A self-described hillbilly who was "too stupid to know any better" bought 26 crack houses at once with zero real estate experience — and became a millionaire in 15 months. In this episode, Hugh Carnahan breaks down the lean manufacturing secrets he used to build 280 rental doors fast, and the dead-simple money habit he started at 18 that most people will never hear from their financial advisor.
Episode 4: Lean Systems, BRRRR Deals, and Building Real Wealth with Hugh Carnahan
What do a rice hat, American-flag overalls, and a decommissioned missile silo have in common? A lot more than you’d think. In this episode, Mike and Zach sit down with Hugh Carnahan to talk about how “lean” thinking can speed up wealth building, especially in real estate.
Hugh breaks down lean manufacturing in plain English: find waste, cut delays, reduce mistakes, and move faster with fewer resources. Then he shows you how those same ideas apply to your money, your investing habits, and your real estate deals.
If you’ve ever felt like you’re “doing the right things” but still not getting ahead, this episode will stretch your brain in the best way. Hugh’s big message is to build systems, automate the basics, pay yourself first, and take action, even if it’s messy at the start.
“Money isn’t money. Money is money over time. So… a million dollars is not a million dollars to me. A million dollars is $7,500 a month.”
“Try stuff. Fail fast, fail often. Take action and do it now.”
“The shorter you can condense your working time, the value-added time, where there’s not something waiting, that right there is going to put you ahead of almost everyone else.”
“Invest over time and let it grow.”
From sitting in soul-crushing traffic to retiring as a millionaire in 15 months – that's the journey of a self-described hillbilly from Missouri who refused to accept the 40-year grind. After a solar panel salesman told Hugh Carnahan to skip the panels and buy real estate instead, he consumed 383 BiggerPockets episodes, liquidated his $220,000 stock portfolio, and made his move.
His first deal? Twenty-six crack houses in the dangerous part of town for $1.04 million – despite never owning a business before. Using lean manufacturing principles from his corporate career, he survived squatters, corrupt officials, and near-bankruptcy to scale from zero to 280 doors in just 22 months.
Today, he teaches business owners how to go from "overload to overlord" by combining operational excellence with real estate fundamentals. His worst-case scenario? Retiring on $3 million in index funds and $15,000 monthly cash flow.
For Investors & the Fund – Learn how the Fund works and book a call
For Borrowers & Deals – Get funding and support for your next investment
[00:00.1]
Was her shaking you literally all it took? Or was it like something that was simmering in your mind and that made it boil over? Like, how did that happen to you? So I'm, I'm Asian. And when I was 13, I remember it clearly, my uncle pulled me aside and I didn't know anything about money because I was 13, right. And he goes, Japanese people save 60% of their income.
[00:21.2]
You know, we're Taiwanese. Taiwanese save 50%. American white people, they save nothing. And he said, you will be at least Chinese. So I was like, all right, so I just started there. Most people think saving money is the answer, but the truth is, saving only gets you to zero.
[00:43.8]
Join Mike and Zach as they flip the script from saving to earning from zero to unlimited potential. Welcome to Save to Zero. Hey, everybody, thanks for, listening to episode number four of the Save to Zero podcast with a buddy of mine, Hugh Carnahan, out of, Missouri.
[01:05.1]
And, Hugh's got a varied background and this is going to be a very fun show. Just a little background as to where I met Hugh. I was at a real estate event and he was walking around with. What is that called, Hugh? The hat that you had on?
[01:20.9]
Oh, a rice hat. He had a rice hat on. He had shorts on. I believe the shorts. The shorts of the shirt had stars and the other one had stripes. And you had. I was wearing, it was an American flag, American, flag overalls that I cut into shorts and was wearing nothing else.
[01:41.3]
I don't think I had a shirt underneath. And then a rice hat was walking around like a super professional conference. Okay, so here I am at a conference and I'm thinking to myself, okay, who is this guy? And he is either absolutely crazy or he's brilliant, but either way, I'm gonna talk to him.
[01:58.9]
And then you out back talking to Alex, and I was like, dude, I wanna talk to you. And you kind of stepped back, like, what? And ever since then, fricking I was right. I hit the brilliant part. Oh, and just for fun, Hugh owns a, flamethrower and a decommissioned missile silo in Kansas.
[02:21.4]
Yep. So this is definitely someone who's going to stretch everybody's thought process. So well, let's just jump right in. I know you've got a background. Let me see, I'm reading over here. 15 months it took you to, as a self described.
[02:37.7]
With a self described hillbilly and you sitting in traffic. And in 15 months, becoming a millionaire, you liquidated a $220,000 portfolio and your goal at some point, at a minimum, is to have 3 million in index funds, cash flowing 15 grand a month. Yep.
[02:55.8]
But that's pretty pedestrian based on some of the stuff I know you're working on now and I'm sure some of the thoughts you've had. So I think that's enough lead in. Tell me a little bit more, what big stuff do you have going on and what's more of your focus as far as growing versus saving yourself the wealth?
[03:14.3]
Well, thanks for the intro, Mike, I really appreciate it. It's fun not having to come up with an intro. It's always awkward. It's kind of fun watching just being a part of it. So first and foremost, I'm your average guy. And I like to describe myself as a huge piece of garbage.
[03:31.4]
I'm your normal guy, I'm super lazy. And I'll try to find the easiest way to do stuff. And I just applied that. You know, I'll work very hard to do very little. You know, I'll hustle a little bit for a lot. And then, so my superpowers in the back end is, something called Lean.
[03:49.8]
And it comes from the manufacturing space. And on the lean side, it's the science of process. Doing the most or making the most with the least amount of resources in the least amount of time. And then also, I just took that and applied it to wealth building and personal finance.
[04:04.9]
I actually, It sounds weird. I love money. It's very. That's a. Normally people don't say that. It's, it's. Money is made up and it's all pretend and it's fake. It's something that can be created. I've created millions of dollars from nothing.
