Lease Purchase Agreements with Jim Manning

george grombacher 0:02
Jim Manning is the founder of three doors homeways and client first lending. He is the CEO of doorway properties, Real Estate Fund and the host of the passive wealth Show. Welcome to the show, Jim

Jim Manning 0:15
George, thanks for having me, man, excited to be here,

george grombacher 0:18
yeah, excited to have you on. Tell us a little bit about your personal lives, more about your work and why. You do what you do?

Jim Manning 0:25
Yeah, so I have four kids, three to 10. Oldest is a girl and three boys and real estate. We’ve been doing this for 18 years now. So it may sound like we have a lot going on, but it didn’t always start out that way. It was, you know, we started out just buying houses and doing short sales and then flipping them and and, yeah, there’s a lot of different things going on now, but it’s a, you know, we have over 30 people in the different entities now. So, yeah,

george grombacher 0:55
that’s a whole nother thing. So What? What? 18 years ago, what was it that said, You know what, let’s, let’s, let’s start a real estate company?

Jim Manning 1:05
Yeah, well, I was in corporate America, and one month I did, I worked my tail off, and my Boston noticed. The next month, I slacked off, and my boss didn’t notice. And I was coaching baseball at the time, you know, shocker, right? But I was coaching baseball at the time, and one of my best buddies was in real estate, and I was like, Well, if he’s doing it, why can’t I? And I fell in love with the concept of investing, because I was like, Well, if I take a property that needs work that no one can live in, and I put capital into it, I can literally create a home for a family. And I can get rich while I do it. I can, I can make a lot of money, like, sign me up, you know, I fell in love with being able to do well while doing good at the same time. And really that that kind of missions, you know, trying to impact the community in a positive way has, you know, really led us to where we’re at now, and now we’re much more focused on, you know, creating an impact for the community and at an even higher level. So, you know, it’s helping us stay motivated, even though we’ve been doing it for a better part of two decades, which

george grombacher 2:20
is always kind of a weird thing, right? Because when you started it, you were like, Oh my gosh, how is this going to work? How am I going to make it happen? And then you go through different market cycles and booms and busts and interest rates move around, and now you’ve got 30 employees, and it’s two decades later. It’s pretty wild.

Jim Manning 2:39
It’s wild, that’s right. And, you know, we’re doing a strategy now called lease purchase deals and and one of our first clients was a was in a situation where they got behind on medical bills and their kid got sick, and they we, when we crossed paths with them, they had paid off their medical bills, but their credit was dinged, and they’re looking for a school district called Lindbergh schools here in St Louis, which is highly sought after, hardly anything to rent, even less properties to buy, and their kid needed that school district, and so we crossed paths with them, And we said, well, your kid doesn’t have eight years for your credit to rebound. Like that’s all of grade school, and you did the right thing. You paid off the medical bills. The only thing that this person, this family, messed up was that they didn’t, they didn’t have a big enough rainy day fund. And, you know, honestly, like, I could have been me, that could be really anybody at the right time, right? And so we said, Well, why don’t you be a homeowner and we’ll get you in that school district that you need? And we put together the deal and and that was one of our first lease purchase deals that we did. And then we realized, whoa, like, if we do this at a bigger scale, we can impact the community at a bigger level, and then also it’s, it’s an amazing investment opportunity, because we can put the tenant in the place of the homeowner. They can pay for all the repairs and maintenance, and now we can have an investment that can generate us passive income without a lot of the overhead that a landlord normally takes on. So, you know, we decided, you know, at the time, things were getting a little bit stale, and then we decided, hey, well, let’s focus on this and creating an impact. And I don’t know George about you, man, but one of the things about that the financial industry teaches is, is, hey, let’s invest into global index funds. Let’s, let’s invest into and and have our money make money and, and there’s not anything wrong with that, but there is something we give up when we only invest like that, and that’s our influence. I mean, think about it this way, George, have you ever thought about, if you guys, ever, have you guys ever thought about like Christopher Columbus, i. And Christopher Columbus had a financial backer known as the king of Spain, and there’s parts of the world now that speak Spanish that had the King of France backed them, would speak French, right? And so what’s amazing about this is like, like our capital. Not only can we have our capital make us money. But if we do it in certain ways, we can, we can have our capital, create influence for things that we care about and and my opinion, like one of the things that I care about deeply is keeping housing affordable and keeping the American Dream alive. I mean, it’s, it’s, I think it’s really important for as many people as possible to own a roof over their heads. And so really, you know, we talk, you know, a lot of times Simon Sinek talks about his why, and you know, or finding your why, and and that for us is really opened, opened it up. And you know, we had done over 3000 deals without any equity partners, and we brought in, we created a real estate fund to help us with this mission. You know, we have over 130 partners now in our two funds. And, and it’s really lit us up, and, and, and got us, got us going to try and make a bigger impact, you know, and and help people in a bigger way.

