Why Buy-and-Hold Investors Become Cash Flow Poor & Equity Rich | Bill Faeth’s Real Estate Strategy

William Faeth (00:00)
That means I need to reposition. So I take that kind of commercial experience and the

mentality to reposition. I want to reposition every single property I own in less than 36 months. If I don’t believe that I can reposition in 36 months, I won’t make that investment. It’s too long for me. It’s too comfortable. The buy and holds, those people are cash flow poor and equity rich. And I believe that all of us should be doing a return on equity audit of every one of our real estate holdings every quarter

to see where we can redeploy or reposition to create more opportunity for ourselves.

Quentin Edmonds (02:06)
Hello, everyone. Welcome to the Real Estate Pros Podcast. I am your host, Q Edmonds. Yes, you see this big smile on my face because I get to talk to this gentleman again. We had a great time the first time, and we’re gonna have a great time the second time. And so I’m excited. And listen, I’m gonna let him tell you everything that he’s involved in, ton of experience. I’m just gonna see if I can pick his brain a little bit to go down a journey. But I’m excited and I’m gonna do this way. I wanna

present to some and introduce to others Mr. Bill Faeth. Mr. Bill, how you doing today, sir?

William Faeth (02:39)
I’m doing amazing, Clint. How can you not be doing amazing with your smile and your infectious enthusiasm? I love it.

Quentin Edmonds (02:46)
Man, I appreciate that so much, sir. I really do, man. Again, man, I’m so glad you’re here. I always say this, I say time is our most precious commodity. And so the fact that you gave us some of your time, that’s valuable to me. So I wanna thank you for just giving us some of your time.

William Faeth (03:00)
Well,

thank you for having me back twice in like three months. I really appreciate it.

Quentin Edmonds (03:04)
Yeah, absolutely. Well, Mr. Bill, I do like to dive in. So I would love for you to tell the people what’s your main focus these days. If you don’t mind, give us a little origin story, kind of how you got into the space that you’re in, and then tell them what markets you’re operating in, sir.

William Faeth (03:18)
Yeah, I mean I’m snowboarding. That’s all I do, Quentin, just snowboard, right? I just got back from Chile in the Andes Mountains in South America snowboarding two days ago. And the only reason I can do that and I can be snowboarding with my wife in another country a nine-hour flight away, on a Wednesday afternoon in the middle of August, is because I’m a real estate investor. And first and foremost, I’ve been a real estate investor for thirty-one years. I dropped out of UCLA on a full-ride golf scholarship

and literally used my winnings from my very first year to buy my first duplex and I house hacked. So I was living in one side, it was a two-bedroom, the other side was a two-bedroom, and I would rent that out long-term rent. There was no Airbnb or short-term rental back then, before probably half of your audience was even born. That makes me feel so old, Q. Yeah. I’ve done everything. I’ve done commercial, I built—I’ve built LEED-certified warehouses and commercial property, and

I was in long-term rent like most people were. And then in 2015, I’ll make this really quick, a golf buddy—we both owned a two-bedroom condo in downtown Nashville. We were playing golf one day and he said, “Man, have you heard of this Airbnb stuff?” I said, “Yeah, I’ve heard of it.” But long story short, he did $75,000 or $7,700 in rental income off Airbnb on an exact same unit that I owned, and I was getting $2,200 a month in long-term rent. That’s when the light switched.

And that’s when I actually sold that unit and I went down to Gulf Shores, Alabama, and started investing into short-term rentals. That was in 2015. I now have a $24 million short-term rental portfolio. Opening up a hotel in two weeks in New Orleans. I’m in commercial, I’ve got resorts. I do all different types of things now, and I’ve diversified my portfolio. And the thing that’s kind of interesting that most people don’t know, I live just outside of Nashville, Tennessee,

but I have never owned a short-term rental or a hotel or anything in Nashville. So I’m always looking for the best market to invest in for the dollars that I have to invest. And I want—I want to say that again, and very loud and clear for your audience. Don’t invest someplace because it’s close and you feel comfortable. Find the best place. And if you have $50,000 to invest, that’s going to be a completely different market, a completely different property type than if you have $200,000

or if you have $500,000. So we have to build out these buy boxes first, then we plug those into a market that it’s gonna work best for that buy box. And I think most people do it backwards.

