Jim Zes continues his teaching for young people on investing in real estate, drawn from a financial intelligence conference Jim taught at Hope Baptist Church. Part 2 of 2.

Okay, let's start up again. Page 39. There are numerous ways to finance the purchase of rental property. You can get a number one, conventional bank loan. Typically, the way banks are now, you put down 25% and they'll give you a three year to seven year loan.

But it's amortized over 25 years. Our number two, it's what they call a balloon bank loan. My brother and I got tons of balloon loans. It's a short-term loan, balloon, where you pay interest only. So instead of paying principal, we would use that principal money to fix up the property.

And when you buy a property, You want your payment as low as possible because you need the money now to fix it up. I know people tell me, oh, I got a home loan and I got a 15-year loan, 15-year loan because I want to get it paid off. Well, we were taught you always get a loan where your payment is low as possible. So, I would recommend a 25 or 30 year loan on your home, but no prepayment penalty. So if you wanna pay it off in 15 years, you still have that option.

But if things get bad, you drop down and you pay the way lower payment. And something else, in real estate, any principle you pay off off is considered profit. So you might pay off, say you own a lot of real estate and you pay off $50, 000 in principal. You don't have the principal anymore because you paid it to the bank and the government says, oh you made a profit of $50, 000, you get taxed at 30%, so now you owe $15, 000 in taxes. Well you don't have the 15, 000 because you just paid 50, 000 in principal.

So my brother and I are like, okay, this is the way this game works. So we started buying property and we just get an interest only loan. Why do we want to start paying principal and then pay taxes on that when we're trying to fix up the property, have it go from a B property to an A property when we're trying to raise it up a letter grade. Besides, when you're younger, you need cash now. Why not get a longer loan but with no prepayment penalty?

If you want to pay it off sooner you have the option and Something else to consider when you're paying off a lot more principal up here That means you don't have money to invest in something else. And remember when you own property, you catch that wave of inflation, it's gonna be way more than you're paying off on your loan. You're gonna be better off financially, in my opinion. Once again, this is one way to do real estate, this is how we were taught. There's a hundred different ways.

Your way may be better. So can you go through the balloon payment? I mean, I've seen that before, but you pay in interest only, and then at the end of it, you pay the rest, right? All the principal. Is that right?

Well, we would get a balloon loan and say we'd get it for three years. In three years we fixed up the property and now we go get a different loan. Yeah then it's it's all due but then you just get a different loan or if the bank likes you they'll extend it for another year or two. If you get the balloon loan fixing it up, improving the property, doesn't that make the next one more because the property is worth it? Right, It's worth a lot more, absolutely.

Then you do the burr method. Then you can actually pull your 50, 000 back out or whatever your down payment is and use it to buy the next piece of property. The way the government works, they don't want you to pay off stuff, because the government should not be saying principal is profit, but this is the rules of the monopoly game we got here. Okay, so you can get a balloon loan. That's one way.

We've done all these loans. Government-backed loans, Fannie Mae, Freddie Mac. Adjustable rate mortgage, number back. Adjustable rate mortgage, number four. You can do, I don't, adjustable rate mortgages are hard because you don't, you're taking a chance.

Did you have a question? Yes. Do you have a microphone? Could you explain that balloon loan a little bit? Because with a conventional loan, in the first three years, most of what you are paying is interest.

So how does the balloon loan help you? Because you're not, you're paying zero principal. You need three years of a conventional loan. Conventional loan you're paying principal every month. But it's so little.

Most of your payment is going to interest. So what's the difference? You're not saving that much in principal. Well, conventional loan, you're going to sign up for three years, seven years, whatever it is, ten years. This is just a, this is a one to three year loan.

Then, then you're paying that the whole loan. We, we're trying to think of How do I get the most money together to fix up the property? Even if $1 goes to principal every month, that's $1 less I have to fix up the property. And usually when you're buying a property, You don't have much money. But are you selling the property to pay off the?

No, you just say I bought, it's like that example. You bought a property for $200, 000, and you get a balloon loan. You're paying interest only. But now that you've fixed it up and the rents are higher and appreciation now it's worth two sixty eight so I borrow two hundred and one thousand I get my fifty thousand back and I go buy another property. My brother and I have done that numerous times.

He used the same money over. So the next loan you're saying instead of borrowing 200 because it's valued at 268, the bank will loan you 268? No, they would, it's worth 26, I bought it for 200 back on that page. It was back a couple pages, but we bought it for 200, 000 say, but five years later it's worth 268. I put 50, 000 down here, is down payment.