george grombacher 6:18
What sounds like you’re doing exactly that. And I am somebody who likes to put my money and my time and my attention where my mouth is, and so when I say that I’m interested in my community, well, how does that actually manifesting? How is that actually taking hold? And there’s a lot of different ways we could do that, but to your point, I don’t know that we think about actually how we can have such a profound impact with our investment dollars. And this is such a wonderful

Jim Manning 6:46
way of doing it, that’s right, absolutely.

george grombacher 6:50
So how does it? How does it handle or how does it, how is it affecting the problem of affordable housing?

Jim Manning 7:00
Yeah, so we’re working on a model now. This is, like, one of my things, to be able to take donor advised to fund money and have that, be able to enter into our program and create and keep the cost down. And so that’s, you know, I full disclosure. We’re in development on it right now. We have our first investor, we have our first deal lined up, and our program is fantastic because it’s keeping the American Dream alive for small business owners one time, hardship people, people that just don’t fit the normal mold. And our next thing is, okay, well, how do we, you know, is there a way we can utilize donor advised fund money and and we believe we have that path now to now to even whittle down and and keep the housing more affordable too. So, you know, it’s, it’s a part of the journey, baby. It’s like, we don’t have all the answers, but we’re sure gonna, we’re sure gonna do our part and try and try and help any way we can.

george grombacher 8:05
Yeah, well, I think that oftentimes, when you’re looking at a problem like the lack of affordable housing for people and somebody who wants to get their kid in a certain school district, and for circumstances of life, we had some medical bills, and I’ve got bad credit, and oh my gosh, by the time I clean this up, my kid’s going to be in, you know, is going to be 30 years old, and it’s not going to be the school district, school district anymore. So, so how can we innovate on this and do it? And I think that that always, constantly looking for ways to work more on purpose and to come up with ways that find solutions to problems that seem like they’re, you know, beyond our control. So I respect and appreciate everything you’re doing.

Jim Manning 8:50
Well, I appreciate it. George, thanks a lot. Man, yeah,

george grombacher 8:53
and you mentioned things get stale. I wanted to ask, how much? How much do interest rates and market conditions matter? Probably a little bit, maybe a lot. Or you’re just focused on doing what you’re doing and just keeping things moving. Oh,

Jim Manning 9:12
George, what a insightful question. Man, the mark, the the market dynamic does impact things quite a bit. So there’s a an investing there’s a concept that I love to talk about called market of the moment. And that market of the moment can shift. So for example, in 2006 to 2009 short sales were the market of the moment. Short Sale got up to around 30% depending on who you’re talking to, of the of all the deals that were done. And so a short sale is, if it’s $100,000 house, you talk the bank into selling the property short for $50,000 instead of take it to the property back for foreclosure, right? So, yeah, like as the market. Shifts. And you know, we have inflation right now. We have home prices are going up, lack of inventory, interest rates are going up. Yeah, there’s different shifts that we need to do. So, for example, short sales like we don’t focus on them anymore, even though that was like our main business for a couple years and flipping those properties, right? So now what we’re doing is, because of the housing shortage and the labor shortage. You know, Harvard did a study that we believe through 2038 that there’s going to be a housing shortage. And why that’s happening is, well, you have baby boomers are a gigantic demographic, but Millennials are bigger than baby boomers, and then Gen Z’s are right after millennials, and those are creating a tremendous amount of demand on the housing market, because there’s starting families entering into the housing market and construction workers one in four over the age of 55 and the last decade, we built less houses than we built in the 1960s so even though the populations over double, or almost double what it was in the 1960s right? So it’s really this. So the market of the moment, in my opinion, when you factor in all these circumstances for single family real estate, is to buy and hold on to as much as you possibly can. So that’s really so when we ebb and flow, yeah, we really like to kind of have the macro level environment in sync, and we’ve been fortunate in that interest rates for our strategy of going up have helped us. But there’s other strategies out there, like commercial offices, apartment complexes where interest rates going up have really hurt it. And, you know, so, like, you can’t when you’re investing, there’s risk everywhere, and executing beautifully on a plan is is one of the most important parts. But, you know, we can’t control that if I’m a world class apartment complex investor, there’s still ways to make money in apartment complexes, even if interest rates go up, it’s you know, so I might want to stick doing that, but we’ve been really blessed on our end, but all the macro level and shifts and changes have helped us. Like covid created more demand on single family, not less demand, right, right? So,

george grombacher 12:28
so as people are are going through this lease purchase, and just going back to the the example of somebody that got themselves it’s in a bad situation through no fault of their own, through medical bills. How much do you recommend, if you do or suggest to people, whatever the right language is, how much of an emergency fund that they should have?

