ATHLLC8041254267

00:00:00.000 | A quick word from our sponsor today.

00:00:01.680 | Hello and welcome to another episode of All The Hacks,

00:00:07.220 | a show about upgrading your life, money and travel.

00:00:09.560 | If you're new here, I'm Chris Hutchins.

00:00:11.140 | I'm a diehard optimizer.

00:00:12.600 | I love doing all the research

00:00:13.940 | to help you get the best experience in life without an expensive price tag.

00:00:17.480 | And today I'm talking to Brandon Turner about real estate.

00:00:20.520 | And while I do own my primary residence at a fraction of a vacation home,

00:00:24.520 | I've never really dabbled with rentals, Airbnb's or any residential

00:00:27.900 | or commercial real estate projects, except owning some REITs in my investment accounts.

00:00:31.860 | But Brandon's taken a different path and it's worked out pretty well for him.

00:00:35.500 | He's a real estate investor with thousands of properties,

00:00:38.540 | hundreds of millions under management, and he's also the author

00:00:41.420 | of a few real estate books and has sold over a million copies.

00:00:44.500 | He's also a podcaster with over 100 million downloads,

00:00:47.960 | having hosted the BiggerPockets real estate podcast for almost 10 years.

00:00:51.420 | If you're not familiar with BiggerPockets, it's a massive real estate

00:00:54.840 | investing resource with millions of members, tons of content, books, courses and more.

00:00:59.100 | So I want to use this conversation to do two things.

00:01:02.020 | First, Brandon is a fascinating person who's very intentional

00:01:05.780 | with his mindset on life, work, philanthropy and more.

00:01:08.440 | So I want to understand how he operates, why he works with a performance coach,

00:01:12.440 | whether most of us should be doing that, how he's managed to be successful

00:01:15.860 | and still prioritize friends, family and the quality of life.

00:01:18.960 | Did I mention he lives in Hawaii?

00:01:20.700 | So he's doing something right.

00:01:22.160 | But I want to start by brushing up my knowledge on real estate

00:01:24.840 | and learn who should be investing in real estate, whether I'm even on that list,

00:01:28.680 | how people should get started and ask some of the questions

00:01:31.600 | that have been on my mind for years and held me back from doing real estate

00:01:35.180 | in the past, fees, overhead, lack of skill.

00:01:38.260 | So without more delay, Chris Hutchins works at Wealthfront.

00:01:41.720 | All opinions expressed by Chris and his guests are solely their own opinions

00:01:45.400 | and do not reflect the opinion of Wealthfront.

00:01:47.740 | This podcast is for informational purposes only and should not be relied upon

00:01:51.020 | for investment decisions.

00:01:52.440 | Brandon, welcome to the show.

00:01:54.440 | Dude, that may have been the greatest interview introduction I have ever had.

00:01:58.200 | So I am psyched to be here.

00:01:59.440 | There's going to be a lot of fun and excited to talk to you

00:02:01.320 | not only about real estate, but can I tell you a quick story

00:02:03.240 | about how terrible I am at your world?

00:02:05.360 | Yeah, I don't even know what my world is.

00:02:07.380 | The world of like points like that piece of your world

00:02:09.880 | like hacking the point thing and the travel thing.

00:02:12.160 | So I spent half a million dollars on ads on Facebook over the past eight weeks.

00:02:16.260 | We've been talking about what I was raising for.

00:02:17.920 | I already know where we're going.

00:02:19.340 | I didn't use a credit card for it.

00:02:20.960 | Like, that's how bad this was.

00:02:22.180 | I think we like hooked up an ACH something or a debit card,

00:02:25.180 | like half a million dollars on ads, and I didn't get anything for it.

00:02:28.440 | Like, I could have probably like flown in a nice plane or something.

00:02:30.860 | So I probably have a lot to learn from you.

00:02:32.680 | Hopefully, I can share at least some with you and your audience.

00:02:35.820 | Well, for anyone listening, if you're in that situation,

00:02:38.940 | the Amex business gold and the Chase Inc business

00:02:41.580 | preferred are three and four X points on ad spend.

00:02:45.200 | So, you know, somewhere between one point five and two million points

00:02:49.880 | are often the ether.

00:02:50.960 | So that's yeah, terrible.

00:02:53.040 | People listening will really feel that pain.

00:02:55.180 | But yes, hopefully, if you're spending money now,

00:02:57.960 | you'll be spending money in the future and we can correct that down the road.

00:03:01.220 | I mean, I don't keep receipts.

00:03:02.840 | That's something that people are always shocked when they hear.

00:03:04.340 | I don't keep receipts.

00:03:05.680 | Like even though I could deduct a lot of the stuff I do,

00:03:07.440 | I don't do like the whole tax thing.

00:03:08.820 | Like I go to a business dinner.

00:03:09.820 | I don't keep the receipt and people think I'm crazy.

00:03:12.100 | And here's why, though.

00:03:13.020 | I'm a big believer in like going all in and using all available space

00:03:17.240 | in my head for two things, and that is like family.

00:03:20.100 | And getting stupid rich through real estate, right?

00:03:22.480 | So those like the two things, if it's not those two things,

00:03:24.900 | like I just don't generally get into it.

00:03:27.400 | And I think that has been one of the things

00:03:28.900 | that's let me be successful in those two areas,

00:03:30.660 | because I'm only really focusing on two areas and not 50 areas.

00:03:34.000 | So points and receipts and all that stuff that I should be doing,

00:03:37.740 | I'm just not doing.

00:03:38.920 | So maybe I just need like a person in my life to run that part for me.

00:03:41.260 | But maybe I need to start that company.

00:03:43.540 | Maybe you do.

00:03:45.500 | Oh, that's a great idea.

00:03:46.260 | Do we just make a billion dollar company?

00:03:47.640 | Do we just become best friends?

00:03:48.880 | Oh, all right.

00:03:50.140 | Let's go back to real estate.

00:03:50.880 | What do you want to know?

00:03:51.600 | What can I tell you?

00:03:52.100 | So I'm a pretty thoughtful investor.

00:03:53.760 | I used to run an investment advisory firm, financial planning firm,

00:03:57.100 | and I own my home.

00:03:58.900 | I own some REITs in my accounts.

00:04:00.360 | But I see people like you who've done a lot in real estate.

00:04:03.240 | And I always question whether I'm doing it wrong.

00:04:05.580 | Is investing in real estate

00:04:06.700 | outside of your home something that everyone should be doing?

00:04:09.200 | Hmm. All right.

00:04:11.280 | So the short answer, I would say, yes.

00:04:14.420 | The more nuanced answer is which way to invest in real estate.

00:04:19.000 | I think real estate belongs in everybody's portfolio.

00:04:21.800 | I think that real estate has so many cool things to it.

00:04:25.060 | It's not the only way to make wealth.

00:04:26.640 | I mean, stocks, they're great.

00:04:28.020 | I'm sure like bonds, I don't know, whatever those are,

00:04:30.220 | like all that stuff works, right?

00:04:32.220 | The thing that's cool about real estate is it has so many different ways

00:04:35.100 | to make money within it that it can find its way into any person's portfolio.

00:04:39.280 | So what I mean by that is like I was like 21 years old.

00:04:42.660 | I'm working at Coldstone Creamery.

00:04:44.820 | I like dissing ice cream and singing for tips.

00:04:47.480 | And I think I was actually 19 at this point.

00:04:49.620 | We're going to Coldstone like 19 singing for tips. Right.

00:04:51.780 | And I rent an apartment, a four bedroom apartment,

00:04:54.040 | and I rent out the other three rooms and I just live in the fourth room.

00:04:56.800 | And all of a sudden I'm like living for free.

00:04:59.000 | I ended up actually renting out my bedroom and I lived on the couch

00:05:01.580 | for half that year and I started making money.

00:05:03.840 | You can go that extreme.

00:05:05.880 | That's kind of real estate investing.

00:05:07.720 | And then on the other side, like I own whatever 7000 rental units

00:05:10.600 | and I own a big company that buys apartments and mobile home parks.

00:05:13.740 | And I just run like a business over there.

00:05:16.360 | And so you take those two extremes and everything in between

00:05:19.900 | involving real estate, you can make money and you can make a lot of money.

00:05:23.660 | And so, yes, everyone should invest in real estate.

00:05:25.740 | The question is how and how is it going to work for you?

00:05:29.320 | What fires you up? What gets you excited and what's your goals are?

00:05:32.040 | So I imagine most of the people listening are not looking

00:05:36.920 | to have four roommates and sleep on a couch.

00:05:38.840 | So we knock off that.

00:05:40.580 | And I'm guessing that if they're listening to this, trying to learn about real estate,

00:05:43.680 | they're also not on the other end of trying to figure out

00:05:46.180 | how to buy their next 3000 properties.

00:05:48.300 | So we find somewhere in the middle, someone who maybe they own their home.

00:05:51.340 | Maybe they've thought about buying a vacation home or a rental home,

00:05:54.260 | but they haven't pulled the trigger and they're trying to figure out

00:05:56.360 | what's a good way to get into this,

00:05:59.560 | whether it's just the learning side or the experience through doing.

00:06:02.940 | Yeah. So one of my favorite ways into real estate,

00:06:05.320 | especially with those people who don't have a ton of capital to start with.

00:06:08.440 | Right. Again, going back to why I love real estate.

00:06:10.540 | Real estate is kind of like any business in that it doesn't necessarily require

00:06:14.700 | a lot of money if you use time instead. Right.

00:06:18.700 | So there's ways to kind of hustle your way into real estate.

00:06:20.880 | So maybe it's not the living on a couch kind of idea,

00:06:23.340 | but there's a term we call house hacking.

00:06:25.680 | This has changed my life.

00:06:26.680 | House hacking. I've done it many, many times.

00:06:28.640 | It's where you buy like a small multifamily property.

00:06:31.260 | Let's call a triplex, like three separate units, right?

00:06:34.220 | And they're all over the country, all over the world.

00:06:36.180 | Every country's got them.

00:06:37.600 | And you live in one of the units and then you rent the other ones out.

00:06:40.180 | Now, you don't even have to be the property manager.

00:06:42.100 | You can even hire management so you don't deal with the tenants.

00:06:44.400 | But the benefit is, is one, you can get into these deals

00:06:48.280 | for very low money down, like three percent, four percent, five percent down

00:06:52.480 | when you're willing to live in the property for at least a year.

00:06:54.700 | So let's just say you're somebody you've saved up 20 grand.

00:06:57.960 | Well, what's 20 grand really going to do for you? Right.

00:06:59.920 | You throw it into the

00:07:01.500 | stock market and you make yourself 10 percent on your 20 grand. OK, good.

