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Speaker 1: Welcome to Hod of Money. I'm Joel and I am Matt,

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Speaker 1: and today we're talking about the harsh realities of real

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Speaker 1: estate investing.

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Speaker 2: Yeah, boy, this is gonna be an episode all about

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Speaker 2: investing in real estate. And you know, we're not gonna

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Speaker 2: paint too Rosie of the picture when it comes to

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Speaker 2: real estate, although I think we're gonna give it a

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Speaker 2: fair shake.

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Speaker 1: Yeah, it's coming.

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Speaker 2: From we are two guys who've done it ourselves, who

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Speaker 2: own investment properties ourselves. But we're gonna talk all about

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Speaker 2: real estate. We're gonna discuss how you can know whether

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Speaker 2: or not investing in real estate is the right thing

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Speaker 2: for you, as well as just some simple ways that

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Speaker 2: you can consider getting started with investing.

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Speaker 1: In real estate, and the way you have to think

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Speaker 1: about it has changed since we started investing in real

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Speaker 1: estate ten years ago.

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Speaker 2: So no, it hasn't been a long night.

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Speaker 1: I think it's to be close to that long or

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Speaker 1: get an old bud, holy crab, I know.

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Speaker 2: Okay, before we get to realistic, wife.

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Speaker 1: Keeps telling me, oh, look at all the grays in

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Speaker 1: your hair.

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Speaker 2: I'm like it, stop, Okay, you're not out, but I

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Speaker 2: wanted to ask you basically, I think I've got a

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Speaker 2: frugal or cheap here for you. So you know that

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Speaker 2: I like a variety of different craft beers in my life.

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Speaker 1: Yeah, I think.

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Speaker 2: Anybody listened to the show that that's something that you

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Speaker 2: and I both enjoy. In particular, I am a fan

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Speaker 2: of singles. Anytime I go to the package shop or

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Speaker 2: wherever and they've got the shelf where the multiple shells

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Speaker 2: full of the of the singles there, I like to

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Speaker 2: spend some time looking at those because it's just a

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Speaker 2: great way to try to kind of dip your toes

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Speaker 2: into some of that variety without committing to a six pen.

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Speaker 1: I just say, the worst thing in the world is

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Speaker 1: when I go into a package store and my wife's like,

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Speaker 1: you got five minutes, and I'm like, no, I need

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Speaker 1: like twenty. Then let's just go ahead and turn It's amazing.

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Speaker 1: It's not like there's that much turnover in the beer section,

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Speaker 1: but I have to look at every single item like

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Speaker 1: every time. Absolutely, it's an obsession. Yeah.

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Speaker 2: Anyway, so I was a local package shop here in

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Speaker 2: our new part of town. This is a package store

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Speaker 2: that folks have definitely recommended. In fact, I'm not going

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Speaker 2: to name them, but you yourself have also been to

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Speaker 2: this package shop. Okay, So I went in there and

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Speaker 2: I saw a couple that looked pretty solid, and I thought,

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Speaker 2: I'm going to try those out, took them home, cracked

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Speaker 2: it open, and one of them, Dude, was awful, like terrible.

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Speaker 1: And it wasn't just the beer was old.

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Speaker 2: And it wasn't because I did not like the style

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Speaker 2: of that particular beer. And it wasn't because it wasn't

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Speaker 2: from a brewery that wasn't solid in and of themselves,

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Speaker 2: like this was a fantastic brewery. And I thought, man,

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Speaker 2: that's so weird. And I checked the label and this

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Speaker 2: beer was from twenty seventeen.

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Speaker 1: Oh my gosh.

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Speaker 2: Yeah, so base. I mean, some beers can be bottle conditioned,

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Speaker 2: like the spontaneously fermented beers are, like, you know, you

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Speaker 2: can let it age for one to three years.

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Speaker 1: I've still got a cante o and it's like a

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Speaker 1: decade old that I brought back from my from you.

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Speaker 2: Might have a bottle of vinegar.

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Speaker 1: No, no, it says on the bottle way you can

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Speaker 1: you can hang on some twenty super higher quality of

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Speaker 1: ones evolve. So all that to say, would you go

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Speaker 1: back to that package store and ask for your money back. Okay,

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Speaker 1: I would go back if I was in the vicinity

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Speaker 1: and it wasn't a big deal, but I wouldn't drive

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Speaker 1: back there just to return my four dollars.

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Speaker 2: People, I will definitely go back. Well, and it's it

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Speaker 2: was a drain pour. I mean, I like, we literally did.

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Speaker 2: But I had the same experience. I wound it out

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Speaker 2: because I couldn't I mean, I couldn't drink the dang thing.

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Speaker 2: So I've only literally ever been there once. But the

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Speaker 2: next time I go back there, I've decided I'm not

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Speaker 2: going to return it, but I am going to let

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Speaker 2: them know and say, hey, you know, I just want

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Speaker 2: to let you know the last last time I was here,

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Speaker 2: I bought a beer and it was what is that

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Speaker 2: six years old? It was not it was not drinkable.

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Speaker 1: It was very bad.

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Speaker 2: Yeah.

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Speaker 1: Yeah, No, I would definitely mention it to them, and

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Speaker 1: I'm curious if it's the whole place.

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Speaker 2: I want them to be able to do better.

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Speaker 1: Because I had the same experience. I brought a bought

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Speaker 1: a Bissell Brother's beer, which I know I love, and

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Speaker 1: it was old and it was trash and I was

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Speaker 1: just super disappointed. I just haven't been back to that place,

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Speaker 1: so but yeah, again, if it's not just going back,

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Speaker 1: like wasting a half hour of your time to return

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Speaker 1: afore dollars.

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Speaker 2: Like trekking across to the other side of the city. Yeah,

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Speaker 2: this is close by, but that's pretty crappy. Yeah, I

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Speaker 2: want I want them to do better because tosher old beers.

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Speaker 2: I'm thinking about the other guys out there, the other

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Speaker 2: ladies who are also interested in craft beer, and what

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Speaker 2: if this is a style or maybe they're just getting

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Speaker 2: into it and they're thinking the same thing that I'm thinking. Oh,

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Speaker 2: I'm just going to go with one of these singles

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Speaker 2: to try out this new style, and they're thinking, oh,

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Speaker 2: this is terrible. I can't believe exactly. I want them

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Speaker 2: to be able to deliver a quality products. I think

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Speaker 2: I'm going to say something next time I go in there. Cool,

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Speaker 2: not sure if it's going to change anything.

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Speaker 1: Yeah, I think it's worth pointing out, and I think

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Speaker 1: you can do it nicely and hopefully they'll give your

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Speaker 1: money back, because that's ridiculous to be selling a little

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Speaker 1: bonus a six year old IPA, sorry to hear about

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Speaker 1: your crummy experience.

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Speaker 2: A right.

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Speaker 1: Yeah, one other thing to do is you could literally

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Speaker 1: just like tpe their their establishment one night in the

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Speaker 1: middle of the.

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Speaker 2: Night, just fire bombs.

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Speaker 1: Yeah, just in case you're you don't want to test fate.

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Speaker 1: Maybe maybe I'll end up in prison. Maybe I'll just

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Speaker 1: get away with going to choose violence. Let's mentioned beer

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Speaker 1: that we're having on today's episode. Hopefully this one isn't

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Speaker 1: a piece of crap. I don't think it is. This

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Speaker 1: one is a it's called US Alive or US Alive,

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Speaker 1: I don't know, by Michel or brewing. We'll give our

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Speaker 1: thoughts on this one at the end. Since this is

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Speaker 1: a wild ail, even if it's old, I'm sure it's

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Speaker 1: going to taste great. But Matt, let's move on. Let's

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Speaker 1: get to the subject at hand. We're talking about the

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Speaker 1: harsh realities of real estate investing, and for some reason,

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Speaker 1: I don't know, maybe think of homeschooling because there's this

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Speaker 1: like massive change, this massive shift. More people are homeschooling

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Speaker 1: than ever before. And when you decide whether or not

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Speaker 1: you want to homeschool your kids, it depends on so

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Speaker 1: many factors, right, like the school that your kids are

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Speaker 1: going to, now, your goals for your family and your career,

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Speaker 1: the resources that are available to you, how much school

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Speaker 1: choice you have available in your state. Can you send

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Speaker 1: your kid to another public school that's around the corner

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Speaker 1: that you're not necessarily zoned for, that's not the closest

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Speaker 1: one to you. They're just and there are lots of

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Speaker 1: helpful resources now, including an abundance of co ops for

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Speaker 1: people who want to do homeschooling. So I feel like

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Speaker 1: the trade offs are less severe than they used to be,

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Speaker 1: like twenty years ago, when and couple my friends were

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Speaker 1: getting homeschool right, gosh, I guess that was more like

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Speaker 1: thirty years ago. But when you look at the numbers,

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Speaker 1: actually the proportion of homeschooled children in the US, it

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Speaker 1: basically doubled from two point eight percent before the pandemic

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Speaker 1: to five point four percent in the twenty twenty twenty

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Speaker 1: twenty one school year. There's just a massive influx, a

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Speaker 1: massive movement towards homeschooling, which makes sense to me because

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Speaker 1: lots of parents they got they got more insight into

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Speaker 1: what was going on, what was happening in their child's classroom,

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Speaker 1: and they weren't loving it. It makes me think of

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Speaker 1: just like how awful, how tough. Virtual school was for

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Speaker 1: our family and for so many families out there, but

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Speaker 1: homeschool also, it's not this slam dunk decision, right, Like,

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Speaker 1: we literally picked up and moved, at least in part

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Speaker 1: for school reasons, and we still wanted our kids to

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Speaker 1: have a public school experience, or at least an in

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Speaker 1: school person experience. But again, lots of factors to consider,

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Speaker 1: right And the same is true on the real estate

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Speaker 1: investing front. We love that path for some people. It

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Speaker 1: makes sense for some folks. For sure, We've done well

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Speaker 1: as real estate investors ourselves, but we want I did,

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Speaker 1: to have a nuanced conversation to help folks decipher whether

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Speaker 1: or not it's right for them. If they've kind of

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Speaker 1: thought about it, it's somewhere in the recesses of their mind.

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Speaker 1: They're like, maybe real estate investing will be right for

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Speaker 1: me at some point, or I'm kind of starting to

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Speaker 1: think about it now, Well, what factors do you need

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Speaker 1: to consider? That's kind of what we want to talk

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Speaker 1: about today.

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Speaker 2: That's right, And if you are listening to this podcast,

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Speaker 2: there's a good chance that you want to grow your

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Speaker 2: net worth. I'm going to assume that's true, right, and

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Speaker 2: you might even be interested in some of the different

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Speaker 2: ways and the different paths to achieve that goal. You're

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Speaker 2: probably even thinking, yeah, and if I can get there

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Speaker 2: even faster, all the better. And so who hasn't heard

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Speaker 2: that investing in real estate is a great path to take? Like, oh,

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Speaker 2: he made all his money in real estate? Like that

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Speaker 2: is literally something I've heard many times before, and unfortunately

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Speaker 2: it glosses over though the harsh realities of investing in

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Speaker 2: real estate. The different real estate influencers out there, they

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Speaker 2: can often make you feel like an idiot for not

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Speaker 2: having taken the plunge yet, for not getting into the game.

