Erik Smolinski - Marine Vet To Self-Made Millionaire By 30
LISTEN TO THE FULL EPISODE ON:
Many people think that to become a millionaire by the age of 30, you have to come from money, have loads of opportunity coming your way, or get lucky becoming some sort of overnight success. This isn't Erik. He was a child of a single parent in a low income household and worked odd jobs as a kid and wasn't planning on attending college. After getting into investing in high school, he saw a future path to wealth. He did up attending college (thanks to a scholarship he earned), enlisted in the Marines, completed 6 years of active duty, earned an MBA and now spends his time doing trading, investing in real estate, and angel investing. Find out how he strategically used the VA loan to build over 250k in net worth and how he'll continue to use it in the future.
In this episode, hosted by Mike Swenson, we discussed:
- Mindset is important in how you approach life, build wealth, and pursue things.
- Being exposed to different paths is important for young people.
- Finding what motivates you helps you to be more efficient & effective with your time.
- VA Loan is not a one-time deal. It is good leverage for getting multiple properties in your lifetime.
- If you have a good strategy for choosing and purchasing homes, you can make money from their rental.
- Finding properties that have good appreciation will help you make more money in the longrun.
- Utilizing appreciation of the asset is useful in funding future properties.
- Angel investing is a good way to enjoy people's great ideas to help them become successful.
- If you're looking to get into investing with stocks or other commodities, people should consider opening a brokerage account to get started.
- The benefits of having multiple streams of investment income.
Timestamps
0:00 – Intro to Erik’s Career
2:31 – Mindset to Approach Life
3:25 – Erik’s Background
8:17 – Investing at a Young Age
10:07 – Experience in Marine Corps
14:56 – VA Loan Advantages
23:35 – Commercial Real Estate
28: 30 – Angel Investing
34:09 – Trading Derivatives
39:46 – How to find Erik
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Full transcript here:
Mike Swenson
Welcome to The REL Freedom Podcast where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson, let's get some real freedom together.
Mike Swenson
All right, welcome everybody to another episode of The REL Freedom Podcast where we talk about building time and financial freedom through opportunities in real estate. And today, we have a special guest that's going to talk about a few things that we haven't talked on the episodes, VA loans, how to leverage VA loans to help build your wealth, and also just talking about trading, and angel investing. So we're so excited to have Erik Smolinski on here, and Erik is going to talk about how he built wealth through real estate through investing.
Mike Swenson
He does angel investing, like I mentioned, so a little bit more about him, people tend to think about when they think about people building wealth and real estate is they came from money, right? And so Erik, stories came from a single parent, low income household, worked odd jobs as a kid, and you began investing in high school. And so while you weren't going to attend college, we're able to get a scholarship. And then ultimately, you went and went into the Marine Corps and you completed six years of active duty before you transition to the reserves. Also got an MBA through trading through real estate and all that you became a millionaire by the age of 30.
Mike Swenson
So congratulations on that. And you're a smart dude. You know, I think that's for a lot of people to know, hey, just an average guy coming from an average upbringing can apply these principles and build wealth. So Erik, we're so excited to have you on the show and share your wisdom with us.
Erik Smolinski
Yeah, thank you so much for having me Mike. Again, it's funny that you bring up the point about, the average person can do this. And you know, it's so colloquial, we hear it all the time. But I know that different people connect with different average people. And that was a huge part of the way that I started getting interested in investing. I didn't even know what it was, until one of my teachers in high school saw me hustling, saving money. And they were like, Hey, have you thought about investing? So it was just one person that I knew that made a recommendation that turned on a light bulb, and completely sent me down an entire different life trajectory. So that's, I think the beauty of what you do is you offer different kinds of people for others to connect with, and pick up what they can. So thank you for having me. I'm stoked.
Mike Swenson
And I think it's key because I think, number one mindset is so important to how you approach life, how you build wealth, how you pursue things like, you know, going into the Armed Forces mindset is so important. And I think there's certainly people that have challenges, they have more things that they have to overcome in life. And then there's also people that to also realize that I can make what I want out of my life based on how how I attack things, how I overcome obstacles, and so so you're an example of somebody that has has done that you weren't spoon fed anything.