00:07:04.720 | You're now making two thousand dollars a year.

00:07:07.100 | Like it's not life changing money.

00:07:08.940 | But that same 20 grand, if you were to buy that duplex or triplex,

00:07:12.520 | you could be living for free and saving what you'd be paying on rent

00:07:17.100 | somewhere else.

00:07:17.600 | You could be saving a thousand, two thousand, three thousand dollars a month

00:07:21.020 | and building equity at the same time.

00:07:23.700 | So that's a cool strategy.

00:07:25.040 | And a lot of people like, well, I don't want to live in a crappy duplex.

00:07:27.580 | So I live in Hawaii.

00:07:28.660 | I have an ocean view.

00:07:29.920 | My house is worth about three million dollars.

00:07:31.920 | I got a pool.

00:07:32.880 | I got this crazy cool property here.

00:07:35.080 | It's a triplex.

00:07:36.220 | I rent out the back unit that pays almost half my mortgage.

00:07:39.640 | And if I wanted to rent out the other unit that I have, I could.

00:07:43.060 | And I would pay my whole mortgage.

00:07:44.600 | I'd be living for free in Maui, looking at the ocean because of house hacking.

00:07:49.300 | So it's not just for people who are starting out.

00:07:50.980 | It's just a cool strategy in general.

00:07:52.400 | A cool hack. Again, house hacking.

00:07:53.940 | And you're the hack guy. So there you go.

00:07:55.780 | I actually ended up doing this without realizing it about a decade ago

00:07:59.900 | because we were trying to buy a home and we kept struggling with the fact that

00:08:03.080 | if you buy a two bedroom home and you're going to start a family,

00:08:06.280 | you're going to outgrow that home.

00:08:07.320 | Yeah. And like the traditional advice when you buy a home,

00:08:09.900 | you pay real estate agent fees or someone does.

00:08:12.200 | And when you sell the home, the same thing and closing costs

00:08:14.280 | and furnishing and staging and all this stuff.

00:08:16.320 | So the general rule is like, if you're not going to live there

00:08:18.540 | for a long time or own it for a really long time,

00:08:20.960 | the transaction costs are going to eat you up.

00:08:23.160 | So we're like, well, we can't buy a place that's two bedrooms

00:08:25.380 | because we're going to move out.

00:08:26.260 | And so we found a place with three bedrooms,

00:08:27.800 | with one of the bedrooms having a door to the outside.

00:08:30.340 | And we said, great, we'll turn that bedroom into a studio.

00:08:32.680 | And for the next five years, while we don't need three bedrooms,

00:08:35.920 | we're going to rent it.

00:08:37.220 | Real estate in San Francisco did so well that it ended up paying the whole mortgage.

00:08:40.220 | And then when we finally had our first child, we said, oh, we need the space.

00:08:43.900 | We were done with tenants.

00:08:45.520 | And now we have a three bedroom. We didn't have to buy and sell.

00:08:47.640 | So that was our version.

00:08:48.600 | I didn't know there was a house hacking movement.

00:08:50.400 | Now, I met this guy from the Investor's Podcast Network, Robert Leonard.

00:08:53.740 | He wrote a book about house hacking recently.

00:08:55.660 | So now it's become this thing. At the time,

00:08:58.160 | it was just a way that I could subsidize the cost of my mortgage.

00:09:01.320 | You know, it's funny about this.

00:09:02.540 | So the word house hacking.

00:09:04.280 | So I coined that and I'm not trying to just pat myself on the back.

00:09:06.840 | I was the first one to coin that years and years ago, like 10 years ago.

00:09:10.080 | You can go back to the original article I wrote on it.

00:09:11.880 | The reason that I coined that was based on travel hacking

00:09:14.880 | because everyone talked about travel hacking.

00:09:16.220 | And I was like, well, I'm kind of doing the same thing

00:09:18.420 | when I buy duplexes and live in a house.

00:09:19.840 | So I call it house hacking just based on that.

00:09:22.300 | And the term just took off.

00:09:23.340 | Really, I owe a lot to your world and your industry for that term.

00:09:26.180 | So really, what I'm saying is we're all here because of you, man.

00:09:28.720 | Yeah, definitely not because of me.

00:09:31.020 | But you are here because of me, but not everyone else.

00:09:33.600 | But I love that story that you just told, right?

00:09:35.400 | Because it just illustrates one of the million ways

00:09:38.360 | that real estate can change your life or benefit your life in a lot of ways.

00:09:41.780 | Like, I wouldn't buy a three million dollar house in Hawaii,

00:09:44.040 | but because I house hack, I can.

00:09:46.820 | And in fact, there's other cool things like my buddy actually rents for me,

00:09:49.380 | which is normally a terrible idea.

00:09:50.800 | I usually caution against that.

00:09:51.960 | But my buddy rents for me because he's back there.

00:09:54.340 | We started this company together to buy big commercial properties.

00:09:57.260 | And now we bought whatever, 7000 units because of him being there.

00:10:01.060 | So it's kind of a cool like the ancillary thing is you kind of get a community vibe,

00:10:04.220 | which is sorely missing in America today, right?

00:10:07.180 | Like we're all so alone in the world.

00:10:09.680 | So now I kind of feel like I have my own little compound in a way,

00:10:12.820 | which is kind of funny, but it works really well.

00:10:15.100 | One of the key mathematical reasons behind what you just said

00:10:19.020 | when house hacking is that you can get leverage and that that leverage,

00:10:23.020 | unlike the leverage in a brokerage account, is not subject to a margin call.

00:10:28.200 | So if house prices go down, you don't get evicted.

00:10:31.400 | And if you ride it out long enough, you'll be OK.

00:10:33.480 | So that works really well if you are ready to buy a new place.

00:10:37.200 | What if you're already in a home and you're not really looking to move out of it?

00:10:40.500 | Is getting into real estate, is that just buying the duplex and not living in it?

00:10:45.580 | Is it buying a vacation rental property?

00:10:47.920 | Is that version of it as appealing when you can't live in it

00:10:52.040 | and something that the average homeowner should be thinking about

00:10:54.720 | as a way to invest their savings?

00:10:57.040 | Yeah, 100 percent. Yes, they should look into it.

00:10:59.880 | That said, most deals aren't deals.

00:11:02.460 | Most properties are going to lose you money by owning them.

00:11:05.340 | And so as long as you're willing to learn how to run some simple math,

00:11:09.300 | and it's not hard.

00:11:09.940 | I mean, like you can just go to YouTube and search like rental property math.

00:11:12.980 | Like it's not super hard to do.

00:11:14.680 | Now, again, there's different strategies, different strokes for different folks.

00:11:17.240 | Right. Vacation rentals are a phenomenal way to bring in a lot of profit.

00:11:20.820 | I got a condo here in Hawaii.

00:11:22.940 | One condo makes me $7,000 a month in profit.

00:11:26.020 | One property. Right.

00:11:27.080 | And I think I paid maybe 150 grand like into it like that.

00:11:30.660 | I've got into it and it's a million dollar property.

00:11:33.080 | But like that's a phenomenal return.

00:11:35.500 | Like that's going to blow the stock market out of the water.

00:11:37.700 | However, I have to manage that.

00:11:39.760 | I have an assistant who takes care of it, but like that's still a business

00:11:42.380 | basically I have to run.

00:11:43.760 | So again, there's different things for different people.

00:11:46.000 | Let me tell you a story that illustrates a couple of points

00:11:47.820 | on why I love real estate so much.

00:11:50.240 | So when my daughter, whose name is Rosie, she's super cute.

00:11:53.000 | She's six years old now.

00:11:54.420 | When Rosie was born, literally the week she was born,

00:11:57.000 | we went and signed papers on a four unit property.

00:12:00.260 | It was a fourplex located in kind of a rough area.

00:12:03.340 | Not like I'm going to get shot there, but like definitely not like a place

00:12:06.560 | I'd want to live.

00:12:07.600 | But we got this four unit property there and it was super cheap and disgusting.

00:12:11.300 | And there was like rats living in it.

00:12:12.600 | And a bunch of like people had broken in and stolen stuff.

00:12:15.320 | I mean, it needed a lot of work, but we buy this property and we fix it up.

00:12:19.020 | And then we put it on an 18 year payoff plan.

00:12:22.740 | It's a 30 year mortgage, which is pretty typical.

00:12:24.860 | But I actually went to like Dave Ramsey's like calculator online and was like,

00:12:28.040 | how much extra do I have to pay every month to pay it off in 18 years?

00:12:30.960 | And it was like one hundred and fifty bucks extra every month.

00:12:33.320 | So I put it on this 18 year path plan.

00:12:35.740 | Now, our mortgage at the beginning was one hundred and fifty thousand

00:12:39.040 | that I owe in the mortgage.

00:12:40.420 | When my daughter is 18, we'll owe zero dollars on it.

00:12:44.960 | Now, that property could make me no money for the next 18 years.

00:12:49.000 | I can make nothing off of it.

00:12:51.260 | But at very least, my tenants just paid off a mortgage

00:12:54.000 | over the course of 18 years, and now it's worth a lot more money, right?

00:12:57.460 | In fact, it's probably worth when I bought it.

00:13:00.000 | Two hundred thousand. My mortgage was one fifty.

00:13:02.080 | I always said it'd be worth three to four hundred thousand dollars

00:13:05.260 | when Rosie's ready to go to college.

00:13:07.040 | So no, these are two things that play here, right?

00:13:09.080 | The property values tend to go up over time.

00:13:11.580 | Yes, there's dips and such, but based on just three percent

00:13:15.040 | appreciation over the next 18 years, it should be worth between three

00:13:18.120 | and four hundred thousand dollars.

00:13:19.660 | We will then owe nothing on it.

00:13:22.080 | So we've built now three or four hundred thousand dollars of equity

00:13:24.740 | that Rosie gets to use for college.

00:13:27.780 | And this is a plan I tell a lot of parents, buy one rental house

00:13:30.740 | when your kids are young, put it on a 15 or 18 year whatever mortgage,

00:13:34.420 | whatever it takes to go to college and their college is paid for off one property.

00:13:39.500 | So that's the loan getting paid down and appreciation.

00:13:42.660 | Those are two of the four wealth generators of real estate.

00:13:46.660 | So one of them is appreciation.

00:13:48.660 | Real estate goes up.

00:13:49.840 | Number two, real estate gets paid down when you have a mortgage, which is great.

00:13:52.700 | That's the whole leverage piece.

00:13:54.300 | Number three, though, is the cash flow.

00:13:56.580 | This fourplex makes me over fifteen hundred dollars in profit

00:14:00.580 | every single month.