Jim Manning 12:54
Oh, man, you know, it’s kind of across the board, what you’re comfortable with. I think the biggest thing is, is like, what, what will I lose sleep over if I you know, like, what point you know? And for some people might be a year worth of cash in the bank account. And some other people, it might be six months or three months, but definitely having some cash in the bank account is, is critical, right? I know there’s been times in my life where I’ve had very little cash in my bank account, and that that’s an incredibly stressful thing, and other times where I’ve had more and, you know, I think you have to find what works for you. And personally, I like to have at least six months in my bank account. That’s literally the the purpose of it, like when I was in my 20s, I would feel like I was burning a hole in my pocket if I had, if I had cash in my checking account, because it wasn’t generating me a return right all my head to get my money working and but now the way I view cash in a checking account is like, that’s Peace of mind, money that’s rainy day money that is generating me a return. It’s it’s keeping me in the game and not allowing me to get knocked out because I overextended myself. So even if it’s a 0% return, that there is still a return for the money and in that bank account and and so I view it a little bit different than I when I was in my 20s. Oh,

george grombacher 14:23
for sure, right? You’ve got a family now, and you’ve got 30 employees. And,

Jim Manning 14:30
yeah, that’s a lot. That’s right.

george grombacher 14:33
Life is very different. And I like the idea that just because something’s not getting a a rate of return on the actual money doesn’t mean it’s not giving you some kind of rate of return through the form of peace of mind, because if you do not have peace of mind, then that’s going to impact every aspect of your life.

Jim Manning 14:51
That’s right. That’s absolutely right.

george grombacher 14:55
So for people, and I think that is. There is there an avatar or a ideal client profile for this lease purchase program, people who are frustrated, who are bummed out, whatever the term might be, say, Hey, you don’t need to give up. You don’t need to give up hope. There is a, there is a path to home ownership for you.

Jim Manning 15:18
Yeah, I would say so. Our common ones are small business owners like you know, in my first couple years of being in real estate, I could have been one of our clients. So small business owners people going through divorces and then the one time hardship of medical bills or job loss that caught danger credit, but now you don’t have now you’re over it like, you know, insert any sort of hardship that happens in people’s lives, death of a loved one, you name it, right? And you know, back in 2006 lenders were very loose with their lending guidelines. They if, if I told a lender I made 200 grand, they wouldn’t even verify my pay stubs. And that lack of like a rigidity, created some of the problems that we had in the real estate market. Well, fast forward to today. That pendulum was very loose, and then now it’s kind of swung the other way, and it’s, it’s created an opportunity for, you know, I think it’s about 10% of the market where it’s, they’re good, common sense underwrites these people can afford the property. They just don’t have the right product anymore, because lending is just a little bit too restrictive for for these individuals, 10% is a big number. Yeah, I, you know, and that’s, there’s no market data. I’ve tried to find market data over it, guys, but, you know, that’s Jim Manning’s informal research. You know, it’s, it’s been substantial. We get a tremendous, we have tremendous demand on the properties we market.

george grombacher 17:04
Yeah, I don’t doubt it for a second. So what is, how does it just this sort and quick and dirty, how does it actually, what? How does the program work?

Jim Manning 17:13
Yeah, so we cross paths with someone, and then we, if it’s a $200,000 house, we ask for 5% down. So it’s $10,000 down before they move on. And then we put them into the position of the homeowner, and we act as the bank. And so if the toilet leaks, they need to call the plumber, they don’t call us and and repair it. And you know, we have a couple stages to the program, and, you know, just depending on what happens, but at the end of the day, we’ve created an environment where, as long as they make their payments, they can end up owning the house outright, the same way anyone getting a loan has a similar agreement from that from that front.

george grombacher 17:59
Excellent. Okay, beautiful, yeah. Beautiful Man. Well, I think it’s exciting. I think that the more we know that we can have an impact with our dollars in so many different ways. And in this example, it’s it’s being able to have an impact by how you invest your money to help people with affordable housing and the American dream. So I think it’s great. Where can people learn more about this program? I don’t know if you’re looking for I assume that you’re looking for potential homeowners, but you may also be looking for investors. So tell us. Tell us about everything. Where, where, where can people get involved and in touch? Absolutely.