[04:20.0]
And and you can too. And it's not that hard. It seems overwhelming. But baby steps. You guys can get there too. So. So, yeah, so tell me how I know that we talk about Lean manufacturing in the past. Can you give just a 50,000 foot view of lean manufacturing and how that led into and how you use it in wealth creation? Yeah.
[04:43.2]
So, 50,000 foot view, lean manufacturing. For those of you who don't know, people in manufacturing are like superheroes. They are busting their butt off no matter what country they're in. And they usually have really slim margins, like 1 to 2%. Right.
[05:02.6]
They'll say it's 10%, 15%, but when it's all said and done, they're like 1 to 2% margins. They're constantly on the verge of bankruptcy, even if they don't realize they are. And there's always this mad scramble of, let's coordinate. So my background, I used to work at a $52 million company.
[05:19.0]
It was mad scramble we take every month. It was like a timer, right? Gun goes off and it's like, all right, we've got to get $7 million of raw material through the factory, through 12 different departments to hopefully make $9,000 of finished goods.
[05:37.8]
And hopefully we can sell it out the door without creating any defects or getting behind. And coordinating 350 people across multiple 12 time zones. Okay, well that's very difficult. So they created a process, the most well known ones called TPS or Toyota Production System.
[05:55.3]
And they did it because Toyota was broke in the 30s and wanted to build cars. And so they didn't have enough money to function. So they created a system that allowed them to function with very little money. And through that, in the modern times, they call it Lean Six Sigma.
[06:11.9]
And it's kind of what I teach here on business wealth blueprints. And basically I took that skill set and I applied that to, basically investing in real estate and personal finance. And it allows you to have a really good tool set.
[06:28.7]
But yeah, I mean, very simple stuff. So I'll give you a very generic example. I'll walk into a manufacturing facility and we'll say there's a workers and they're just doing batch work because I'm going to do step a 10 times on 10 pieces and then it's got to go to department B and do that 10 times and then department C and do it 10 times.
[06:51.9]
And I would try to figure out how to get all three machines close together. Where one guy does step one, right? Step A, step B, step C, and then it's done, the customer can have it and then the project doesn't have to wait, all kinds of stuff like that. But those things can translate to millions and millions of dollars with ease.
[07:08.8]
And so kind of taking cheap tools like that and applying them to real estate, that's where I built the bulk of my wealth. And I do a little bit of lending now if I'm not investing in stuff or some things in the market. So I now have enough money to do stuff with it.
[07:26.8]
But applying it to real estate was really, really a game changer because it's such a sloppy industry, honestly. So many people are complete, garbage and noobs at it, including me when I started and still make money Print money.
[07:42.3]
I mean, they're just making a whole bunch and you can too. And most people listening to this podcast, if they are, are going to be smart. That's why they're listening to your podcast. And those folks are probably going to be very successful. So just having good process when you're doing a project, whatever it may be, if you can line it up and not have delays, then you can really, really cycle it through and get a lot of, jobs done and that kind of stuff.
[08:08.0]
It's funny or interesting that you talked about Toyota's system, because when I was traveling after selling my first business, I don't know if you know this, but we traveled around the US for 16 months in a motorhome and we went to Lexington, Kentucky. Yep.
[08:24.4]
Which, where, Toyota has their factory for the Camry. And we went in and they have one of the first Camrys that ever came off the line. And of course, I'm a systems and operations guy, so I wanted to go check it out. And we did the tour and the way that they were making cars.
[08:39.8]
And they explained, if I can remember this going back a lot of years, where, people will work four hours per day on one task and then four hours after lunch on another task, they flip flop so that they decreased the incidence of carpal tunnel.
[08:57.5]
Their seats were on, is it pneumatic arms. They would just move and the seat would come right out. And they never actually were going down the line. The cars were coming and they were just moving in and out, doing what it is that they had to do.
[09:12.7]
And they had all of their screws and widgets and wobbits all on the side of them. So waist height. Yep, yep. Oh, it's fantastic. And then I found out that they put the engine in from the bottom instead of from the top because it has to do with saving time and ultimately money.
[09:30.1]
And that's why they do it that way. And what was interesting is in the factory, people are zipping around on bikes because it's faster than walking from point A to point B. And they actually have travel lanes and everything, if I remember correctly, they've got yellow tape so people know where to look.
[09:46.2]
And it's just like a, like a little city in there. It's approximately 60% faster to travel by bike. Inside of a vehicle or factory. We had scooters, like the little, like a razor scooter. And, it's a really big deal. Yeah.
[10:02.0]
And that's exactly it. Right. So, here's a smaller example right of, you know, what we were doing. Talk about the screws being at waist height and the worker not having to bend over. Right. Everything's right there. They don't have to, they don't have to crawl into the vehicle and then crawl back out. Their chair swung in, they did the thing and they swung back out. Yeah.
[10:21.4]
You know, you had an operation where someone was like, hey, this is six inches on your desk, but I make 500 pieces a day. And you brought it from six inches and you just tipped the box up so it's a 45 degree angle and the parts slide to you. That six inches is now decreased to three inches. Right.
[10:40.7]
Or you scoot it closer by three inches. Whatever, whatever is easier. All of a sudden you take three inches and it's three inches there. I'm going to do the math real quick because it's fun. It's three inches there times back, which is, you know, going to be 6 inches times 500 pieces a day.
[10:58.4]
That's, 3,000 inches divided by 12. That's 250ft divided by 5, 2, 6, 8. So. So that's almost a quarter mile gone. Just because. And that's not serving the customer. It's just making you more tired.
[11:14.6]
They're reaching a little bit more. And so like, you apply that skill set of just being able to see waste and problems, you know, just to whatever you're going to be working on and it's, it's a big deal. How have you applied that to real estate? Like, I think a lot of people can see that. Yeah, if you're doing screws and parts and physical things like that makes sense.