00:14:02.540 | Now, some months a little bit more, some a little less if we have repairs and such.

00:14:05.540 | And that's after paying the property manager.

00:14:08.500 | It's like I don't even deal with this property.

00:14:10.380 | It's maybe a minute every single month.

00:14:12.500 | So now I've got the third wealth generator is cash flow.

00:14:15.220 | Now, Rosie doesn't get that.

00:14:16.640 | I get to have a nicer car because of that, right?

00:14:18.880 | I can use that for my life.

00:14:20.680 | And that's why I love cash flow.

00:14:21.800 | So cash flow is a third reason.

00:14:23.100 | And the fourth wealth generator of real estate is the tax benefit.

00:14:26.640 | So when I make fifteen hundred dollars a month on cash flow,

00:14:30.460 | I pay zero dollars in taxes on that zero dollars in it.

00:14:34.960 | You make fifteen hundred dollars doing a W2 job, not you, but somebody does.

00:14:39.180 | And they're going to pay five hundred in taxes, six hundred in taxes, whatever.

00:14:43.520 | So not only do you have the three areas where you're growing wealthier,

00:14:47.020 | but the fourth area is that there's so many tax strategies

00:14:50.520 | for real estate investors

00:14:51.320 | that you typically will pay little to no tax as long as you invest in real estate.

00:14:55.120 | So combine those four things together.

00:14:57.280 | And it's a phenomenal return that I think can blow out any business,

00:15:01.120 | any investment, any way to generate wealth completely out of the water

00:15:04.900 | in terms of both how well it grows and the assuredness of which it grows.

00:15:10.620 | Now, you can start a business and you'll get 10000 percent return.

00:15:13.280 | But businesses fail all the time.

00:15:15.660 | Real estate's fairly stable.

00:15:17.360 | It would be hard to lose when you buy right and you manage right.

00:15:20.860 | You said we're going to be friends.

00:15:22.580 | Maybe this is the pivotal moment here when I push back on a few things.

00:15:25.860 | So on the tax front, let's go in reverse.

00:15:28.360 | All right.

00:15:28.660 | The reason I assume you're not paying taxes is because you're depreciating

00:15:31.580 | the property.

00:15:32.580 | That's a huge piece of it. Yes.

00:15:34.580 | And at some point in the future, when you sell that house,

00:15:37.620 | having depreciated the value of it, if you were to sell that property,

00:15:41.660 | you would have much more taxes in the future.

00:15:43.960 | Whereas my W-2 income that I invested, I would only pay on the gains

00:15:48.200 | if I went and invested that W-2 income after tax.

00:15:50.860 | So yes and no.

00:15:52.120 | But this is why I said, as long as you keep investing in real estate,

00:15:54.580 | you pretty much never pay taxes.

00:15:55.780 | So between a thing called the 10th Irwin Exchange, which is awesome,

00:15:59.120 | and between a thing called cost segregation or depreciation,

00:16:02.820 | accelerated depreciation, all that stuff.

00:16:04.860 | And we don't need to go in the weeds on it.

00:16:06.780 | But essentially, as long as you don't stop investing in real estate,

00:16:09.000 | it's kind of a treadmill.

00:16:09.820 | I will admit it is a treadmill you get on.

00:16:11.820 | But what most investors do eventually is they just get more and more

00:16:14.660 | passive properties.

00:16:15.980 | Like they start maybe buying the duplex that they're managing or the fourplex.

00:16:19.320 | And eventually they sell it and then they buy a share,

00:16:22.620 | a small piece of a huge shopping mall, and they just hold on to that for life.

00:16:27.120 | And then when you die, the taxes basically just get wiped out.

00:16:29.500 | The government says, OK, well, your children aren't going to owe any of that.

00:16:32.040 | And they wipe it out.

00:16:33.240 | And so there are ways to pay nothing forever.

00:16:36.160 | But like you said, there is that.

00:16:37.280 | That said, on that $1,500, first of all, I don't pay any self-employment tax

00:16:41.740 | or any of the 15% that everyone else pays.

00:16:44.040 | So it's naturally lower anyway.

00:16:45.780 | But then the depreciation just wipes the rest of it out.

00:16:48.000 | Even if you did decide, I'm getting off the treadmill,

00:16:51.080 | I'm selling these properties, you're still paying capital gains on that.

00:16:54.300 | You're not paying income tax.

00:16:55.660 | So correct.

00:16:56.340 | I'll give you that.

00:16:57.300 | Even in the worst scenario, it's still a better scenario from a tax standpoint.

00:17:00.920 | But there are future tax liabilities by taking the depreciation.

00:17:05.180 | Yeah, it's not as easy as just you buy a rental property and pay no taxes ever.

00:17:10.040 | There's definitely a strategy to it.

00:17:11.620 | And understanding how this stuff works is important,

00:17:13.660 | which is one of the reasons people should not invest in real estate.

00:17:16.420 | Let me argue why you shouldn't invest in real estate,

00:17:18.500 | because it is not a button you press on an app.

00:17:20.660 | Now, there are easier ways to do it right.

00:17:22.080 | So like I've raised,

00:17:23.200 | I don't know, 250 million dollars over the past couple of years

00:17:26.460 | from investors like you, maybe who like, I don't want to go buy a duplex

00:17:32.040 | and deal with the toilets

00:17:32.960 | and the tenants and the termites and all that crap, right?

00:17:35.000 | I don't want the trauma.

00:17:36.160 | So they just invest with me and then we go and buy it.

00:17:38.240 | So that's what my company does today is we do something like that.

00:17:40.780 | And this is not a sales pitch.

00:17:41.660 | You don't have to go with me. You can go to anybody.

00:17:43.000 | There's lots of us out there who do this very thing.

00:17:45.500 | You can still get depreciation.

00:17:46.740 | You still get some of that stuff,

00:17:47.660 | but it's much more of a push button sort of investment.

00:17:50.740 | Now, your returns are probably lower than if you were renting out

00:17:53.080 | all your bedrooms in your house, living on the couch.

00:17:55.460 | But you pay and you get what you want to put into it.

00:17:59.000 | Just like really any business.

00:18:00.920 | One more quick point.

00:18:02.620 | The other cool thing about the tax depreciation stuff,

00:18:04.880 | not only are you not paying the 15 percent that everyone else has to pay,

00:18:07.800 | but I read the numbers one time and it's in one of my books.

00:18:10.920 | Even if you were to just pay it anyway, at some point,

00:18:13.840 | just settle up with the government

00:18:14.880 | because you deferred it down the road, down the road, down the road.

00:18:17.080 | Because you are not paying it.

00:18:18.960 | You are using the government's money next time to buy more.

00:18:23.040 | So even when you settle up, you are far ahead of where you would have been

00:18:27.380 | if you just pay taxes like a normal person.

00:18:29.340 | Does that make sense? Yeah. You're using their money.

00:18:31.220 | That's the same logic that goes into tax deferred retirement plans.

00:18:35.080 | The reason why is that your money can compound before you owe that tax liability.

00:18:39.460 | I did an episode that we will not get into all about some crazy

00:18:42.760 | estate planning tax strategies.

00:18:44.420 | And part of the reason that those work is that the rates

00:18:46.880 | the government thinks things will grow are not the same rates

00:18:49.340 | that things actually end up growing in the markets.

00:18:51.300 | And so if you can defer taxes as long as possible,

00:18:54.260 | you can actually get an outsized return, compound interest, et cetera.

00:18:57.600 | And you briefly brushed on 1031, but I'll say my version of it,

00:19:02.100 | which is completely unsophisticated, but maybe that's easier than going down.

00:19:05.560 | It's just that if you have real estate property that increases in value,

00:19:10.520 | you can either realize those gains or you can roll them into another property.

00:19:14.340 | And defer and defer.

00:19:15.420 | So as long as you're rolling in the gains from real estate sale

00:19:18.020 | to another real estate transaction, you can postpone and postpone.

00:19:20.980 | You buy a property, make a million bucks, dump it into a new property.

00:19:24.680 | And the government's going to be like, oh, yeah,

00:19:26.640 | I would say it's like the government is like your uncle who's partnering with you.

00:19:29.600 | They're like, hey, you did a really good job with that investment.

00:19:31.820 | You made a million bucks.

00:19:32.780 | Keep our money.

00:19:33.440 | Just put it in the next deal and then put the next deal.

00:19:35.700 | The government's going to let you just keep putting in the next deal.

00:19:37.480 | Now, there's a lot of rules with that, but that's essentially what it is.

00:19:41.280 | In today's Internet age, people's personal information

00:19:44.440 | is being shared online with the click of a button without their consent.

00:19:48.400 | And it happens all the time.

00:19:50.480 | But you can tackle this problem thanks to Delete Me from Abine.

00:19:53.940 | And I am excited to be partnering with them for this episode.

00:19:56.780 | When I used to Google myself, I would find hundreds of detailed profiles

00:20:01.200 | sharing my cell phone number, address, email, family members and a lot more.

00:20:05.660 | At first, I actually tried to remove it all myself, which you can do.

00:20:09.720 | But after at least 10 hours, I signed up for Delete Me and it was so much easier.

00:20:14.160 | Their software and team of experts will not just find and remove

00:20:18.040 | your personal information from hundreds of data broker websites,

00:20:21.420 | but they'll continuously scan for new data that shows up and get that removed as well.

00:20:27.120 | On average, Delete Me finds and removes over 2000 pieces of data

00:20:31.680 | for a customer in their first two years.

00:20:33.800 | So if you want to get your personal information removed

00:20:36.720 | from search results on the web, go to AllTheHacks.com/DeleteMe

00:20:41.640 | and get 20% off a plan for you or your entire family.

00:20:45.440 | Again, that's AllTheHacks.com/DeleteMe.

00:20:49.740 | Getting the crew together isn't as easy as it used to be.

00:20:54.620 | I get it. Life comes at you fast.

00:20:57.120 | But trust me, your friends are probably desperate for a good hang.

00:21:00.880 | So kick 2024 off right by finally hosting that event.

00:21:05.220 | Just make sure you do it the easy way and let our sponsor, Drizzly,

00:21:08.920 | the go-to app for drink delivery, take care of the supplies.

00:21:12.380 | All you need to come up with is the excuse to get together.

00:21:15.420 | It doesn't even have to be a good one.

00:21:17.520 | It could be your dog's birthday, that the sun finally came out,

00:21:20.680 | or maybe you just want to celebrate that you got through another week.

00:21:24.140 | With Drizzly, you can make hosting easy by taking the drink run off your to-do list,

00:21:28.820 | which means you can entice your friends to leave their houses

00:21:31.860 | without ever leaving yours.