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Speaker 2: And given the number of folks who think of themselves

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Speaker 2: as Zillow experts, it might be more tempting than ever

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Speaker 2: to think that real estate investing is the natural next

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Speaker 2: right step for you. But we'll offer a laundry list

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Speaker 2: of things to consider before you start making offers. Were

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Speaker 2: our goal here is to not talk you out of

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Speaker 2: investing in real estate and if that's going to be

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Speaker 2: again the right next step for you, But we just

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Speaker 2: want to make sure that you've thought through all of

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Speaker 2: the different factors before you take the plunge.

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Speaker 1: Yeah, basically, we want to give you a realistic understanding

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Speaker 1: of what it's going to take to actually make money

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Speaker 1: as a real estate investor. And we want to think

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Speaker 1: through all of the good potential outcomes from investing in

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Speaker 1: real estate, but the potential downsides as well, because they

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Speaker 1: are there significant, right and you know, just like I

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Speaker 1: was talking about homeschooling, it's seen some significant changes the

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Speaker 1: reality that real estate investors are encountering in the market

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Speaker 1: right now. What's dramatically changed over the past decade, over

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Speaker 1: the past ten to fifteen years. We used to talk

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Speaker 1: about real estate investing a lot Matt early on in

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Speaker 1: the podcast. You know, we started the podcast five and

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Speaker 1: a half years ago, and it was a different ballgame

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Speaker 1: five and a half years ago when we were kind

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Speaker 1: of pushing listeners in that direction with a little more

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Speaker 1: bigger than we do now, sure, because the facts on

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Speaker 1: the ground were different than they are in twenty twenty three.

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Speaker 1: But when the reality on the ground changes, so does

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Speaker 1: our advice. And it's not that real estate investing doesn't

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Speaker 1: make sense for anyone at any point in time, or

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Speaker 1: for anyone right now, but the truth is that it

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Speaker 1: just makes less sense. Yeah, it makes sense for far

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Speaker 1: fewer folks, given the current market dynamics, what's going on, that's.

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Speaker 2: Right, Yeah, and that's because home prices have gone up

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Speaker 2: dramatically over the past few years, and interest rates have

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Speaker 2: gone up in a major way over the past twelve

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Speaker 2: months as well. We've talked about that last week. And

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Speaker 2: inventory is essentially at all time loves as well, which

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Speaker 2: is also keeping prices inflated. And so this means that

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Speaker 2: housing affordability it's essentially the worst it's been in forty years.

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Speaker 2: This is specifically coming from data from the NAR, the

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Speaker 2: National Association of Realtors, And so that doesn't mean that

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Speaker 2: becoming a real estate investor is impossible, but timing does

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Speaker 2: matter a little bit. Speaking of timing, like you can't

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Speaker 2: dollar cost average into a home just right like you

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Speaker 2: can when you are investing in the stock market, it's

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Speaker 2: going to pay, and it matters a lot to understand

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Speaker 2: the context and what is going on in the market

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Speaker 2: around you. And even though rents have gone up as well,

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Speaker 2: they just haven't kept pace with the rising prices. And

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Speaker 2: so we're just in a tough market right now for

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Speaker 2: folks hoping to buy a house, rent it out and

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Speaker 2: then turn that fat profit.

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Speaker 1: Yeah, exactly. It's just not as easy as it used

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Speaker 1: to be. It felt like shooting fish in a barrel

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Speaker 1: kind of in twenty eleven twenty twelve when housing prices

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Speaker 1: were basically at their bottom. But in addition to current trends,

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Speaker 1: it's important to note that real estate doesn't perform as

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Speaker 1: well as the market does from a return standpoint on

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Speaker 1: a historical basis. So the wind is kind of in

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Speaker 1: your face just given kind of what's happening in the

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Speaker 1: market as a whole, but it's kind of always in

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Speaker 1: your face actually as a real estate investor. But you're

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Speaker 1: also hiking up a hill, yes, at the same time.

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Speaker 1: Right when you run the numbers, you see that the

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Speaker 1: overall market returns are close to ten percent from a

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Speaker 1: historical returns standpoint, right, that's total stock market or s

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Speaker 1: and P five hundred fun something like that over the years.

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Speaker 1: That is, that tends to be the average different years, right,

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Speaker 1: different results last year, not even close to that. But

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Speaker 1: real estate has returned something closer to four percent on

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Speaker 1: average over.

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Speaker 2: Time, significantly less than the overall market. And that's four

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Speaker 2: percent on average across the entire country on real estate,

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Speaker 2: not necessarily for real estate investors.

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Speaker 1: So different markets, we'll see different returns over times, and

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Speaker 1: like we'll talk about later on in the episode, different investors,

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Speaker 1: there are ways to increase that return as a real

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Speaker 1: estate investor to do a lot better than the average. Basically,

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Speaker 1: real estate investors, savvy ones can take advantage of what's

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Speaker 1: kind of a quirky market. It's so much more localized,

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Speaker 1: and so people are able to use sweat equity and

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Speaker 1: market inefficiencies to their advantage to juice returns. To see

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Speaker 1: you see the four percent number and you think, well,

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Speaker 1: why would anybody ever invest in real estate? And it's like, well, yeah,

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Speaker 1: like you said, Matt, it's because that's the average. Because

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Speaker 1: there are significant ways to increase your returns in real estate,

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Speaker 1: Whereas when we talk about investing in the stock market,

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Speaker 1: the boring take your ten percent approach makes sense for

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Speaker 1: the average investor, but real estate investors have outsized abilities

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Speaker 1: to kind of control their own destiny and push those

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Speaker 1: returns higher.

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Speaker 2: That's right. Yeah, So let's clear the air and talk

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Speaker 2: about what real estate is not for a second. And

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Speaker 2: first of all, one of the points, Joe, that you

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Speaker 2: know we wanted to cover is that real estate is

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Speaker 2: not passive. Oh yeah, and that's.

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Speaker 1: A common thing. Like people, yeah, passive income over here

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Speaker 1: invest in real estate.

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Speaker 2: Literally, none of the steps to real estate investing include passivity.

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Speaker 2: There is a lot of upfront work needed in order

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Speaker 2: to educate yourself, and then there's getting hyper familiar with

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Speaker 2: a local area to know when a deal pops up

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Speaker 2: so that you can pounce on it. And then once

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Speaker 2: you do have that place locked down, you've got to

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Speaker 2: find good tenants and landlords. Screw that part up all

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Speaker 2: the time, all the time.

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Speaker 1: That's like the biggest reason I think why people who

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Speaker 1: do invest in real estate they get out of it

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Speaker 1: so poor jobs.

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Speaker 2: The greening tenants.

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Speaker 1: Yeah, and they're like, okay, in real estate investing is terrible,

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Speaker 1: and they tell everybody they know that. But that's not

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Speaker 1: necessarily the case. It's like, oh, you were bad at

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Speaker 1: the most important thing.

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Speaker 2: So, I mean, bottom line, investing in real estate it

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Speaker 2: just takes a lot of energy and hustle. It is

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Speaker 2: not passive income, like some online marketers like they might

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Speaker 2: lead you to believe. We actually talked about real estate

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Speaker 2: and whether or not it's passive. In the episode where

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Speaker 2: we talked about passive income, it was passive income a myth.

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Speaker 2: We wanted to know if it was this elusive unicorn

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Speaker 2: that was impossible to find. That was episode three fifty three.

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Speaker 2: If I interested in other types of passive income.

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Speaker 1: I mean, passive incomes sounds so nice on the surface,

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Speaker 1: but the reality is it takes a lot of hard

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Speaker 1: work to get.

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Speaker 2: There, exactly. And that doesn't necessarily mean that the juice

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Speaker 2: isn't worth the squeeze when it comes to real estate,

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Speaker 2: but newbi landlords, they often make massive mistakes when it

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Speaker 2: comes to finding that first property, and the stakes are

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Speaker 2: incredibly high when you're talking about sinking a ton of

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Speaker 2: money that you've worked to save up into a down payment,

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Speaker 2: not to mention like kind of all the other expenses

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Speaker 2: oftentimes associated with the investment property.

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Speaker 1: Yeah, I mean talk about the transaction costs of real estate.

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Speaker 1: And if you get into it and you realize, wait,

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Speaker 1: this wasn't a great buy. Oh wait now I need

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Speaker 1: to get rid of it. You could be out tens

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Speaker 1: of thousands of dollars. Right, You could lose a lot

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Speaker 1: of money on that one investment. And landlarding isn't easy.

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Speaker 1: That's important to note here is that's what makes it

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Speaker 1: not passive. And you can say, well, I'm going to

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Speaker 1: hire someone to do the landlording for me. I'm going

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Speaker 1: to hire a property management company. Well, that might work

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Speaker 1: out for you, but that's going to cost money too,

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Speaker 1: that's going to reduce returns. And it doesn't necessarily mean

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Speaker 1: that it's passive either. And so whether it's underestimating you

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Speaker 1: know what repairs are going to cost, or screening tenants poorly,

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Speaker 1: like you mentioned, Matt, we don't want people to be

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Speaker 1: fooled by the passive income claims that people are making

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Speaker 1: all over the internet when it comes to investing in

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Speaker 1: real estate. But another important distinction to make is that

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Speaker 1: real estate is not a diversified investment. You know, we're

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Speaker 1: talking about putting a lot of money into a single investment.

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Speaker 1: So you're betting a lot of marbles. You're taking a

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Speaker 1: big swing, and if it's a big swing and a whiff,

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Speaker 1: this could cost you in a big way. So it's

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Speaker 1: just important to know that circumstances outside of your control

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Speaker 1: can impact your investment. Like what if your town's major

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Speaker 1: employer closes up shop, what if they move elsewhere? Depending

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Speaker 1: on the size of that town, it can have a

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Speaker 1: significant impact on local housing demand and rent levels. There

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Speaker 1: are things outside of your control as a real estate investor.

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Speaker 1: What a crappy neighbor with like three Doberman pinchers moves

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Speaker 1: in next door and they're really loud and noisy and

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Speaker 1: they bite, like snapping too.

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Speaker 2: People as you want to buy, why you hate, I'm.

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Speaker 1: Just saying, man like you never these are the kind

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Speaker 1: of things that can happen that can actually inhibit your

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Speaker 1: property from attracting the good tenants from rising in value.

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Speaker 1: Like you're hoping, you just kind of you kind of

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Speaker 1: don't know. There are things out of your control as

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Speaker 1: a real estate investor. It doesn't mean that it's like

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Speaker 1: you said, the juice isn't worth the squeeze and it's

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Speaker 1: not worth looking into owning rental real estate. But there

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Speaker 1: are a lot of other factors you need to consider,

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Speaker 1: and there's more risk. The stakes are just higher.