Quentin Edmonds (06:26)
Yeah, yes sir. Yes sir. So listen, and not to go too far off, and of course we’re in control of what we can edit out, but you mentioned golf and I just want to know, do you—are you familiar with a guy named Tiger Woods? And are you familiar with his iconic kind of hand dressing? You ever heard of the guy?

William Faeth (06:43)
The

first time I saw the famous fist pump, he was thirteen and I was sixteen years old. And I have slept with Tiger Woods over a hundred times—just at my house! You guys can unpack that any way you want, but there was a guy named Tiger Woods, Jason Gore, Chris Riley, Jerry Chang. We all grew up in Southern California playing golf together. We were all the best golfers there when I was fortunate enough to be the third-ranked player in the world coming out of

high school. This is my USA Today best-selling book that just came out in June. Not saying this to pitch it, but the two extra steps I learned in Long Beach, California, from Tiger and his dad Earl. And long story short, Q, Tiger was an eighth grader. I was a sophomore at that time. Everybody

in our world knew who he was, but he hadn’t been on TV yet. I mean, he was on That’s Incredible!, a TV show a long time ago, when he was like three. But he came in, I was leading in the clubhouse. I’d shot seventy-one, one under par. Mine was the only name in red, which means I shot under par. My mom was there. It was my first really big tournament, my first time shooting under par in LA, ’cause I grew up in this podunk town called Bakersfield, California. And then Tiger comes in, and the story—he collapsed. He literally gets up, they give him water on the eighteenth green. He sinks a five-footer. First time I ever saw the fist pump. Yeah. He walks over and—we didn’t call him Tiger. Only his dad called him Tiger; his name’s Eldrick. And I said, “Hey Eldrick, how’d you play?” “Aww, I made a bogey on three. I had a three-putt. It was okay.” I said, “Well, what’d you shoot?” He said, “Sixty-four.” And I’m just—I just wanted to give him the big finger, right, ’cause he just beat me by seven shots and I got moved from the top of the leaderboard to second. But what changed my life that day, Q, was

he went out, and I mean, Phil Mickelson was in this tournament, David Berganio, all these guys that played on the PGA Tour, right? And we wouldn’t go and practice when we’re done. I mean, it’s hot; it’s the middle of summer. We were what I call shade seekers. We went inside, we ate, maybe go hit balls and practice for twenty minutes. No. About seven o’clock that night, we literally have adjoining rooms—me and my mom in one room, Eldrick and his father

in the next room. And there’s a bang on the door about seven o’clock and he comes over and says, “Hey, you want to come over and watch some TV and hang out?” I’m like, “Yeah, did you just get back?” He’s all, “Yeah.” “What have you been doing?” And I thought he might have gone home because he lived about an hour away. Yeah. He was like, “No, we were practicing.” So we go and sit down, and like Dukes of Hazzard or The A-Team, one of the shows was on. And I’m sitting there watching it and all of a sudden, Earl, his dad, just starts grilling him, just grilling him. Not like mean-wise, but

yeah, taking him through his thought process. “What were you thinking in your pre-shot routine? What was your target on the first tee shot? Why did you three-putt? Did you get distracted? What were—I need you to recall what your pre-shot routine, your thought processes were, shot by shot, all 64 of them.” After about 10, 15 minutes, I left. Wow. And my mom starts asking me, “Hey, why are you back? What’s…” “Well, his dad’s doing this again, and blah, blah.” But that’s where I learned what the two extra steps was.

The reason he became the best ever wasn’t because he’s the most physically gifted; it’s because of the same thing of why Kobe Bryant was one of the best, why Michael Jordan was the best, why the Williams sisters were the best. I can go sport by sport and I can go literally business by business of why these people—we’ve all heard the stories of Elon Musk sleeping on the factory floor when he was about ready to go bankrupt in 2012, 2013.