00:21:33.940 | And since I know you like a good deal, Drizzly compares prices

00:21:36.960 | on their massive selection of beer, wine, and spirits across multiple stores.

00:21:40.920 | So when I really wanted to make a few cocktails while we were hosting family

00:21:44.300 | last week, not only could I get an Italian Amaro delivered in less than an hour,

00:21:48.560 | but I found it for $15 less than my local liquor store.

00:21:51.940 | So whatever the occasion, download the Drizzly app or go to Drizzly.com.

00:21:56.940 | That's D-R-I-Z-L-Y.com today.

00:22:01.160 | Must be 21 plus, not available in all locations.

00:22:04.200 | And then the returns, right?

00:22:07.580 | Historical property appreciation is positive,

00:22:10.660 | but historical stock market appreciation is more positive.

00:22:15.040 | Comparing apples to apples, it's like the returns are higher.

00:22:18.540 | So how do you compare this to I'm going to take all the money I have,

00:22:22.800 | I'm going to put it in a diverse index funds, including REITs,

00:22:26.840 | and, you know, we can get to REITs after.

00:22:28.600 | And instead of paying down this mortgage each month,

00:22:31.300 | I'm going to take that cash flow and I'm going to invest it.

00:22:33.440 | I've said that mortgages are great for people who wouldn't otherwise save

00:22:36.760 | because it forces you to.

00:22:37.720 | But if you're disciplined and you took all that cash flow and saved it,

00:22:40.980 | how do you think that compares?

00:22:43.020 | You think real estate still wins every time or on average?

00:22:46.280 | I think on average it does and it has.

00:22:49.240 | When you use that leverage, if we're talking apples to apples,

00:22:51.700 | like you got 100 grand, should you buy a $100,000 property in cash

00:22:56.200 | or put $100,000 in the stock market?

00:22:58.340 | I would probably put $100,000 in the stock market, honestly,

00:23:01.340 | because like when you lose the leverage piece, you lose everything.

00:23:03.960 | But if you can use the 100 grand to buy 500,000 worth of real estate,

00:23:07.680 | your $500,000 deal is appreciating at 3% per year.

00:23:11.640 | So you're getting whatever that is, like way better leverage on it.

00:23:14.520 | Right. And the loan's getting paid down and you get the tax benefits

00:23:17.480 | and you get the cash flow.

00:23:19.140 | So you kind of combine it all together and the stock market.

00:23:21.820 | I mean, everyone's got a different number, right?

00:23:22.940 | But six to ten, somewhere in that percentage.

00:23:24.940 | Or if you're Dave Ramsey, 12%, you say.

00:23:26.980 | But the stock market average is somewhere in that range, right?

00:23:29.120 | Let's call it seven, 8%.

00:23:30.860 | I mean, like my real estate, like I don't buy anything

00:23:33.540 | that doesn't average me 15% or greater.

00:23:35.360 | Like I don't buy anything that doesn't do 15%.

00:23:37.080 | And that's after factoring in all of the crazy costs

00:23:40.000 | that come from owning real estate.

00:23:41.460 | That's the number we what we call underwrite.

00:23:43.620 | So we underwrite from a 15% per year standpoint

00:23:47.500 | when we buy real estate for our investors.

00:23:49.540 | And we're actually getting more than that.

00:23:50.600 | We're getting more like 20 to 25%, but we take about a third.

00:23:54.140 | That's what my company does.

00:23:54.980 | So we underwrite from a 15% per year for our investors.

00:23:58.720 | Now for that, right, higher risk, higher return.

00:24:01.360 | Obviously, like you're trusting some random dude from the Internet

00:24:04.240 | to invest your money and hoping you get your 15% per year.

00:24:07.980 | So it's maybe a little riskier than throw it into GE or Tesla.

00:24:13.040 | But I don't know. I could actually argue the opposite.

00:24:15.120 | I mean, what do you think? Let's throw it back at you.

00:24:16.960 | Yeah. Yeah. I mean, dumping in the stocks.

00:24:19.460 | Definitely when you're talking, dump it into GE or Tesla.

00:24:22.720 | I feel like I'm with you, right?

00:24:24.380 | The volatility of any single stock almost thought you were going to go GM or Tesla.

00:24:28.560 | And then I was like, well, that's an interesting perspective, right?

00:24:30.520 | Like one of those two could go very different direction.

00:24:33.220 | Historically, the challenge for me has been the push the button, right?

00:24:37.600 | To buy the real estate, you've got to find the deals.

00:24:39.900 | You've got to process the deals.

00:24:41.020 | We had one tenant in a house we lived in, and that even felt like a lot.

00:24:44.740 | Not because they were there, but because, oh, the sink's not working.

00:24:48.160 | It just felt like a lot.

00:24:49.540 | So I think for me, I've always been apprehensive

00:24:53.860 | of buying real estate with all of the kind of craziness

00:24:57.420 | that comes with managing it and dealing with it.

00:25:00.000 | If it's not your primary residence and you would know better than me,

00:25:02.740 | I feel like the loan situation is harder in terms of you

00:25:06.160 | just don't get as favorable terms when you're not buying a primary residence.

00:25:09.120 | And that's kind of held me back.

00:25:10.840 | The vacation rental.

00:25:12.140 | If it's not a long term tenant, then you've got a vacation rental.

00:25:15.140 | Now you've got to put it on Airbnb or you've got to put it somewhere

00:25:17.240 | and manage who's coming and what happens if there's a pandemic

00:25:21.520 | and no one wants to travel and all that stuff.

00:25:23.620 | So for me, it was just so much easier to invest in the markets.

00:25:27.660 | But that doesn't mean I'm not interested, because then I go, OK, well,

00:25:31.460 | then I could just pay someone to do all this for me.

00:25:33.680 | A company you're starting or anyone else.

00:25:35.220 | And then I'm like, oh, but then the fees, maybe I should do it myself.

00:25:37.680 | And I kind of get stuck in this analysis paralysis of I want to do this thing.

00:25:41.180 | I don't want to do the work, but I don't want to pay someone to do the work.

00:25:43.520 | OK, I'm just not going to do it.

00:25:44.720 | And so I ended up just doing REITs.

00:25:46.300 | So I'm curious where you think REITs fall on the spectrum.

00:25:48.800 | Is that a form of real estate investing or do you kind of say, no, no, no,

00:25:52.000 | that's like the stock market version.

00:25:54.040 | Let's leave that aside.

00:25:55.340 | It is a stock market version.

00:25:56.640 | REITs typically have a very similar return as the regular stock market.

00:26:02.440 | Right. Depends again, which REIT and which ones you're looking at

00:26:04.780 | and how you're measuring it.

00:26:06.240 | You can manipulate data all you want, but typically it's not a whole lot better

00:26:10.180 | and maybe even worse than traditional just stock market investing.

00:26:14.080 | But REITs are great. REITs are a push a button.

00:26:15.660 | They are the stock market for real estate.

00:26:17.460 | You're typically buying a large A class, real nice

00:26:21.200 | like apartment complexes or shopping malls or whatever.

00:26:24.020 | And you're combining your money with lots of other people.

00:26:26.500 | And they're just very stable.

00:26:28.100 | You're not doing anything fancy.

00:26:29.240 | You're not really having to work at all at it.

00:26:31.440 | Now, what we do so at Opendoor Capital, which is my company.

00:26:34.280 | And again, there's lots of us out there that do this.

00:26:36.640 | It's a similar model.

00:26:38.100 | You wire the money to us, you push your button and you're pretty much done.

00:26:42.220 | The way that we're different is we're actively investing.

00:26:44.420 | Like we're not buying super A class shopping malls for three billion dollars

00:26:48.700 | and getting 10,000 investors all chipping their money on it or 10 million investors.

00:26:53.100 | We're typically 100 investors coming together, pulling our money,

00:26:56.940 | and we split profits a little different.

00:26:59.240 | So we just basically take the first seven or 8%.

00:27:02.600 | Like we always assume, like if we're not going to get you

00:27:04.400 | at least a stock market return, then I shouldn't get paid.

00:27:07.040 | So the first seven or 8% goes right to our investors.

00:27:09.740 | Like you would get the first seven or 8% per year return.

00:27:12.720 | Anything above that, we then split.

00:27:15.620 | So typically it's like a 70/30.

00:27:17.880 | So I would take 30% of anything above your average stock market return,

00:27:22.420 | and then you would get 70% of that.

00:27:24.660 | And then at some point, it might shift also to what's called a 50/50.

00:27:27.760 | At some point, if we blow it out of the water and do exceptionally good,

00:27:31.160 | that's our kind of like hope is that we get a 50% return for investors

00:27:35.040 | so that we make more money and that everybody wins.

00:27:37.200 | But yeah, so I guess the point being there are ways to invest

00:27:39.560 | completely passively into real estate, whether it's a REIT or a company

00:27:43.200 | like Fundrise, which is kind of a middle ground between a REIT and what I do,

00:27:46.780 | or whether you're investing in a person you trust and know from the Internet

00:27:50.620 | or from a meetup group or whatever.

00:27:52.380 | That's why and because of that, I'll even make this point.

00:27:54.780 | Most rich people, when I say rich, I mean, like you have disposable income

00:27:58.820 | in a significant amount of way, should not invest in real estate,

00:28:02.220 | like actively, because at the end of the day, you go out there,

00:28:06.360 | you buy a rental house, right?

00:28:08.260 | You're a month in.

00:28:09.200 | You're sitting at the dinner table with your family.

00:28:11.460 | You're asking your kids these questions about that.

00:28:13.300 | And then your phone rings, right?

00:28:15.100 | You pick up your phone and they're like, oh, yeah, my toilet's not working tonight.

00:28:18.040 | And you say those like four most dreaded words of every landlord and family,

00:28:21.480 | which is I'll be right over like I'll be right over. Right.

00:28:24.440 | So now you're leaving your family.

00:28:25.780 | You're driving over there.

00:28:26.920 | You fix the toilet.

00:28:27.940 | You come back home a week later.

00:28:29.820 | The stove's not working right.

00:28:31.420 | And then they didn't pay rent three months later.

00:28:33.220 | And now you've got to evict them.

00:28:34.280 | And so if you were to look at the average person who buys real estate

00:28:38.520 | like out there, that doesn't love it.

00:28:42.020 | They're just trying to buy real estate and they're putting a bunch of their money

00:28:45.320 | into it.

00:28:45.960 | I would argue you'd get a better return investing with a company like mine

00:28:50.100 | or Fundrise or maybe even a REIT, then you're going to get on your own.

00:28:53.400 | Because when you average in all those costs

00:28:56.840 | of owning a rental property, they add up.