Now it's worth 268. I borrow 201. But I only owe the bank my loan for the bank was a hundred and fifty thousand originally because I I put down 50 borrowed 150 to buy the 200, 000, but five years later, it's not worth 268, the bank lends me 201, and at the closing they give me a check for 51, 000. I have this one of our employees, he wanted to get into rental property and he bought this house in the neighborhood, this was 25 years ago, he bought the house believe it or not, it needed some work for $35, 000 and the bank appraised it for 50 something thousand and he needed like $3, 500 to fix it up. It's like 30 years ago.

So believe it or not at the closing he brings in no down payment and the bank gives him a check for $3, 500 to fix up the property. He gets money at the closing because it was worth say 55, 000 but he's buying it for 38 and the bank says we'll lend you 80% of the value so they so they lent him 38, 500. I don't know if you could do that today or not, but did this, do you remember this now, Ash? Okay. Did that help you on this?

The same 50, 000 I get back right here. Now I have a new loan for 201. Yeah it just converts that balloon into a regular like delock. I guess it's what that is. The rents are up.

I've gotten rid of, we call the tenants when we buy a building the old guard and They think they own the property And you have to kind of straighten them out, let them know who really owns it. That we bought a 44 family, there were nine vacant, and there was, they had front doors on the buildings, they were three foot door, and on the side there was three foot glass three foot glass well the glass was missing on some of the buildings kind of rough and this one tenant would ride his motorcycle right through where the glass was missing and ride it inside the hallway and park it outside of his apartment. We're like hello. And when he needed to work on his motorcycle he'd pull it in and that's when everybody used carpet. His carpet was just black with all motorcycle parts all over the place and the whole hallway smelled like gasoline.

He thought he owned the building, he could just pull his motorcycle in. So we had to evict him. And there was another tenant there that I forgot what his problem was. He, my brother and his wife move in, it isn't all fun and games. So he and his wife are living in the apartment on the first floor and on the second floor there's this unruly tenant.

So my brother and his wife are laying in bed one night, it's like 10 o'clock, all of a sudden, boom, on the ceiling. The whole ceiling shakes and it happens like five or six times and they had one of those square glass lights in the bedroom ceiling that, you know, remember 40 years ago? The light fixture breaks in half and falls in the bed with them. My brother's like, okay that's it. So he goes upstairs and knocks on the door.

He's like, what's going on here? It's 1030 at night And the guy upstairs says, oh I was playing with my bowling ball. He was just letting his bowling ball boom. He had to go. We had some tennis one time.

One tenant got mad at another tenant and he took a brick and threw it through the one tenants window these two tenants were fighting so my brother goes to the complex and he knocks on the door and he says did you throw a brick through so-and-so's window of their car? He said yes I did but it was an accident. Accident? How was that an accident with a brick? The guy says with a straight face, oh we were playing football in the parking lot with the brick and the guy I threw it to missed it and went through his windshield.

They had to go. We could write a book about all the things with the tenants. In fact, when we went in business and we would have this issue at one of the apartment complexes, like the sewer backs up or there's a fire, my brother came up with an idea. Instead of saying we have a problem there, he called it entertainment. And he called it entertainment because he said if these things didn't happen life would be boring.

So now that we have this fire we got this entertainment over here the sewer back up, oh more entertainment. Just a different outlook on life. Okay, so you could do adjustable rate mortgage, owner financing. You could pay all cash, but then if you pay all cash, remember that you can't take advantage of inflation as much as you'd want to, or that you could. Remember that example?

If you have $100, 000 as a review and you pay all cash, inflation rate is 6%. Now that building is worth $106, 000 one year later but you could take that hundred thousand and buy a four hundred thousand dollar property and now you're in because of inflation your value goes up twenty four thousand And then the last one is private funding, thinking creatively. If you have some relatives or friends that have some cash in the bank or they're well off, and they know about the rule of 72, some people don't want to do the stock market, they don't know where to invest their money. So maybe you tell Aunt Susie or Uncle Joe, whoever, we'll pay you 5% on your money. And you lend it to us, because right now you're only getting 0.5 and you'll be getting 10 times as much interest.

So you borrow the money from friends or family, now you're paying them 5% interest. And for me, I like having my money invested where I know where it's at. When it's in property, I can drive up, get out, walk around, touch the building. Okay, this is where my money is versus your aunt or uncle investing in the stock market or wherever. It seems to be a win-win situation where they could be the bank and they're giving you a 5% loan or you could say we'll give you 10, 20% ownership, you do nothing, you're just the bank and you go from there.

Any questions about that? Remember the rule of 72, their money doubles every 288 years. What my brother and I do is We help our children, we teach them about apartments, but we take a, we'll help them buy an apartment building, and we take 1% ownership. And we'll lend them, and they own 99%. This is children.