We’ve heard the stories of Mark Zuckerberg being locked in with his headphones for forty hours at a time coding to build Facebook. That’s the two extra steps. So at the very bottom down here, it says “the unfair advantage anyone can use,” and that’s a hundred percent correct. And this is published by Simon & Schuster, like the biggest publisher. They wouldn’t let me say “two extra steps: the unfair advantage that lazy fucking people won’t do,” right? They wouldn’t publish that. And that’s

the reality is it’s small things. It’s not major. You don’t have to be the guy that puts in 20 extra hours of work. You need to be the guy, if you want to get in shape, then instead of staying on the treadmill for 30 minutes, you do it for 32 minutes. Instead of running one mile, run 1.2 miles. Instead of putting an hour in on research, put in an hour and two minutes. And this compounds, just like compound interest investing into the stock market, right?

And I learned that from him that day, and I put that into everything that I’ve done in my adult life. Whether it’s my restaurant business, my importing a Brazilian swimwear business that I did on AOL chatrooms in 1992 and ’93 and ’94, to my real estate investing, I’m always putting in those small two extra steps and I believe that’s my biggest competitive advantage.

Quentin Edmonds (11:14)
Absolute. Well, I’m looking for a Brazilian swimsuit, Mr. Bill, so maybe you can hook me up. But no, listen.

William Faeth (11:21)
I don’t need that visual, Q.

Quentin Edmonds (11:23)
I’m sorry, but you got it there. Hey, you said you slept with Tiger. I’m getting you back. I’m just getting you back in there. But no, everything that you said, I’m synthesizing: mindset. Like everything you taught—mindset in golf, mindset in business. So I’ve asked you this in the past, I’m gonna ask you this again. So I often say destiny has no wasted moments, right? We are borrowing the mind, we’re borrowing from each leg of the journey, and it’s reinforcing who we are. And I would love to know your journey.

31 years in the real estate space, golf, I mean, all these different things that you’ve done—what has the journey revealed to you about yourself? Has it revealed discipline? Has it made you more humble? Has it increased your tenacity? Like, what have the moments revealed to you about yourself?

William Faeth (12:06)
I have more tenacity today than I did twenty-five years ago. But the thing that I focus on, Q, is I’ve done forty-three startups. I’ve had six failures. As recently as 2012—April, May, June, July of 2012, sorry—I was on the verge of bankruptcy, right? And I’d made a lot of money before then.

But with the downturn in the economy, the Great Recession we went through, then the Nashville flood, we all have to be prepared to handle adversity. And I’m not saying like we can prepare for the stock market to crash. We can’t prepare for a housing crisis. We don’t know when those things are gonna happen. I couldn’t prepare for a flood. Who would have ever thought North Carolina would get hit by a hurricane two years ago and destroy Banner Elk, North Carolina, and Asheville, North Carolina? You can’t predict those things. Yeah.

And there’s a guy that I look up to tremendously. You’ve probably heard of him—his name’s Dean Graziosi. He’s partners with Tony Robbins in a bunch of different things. They started Mastermind.com years ago. Dean’s made billions of dollars in education and coaching and business ventures and all that type of stuff. And he uses a term that sticks with me every single day, and it’s called “success tax.” Success tax. I don’t

have 37 successful entrepreneurial startups if I didn’t pay my success tax in those six failures, right? And ironically, the majority of those six failures have happened later in my life when I’ve gotten better and better at business, because I’ve been willing to take more risks, right? And one of the problems with people that are investing into real estate or trying to be in any type of entrepreneurial adventure—and

if you heard what I said, I called it an adventure, not a venture, because it’s always an adventure—we’re all way too conservative. We all try to play the middle. And the one thing that I’ve learned, the most important thing I would share with your audience, I have learned to play in the fast lane. I was just like everybody else. I wanted security, I wanted insurance, I wanted to be safe, so I’d play in the middle lane. And I mean, it doesn’t matter if you’re driving in LA, New York, Chicago, Nashville, or Des Moines, Iowa:

when you’re in the middle lane, you can get squeezed by a car on each side of you. And that’s usually the lane that gets blocked, and then you got to weave in and out to get around the car in front of you, right? So I stay in the fast lane. Like, I grew up in Southern California and I was the guy that was taught to weave in and out of traffic to get around these people. But what I learned from my wife, ironically, is, “Hey, if you just stay in the fast lane, these people from the slow lane aren’t moving all the way over. You might get somebody from the middle lane to get in front of you, but

if you just stay there, you’re probably gonna pass all the people in the slow lane.” Well, I stay in the fast lane all the time. Even like I just shared with you, I’ve been snowboarding with my wife in the Andes Mountains in Chile in South America. Snowboarding is a full-contact sport. I’ve fractured three ribs snowboarding in the last two years, right? It’s an adventure sport that you can get killed in, you can get hurt, all of those types of things.

That’s the way that I live my life today. I want that adventure in my sex life, in my vacation life. I mean, I just don’t go sit and lay on a beach and drink Corona; it’s boring to me. It didn’t feel that way until I had failures. And once I had failures and I learned that I could recover from them, I’m willing to take bigger risks. So when we were doing the pre-show, you were talking about buying and holding. I don’t fucking buy and hold, yeah. I buy, I create value out of that property, I

increase value, I try to force appreciation, I suck cash flow out of it, I reinvest the cash flow, and then I reposition that property. So I take the way that people raise money to buy a hotel or a commercial piece of property or whatever it is, a syndication, let me say, and my number one responsibility is to get my investors paid back as quickly as I can, right?

That means I need to reposition. So I take that kind of commercial experience and the

mentality to reposition. I want to reposition every single property I own in less than 36 months. Yeah. If I don’t believe that I can reposition in 36 months, I won’t make that investment. Yeah. It’s too long for me. It’s too comfortable. The buy and holds, those people are cash flow poor and equity rich. And I believe that all of us should be doing a return on equity audit of every one of our real estate holdings every quarter

to see where we can redeploy or reposition to create more opportunity for ourselves.

Quentin Edmonds (16:18)
Well, Mr. Bill, thank you, man. I mean, you gave us nugget after nugget there. What—like, what’s next for you, man? What’s next for you? What are you looking to solve or scale?

William Faeth (16:27)
I mean, I just launched a new program and I’m actually doing everything for high-income buyers, meaning I find their market, find their property, connect them with contractors, designers, stagers, co-hosts, PMs, for the people that want to be hands-off, right? And they can end up self-managing if they want, but there’s a lot of people that are high-income earners that don’t understand the tax code and the short-term rental loophole. And they—and a lot of people that

really just need affirmation. They’re afraid to pull the trigger because they don’t know what market to go into, they don’t know where their buy box fits, all those types of things. So it was called the Buyers Club and it’s something that I just launched. And ironically, we do it in small waves. It’s not like anybody can just come and join; we only open it up to a small—no more than 10 people at one time. And we sold it out in the first six days.

And now we’re—and I’m almost done, so we’re into the second round, right? And then when I complete that, we’ll move into the third round. But there’s so many advantages of investing into short-term rentals, like just from a tax benefit standpoint, the cash flow is usually three to five times higher than long-term rents. I think people just don’t have the exposure to it and they don’t understand it. So I try to educate people, whether it’s middle-income or high-income earners,

so they really truly understand what the advantages are of investing into it.

Quentin Edmonds (17:43)
Absolutely. Mr. Bill, talk to me about relationship building. Talk to me about your philosophy on building healthy relationships. You—I think you are very great at building relationships, but just give me your philosophy when it comes to building healthy relationships within your sphere.