00:29:00.100 | Now, over time, if you're fired up, if you want to be good at landlording,

00:29:03.740 | you want to be good at this stuff, you want to manage your own properties

00:29:06.280 | and you like it.

00:29:07.140 | Yeah, you can make it a stupid, oversized return

00:29:10.220 | that's going to get you financial freedom in just a few years.

00:29:12.980 | I did it from the time I was 20 ish to 27.

00:29:16.260 | I mean, I was in it like I was changing toilets and painting walls and all that.

00:29:21.060 | And when I was 27, I was able to quit my job and quote unquote,

00:29:24.300 | retire, starting with no money, starting with Cold Stone Creamery.

00:29:27.360 | Now, you show me a stock strategy that somebody can start with no money.

00:29:32.200 | And in seven years, be retired with that level of assuredness.

00:29:36.740 | I'll be shocked.

00:29:37.580 | I mean, if it can happen right by Bitcoin, do the GameStop thing.

00:29:40.540 | Like you get lucky.

00:29:41.580 | But I'm talking about like that level of confidence. It's rare.

00:29:44.620 | So if you want to be active or great, if you want to be passive,

00:29:47.660 | there's ways for you to do that as well.

00:29:49.860 | When I hear the word active

00:29:51.120 | and I think about how you talked about REITs buying a class,

00:29:53.820 | it made me think that, yeah, is the real unlock in real estate,

00:29:58.360 | the ability to buy a property and fix it up

00:30:01.500 | more than it is to just buy it and wade in cash flow?

00:30:04.740 | It is the true skill finding places that have the opportunity

00:30:08.880 | to put in less money than it will ultimately appreciate.

00:30:12.140 | Is that where the magic is?

00:30:13.800 | Is that what you look for with your company?

00:30:16.080 | I mean, there's a million ways that you can pull profits up.

00:30:18.620 | But yes, if I'm getting your question right, what I like to do

00:30:21.620 | is I like to buy properties that you can immediately bump up the value

00:30:24.720 | and then it goes up gradually from there. Right.

00:30:27.160 | So imagine you buy, let's go simple math, right?

00:30:29.020 | You buy a hundred thousand dollar property

00:30:31.200 | that you can just make look a little bit nicer.

00:30:33.060 | And now it's worth one fifty.

00:30:34.660 | You got to put a little money into it or whatever.

00:30:35.940 | Let's say now it's worth from one hundred.

00:30:37.360 | Now it's worth one fifty.

00:30:38.500 | Well, now it appreciates from one fifty upward.

00:30:41.840 | It's not starting at the hundred.

00:30:42.940 | So you immediately start at this new high level and then it goes from there.

00:30:46.280 | So that's one of my favorite strategies.

00:30:48.420 | We call that value add investing to where you immediately add value.

00:30:52.120 | That is not what REITs do.

00:30:53.920 | And that's why REITs get a lower return is because REITs

00:30:56.520 | typically would just buy a property that's already there.

00:30:58.660 | And they're just banking on three percent per year rent raises

00:31:01.960 | to make all their wealth.

00:31:03.420 | And it's a strategy, I hear lots of people kind of amateur real estate

00:31:07.800 | investors are we're going to buy a place in a neighborhood

00:31:10.040 | that maybe we understand because we've lived here and we're going to fix it up

00:31:13.040 | and either ourselves or hire someone and then we're going to flip it.

00:31:15.980 | Is house flipping something that seems like such a great idea,

00:31:20.320 | but has a lot more cautionary tales than the average person knows?

00:31:24.820 | Definitely does. It's super fun, right?

00:31:27.020 | I mean, who doesn't like to take something ugly and make it beautiful?

00:31:29.080 | But maybe a lot of people, but I love it. It's super fun.

00:31:32.000 | You feel like you're on HGTV and flipping things.

00:31:34.100 | But flipping is very much a business in every way.

00:31:37.660 | Like you go start a business doing a lot of things.

00:31:40.040 | Some people just happen to do it with a piece of real estate, right?

00:31:43.100 | You fix it up, you make it better.

00:31:44.680 | You sell for more money.

00:31:45.800 | The risk of flipping, especially today in this market,

00:31:48.440 | is that when you're flipping in a market that is dropping,

00:31:51.340 | which is what we find ourselves in today.

00:31:53.340 | Now, I don't think we're going to see a dramatic plunge 80% of real estate values.

00:31:56.400 | But when you're in a market that is correcting,

00:31:58.540 | you're kind of catching the falling knife, right?

00:32:01.380 | Like you're buying it for 100.

00:32:03.520 | You're going to put 20,000 into it and you think it'll be worth 150.

00:32:07.980 | But what if it's not worth 150?

00:32:09.920 | Like what if it takes you longer to do the project?

00:32:11.680 | Now it's only worth 140.

00:32:13.380 | But you also went over budget and so you had to put an extra 20 into it.

00:32:16.260 | Well, now you're broke even.

00:32:17.660 | And then you pay the real estate agent and now you're losing money.

00:32:19.960 | I've been there. I've had one bad flip that I lost money on.

00:32:23.000 | Ironically, had I kept that property,

00:32:25.960 | I would have made cash flow every month, probably between five

00:32:29.500 | and seven hundred dollars a month on that property.

00:32:30.980 | I would have kept for the past nine years or 10 years since I bought it.

00:32:35.140 | Today, I sold that property, ended up selling it.

00:32:37.780 | Those numbers actually were this property.

00:32:39.780 | I tried to sell it for 150, didn't sell, ended up selling it for 120.

00:32:43.780 | Today, that property is worth over half a million dollars.

00:32:46.660 | So like real estate, one of the other things that's very, very helpful

00:32:51.220 | is it is a very forgiving asset class in time.

00:32:54.800 | It's a very forgiving asset class.

00:32:56.800 | You can screw up a lot of stuff, but as long as you can hold it,

00:32:59.600 | you get bailed out of almost everything.

00:33:01.540 | That's not dissimilar from the stock market, right?

00:33:03.800 | If you just hold through the down times and through rough times,

00:33:07.380 | you can survive almost anything.

00:33:09.180 | And so the deal with real estate is you just need to buy properties

00:33:11.740 | that you can hold if you need to.

00:33:13.820 | If you're going to flip houses, great.

00:33:15.020 | Just make sure if something goes wrong, you can hold it to bail yourself out.

00:33:20.120 | You said rough times depend on who you ask.

00:33:22.060 | We're either in rough times, we're on our way towards rough times

00:33:24.560 | or rough times are about to be in the past.

00:33:27.200 | But it is true that interest rates are pretty high right now.

00:33:31.000 | How does the current market affect what the average person

00:33:35.640 | should be thinking about doing when it comes to real estate investing?

00:33:38.340 | Interest rates are high if you look at a five year time span, right?

00:33:42.180 | If you look at a 50 year time span, they're actually pretty normal.

00:33:45.280 | Whether or not they'll go up higher or lower, we don't know.

00:33:47.820 | Interest rates definitely affect the market.

00:33:49.620 | That's what the government's doing, right?

00:33:50.720 | Like they raise interest rates

00:33:52.360 | as a way to slow down the economy or the inflation anyway.

00:33:55.820 | And so the government is actively trying to make house prices stop going up.

00:33:59.960 | So by raising interest rates, they do that.

00:34:01.660 | Ironically, we're in a really weird time right now

00:34:04.240 | where they are deliberately trying to raise interest rates

00:34:06.740 | to keep house prices from going up.

00:34:09.040 | But what happens then is it makes it harder to build new property

00:34:12.740 | and it makes harder for people to buy property.

00:34:14.680 | So where do all those people go?

00:34:16.580 | They go rent because they can't build a new property

00:34:19.140 | and they can't go and buy something.

00:34:20.320 | So they go and rent.

00:34:21.420 | Well, we've already got a housing deficit in America, a really bad one,

00:34:24.860 | which is why rents are going up so much.

00:34:26.660 | So now we've got this increased problem.

00:34:28.060 | The government is trying to slow down

00:34:29.920 | real estate prices and other prices from going up by raising interest rates.

00:34:33.320 | But what the effect it's having is it's driving rents higher and higher and higher.

00:34:37.560 | So who wins in that situation?

00:34:40.160 | Like who wins when rents are going up dramatically

00:34:43.680 | and people can't buy as much?

00:34:45.180 | Flippers don't win, right?

00:34:46.280 | Because you can't sell a house when you're flipping houses as much.

00:34:48.640 | But when you own rental property and you have a fixed mortgage

00:34:51.520 | that does not change and your rents go up by 10 percent, 20 percent per year,

00:34:56.120 | it's the landlords, it's the rental property owners

00:34:58.960 | that are beginning wealthier and wealthier and wealthier.

00:35:01.320 | Are we in rough times?

00:35:02.400 | I mean, if you're a tenant, yes, it's going to get rough.

00:35:04.760 | I think the next few years,

00:35:06.000 | I think tenants are going to see their rent go up across the country dramatically.

00:35:09.160 | If you're a landlord.

00:35:10.560 | I mean, it's going to be really good times for us in the next few years.

00:35:13.560 | And honestly, that's what's propping up real estate values right now, too,

00:35:16.180 | because we know that's what's happening.

00:35:17.800 | So we're willing to pay more for problems.

00:35:19.200 | I'm willing to buy property right now that breaks even

00:35:21.340 | because I know that next year rent is going to be a lot higher,

00:35:24.040 | not everywhere, but in a lot of places.

00:35:25.820 | So that's what I see in my crystal ball.

00:35:27.740 | I could be 100 percent wrong, though.

00:35:30.020 | If leverage is the magic that helps you get the returns,

00:35:32.620 | the cost of capital going up, does that eat into the returns

00:35:36.020 | or does it get made up for by rising rent prices?

00:35:38.400 | Or how do you even think about interest rates?

00:35:40.820 | Do you slow down a little bit right now or does it not affect you at all?

00:35:44.100 | It is compensated by rent raises. Right.

00:35:46.240 | So on one hand, they're compensating, so it's not a big deal.

00:35:48.980 | But what's cool is that like interest rates can be refinanced

00:35:54.700 | and you can refinance your mortgage at any point.

00:35:56.920 | So it's not like, oh, I'm paying 7% right now on my mortgage. OK, fine.

00:36:00.220 | Well, in two years, if they go back down, you refinance into a 5% or 4%.

00:36:03.720 | You're not stuck for life with that.

00:36:05.480 | But what doesn't historically always go down is rents.

00:36:09.260 | Rents typically go up because inflation tends to go up.

00:36:11.560 | Rates go up and down.

00:36:13.220 | So it's kind of like dollar cost averaging.

00:36:15.560 | And maybe it's use a phrase that I don't fully even understand

00:36:17.960 | because I'm not a stock guy.

