Cash Flow Investing, Real Estate, and Building Passive Income: Steve Lawson on the Wealth Highway

Steven Weinstock (00:00) Hello. Before we start, what if everything you've been taught about retirement is technically correct, but still leaves you working decades longer than you planned? Today's guest spent years helping people invest before realizing that the traditional roadmap was not really getting the job done. Welcome back to another episode of the Wealth Clock Podcast. I'm Steven Weinstock. For more than twenty-five years I've been investing in real estate, raising capital, operating apartment buildings, making loans, building businesses. On this show I sit down with operators, founders, investors, entrepreneurs, teachers who are actually doing the work. No theory, no fluff, just real conversations about business, investing, entrepreneurship, and building wealth. This is the Wealth Clock where top operators, founders, and closers share what really works. Today's guest is Steve Lawson, founder of Unbroken Investing, and author of the book Wealth Highway. After spending decades helping people invest, Steve realized that many traditional strategies were not creating financial freedom. That realization led him toward cash flow investing, diversification, and passive income. Before we jump in, I do have a sponsor, Cable NOI. If you own an apartment building with 20 units plus, all they need to get you extra income is the address and the unit count. They may be able to get you upfront money from Cablevision, Verizon, Charter, Spectrum, all for putting some flyers towards your tenants. No wiring, no billing — regular cable, TV, internet. You'll earn residual income as well. CableNOI.com. NOI stands for net operating income. Steve, thank you very much for coming on. Steve Lawson (01:53) Thank you so much for having me. I appreciate it. Steven Weinstock (01:54) All right, before we start, where are you? Where did you grow up? How did you get into this? Steve Lawson (01:58) I'm currently in Indianapolis. I grew up in the state of Indiana. I've always been kind of a numbers nerd. Growing up, we lived below the poverty level until I was a teenager, so I got used to hearing, "we don't have money for that." The only vacation I knew of as a kid meant driving to another family member's house. I like exploring and traveling — that's one of my passions. I realized the only way to do those things is to have more money. So I got into investing, and being a numbers person, it was a natural fit. What I tell people now is you can't buy happiness, but if you have good cash flow and finances, you can buy the things that bring you joy. Steven Weinstock (02:48) What was your first job? Steve Lawson (02:50) Financial planning, right out of college. I had a double major in accounting and finance from the Indiana University School of Business and I went right into financial planning. Steven Weinstock (02:58) How has your theory on investing changed over the years? Steve Lawson (03:04) Drastically. Right out of college I thought that's what you were supposed to do to create wealth — dollar cost averaging into the market, diversified portfolio, index funds. After 10 years of doing that — and keep in mind this was during the big bull run of the 1990s — we hit 2001 and 2002, the tech bubble burst, and a lot of people were suddenly in the same spot they were 10 years before. They had grown a lot and lost it all. I realized that's not how you create financial independence. There's got to be a better way. So in 2002 I made the switch into real estate investing. Steven Weinstock (04:02) I've been doing it since 2001, so I'm right there with you. Talk to me about cash flow investing. What does that mean? Steve Lawson (04:33) Initially I was doing flips — short-term cash flow, but not sustainable. My cash flow mindset really came about much later, around 2018-19. At that point I had two kids about five years from college, and I set the goal of paying for their college with nothing but passive cash flow. From 2002 to 2018, real estate was the main thing I did — a lot of rentals, a lot of flips. One realization is that real estate is not a cash flow heavy investment on its own. I saw someone say, "my property only makes $200 a month net cash flow." True, but add 3-4% per year appreciation on a $200,000 house — that's another $600-700 a month. Add tax deductions, add mortgage paydown — your cash flow is $200 a month, but the value from that rental is over $2,500 a month. That's what a lot of people miss. With a BRRRR strategy — buy, rehab, rent, refinance — ten years later you have $100,000 of equity you can pull out tax free. Steven Weinstock (06:19) When you say tax free, in your example it's tax free because you're doing a refinance — it's a loan, not income. You can do whatever you want with that $100k — buy a Porsche, buy another property — and if you sell you can use a 1031. You mentioned some of your