So we lend them the money. We own 1%. We'll loan it to them at 4% or 5% interest. So I know where my money is, it's in that building they just bought. I'm collecting an interest check every month.

John Calvin had a theory about that, or principle. He would say, if here's a couple or somebody that's in need financially and they need money for their house or you loan them, you don't charge them interest. But if it's business dealings, It's fine to charge them interest. So we collect interest from the property every month and then That's there's one LLC that owns it and then there's a management LLC And you can set up the management however you want. So you get 50% of the profit And your children get 50% of the profit, but they're doing all the work.

You're just directing them around. You're the bank, you're getting the interest, and you're getting 50% of the profit. A positive cash flow after five years, you can start splitting it once you have enough in your operating capital. It's so much better to me than investing in the stock market or IRA or 401k or whatever else you may do. Because like I said, I can get out and walk around and touch the buildings.

Here's my money. And it's a win-win. I'm making money here, money here. If I pass away, my wife and I, they pay capital gains tax, inheritance tax on 1% of the ownership. Could you put some numbers around that in terms of imaginary value of property?

How much are you actually loaning them and how much are they getting from the bank or financing all of it? Sometimes we finance all of it. Sometimes, let's take that $400, 000 property. So you can, depending on your wealth, you can lend them the full $400, 000 or you lend them the $100, 000 as the down payment to buy it and at 4% interest they're paying you 4, 000 a year divided by 12. What we have to think about, I believe, is passing wealth down to our children, the next generation, but not just give it to them, teaching them how to fish.

So they're owning a building, and you're right there mentoring them, directing them around. You're making money two different ways on it, plus it's going up in value. I don't know a better system that you could be helping young people than this. It's a win, win, win situation. Yes?

Going back to your last kind of your nightmare scenarios with tenants, do you factor in on any given year 10% of your rent won't be collected or it's gonna be wrapped up in legal fees or in an environment where it's maybe more favorable to the tenant than it is to the landlord that you're just gonna have to write stuff off or how to, I'm just curious how you operate or think about it. Well see it all, It all works together. You buy in a nice neighborhood, you're gonna get better tenants because the rents are higher. Even during COVID, we collected close to 98% of the rent. People were still paying.

No, we don't. Most people are gonna pay, you know, 95, over 95% pay because you take them to court and eventually they're gonna pay. It either gets garnished out of their wages, and though we've had people come back seven years later and say, we skipped out on $1, 500, but we want to buy this house, we've got to clear this up, and they pay us. You eventually get paid. You can hire attorneys and they take and they go after the people and they take between one third and half of what's out there to be collected.

But that's where the nicer you make it, the better neighborhood you are, the better tenants you get, the less people are not paying their rent. It kind of all works together. Well, that was my other friend's problem with those six houses that he didn't want to go down there at night he couldn't collect the rent half the time because they weren't home or they wouldn't answer the door or it was just a bad situation so yeah my father would told us we first went business hey I want you boys know there's a difference between slumlord and landlord. I want you to be landlords. And I want you to treat people the way you want to be treated.

Yes. Can I go back to your example on what you do with your children in the LLC? That 1 percent, is that just for the LLC, so you have ownership and trust if you pass away? Or if you sell that property, how does that 1% come in back into play for us? I'm glad you brought that up.

When you're collecting this interest, you want a 1% ownership because an inheritance, one reason, but the other thing is you can write this bookkeeping however you want so we we write it down is owners draw And I don't pay tax on this. The complex does because it's an owner's draw. So I'm getting 4 or 5% interest-free money. It's like a win-win-win situation. And if I lend a young couple some money to buy a forefamily, I may take 1% ownership.

That way if they fall on their face and they you know I'd have to take it back I'm 1% owner I'm first in line to recoup the property then I have a vested interest This is something my brother came up with. We just developed it because when we first went in business our father was one-third partner and we realized that was a bad idea because when he would pass away, one-third of the company would get divided between me and my brother and two sisters. So his one-third would get divided four ways, but my sisters were doing nothing. So we were actually able to buy my father back out of the company in the early 90s for his original $10, 000 investment. Any other questions about this?

As you get older, you hopefully you have more money to invest, and how can you help the next generation get started? Besides just giving them money, why not help them get in business? That's why our family's philosophy is, I'll teach you how to fish, I'm not gonna give you the fish. Can you explain again the two LLCs, the management, is the management, would that be across multiple properties or do you have an LLC for each property. This would be the owner LLC.

There's two LLCs involved. If you get big enough, you have another LLC just for employees that owns no property. All our employees don't work for this LLC, they don't work for this one. It's a different LLC, they work at the property, but it has no assets. Because if one of them does something stupid, I don't want to put the complex in jeopardy because you know.

