Buying Real Estate and Small Businesses From Retiring Owners with Jim Freeman

Jim Freeman (00:00)
partly because I’m the age I am, I’m aware of something called the silvered tsunami. And here’s a number for you if you’re a numbers person. I got this from, I think it was an MIT study that I found. And the study was looking at demographic shifts in the US population. Actually, it’s all over the world. But every day in the United States, 10,000 people are turning 65. 10,000.

And that number is going to rise slightly ⁓ and stay steady for the next 20 years. maybe if you’re into YouTube and podcasts and whatever, you probably have heard the great wealth transfer that has made headlines because of that fact. And it’s true.

Scott Bursey (02:18)
Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host, Scott Bursey. And today we have a powerhouse guest who is fluent in the language of capital. Jim Freeman is in the studio. Jim is bringing the high octane financial fuel we all need to scale up. We’re about to inject some serious knowledge into your business. So let’s get this conversation started. Jim, thank you for being here.

Jim Freeman (02:42)
Thank you, Scott. I’m really looking forward to this. I’m very happy to be with you today.

Scott Bursey (02:46)
What really caught my attention about you was the way that you’ve been able to navigate and master the world of complex financing, effectively raising equity and capital and structuring deals from multiple angles. It’s a rare and powerful perspective to have in this industry.

Jim Freeman (03:02)
Well, thanks. ⁓ know, but let me just say, though, every time I’ve been able to do that, and I have been able to do those things, I didn’t know what I was doing when I started. I I had to pick my way through it, you know, and find out what to do and who to talk to. And that was the biggest strength, I think, that I had beginning at a fairly early age was I didn’t know anything. So I didn’t know, you know, what not to do. I just

did whatever I felt right at the moment.

Scott Bursey (03:32)
For our listeners who may not be familiar with your journey, please tell us how did your career begin and where are you at now?

Jim Freeman (03:38)
Well, it’s a long story, so I’ll try to truncate it. But ⁓ I was a ⁓ student at the University of Washington in Seattle. And ⁓ I had no job. I had no money. I had no credit. ⁓ And at that time, the Student Union Center provided a job board for students who could go down on Thursdays at noon. And people would stick.

stickers on the job board and they wanted starving students to come and do things. And I would clean out basements, paint apartments, whatever. Eventually I got connected with a gentleman who just returned from military service from the Vietnam War. And he had started a company that ⁓ was a home inspection business, a general contracting business. And at the time in Seattle, in that era, things were very bad.

⁓ 50,000 people have been laid off from Boeing and foreclosures were everywhere. And my new employer, my part-time employer, was buying foreclosed homes in Seattle. And today we understand that is flipping. We didn’t call it back then. But ⁓ I watched him do it and ⁓ I gained some trade skills working for him. And, you know, after a few months I said, you know, I can do that.

uh… so i sat down with the print printed seattle times classified section and i was looking through the ads and there was an ad for a duplex on uh… queen and hill in seattle which today is a very she she address but it was for sale and i don’t know why it caught my eye but i it was listed by a broker i called the broker up and i said i’d to look at that he says yeah sure come on over and it was a

⁓ nineteen hundreds building ⁓ up-and-down duplex in very bad condition had been purchased by a young doctor who read a book that said doctors should own real estate and he had purchased this duplex with a with an FHA loan so I don’t know all the details but I assume he purchased as an owner-occupant and his dad was a contractor who was supposed to fix the place up and then

the doctor was supplying the money and so forth. And somehow the dad disappeared and the place was a wreck, you know, full of stuff and the doctor was discouraged. He didn’t want to move forward. So he made it possible for me to buy that place with no money down by assuming the FHA loan, which didn’t require credit and, you know, or any kind of underwriting.

And each time I found a barrier, the broker spoke up and said, wait a minute, you know, I can fix this. So I had no down payment. very little income to make the payments because it was vacant. And I didn’t have any capital to spend to just even buy materials to fix the place up using my own labor. And they solved all of that. When we closed, he had…

excess funds in the escrow account for taxes and insurance and it was a few hundred dollars maybe a thousand dollars and he gave me that money at closing so i was literally paid to buy this duplex and take it over make the payments and you know and try to operate it and so that’s that was my beginning you know in in real estate and and i i i worked uh… in the mornings i went to school in the mornings i work for my my boss in the afternoons

in the evenings I would go over and just work until I couldn’t, you know, I was falling asleep. That lasted for a couple of months. But I was very fortunate. I got one of the units fixed up where it was livable. And I got a tenant right away who made the payment plus about 100 bucks a month. And I living in a student ghetto closer to the university. ⁓ But that’s a true story. And that’s how I got started in real estate investing.

Scott Bursey (08:26)
What an incredible way to work yourself up the ladder. Jim, let’s dive right on in. What is the biggest strength you bring to a complex financing negotiation?