Mike Swenson
And yet, at the same time, you were able to roll up your sleeves and dig in this is hopefully inspirational for people that sometimes might have the mindset of, oh, you know, I needed to be born into wealth, or I needed to have things handed to me to be successful. And you're somebody that shows hey, I can be successful, and I can overcome challenges that come my way. So maybe share a little bit about your upbringing, a little bit about kind of your background, and how you got into an investing. Walk us from the beginning here, how you kind of transition through things in life. Yeah, easy. So
Erik Smolinski
I think for me early on, you know, like you did in the intro, which was beautifully done. I did come from a single mom, and she worked two jobs plus, and she was a contractor. So she didn't have like a 401k. She didn't have a bunch of excess savings, a lot of what we did, unfortunately, was fueled by that. And I just remember seeing the way that we were living life. And I was like, There's got to be a better way. Like, there has to be a better way. I didn't know what it was. But I thought there had to be a better way. Because, you know, if the car broke, that was a problem. Or I might not be able to go get dropped off at my friend's house, because that's going to take the gas we needed to get to work the next day. Or if you know, I missed if I missed the school bus. That was always a huge problem. I missed a once. And that was a big deal.
Erik Smolinski
So I just started realizing like man, you know, in this financially constrained environment, there's a lot of impacts. And the way I will I started thinking about it is how can I change our paradigm not really having much to start with so I immediately started working there was actually a guy, I used to hunt on his property and he had like a shale pit and he like processed wood. This is you know, where I'm from in New York. And, you know, it's just like, can't work for you. And he's like, Yeah, we want to do I was just like, well, you know, you split what all the time what if I do that or load shale? He's like, Well, You know, you're like 12. So you're not going to load shale. But you could split wood, which I guess the calculus there sounds off, but it was super normal, you know, for instance, what? So that's what I started doing.
Erik Smolinski
And I actually love that job does a great job until you hit the log that had bees in it. That happened a handful of times. And man, that is terrifying, because then you get like, B PTSD. And you hit a log, and you think you hear buzzing? That's not there. So yeah, so I started just doing these odd jobs anywhere I could find work. And I started working at a local bowling alley, I was trying to scrape together anything I could. And then for any younger people that might be listening to this, one of the best jobs I had as a younger person was selling Christmas trees at like a local farm. Yeah, and the tips were so good. I part of me, you know, I'm 31. Now part of me thinks about going back and selling Christmas trees, because the money's really good. Yeah. But I started, you know, socking away what I could. And then like, I told you that that one high school teacher of mine, he's a huge life mentor for me.
Erik Smolinski
He's the one that got me to apply for a scholarship for my undergrad. But he's the one that introduced me to investing. And I realized the power of investing early on. And he's the one actually that got me into real estate, because he was a retired Air Force Colonel. And he moved all over the place. And just about everywhere, he went kind of like what I started doing, just bought a house. And then when he left, he rented it and bought another house, and so on and so forth. So he's the one that planted that whole approach in my head that, you know, we can save, which is good. But the problem is, is on a regular salary, even if it's a high paying salary, making three $400,000 a year, if you're just trying to build wealth by saving, they requires the passage of additional time. And, you know, depends on you know what your goals are. But for me, my main objective was to have wealth a little earlier in my life.
Erik Smolinski
So then I could have choices, like, I will always work on something because I really like to work. I think it's important, I think it's important for us to add value to our communities, I really do think that, but there's a whole other flavor to it when it's a choice. And I think that by his example, he's the one that got my mind working in this completely alternate way. And I think that that's, you know, hopefully one of the messages we can discuss on the on the video today for people and get some other people thinking that way.
Mike Swenson
It's important for young people to be exposed to different paths, because I didn't necessarily know what else was possible. I followed the example of my parents, which was work, work a job get a stable income. And so I didn't necessarily see how entrepreneurship could work. I went to college, actually, for entrepreneurship 20 years ago, before it was cool, but at the same time, I didn't know how to take a risk. And so I didn't do anything with that entrepreneurship degree right out of college, because I didn't know how to take a risk. I didn't see the value. I didn't see the upside of taking the risk. I saw the bad side of risks and not necessarily the upside of the potential that's out there. So in high school, then you started to tinker with it with investing. What did that look like for you?