But the management is multiple? The management, say this is, this is, yeah this is the second place we bought was 24 family Shirley Gardens, so it's Shirley Gardens LLC Shirley Gardens management company management LLC Yeah Yeah. Well, here's another way of asking. If you have 20 properties, do you have 40 LLCs? Yeah.

Yeah. Okay. Okay. Which we had like 50 LLCs. And then one for all the employees.

Yeah, one for all the employees, correct. That's cool. One for each property or one for all? No. One for each.

One LLC for all the employees at all the different places. All 50 employees were this LLC. Is the owner LLC getting the rent and paying the management? Or is the management getting the rent? Yeah, this collects it, pays the management company, and then you, the profit is called owner's draw.

So say this company, I bought this place for $400, 000. I lent them $100, 000. We have the account where we want the operating capital. Say it makes $1, 000 profit a month. My children get $500 and I get $500.

Plus I'm getting interest. Plus I'm not paying tax on it. It's a lot of financial transactions. But it's automatic. Yeah.

It's real-life game of Monopoly. How do you play this game to your advantage? For the two properties that you have per LLC, one LLC simply functions as the property owner. The other LLC Collects all of the rent From on the property correct they this one collects the rent, okay? No, they give us no the management fee would take take maybe a thousand dollars a month out of here and split it up.

It's only to disperse the funds. To the owners. Right. So the owner... We have to have this management because you could split the profits however you want but if you're 1% owner, the $1, 000 profit you may get $10 and your children get $990.

So you set up the management company however percentage you want to split it up. So one LLC is to divide the percentage of property ownership and the other LLC is to divide the percentage of property revenue? Correct. Okay. Thank you.

And is this just for your kids or is this for every property? Cuz if you're the sole owner. What? Well. I've done it both ways.

Yeah. It's, I don't know how to explain it, it's just, I love real estate. You sit there and think about stuff. How do we, how do we make this, turn this lemon into lemonade? You have to do something with your money.

Let's help the next generation get rolling, especially your own children. Let's teach them how to fish. If you're able, not everybody's able to. I just had a father call me a month ago. He said, I have, my house is worth a million dollars, and I owe less than $50, 000 on it, but that's where all my money is.

I can't even help my children because all my money is right here because my goal was to get my house paid off he goes what do I do now I don't know what what you do at that point. The only... He's... He's, you know, he's thinking about himself and his wife. He doesn't want a payment because he's getting older.

He wants his house debt-free, but you know, that's just personal decisions you have to make. You don't have an unlimited resource of capital. That's why when you start early, you young folks and the most property you can put your hands on and catch that wave of inflation the better off you are. Yes? In the case of the man who has $950, 000 in equity in his house.

How much? $950, 000 in equity. He owes $50, 000. It's worth a million. Your friend that had a million dollar house.

Oh, yeah. Oh, yeah. This one. Okay. So when he and his wife pass, the house goes to the kids.

Correct. They can dispose of it. So in that case, would it be prudent to do a reverse mortgage or I'd never do a reverse mortgage not even to give the money to the kids what's that not even to give the money to the kids so that they can do something that they get it either way. That's just me. I wouldn't do it, because you've just given up ownership of the property.

What we don't want as Christians is waiting for your parents to die so you can inherit things. I have to tell you my Uncle Rollins story, true story. Uncle Rollin married my father's sister. He lived on a farm in Iowa. He had two younger sisters.

It's a 700-acre farm that is, Uncle Rollin's father owns free and clear, been in the family several generations. So Uncle Rollin's 19, and the farm comes for sale next door to them. Uncle Rollins says I know how to do farming dad help me buy this farm and I can make it a success, I know I can. If you help me get the loan." His dad says, no. Rollin, this farm's all gonna be yours someday.

Your two sisters don't want the farm. When I quit running the farm, it's all going to be yours." So Uncle Rollin says, okay. He can't buy it anyway without having his parents sign. So like three more, Three or four more farms come for sale during when Rollins in his twenties and his dad says no every time. So Uncle Rollin is working on the farm under the thumb of his father about what crops to plant, what fields to lay fallow, what farm equipment to use.

He's always under the thumb of his father. His father works till he's 70, 80, 80, 91. Uncle Rollin took over the farm when he was 70 years old, waiting all these 50 some odd years for his father to step back and sign the farm over to him. His father lived to be like 96 or 97. Uncle Rollin waited 51 years to do things he wanted, the way he wanted.

He ran it for two years and signed it over to one of his sons who was 50, that he would take over the farm. So these, see in our family, It isn't where the children inherit the business or take it over when the parents retire. It will help you get your own heating and cooling company going. It will help you buy your own apartments. It will help you do your own thing.

