In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Bronson Hill, Founder and CEO of Bronson Equity, a multifamily investment company that is a general partner in over $200M in performing real estate assets, host of The Mailbox Money Show podcast, and author of Fire Yourself: Replace Your Working Income with Passive Income in 3 Years or Less.
In addition to his real estate business, Bronson also operates an educational platform, hosts the Bronson Equity Monthly Investor Series, and co-leads a large monthly meetup in Pasadena, California for investors.
In this episode, you will learn:
- What types of alternative assets offer passive income.
- How long it took Bronson Hill to replace his working income with passive income.
- If real estate investing is truly passive.
- How to get started passively investing.
- And more!
Bronsonequity.com | Fire Yourself: Replace Your Working Income with Passive Income in 3 Years or Less | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Bronson is the Founder and CEO of Bronson Equity, a multifamily investment company that is a general partner in over $200M in performing real estate assets, host of The Mailbox Money Show podcast, and author of Fire Yourself: Replace Your Working Income with Passive Income in 3 Years or Less.
In addition to his real estate business, he also operates an educational platform, hosts the Bronson Equity Monthly Investor Series, and co-leads a large monthly meetup in Pasadena, California for investors.
Bronson has spoken personally with over 2,000 investors and is passionate about helping these busy professionals create passive income and grow cash flow through investing in alternative assets.
Bronson, welcome to the show.
Hey Marc, I’m excited to be here today. I love talking about finance and being an agent of wealth, so I’m looking forward to it.
Great, I’m looking forward to it too. In October 2023, you published the book Fire Yourself, which offers a practical guide to achieving financial independence through passive investing in alternative assets. In it, you share your personal journey, but I was hoping you could discuss it here as well… How did you go from leaving a high-paying corporate job to pursuing passive income opportunities?
How (and When) Bronson Hill Fired Himself
Well, I had a job in medical device sales where I was making $200,000+ a year. Although I had it down to about 30-35 hours a week, I felt like I didn’t have control over my time. I really love traveling, I love being able to create things – whether it be writing a book or writing music – and I love spending time with family. So I realized I wanted to have more flexibility. I wanted to be able to structure my day exactly how I wanted. So, I decided to go after my dreams and find a way to create passive income.
It’s interesting because my family asked me, “Why would you ever leave your great job?” Because they’re all teachers and work in nonprofits. But I was in an entrepreneur’s group where I met with five entrepreneurs over a period of about a year or so, and all – without exception – told me to leave my job. Eventually I did.
A lot of people say they want financial freedom, but really I wanted freedom over my time. To me, financial freedom means time freedom. It was really exciting for me to get out of the time for money trade business.
Did you quit your job cold turkey, or did you wean yourself into this passive income strategy? How long did it take for you to replace your working income with passive income?
People often ask me, “When is the right time to quit my job?” There’s different numbers to look at.
A lot of times people think they need to fully replace their income. So, if an individual is making $200,000 a year, they might want to replace that before they fire themselves. I did it differently – I looked at what’s called my rat race number, which is how much money I needed to cover my expenses. For me, it was about $70,000 a year, or about $5,000-6,000 a month.
I realized that if I could generate that type of income through my investments and passive activities, I could leave the job. So initially I didn’t fully replace my working income, but I was able to do that over time.
You mentioned investments that generated passive income. There’s obviously a lot of different types of asset classes that can produce passive income… When you started, what were you utilizing, and how has that transformed over time?
How to Generate Passive Income Streams
I started with single-family real estate investing, but eventually realized that it was a lot of work, and it wasn’t producing the type of cash flow that I wanted.
The challenge with single-family investing is while there is a bit of cash flow, you usually only breakeven. What I tell people who want to scale their wealth is: You should be able to 10x the size of what you’re doing. So if you are a single-family real estate investor with three houses, it’s going to be a lot of work to 10x that to 30 houses. That’s essentially another job – and I didn’t want another job.
Over time, I started looking into larger, multi-family real estate deals. The first kind of which was 225 units in Texas. My role in that deal was simply raising $100,000. I discovered it from an investor I met at a meetup that I had started – the same meetup I still lead now.
These deals are called syndication (or syndicated) deals. While there’s no investment that’s 100% passive, these are considered very passive. In them, you vet a deal and vet a team that operates it. In my book, I talk about how to vet any deal. Then, over time, you can scale it up. Once I got used to that first deal, I started raising more money for different ones. That was how I was able to leave my job.
Now, things have shifted a bit in the last couple years, as interest rates have gone up. In response, I’ve done a lot more work in cash flowing types of businesses – ATM machines, car washes, oil and gas deals. I still do some other stuff in real estate, like development types of projects. But right now, I’m focused on deals that generate cash flow.
Single-Family Versus Multifamily Investing
I want to unpack a couple of things… First, you mentioned single-family investing. A lot of individuals get started in real estate through single-family homes, and oftentimes it’s accidentally – they own a condo or home, they move, and they decide not to sell their property. That then becomes their first investment property. Can you explain why it’s difficult to scale a single-family versus a multi-family type of investment?
Again, I’m not fully against single family real estate – some investors do very well. The issue is it typically takes 10-15 years to really see profits, because profits are achieved through appreciation. You make the majority of your money at the sale.
But, as you mentioned, it’s how a lot of people get started in real estate.