cash flow investments are outside of real estate. What are those vehicles? Steve Lawson (06:57) Most people invest in things that either appreciate (stocks, gold, crypto) or pay a fixed return (CDs, bonds). But I talk about two assets that actually create wealth. One of my first real estate examples was a house I bought for $4 a month net cost — I was paying the seller $804 and collecting $800 in rent. I did that for five years, it was paid off, and I sold it for $75,000. My $240 investment became $75,000. That's wealth creation. Real estate is one way you do it. The other one is owning businesses. If you look at the 1,000 wealthiest people in America, every one of them made their wealth by owning a business or owning real estate. So I help people invest in businesses they own even if someone else operates them — just like real estate. Business often generates more current cash flow than real estate, so we do the two in conjunction. Steven Weinstock (08:19) Got it. I might deviate from you here — what I used to call mailbox money is very different than what I call mailbox money today. Mailbox money — another word for passive income — has a lot of layers. Is it literally a check in the mail with no involvement? Or is it more hands-on but less than a nine to five? When you talk about passive income, are you referring to true mailbox money or something you still put time into? Steve Lawson (09:27) Great question. A lot of the confusion comes from the IRS calling real estate passive income. But if you own it and manage it yourself — screening tenants, doing maintenance — that's not passive, that's a part-time job. The difference is whether you do it yourself or hire a management company. Early in my career I saved money managing myself. Then I had a property I struggled to lease for months. I hired a property manager and they found a tenant in two to three weeks at the rent I'd been asking. My net after paying them was more than I would have made placing the tenant myself. That's when I started hiring people to manage all my properties and most of my businesses. The businesses we do often take less than an hour a week — still your business, still involved, but mostly passive. Steven Weinstock (10:52) What do you say to successful people who say, "I'm fine with the stock market — maybe not individual stocks, but SPY, the S&P 500, has ups and downs, and if I'm 30 with a long horizon, maybe the CEOs of those 500 companies are smarter than me. It's liquid, there's some dividend"? I'll tell you why I ask — I speak to investors in my business, and over time I've stopped pushing every investor into my deals. If they have zero experience in real estate, I often tell them to dollar cost average into SPY. The investors I want either have lots of other deals or already have a significant stock portfolio so what they put in with me is a small slice. I always tell them there's no such thing as mailbox money — you won't be responsible for the deal, but you'll have headspace thinking about it. A lot less than $500,000 in the S&P, but more than zero. Steve Lawson (14:31) I agree completely. That's actually my wife. Had I not come along, she's a pharmacist, maxes out her 401k, had a financial advisor before me, dollar cost averages — that's all she would ever do, and that's fine. I divide people into inside-the-box and outside-the-box thinkers. She's inside the box: 401k, dollar cost averaging, emergency fund, done. I can't persuade her — and that's fine. But when people are outside-the-box — they've done real estate, a business, crypto, private lending — they're open to other nontraditional things. Steven Weinstock (15:45) You mentioned you're sometimes a private lender. Talk about that. I recently started a private credit fund — first lien loans on real estate. Brokers send me approved files and I decide whether to fund. I close at title, hold the note, service the loan. For the first time in 25 years I finally found what I consider as close to mailbox money as possible. Tell our audience what private lending is for you. Steve Lawson (17:35) I have an investing community and we do private lending inside it. I'm actually more of a borrower than a lender. People further along in life are more conservative — they're not looking for the next startup, they're looking for consistent cash flow. Being a private lender is a better fit for them. I use private lenders to fund fix and flips and BRRRRs. I rehab, then refinance long term with a DSCR loan, pay the lender back, and do it again. We have both borrowers and lenders in the community — both investors, just at different stages. Steven Weinstock (18:39) Tell me about your book and your community. Steve Lawson (18:44) The book is written as a story — a friend driving across country starts asking financial questions and I spend the trip explaining investing concepts. I talk about the five levels of financial freedom. At the bottom you spend more than you