[11:32.7]
But if you're doing money or things that are a little bit more abstract, like, how do you apply those same concepts? That's a great question. So, you know, I had to train all my contractors when we first get in there. So the first thing is I am a. I generally use the brrrr method.
[11:48.3]
So, you guys can Google that if you want later. But, I'm basically going in. I'm flipping crack houses and holding them. So I'll go in, find something that's really bad shape, but the bones are good. I know I'm gonna gut it anyways. And so for instance, if we can have the trailer set, go in, gut all of it, we'll see everything as opposed to, I used to not, without knowing any better, try to retain stuff.
[12:13.7]
I'll go in, gut it all and go in. I'll give you, a great example on timing. Let's say I'm gonna go into a bathroom, and we're gonna reframe a bathroom out. Well before the Sheetrocks on. It's really easy to reconfigure anything, right? Oh, I want the sink a little bit to the left.
[12:29.7]
I want the sink a little bit to the right. I want the mirror to be, you know, I want the electrical sconce where the lighting is at, to be to the left, to the right, whatever. You can basically change it for free or nearly free. You know, 50 bucks, 100 bucks, raw materials. But if you close up the wall and then you mud and tape it, and then you paint it, and then you're like, hey, this vanity doesn't fit.
[12:54.7]
It's got to go to the right a little bit. Now you're looking at thousands of dollars, possibly a day or two delay, possibly more, depending on who your contractor is or if they're dealing with subs. Now, you've just created a massive problem. So it's about being organized to be able to say, oh, hey, this is good versus this is bad. Right?
[13:15.5]
You'll often see this. Usually, neighborhood builders are pretty good. People are like, oh, my gosh, they threw up that subdivision real quick. You'll go and you'll see. Foundation, foundation, foundation. I know this can apply to us, too, as normal people. We're not big businesses like that, but foundation, foundation, foundation.
[13:31.0]
By the time some other crew is working on a foundation, they're pushing the dirt up the street like an assembly line. Then they're framing. So you have the framers going through behind the people pouring the concrete, and then so on and so forth. So if you can stack the timing, then it's really big.
[13:48.7]
But biggest thing is, and, manufacturing is really big on this is don't have a defect or catch the defect. As soon as you can catch the defect before you put the wall in, right? Catch the defect or strong visual controls, while the studs are all, exposed, right?
[14:05.9]
So phase one, demo. Phase two, you run all your lines and stuff. Phase three, you button it back up and make it pretty. So in phase two, before you have all your stuff on the walls, you know where every electrical outlet is. You know where all the plumbing's at. You know where the outlets, you know, you know where all the stuff is on the ground because you don't have flooring yet.
[14:23.6]
Mark, a C, you know, or, you know, Mark, like a C for. I can't remember what it was. One of the boxes we Use that. In addition, if you had an outlet, mark an O. So now it's on the ground in the stud where it's at. And now after everything's buttoned back up, you still have a strong visual control on the ground.
[14:43.9]
So you can be like, okay, here's where this is at. Here's where the plumbing is at. Here's where the le for electrical. You know, it's really easy to do when it's open. So while things are easy, take advantage of it. Or. And here's the fastest, best thing. Triple check your work that your contractors do before doing the thing. Right?
[15:01.6]
Another one, use, a video, right? Everyone's got a supercomputer in their pocket. Take your phone, turn it horizontal and do a slow, smooth, horizontal video of the thing. Hey Jim, I want the vanity here. And then send the video to Jim.
[15:17.4]
And because Jim's not going to do it, Jim's going to have his guys do it. And then Jim can send that to his guys, right? And then training and teaching them. So that's how you instituted it in or integrated it into real estate. How do you integrate it when it comes to investing?
[15:36.0]
Because I know you said you do some stocks when a good thing comes about, good opportunity. So how do you integrate it? So I'm going to say overarching. My extremely boring answer for the stock market is I am a ETF investor.
[15:53.6]
I buy VTI dollar cost average into it. Even right now, a grand a month automatically leaves my account and goes to buy the thing and I forget about it. That's 99.99% of my, investing. So that's an automation. It happens.
[16:10.2]
It's, it's automatic. I timed it where it, you know, X dollars hits my account and on that Same day at 2am X dollars leave. So I never even see it. So that's one thing is take the human out of it. Absolutely. There's some just basic fundamentals that are huge that I really live by that are, just general finance, tools that I use.
[16:35.2]
And so I kind of combine really the lean stuff that's really going to help when you're investing, you know, and doing stuff. But then there's just some basic, like finance stuff that I have, that are just habits that I get into that help me build enough of a nest egg to be able to do stuff.
[16:54.4]
Okay. Other ideas is, you know, you can use automations, you can use reminders. On the investing side, I you, I'm building a bunch of AI Tools right now, that sounds more fancy than it is. But there's projects, in Grok and Claude and Perplexity.
[17:12.7]
So I usually do Perplexity to do research. I don't just have it talk to everybody else and then keep track of things. So the more I can take the human out or do repetitive tasks like if you were always, I don't know if you were an investor and you are always comparing tech stocks and you have some fancy metric that you always check, you probably tie that into an AI that will watch the charts for you and tell other stuff to do stuff so you don't miss an opportunity.
[17:39.8]
But that would be the base level. A lot of the stuff is just good financial hygiene that I had forever and, and then now that I have money when I go to apply it somewhere. I think a lean side of things is try stuff, fail fast, fail often, take action, do it now.
[18:01.0]
It doesn't mean go take massive action and blow up your life and do something. But we are not smarter than most of the people. We are not as educated as most of our competitors. We're not as well funded as most of our competitors, but we consistently find ourselves in a winning position.
[18:17.8]
And, and it's usually because we'll act sooner than other people going into a position or out of a position, whatever that may be, to take advantage. So I can get into some speculative stock market stuff that I did as an example if that's helpful.