Erik Smolinski
So I opened up a custodial account because I was too young to open up my own brokerage account. And the way that I started and it's funny, because the guy that got me into investing, he didn't really invest himself. He had like some accounts, but he didn't like actively trade or anything he's like, this is just something you should look at. So I started reading what I could, and I got struck by dumb luck. And I bought a handful of companies that were very young that ended up doing very well. There's a company called Apple, Amazon, Netflix, literally all three of those. I heard of all three of those interesting, but funny enough, and I just started seeing success early. And I think for investing that's okay. I think for traders, that's a bad thing. And that's just a whole other psychological conversation.
Erik Smolinski
But I think once I started seeing, like, Hey, I didn't start with much money. And this is growing like, pretty dang fast here. There's something to this. And I have a naturally obsessive personality, when there's something I'm interested in it like it really does consume me I have to be careful. Like when I used to play video games, I would just get so locked in. So I had to be really thoughtful, but luckily it bit me with investing and that's how I stumbled into trading is I was thinking okay, if I invested this and I was able to start getting these returns in X amount of time. If I trade then it should happen faster. And like most young men, my patients, my patients isn't good now, but it is even worse than Yeah. And I just wanted to figure out how to snowball this thing even faster. And that's really what got me started taking it very seriously was that early success? So I was super fortunate about that.
Mike Swenson
Talk about the decision to go into the armed forces. And how are you able to keep these things afloat as well, when you spent your time in the Marines.
Erik Smolinski
super fortunate that I started this early, because so for me, you know, you can go into the Marine Corps via enlisted or officer, most enlisted people will go in directly out of high school officers, we will go in after college. And so I applied for a Marine Corps Scholarship, thankfully, I got it. So I had a full ride to college, otherwise, I wasn't going we didn't have the money for it. And while I was in college, even though we had ROTC training pretty much, five, six days a week, and most of our mornings started early, at least 5am in college, which is different, you know, athletes could probably identify with that. But it's, I still had so much free time, even beyond school, I was taking a plus load on school, because I was forecasting that the later years I had in college if I had a slightly lighter load, but I mean, maintain being a full time student, then I have even more time and hopefully more capital at that point to get real, real serious about this trading thing.
Erik Smolinski
Yeah, so while I was in college, it was actually relatively easy, because for me, it was I on the price. And it's actually interesting now that I think back about it, because college is also when I started getting my foray into, I guess, less common ways of creating money, I started buying and selling motorcycles, that was a big one. And then I started buying broken cars with a friend, we would fix them and sell them. That was another way. So I started realizing that if I took some risk with this capital, but I was smart about what I was getting, and how I was going about it, I can actually make pretty good money. And that's, that's how I made money throughout college because I wouldn't pull any money out of my trading account, I would bind some motorcycles buy and sell cars.
Erik Smolinski
And I started seeing that, you know, the hustle is there, there's a lot of different ways you can get into money. Once you have at least a little bit. I mean, the cars I were buying that, you know, 500 bucks, 1000 bucks. But it was transformational for me to see that. So while I was in college, it was easy on active duty trading is much harder. But I've learned to get really efficient with my time I'm a very process driven human being like there's I like to be trim the fat, lean operating. Because it's just efficient. I'm obsessed with efficiency. So I started doing a bunch of my homework in my analysis for how I was going to trade at night, the market doesn't have to be open while I'm doing that.
Erik Smolinski
And then I would put on trades while I was commuting into work in the morning, or when I was on my way home, depending on what what the day looked like. And that worked for most days. And then when I would go on deployments and stuff like that, I would just set up the account, so that I had trades that matched my timeframe, that's why I love trading so much is you can pick timeframes that work for you. And that's exactly what I did. So once you develop the skill set, it's actually very malleable. Most people think trading got us in front of the computer all day. And for me, I'm thinking, like I'm trading to not do that I'm trading to have the time. So I was able to do that pretty successful, you just give up opportunities is what it comes down to. But it is what it is
Mike Swenson
kind of going back to the mindset piece. There's a lot of people that have a million different excuses about why they can't do something. And here's you, you're creating the time you're following your schedule, you're planning ahead, and you're able to be building wealth, while you're also serving in the Marine Corps at the same time and going to college to butt into the Marine Corps, being able to do that. And so it's not, hey, once I get out, then I can do the thing that I want to do. And you're running down both lanes at the same time. And because you're smart with how you're spending your time, you're able to do both, which is awesome. So congratulations on being able to do that.