Jim Freeman (08:36)
Well, first of all, knowledge, which you don’t start out with knowledge. But if you know what you don’t know and you know what you need to know, and you have the ability to take action and go research what to know, then that’s where it starts. And I don’t look at complex negotiations as a blood sport. I’ve worked with a lot of very aggressive people throughout my career.

you know, experience the corporate world where it’s very competitive and all that. None of which I really care for. ⁓ But I have, ⁓ you know, you know, ⁓ to kind of tag on to the story about the duplex, within two years, I built my first 27 unit condominium in Seattle. And I had I still had no money and no income. But I had to learn how to to go ask strangers, people I didn’t know.

And put a put a proposal together that made sense to them. So I needed equity, you know, people talk about the capital stack today But I needed equity partners and I needed debt. I need to borrow money. I needed land I needed, you know cruise and you know, I needed designs I needed permits I needed all that none of which I really know how to do But you know after about a three-year period from when I first began

I built that and successfully sold that and we made a nice profit. So to answer your question, ⁓ dream a lot. Think of what’s possible. And in your dreaming, if your motives are correct, if you’re doing it not just to steal what you can steal and run away, but if you’re genuinely looking out for your end users, your end

Scott Bursey (10:00)
I love that.

Jim Freeman (10:23)
⁓ people who are going to use the product that you build or you buy or whatever you’re doing and be cognizant of how you can best benefit them. That’s going to place whatever you do in the best position. You’re going to have the most demand for what you do and that’s what leads to success in the end.

Scott Bursey (10:41)
We all wake up in the morning with the opportunity to do it correctly, and I believe that’s what you’re conveying.

Jim Freeman (10:47)
Well, look, that doesn’t mean I did it correctly. It just means that whenever I didn’t have something or I didn’t know something, I went to learn it.

Scott Bursey (10:56)
Education, absolutely, that’s the backbone of success.

And let’s discuss opportunities, Jim. What do you feel is the biggest opportunity on the horizon right now for you?

Jim Freeman (11:41)
Well, ⁓ you know, partly because I’m the age I am, I’m aware of something called the silvered tsunami. And here’s a number for you if you’re a numbers person. I got this from, I think it was an MIT study that I found. And the study was looking at demographic shifts in the US population. Actually, it’s all over the world. But every day in the United States, 10,000 people are turning 65. 10,000.

And that number is going to rise slightly ⁓ and stay steady for the next 20 years. maybe if you’re into YouTube and podcasts and whatever, you probably have heard the great wealth transfer that has made headlines because of that fact. And it’s true. ⁓ something like 70 % of that population owns a home, which is their primary source of ⁓

capital that they’re going need to pay for their care, their long-term care.

About 70 % of that population happens to be the same number, but not correlated, is going to need to sell their home in order to pay for their long-term care. And they’re going to need long-term care. But mixed into that population are incredible opportunities because maybe, I don’t know, maybe 5%, 10 % of that population owns a business.

And here’s another startling fact. 90 % of those closely held businesses, businesses that are classified by the SBA as small businesses, are going to die with the founder. And I just think that’s a waste. It’s a waste for the person who built that business, started that business. And it’s a lack of understanding and ability to approach opportunities by the younger people who could buy and assume those businesses.

Scott Bursey (13:27)
It’s startling, it really is. And I love the way that you were able to illustrate that. Let’s shift gears just a little bit, Jim. Any challenges you’re watching closely? You know, this could be market risk or competition, access to capital, that sort of thing.

Jim Freeman (13:30)
It is.

Well, those are always risks, ⁓ not risks, barriers to taking action. To me, the thing that is most frustrating is the problem of inflation. And what are we going to do about that as a country? And I have little or nothing to do about it. I guess people can use crypto. I don’t understand crypto. I don’t know why it works. ⁓ But the US dollar

Fortunately is still the world reserve currency ⁓ but unless things get turned around in a better direction that may end and You know so world geopolitical risks and things that are going on affect everybody’s life down to a very granular level Including the amount of money you have to spend at the grocery store every week. So How how can that? ⁓ fact and how can you recognize that fact in

and network, you know, with other people, with people who need your help in order to improve the situation. Here’s another area that I’ve had, I’m interested in have been over the years, ⁓ and that’s farmland preservation and farm, you know, food production. ⁓ Food production is so fundamental to well-being and to ⁓ wealth and the human experience that

you know, just and most of us who are eaters, not producers, ignore, you know, how it gets produced. And we don’t understand the health benefits of well produced food and, you know, the economics of how far how hard farmers have to work, the costs of the inputs, the cost of farmland. And we’re losing, you know, tens of thousands of acres of farmland every year in the United States, which can’t go on forever. You know, it can’t be done. there, you know, in

Let’s say a hundred years ago, % of the U.S. population lived in a rural area. They lived on farms. Today, ⁓ 90 % of the population lives in urban areas, and they do something other than food production.