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Speaker 2: Yeah, And I mean what you're talking about are externalities essentially,

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Speaker 2: but in addition to that, even there are intrinsic factors

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Speaker 2: to a given specific property as well. Because you can

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Speaker 2: do all the research in the world and you might

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Speaker 2: have nothing externally impacting your investment. But the fact is

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Speaker 2: we're just talking. We're talking about versity here, diversification and

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Speaker 2: with a singular investment, and so it just might not

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Speaker 2: pan out like you might expect it to, right, Like,

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Speaker 2: maybe it doesn't quite have the curb appeal that maybe

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Speaker 2: you thought, or maybe it's only got one bathroom and

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Speaker 2: folks are like, yeah, everybody wants two bathrooms now, Like,

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Speaker 2: there are just a host of factors that could influence

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Speaker 2: that specific property, as opposed to spreading that risk out,

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Speaker 2: which is what you do when you invest in the

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Speaker 2: market as a whole in the stock market. But real

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Speaker 2: estate is also not ubiquitous. Because I'm thinking about again

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Speaker 2: the market. I can log into Fidelity or Vanguard like

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Speaker 2: right now, and I can invest more money if I

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Speaker 2: want to. I can easily log in and snag more

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Speaker 2: shares of my favorite index fund, which is Vanguard's SMP

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Speaker 2: five funded by the.

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Speaker 1: Way Voo Voo.

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Speaker 2: And so if you're looking to find a solid or

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Speaker 2: real estate investment, there's no guarantee that one even exists

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Speaker 2: in your market, at least at the moment. Right there's

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Speaker 2: just a limited supply of homes out there, but there's

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Speaker 2: an even smaller supply of properties that will be effective

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Speaker 2: for you as a told that's going to give you

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Speaker 2: that return on your investment.

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Speaker 1: Yeah, we were just looking at the graph, Matt, just

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Speaker 1: this week of the supply of homes available in the

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Speaker 1: United States. Gosh, and it's still pretty close to an

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Speaker 1: all time low. And so when you think about that,

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Speaker 1: the fact that there's very little supply, well, how many

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Speaker 1: of those are actually going to make good rentals too?

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Speaker 1: Because there's million dollar homes on the market that almost

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Speaker 1: never make good rentals. It's usually the less expensive homes

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Speaker 1: that make for a great rental property. And so when

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Speaker 1: you're talking about a low supply, high demand, higher prices,

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Speaker 1: higher interest rates, you just really are talking about like

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Speaker 1: all of those factors kind of pushing against the likelihood

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Speaker 1: that you're going to be able to find a great

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Speaker 1: rental property exactly.

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Speaker 2: But now that we've been negative, nellis that we can

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Speaker 2: talk about some of the questions to ask yourself to

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Speaker 2: know whether or not taking the plunge into real estate

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Speaker 2: is going to be the right move for you. And

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Speaker 2: we'll get to those questions right after this.

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Speaker 1: All right, let's keep talking about real estate and whether

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Speaker 1: investing in real estate makes sense for people. Man, I

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Speaker 1: feel like we have been pretty down so far on

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Speaker 1: investing in real estate, which is so funny because if

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Speaker 1: you'd asked me ten years ago, I would have had

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Speaker 1: a very very positive, upbeat way of thinking and talking

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Speaker 1: about investing in real estate. But like I said at

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Speaker 1: the beginning, like factors on the ground change, and if

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Speaker 1: real estate was priced at twenty thirteen levels, I would

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Speaker 1: be still probably seeing the same tune that I was.

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Speaker 1: But it's just not as easy to become a real

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Speaker 1: estate investor in twenty twenty three as it was a

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Speaker 1: decade ago.

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Speaker 2: In a sense, we're kind of like financial journalists. Right

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Speaker 2: as the facts on the ground change, we should be

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Speaker 2: willing to make sure that we're still reporting what's act,

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Speaker 2: like what is truth, And as we come across new

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Speaker 2: data or the wood word in Burnstein dot new facts,

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Speaker 2: as new facts on the ground present themselves, we should

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Speaker 2: be able in certainly willing to change our tunes slightly.

436
00:18:54,600 --> 00:18:55,919
Speaker 2: And I feel like that's what we're doing here right,

437
00:18:56,080 --> 00:18:59,280
Speaker 2: Like we're not doing a complete one to eighty, but we,

438
00:18:59,560 --> 00:19:01,680
Speaker 2: like you said, we were much more hesitant to push

439
00:19:01,760 --> 00:19:02,600
Speaker 2: people in that direction.

440
00:19:02,720 --> 00:19:04,480
Speaker 1: And let's talk about leverage for a second act, because

441
00:19:04,480 --> 00:19:07,479
Speaker 1: that's a really important part of thinking about investing in

442
00:19:07,520 --> 00:19:11,200
Speaker 1: real estate, because, like we said, real estate is historically

443
00:19:11,280 --> 00:19:14,160
Speaker 1: a worse investment than the stock market from an overall

444
00:19:14,160 --> 00:19:16,600
Speaker 1: return standpoint. We're talking about it in the most bland

445
00:19:16,640 --> 00:19:19,760
Speaker 1: way possible. But part of what helps real estate investors

446
00:19:19,800 --> 00:19:22,840
Speaker 1: earn more than what their stock market investing counterparts are

447
00:19:22,880 --> 00:19:25,879
Speaker 1: able to earn is smart use of leverage. So it's

448
00:19:25,960 --> 00:19:27,840
Speaker 1: not just that they're able to force equity in the house,

449
00:19:27,880 --> 00:19:30,760
Speaker 1: appreciate that property by doing work to it, by like

450
00:19:30,800 --> 00:19:34,520
Speaker 1: working their butts off, but they are also able to

451
00:19:34,560 --> 00:19:36,560
Speaker 1: make money because they only have to put a certain

452
00:19:36,600 --> 00:19:39,040
Speaker 1: percent down on the home that they're buying. And so yeah,

453
00:19:39,040 --> 00:19:41,879
Speaker 1: without the ability to take out that loan for the

454
00:19:41,920 --> 00:19:44,600
Speaker 1: majority of the purchase price, most investors wouldn't even be

455
00:19:44,600 --> 00:19:46,760
Speaker 1: able to consider buying a rental property. So like, sorry,

456
00:19:46,880 --> 00:19:49,080
Speaker 1: move on, go do another investment because you don't have

457
00:19:49,080 --> 00:19:50,760
Speaker 1: the skin to be able to get into this game.

458
00:19:50,800 --> 00:19:53,639
Speaker 2: All right, poor guys, All right, no investing in real

459
00:19:53,720 --> 00:19:54,159
Speaker 2: estate for you.

460
00:19:54,200 --> 00:19:56,479
Speaker 1: The poors can invest in real estate apparently, right and so,

461
00:19:56,840 --> 00:19:58,480
Speaker 1: but leverage can swing either way. And I think a

462
00:19:58,520 --> 00:20:00,359
Speaker 1: lot of people think of leverage as only good thing,

463
00:20:00,400 --> 00:20:02,080
Speaker 1: like oh, it helps me get into this like three

464
00:20:02,160 --> 00:20:04,919
Speaker 1: hundred thousand dollars property that otherwise I'd be unable to purchase.

465
00:20:05,280 --> 00:20:07,760
Speaker 1: But an intelligent use of debt it can help make

466
00:20:07,800 --> 00:20:10,399
Speaker 1: returns look better than they otherwise would, especially in a

467
00:20:10,440 --> 00:20:13,520
Speaker 1: booming market. You know, putting something like forty dollars down

468
00:20:13,560 --> 00:20:15,960
Speaker 1: on a two hundred thousand dollars home that doubled in

469
00:20:16,040 --> 00:20:18,600
Speaker 1: value over the past five years, which is not too

470
00:20:18,640 --> 00:20:21,160
Speaker 1: far from the truth in some markets. It means that,

471
00:20:21,240 --> 00:20:24,399
Speaker 1: in the simplest terms possible, you turned forty thousand dollars

472
00:20:24,560 --> 00:20:27,399
Speaker 1: into two hundred thousand dollars thanks to leverage. So that

473
00:20:27,560 --> 00:20:31,680
Speaker 1: is how leverage can be beneficial. But the truth is

474
00:20:31,800 --> 00:20:34,080
Speaker 1: leverage can also bite you in the button. I mean,

475
00:20:34,680 --> 00:20:36,199
Speaker 1: talk to anybody who about real estate back in two

476
00:20:36,200 --> 00:20:38,080
Speaker 1: thousand and seven. They'll tell you. They'll sing the tune

477
00:20:38,160 --> 00:20:39,479
Speaker 1: of how leverage can work the other way too.

478
00:20:39,520 --> 00:20:42,239
Speaker 2: Yeah, and that's not counting the transaction costs of real estate, right,

479
00:20:42,280 --> 00:20:44,640
Speaker 2: and those are pretty high. But yeah, from the most

480
00:20:44,640 --> 00:20:47,560
Speaker 2: basic vantage point, that example helps you to see how

481
00:20:47,600 --> 00:20:50,640
Speaker 2: leverage can accelerate your ability to build wealth because if

482
00:20:50,720 --> 00:20:52,199
Speaker 2: you know, were you to take that same amount of

483
00:20:52,200 --> 00:20:55,320
Speaker 2: money and stick it in the market, and even with

484
00:20:55,560 --> 00:20:58,040
Speaker 2: healthy returns, like at ten percent rate of return, you

485
00:20:58,160 --> 00:21:00,959
Speaker 2: might have only earned something like twenty five thousand dollars

486
00:21:01,200 --> 00:21:03,840
Speaker 2: on forty thousand dollars worth of capital within a five

487
00:21:03,880 --> 00:21:06,359
Speaker 2: year time span. But like you said, you do need

488
00:21:06,400 --> 00:21:09,320
Speaker 2: to be careful because leverage can swing both ways. We

489
00:21:09,440 --> 00:21:12,160
Speaker 2: are not against using it to your advantage, but it's

490
00:21:12,200 --> 00:21:14,679
Speaker 2: it's something that you've got to be very careful with

491
00:21:15,000 --> 00:21:18,360
Speaker 2: because were you to be over leveraged and where we'd

492
00:21:18,400 --> 00:21:20,360
Speaker 2: see a massive downturn in the market like we did

493
00:21:20,560 --> 00:21:23,320
Speaker 2: back during the Great Recession, you would see yourself completely

494
00:21:23,440 --> 00:21:26,359
Speaker 2: upside down. You would see yourself underwater with your real estate.

