didn’t understand that until after I sold my multi family, and I actually sold it to someone who I was in another group with. And I was pleased because I more than doubled the value of that property. And he then in another year, doubled it again because he did it. He did it right. So it just proved to me that you need someone who’s a professional who knows what they’re doing to manage these assets. And so I would rather put my money with Western Wealth capital because that’s all they do. They know what they’re doing. They’re going to take it. They’re going to run with it. And I am convinced that my cash flow, well, my cash flow is going to be better during the whole time, than on the multi family I owned, and the return afterwards will probably also be better.

Buck: So one of the challenges, though, Jim, is that in this market, too, it’s like, what is cash flow, right? If you really want to increase the value of these properties, you’re generally putting in quite a bit of money. What I found and the evolution that I’ve had, I start. And this brings you back to the Purple Book thought that I forgot about was that it’s not that actually easy to generate that much cash flow where you can just replace your income by buying a certain number of houses. It takes a tremendous amount of equity, actually, to get to a position where you can maybe 6 to 8% really have substantial cash flow that could replace your income. In our group, we have so many people who have very high paying jobs. So the question is, do you really even need that cash flow, or do you really care that much? It’s still there. It’s not very much if you look at Western North Capital, but really, what the difference in paradigm is. Okay, what we’re really trying to do here is force equity, create equity, create a future pile of equity that at some point we can flip the switch and buy Walgreens if we want to and then live off of that cash flow. But in the short term, the cash flow is probably not the way the Purple Pill made it seem.

Jim: No, that’s correct. But I would also say that if you’re buying apartments on your own or buying turnkeys, you’re also not getting the cash flow that you think you would get. And one of the guys in our network, he called it lumpy returns. So if you have a single family or you have multi family and you’re an active guy, then your returns and an air conditioner is going to take a month or a year’s worth of cash flow from you. But if you’re in a syndication, you’re going to have maybe the returns might be the same or lower, but they’re going to be steady. You can rely on every year or every month or every quarter. However often they turn out those distributions that they’re most likely going to come because they are running it as a professional operation. And in my mind, that beats me being active in hiring a property manager every time.

Buck: What it ends up being is the difference. You know, another, aha, moment that I had as I phased out of being a guy who is buying 20, 30, 50 units at a time was that it’s a difference between being an investor in a business versus being a landlord. Right. Those are two very very different things. If you are investing as a passive, it is a limited partnership. Essentially, what you’re investing in is a business that does real estate business. And that is a very, very different thing from deploying capital and becoming a landlord. I mean, that is, like, fundamentally the big difference, don’t you think?

Jim: Yeah. I completely agree. And you don’t realize that you have to go on your journey, right. So I never would have gotten into real estate, had the 2008 crash not happened, and I wasn’t able to sell my old house. And from there I just got a little taste, and I kept moving and kept moving forward. And now I think I’m never going to say I figured it all out, but I’ve landed in the space where it makes sense. I’m having professional people manage my investments, and then all I need to do is screen those operators, find those investments, find the people that source the investments, and then invest in them. And once I invest, that’s where the passive starts. The active part is trying to find the investments from the people that you’re going to invest in. But after that, I don’t have to do anything because I’m investing in a professional company that’s going to send me periodic reports. They’re going to send me distributions. They’re going to handle all that stuff. And that’s what I’ve proven, that I’m not as good at that as they are, because that’s all they do.

Buck: Absolutely. Makes sense. So one of the things that we talk about a lot of times through forums like ours, whether it be Wealth Formula Network, which you’re a part of or you have your own forum, which is the Left Field Investors. We always talk about this idea that you learn from your mistakes and whether or not you call it a journey or you call it whatever. Ultimately, what you’re doing is you’re going through your own mistakes and you learn from them. How much I’ve always thought that groups like, Wealth Formula Network or Left Field Investors like part of the idea there is that, yes, you do learn from mistakes, but they don’t have to be your mistakes. Right. They could be other people. And if you found that to be the case, whether it’s through our group or your group, have you had that experience or felt like others have gotten that from your group?

Jim: Yeah. Absolutely. I found Wealth Formula, your group. And it was a huge, aha moment for me because I finally understood how to the force equity part was just a light bulb that went off, and I jumped in a bunch of those investments, as my accountant said, it was the lazy 1031, using all that depreciation to offset the sale of my active businesses. So I learned that from your network and a lot more. And I’ve learned a ton from my network. And it is the fact that you can learn from other people’s mistakes, learn from other people’s history. And I can’t get over the fact of this little niche we’re in of passive investing. It’s so collaborative. Your group is fine to work with. There isn’t competition. I mean, we do different things, but we’re not competing. And it’s really the same when you’re talking to one syndicator, they know the next. There’s so much sharing of information, which always surprises me rather than people being competitive and trying to hoard their little area. But there’s a ton of benefit to having a place where you can talk to others and say, Hey, I’m thinking about doing this, and they might say, Well, I did that before, and that turned out to be a mistake. One of the pieces of advice I got from one of the guys in my group was when he invests with a new syndicator. He waits a full year before he recommends them or invest in another deal. And that’s good advice. I tend to jump in with one foot and then go all in and invest in the next four deals you send out. And it’s worked out, but it makes sense to pause. You don’t have to always rush so much. Some of the other things I’ve learned is make sure that when you’re dealing with an operator that they have not only experienced, but they’re not transitioning to do something else. The one time I really got burned, and this is before I was in a community, was investing with someone who had done one thing, turn key rentals in Dallas and was now doing office real estate and didn’t know what they were doing. And there are huge problems with it. So relying on your community, your network, and having multiple communities, it’s the best way. It’s shortcuts. It allows you to skip over some things that you might have learned the hard way. And instead, as you said, you can learn from someone else’s experience. So I’m all in with the community and network. I think it’s vitally important.