[18:33.7]
But well, how about if we switch just a little bit? So I know that you went from near bankruptcy to $280 and what is it, 22 months? What are some of the things that you instituted for that growth so quickly?
[18:49.7]
Because that's very fast. Yeah. So the first and foremost is the vehicle I selected in that case was real estate. And I use the brrrr strategy because it makes use of good debt.
[19:05.6]
And I'm going to assume your audience knows a lot about debt. So money isn't money. Money is money over time. So I like if I'm going to borrow a million dollars, earlier we were talking about a million bucks, for someone that was going to buy a crypto mining farm to put in a megawatt or something.
[19:23.2]
A million dollars is not a million dollars. To me, a million dollars is $7,500 a month. What I mean by that is if I borrow a loan, borrow a million bucks over 25 years, I've got to pay $7,500 a month.
[19:38.3]
So I'm using the Monthly increments to judge if that's going to be a good thing. Now you can scale it down. If I'm paying $100,000 house, it's $750 a month, right? Probably I'm going to have a different, thing. So the tools that I used were high, which is, I used a lot of leverage.
[19:56.9]
I used other people's money. Well, now I use other people's money to get me in. I actually was slower than I could have been because I was using my own money. When I first started, I didn't know any better. But I basically would borrow money. Now I'll borrow money and then I will go and I will renovate a property. I'll take it down.
[20:15.9]
I'll do the property and the renovations immediately. And you do one right as fast as you can. Complete a project with good quality, don't slap it together, but don't let that thing stop. Most people get in trouble because time drags out.
[20:31.4]
So if you can do whatever, pay more, right? If you're like, hey, the plumber can't get here till Tuesday and it's $4,000 for the thing, be like, can I pay you $5,000 to get you here this week? Can I pay you $6,000 to get you here this week? People don't think like that.
[20:47.9]
But from a manufacturing perspective, it's huge. If you drag from month A into month, you know, You know, from one month into the next month into the next month, and the next month you just burned all of your opportunity cost of being able to rent that unit. Almost all contractors, the reason project overruns happen is because people spend too much.
[21:05.2]
They spent too much, usually because they spent too long of time attempting to save money. They tripped over the dollars to pick up dimes, right? And then all of a sudden their holding costs are escalating out of control. So that's one of the big ways that we scaled.
[21:24.3]
And another thing is teams. I luckily had a. You know, I was used to working with managers. You know, I ran 350 people and I had the lean background. I was able to coordinate pretty well on getting a good core four.
[21:39.5]
So when I first started investing, I was full time working as well. So I had to depend on the contractors. So it was good communication, and then cycling it. Also one of the main reasons is I started big.
[21:56.8]
It sounds weird, but the bigger the project is, the easier it goes. And that still holds true today. Like now we're doing larger and larger projects and it's just easier the bigger you do it. Let me ask you.
[22:12.7]
You hit on something. I kind of want to dive into it a little bit because I think a lot of people don't engineer it the way that you are engineering it in your head. So if you pay $1,000 or $2,000 more for the plumber, that then gives you the opportunity to rent the unit faster because it's done and also gets the other trades in there faster as well. Correct.
[22:37.6]
And then you talked about, the $7,500 a month on a million dollars over 25 years. Correct. So that's a specific type of thought process. Can you dive into that a little bit as to how you break it down and reverse engineer it so that it doesn't sound like it's a million dollars?
[22:56.1]
No, it's $7,500 a month. Yeah. I pretty much just instantaneously tune out. Anyone's like, oh, it's a million dollars. If someone says $2 million, I don't think $2 million. I think $14,000 a month. Right. My brain immediately jumps to that.
[23:13.1]
And I actually have some, other good examples. But we're all going to start with the back end. So I always start on the backside of a problem and then work forward. So in my example of, hey, I'm going to pay the plumber more, people are always freaking out because they think they don't have enough money.
[23:30.2]
Well, on the back end, I'm going to get my money back from the bank. And so the faster I can do that, the less money I spend in holding costs. So If I borrow $100,000 from Mike and he's charging me $10,000, or, sorry, $1,000 a month. Right.
[23:48.9]
For that, if I do it for three months, I only paid Mike three grand. But if I drug it out into a fourth month, I paid him four grand. I drug it out into a fifth month, I paid him five grand. Right. And if I just got it done in the three months, I thought I would that save that, the two grand in the end?
[24:09.7]
Well, almost everyone, when they first start out, they don't borrow enough. They don't capitalize themselves enough to be able to knock everything out. There's this, I don't know. There's like a fear barrier on, like, oh, I'm afraid I don't have enough money. I've never done this before. It's clunky. And their projects usually take a really long time.
[24:28.5]
Even if you're like. And maybe that's just the product being new. But I work with a lot of new investors, so the faster you can complete a project, the faster I can stack my, get my bank financing back.
[24:44.2]
If I were a flipper, because let's say I was in California for some reason, then I would be able to list my house faster. Right. Most people who end up upside down, you probably in a large, let's say 70 plus percent of cases, their project went too long and that's why they bled to death.
[25:04.4]
Then they have no money and, the clock's still ticking and then they drop their price to try to get rid of it, and then there's no profit. Right. It's usually always a timing thing, but people don't associate that. So in manufacturing, you're very, very well aware of the timing thing. Right.
[25:21.0]
You have product that can expire, you've got deadlines. You know, if, you know, we sign a contract and if we don't get this out the door this week on the shipping container overseas, then we got to fly it to Europe and that's $20,000 gone, you know, extra, like. So I'm very aware of the time it takes to do things.
[25:38.3]
So like in my process, when I know, hey, we're about, you know, 30 days out instead of waiting for the project to be done, I've got enough experience now to be like, okay, I'm going to go ahead and get start, get it moving with the bank because they're going to take several days, you know, several weeks to get my money back out. Right?