495
00:21:26,480 --> 00:21:29,120
Speaker 1: Yeah yeah, and then if you don't have the cash

496
00:21:29,160 --> 00:21:31,399
Speaker 1: flow to cover your losses, you end up in a

497
00:21:31,440 --> 00:21:34,320
Speaker 1: really difficult situation that leads to foreclosure for a lot

498
00:21:34,359 --> 00:21:37,000
Speaker 1: of people. And so investing in real estate it's just

499
00:21:37,080 --> 00:21:40,520
Speaker 1: not as straightforward as it is to invest in the market,

500
00:21:40,600 --> 00:21:43,879
Speaker 1: and so bigger there's potential for bigger returns for savvy

501
00:21:43,920 --> 00:21:47,399
Speaker 1: real estate investors, but there's also a bigger risk at

502
00:21:47,440 --> 00:21:50,480
Speaker 1: the same time. So let's talk about Matt a few questions,

503
00:21:50,520 --> 00:21:52,359
Speaker 1: a few things that people need to think through before

504
00:21:52,720 --> 00:21:55,640
Speaker 1: they decide that real estate investing does make sense for them.

505
00:21:56,000 --> 00:21:57,840
Speaker 1: So we've got kind of a few factors who want

506
00:21:57,840 --> 00:22:00,119
Speaker 1: you to consider. First is, how are you doing with

507
00:22:00,160 --> 00:22:02,720
Speaker 1: those tax advantage retirement accounts? If you don't know what

508
00:22:02,760 --> 00:22:04,600
Speaker 1: a four oh one K is or you haven't considered

509
00:22:04,600 --> 00:22:07,119
Speaker 1: a roth iray yet. First things first, we want you

510
00:22:07,440 --> 00:22:08,800
Speaker 1: we want you to be at least getting the match

511
00:22:08,840 --> 00:22:11,720
Speaker 1: from your employer if you're employed at a full time

512
00:22:11,760 --> 00:22:14,399
Speaker 1: gig who offers you a retirement account. That's kind of

513
00:22:14,400 --> 00:22:17,000
Speaker 1: the minimum threshold, right, I mean, hopefully you've been stocking

514
00:22:17,080 --> 00:22:20,040
Speaker 1: away meaningful amounts for years before you even start thinking

515
00:22:20,040 --> 00:22:23,440
Speaker 1: about investing in real estate, and largely because since real

516
00:22:23,520 --> 00:22:26,720
Speaker 1: estate lacks diversification, we want you putting some money to

517
00:22:26,720 --> 00:22:29,080
Speaker 1: work for you in the market before you start saving

518
00:22:29,160 --> 00:22:31,520
Speaker 1: up for that first rental property down payment. I mean,

519
00:22:31,520 --> 00:22:34,360
Speaker 1: we want you to have just a solid financial foundation, right.

520
00:22:34,480 --> 00:22:37,680
Speaker 1: We want you to have no high interest rate debt.

521
00:22:37,720 --> 00:22:40,280
Speaker 1: We want you to have a fully funded emergency fund.

522
00:22:40,680 --> 00:22:44,280
Speaker 1: You're just not ready to even start looking at properties.

523
00:22:44,600 --> 00:22:46,800
Speaker 1: You can start learning, right, you can start researching, you

524
00:22:46,800 --> 00:22:49,080
Speaker 1: can start listening to podcasts and reading books, but you're

525
00:22:49,080 --> 00:22:52,080
Speaker 1: just not ready to start like hopping on redfin and

526
00:22:52,160 --> 00:22:55,639
Speaker 1: Zillow and making offers on properties that are in your

527
00:22:55,680 --> 00:22:58,600
Speaker 1: neighborhood until you've got a solid financial foundation, until you

528
00:22:58,640 --> 00:23:01,359
Speaker 1: started investing I think in some of the more boring

529
00:23:01,640 --> 00:23:03,359
Speaker 1: index fund style routes first too.

530
00:23:03,520 --> 00:23:05,080
Speaker 2: Yeah, Basically, we want you to do things in the

531
00:23:05,160 --> 00:23:07,240
Speaker 2: right order, and it starts with, like you said, you'll

532
00:23:07,320 --> 00:23:10,240
Speaker 2: having some margin in your life, an emergency fund, but

533
00:23:10,280 --> 00:23:12,840
Speaker 2: getting rid of that high and straight debt, but then

534
00:23:13,200 --> 00:23:16,399
Speaker 2: also making sure you are invested in the most simple

535
00:23:16,680 --> 00:23:20,119
Speaker 2: of ways before you then start saving up. Yeah, for

536
00:23:20,280 --> 00:23:22,480
Speaker 2: that first investment property. It's kind of like becoming a

537
00:23:22,520 --> 00:23:24,400
Speaker 2: parent before becoming a grandparent. You just kind of got

538
00:23:24,400 --> 00:23:27,400
Speaker 2: to do it right. Well, yeah, there's only one way

539
00:23:27,440 --> 00:23:29,480
Speaker 2: you do that. Whereas you can't get out of there.

540
00:23:29,480 --> 00:23:31,280
Speaker 1: You could do it, Yeah, you could get this one

541
00:23:31,280 --> 00:23:32,600
Speaker 1: out of order, but we don't want you to. Yeah.

542
00:23:32,640 --> 00:23:34,919
Speaker 2: And so after you have that financial foundation, you need

543
00:23:34,960 --> 00:23:37,800
Speaker 2: to have a down payment saved up. You'll not only

544
00:23:37,880 --> 00:23:40,480
Speaker 2: need the money to put probably twenty five percent down

545
00:23:40,640 --> 00:23:43,320
Speaker 2: on the unit that you want to purchase, but you'll.

546
00:23:43,200 --> 00:23:45,240
Speaker 1: Need what most lenders want from you. Yeah, you just

547
00:23:45,280 --> 00:23:46,600
Speaker 1: iny invest for twenty five percent down.

548
00:23:46,560 --> 00:23:48,240
Speaker 2: But beyond that, you're going to need a fair amount

549
00:23:48,320 --> 00:23:51,280
Speaker 2: of additional cash to just get it into shape for renting,

550
00:23:51,560 --> 00:23:53,920
Speaker 2: and you'll want to have rezeras on hand to pay

551
00:23:53,960 --> 00:23:58,720
Speaker 2: for any potential major upgrades or major expenses, unforeseen expenses

552
00:23:58,720 --> 00:24:01,200
Speaker 2: that might pop up. And so this is in addition

553
00:24:01,480 --> 00:24:04,320
Speaker 2: to what you're sticking into your traditional investment accounts and

554
00:24:04,400 --> 00:24:07,119
Speaker 2: in addition to the cash that's sitting in your own

555
00:24:07,359 --> 00:24:11,439
Speaker 2: personal emergency fund for your personal emergencies. Essentially, it's like

556
00:24:11,480 --> 00:24:13,960
Speaker 2: having in a like an emergency fund for each of

557
00:24:13,960 --> 00:24:16,520
Speaker 2: your properties basically, And it's so true. I mean there's

558
00:24:16,600 --> 00:24:20,040
Speaker 2: always something that's needed at rental properties and doing work

559
00:24:20,080 --> 00:24:23,040
Speaker 2: at multiple rental properties as we speak, not me, but

560
00:24:23,119 --> 00:24:24,760
Speaker 2: I have people that I'm hiring to do the work

561
00:24:24,840 --> 00:24:27,240
Speaker 2: putting in a whole new bathroom in one unit. And

562
00:24:27,320 --> 00:24:28,959
Speaker 2: so these are the kind of things that you have

563
00:24:29,000 --> 00:24:32,160
Speaker 2: to be ready for, these upgrades expenses. It's not cheap

564
00:24:32,240 --> 00:24:34,439
Speaker 2: and it's a long term play, but you got to

565
00:24:34,480 --> 00:24:36,040
Speaker 2: have the cash flow and you've got to have the

566
00:24:36,080 --> 00:24:40,520
Speaker 2: reserves to cover those upgrades that are necessary. Definitely, don't

567
00:24:40,520 --> 00:24:42,119
Speaker 2: want to get caught off guard. That would be a

568
00:24:42,119 --> 00:24:43,480
Speaker 2: bad place to be. If you're going to be investing

569
00:24:43,480 --> 00:24:45,520
Speaker 2: in real estate, you're right you need a significant amount

570
00:24:45,560 --> 00:24:48,560
Speaker 2: of extra cash on hand, or you should probably not

571
00:24:48,600 --> 00:24:50,280
Speaker 2: consider it at all all Right, You also need to

572
00:24:50,280 --> 00:24:52,359
Speaker 2: think about what market you're in, because real estate is

573
00:24:52,359 --> 00:24:53,959
Speaker 2: a very local thing. We've been giving kind of some

574
00:24:54,040 --> 00:24:57,560
Speaker 2: generalized numbers about how real estate performs, but so much

575
00:24:57,560 --> 00:25:00,600
Speaker 2: depends right. Real estate is about location, location, location, and

576
00:25:00,640 --> 00:25:03,159
Speaker 2: it's about specific location, but it's also about just like

577
00:25:03,400 --> 00:25:04,920
Speaker 2: what part of the country do you live in. So

578
00:25:04,960 --> 00:25:07,000
Speaker 2: if you live in like New York City, San Francisco,

579
00:25:07,320 --> 00:25:09,639
Speaker 2: it would likely mean losing money each and every month

580
00:25:10,000 --> 00:25:12,800
Speaker 2: in hopes that that property would appreciate and that that

581
00:25:12,840 --> 00:25:14,320
Speaker 2: would pain out in the end that would make that

582
00:25:14,359 --> 00:25:19,679
Speaker 2: a good investment. Incredible incredibly expensive markets make it ridiculously

583
00:25:19,720 --> 00:25:22,840
Speaker 2: difficult to invest and make money, But there are lots

584
00:25:22,840 --> 00:25:26,000
Speaker 2: of other markets where investor opportunity still exists. And even

585
00:25:26,040 --> 00:25:29,160
Speaker 2: though the market has from a broad national standpoint, made

586
00:25:29,160 --> 00:25:31,159
Speaker 2: it more difficult to find deals that makes sense for

587
00:25:31,200 --> 00:25:33,960
Speaker 2: real estate investors, some markets still have homes for sale

588
00:25:33,960 --> 00:25:36,280
Speaker 2: that are going to be profitable, and where you live

589
00:25:36,520 --> 00:25:38,600
Speaker 2: is just going to have a massive influence on whether

590
00:25:38,720 --> 00:25:41,280
Speaker 2: or not you ought to invest long distance is possible,

591
00:25:41,320 --> 00:25:44,240
Speaker 2: but that's just another can of worms. So where you live,

592
00:25:44,480 --> 00:25:46,960
Speaker 2: the kind of deals that are available in your neighborhood

593
00:25:47,040 --> 00:25:49,639
Speaker 2: or in surrounding neighborhoods, that's probably going to have an

594
00:25:49,640 --> 00:25:51,760
Speaker 2: impact on whether or not you decide to proceed. You

595
00:25:51,840 --> 00:25:54,520
Speaker 2: might say, wait a second, I am living in downtown

596
00:25:54,720 --> 00:25:58,280
Speaker 2: Los Angeles and there are no deals to be had

597
00:25:58,320 --> 00:26:00,800
Speaker 2: that would make sense from an investing stand point. But

598
00:26:00,960 --> 00:26:03,440
Speaker 2: you might say, I live in Cincinnati, and actually there's

599
00:26:03,480 --> 00:26:06,160
Speaker 2: some good quads right around the corner quad Plexus, and

600
00:26:06,280 --> 00:26:08,960
Speaker 2: maybe I'll buy one of those. I rand the numbers

601
00:26:09,000 --> 00:26:11,760
Speaker 2: actually look really good. So again, so much of it

602
00:26:11,800 --> 00:26:14,280
Speaker 2: comes down to where you live, and if the deals

603
00:26:14,280 --> 00:26:16,639
Speaker 2: exist where you are, that's right. Yeah, this is a

604
00:26:16,760 --> 00:26:19,560
Speaker 2: very broad brush that I'm pinning with here, but generally speaking,

605
00:26:19,600 --> 00:26:22,600
Speaker 2: on the coast it's way more expensive versus buying and

606
00:26:22,640 --> 00:26:24,880
Speaker 2: investing in the heartland or in the sun belt, where

607
00:26:25,080 --> 00:26:28,280
Speaker 2: more and more folks happen to be moving to these days.