The challenge with scaling is that it becomes a full-time job, and it’s a very inefficient asset. For example, let’s say you have 100 single-family homes in a city – that’s a ton of work to try to manage – versus a 100 unit apartment complex. The latter is one roof, one set of plumbing, etc. It’s much more efficient.
How does someone get started passively investing in multi-family real estate? What if they don’t have a pile of cash ready to invest in a large deal?
How to Get Started Passively Investing
There’s really two paths – either you have time, or you have money. Although I had a full-time job, I was still able to leverage my time – as I didn’t have hundreds of thousands of dollars to put into a deal at the start.
But there are people that have money to put into a deal right off the bat. If that’s you, I talk about what I recommend doing in my book.
If you have more time than money, you can do what I did. I’ve raised about $40 million now for different deals. In short, you do this by finding real estate deals and bringing them to investors. In return, you get a piece of the deal. The team that’s operating – whether it’s raising money, operating a deal, or finding a deal – will typically share on the upside. That’s how I was able to 20x my net worth to seven figures in about three to four years.
So there’s different ways to get in, and some people do both.
Again, my advice is to avoid single-family homes, as I think it’s hard to scale.
Now, let’s go back to the cash flow versus appreciation topic. You and I live on the coast – I’m on the east coast close to New York City, you’re on the West coast close to Los Angeles. It’s hard in our areas to find cash-flowing properties. So where do you look for these cash-flowing properties? Where, geographically?
We don’t invest in anything in California. California is not a very landlord-friendly area, there’s tax issues, there’s business issues… There’s lots of issues. We mostly invest in Florida, Georgia, Alabama… The sunbelt.
Passive Income Investing in the Current Market Conditions
Right now is an interesting time, as rates are increasing. It’s the least affordable time in the last 50 years to buy a single-family home, due to interest rates. But then people that have homes don’t want to sell them, because they’ve got anywhere from a 2½-4% rate on their mortgage. The asset really is the loan. So it’s an interesting time.
In multi-family real estate, we are starting to see some good deals become available now, because groups are having trouble with valuations. But there’s examples of people paying much more per deal, and with the rates higher, buyers are having trouble with cash flow in some of these big, multi-family deals. So a lot of investors aren’t looking to multi-family… But that reminds me of Warren Buffett’s principle: Be fearful when others are greedy and be greedy when others are fearful. There’s some fear out there right now.
The last couple of years we’ve actually shifted a bit to do less real estate and go to some of these other assets (ATMs, car washes, oil and gas), which are cash flowing businesses. I think it depends what your goals are, and it depends on the specific deal and the operator.
Earlier, we talked about how increased interest rates have impacted real estate. Has it impacted these other types of businesses?
Well, it depends if a business relies on financing. So, for car washes, there has been a little bit of an impact as there’s some financing that goes into buying land or financing construction. I wouldn’t say the impact is huge, but it does affect it. The ATM machine deal fund that we’re partnered on, that one is zero leverage. So no, it’s a full cash deal in every way.
That makes sense. In Fire Yourself, you discuss your failures and successes in various investments. What are some of the biggest mistakes you see investors making, no matter the asset class?
Mistakes to Avoid, No Matter the Asset
I think the biggest issue is analysis paralysis. There’s so many investment options that it can be overwhelming… There’s all these shiny objects out there. So I think that’s one of the issues is just really picking a course and choosing it over time when people do invest. I think just really spending time and trying to understand who the operator is. Maybe talking with other investors that have worked with ’em and regardless, you can do all the stuff and stuff can still happen, but I think having some diversity is good. I think too much diversity is an issue. I know a guy that’s invested passively in over 70 deals, which I think is too much because then that’s a full-time job.
So if you’re trying to fire yourself, if you’re in 70 deals, that’s like, oh my gosh, welcome to another job, or welcome to nights and weekends every day. So I think being invested in five or 10 different deals is probably enough for most people. And over time, people may need to increase their allocations instead of putting in the minimum. Maybe they put a little more into deals as they go along. But again, once you get to know a certain number of operators that are good operators that you’ve worked with, you had experience with you, like their approach though, you like the communication and the performance, then maybe you can say, I’m between these two, three operators, I’m going to put more of my assets with these guys. And so I think those are things, but most people I think that are passive investors don’t go to invents.
They don’t go to meetups, they don’t talk to other people. And one of the most transformational relationships I’ve found for passive investors is just meeting other passive investors because they don’t have anything to sell anybody. For me, I’m a syndicator. We raise money for our funds. I know you are investment advisors, so we have products and things that we provide people with and help people, but we do have a bias where we want people to use our stuff. We believe in it, but a passive investor, another passive investor, they have no, they’re just simply out there to help and learn and collaborate. And so it’s a really great relationship I find for other passive investors because this is somebody who has no financial interest at all in anything except just try to be there and learn and help other people, which is cool.
That makes sense. Well, we’re just about out of time. Bronson, I’d like to thank you for joining me on The Agent of Wealth Podcast today. You provided some great information on passive income. How best can someone find out more about you and what you do?
Thanks for having me, Marc. This has been a lot of fun. If your listeners would like to check out my book Fire Yourself, it’s available on Amazon. And on my website, Bronsonequity.com, you can read the first couple of chapters for free. We also have information about our investor clubs on the site. Finally, your listeners can also find me on social media at Bronson Hill.
Great, we’ll link to all of that in the show notes. Thanks again, Bronson. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.