J Massey was the featured guest on the Capital Gains Tax Solutions podcast with Brett Swarts recently and they talked about everything from how J got started in real estate investing, to key short term rental strategies, growth mindset, the Cashflow Diary, and more.
Questions and Answers
- What is your background and what’s your current focus?
J started out from a very difficult situation in life. J’s wife has a condition that when she’s pregnant she can’t eat or drink, and at the same time as her pregnancy J had a punctured lung and brutal asthma. The challenge was that neither of them could earn income by going to work so they needed to find a solution. A friend recommended that he look into real estate investing so with literally no money and terrible credit J began wholesaling properties.
After being introduced to taxes, J started keeping the properties and that developed into a portfolio that included single family houses, mortgages, and cell phone towers. Eventually people started asking how he’d been able to achieve all of that, so J began teaching others how to do the same thing. One of J’s students introduced him to the idea of short term rentals, and three years ago J switched his focus to teaching people how to create their own short term rental business.
- What is your super power and how does it shape how you help others today?
J grew up as a military kid outside of the States and growing up overseas has given him the ability to adapt to new situations very quickly. J is autistic and has ADHD and he considers those his super powers as they help him connect the dots and learn new things surprisingly fast. It’s also a gift being able to share that information and help other people as well.
- How did you transfer the idea of a weakness into a strength?
Being able to provide for your family is great but when that’s accomplished there’s not much else to do. At the age of 38, J found himself functionally retired and with nothing to do until one person came to him and asked to learn everything he knew. In the process of teaching this person the skills of real estate investing, both J and the other person went through incredible transformations. He realized how fulfilling and valuable it is to help other people achieve their dreams and that ultimately put him on his current path.
- Does your approach to life filter into your basketball game?
J judges his success in a basketball game by the number of rebounds and blocks he made, the things that enable someone else to be able to be great. Setting the example of helping other people is very important to J. In many ways, entrepreneurs can be some of the most selfless individuals and since they are so connected to so many different people, they have the ability to make fundamental positive changes to their communities.
- Walk us through the tactical parts of what you do and how you help people create more wealth.
One of the things that people rarely tell you is that owning real estate long term is a great way to build wealth but horrible for building income. Income doesn’t materialize until the debt servicing is complete. When J had 450 units, there was always something to repair and something to do, so they started looking for ways to increase income and reduce the work. This is where short term rental units come into the picture.
Short term rentals have a number of advantages to the user compared to a traditional hotel room that customers appreciate, which are some of the things he covers on the Cashflow Diary podcast.
- What’s the process once someone gets their first deal done?
We’ll assume two things: each bedroom in a short term rental will net you $800 per month throughout the year. The second thing is that you have $250,000 to invest in real estate. On average, that $250,000 will allow you to acquire anywhere from 10 to 17 short term rentals. When you do the math, you realize that within 18 months or less, you will have your $250,000 back.
That means that not only do you get your money back, but you’ve turned it into a stream of income and a business that you can continue to grow.
Saving that much money is hard, and making large financial commitments like a mortgage can be extremely successful because of the lack of experience. By building a short term rental business first, you are building a stronger, bigger, and better real estate portfolio than any other strategy while also building your experience.
- Are short term rentals harder to own and manage than regular rentals?
Since J came into the short term rental industry with prior experience, he had a number of different skills in place that he could bring to the space. He applied those skills and developed a system that allows his students to leverage a number of different pieces of technology and manage their business with only an hour of work a day.
The tools are important, but you also need an expert who knows how to use it to get the best results. That’s where J’s business really shines, as they impart the expert skills the student’s need to excel. Building a team is absolutely crucial to success in the short term rental industry. You will never achieve the results you could with a team on your own because the skill sets required are so diverse. It only works if you build a system and a team.
J’s system allows him to take a completely blank space and get it online and generating revenue in only 72 hours. Bringing in his wife was a big asset for J because of the additional skill set and perspective she brought to the table.
Real estate is the best risk adjusted rate of return you can have. It creates positive impacts in the community and helps people in their daily lives, which can also make very rewarding.
- What’s your take on selling real estate and what tax strategies do you implement?
J generally avoids selling, but if he does he always tries to make sure he has enough offsetting credits and depreciation to deal with whatever the capital gains would be. He’s not a fan of a 1031 exchange, so he will take on different projects like larger rehabs to create more offsetting losses. This is also one of the reasons why J is so excited about the Deferred Sales Trust that Brett talks about.
The time constraint of the 1031 exchange can result in very unfavorable deals and poor decisions just to avoid the tax. The Deferred Sales Trust is a very attractive alternative to the 1031 exchange.
- What is the single best practice to implement to be successful in real estate investing and building wealth?
The first skill is failing fast, failing forward, and failing frequently. As a child you learned how to fail while learning to walk and that’s a skill you need to cultivate. Real estate is the same way and understanding that will allow you to get out there and start making things happen. Most of us haven’t given ourselves enough opportunity to fail in order to get it right!
Other than that, realize that it’s never going to be perfect. Make the decision to get to your destination and do what it takes to get there, detours, full stops, and all. Give yourself the grace to work at it until you get it done. When the ‘why’ gets big, the ‘how’ gets easy.
- How do you stay centered in your values?
Praying and reading the Bible is central to J’s ability to stay focused on his mission. The world comes at all of us and sometimes the people we look up to are not going to be the ones that enable our transformation. Don’t let the world tell you what you should be.
Seeing his students develop and grow is something that keeps J going as well. It inspires him to keep looking for the next thing he can learn and add to his student’s lives.