608
00:26:28,600 --> 00:26:31,120
Speaker 2: But just because you are in the right market, though,

609
00:26:31,320 --> 00:26:33,920
Speaker 2: and just because you've got your financial ducks all lined up,

610
00:26:34,119 --> 00:26:36,720
Speaker 2: it's still not a slam dunk decision that you should

611
00:26:36,760 --> 00:26:40,400
Speaker 2: invest in real estate because you also need to want

612
00:26:40,680 --> 00:26:41,800
Speaker 2: to invest in real estate.

613
00:26:42,000 --> 00:26:43,040
Speaker 1: You got to get hire.

614
00:26:43,200 --> 00:26:46,000
Speaker 2: Yeah, you need to have that fire. If you aren't

615
00:26:46,000 --> 00:26:49,760
Speaker 2: even interested in learning about the mechanics of real estate, like,

616
00:26:49,800 --> 00:26:52,480
Speaker 2: that's okay because of the nice thing about investing in

617
00:26:52,480 --> 00:26:54,199
Speaker 2: the stock market is that you don't need to know

618
00:26:54,600 --> 00:26:57,720
Speaker 2: very much in order to land in the index funds

619
00:26:57,800 --> 00:26:58,480
Speaker 2: rule you can't.

620
00:26:58,640 --> 00:27:00,720
Speaker 1: You can get rich while being blissed fully ignorant, which

621
00:27:00,720 --> 00:27:02,400
Speaker 1: I think is the best part about index fonds. It's

622
00:27:02,400 --> 00:27:03,400
Speaker 1: like you can be.

623
00:27:03,560 --> 00:27:06,600
Speaker 2: Like completely removed from your day to day It's completely

624
00:27:06,640 --> 00:27:09,080
Speaker 2: removed from how it is that you think about. Yes, yeah,

625
00:27:09,280 --> 00:27:11,480
Speaker 2: real estate investing is going to take more due diligence,

626
00:27:11,680 --> 00:27:14,520
Speaker 2: and if the desire isn't there, like it's gonna just

627
00:27:14,600 --> 00:27:17,240
Speaker 2: quickly begin to feel like a slog. And it's okay

628
00:27:17,320 --> 00:27:20,440
Speaker 2: to work for those profits. But it's even more fulfilling

629
00:27:20,560 --> 00:27:22,480
Speaker 2: when it's something that you enjoy, when it's something that

630
00:27:22,600 --> 00:27:25,360
Speaker 2: you are excited about, as opposed to something where you're

631
00:27:25,359 --> 00:27:26,880
Speaker 2: just like, ugh, I don't want to have to deal

632
00:27:26,920 --> 00:27:29,600
Speaker 2: with that. Think about what you actually want your life

633
00:27:29,640 --> 00:27:31,159
Speaker 2: to look like and what you want to spend your

634
00:27:31,200 --> 00:27:32,040
Speaker 2: time doing I think.

635
00:27:32,080 --> 00:27:34,119
Speaker 1: I think that's a great point because some people are like,

636
00:27:34,160 --> 00:27:35,640
Speaker 1: I feel like I'm supposed to that's the next step

637
00:27:35,680 --> 00:27:37,479
Speaker 1: in wealth building. But no, you don't have to if

638
00:27:37,480 --> 00:27:39,920
Speaker 1: you don't want to, And it's if an interests you,

639
00:27:39,920 --> 00:27:41,560
Speaker 1: if it picture like I always liked it, like I

640
00:27:41,640 --> 00:27:43,919
Speaker 1: always found it to be like fun and fascinating and

641
00:27:44,040 --> 00:27:46,800
Speaker 1: like a learning experience. But not everybody feels that way,

642
00:27:46,840 --> 00:27:48,760
Speaker 1: and other people are like, I want my weekends to

643
00:27:48,800 --> 00:27:50,399
Speaker 1: be my weekends. And it's not that being a real

644
00:27:50,520 --> 00:27:52,399
Speaker 1: estate investment means all your weekends are going to be

645
00:27:52,440 --> 00:27:55,159
Speaker 1: spent working on that property. Probably not, but it's important

646
00:27:55,200 --> 00:27:57,960
Speaker 1: to have the desire because there are inevitably going to

647
00:27:58,000 --> 00:28:00,280
Speaker 1: be times when you've got to devote attention into that

648
00:28:00,280 --> 00:28:02,199
Speaker 1: rental property when you'd rather be doing something else. And

649
00:28:02,240 --> 00:28:05,120
Speaker 1: so exactly, like, if it annoys the ever living crap

650
00:28:05,160 --> 00:28:08,359
Speaker 1: out of you, then you're it's probably not meant for you.

651
00:28:08,800 --> 00:28:11,720
Speaker 2: Yeah, this is a rare instance in investing where I

652
00:28:11,720 --> 00:28:13,679
Speaker 2: think it makes sense to say.

653
00:28:14,000 --> 00:28:18,040
Speaker 1: Follow your heart, which is rarely the best advice in investing,

654
00:28:18,160 --> 00:28:20,960
Speaker 1: rarely exactly, but in this case, like, well, truly, like

655
00:28:21,119 --> 00:28:23,000
Speaker 1: we're talking about how you're spending your time what you

656
00:28:23,000 --> 00:28:25,280
Speaker 1: want your days and your your hours to look like.

657
00:28:25,600 --> 00:28:27,560
Speaker 1: And I kind of like like architecture, and I like

658
00:28:27,600 --> 00:28:29,320
Speaker 1: these and so I like street to street and I

659
00:28:29,359 --> 00:28:31,040
Speaker 1: like that kind of So my interest in the old

660
00:28:31,080 --> 00:28:33,920
Speaker 1: neighborhoods in times right, my interests aligned with this form

661
00:28:33,920 --> 00:28:36,520
Speaker 1: of investing. So to me, that actually made it make

662
00:28:36,560 --> 00:28:38,720
Speaker 1: more sense. And so that makes me think it's not

663
00:28:38,760 --> 00:28:40,440
Speaker 1: just desire. But do you have the time to do this?

664
00:28:40,760 --> 00:28:43,640
Speaker 1: Because sure, that's another important question, another important filter to

665
00:28:43,720 --> 00:28:46,320
Speaker 1: run this decision through. Do you have the time that

666
00:28:46,400 --> 00:28:48,920
Speaker 1: it takes to be a real estate investor? Because you

667
00:28:48,960 --> 00:28:51,440
Speaker 1: know a significant amount of both are going to be

668
00:28:51,440 --> 00:28:54,200
Speaker 1: necessary to make this a success. And and you know,

669
00:28:54,560 --> 00:28:57,240
Speaker 1: we've talked about how it's not passive income. It has

670
00:28:57,800 --> 00:28:59,920
Speaker 1: aspects of a part time job to it. But I

671
00:29:00,040 --> 00:29:01,840
Speaker 1: just want to drive that point home because there are

672
00:29:01,880 --> 00:29:04,440
Speaker 1: so many folks out there preaching the exact opposite message.

673
00:29:04,480 --> 00:29:06,840
Speaker 1: They're talking about the passive income side of things. But

674
00:29:06,880 --> 00:29:09,280
Speaker 1: time and effort really are required to be a successful

675
00:29:09,440 --> 00:29:11,520
Speaker 1: real estate investor. And so I would say count the

676
00:29:11,560 --> 00:29:14,760
Speaker 1: cost before you proceed. That's really important if you're working

677
00:29:14,800 --> 00:29:17,440
Speaker 1: a full time job, So is your spouse, and you

678
00:29:17,440 --> 00:29:19,400
Speaker 1: want to be at your kids soccer games on the weekend.

679
00:29:19,800 --> 00:29:23,320
Speaker 1: All the above, Well, real estate investing might eat into that.

680
00:29:23,600 --> 00:29:25,200
Speaker 1: And so it's important to figure out whether or not

681
00:29:25,240 --> 00:29:27,479
Speaker 1: you've actually got the time to commit to this new endeavor,

682
00:29:27,520 --> 00:29:29,680
Speaker 1: because yeah, it's going to take some time.

683
00:29:29,600 --> 00:29:32,280
Speaker 2: That's right. Yeah, Okay, So even if you've got the desire,

684
00:29:32,440 --> 00:29:34,520
Speaker 2: you're in a great market, and you've got the time,

685
00:29:34,520 --> 00:29:36,800
Speaker 2: and you've got the money, Well, it's also worth considering

686
00:29:36,960 --> 00:29:40,920
Speaker 2: that you might already have a decent amount of local

687
00:29:41,000 --> 00:29:46,080
Speaker 2: real estate exposure already via your primary residence. Right, And

688
00:29:46,120 --> 00:29:49,160
Speaker 2: so this isn't to say that quote unquote investing in

689
00:29:49,200 --> 00:29:51,000
Speaker 2: the home where you live like that that is the

690
00:29:51,000 --> 00:29:54,120
Speaker 2: most optimal way to invest in real estate, but it

691
00:29:54,200 --> 00:29:58,400
Speaker 2: is the reality for American homeowners. At least sixty five

692
00:29:58,480 --> 00:30:02,120
Speaker 2: percent of Americans net worth is tied up in their homes. Dude, Like,

693
00:30:02,160 --> 00:30:04,680
Speaker 2: that is a lot of eggs in a singular basket.

694
00:30:05,080 --> 00:30:08,080
Speaker 2: And we're not against buying a primary residence that you love,

695
00:30:08,560 --> 00:30:10,520
Speaker 2: but it is a good idea to consider how buying

696
00:30:10,680 --> 00:30:13,600
Speaker 2: some additional local real estate how that will impact the

697
00:30:13,640 --> 00:30:16,240
Speaker 2: diversity of your overall portfolio.