Instead of waiting for the parents to retire or die. That's how businesses are lost. 75% of them, the children, don't know how to run the property. My father said Whenever they would get together with Rollin and Mary, my dad's sister, he would tell my dad every time, the biggest regret in my life is I did not buy a different farm. I could not do things the way I wanted.

We'd have another child and I'd have to go to my father and say, Dad, can I get a raise? I have another mouth to feed. He was, he could never do things he wanted. Yet he's there working on the farm. I see guys with different trades in St.

Louis, bricklayers and that, and they're like, oh yeah, my son's going to take over the business. Well, you're 70 something, your son's 50 something, when's he going to take over? Oh, in a couple years, I'll be letting him take over. My father said he would see friends from high school saying, they'd meet at high school reunions and they'd say, I love my parents but it's going to be nice when they pass away so I can get my inheritance. Waiting for your parents to die for your inheritance?

What the what? That's that's not a good way. See to take dominion we need to, you know, my father's like, you could wait and inherit our apartments that he had with two partners, but he said, you kids aren't gonna inherit anything from me. He said, because I'm gonna live longer than all you guys anyway. Which he's 95 and a half, he's still living.

I'd still be waiting to inherit something. So, no, we gotta be taking this place over. That means helping other people get their businesses started. Okay, page 40. The importance of having the ability to work on your own apartments.

I have young men come to me and say, I want to get into apartments, but I don't want to do the plumbing, electric, anything. I really don't want to get my hands dirty. I'm more of a computer guy. I'm like, well, maybe you'll be successful. I don't know.

It's really going to be hard because you're going to hire a plumber to fix something and pay him $200 and I'm going to go over and fix it and put the $10 part on it. So how are you going to compete against me when I can fix it myself. So if you buy apartments, are you willing to get your hands dirty, get in there and do the work? You can ask Scott. I love to get in there and do the demo and tear it up and put it back together.

I love, one of my favorite things is the jackhammer, believe it or not. I'll come home just like Four months ago, I was jackhammering. I came home all dusty and dirty. My wife's like, what were you doing today? You're all full of dust and that.

I said, well, we had to jackhammer to move some toilet and these lines over. She's like, why are you Jack Hammering? You have all these young employees, why aren't they Jack Hammering? I told her, well, why do they get to have all the fun? I wanted to get in there and Jack Hammer.

So, Jim and I were on our board together. We'd have these conference calls And invariably, well, one of our board members is a cow rancher. So in the background, you'd hear this, mmm, that's a cow. But with Jim, you'd hear, or compressor, or power tool, because he was doing the work. This wasn't very long ago either, right?

Hey, I'm 70 years old, and I still love to go in and run the jackhammer. In fact, I'll tell the guys, we just had a job where the guys got in there before I got there and they did the jackhammering and I was not happy about it because I wanted to do the jackhammering. So are you willing to get your hands dirty? The young guys come to me and say, I want to learn everything I can about apartments, so I'm going to get my real estate license. And I tell them, well, you can do that, But I don't recommend it.

I recommend you learn how to do plumbing, electric, learn how to do carbon rework. That's where you're really going to save some money. You're not really going to save much money if you're a real estate agent, someone on the commission, but that's not really helping you get to where you want to be. So my father would tell my brother and I, he would teach us how to do stuff and he'd pull up a lawn chair like in the kitchen or something, he goes, okay, now you're changing the garbage disposal. And he'd sit there with a beer or a glass of lemonade and just direct us around.

Or he'd have a higher up somebody, one of his maintenance men who know how to do something and he'd tell us, you boys sit right here and watch him because you're probably going to do the next one. All right, let's keep going. Page 41. Avoiding high maintenance costs, five things you need to know. Plan for expenses, always keep plenty of operating capital in your account.

Know the law. Know the law in dealing with tenants and fixing things according to building code. That's very important. If you fix something do it according to the building code. So you don't have to go back and redo it.

That means finding out what the codes are. My brother became a master electrician, master plumber, master drain layer, and master mechanical. He's the only guy that holds all four license. His two sons wanted to go in the apartment business. So one became a master electrician and the other became a master plumber.

So they can hire guys at a cheaper rate who don't know anything and teach them plumbing, teach them electric, and they're doing it under their license. If you're a master plumber or whatever master you can pull permits and in St. Louis you just take a test and you become a in St. Charles the city is different but you can you could move to St. Louis tomorrow take a test and if you pass it now you're a master plumber.

It's that easy. St. Charles. But fix things according to building codes. Number three, tenant satisfaction.