Erik Smolinski
Yeah, thank you. And I think that's just another testament to the impatience because there was another, you know, fuse time fuse item, I was literally just, you know, talking with my mom this past weekend and doing a budget for her because, you know, she's getting older. And again, she doesn't have like a big retirement setup. So for me, I'm thinking I need to be in a position to take care of her because who else is there she's she's by herself. Yep. So I had a lot of really strong motivation beyond just, I didn't want to necessarily live paycheck to paycheck. But I also felt early on like, there's other people relying on me. And thankfully, I really liked that pressure. That's good pressure for me. And I think finding what motivates you can you can create time out of thin air everybody complains that there's not enough time and you could make that excuse. It would be nice if there's more but there's not and yeah, once you get the right motivation, though the time you just sleep less.
Mike Swenson
Well, we'll table the trading talk. We'll kind of get back to that at the end. Talk about a little bit of the nuts and bolts because I want people to hear what you're doing and how that works. So, so let's talk about the real estate side then, for you, because you're because you're in the Marine Corps, you're able to have access to the VA loan, and you were able to use that very strategically to your advantage. So talk about that process. Yeah, for sure. So,
Erik Smolinski
as soon as I found out that I was getting stationed, I already did. When I was we go to a school called TBS the basic school, and it's right before you go to your first duty station. And this is when you're figuring out if you're gonna go to Twentynine Palms in the desert of Southern California, or if you get to go to Camp Pendleton in sunny San Diego. So I already did market research on all of these places to figure out what my move was going to be. And if I landed in San Diego, which I did, I got Camp Pendleton, my game plan was to buy a house because I started looking at some really, really rudimentary indicators. I was looking at things like average time on the market, average sale price, I was looking at average median income, and most specifically, the trend of the average median income to see if I felt like there was even an opportunity there. And when I got stationed in Camp Pendleton, I stayed on base, there's a hotel on base, you stay there for like 10 days while you're getting your feet under you. And then I immediately bought a house. And the way I went about buying house was I had the capital at that point, because I was doing well with trading.
Erik Smolinski
But I didn't want to burn it because military people have the VA loan available to them. And recently, they got rid of even the cap on the VA loan, it used to cap out at like 749,000 or something like that. But they got rid of the cap. So that's a you know, another conversation. But I thought that, okay, if I can buy something that I would like to live in, there's one benefit. The second benefit I derive from that if if I live in this for a certain amount of time, and then I want to rent it, I will be able to rent it because it's somewhere that you can commute to base, there will always be demand near any sort of military installation, people got to live somewhere. Yep. And I also thought there was a safety net there, because especially in California that has very tenant friendly laws. One of my jobs in the Marine Corps was a company commander.
Erik Smolinski
And one of the most awful parts about that job is you have to deal with everyone's BS, if husband and wife are fighting and wife calls into the command that's now my problem, these two people that are having a domestic dispute, I'm involved. I'm thinking what am I doing here. But anyways, I realized though, that that's a huge safety net. Because if you have tenants that are being awful, I would just call the command now and say, Hey, I'm renting out to these people, because I tell you what, the Marine Corps will take care of it. So I thought this is just a good backstop, helping me reduce additional risk. So by the house, live in it for five years or so while I was stationed on Pendleton. And then when I was rotating over, I stayed there to the reserves. I stayed there. And when I decided to leave the house had appreciated quite a bit, but I was like, you know, I could rent it for a little bit, I still think that the housing market is stable.
Erik Smolinski
So we'll go with it. And like I was just telling you, you know, last two weeks ago, I think we just closed on that house, I rented it out for two years to a dual military couple that were absolutely fantastic. They were great tenants. And the house appreciated enough and value that it made selling it way more worthwhile. Because two reasons. The first one is I still was available for that tax benefit, which is from publication five to three, there's like different exemptions that you can qualify for. And then the other thing was, I started just via my trading, I looked at the markets every single day. And I started seeing a lot of warning signs, in my opinion for the housing market. And I was just like, man, maybe I'll take the chips off the table, and then I'll just reinvest when the time is right. And I ended up selling that house I had made $260,000 That it's tax free. And I'll just put that in the trading account for now. And then when I find another opportunity, I'll just rotate back out.