698
00:30:16,240 --> 00:30:18,160
Speaker 1: We see we're talking like, Hey, I've been maxing out

699
00:30:18,160 --> 00:30:19,880
Speaker 1: my wrath for two years. That's all you've done in

700
00:30:19,920 --> 00:30:21,720
Speaker 1: the market. But you own a primary home and now

701
00:30:21,760 --> 00:30:23,320
Speaker 1: you're looking to buy a rental property.

702
00:30:23,440 --> 00:30:26,479
Speaker 2: Yeah, if you've got twelve five hundred dollars sitting there,

703
00:30:26,560 --> 00:30:28,600
Speaker 2: or hopefully a little bit more with gains in the market.

704
00:30:28,640 --> 00:30:29,680
Speaker 1: But if that's all you got.

705
00:30:29,560 --> 00:30:33,400
Speaker 2: Then yeah, maybe you want a little more exposure broadly speaking,

706
00:30:33,480 --> 00:30:35,880
Speaker 2: across all the companies look at it here in the

707
00:30:36,000 --> 00:30:38,160
Speaker 2: US or that trade on the New York Stock Exchange

708
00:30:38,320 --> 00:30:43,120
Speaker 2: before sinking a significantly larger amount than that into a

709
00:30:43,120 --> 00:30:45,120
Speaker 2: local piece of property via a don't payment.

710
00:30:45,160 --> 00:30:47,480
Speaker 1: Yeah, I mean this goes back to that diversification point

711
00:30:47,520 --> 00:30:49,600
Speaker 1: that we made earlier a little bit, and a lot

712
00:30:49,600 --> 00:30:52,400
Speaker 1: of people are not diversified in terms of their net

713
00:30:52,400 --> 00:30:54,120
Speaker 1: worth because so much of it is tied up in

714
00:30:54,160 --> 00:30:57,000
Speaker 1: their home. They think of that as their forced method

715
00:30:57,000 --> 00:31:00,320
Speaker 1: of savings, as their way to retirement. But I'm mary,

716
00:31:00,400 --> 00:31:03,280
Speaker 1: home isn't typically a great investment. We'll talk about that

717
00:31:03,320 --> 00:31:04,719
Speaker 1: a little bit more, but we also want to talk

718
00:31:04,760 --> 00:31:08,520
Speaker 1: about alternatives to buying actual physical real estate. Do any

719
00:31:08,520 --> 00:31:10,520
Speaker 1: of those make sense for investors who want to grow

720
00:31:10,520 --> 00:31:12,720
Speaker 1: their net worth. We'll get to all that right after this.

721
00:31:22,120 --> 00:31:25,280
Speaker 2: All right, we are still talking about investing in real estate.

722
00:31:25,520 --> 00:31:28,760
Speaker 2: And the good news is that even if you feel

723
00:31:28,760 --> 00:31:31,920
Speaker 2: completely overwhelmed by what we've said so far, you can

724
00:31:31,960 --> 00:31:35,560
Speaker 2: still participate in seeing your net worth grow by investing

725
00:31:35,560 --> 00:31:39,560
Speaker 2: in real estate. Oh yeah, let's say you've heard talking

726
00:31:39,560 --> 00:31:42,000
Speaker 2: it sounds like it's too much work. Let's talk about

727
00:31:42,040 --> 00:31:44,440
Speaker 2: a few alternative ways to get exposure to real estates

728
00:31:44,560 --> 00:31:49,080
Speaker 2: as an asset class and rates which stand for real

729
00:31:49,160 --> 00:31:52,720
Speaker 2: estate investment trusts. They are the main way to gain

730
00:31:52,840 --> 00:31:56,040
Speaker 2: some of that that hassle free exposure to real estate,

731
00:31:56,680 --> 00:31:58,560
Speaker 2: and there are a few a couple different types that

732
00:31:58,560 --> 00:32:01,080
Speaker 2: we're going to talk about today. E REITs are becoming

733
00:32:01,160 --> 00:32:04,120
Speaker 2: more and more popular, and ereats basically mean the routs

734
00:32:04,120 --> 00:32:09,560
Speaker 2: available through specific investing platforms, of which fund Rise tends

735
00:32:09,560 --> 00:32:10,920
Speaker 2: to be the best of the bunch. Yeah, probably the

736
00:32:10,960 --> 00:32:13,479
Speaker 2: most popular too. But even still, this isn't our favorite

737
00:32:13,480 --> 00:32:16,800
Speaker 2: way for folks to invest in real estate, largely because

738
00:32:17,480 --> 00:32:21,320
Speaker 2: of the pretty high, pretty hefty fees. We're talking one percent.

739
00:32:21,920 --> 00:32:24,680
Speaker 2: There's just add a complexity as well, and just how

740
00:32:24,760 --> 00:32:27,840
Speaker 2: tied up your money is. Even though it is you know,

741
00:32:28,200 --> 00:32:31,160
Speaker 2: it is easier than actually buying a duplex, and the website,

742
00:32:31,320 --> 00:32:34,520
Speaker 2: the apps, they make it really easy to invest as well.

743
00:32:34,560 --> 00:32:37,240
Speaker 2: But like, honestly, I almost see this as a downside

744
00:32:37,520 --> 00:32:39,440
Speaker 2: because it could mean that investors they just run the

745
00:32:39,520 --> 00:32:42,560
Speaker 2: risk of having not performed their due diligence. Right if

746
00:32:42,600 --> 00:32:44,120
Speaker 2: you're kind of just sitting back and you're thinking, oh,

747
00:32:44,120 --> 00:32:46,680
Speaker 2: I want to be a real estate investor, swoopsoopsoopsoop, and

748
00:32:47,000 --> 00:32:49,440
Speaker 2: you know, double click your side to download the app,

749
00:32:49,520 --> 00:32:52,160
Speaker 2: you log in, and before you know it, your money's

750
00:32:52,160 --> 00:32:56,000
Speaker 2: tied up in Wichital Hansas and you haven't given much

751
00:32:56,000 --> 00:32:58,360
Speaker 2: thought to whether or not you are going to need

752
00:32:58,360 --> 00:32:59,760
Speaker 2: access to those funds in two months.

753
00:32:59,840 --> 00:33:01,800
Speaker 1: Well, and the truth is that when we're in talking

754
00:33:01,840 --> 00:33:05,160
Speaker 1: about investing in real estate, it's a non liquid form

755
00:33:05,200 --> 00:33:08,080
Speaker 1: of investment. It's hard to sell that property anyway, and

756
00:33:08,120 --> 00:33:10,880
Speaker 1: if you try to sell it in a short timeframe,

757
00:33:11,040 --> 00:33:12,880
Speaker 1: you're going to lose money, like we talked about earlier,

758
00:33:13,080 --> 00:33:15,400
Speaker 1: So the same thing is true with these e rates

759
00:33:15,520 --> 00:33:18,240
Speaker 1: where your money is often locked up for a number

760
00:33:18,240 --> 00:33:20,400
Speaker 1: of years. But you're right, a lot of people don't

761
00:33:20,440 --> 00:33:22,480
Speaker 1: realize on the front end, or they haven't thought it

762
00:33:22,520 --> 00:33:25,760
Speaker 1: through long enough before they make that purchase. So real

763
00:33:25,840 --> 00:33:30,080
Speaker 1: estate's just liquid in general, unless we're talking about publicly

764
00:33:30,120 --> 00:33:33,640
Speaker 1: traded rates, which are different publicly traded real estate investment trust.

765
00:33:33,680 --> 00:33:35,760
Speaker 1: They're a better option for a lot of folks if

766
00:33:35,800 --> 00:33:37,560
Speaker 1: you want to invest in real estate, let's say, from

767
00:33:37,640 --> 00:33:40,680
Speaker 1: the comfort of your couch and buy a few clicks

768
00:33:40,720 --> 00:33:43,000
Speaker 1: on your smartphone. And what we mean by that is

769
00:33:43,040 --> 00:33:46,000
Speaker 1: like a specific rate fund. And this fund that you

770
00:33:46,000 --> 00:33:49,520
Speaker 1: could invest in itself invests in a ton of different

771
00:33:50,000 --> 00:33:52,960
Speaker 1: rates that are offered by some of our favorite brokerage companies.

772
00:33:53,000 --> 00:33:56,760
Speaker 1: And so you're talking about investing in real estate all

773
00:33:56,800 --> 00:33:58,560
Speaker 1: across the country, and different kinds of real estate. You

774
00:33:58,640 --> 00:34:00,440
Speaker 1: might be talking about office real estate, might be talking

775
00:34:00,440 --> 00:34:03,440
Speaker 1: about hospitals, you might be talking self cel phone towers,

776
00:34:03,480 --> 00:34:07,719
Speaker 1: all sorts of different real estate classes. And so V

777
00:34:07,840 --> 00:34:10,280
Speaker 1: and Q, for instance, is a solid fund that Vanguard

778
00:34:10,320 --> 00:34:12,319
Speaker 1: offers if you want to invest in real estate, but

779
00:34:12,400 --> 00:34:16,000
Speaker 1: you want to have that investment be somewhat liquid. Shh

780
00:34:16,200 --> 00:34:21,640
Speaker 1: from Charles Schwab. That's a great one too, Yeah, shut up,

781
00:34:22,400 --> 00:34:24,640
Speaker 1: And like this is this is a great way to

782
00:34:24,640 --> 00:34:27,760
Speaker 1: invest in real estate passively, but in a diversified manner.

783
00:34:28,200 --> 00:34:30,920
Speaker 1: But know this, it's not doing much actually for you

784
00:34:31,000 --> 00:34:33,640
Speaker 1: on the diversification front. So if you're like, I want

785
00:34:33,640 --> 00:34:36,920
Speaker 1: some real estate exposure, these publicly traded reads, they sound like,

786
00:34:37,040 --> 00:34:39,200
Speaker 1: you know, the costs are low and I can get

787
00:34:39,200 --> 00:34:41,719
Speaker 1: in and out when I want to. Well, they they're

788
00:34:42,080 --> 00:34:44,720
Speaker 1: but and then maybe they'll diversify me from my total

789
00:34:44,719 --> 00:34:47,720
Speaker 1: stock market holdings. That that might be the best solution

790
00:34:47,800 --> 00:34:49,960
Speaker 1: for me. Well, it's important to note that because you're

791
00:34:49,960 --> 00:34:52,840
Speaker 1: already plenty diversified by holding hundreds or even thousands of

792
00:34:52,840 --> 00:34:55,000
Speaker 1: stocks in that total stock market fund or the S

793
00:34:55,040 --> 00:34:56,320
Speaker 1: and P five hundred index fund.

794
00:34:56,200 --> 00:34:59,239
Speaker 2: Because again you are doing that first before you are

795
00:34:59,239 --> 00:35:01,200
Speaker 2: investing in real estate, right right.