Keep your tenants happy. Those are your customers. Number four, respond promptly. Fix any maintenance problems the same day or the next day. And we've developed checklists when a maintenance guy goes into a vacant apartment there's certain things he checks to make sure everything's working in the apartment because you don't want someone to move in and this outlet not work or this light switch not work or The dishwasher not work so they check all that Then page 42 there's the office and managerial side of rental property you have to take time out to show apartments to rent them.

Like I said, your life changes. Now what I've heard some people are doing nowadays is they don't necessarily meet everybody to show them every vacant apartment. They will put a code box on the door and they'll just give the prospective tenant the code so the person can go in and look at the apartment, but you're trusting they're not going to tear it up, and you're trusting they're going to lock it back up when you leave. But it's one way to not be running over there all the time. And when you own property, you'll set up emergency situations where the tenant calls you after hours.

In other words, you don't want them calling you at 9 o'clock at night telling you their towel bar fell off the wall in their bathroom. That could wait till the next day. In fact, some complexes fine, like it's a $50 fine if you call after hours and bother the manager. Most stuff can be handled during business hours. And taking care of the tenants, say you don't know anything about furnaces and you own this duplex.

And someone calls you up and says, it's 11 o'clock at night, my furnace isn't working. Uh-oh, what are you going to do? Well, that's easy. You've planned ahead. You have these three little heaters that you run over there, plug them in, they have heat for the night, you go back home and you get a serviceman there the next day.

They're immediately taken care of. Same way with the window air conditioner. Put the window air conditioner in, boom, you're back home. So I make sure at our complexes we have plenty of space heaters and window air conditioners to take care of the tenants. Because what happens if you call a serviceman at 11 o'clock at night or even if you're a maintenance man, knows how to fix it but it's like a two-hour job.

He's there from midnight to two in the morning. No, you can't do that. The people want to go back to sleep, they just want heat. Collecting the rent, record keeping, making rent deposits. Just remember your other duties of apartment, owner, manager, you're on call 24 hours a day.

We have a ledger book that we keep track of any maintenance call that's called in. And it has carbon copy and we give the maintenance guy the carbon copy and he goes and fixes it, then he puts a tag on the door, I was here to fix your problem, whatever, if the people aren't home. And then we keep track of any calls, because sometimes people, they get behind in their rent, and they say, oh, by the way, I've called in 20 times to have this thing fixed, and you guys have never showed up. And we say, well, wait a minute, let's check the maintenance book. Sir, you've never called that in.

Oh, okay, we have a record of that. They can't get away with stuff. And the last thing, get in the habit of paying all your bills every week. My father told my brother and I, I want you to pay all your bills every week, which we've been doing for 47 years. We pay all our bills every week and when we need a subcontractor we pay all our bills every Thursday.

If a subcontractor turns his bill in on Wednesday he gets paid on Thursday and guess what when we need them they come because they know they're going to get paid right away. My brother and I each had a company checkbook we'd carry with us, and lots of times the subcontractor would finish a job and we would drive over there, look at the job and write a check immediately and hand it to them. That's how you take care of people, your subcontractors in business. Page 43. Why businesses should pay all their bills on time if possible.

You pay all your bills as a testimony to the God you serve. You pay your bills every week. My brother-in-law had a glass blowing company and his biggest customer was Monsanto. And Monsanto, he's just a little glass blower, it's him and another glass blower. Monsanto was paying their bills.

They'd wait 30 days and make the payment. And he's doing 40, 50% of his work for Monsanto. Then Monsanto says, we readjusted things, we're gonna pay you every 60 days. Then it went to 90 days, then it went to 120 days. That's not how you treat people.

So you pay your bills on time. Number one, saving your good name saves money. Lots of times we can take a discount if you pay your bill right away. Ensuring excellent future service. Number four, encouraging people in your network to recommend your business, page 44, building and keeping a positive credit profile, getting a payment cushion, and what you do when you're late.

You call the people, just like we tell our tenants, if you can't pay your rent this month, don't avoid us, come to us and talk to us about it. If you can't pay your business bills, go talk to whoever you owe the money to, and tell them what your problem is. Page 45 business advice for young men. Proverbs 24-27 Prepare your work outside and get ready, get everything ready for yourself in the field and after that build your house. What this proverb is saying, When my father told my brother and I if you're gonna buy apartments you need to buy apartments before you get married My I had ten thousand dollars saved from working when I was eight years old up to 23 years old.

It doesn't sound like much, but there was a lot of money back then. And my wife and I got engaged, And we, it was like the beginning of October and we didn't buy any apartments to the end of October. But we're engaged and we all excited about getting married. We went and looked at this house, a three bedroom house that was on a slab, but it was selling for $12, 000. That shows you what $10, 000 would buy back then.