[25:57.1]
And remember, now I'm, now I got to send to the bank. They're going to take a month to do it and then there's going to be the closing date. Well, Mike, I still owe Mike $100,000, but now the house is worth $200,000 and the bank's going to loan me 150. So I'm going to schedule it right. And that's just going to take some experimenting.
[26:14.6]
But the shorter you can condense your working time, the value add time where there's not something waiting, that right there is going to put you ahead of almost everyone else. Which is why we consistently win always. Not always when we're constantly making mistakes, but when we're making mistakes, we're tweaking our processes and learning from that.
[26:35.7]
That's a really good point because like projects we've lent on, I know somebody that goes over budget every time, but she does the flip in two or three months. So it's fine But I've had other people that take 6, 7, 8, 9, 10 months and it just bleeds on forever. And then that's exactly when people start to run into trouble.
[26:52.7]
So very good point. If you can. And this, it's scary, right? If you've never done this before, it's scary. But, we've got someone we're going to loan five, hundred grand to. And they were like, we're going to make this 500 grand last the whole year.
[27:09.8]
That's not the way I would do that. I would be like, okay, I'm going to spend like 300, $350,000 immediately on Pushing everything forward to get all of the big boulders out of the way. Because I know I'm going to screw something up and have to undo and redo stuff.
[27:29.9]
I know it's going to be wrong. I know there's going to be inspections. I know we're going to have to, you know, have the city inspector have his name on the free, beer for this guy sign at the local breweries, right? You're going to have to do all the relationship things, but it's going to take time. So like front loading and doing the timing is big.
[27:48.6]
And one way to do that is through money. And one way to do that is to pay your contractors more, to make them happy because you better believe everyone else is trying to squeeze them for as little as you can. If you can be the guy that like, hey, listen, I will give you five grand for every four grand job, but you will do it.
[28:07.3]
They're going to always they made a free thousand dollars extra because everyone was running a business. Everyone's tight margins pay for the difference. And usually that really, that makes the difference right there. If I could say that I would definitely do borrow more up front, than you think you're going to need to and try to get the work done as quickly as you can.
[28:29.9]
Well, yeah, then you're getting it on both sides. Because if you're using the brrrr method and you're renting the property out, if you have two months, one month less on your loan and it's $1,000 a month, well, in interest, now you've got that thousand dollars and then you have somebody move in a month earlier and now you've got 1500, $2000 of extra cash flow. Right?
[28:52.5]
And to answer you now, so to answer your question, my first property I ever bought with zero experience, not knowing anything about real estate, having, listened to, I think it was just 300 podcasts and did that in about a month. So I just listened to the Bigger Pockets podcast.
[29:09.2]
I started on one and I finished on episode like 300 or whatever, whatever they were at the time. Didn't even read their books. Didn't even read their books. And so I had zero real experience. Basically the first thing I ever bought was actually it was about a million dollars. Which was.
[29:26.4]
It's not a million dollars by the way. Today I'd buy it for nothing. But I basically bought a. I bought it about 26 crack houses at once. And the math said you have enough meat in the bone right? At the time is.
[29:41.5]
We'll say it was a million bucks. But at the time it was. I think it had bad debt. It was about $8,000. I was on a 20 year AM. $8,000 a month. It was pulling in $12,000 a month with five vacancies and all of the properties were 30% undervalue market value.
[29:57.9]
So I try to make an unemotional decision and based on the data and I try to take action. Now I recommend people don't do that. I'm insane. So I did do that. But just when the math said it's going to cost me $8,000 a month. Right.
[30:13.8]
By the way, that's just a loan, that's not taxes. And all the stuff that goes wrong, it's bringing in $12,000 a month. I'll figure it out. Right. And by the way that's horrible math because I didn't include any of the vacancy and holding costs and this and that.
[30:29.0]
I also bought in the wintertime. So I bought with no experience starting out. I didn't have a core four or contractor or anything like that. I just had an agent. So I bought my properties not even having a property manager or a contractor or knowing anybody. So I would recommend you don't do that. But the math basically said you should do this, you'll figure it out.
[30:46.2]
And when there was a gun to my head I figured it out. And it's kind of started. So let me ask you a question. How long did it take you to listen to the 383 podcasts from sorry, Bigger Pockets. Under a month. It was definitely under a month. So I did two hours a day. Oh.
[31:03.6]
And I was watching them on YouTube because I didn't know there was an actual podcast. So I was watching them. Oh man. So I had, I did. And I. So I would do 2x speed and I would listen to two hours a night. And I think I bought YouTube Premium subscription at the time.
[31:21.5]
So I could shut my phone off and like it could still keep playing, right? And so I listened to basically four episodes per night. And then I would do four hours on the weekends. So I'd work my full eight hours of working day.
[31:38.4]
And then at home for two hours, I just educate myself. And if I got bored, I jumped to their money podcast, which is fascinating. And then I jump back and forth. But it's all normal. It's all real people with real stories of normal people doing it. And I was like, hey, I can figure it out.
[31:55.7]
I think it's interesting that you hit on that because it wasn't. Oh my God. I have to listen to 383 episodes. It's okay. This is what I need. This is my goal. And here's how I'm going to get to it. I'm going to break it down into these pieces and bite off one piece at a time.
[32:14.9]
I think that's something that people focus on is okay, I want to be a millionaire and all they're thinking of is a million dollars or I want $3 million and they're focusing on the end. And that's good because you know where you're going to go. And a boat needs to have direction.
[32:30.8]
Otherwise it just goes in circles in the harbor. So I get that. But you broke it down into pieces to say, okay, here it is. This is how I'm going to do it. I want to do it in 30 days. That'll mean X number of hours per day. So instead of coming home, instead of coming home and flipping on Netflix or going out and drinking beers with the guys, I'm going to do this for 30 days.
[32:53.8]
And then after that 30 days, I'm going to go buy myself 200. And was it 200? 300. I'm sorry, 200 and some doors. Well, it was, it was 26 doors. Was my first. I got you. I'm just looking over the 15 months. Oh, yeah, yeah, yeah. Okay.