make. Most people are on level two or three. At level four you have substantial passive cash flow. At level five you have all you'll ever need. I cover the formula for wealth creation and the two best ways to create wealth — owning real estate and owning businesses. It's a best seller now. The community is based on the same concepts. Instead of saying "get to the top of the mountain," we break it down: how do you get from level two to three, three to four? Steven Weinstock (20:35) You've mentioned $30,000 a month in passive income. What's paying that? Steve Lawson (20:58) That was built over less than five years. I had kind of started over, changed strategies, and built it up to $30,000 a month — mostly real estate, some business, a little bit of crypto. Steven Weinstock (21:24) Talk to me about cash flowing from crypto. Steve Lawson (21:51) Two things. There was a DeFi strategy that worked for a while and then didn't — I no longer do that. Now I follow Richest Man in Babylon: only invest in things in which you are an expert or you have a trusted advisor who is. I'm not a crypto expert, so I found a private fund. It's been almost four years, they've made at least 3% per month every single month, never had a down month, 43 consecutive profitable months. They use hedging strategies. I have a normal account with them and a self-directed Roth 401k account so part of it grows tax free. Steven Weinstock (23:17) When did you write Wealth Highway and what prompted it? Steve Lawson (23:32) Last year. My goal has always been to help people achieve financial independence. My chief marketing officer asked me what my goal was. He said, "Steve, you don't do much social media, you don't have a book — you can't help people if they don't know you exist." So I finished the book and started doing more podcasts. Steven Weinstock (24:05) Note to audience: please reach out to Steve so he knows he exists. Talk to me about Unbroken Investing. Steve Lawson (24:19) It's a community. The traditional method of investing is broken — if all you ever do is put money into stocks and wait, it won't help most people retire the way they think. We offer access to investment opportunities you can't find elsewhere, a community of accredited investors doing due diligence together, and education across different asset classes. Steven Weinstock (25:13) For the young W-2 listener with $150 extra a week and zero investing knowledge — what's the first step? Steve Lawson (25:52) I'll talk about the formula in the book. Wealth creation is a multiplication: capital × knowledge × time. The more knowledge you have about investing, the more your money grows. The more time and effort you put in, the faster it grows. And it's not just you — you can use other people's capital, surround yourself with intelligent people who know what you don't, and use other resources for time. For a young person with $150 a week, gain education, set the money into an index fund while you learn, build trusted advisors, and as the capital grows take the next step. Steven Weinstock (27:38) Is Unbroken Investing local, national, international, online? Steve Lawson (27:50) Technically international — one member in the UK, a couple in Mexico and Canada — but mostly U.S. and mostly coastal. We have live meetings every week. Monday at 8 p.m. Eastern is our opportunity call where we introduce a new investment or strategy. We have office hours throughout the week, and a 24/7 online community. I love to travel, so I've been doing more spontaneous in-person meetups when I'm in a city. Steven Weinstock (29:00) Is it free to join? Steve Lawson (29:02) No. $97 a month. But the investment opportunities, private lending and borrowing access, and real estate access pay for it pretty easily. There's no commitment — if you hate it after a month, leave. Once in a while we find an amazing startup. One we got into late last summer at $2.30 a share went public last week on Nasdaq at $13 — last I saw it was at $17. That's the kind of thing we're always looking for. Steven Weinstock (30:20) How did the community start? Steve Lawson (30:37) It started with my real estate investors. When I branched beyond real estate, I went back to them and said, "would you be interested in other opportunities too?" That got the ball rolling. It's been mostly word of mouth since. Steven Weinstock (31:10) Steve, before I let you go, where can people reach you? Steve Lawson (31:26) Easiest is talk.unbrokeninvesting.com. I don't make my calendar available to everybody, but I do for podcast guests. You'll find my LinkedIn, Facebook, and personal calendar there. The book is on Amazon — it's called Wealth Highway, and we have a link on the same page. Steven Weinstock (32:00) Steve Lawson, Unbroken Investing — thank you very much. Very informative. This has been another episode of the Wealth Clock Podcast. I'm your host, Steven Weinstock. Episode over. Steve Lawson (32:13) Thank you very much.