So I went and looked at the house with her, and we're leaving, we're driving away. And My wife, fiance at that time, says, what do you think? We could just about pay cash for this. I'm driving down the road. Don't tell her this.

It all of a sudden, it hits me. I'm like, no, I'm not buying any house forget it this is my money I'm buying apartments are not spending my ten thousand dollars on a house and we laugh about it now That would have been the biggest mistake we could have made because I took my $10, 000, my brother's $10, 000, my father's $10, 000, $30, 000 and we bought a 12 family, a 24 family and a 44 family all within five and a half months. I got married and we had 80 apartments and I lived in one as a manager or I could have used my $10, 000 and paid cash for this house and I would have no house payment. But the way I was brought up, that's not a good use of my capital. What they say in this proverb is, first you start your business, then get some passive income coming in, then you get married and build your house.

It doesn't say get married, but then you build your house. So it doesn't mean, you look at the bottom, it says we need to recognize that the proverb says to prepare the fields, not necessarily to harvest them. Next page. Along the same lines, this guy argues, and Grant Cordon did in his article, buying a house is a bad investment. He's saying it's a bad investment.

If you want to go into business for yourself and you only have a certain amount of capital, if you use that to buy a house, well then how are you going to start a business with no money? You can't borrow money to start a business. That's how you get over leveraged. Page 46A. Young men working lots of hours and earning money in order to prepare for life, business, and marriage.

When I was 14, my brother was 13. People would ask us, What do you want to be when you grow up? We tell them, we want to own apartments. They'd say, you already know what you want to do? Yes, we're buying apartments.

But my father would tell us, this is a cutthroat business. There's a lot of competition. So you're going to have to have some capital to start this business. So my brother and I were working during the summers and Christmas vacation. We're working 60, 70, 80 hours a week because we could work on his properties because we were trying to accumulate some capital to buy property.

If I thought, oh, I'm just going to work 40 hours a week because I want to do whatever, How are you going to get ahead of this guy over here that's working 40 hours a week? Besides, my father would tell us, you're single. You don't have hardly any responsibilities. You don't have a wife to take care of or children. You don't have a house payment.

You're living here. You can save the most amount of money right now. So my brother and I would take advantage of that because we knew it took money to make money And we were, we had a goal. We wanted to buy apartments. And how do we get there?

So there's an article here at the bottom. It starts, why it pays to hustle while you're young. Next page. It says, time is your most precious resource. Number two, you have fewer responsibilities.

Number three, you're bolder and more creative. You can fail and learn. Start early and hustle for what you love. I was going to just point out one thing on back one page, 46A. You don't want to be one of the young men not prepared for life, business or marriage.

I've had parents call me and say, my son is 20 years old. He has no money saved, he has no job skills, and he doesn't know what he wants to do for a living. Uh-oh, that's not good. Parents' job is to help to get this child mentors, whatever it takes, whatever field they wanna get into, help them get started in there. On the other hand, I've had parents call me and say, "'My son's been cutting grass since he's eight years old.

He's got $65, 000 in the bank. What do you think we should do with it now? It's from one extreme to the other. Okay, page 47 is Don't Marry a Woman, the Spending Signs. Page 48, Finding Enjoyment in your labor, God's gift to man, five times in Ecclesiastes, tells us that God's gift is to find enjoyment in our work.

Look at Ecclesiastes 3, 12, and 13. I perceive there's nothing better for them than to be joyful and to do good as long as they live. Also that everyone should eat and drink and take pleasure in all his toil. This is God's gift to man. Whatever you want to do for a living, you should enjoy it.

In fact, you should love it. My father would say, if you love what you do, you really never have to work a day in your life because you're enjoying it. On Sunday nights when my brother and I were little kids, my father would say, you know what tomorrow is? We'd say Monday morning. He'd say, it's a day I get to go to work.

I get to go to work and have fun and I can't wait to get there. So when I was eight, my brother was seven, on a Friday night my father tells us, tomorrow you boys are going to work with me." We couldn't sleep Friday night, because we're going to go do this fun thing, this work thing. So we went and worked on his apartment. So anyway, I know a guy at the bottom of the page, he just wanted to own his business. He bought this printing business, he invested $125, 000 in it, didn't know anything about it.

His main thing was own his own business. Anyway, He ended up losing it, his whole investment, because he didn't love it or know anything about it. Page 49, I just put this in as a reminder. What is a chief end of man? To glorify God and enjoy him forever.