Mike Swenson
And you can continue to use your VA loan, you know, moving forward. So it's not something where it's a one time deal. You can continue to utilize utilize that.
Erik Smolinski
Yeah, there's stipulations with it. Typically, if you're buying a house with the VA loan, it has to be a primary residence for a certain period of time. But I emphasize certain period of time because that's something you can navigate around depending on what you consider your permanent residence. It's just like, you know anything else once you understand the rules, you can find ways to operate within the rules, but in a way that's advantageous for your objectives. But the main thing is exactly as you said, when I first bought my house, I use the VA loan so I didn't have to come out Cash crate leverage. And then when I went to rent it, I just refi and it unlocked the VA loan, it wasn't utilized anymore, and I had a chance to use it and it's ready to be used on something else.
Mike Swenson
That's awesome. I'm just, I'm smiling because thinking about the, the strategy that you have to think ahead like that. Number one, most people don't think that far. And so, so you're very strategic in how you approach things. But But yeah, to have to have the knowledge to think ahead, plan ahead like that, and say, This is what I think I want to do down the road, doing the market analysis, thinking, okay, I can rent this out in the future. It's just, it's phenomenal. And so, once again, good congrats to you on how you're able to handle those situations. And, and so I think for for folks, you know, in the military, like, these are options that are available to you.
Mike Swenson
And so like you said, you know, find the find the way that you can make this work for you, and utilize it to your advantage, because it's a benefit for you for the work that you've done the service that you've given, and so find a way to make that a benefit to you. And you can see that, you can see the profit that comes from that to the tune of over a quarter of a million dollars, because you stayed within the guidelines, and you had the future site to plan ahead on that. And you deserve to reap that reward.
Erik Smolinski
And I think the really cool thing about something like the VA loan that it provides, like I said, it's like, it's really good leverage, because if the way I viewed it is if I buy a house that I like to live in, then I'm going to buy a house anyways. So I might as well like to live there. And then when I was doing the market analysis, especially in southern California, I was like, I don't see it getting cheaper, because I wasn't that far inland. And there's only so much space to put houses. So I think if you're really strategic about where you choose to purchase a home, you can make good money off of rental income like we made, we made our mortgage, HOA fees, and then money on top with the rent, and it was good. But I still if I wanted to make a good amount of money, you need appreciation of the asset. So finding places where the asset will appreciate is incredibly useful.
Erik Smolinski
Like if I got stationed in North Carolina, which is another big Marine Corps Base, I would have thought differently. Because housing prices, they just haven't changed much there over the past 20 years. Some pockets, yes, but where I probably would have lived No. So I think being very thoughtful about where you choose to use it, it offers you the opportunity to maximize the output. But even if you buy a house in North Carolina, and then you rent it out using your VA loan you refi like that's still not a bad move. You just don't necessarily get the additional kicker of capital appreciation, which is what I hunt for. That's anytime I'm looking at a real estate investment. I'm balancing it against what I know I can do in trading. So I've been trading for 15 years now I haven't known good I know what I can do. So if it can't outperform that there needs to be a really good reason why I would do it. So I think once you find those numbers for yourself, depending on you know what, what income streams, you have the VA loan and using it as good leverage. It's just it's just incredibly useful.
Mike Swenson
It's the difference between running uphill into a headwind versus running downhill with a tailwind. Right. You know, you're you're you're putting the odds in your favor. And it's it's your knowledge of trading that's helped you to think that way. Yeah,
Erik Smolinski
I think that's completely accurate.
Mike Swenson
So talk to me about some of the other real estate stuff that you've done.
Erik Smolinski
Yeah, for sure. So I was fortunate enough to find a couple of partnerships. So as I started developing a little bit more capital, I was interested in commercial real estate. And then I was also interested in real estate in near other military installations, because those are really my main. The main platforms I think through are Where can I rent relatively risk free, because like most I'm a millennial. And unfortunately, a lot of us are risk averse. And even though I've developed a healthier relationship with risk, I still consider myself too risk averse. And I actually don't like that about myself. But anyways, I think by looking around military installations or by colleges, were really useful places to hunt for properties, because I remember when I was in college, I really didn't care what it looked like, didn't really care.