[33:09.9]
So I, I bird it. I burned it 10 months later. And that was my next step. And then, market forces, you know, we were going into Covid. So I basically bought like December 31, 2019 and then 2020 started.
[33:26.6]
So I'm like a brand new one month, two month landlord. And then Covid happens and I'm like, oh, like, we'll figure this out. This is, this sounds bad. Which, yeah, so, now you're giving me a lot of credit that I intentionally broke it down.
[33:41.6]
I was too stupid. I use this joke a lot. I'm too stupid to know any better. Like, I was too stupid to know how hard it is, really. I'm just gonna keep putting the ball forward. I said, I listened to 300 episodes. I was doing yard work, or I was driving, or I was, you know, washing the dishes or cleaning the house or doing normal stuff I was gonna do. So I just.
[34:01.5]
Instead of listening to music, I put the podcast in. Exactly. When I'm on the treadmill in the morning, I'm not just standing there on the treadmill. Cause the treadmill is boring. Exercise is boring. So boring. Yeah. Super Bowl. So I'm whipping on a podcast, and I'm, And I actually am a little ocd, and I'll actually stop it and take notes if they say something that I like.
[34:22.1]
Oh, yeah. And you see me on the treadmill at four miles an hour doing this stuff here. It's good for my balance. Well. And I was trying to do something value added. You know, like, I say, value added. But, like, stuff I hated to do that was dishes or yard work or something like that. Like. Or work out.
[34:38.2]
Actually, I hate working out. But if I have podcasts and I'm learning about money. Oh. And realistically, I got to 300 the same message by the time you get to episode 30, it becomes the same story over and over. This guy sucked. They're a cop, and then they sleep in their car. Oh, and now they're a millionaire because of real estate.
[34:54.1]
And then it's, oh, there was, you know, they were a waitress, and then they moved into houses and started living flipping houses. And now they're a millionaire because of real estate. Right. Or I was a dirty college kid, and I decided to live in my living room and put up a curtain. And then I rented all the rooms out, and I didn't pay my student.
[35:11.4]
You, know, I paid the minimum on my, you know, student loans. Oh. And now I'm a millionaire because of real estate and, you know, retired. So I'm not smart. My skill set was really. I am very good at processes, and I'm very good at team building. So I was able to coordinate really well.
[35:26.5]
I just combined those two strengths, which. Real estate's a great strength. Lending money, it's a great strength. And it just took off like a rocket. Right. And then part of what I'm doing, too, is when I did my first refinance. So I'll, talk, because you Guys are talking about that.
[35:42.4]
So my first house, my first investment property I ever bought, right? The 26 crack houses, it was $1 million, roughly. I think they are like 1.5. We negotiated back and forth. I was doing stuff. We'll just call it a million dollars because it was, you know, 1.1 or something.
[35:59.9]
the end of the day, my con, I was, I was making offers on houses, and I got two that were rejected. I had $200,000. The 200. Actually, that's not technically true. I had, $180,000 because I owed taxes on the difference.
[36:18.2]
I had saved 50% of everything I had ever made. From the time that I graduated college, I lived on 50% of my paycheck, and I dumped it into the stock market, into a VTI or vtsax at the time.
[36:33.9]
And I saved a bunch to get to that, because at the time, you needed $3,000 to get into VTSax. And I just saved and saved and saved and saved and saved and saved and saved and saved and saved all the way. Until that time, I knew I was saving. I didn't know for what.
[36:49.6]
I didn't know anything about investing. I was a guy that worked in a manufacturing facility. Then when I learned about the vehicle. Right. So your listeners are going to be way smarter than I was back then. And, so I was trying to buy a house.
[37:04.6]
I was trying to buy a crack house because I only had 180 grand because I owed taxes. And my contractor or my, agent was like, hey, there's this crack house, but it's attached to a larger portfolio, right? Because there's a little horrible for sale sign written in Sharpie on the front yard.
[37:22.5]
But it's part of a bigger thing. It's 26 houses. And I was like, oh, okay, cool. Well, I guess we can't buy that one. Then. He's like, well, why don't you buy all of it? And I was like, what are you talking about? I can't do that. And he was like, when you buy a house, it's 100 grand and you need to bring 20 grand down and the bank loans you the rest.
[37:38.3]
This is the exact same thing. You just have 200 grand. So I didn't pay my taxes. Well, actually, I had taxes. They were due April 15th. This was in November at the time when I was making the offer and going through negotiations. So I chose to not pay my taxes, pulled the money, borrowed more money from family, and then bought the first unit, and then was able to Try to figure it out.
[38:02.5]
So I was able to pay my taxes off before then. So I burred, like, two or three houses. And then 10 months in, I finished a bunch of projects and I burred out, I think, $270,000. So I got all of my money back out, plus 70 grand paid back family.
[38:21.3]
And then I took that money and I put it right back into vti. And it's still there today. Yeah, but what's interesting, though, is you said that you saved money. I would venture to, say that you didn't save money, you invested money.
[38:36.4]
Oh, yes, I invested money. You know, you get these people that, you know, they go out and they want to save 10 cents or 15 cents on a gallon of gas, and what do they do? They go out and then they supersize something at McDonald's instead. So they're not ahead.
[38:52.5]
What you did was, in my interpretation is you went and you actually invested that money. So you grew it, similar to what you did with, the episodes of Bigger Pockets. I don't mean to keep going back to. It is you got the information and it wasn't entertainment, it was education that you then acted on and you implemented it.
[39:14.5]
And then from there you grew and you compounded all your time. So it wasn't just a matter of, well, I saved and then just bought something else. You invested it so that you could be a millionaire in 15 months. Yeah, yeah.
[39:31.1]
So this goes back to great financial hygiene. And you can do this anywhere, right? If you're. If you. I was a guy working, you know, I was middle, management, if you will, at a manufacturing, facility. But if you're a doctor or a lawyer, which, you know, they're, you know, they have their own thing.