Scott Bursey (15:48)
Jim, I know our listeners are gonna wanna hear this from you. What is one unique competitive advantage you gained from all of your experience?

Jim Freeman (16:36)
Well, so I guess it’s just understanding the rules of the game, number one, ⁓ which, you know, which include a lot of factors, regulatory, finance, rates of return, securities regulations regarding raising capital, ⁓ lending and borrowing, you know, what’s the documentation of that. But it goes down to even basic understanding of, you know, if we’re talking about real estate here, ⁓ what

What are the rules of transferring property from one person to another? ⁓ And what are the rights and obligations of the parties engaged in those transactions and how can you comply with the law? ⁓ And how can you you know most most people probably that are listening to this are not considered fiduciaries But if if you are engaged in Transaction with people is especially in what I call asymmetric

relationships. How can you look out for the benefit of all parties in transaction and use the knowledge of the rules of the road to make an outcome that fits all, that helps everybody? For a long time, in fact, I was a founding member of a Rotary Club in Seattle decades ago. And I don’t know if many people understand or know about Rotary. ⁓

they have a great gauge to use ⁓ to evaluate whether something is worth doing. And it’s called the four-way test. ⁓ And it starts with the question, is it true? Is it true? And if you are engaged in something that you know in your gut, in your heart, it isn’t true, I would say don’t do it.

Find your own truth. Find what’s true for you and the people that you are engaged with and the communities that you’re forming.

Scott Bursey (18:30)
Jim, let’s talk short-term strategy, long-term strategy. What advice could you give our listeners?

Jim Freeman (18:38)
Well, long-term strategy is always be improving, always improve. You can always do better. You can always learn more. So continue the process. Do not stop. ⁓ But always also engage in practical application of what you learn. And to me, always be questioning your own motive. What is it you’re trying to achieve? What are your long-term goals? And I would suggest that

that in your motive statement, if you have one, is that right at the top of your list in your motive statement should be to help those around me and people that I don’t know. And if you spend more time discovering what other people’s problems are and then trying to figure out the solutions to them, either that you can do yourself or that you can gather people together to form a solution,

That’s going to, that’s a hit. That’s going to be a success for you. ⁓ Now people, you you may or may not like Google for instance, Alphabet, their parent company. ⁓ But Google has always had an approach which I admire, which ⁓ they focus, when they’re doing their research and they’re talking about product development or, you know, they own the search market. They look at the ⁓

opportunities, they ask the question, what’s a problem that a billion people have? And what can we do to solve that problem? And that’s where they start. Now, not all of us are, you know, in a position to do that. Well, I don’t know. I’m going to rethink that. Maybe we are, we just don’t know it. ⁓ But if, you know, we do have, we have friends and family, we have ⁓

colleagues that we can engage, you that we do every day if we’re active in a business somewhere. And we have the opportunity to open up our thinking, change our, you know, our analysis and our point of view and ask those questions. You know, what, how many people around me have a problem and how can I solve that problem?

Scott Bursey (20:45)
That was pure gold. Jim, any last words for our listeners today?

Jim Freeman (20:49)
Well, ⁓ I would say if you are in a position, if you’re a self-motivated person and you’re looking for opportunities or you’re looking for a way to improve your outcome, ⁓ Scott and I discussed this when we were having a little conversation before this podcast. let me just, if you, whatever organization that you think you are in or that you have, there are some questions that you might ask about that organization.

as you are attempting to improve it and the people in it. And they go like this. Why does the organization exist and what difference does it make in the world? What behavioral values are irreplaceable and fundamental? What business are we in and against whom do we compete? How does our approach differ from that of our competitors? What are our goals this month, this quarter, this year, next year and five years from now?

you’re never going to have an answer to all those questions ever. But you have to keep asking those questions. you have to, if you are a person who is trying to align other people to see your vision and work with you for mutual benefit, having ⁓ active discussions, even contentious discussions about those questions is very valuable. And the more that you can do that and have what I would call ⁓

friendly fights, ⁓ that you’re going to get better results by asking those questions and then trying to work through them as you go through life. So there’s my advice.

Scott Bursey (22:18)
Jim,

your advice was very valuable. Thank you so much.

Jim Freeman (22:23)
You’re welcome, Scott. Good to be with you.

Scott Bursey (22:23)
And for our listeners

that would like to follow and collaborate with you, what is the best way for them to reach you,

Jim Freeman (22:30)
uh… well uh… so i guess email i’m i’m on linkedin you know it’s not hard to find me i’m i’m in a little uh… place west of seattle washington uh… but i’ll give you my email address if you people want that uh… it’s [email protected]

Scott Bursey (22:50)
Jim Freeman, everybody. Jim, once again, thank you for being here today.

Jim Freeman (22:55)
Thank you, Scott.

Scott Bursey (22:56)
And for our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We have a lineup of exceptional guests, just like Jim, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.