Erik Smolinski
And thankfully, I didn't because it was disgusting. But there's there's a beauty to that, because if you're renting that out, you just accept the fact that at the end of that stay, you are going to keep the security deposit and got the house repaint and put some new college kids in there. So I started looking for opportunities to get exposed to different markets. But I favored partnerships in those instances for two reasons one because If I wasn't local, so I wasn't gonna be able to manage it myself. And I'm not a huge fan of management companies, mostly just because of the experience that my meant mentor had that I referenced earlier, he hasn't had the best experience with them so unfair, so likely, but I still am hesitant about them. So I preferred partnerships for that plus, most of the opportunities would not outperform what I could do on the markets. So the way that I was using it as a risk diversification tool.
Erik Smolinski
So I found commercial real estate was really effective. I also found the returns were not great. It was very stable, very steady, at least what I could find out here. So my experience with commercial real estate out here was pretty limited. I didn't like what it did to Well, again, if you know, I'm 50 or something like that, and I just want a stable income. Great, great choice. But for now, it was a little too slow for me. But I've been continuing to focus on places that offer capital appreciation, places like DC is a really good area. And yeah, that's really been the main strategy, looking around colleges, looking around military installations and focusing on capital appreciation. And yeah, that's that's the long and short of it.
Mike Swenson
One of the things I was just gonna mention, just to chime in for folks considering colleges is, number one, typically, it's higher rents. Because college students, it's, you know, whether it's a rent by the room, or you get a bunch of people in a house, and you split a lease, like so you can get 30 to 50% more in rent. And then as you kind of alluded to, they, they may have some additional wear and tear on the property, but they also don't care about updates. So it's not like, you know, if I'm looking to rent out, depending on where I'm renting it out, it's do they have to have you know, does the bathroom have to have these finishes, does the kitchen have to have these finishes, college kids don't care about that, right? They're not like, oh, my gosh, I love this house, but this one had granite countertops. And so I think we're going to choose the one with the granite countertops, it's not like that it's different.
Mike Swenson
Now, there's classes within that, but at the same time, in general, yeah, they don't care as much about that. So you can save on some capital expenditures, your maintenance might be a little bit higher, but at the same time, you can just if you ever look to get out of the college rental game, then you could sink some money into some some capital expenses. But at the same time, you can just run with it for a while, you know, keep the meter running and experience those higher rents, still see the appreciation still see the some of the tax benefits as well. So there's a lot of upside there.
Erik Smolinski
And you hit a super important point on the appreciation because the there's always demand as long as it's a thriving institution, there's a demand for proximity close to the institution, because a lot of people especially if it's a predominantly out of state attendees to that college, which is what I would look for, a lot of them don't have a car. So they need to be close to something that they can get them to the campus. And I found that that proximity always produced a premium.
Mike Swenson
So the other thing I want to touch on before we get back to trading here is you are an angel investor. And so this kind of comes back to building time and financial freedom through opportunities in real estate, you are experiencing time freedom and able to pursue some things that are a passion project for you as well. Maybe not the best return time on money. But at the same time, you get to choose to do what you want to do with it because of the investments that you've made another area. So talk about the angel investing for a sec.
Erik Smolinski
Yeah, angel investing for me is super fun. And part of it is because I've always lamented this about myself. But I never came up with like the good idea. I always wanted to start a business. And I but I would spit ball things as like, hey, you know, I'm just not really feeling that. So, angel investing was a way for me to enjoy other people's great ideas with them, and help them be successful. And the more I thought about that, the more I realized, like, that's who I am as a human being I'm an enabler, I really love helping people do their best work. And it's the same thing I did in the Marine Corps, it was always all about the Marines setting the Marines up for success, and I love that job.