Jim Manning 18:38
Yeah, if you just want to passive wealth show.com passive wealth show.com I have a couple of free courses on there. I have you can set up a call with our team and kind of learn more about if investing in real estate from your couch without doing any of the work. And you know with the passive income, and you know that you can generate and and really invest in real estate through our team, and we were the mechanism that makes it passive for you. There’s a lot of work that goes into it, but that doesn’t mean you have to be the one doing the work. If you have either your own cash or IRA money that you’re looking to invest in real estate and so, so there’s that, and then, you know, on YouTube and the different podcast players as well, if you just want to listen to some additional content that we have too. But yeah, definitely open to having a conversation and seeing how we can help. So if you’re looking to invest or or even sell some real estate as a homeowner, we can, we can help you out.

george grombacher 19:43
Excellent. If you enjoyed as much as I did. Show Jim your appreciation. Share today’s show with a friend who also appreciates good ideas. Go to passive wealth. Show.com take advantage of those courses that Jim has been talking about. Take advantage of. Just learning more through education. If you are interested in being a coming to homeowner, there’s programs there if you want to sell a house, there’s programs there if you want to be an investor. There’s resources there as well. And then you can find them on YouTube and find the passive wealth show wherever you listen to your podcast. Certainly link all of those in the notes of the show as well. Thanks again,

Jim Manning 20:20
Jim. Thank you Till next time,

george grombacher 20:22
remember do your part but doing your best. Do.

george grombacher 16:00
So if I want my iPhone, and my Tesla and my Bitcoin to work, we need to get the metal out of the ground.

Pierre Leveille 16:07
Absolutely. Without it, we cannot do it.

george grombacher 16:13
Why? Why is there a Why has production been going down.

Pierre Leveille 16:21
Because the large mines that are producing most of the copper in the world, the grades are going down slowly they’re going there, they’re arriving near the end of life. So and of life of mines in general means less production. And in the past, at least 15 years, the exploration expenditure for copper were pretty low, because the price of copper was low. And when the price is low, companies are tending to not invest more so much in exploration, which is what we see today. It’s it’s, it’s not the way to look at it. Because nobody 15 years ago was able to predict that there would be a so massive shortage, or it’s so massive demand coming. But in the past five years, or let’s say since the since 10 years, we have seen that more and more coming. And then the by the time you react start exploring and there’s more money than then ever that is putting in put it in expression at the moment for copper at least. And what we see is that the it takes time, it could take up to 2025 years between the time you find a deposit that it gets in production. So but but the year the time is counted. So it’s it’s very important to so you will see company reopening old mines, what it will push also, which is not bad, it will force to two, it will force to find a it will force to find ways of recalibrating customer, you know the metals, that will be more and more important.

george grombacher 18:07
So finding, okay, so for lack of a better term recycling metals that are just sitting around somewhere extremely important. Yeah. And then going and going back to historic minds that maybe for lack of technology, or just lack of will or reasons, but maybe now because there’s such a demand, there’s an appetite to go back to those.

Pierre Leveille 18:33
Yes, but there will be a lot of failures into that for many reasons. But the ones that will be in that will resume mining it’s just going to be a short term temporary solution. No it’s it’s not going to be you need to find deposit that will that will operate 50 years you know at least it’s 25 to 50 years at least and an old mind that you do in production in general it’s less than 10 years.

george grombacher 19:03
Got it. Oh there we go. Up here. People are ready for your difference making tip What do you have for them

Pierre Leveille 19:14
You mean an investment or

george grombacher 19:17
whatever you’re into, you’ve got so much life experience with raising a family and doing business all over the world and having your kids go to school in Africa so a tip on copper or whatever you’re into.

Pierre Leveille 19:34
But there’s two things I like to see and I was telling my children many times and I always said you know don’t focus on what will bring you specifically money don’t think of Getting Rich. Think of doing what you what you like, what you feel your your your your your, you know you have been born to do so use your most you skills, do what you like, do what you wet well, and good things will happen to you. And I can see them grow in their life. And I can tell you that this is what happens. And sometimes you have setback like I had recently. But if we do things properly, if we do things that we like, and we liked that project, we were very passionate about that project, not only me, all my team, and if we do things properly, if we do things correctly, good things will happen. And we will probably get the project back had to go forward or we will find another big project that will be the launch of a new era. So that’s my most important tip in life. Do what you like, do it with your best scale and do it well and good things will happen.

george grombacher 20:49
Pierre Leveille 21:03
Thank you. I was happy to be with you to today.

george grombacher 21:06
Damn, tell us the websites and where where people can connect and find you.

Pierre Leveille 21:13
The it’s Deep South resources.com. So pretty simple.

george grombacher 21:18
Perfect. Well, if you enjoyed this as much as I did show up here your appreciation and share today’s show with a friend who also appreciate good ideas, go to deep south resources, calm and learn all about what they’re working on and track their progress.

Pierre Leveille 21:32
Thanks. Thanks, have a nice day.

george grombacher 21:36
And until next time, keep fighting the good fight. We’re all in this together.