[39:46.8]
But if you're just a normal person. The biggest thing I did is not have lifestyle creep or lifestyle inflation. And if you get a raise, you're already used to all the money you made before the raise. And so when you get the raise, just invest the difference.
[40:03.1]
Well, if you do that, you'll starve yourself and you'll not have any fun. So I allowed myself a 10% increase every time I got a raise. So if I was making a thousand dollars a month, and, you know, or let's, say I was making $2,000 a month and then I got a raise to 2,200amonth, right.
[40:19.7]
The extra $200, I'd invest all of the difference, but I'd save 10%, right. I'd save 20 bucks. And at, 20 bucks, Hugh gets to blow on whatever he wants. And I just always lived like that throughout everything. The other thing I did was every time that happened, we were already used to it.
[40:37.0]
That was an easy, easy way. Whatever life stage you're at, the likelihood of you regressing is probably low. But the likelihood of hitting pause on whatever your. Your scope creep is, of what your lifestyle creep is right now is probably pretty high. Now, some people might need to cut back a lot, right?
[40:55.1]
I think I did the math on one thing right. Housing is the most expensive. And then transportation is like the second most. As far as the United States goes, housing's like 33%. I remember I committed the cardinal sin. I wanted to live at the cool place, but I worked really far away. And so I was commuting forever.
[41:11.7]
This is when I lived in Dallas. It was Addison Circle, but I worked in Plano. So I was driving like an hour, mainly because of rush hour. And then I drive back and it was just a nightmare going back and forth, back and forth. And then on the weekends, I never wanted to go out. And then in the evenings, I didn't want to go out.
[41:27.4]
Cause I just spent an hour in traffic. Sure. Okay. So it's much smarter. Even though rent was cheaper. Well, actually, it was kind of expensive there. Had I lived closer to work then, even if it cost me more to live closer to work, I got all that time back. And I could go travel to the cool place on weekends.
[41:45.2]
Right now we have Uber, so it's way easier. People probably do more of that. But back in the day, it was a lot, a lot different. So it was like saving. Like I saved 50% of my income. 50%. That was my target. Right. And I didn't know what I was going to do with it.
[42:00.9]
I didn't just put it my bank account. I put it into what I viewed as a pretty safe investment, which is AN S&P 500 index fund. It's tracking the U.S. government. Whether it goes up or goes down, I don't care. Right. If that goes away, I probably have larger problems than. Absolutely.
[42:17.4]
The United States has ceased to exist. Whatever money I'm thinking about doesn't matter anymore. Right? So that 50% of my income was saved and invested somewhere where it could grow until I could do something with it. The real winner of all this story was I had enough to do something with it.
[42:33.5]
Because I started way back in the day when I was 18. I had a friend who was a financial advisor. I was an IT guy, and I was Helping her with her business. And she was a financial advisor. And she shook me, she grabbed me by the shoulders and like, Hugh, you're an 18 year old moron.
[42:51.6]
Do this. And I was like, I am an 18 year old moron. I don't know anything. I will. I should do the thing that the financial advisor, the nice lady with all the fancy cars and crap, I should do what she says. And she said, basically, pay yourself first. And so I live.
[43:08.3]
Even my companies, I live and die by pay yourself first. I have a big problem with it though. I don't like pay yourself first and I have a YouTube video about it. I don't like pay yourself first at all because it makes it a suggestion. I renamed it to steal from yourself and hide it because you're a moron and will blow all your money.
[43:29.8]
And so where did I steal from myself and hide it into a. You know, I could still access it within three days if it was a true emergency. But it's going to go into vta, VTS X. And I think I like the fact that you took it out or take it out religiously before you get a chance to get your hands on it.
[43:49.7]
When I first got out, I worked for ExxonMobil and I don't know, whatever pay system, they do it automatically. It was really cool because whoever I worked with, they let me do two bank accounts. Like I could choose where the money went. It didn't just go to one bank account per month for direct deposit.
[44:06.1]
So when I found that out, I logged in there and was like, don't even hit my account. Just go straight into that. So I wouldn't even see it. Brilliant. And if you just never saw it, then it's not hard. It's a habit, right? You're already living like that now. It's already simple, it's already easy.
[44:21.8]
Like you're already used to it. Don't have lifestyle creep, or when you do, give yourself some bonus. But so many people, I think lifestyle, creep is what crushes them before they can even actually start. I want to go back to what that financial advisor said to you because a lot of people aren't born with the mindset to do something as what people, your average person would think is extreme of saving 50% of your money and all that was her shaking you, Literally all it took.
[44:48.7]
Or was it something that was simmering in your mind and that made it boil over? How did that happen to you? So, I'm Asian and, the. When I was 13, I remember it clearly. My uncle pulled me aside and I didn't know anything about money.
[45:03.9]
Cause I was 13, right. My uncle pulled me aside and he goes, Japanese people save 60% of their income. You know, we're Taiwanese. Taiwanese save 50%. He said, American white people, they save nothing.
[45:23.4]
And he said, you will be at least Chinese. So I was like, all right. So, so I just started, I just started there. I was like, cool, I will. I'll save, you know, 50%. And. But those. But when they say save, they didn't mean they put it in the bank account. It's. It's not investing. They're just saving.
[45:39.4]
It's truly just saving. And so that, So I was. I guess I was, you know, maybe I was pre primed. Then when the lady shook me and she was like, hey, do this.
[45:57.7]
She basically described. Well, she just, you know, it was profit or not profit first. It was pay, yourself first. Hey, step one. The first thing that goes out of your paycheck goes directly into investing. And what you invest in, I can't tell you that because I'm not your financial advisor, but I would personally invest in S&P 500 index fund because I believe the United States will be around.