00:36:18.760 | But like right when things go down, you just refinance, get the lower rate

00:36:21.640 | and then you lock in that rate for the next few years.

00:36:23.740 | If they go down again, you just refinance again.

00:36:26.000 | I don't worry about rates right now because rates are temporary.

00:36:28.540 | Rents are going up.

00:36:31.040 | And I've been seeing all the news

00:36:32.120 | about the highest 30 year fixed prices in a long time.

00:36:35.280 | And all I can think about is if I were going to mortgage right now,

00:36:37.960 | I would probably not be getting a 30 year fixed right now. Right.

00:36:40.280 | My bet and I am not an expert and I could probably be wrong,

00:36:43.420 | but is that in the next 10 years, rates will likely at some point

00:36:47.020 | be lower than they are now.

00:36:48.560 | So if I were buying a home today and this is not advice for anyone,

00:36:51.460 | but if I were, I would probably look at the like seven, 10 year

00:36:54.900 | adjustable mortgages where it's only fixed for seven or 10 years

00:36:57.740 | with the anticipation of being able to refinance in that window.

00:37:00.660 | Yeah, which I think is just this amazing feature of a mortgage.

00:37:02.980 | Like the bank can't refinance on you, but you can on them.

00:37:06.780 | You can on them.

00:37:08.020 | Yeah. The 30 year mortgage thing, it's for me.

00:37:10.680 | Yes. If I can get a dramatically lower rate off a seven year arm,

00:37:13.720 | they call adjustable rate mortgage a seven or 10 year.

00:37:15.920 | Yeah, I like that idea.

00:37:17.520 | Here's what I don't like, though.

00:37:18.520 | What happened in 07, 08, right, is people have these adjustable mortgages

00:37:21.560 | for the same reason that we're having today.

00:37:23.360 | And so they get the arm because it was cheaper.

00:37:25.940 | And then the arm would shoot up when the market collapsed.

00:37:28.940 | The arm shot up to 28 percent.

00:37:31.000 | So all of a sudden, people's mortgages went from 1000 to 5000 dollars

00:37:34.080 | and they lost their homes.

00:37:35.920 | That has been changed.

00:37:38.220 | There are now limits on what an arm can do.

00:37:40.360 | A lot of people don't realize this.

00:37:41.360 | They think, oh, I would never get an adjustable rate mortgage

00:37:43.320 | because I don't want 08 to happen again.

00:37:45.000 | Well, if you look at the paperwork and talk to your lenders,

00:37:47.060 | yeah, most arms have a max what they can get to.

00:37:49.500 | And it's somewhere in the like the 11, 12 percent range.

00:37:51.560 | Could rates stay high forever?

00:37:53.600 | And then your adjustable rate seven years from now goes up to 12 percent.

00:37:56.340 | That is possible. That is a risk.

00:37:58.600 | So if you really don't like risk, take a 30 year mortgage.

00:38:01.100 | You can refinance a 30 year mortgage, too.

00:38:03.300 | But if you want to lower your interest rate and take a little gamble,

00:38:05.760 | that's what I typically do.

00:38:07.600 | Yeah, the arm's not bad.

00:38:09.160 | I built that into my model when I was like, which one do we do?

00:38:11.600 | And by the way, because of the lower rate, don't think of the break

00:38:14.660 | even as seven years.

00:38:15.600 | You do a seven rate arm because you're going to get a lower rate.

00:38:19.100 | You probably have maybe eight, nine, 10 years to refinance

00:38:23.060 | before it would have been a worse deal than the 30 year fix.

00:38:25.800 | Because for the first seven years, you're saving money.

00:38:28.500 | Yep. And you can invest that in other things and all that.

00:38:30.660 | Yeah, 100 percent. I love that.

00:38:32.980 | I love helping you answer all the toughest questions about life, money

00:38:37.820 | and so much more, but sometimes it's helpful to talk to other people

00:38:41.820 | in your situation, which actually gets harder as you build your wealth.

00:38:45.480 | So I want to introduce you to today's sponsor, Long Angle.

00:38:48.780 | Long Angle is a community of high net worth individuals with backgrounds

00:38:52.720 | and everything from technology, finance, medicine to real estate, law,

00:38:56.640 | manufacturing and more.

00:38:58.640 | I'm a member of Long Angle.

00:39:00.040 | I've loved being a part of the community, and I've even had one of the founders,

00:39:03.620 | Tad Fallows, join me on all the hacks in episode 87 to talk about

00:39:07.180 | alternative investments.

00:39:08.820 | Now, the majority of Long Angle members are first generation wealth,

00:39:12.140 | young, highly successful individuals who join the community to share knowledge

00:39:16.580 | and learn from each other in a confidential, unbiased setting.

00:39:20.180 | On top of that, members also get access to some unique private market

00:39:24.480 | investment opportunities.

00:39:26.120 | Like I said, I'm a member and I've gotten so much value from the community

00:39:29.720 | because you're getting advice and feedback from people in a similar situation

00:39:33.440 | to you on everything from your investment portfolio

00:39:36.380 | to your children's education, to finding a concierge doctor.

00:39:39.780 | So many of these conversations aren't happening anywhere else online.

00:39:43.720 | So if you have more than two point two million in investable assets,

00:39:47.580 | which is their minimum for membership,

00:39:49.420 | I encourage you to check out Long Angle and it's totally free to join.

00:39:53.320 | Just go to longangle.com to learn more.

00:39:56.680 | And if you choose to apply, be sure to let them know

00:39:59.440 | you heard about it here.

00:40:01.240 | Again, that's longangle.com.

00:40:05.220 | I just want to thank you quick for listening to and supporting the show.

00:40:10.140 | Your support is what keeps this show going to get all of the URLs,

00:40:14.920 | codes, deals and discounts from our partners.

00:40:17.720 | You can go to all the hacks dot com slash deals.

00:40:20.940 | So please consider supporting those who support us.

00:40:24.340 | I've heard you say in real estate it can be easier to do bigger deals, right?

00:40:29.320 | Like some of these huge deals compared to buying one house

00:40:33.280 | and fixing it up can be easier and more profitable.

00:40:36.380 | So what does that mean for the average investor?

00:40:38.580 | Does that mean forget starting with buying?

00:40:41.340 | I think for you, it was like, you know, you bought a house in Portland.

00:40:43.620 | Forget that as your first strategy.

00:40:45.540 | Is there a way to kind of skip and jump into something bigger

00:40:48.540 | without necessarily needing to hire someone?

00:40:50.920 | Or is the answer to jump into these bigger projects?

00:40:53.520 | You need to invest with a syndicate or something like that.

00:40:57.520 | Yeah, so you could definitely invest with a syndicate, right?

00:40:59.380 | That's totally fine.

00:41:00.080 | You get a good return that way.

00:41:01.120 | Hopefully you have a good person, right?

00:41:02.640 | A good company that you're working with.

00:41:03.840 | Should a person jump into a larger deal?

00:41:06.140 | For example, there's an investor named Grant Cardone.

00:41:08.340 | He's very popular on social media.

00:41:09.640 | Millions of followers.

00:41:10.820 | Very loud and exciting guy, right?

00:41:13.220 | So Grant has this big thing.

00:41:14.880 | He's always like, don't buy anything under 50 units.

00:41:16.880 | It's stupid. You shouldn't do it.

00:41:18.320 | He's kind of a Dave Ramsey of the opposite side.

00:41:20.320 | He'll tell you you're stupid if you don't use debt.

00:41:22.420 | So over here, we've got Grant saying, don't do anything small ever.

00:41:26.480 | Only buy large deals because they're easier.

00:41:29.220 | And I've said the same thing.

00:41:30.520 | Large deals are easier.

00:41:32.080 | But large deals require a whole lot more capital that may not be yours.

00:41:37.320 | And there's a big learning curve, right?

00:41:39.820 | So if I make a mistake on my that, let's go back to the flip.

00:41:43.220 | I said I lost money on the one flip. I lost money on. Right.

00:41:45.540 | So I lost probably $15,000.

00:41:47.580 | What I lost because the market wasn't as good as I thought it was.

00:41:50.940 | Maybe I didn't do as good of a job rehabbing as I thought.

00:41:53.080 | I took a lot longer than I thought.

00:41:54.680 | I screwed up because I was new to flipping houses and I lost $15,000.

00:41:59.240 | OK, you know, I can survive that.

00:42:02.140 | I can earn that back other ways.

00:42:03.640 | I bought a $100 million apartment complex and I screwed up and lost 15 percent.

00:42:08.080 | Well, now I've just lost $15 million

00:42:11.020 | of probably investor capital or your own capital.

00:42:14.040 | So going big is great.

00:42:15.880 | It is easier because you have smarter people at all the levels

00:42:19.440 | and the salaries for those people or whatever you want to call it.

00:42:22.080 | The way those people get paid is kind of baked into it

00:42:24.380 | because you're buying a business.

00:42:26.040 | If you're buying an apartment complex, you are not buying a real estate.

00:42:28.620 | You're buying a business that happens to trade in real estate.

00:42:31.640 | That makes sense.

00:42:32.480 | You have people, you have staff, you have processes, systems.

00:42:35.120 | And the bigger you go, the better those systems and processes

00:42:38.480 | and people are, which is why you want to go bigger when you're buying a duplex.

00:42:42.240 | I mean, who's changing your toilet?

00:42:43.620 | You got to call the plumber or you got to go do it.

00:42:45.980 | When you own one percent of a billion dollar portfolio,

00:42:49.380 | that portfolio manager has people who take care of the problem for you.

00:42:53.640 | So, yeah, bigger can be easier because you're allowed more people.

00:42:56.740 | You got bigger teams.

00:42:58.080 | And frankly, there's just more cash flow

00:43:00.840 | usually to be able to afford and to pay for all those problems.

00:43:04.380 | This might be a naive question, but is it easy

00:43:08.520 | even at the small level to hire someone to handle all the problems with a rental?

00:43:12.880 | If I were to say I want to buy a rental property in North Carolina, right?

00:43:16.320 | I'm not going to drive over and fix it.

00:43:17.780 | It's a multi-hour flight.

00:43:19.580 | Maybe I have to change planes.

00:43:21.280 | But is it easy as a small time real estate investor

00:43:24.820 | to buy a property in another state and hire someone to manage it?

00:43:27.580 | Are they easy to find those people and vet those people?

00:43:29.920 | And does it eat too much into your returns that it makes it not worth it?

00:43:33.580 | It is so easy to hire someone to manage your rental properties.

00:43:37.280 | It's so hard to hire someone good to manage your rental properties.

00:43:41.620 | Right. And so, I mean, there's a million of them out there.