796
00:35:00,920 --> 00:35:02,879
Speaker 1: But yes, as you should be. But then you start

797
00:35:02,880 --> 00:35:05,000
Speaker 1: adding a little bit bit of VMQ or something in there,

798
00:35:05,000 --> 00:35:07,680
Speaker 1: which is that Vanguard re fund I was talking about. Well,

799
00:35:08,000 --> 00:35:10,360
Speaker 1: most if not all, of the one hundred and sixty

800
00:35:10,360 --> 00:35:13,920
Speaker 1: seven companies that V and Q is investing in are

801
00:35:13,960 --> 00:35:16,080
Speaker 1: already a part of the total stock market fund that

802
00:35:16,120 --> 00:35:19,080
Speaker 1: you got. So if you're investing in VTI, right, which

803
00:35:19,120 --> 00:35:21,400
Speaker 1: is which is the ETF that that's.

804
00:35:21,280 --> 00:35:24,279
Speaker 2: Your favorite, right, that's yeah, Vanguard's total to stock market.

805
00:35:24,680 --> 00:35:27,080
Speaker 1: That's a killer one, right if you're investing in that, well,

806
00:35:27,280 --> 00:35:29,719
Speaker 1: you're already kind of by proxy investing in V ANDQ,

807
00:35:29,880 --> 00:35:32,920
Speaker 1: and so you might not necessarily need additional exposure. So

808
00:35:33,160 --> 00:35:35,080
Speaker 1: for a lot of people, it's probably, like I said,

809
00:35:35,080 --> 00:35:36,439
Speaker 1: more trouble and it's worthiness right.

810
00:35:36,520 --> 00:35:39,440
Speaker 2: Yeah, And you also don't have to be fully team VTI.

811
00:35:39,560 --> 00:35:41,600
Speaker 2: You can also come over to my side and join

812
00:35:41,680 --> 00:35:45,680
Speaker 2: Team VU. They're both very similar and both wonderful syndication deals.

813
00:35:45,920 --> 00:35:48,200
Speaker 2: This is another way to invest in real estate in

814
00:35:48,239 --> 00:35:51,800
Speaker 2: a more passive manner, and that basically means just investing

815
00:35:51,800 --> 00:35:54,319
Speaker 2: in other people's real estate deals and other folks in

816
00:35:54,360 --> 00:35:57,560
Speaker 2: other companies real estate deals. So oftentimes you're coming alongside

817
00:35:57,560 --> 00:36:01,120
Speaker 2: other investors to say, purchase an apartment complex, Joe. This

818
00:36:01,200 --> 00:36:03,160
Speaker 2: is something that you've done a couple of times. But

819
00:36:03,280 --> 00:36:05,960
Speaker 2: if you pick the right operator or the right investment,

820
00:36:06,040 --> 00:36:08,440
Speaker 2: it can definitely work out well. But the problem with

821
00:36:08,480 --> 00:36:11,920
Speaker 2: these is that there's a massive barrier to entry. A

822
00:36:11,960 --> 00:36:14,920
Speaker 2: lot of them won't accept an investment less than fifty

823
00:36:15,000 --> 00:36:15,800
Speaker 2: thousand dollars.

824
00:36:16,040 --> 00:36:17,879
Speaker 1: Some will start as low as like twenty or twenty five.

825
00:36:17,920 --> 00:36:19,359
Speaker 1: But you're right, a lot of a lot of them

826
00:36:19,400 --> 00:36:21,520
Speaker 1: say no hind those though. Yeah, fifty is the minimum,

827
00:36:21,600 --> 00:36:23,719
Speaker 1: and so it's hard for It's just the same as

828
00:36:23,840 --> 00:36:25,400
Speaker 1: trying to save up that down payment if that's kind

829
00:36:25,400 --> 00:36:29,600
Speaker 1: of what's prohibiting you from buying the property in your area, Like, oh,

830
00:36:29,600 --> 00:36:31,120
Speaker 1: I got to save up that down payment. Well that

831
00:36:31,200 --> 00:36:33,520
Speaker 1: syndication deals definitely don't make sense for you either, exactly

832
00:36:33,520 --> 00:36:36,080
Speaker 1: because it's a big it's a it's a big slog

833
00:36:36,120 --> 00:36:38,400
Speaker 1: to save up that kind of money. So yeah, but

834
00:36:38,520 --> 00:36:42,200
Speaker 1: I think syndication deals are they're interesting, But you've got

835
00:36:42,200 --> 00:36:45,400
Speaker 1: to be really careful in that space too, because there

836
00:36:45,400 --> 00:36:48,439
Speaker 1: are a lot of crafty salespeople who want to make

837
00:36:48,840 --> 00:36:51,040
Speaker 1: their syndication deals sound like the greatest things in slices

838
00:36:51,040 --> 00:36:53,279
Speaker 1: spread you're going to get rich in just three to

839
00:36:53,320 --> 00:36:56,440
Speaker 1: four years time. But how conservative are their projections and

840
00:36:56,840 --> 00:36:58,760
Speaker 1: what kind of operator are they? Like, can you trust

841
00:36:58,760 --> 00:37:01,200
Speaker 1: that they're going to be able to And so it

842
00:37:01,400 --> 00:37:03,120
Speaker 1: makes you have to do a lot of due diligence

843
00:37:03,160 --> 00:37:07,279
Speaker 1: on those deals too, which makes it not necessarily passive either.

844
00:37:07,520 --> 00:37:09,640
Speaker 2: Yeah, that's right. It takes some time to know what

845
00:37:09,680 --> 00:37:12,360
Speaker 2: it is that you're you're getting into, especially with a

846
00:37:12,440 --> 00:37:15,200
Speaker 2: buy in at that level. Yeah, and so if you're

847
00:37:15,280 --> 00:37:18,839
Speaker 2: unphased by all of these different roadblocks roadblocks that we've

848
00:37:18,840 --> 00:37:21,319
Speaker 2: mentioned during this episode, it just might make sense for

849
00:37:21,440 --> 00:37:23,600
Speaker 2: you to start learning a little bit more. So, we

850
00:37:23,640 --> 00:37:26,120
Speaker 2: wanted to mention a couple of resources that we think

851
00:37:26,280 --> 00:37:29,480
Speaker 2: can be helpful as you're trying to increase your knowledge

852
00:37:29,760 --> 00:37:31,960
Speaker 2: when it comes to investing in real estate. And Bigger

853
00:37:32,000 --> 00:37:34,360
Speaker 2: Pockets is a great website. They've got a solid form

854
00:37:34,440 --> 00:37:38,040
Speaker 2: where investors can help each other out, ask and answer questions.

855
00:37:38,480 --> 00:37:41,440
Speaker 2: Coach Carson he is a good friend of ours and

856
00:37:41,480 --> 00:37:43,960
Speaker 2: we love his philosophy when it comes to investing in

857
00:37:44,000 --> 00:37:46,840
Speaker 2: real estate. He's all about reaching what he calls small

858
00:37:46,840 --> 00:37:50,360
Speaker 2: but mighty real estate investors. I love that approach. He

859
00:37:50,360 --> 00:37:53,520
Speaker 2: thinks the mighty mouse sort of take when.

860
00:37:54,120 --> 00:37:57,360
Speaker 1: He takes the approach if you buy maybe one property

861
00:37:57,400 --> 00:37:59,279
Speaker 1: every two years and then you seek to pay that

862
00:37:59,360 --> 00:38:02,560
Speaker 1: offuntil you reach retirement age, like you can get really

863
00:38:02,960 --> 00:38:07,240
Speaker 1: really rich buying just a having just a handful of

864
00:38:07,280 --> 00:38:10,279
Speaker 1: investment properties. And I like that because sometimes you'll hear

865
00:38:10,320 --> 00:38:13,160
Speaker 1: people talking about, like, you know, thousands of units or

866
00:38:13,239 --> 00:38:15,719
Speaker 1: hundreds of units, and it feels so inaccessible. And the

867
00:38:15,719 --> 00:38:18,719
Speaker 1: way Coach Carson talks about it feels and seems and

868
00:38:18,960 --> 00:38:21,720
Speaker 1: is I think very accessible for people who are interested

869
00:38:21,719 --> 00:38:22,759
Speaker 1: in investing in real estate.

870
00:38:22,840 --> 00:38:24,279
Speaker 2: Yeah, for folks who are looking for it to be

871
00:38:25,400 --> 00:38:27,360
Speaker 2: like a sustainable part of your lifestyle.

872
00:38:27,440 --> 00:38:28,040
Speaker 1: Yeah, that's what.

873
00:38:28,040 --> 00:38:30,359
Speaker 2: Coach Carson does. Will link to those resources in our

874
00:38:30,360 --> 00:38:32,640
Speaker 2: show notes, but they can help you, you know, to

875
00:38:32,680 --> 00:38:35,760
Speaker 2: get up to speed quickly. The Millionaire real Estate Investor.

876
00:38:35,800 --> 00:38:38,080
Speaker 2: That's actually the first book I ever read on investing

877
00:38:38,080 --> 00:38:38,600
Speaker 2: in real estate.

878
00:38:38,640 --> 00:38:41,319
Speaker 1: That's Gary Keller. I thought you were gonna say, that's

879
00:38:41,320 --> 00:38:43,640
Speaker 1: actually the first book you ever read. I ever read

880
00:38:43,680 --> 00:38:45,640
Speaker 1: aggressive Matt, you were like four years old.

881
00:38:45,719 --> 00:38:49,279
Speaker 2: Yeah, No, this is a fantastic book that covers all

882
00:38:49,440 --> 00:38:51,080
Speaker 2: of the basics, and so if you're looking for like

883
00:38:51,160 --> 00:38:54,480
Speaker 2: a comprehensive manual, I would highly recommend that book as well.

884
00:38:54,520 --> 00:38:56,120
Speaker 1: I think there's a lot of great resources. And so

885
00:38:56,160 --> 00:38:58,959
Speaker 1: if you're like, yeah, the market conditions, they don't seem

886
00:38:59,000 --> 00:39:01,120
Speaker 1: favorable right now based on what I'm seeing, based on

887
00:39:01,120 --> 00:39:03,719
Speaker 1: what Matt and Till we're talking about, well, at least

888
00:39:03,840 --> 00:39:07,359
Speaker 1: start doing the research because you never know, maybe in

889
00:39:07,560 --> 00:39:10,719
Speaker 1: six months or a year's time, the winds change, right,

890
00:39:10,760 --> 00:39:14,160
Speaker 1: the market conditions change and we're starting to see more deals,

891
00:39:14,239 --> 00:39:18,319
Speaker 1: more inventory on the market. So having that knowledge and

892
00:39:18,480 --> 00:39:20,799
Speaker 1: getting prepared is never a bad thing, that's right.

893
00:39:20,920 --> 00:39:22,640
Speaker 2: It pays the dig the well before you need it.

894
00:39:22,719 --> 00:39:25,040
Speaker 1: Yes, like our friend Jordan Harbinger says, take the well

895
00:39:25,040 --> 00:39:29,080
Speaker 1: before you're thirsty, the well of knowledge. Yes, yes, I'm

896
00:39:29,120 --> 00:39:31,280
Speaker 1: still impressed with you reading those books of that magnitude

897
00:39:31,280 --> 00:39:33,600
Speaker 1: of four. But as a quick reader, yeah, smart kid?