Page 50, just a way of looking at your life this is a famous book written by Augustine the city of God against the pagans if you're a Christian you're in the city of God now. It's just a way of looking at this life and it's having a love of God rather a love of self. You can read that later. Page 51, Eight issues with becoming a landlord. Number one, startup capital.

My father called it getting over the hump. Buying your first rental property is always the hardest because Number one, you need money for down payment, you need money for operating capital, and you need money to fix it up. Earlier we were talking about if you had 50, 000, did I already talk about this? If you have $50, 000 and that's all you have, maybe you buy a place and you put $35, 000 down payment, then you have 5, 000 as operating capital, and then you have 10, 000 for fix up. So just because you have 50 doesn't mean you use it all for your down payment.

Because the banks don't want you to come back to them and try to borrow more money to fix it up. It's gonna make you look like you don't know what you're doing. Okay, so startup capital is one problem. Page 52, making repairs. It's important for you to know how to fix your own property.

Number three, collecting rent. One of the young guys I'm helping, he says about collecting rent, he says it's either my family or their family, meaning He can only support one family. You have to go after people that are not paying their rent. And sometimes you might have to a victim. Number four, dealing with problem tenants.

I told you about some of those issues. We had one tenant, he had one complex, he got mad at the manager, believe it or not, a big guy, six foot six or something, he picked up one of those big railroad ties, he pulled it off the curb, you know, it was by the drive, pulled that out of the ground, carried on his shoulder and threw it to the manager's windshield. So the railroad tie is sticking out of the front of the car. Do you have what it takes to deal with tenants like that? Remember, they think they own the property.

No, you bought it, you own it. You have to throw them out sometimes. I was working with a guy out of state and he had like six rental units. And he said, he called me up one day and said, I'm selling everything. I said, why?

He said, because I got this one guy, He hasn't paid me any rent in eight months. And every time I go there to collect the money, he always has a sob story and I just don't have the heart to a victim. So this isn't my cup of tea, I need to go do something else. So do you really have the oomph to deal with problem tenants? Next page.

Page 54. How are you at managing your finances? You want to keep your property safe? And then pay your taxes. Page 55, that first paragraph, according to the US Small Business Administration, over 50% of small businesses failed the first year, and 95% the first five years.

Blunder number one, amount of effort exerted. Hey, if you own your own business, you may have to work 70, 80 hours a week. When I started our business, I was working for my father, had the two other jobs. My brother and I took no money out of the company the first four years. No salary.

We let all the money build back up in the company. And we were working a lot of hours every week to make it successful. So how much effort do you want to put in a business that you're starting? You have, your life is going to change. Blunder number two, inadequate financing.

If you borrow on your house and then you borrow the rest from the bank, you're still 100% leveraged. That's a bad place to be. Blunder number three on page 56, lack of planning. Blunder four, unrealistic expectations. Blunder number five, inability to commit.

Blunder six, unwillingness to take responsibility. Page 57, another article about businesses failing. If you look like one-third from the bottom of the page, why do most businesses fail? Because they can't pay their bills. When you run out of cash, it's game over.

When we went in business, my brother and I, we had a checkbook that we, one of us would carry with us and we went to the hardware store, we knew how much was in our account and we wrote checks for years, the first four years, because we wanted to make sure whatever we were buying, we had the money to pay for it. Page 58. Just talks about controlling your cash. 59, six signs you're not ready for entrepreneurship. Guess what?

Owning your own business is not for everyone. When you buy rental property or whatever business you wanna start, it's a risk. You have to be a risk taker to own your own business, because you could lose everything you own, everything that's dear to you. So are you willing to take a risk? It isn't for everyone.

Number one, you aren't self-motivated. You have to be a self-starter. Number two, you haven't established the foundation, meaning, like my friend who bought that print shop, he didn't know anything about the business. He didn't work in the print shop business for a couple years to learn how to do it. He just wanted to own his own business.

I tried to talk him out of it. Number three, you get flustered under pressure. You know, an employee calls you and say, oh we just had the sewer back up, It's all over. You know, and they're all excited. If you get all excited, you just tell them, okay, fine, we got more entertainment to deal with.

You know, you have to be bringing that calm. Okay, we're gonna do X, Y, Z and take care of this. Number four, you haven't done enough research on whatever business you're going to start. Page 60, you have no passion for the business you want to start. That was my friend.

Number six, your growth strategy is try to do what someone else did. Each person is going to find their own way through business. Page 61, just to review, biblical personal finance spending for God's glory. Here are four principles for faithful spending. Christians are stewards.

Number two Christians tithe and give, page 62. Debt is de-habilitating. And number four, now's the time to save and invest. Remember, on page 63, we're doing this for the glory of God, magnifying His name and advancing His kingdom.