Erik Smolinski
So angel investing was a way for me to kind of scratch that itch. And as you rightly pointed out, it is definitely not the best return on my time. And part of that might be because I choose to allocate more of my time than I probably need to. And the other thing is just because I'm genuinely interested in the things that I choose to Angel invest in, and I really provide two main services. The first one is capital. And the other thing I help smaller companies that are trying to get off the ground is just strategy spitballing ideas, because I've been fortunate enough to do it for a little while now. And I've created at least a small Rolodex, you know, not like the Mark Cuban Rolodex, who could call his whoever person but in the niches that I've participated Then I have developed a small network of people where if I'm talking with a prospective business owner, and they're like, Oh, well, I don't, I need to do some market research on my customers like, Okay, I actually know people that can do that.
Erik Smolinski
So I found all of that to be really engaging, it's a super fun time, the return on capital can be pretty good. It is so important, though, for anybody that's interested, especially if there's a hard money loaning component, make sure you have a rock solid agreement, it is super important to have some sort of collateral depending on whether or not you know these people. And it's high risk, because if the collateral disappears for a reason, and the business doesn't succeed, that money's just gone, it's just gone. And it is what it is, you could try to sue them. But you know, now you're just spending more money on lawyers, that kind of thing.
Erik Smolinski
And then the last thing that I really think about is when you're loaning money, usury laws are super important to respect. And that was actually something that my attorney saved me from. Because I was in the process of working in agreement with somebody they were starting an entertainment company in Abu Dhabi. And I asked them, I didn't even propose this, I asked them, hey, how much money do you need? And what? What rate Do you want it at because I wasn't going for equity. I was simply just going for a fixed rate return on the capital. And they suggested, you know, X percent. And when I looked at it, in the first state that I had made that contract with them in New York, it was fine. When I moved to California, where we did the second contract, it would have not been fine.
Erik Smolinski
So I actually could have shot myself in the foot. If for whatever reason, there was an issue, you know, with the agreement. So just a small lesson learned the hard way from me almost making a pretty significant mistake, because essentially, anything that had to go to court at that point would have favored them. But luckily, the attorney caught it. He's like, No, this ain't it. And that's why I think having an attorney help with that is useful. But and the last thing I would say about angel investing is you just get to learn about stuff, you get to learn about stuff that's interesting to you that you might not spend as much time you know, as an individual, but you get to learn from somebody who spent hundreds and hundreds of hours on it, which is really cool. So it's yeah, like you said, passion project, super fun.
Mike Swenson
I think that stuff's gonna come back to though later in life, like you think about the relationships, you're making the business opportunities you're funding, it might just take longer for that hockey stick to grow. But the Rolodex you're developing the number of industries that you're in, that can certainly can grow, it can just take longer of a time. And the nice thing is, is you don't you don't need that for the money today. But the more you invest in that you hit one great company, you make some great connections along the way that might open up your world in a much larger way. So that will probably just take more time. But it's going to come back to you.
Erik Smolinski
I bet. Yeah. And I do think that that makes sense. Because there have been a couple really great success stories. I will say going back to my risk averse nature, as soon as there's a reasonable opportunity to cash out unless I see something with truly tremendous potential, which I haven't seen one yet personally, but there's a handful of them that I've had opportunities to cash out, I typically take it, because some of them, I mean, at least two instances, we were on the brink of it all going away. And luckily, they got picked up for funding from a larger entity. And we were essentially able to cash out. They didn't want to dilute too much. But yeah, it's it can be very, it can be very interesting. And just as you said, I do think it's important for anybody that's interested in that space is you had better have a long runway and not be super connected to that capital, because there is a good chance and ain't gonna be there.
Mike Swenson
Yeah. So before we wrap up, I want to make sure that we do talk about trading for a couple of minutes here. So let's just assume somebody doesn't know much about trading. What can you share in kind of, you know, three to five minutes here in terms of how you're utilizing that to be successful?
Erik Smolinski
What would I do would take way longer than that to dive into this well, and
Mike Swenson
I'll just quit I'll just click Add to like go to your YouTube channel because there's so much there. We'll get into the how they get a hold of you later. But like yeah, what what you're doing is that an amazingly high level so yeah, just just give us the kind of the cliff notes version of how this works.
Erik Smolinski
Yeah, for me, I trade derivatives, which are essentially different style instruments. And they're really weird and essentially the it's just all make believe money is what it comes down to. But it can compound very quickly. Now, the thing that I do think would be useful for the listeners though is, if I think about how I would get started with investing or trading if I were to start all over again after doing it for a while now, I think one of the most important things people should consider is opening up a brokerage account. You can do it with any of the larger brokerages that you like. I am not a big fan of like the smaller gamified brokers but essentially a brokerage, just a connection person, and they give you access to the markets.