[46:16.5]
And if it's not, you probably have bigger problems. And that's where it went. And then I just set it up on auto draft. So. And it's that way to this day. So that's kind of where, you know, that internal thing, we describe it as, extreme.
[46:34.2]
But it's not really extreme if, especially if you're like, in college and you're listening to this right now, like, that was my biggest thing. I dominate 100% of all of my peers that I went through college with. I don't think there's any person that's more financially successful, despite most of them being way smarter than me. Right.
[46:54.2]
I was a D student. And it's because of what she did. And I just happened to be helping out. I was just providing value as the IT guy. I'm like, hey, I'll do this. And that sounds cool. Finances. That sounds intimidating. I don't know anything about it. And so she just said, do this.
[47:09.8]
And I said, okay, I can follow instructions. I will do exactly that. Yeah. It's interesting. It hits upon something else that you've got to be conscious of the circle that you're in. And if you're in a circle of a group of people that go out and go to the bar after work every night, you probably want to change your circle and hang out with people that listen to what the financial advisor said and said, hey, do this.
[47:34.9]
And then when you're in that group, at some point, one of them is going to say, hey, do this. Yes. Yeah. And I think there's a old saying. You, know your, your net worth is your network. I think it's, top take. Take the five closest people to you, your five friends you hang out with the most, and then average them, and you're probably going to be right in the middle.
[47:56.5]
And so, elevating your network is a big one. Getting around, going to, you know, same thing with bigger pockets. You know, they recommended it too, and that's, that's how we got it started here. I started planting some properties locally here because one of the bigger pockets episodes I had listened to was like, hey, you should hang out with people that are on the successful path and if there isn't one near you, start one.
[48:18.8]
And so I, so I was like, oh, I like that. And then I literally ripped the name off of somebody. Her name's Shelby Osborne. By the way, she's awesome. Shelby Johnson now. But, I started a pints of properties locally and it was me, and no one showed up for like six months.
[48:33.8]
And then a guy named Jed showed up and he was the second guy. And then it grew. And now, you know, we're, we're doing that and we're hanging out with people. So get into those circles with people that are of that successful mindset with the digital age now with Zoom, you can join, I don't know, masterminds, groups, all kinds of cool stuff that's out there, that's free.
[48:50.3]
I'm not saying, you know, you don't have to go pay somebody $10,000 or whatever, but, you know, I met Mike because I went to be around people like that. Right. And we went to the bar and we're drinking.
[49:05.4]
So, you know, but we're all kind of some certain level before, you know, kind of before we got there. Absolutely. All right, so this has been great. I appreciate your focus and the way you broke things down for people.
[49:22.3]
Focus on, you know, taking a piece at a time and then not necessarily saving, but investing what it is that you have. And I really love the idea of taking 10% of a raise and investing the rest, because it compounds over time.
[49:39.9]
I mean, banks have been doing it for 4,000 years. It's compound interest. And what was it? It's attributed to. And I don't Know if this is accurate to Albert Einstein, that the greatest invention of mankind is compound interest because you just leave it there and it just keeps growing and growing and growing.
[49:55.1]
Because the first year you have a dollar, then the next year you have $1.10. Well now the second year your savings or your interest is going to be on $1.10. Right. And then you just keep growing and growing and growing. So it's compounding well and it's huge too.
[50:12.1]
So my passive investment in the stock market, it's vtsax, right? Or vti. Right. That's generally what I'm in. We can debate split hairs, that's what I'm in. I'm lazy, I forget about it. My worst case scenario right now is I think I'm a.
[50:30.1]
It, depends on what it is. But if I liquidated all of my real estate holdings, I probably, and after paying taxes I'd probably end up walking with like two or two and a half million dollars right now. Sweet. My worst case scenario, right, I get in a car accident, but I'm still alive, I might do that and then put that money into VTI.
[50:50.8]
And then now I live off the 4% rule indefinitely. Right. And it'll just keep compounding and growing. Right. For every million dollars that's in there, you can spend 40 grand a month or not a month, a year and basically blow it. So whatever your monthly expenses are, you can figure that out and kind of backtrack that as a super emergency.
[51:10.9]
Now would I actually do that? No, I'd probably just keep it in real estate because it's doing pretty good, you know, after you pay everything off free and clear. But the compound growth is huge. Same thing on the real estate game. I thought I got into real estate because of cash flow. I have since learned cash flow is a defensive measure.
[51:27.6]
Cash flow prevents me from losing the property. Yeah, I'm making $100 here and there. But really one day I'll 1031 or sell that property and then I capture all of these massive gains. Even if I owe taxes on them, it's significantly more so my most valuable properties from that first portfolio.
[51:49.0]
I think two years in or three years in, I sold off nine properties and I got 650k out of it. So I paid off almost all of my remaining properties for selling off those old properties.
[52:05.4]
And the properties are worth even more now, the ones that I have. It's, it's. I thought it was a cash flow game. Now if I want to, I could sell it trade into something else. But it's investing over time. Let it grow. Right? Yep. Awesome. All right, man.
[52:21.8]
I appreciate you coming on, appreciate your time. This has been fantastic. You gave us a little bit of a brain stretch, which I absolutely expected. And, you got to remember, you got to let me know when you guys are going to go to, the silo. I want to hang out. I want to come and use, the flamethrower. Yeah.
[52:41.1]
And I think it'll be a blast. Well, we can bring it out. We'll bring the flamethrower out to the missile silo. You actually missed a great one. We did AI automation. We had a three day event. Business owners flew from. I think we had one guy fly from Ireland even came in. We locked ourselves on the ground and just did AI stuff.
[52:58.6]
Learned the, not the cutting edge, the bleeding edge of AI at the time, how companies are doing it. So it's pretty exciting stuff. So, Hugh, we'll, we'll link to your social media and stuff in the, in the podcast description, but if, people want, if anyone wants to see me, it's Hugh Carnahan on all the socials or business wealth blueprint.
[53:17.5]
All right, awesome.