00:43:43.420 | There's a million property managers.

00:43:44.720 | There's an entire industry of people who you can hire for 10 percent

00:43:48.660 | typically of whatever the rent is, they'll take care of your property.

00:43:51.420 | So you've got a property, the rent is a thousand dollars.

00:43:53.560 | They'll charge you 100 bucks a month to manage your property for you.

00:43:55.760 | No problem.

00:43:57.360 | But their only incentive is to make sure the property doesn't go empty.

00:44:01.120 | And they've got a thousand other units that they're also incentivized

00:44:04.520 | to make sure they don't go empty.

00:44:05.760 | So it's not impossible.

00:44:07.380 | There are great property managers out there.

00:44:09.180 | I've worked with a lot of good ones, but I've worked with a lot of bad ones

00:44:11.980 | that they'll put in anybody and they don't care about you.

00:44:15.480 | They don't care about your property as much.

00:44:16.620 | So the key is due diligence. Right.

00:44:18.760 | It's the exact same logic.

00:44:20.360 | Have you ever hired an employee before you owned a company?

00:44:22.460 | So, I mean, it's really easy to hire an employee, right?

00:44:26.120 | It's really easy.

00:44:27.180 | Just put a job description.

00:44:28.260 | Guy walks through the door.

00:44:29.080 | They have a pulse. Hire them.

00:44:30.460 | It's really hard to hire a good employee.

00:44:32.760 | And the way you hire a good employee

00:44:36.420 | is by testing out a few of them, knowing what you want,

00:44:40.660 | getting recommendations, looking at referrals, interviewing them,

00:44:44.380 | talking to them, and then if they suck, letting them go right away

00:44:47.220 | and firing fast and hiring slow, right, that whole thing.

00:44:50.220 | It's no different when you hire a property manager

00:44:52.620 | to look after your properties.

00:44:53.580 | You're just hiring a team member to take over your property.

00:44:56.680 | So it's because they say their property manager doesn't mean they're good.

00:44:58.920 | That's the bottom line.

00:45:00.680 | A funny analog to that is we have an au pair

00:45:03.360 | and we were asked this question after we interviewed our last au pair.

00:45:08.080 | We probably did four or five video calls.

00:45:09.860 | We had her meet the kids. We talked about everything.

00:45:11.780 | We wrote up a guide to how we would want everything in our house to function

00:45:15.920 | and how we take care of our kids and the responsibilities.

00:45:17.880 | And then we got this email that was like,

00:45:19.520 | we have a few questions for you now that you've matched with your au pair.

00:45:21.880 | One, have you and your partner both talked to the au pair?

00:45:25.620 | And we're like, yeah, of course.

00:45:27.320 | And then it was like, have you guys talked about childcare expectations?

00:45:30.120 | I was like, this person is going to live in our house to take care of our child.

00:45:32.580 | Of course, we've talked about childcare expectations.

00:45:34.680 | And then this whole thing clicked when we started hearing from our au pair

00:45:37.680 | how so many of the other au pairs she was friends with

00:45:40.120 | had these terrible situations where the expectations were totally wrong.

00:45:43.260 | And she was like, oh, well, some of them had a one 20 minute call.

00:45:47.260 | And that was it.

00:45:48.220 | And I just couldn't believe that people who I would imagine

00:45:50.820 | in their professional lives treated hiring with a really rigorous process.

00:45:55.960 | And then in their nonprofessional work lives, their job life,

00:45:59.480 | just hire people with a totally different thing.

00:46:01.820 | So it sounds like that same principle applies.

00:46:03.920 | Whether you're hiring someone to manage your property

00:46:05.920 | or you're hiring someone to watch your kids interview them

00:46:08.820 | like you would if you were running a business and trying to hire an employee

00:46:11.920 | you want to work for you for many years.

00:46:14.580 | Dude, that's so good.

00:46:15.880 | This goes to one of my favorite questions.

00:46:17.460 | I think my performance coach once asked me, but I use it all the time in people.

00:46:20.420 | And I'm going to ask it to you right now.

00:46:22.120 | It's exactly related to this.

00:46:23.820 | What is something that you do in your strong area of life

00:46:27.620 | that you don't do in your weak area of life?

00:46:30.920 | Right. Like maybe your strong area of life is business.

00:46:33.160 | So one thing you do really well is you hire people really well.

00:46:35.520 | You put them through the whole system

00:46:37.080 | and then you don't understand why your au pair is terrible.

00:46:39.420 | Not you, but people. Right.

00:46:40.620 | Because they're not doing the things in one area of their life

00:46:43.080 | that they do in the other one.

00:46:44.840 | So if you want to improve the weak area of your life,

00:46:46.780 | just do the same stuff you do in the strong area of your life.

00:46:49.540 | This is that idea of like whether it's an au pair, whether it's whatever,

00:46:53.020 | like do the stuff that you know you need to do and don't be lazy about it,

00:46:56.980 | because that's why you're good at that one thing in your life.

00:46:59.240 | So what's something you do in a strong area of your life

00:47:01.680 | that you're currently not doing in a weaker area of your life?

00:47:05.320 | It's funny because the creation of this podcast in some way

00:47:08.680 | was me trying to identify all the areas of my life for improvement

00:47:12.620 | and applying the principles of them.

00:47:14.580 | So I think when I got started, there were a lot more. Right.

00:47:17.980 | I was like, gosh, when it comes to health and eating, I was like,

00:47:21.060 | I know this is important and I'm not optimizing it at all.

00:47:24.920 | So we end up just like eating quickly, making unhealthy food.

00:47:27.580 | And then we were like, hmm, well, if I was at a company

00:47:30.380 | and I was trying to run this like a business,

00:47:32.260 | I would try to figure out if maybe there was someone else could do it.

00:47:34.860 | And so then we ended up outsourcing to someone local

00:47:37.780 | that cooks meals and drops them off like we do to a chef in our house.

00:47:41.660 | We outsource put an ad on Craigslist and look for someone.

00:47:44.380 | Hey, do you like to cook? Can you cook?

00:47:45.980 | I don't know if I have a perfect example now, because every time

00:47:48.920 | I find one of those things, I'm like, I attack it like this crazy thing.

00:47:52.680 | And then I usually end up talking about it on the show

00:47:54.320 | or making a whole episode about it or interviewing someone

00:47:56.480 | to try to figure out how to do it.

00:47:57.980 | So I guess maybe if I went through the list, I was like,

00:47:59.480 | what's on my list of things I want to talk to people about?

00:48:02.320 | I definitely don't feel like I've nailed best practices for sleep.

00:48:05.820 | You know, I track my sleep and I do a pretty good job,

00:48:07.720 | but I don't feel like I've gone deep there.

00:48:09.640 | So an episode on sleep is one that's kind of imminently

00:48:12.820 | sitting on the back burner.

00:48:14.080 | There's probably a few other topics.

00:48:15.340 | So I would say whatever topics come up on the show in the next six to 12 months

00:48:19.320 | are things that I probably, in hindsight, I'm doing terribly right now.

00:48:22.540 | Well, I love that you brought that example up, right?

00:48:24.680 | It's the example of like fitness.

00:48:26.440 | People are like, oh, I'm sort of my fitness.

00:48:27.920 | And I'm like, OK, well, what do you do in business when you struggle?

00:48:30.340 | Like, oh, you know, I read business books.

00:48:31.840 | I go to conferences, I go to meetups, I interview people.

00:48:35.480 | OK, why aren't you applying that to your fitness?

00:48:37.640 | Maybe read a fitness book, right?

00:48:38.980 | Maybe go to a conference on fitness.

00:48:40.320 | I don't know.

00:48:40.780 | Use the stuff that works that you know works

00:48:42.980 | and apply it to the areas where you're struggling with.

00:48:44.940 | So I love that you brought that example.

00:48:46.040 | Food and fitness is a huge one. Good stuff.

00:48:48.080 | OK, we've talked about improving lives.

00:48:50.080 | You've mentioned mindset, performance coach.

00:48:51.640 | I have a lot of things I want to touch on outside of real estate.

00:48:54.440 | But I do have one question I want to get your take on.

00:48:56.580 | I assume you're pro owning your own primary residence.

00:49:00.220 | I'm pro ish owning your own primary residence.

00:49:02.680 | I love it.

00:49:03.880 | There are reasons not to.

00:49:05.340 | But mathematically, yes, I love it.

00:49:07.780 | Yeah. I mean, look, if you're not going to be in it for a while,

00:49:10.440 | if you want the flexibility of being able to move all kinds of reasons,

00:49:13.780 | I'm not one to say everyone should own.

00:49:16.440 | In fact, I think there are a lot of people who think they should own

00:49:18.680 | that should probably be renting.

00:49:19.840 | But let's say you're not opposed to it.

00:49:21.820 | You're not like, don't buy a home. Correct.

00:49:23.240 | So we've talked about a lot of different types of real estate.

00:49:25.020 | The one I'm curious to get your take on.

00:49:26.920 | I hear from a lot of people saying, gosh, you know,

00:49:30.080 | maybe I live in the Bay Area, maybe I live in New York, real estate's too expensive.

00:49:33.020 | So I'm going to buy a vacation home.

00:49:35.340 | And I see so many people say, I can't afford this.

00:49:37.920 | So I'm going to buy a house in Tahoe.

00:49:38.980 | We have a lot of friends who said, I'm going to buy a house in Tahoe.

00:49:41.420 | And to me, I've always been like, gosh,

00:49:43.420 | I don't want to manage a house in Tahoe as a rental.

00:49:45.520 | I'm not going to be there all the time.

00:49:47.940 | We ended up buying a fractional home with this company, Picasso,

00:49:51.380 | and we now own one eighth and we only go six weeks a year.

00:49:54.220 | It's been absolutely fantastic.

00:49:55.920 | It's exactly what we need.

00:49:57.140 | But I'm curious what you think about vacation rentals, time shares,

00:50:00.380 | that whole side of real estate that we haven't really touched on at all.

00:50:03.240 | This is a great question.

00:50:05.240 | So generally speaking, I think that vacation homes are a tremendous

00:50:10.040 | waste of money when it's like I'm going to buy a house that I can go visit

00:50:13.540 | as a vacation, because you're starting from the wrong angle.

00:50:16.240 | You're not starting with, I want to buy an investment.

00:50:18.140 | You're starting from an emotional standpoint of, I really like Cabo.

00:50:21.520 | I'm going to go buy a vacation house in Cabo.

00:50:23.680 | And then you're just screwed from the first minute you do it.

00:50:26.140 | And then, yeah, you got all the headaches of owning property.

00:50:28.480 | Oh, forgot to renew the insurance.