William Faeth (18:00)
Yeah, my COO, if he was here, his name’s Chris Wharton, he would tell you that that’s my number one skill. It’s not marketing, it’s not finding properties, it’s not real estate investing. I have the knack or the ability to turn clients into friends. And I’m not just talking like a casual relationship. My wife and I have two travel groups that we travel with, like groups of friends, couples, and stuff like that. Yep. Every one of them in both groups are former clients. My

fiduciary responsibility to myself, to my business, to my family, whoever—my employees, whoever I’m trying to support—is to become friends with my clients. And that means really buying into them, really getting to know them, right? And I’m not just talking about casual relationships. So whether it’s a co-hosting client, a property management client, a coaching client, a business partner, whatever that is, we—I rate them on how strong our relationship is. And the number one way that I can grade that is, what are the topics of conversation

when I speak to that person? Doesn’t matter how often I speak to that person, but if we’re only talking business, if we’re only talking importing swimwear or real estate or whatever it is, and we’re not talking about our kids and what our kids are doing and our spouse is doing or about our hobbies, then it’s not a real relationship. So what’s interesting is like this one group has basically turned into a ski and snowboarding group. That’s all we—we’re going to Banff in January. They were at my place in Montana earlier this year. We’re going to—

Bree and I are taking them to Chile next summer. And we never—they’re all real estate investors. They’re all the best of the best, the biggest of the biggest in our industry. And—but we don’t talk about real estate when we’re together. Like, we just did three days of e-biking through Glacier National Park before they let vehicles in. Three days, no discussion about real estate or business at all. And that’s because it’s true relationships.

I don’t think there’s anything more important as an entrepreneur than being able to do that.

Quentin Edmonds (19:48)
Yeah. Mr. Bill, is there anything else you feel like our viewers need to know, should know, or that you just want to share with them?

William Faeth (20:36)
Yeah, I think going back to the very beginning of the podcast, they’re all probably wondering what you’re gonna look like in that Brazilian bikini that I used to—through Belaqua—Belaqua Swimwear back in the day.

Here’s the number one thing that I would share with your audience in regards to me personally: Hit me up on Instagram, @BillFaeth73, F-A-E-T-H. Ask me any of your questions. You might get a bot reply to you, but believe me, I see it and I will personally reply to you and help you. I just want to get the message out, Q. I want to help people. I’m kind of in my Tony Robbins phase of my life to where I’ve made enough money

that I really just want to help people be able to take advantage of this great thing called real estate investing.

Quentin Edmonds (21:11)
Well, Mr. Bill, let me say three things to you sincerely. One of them is a reiteration: Thank you for your time. I really value your time. Thank you for being here. Secondly, man, thank you for your stories. Thank you for the gift of your authenticity, the gift of your vulnerability, the gift of just your integrity. I believe when we plant—when we talk about our life, what we do well, it plants seeds for people, and we never know when those seeds are going to take root and grow.

But the seed is there, so you put some real seed down today, sir. And then man, I love saying this to you: Thank you for your mindset, man. Thank you for the way you think, the way you joke, the way you enjoy life, the way again that you’re just authentic. Thank you for that mindset and that presence in bringing it to this platform. I really appreciate it.

William Faeth (21:54)
You’re very welcome, my friend. And just for your listeners out there, I haven’t always been this way. I had to learn how to have this mindset, and it’s taken a lot of practice every single day. Just like Tiger and his dad in that room, right? So don’t think that you’re born with it. You’ve got to work it out just like any other muscle, and it needs to be consistent.

Quentin Edmonds (22:13)
So well said. Well, listen, y’all heard Mr. Bill. Some of the stuff you—you think you’re gonna hear, you may not hear. No, I’m just joking. Now y’all heard Mr. Bill. We’re gonna keep all of this in, because all of this was good. He gave his information. His information is in the show notes. Connect with him. He wants to help people, so connect with him. But definitely make sure you’re subscribed here, because I’m promising you, we’re gonna continue to bring up amazing people, just like Mr. Bill Faeth.

William Faeth (22:37)
The button’s either down there or it’s up there, depending on what platform it’s on.

Quentin Edmonds (22:41)
Exactly. Sir, I appreciate you, man. Everyone else, y’all have a great day.