Erik Smolinski
And setting up a buy and hold portfolio takes a few minutes, you can get into an index ETF like if it were me, I would open up a brokerage account, I would put whatever money I could in it. And then I would start with something like spy which is the s&p 500 index ETF and just let it run. And depending on how long your runway is, you can include some bond ETFs, or NS exchange traded funds or notes. And they help reduce risk because it spreads risk across a bunch of different assets. But it's only one ticker, or one security that you have to trade, which is really nice. And I think the main thing is just the sooner people can start that the better. Like I was so fortunate to have somebody mentioned it to me so young. And that's the only reason why I was able to do what I was able to do. By the time you know, I was before I was 30.
Erik Smolinski
And the way that trading and real estate work for me now is I just rotate to where I see opportunity, I still keep most of my investing capital in trading again, because it's a known good I know what I'm capable of. And I'm confident in that result. However, if there's really good looking opportunity in real estate, I will happily rotate money over to that, which is exactly what we're talking about earlier, I definitely perceive a lot of overhead right now for real estate, it looks rough, who knows what's gonna happen. But I'm essentially just giving it 612 months to bake out. And we'll see what happens with the real estate market. And if there is any sort of correction, especially out here in San Diego, I'll happily buy another rental property. But it gives me the flexibility to rotate risk around as compared to being focal. And just one thing and you are stuck at that one point. Having multiple mediums that you invest in is really useful in my opinion.
Mike Swenson
Yeah. And I said, Matt mentioned, this isn't financial advice. And don't, don't invest more than you're, then you're able to lose. So just the disclaimer note on that when for you did it kind of turn the corner where you're like, Okay, there's obviously a large learning curve, you got to figure it out. But once you figure it out, where did you see this as being like, you know, what, I can make this I can make this my career, and I can can do really well with that. How long did it take for you? Um, I think,
Erik Smolinski
probably five years. And the reason why I say five years is, after the first couple years, you get your feet under, I got my feet under me. But then the issue is you only get to experience what the market shows you. And I was very fortunate that before we went into a decade long bull market, meaning it's just one condition that you're seeing, I had already experienced 2007 2008 2009 Yep, that was super helpful. So I think the turning point for me was after I went through that really rough bear market, I emerged on the outside relatively unscathed. And I said, okay, like if I could survive that I'm probably okay. So I think, exactly as you said, it is a steep learning curve upfront. And it's because the financial industry in general just looks to add barriers.
Erik Smolinski
So you need somebody, you can do it yourself, because you don't know that you can be you know, long a product, but short the market at the same time with the same thing. And that's just to confuse people. So annoying, but it is what it is. So I think once you get over that hurdle, it starts to make sense. And then the main thing is, as you deploy your strategy, you get more data points. And once you build a comfortable data set, then you can kind of optimize and say yeah, like I kind of know what I can do. And that's really where it becomes powerful.
Mike Swenson
Well, thank you so much for coming on. I mean, we can we can spend a lot more time chatting on this stuff deeper but we got a chance to kind of touch on the different streams and really show how you were able to strategically plan ahead make some smart choices and have a pretty cool cash flow setup with a few different streams of income coming in to where you know, like we said, you know, being being a millionaire at the age of 30 and being able to select what do I want to do with my time versus feeling like you have to make decisions because you have to make money now you get to choose what you want to do with it and so congratulations on that and you know excited to see what the future holds. So for folks that want to learn more about the investing side want to learn more just kind of in general, how can they do that?
Erik Smolinski
Yeah, you guys can find me on Twitter at es invests or on my YouTube channel. Also at es invest I keep it real simple. And then the ES for the people that are wondering, it's just my initials because I'm super original. So Oh, yeah, that those are really the two main things I'm active on.
Mike Swenson
Cool. Well, thank you so much for coming on and sharing your story and best of luck to you in the future. Absolutely. Pleasure.
Erik Smolinski
Thank you for having me. I look forward to keeping in touch and thank you for doing what you do. I think it's awesome.