00:50:29.820 | So they sent the bill to the wrong place or something broke where you were gone.

00:50:32.980 | And now the water leaked all over the floor.

00:50:34.840 | So when you approach it from I want a vacation house because I like Cabo,

00:50:38.320 | I'm generally 100% against that. Just go rent a place in Cabo.

00:50:41.480 | There's great houses and they'll clean up after you're done.

00:50:44.080 | It's way better just to rent a place.

00:50:46.220 | Now, if you have a place you like going to all the time,

00:50:49.020 | a thing like what you did, a fractional ownership.

00:50:50.920 | I love that idea because you still have part ownership,

00:50:53.520 | but you're not wasting the other 90% of your year

00:50:56.520 | that you're just not going to use it.

00:50:57.900 | So I like that strategy a lot when the numbers work out.

00:51:00.820 | But again, I would just caution people to look at, like,

00:51:02.960 | are you really better off owning something or is it better just to go on Airbnb

00:51:05.960 | or rent a stupid house that's different each time so you get to have more fun?

00:51:09.020 | That's up to you.

00:51:10.220 | And then timeshare stuff. I avoid all of that.

00:51:12.500 | I don't like really much of any of the timeshare stuff.

00:51:14.560 | I'm sure some of it's good.

00:51:15.560 | I'm just not good at it.

00:51:16.560 | And I don't like the shadiness of the industry that has been for the last 50 years.

00:51:21.860 | Now, the last thing, though, is owning vacation rentals,

00:51:24.740 | like owning an investment that you buy as an Airbnb property

00:51:29.240 | or as a VRBO property, that can be a tremendous cash cow.

00:51:34.800 | Like I said earlier, seven grand a month for my condo.

00:51:36.800 | I got another one coming online next month between the two of them.

00:51:39.340 | That's 14 to 15 thousand dollars a month in profit I'll be making.

00:51:42.640 | That's like retire from your job, sit on the beach for the rest of your life

00:51:46.100 | kind of money from two properties.

00:51:48.240 | But it is a business.

00:51:51.040 | It is fully a business that requires systems.

00:51:53.440 | People, processes, the whole works.

00:51:55.640 | And it's also very heavily dependent upon service hospitality.

00:51:59.700 | So if your tenant says jump, you got to say how high they'll give you a bad review.

00:52:04.140 | And then that reflects like poorly on you and you get less bookings and all that.

00:52:07.640 | So if you're willing to put into work to own an investment property

00:52:10.940 | that does vacation rentals, it is a phenomenal strategy.

00:52:15.700 | Even better if you can manage it yourself.

00:52:17.560 | Like one vacation rental can give somebody complete financial independence

00:52:21.060 | if you're willing to manage it yourself.

00:52:22.960 | One vacation rental, two vacation rentals will change your life.

00:52:25.680 | And you don't mean a vacation rental that you're like, I like to go to Cabo,

00:52:28.960 | so I'm going to buy it in Cabo and rent it out when I'm not there.

00:52:31.380 | You mean I'm going to treat this like a business.

00:52:33.860 | I'm going to buy a vacation rental wherever I think the best vacation

00:52:36.660 | rental market is.

00:52:37.720 | Now, maybe that's Cabo. I don't know.

00:52:39.620 | Broadly speaking, whether it's real estate to invest in or vacation rentals,

00:52:43.560 | where do you even go to start to learn?

00:52:45.880 | Where is the most desirable place to buy right now?

00:52:48.260 | Where do you collect that data?

00:52:49.620 | Or is there an obvious answer that I, as a novice here, don't know?

00:52:52.720 | There's not. It's very nuanced, which is why real estate is so powerful

00:52:56.560 | because it's not an efficient market.

00:52:58.520 | Right. When we talk about the efficient markets like stocks or whatever,

00:53:01.020 | very efficient, you can buy and sell real easily.

00:53:02.880 | Insider trading is not allowed, right?

00:53:04.560 | Insider trading is allowed all day long in real estate. It's great.

00:53:07.280 | I use insider trading all the time in real estate investing.

00:53:10.680 | Now, someone's going to take that clip right there,

00:53:12.480 | cut out the last half of that and throw me in jail for it.

00:53:15.060 | But no, insider trading is totally out.

00:53:16.180 | So in other words, where do you have inside knowledge?

00:53:19.260 | What area do you know?

00:53:20.420 | I would argue that your knowledge of an area is more important

00:53:23.820 | than the metrics of an area.

00:53:25.580 | Your knowledge of an area is more important than the metrics of an area.

00:53:28.760 | I know Maui, Hawaii really well.

00:53:31.180 | I've lived here for four years.

00:53:32.280 | I moved here because I prioritize lifestyle over profit.

00:53:35.560 | But once I got here, I learned Maui really, really well.

00:53:39.060 | So I can do really, really well here.

00:53:41.080 | You could not.

00:53:42.320 | Like you would lose money almost for sure in Maui because you don't know the market.

00:53:45.780 | The market metrics are almost irrelevant.

00:53:48.520 | There are ways to learn more, right?

00:53:50.520 | There's a million blogs out there in bigger pockets.

00:53:52.880 | The podcast is on forever.

00:53:54.220 | They do a lot of vacation rental stuff, but just in general market research.

00:53:57.680 | I'm a big believer in find what other people are doing.

00:54:01.140 | That's like what you want to do and just do it where they're doing it.

00:54:04.920 | But you don't have to reinvent the wheel if you're like, oh,

00:54:07.080 | there's a lot of people doing vacation rentals in the Smoky Mountains right now.

00:54:11.320 | I can name at least 10 friends of mine that have Smoky Mountain vacation rentals.

00:54:16.420 | So do you think you could be number 11?

00:54:18.640 | Probably.

00:54:19.880 | Are you willing to learn the market to get good enough to make money in it?

00:54:22.520 | If yes, then do it.

00:54:24.320 | So, yeah, there is no one definitive source.

00:54:26.480 | It's like this is where the best thing is,

00:54:27.980 | because then everyone would go there and then it wouldn't be the best thing anymore.

00:54:30.340 | So what are you willing to research, look into and then jump in?

00:54:33.440 | OK, you mentioned bigger pockets, any other resources, books,

00:54:37.380 | things that people should go to if they want to go deeper than just this episode?

00:54:42.240 | Bigger Pockets is amazing, right?

00:54:43.640 | So Bigger Pockets, I didn't start it.

00:54:44.900 | I was just on their podcast for a decade.

00:54:46.480 | But I was a young real estate investor who found Bigger Pockets

00:54:49.280 | when I bought my first property.

00:54:50.980 | And they have a massive forum.

00:54:52.580 | Like, again, they're not paying me to plug this.

00:54:54.440 | I'm just saying like this changed my life because there was a place

00:54:56.680 | you could go and just be like, I'm looking into these Smoky Mountains.

00:55:00.040 | Does anyone know a good vacation rental spot in the Smokies?

00:55:03.740 | You'll get 50 people who invest in the Smokies to be like,

00:55:06.880 | yeah, don't do it or do it here. Watch out for this place.

00:55:09.340 | The forum is phenomenal for Q&A.

00:55:11.300 | Almost every question that could ever be asked is probably already asked in there.

00:55:14.280 | So you don't even have to ask it if you're an introvert.

00:55:15.800 | Like you just want to go and read.

00:55:17.340 | But yeah, Bigger Pockets amazing.

00:55:18.640 | The forum blog podcast meetups are great.

00:55:20.900 | I love local meetups. Real estate's an interesting community,

00:55:23.440 | just like the tech community in a lot of cities like Denver, Austin, San Francisco.

00:55:27.540 | You get really good meetups of like founders and entrepreneurs

00:55:32.140 | that get together because it's a lonely business to run a business by yourself.

00:55:35.240 | Real estate the same way.

00:55:36.480 | Every major city in America has meetups happening almost every night of the week.

00:55:41.020 | Somewhere you can find a lot of them on Bigger Pockets.

00:55:43.140 | I think it's BiggerPockets.com/events.

00:55:45.080 | You can find them on Meetup.com.

00:55:46.820 | You can start your own.

00:55:48.220 | But real estate investors getting together, you're going to learn so much more

00:55:51.820 | than if you were just pick up my book from Amazon or somebody else's book,

00:55:54.680 | because it's real people in the area doing the thing that you want to do.

00:55:59.480 | I love it.

00:56:01.220 | Part of my foray into the tech sector in the Bay Area was just I arrived here.

00:56:06.320 | I didn't know a single person and I was like, I just need to meet people.

00:56:09.020 | So I went to there's this like SF New Tech meetup.

00:56:11.820 | I would go to that and there were just millions of them.

00:56:14.080 | And then I ended up hosting my own event, which was another big part of it.

00:56:17.180 | And so I'm a big fan of meeting people in the flesh,

00:56:19.980 | which we are now getting at least much more comfortable doing.

00:56:22.920 | So this has been great. Yes.

00:56:24.080 | OK, if that ending seemed abrupt, it was probably because it wasn't

00:56:29.920 | actually the end of our conversation.

00:56:31.580 | We kept going.

00:56:32.840 | If you remember when I introed Brandon at the beginning,

00:56:35.240 | there was so much more than real estate I wanted to talk about.

00:56:37.840 | But I didn't want to release a two hour podcast on two separate topics.

00:56:41.720 | So instead, in a few weeks, I'll put out another episode of all the hacks

00:56:46.020 | where I dig into the mindset Brandon used to build a massive

00:56:49.520 | real estate empire while also living his ideal life.

00:56:52.740 | We'll talk about setting goals, hacking self-discipline,

00:56:56.280 | using performance coaches, finding the balance between audacious

00:57:00.180 | business goals and quality family time.

00:57:02.540 | And finally, all of his amazing Maui recommendations,

00:57:05.980 | which by the time that airs, I'll probably have gone and used myself.

00:57:10.080 | So definitely check that out in a few weeks, because I already know

00:57:13.280 | it was fantastic.

00:57:14.480 | And next week, we have an incredible conversation with Annie Duke,

00:57:17.880 | author of Thinking in Bets and Quit.

00:57:20.340 | But until then, have a wonderful week.

00:57:22.520 | Please send me questions for the next Mailbag episode

00:57:25.440 | where I'll cover life, work, non points, travel and anything else you send my way.

00:57:30.640 | Chris at all the hacks dot com.

00:57:32.940 | See you then.

00:57:33.480 | [music]

00:57:41.480 | [music]

00:57:42.480 | [music]

00:57:43.480 | [music]

00:57:44.480 | [music]

00:57:45.480 | [music]

00:57:46.480 | [music]

00:57:47.480 | [music]

00:57:48.480 | [music]