Buck: Yeah. So let’s talk about that. I’ve got, Wealth Formula Network, which is our private community. If anyone’s interested, get a WealthFormulaRoadmap.com and check that out. But you have Left Field Investors. Tell us a little bit about that group.

Jim: Yeah. So basically, I just wanted a smaller community. I participate in your network and listen to the calls. And that’s awesome. There’s phenomenal people on there. But I also wanted a small group where I could just kind of network with people. And so I was going to do a 12 person dinner group kind of thing in Columbus, 12 people, because that’s the smallest room I could get for free in a restaurant. But then the pandemic happened. So we never met and we still haven’t met. We went online once we went online. That allowed people from out of town, some of my financial advising clients, some other friends, family. And then we started inviting syndicators onto every month to be guest speakers, and it just kind of grew from that. And our focus is we want to help educate people and provide a network for people that want to invest in real assets that produce real income. And I think one of the major differences between our groups is we have non accredited people. We have investors that are just starting out that don’t know what they’re doing, and they don’t really necessarily have the money to put in multiple deals. We do have some experienced people too. We have people who have been in 50 deals. And like I said, people who are trying to get into the first one. So it’s really just focused on education and networking.

Buck: In terms of the podcast, one of the things with you and I talked about a little bit offline is I know you’re talking to potentially some other syndicators and stuff I did that early on. And when I started my podcast, it was kind of all over the place because I was just trying to make the point that there’s so many things out there that you can invest in. So I didn’t really necessarily do a quality control type thing. I didn’t really do a lot of, I guess, background check on these people from the standpoint of what I invest in, something like this, would I be interested in this? And how well do I know these people, all these things that I think are critically important for actually making an investment? And that kind of came back to me pretty quickly because I realized that people were starting to see that if I had somebody on the show in a way, I was putting a stamp of approval on it. Right. And I found that to be a little bit disconcerting. So now it is very rare when I’ll actually have anybody on or any group on that raising capital that I don’t know extremely well and would be happy to deploy a bunch of money myself. I’m curious about your journey on the podcast front in that because you’re early on, have you thought about that? How do you vet people who are coming on that kind of thing?

Jim: Yeah. To be honest, I hadn’t put a lot of thought into that until we had that conversation. So I definitely thank you for that. But for the most part, not all, but almost all the guests I’ve had so far that are raising money, I’ve invested with. And I feel like I know, like, and trust them. Now, there’s a few that I haven’t. But I am trying to evaluate that a little bit better, because you’re right. When you have a platform, whether you have as many large audience as you do or a smaller one that I have, they do kind of assume that you’re endorsing them. So I do think that is something that I’m going to be more diligent and careful about. What I’ll probably do is screen them. Like, I screen an operator, get some referrals. Hey, does anybody know this person? What do you think about this person? And that’s kind of the way that I think I need to approach you going forward, because we do need to be careful. We need to protect our brands, we need to protect our networks. And the last thing I would want is having someone on the podcast that does something that harms our community.

Buck: And that’s really important. I’m glad you’re doing that. This is a good, useful ecosystem, the real estate podcast ecosystem, but it’s fraught with Charlton too. It really is. And you got to be really careful. And even, like, really good guys that I know who got podcasts end up having people on their podcast, which I probably would not do. And I don’t think it’s malintent on their case. I think again, it’s understanding that anytime you get behind a mic for whatever reason, even if you don’t have a lot of credibility, which you do, you do end up with some sort of status. And so you are influencing people that really apply to you for doing that. What is the podcast called? And where can we find it?

Jim: It’s called Passive Investing from Left Field, and it’s on all the major podcast players. And if you go to our website at leftfieldinvestors.com, there’s a podcast link there as well.

Buck: Fantastic. Jim Pfeifer. Jim, thanks so much for coming on the show and sharing your journey.

Jim: It’s a pleasure as always. And Buck, just one aside, I really do appreciate your network and all it’s given to me because it really did give me a head start and getting into some quality syndications and then kind of broadening out from there. I still listen to the calls when I can’t attend in person, but your group is a high quality, fantastic group, so I really appreciate all that you’ve given your community.

Buck: Thanks, Jim. I do appreciate that. And we’ll have you on again soon in the next few months and we’ll get a chance to see how things are going over at the Left Field Investors

Jim: Sounds great. Thanks, Buck.

Buck: We’ll be right back.