898
00:39:33,680 --> 00:39:35,880
Speaker 2: Is it through it in one week? You know?

899
00:39:36,120 --> 00:39:39,040
Speaker 1: I think in a way that people can gently ease

900
00:39:39,080 --> 00:39:41,359
Speaker 1: into investing in real estate, kind of like the Chad

901
00:39:41,360 --> 00:39:44,040
Speaker 1: Carson method. And it's actually the way that I first

902
00:39:44,400 --> 00:39:48,080
Speaker 1: got into investment real estate is by transitioning your primary

903
00:39:48,120 --> 00:39:52,920
Speaker 1: residence into an investment property. And basically, if you've got

904
00:39:52,960 --> 00:39:55,120
Speaker 1: a locked in low mortgage rate in a neighborhood that

905
00:39:55,120 --> 00:39:57,759
Speaker 1: has good long term prospects, and if the numbers on

906
00:39:57,800 --> 00:40:01,400
Speaker 1: that home that you own actually makes if that's the

907
00:40:01,440 --> 00:40:04,480
Speaker 1: case for you, then it might be a good idea

908
00:40:04,560 --> 00:40:06,600
Speaker 1: for you to save up enough so that you don't

909
00:40:06,640 --> 00:40:08,960
Speaker 1: have to sell the current place you're living in when

910
00:40:08,960 --> 00:40:10,960
Speaker 1: you buy your next place. And this is just a

911
00:40:10,960 --> 00:40:12,640
Speaker 1: great way that a lot of landlords are able to

912
00:40:12,640 --> 00:40:15,360
Speaker 1: get started you're familiar with the home and it's quirks,

913
00:40:15,440 --> 00:40:18,400
Speaker 1: and the barrier to entry is lowered because you're buying

914
00:40:18,400 --> 00:40:20,920
Speaker 1: the next home is a primary residence, which means you

915
00:40:20,960 --> 00:40:23,440
Speaker 1: get better financing, which means you have to come to

916
00:40:23,480 --> 00:40:26,279
Speaker 1: the table with less money down. And so Matt, you

917
00:40:26,320 --> 00:40:28,040
Speaker 1: and I we've both done this a couple of times,

918
00:40:28,080 --> 00:40:30,439
Speaker 1: and it doesn't make sense for everyone. If you're living

919
00:40:30,440 --> 00:40:32,520
Speaker 1: in a million dollar home or seven hundred and fifty

920
00:40:32,560 --> 00:40:35,720
Speaker 1: thousand dollars for four thousand square foot home, it's unlikely

921
00:40:35,760 --> 00:40:37,920
Speaker 1: to be a great rental from a number standpoint, So

922
00:40:37,960 --> 00:40:40,480
Speaker 1: it depends on the specifics of your property. But I

923
00:40:40,520 --> 00:40:42,239
Speaker 1: just love this as a way for people to get

924
00:40:42,239 --> 00:40:45,440
Speaker 1: into real estate investing. If you're kind of living in

925
00:40:45,480 --> 00:40:47,960
Speaker 1: a starter home and you're ready to upgrade, well, instead

926
00:40:47,960 --> 00:40:51,080
Speaker 1: of selling that home and using your equity to kind

927
00:40:51,080 --> 00:40:54,080
Speaker 1: of buy help you purchase a bigger home, keep that

928
00:40:54,120 --> 00:40:56,360
Speaker 1: home and save up the down payment for that next home.

929
00:40:56,520 --> 00:40:59,320
Speaker 1: That's just a really excellent strategy for a lot of

930
00:40:59,360 --> 00:41:00,000
Speaker 1: people to get going.

931
00:41:00,120 --> 00:41:02,719
Speaker 2: That's right. Yeah, Well, house hacking, that's another way for

932
00:41:02,840 --> 00:41:06,000
Speaker 2: first time investors to that also get into the landlording game.

933
00:41:06,360 --> 00:41:09,920
Speaker 2: And so whether that's buying a single family house where

934
00:41:09,960 --> 00:41:12,040
Speaker 2: maybe you're just running out, you know, just a portion

935
00:41:12,120 --> 00:41:14,719
Speaker 2: of it, like a room where you've got roommates, or

936
00:41:14,760 --> 00:41:17,239
Speaker 2: even a duplex or a quad, but buying something that

937
00:41:17,280 --> 00:41:19,879
Speaker 2: you can live in that also generates income. That makes

938
00:41:19,880 --> 00:41:21,839
Speaker 2: a ton of sense for lots of folks. It can

939
00:41:21,920 --> 00:41:23,960
Speaker 2: just be a way to minimize their housing costs in

940
00:41:24,000 --> 00:41:26,880
Speaker 2: a pretty major way, allowing you to then save up

941
00:41:26,920 --> 00:41:29,640
Speaker 2: even more money for that next real estate investment much

942
00:41:29,680 --> 00:41:32,600
Speaker 2: more quickly than you otherwise would be able to. We

943
00:41:32,640 --> 00:41:36,480
Speaker 2: talked with real estate investor Craig Cheerlop back in episode

944
00:41:36,480 --> 00:41:39,359
Speaker 2: four forty five, and he's, I don't know. He might

945
00:41:39,400 --> 00:41:41,840
Speaker 2: have the most inspiring story when it comes to house hacking.

946
00:41:42,080 --> 00:41:44,040
Speaker 2: He's done it a bunch of different ways. He's done

947
00:41:44,080 --> 00:41:46,920
Speaker 2: it multiple times, multiple different ways. One of which was

948
00:41:47,040 --> 00:41:50,120
Speaker 2: the home that he owned. He was sleeping in the

949
00:41:50,120 --> 00:41:53,520
Speaker 2: living room and he partitioned off his He basically made

950
00:41:53,560 --> 00:41:55,360
Speaker 2: a roo. He's like, no, no, no, this is my house,

951
00:41:55,560 --> 00:41:57,280
Speaker 2: so living room is now a bedroom.

952
00:41:57,960 --> 00:41:59,680
Speaker 1: Well, he got to decide, and you don't have to

953
00:41:59,680 --> 00:42:02,200
Speaker 1: do it as hardcore as Craig did, necessarily, Like yeah,

954
00:42:02,320 --> 00:42:03,759
Speaker 1: in his book, he outlines have.

955
00:42:03,760 --> 00:42:05,440
Speaker 2: An actual room with a bathroom if you'd like.

956
00:42:05,520 --> 00:42:07,239
Speaker 1: Yeah, and he outlines multiple ways to do it, and

957
00:42:07,280 --> 00:42:09,719
Speaker 1: it takes some sacrifice, right It's house hacking is not

958
00:42:10,280 --> 00:42:13,200
Speaker 1: for the fate of heart necessarily, but it can completely

959
00:42:13,280 --> 00:42:16,680
Speaker 1: change your financial trajectory. Have taking on roommates or buying

960
00:42:16,719 --> 00:42:18,440
Speaker 1: a house that has like a basement apartment that you

961
00:42:18,440 --> 00:42:21,040
Speaker 1: can rent out, whether it's on Airbnb or whether it's

962
00:42:21,040 --> 00:42:23,000
Speaker 1: full time to attendant like those are the kind of

963
00:42:23,000 --> 00:42:26,680
Speaker 1: things that can really completely change your finance is moving

964
00:42:26,719 --> 00:42:29,160
Speaker 1: forward because you're able to generate a whole lot more

965
00:42:29,160 --> 00:42:31,480
Speaker 1: income or maybe even like live for free. Think of

966
00:42:31,520 --> 00:42:33,120
Speaker 1: what you could do if you were living for free,

967
00:42:33,120 --> 00:42:34,880
Speaker 1: think of how much you could save and invest and

968
00:42:35,320 --> 00:42:39,080
Speaker 1: start banking towards like future projects Like it's it's pretty impressive.

969
00:42:39,480 --> 00:42:42,759
Speaker 1: And again, it's like amazing how much cartoons have changed

970
00:42:42,760 --> 00:42:45,319
Speaker 1: on real estate investing. When the price is right, you know,

971
00:42:45,360 --> 00:42:46,759
Speaker 1: we think it can make a lot of sense for

972
00:42:46,800 --> 00:42:49,520
Speaker 1: folks who have the real estate investing bug to take

973
00:42:49,520 --> 00:42:51,640
Speaker 1: the plunge. And even just two and a half or

974
00:42:51,640 --> 00:42:53,439
Speaker 1: three years ago, I think it was possible to find

975
00:42:53,440 --> 00:42:56,240
Speaker 1: deals that made sense in Atlanta where we live. Although

976
00:42:56,480 --> 00:42:58,640
Speaker 1: even then it was getting harder, and today it's just

977
00:42:58,760 --> 00:43:01,560
Speaker 1: gotten incredibly difficult to make the numbers work unless you're

978
00:43:01,560 --> 00:43:05,160
Speaker 1: willing to take those more intense approaches like house hacking.

979
00:43:05,640 --> 00:43:08,440
Speaker 1: But that's our location, right, that's where we live. And

980
00:43:08,760 --> 00:43:11,279
Speaker 1: even still, it's not that it's impossible to find something

981
00:43:11,280 --> 00:43:14,080
Speaker 1: that's worth investing in, but it's important to figure out

982
00:43:14,280 --> 00:43:17,440
Speaker 1: what your town or city dynamics are like before swearing

983
00:43:17,480 --> 00:43:20,799
Speaker 1: it off all together, or before jumping in with both feet.

984
00:43:20,880 --> 00:43:24,879
Speaker 1: I think I still like the path of real estate

985
00:43:24,920 --> 00:43:27,880
Speaker 1: investing for a whole lot of people. It's just that

986
00:43:28,000 --> 00:43:30,200
Speaker 1: it's more difficult than it has been in a long

987
00:43:30,280 --> 00:43:32,520
Speaker 1: time to actually start going down that path.

988
00:43:32,560 --> 00:43:35,360
Speaker 2: Absolutely. And if there's one thing I think that prevents

989
00:43:35,480 --> 00:43:37,960
Speaker 2: folks from investing in real estate when it actually makes

990
00:43:37,960 --> 00:43:39,880
Speaker 2: sense for them, right like, if they have run the numbers,

991
00:43:39,920 --> 00:43:43,120
Speaker 2: if they have thought through how this is going to

992
00:43:43,120 --> 00:43:46,080
Speaker 2: impact their personal life, I think it's just being afraid

993
00:43:46,520 --> 00:43:48,640
Speaker 2: to take the risks, right Like, there's a I think

994
00:43:48,640 --> 00:43:50,800
Speaker 2: there can be a fear that can keep people from

995
00:43:50,960 --> 00:43:53,520
Speaker 2: maybe achieving some of the financial goals even faster than

996
00:43:53,520 --> 00:43:56,360
Speaker 2: they would have otherwise. Obviously, real estate investing is not

997
00:43:56,400 --> 00:43:58,840
Speaker 2: for everyone, But we don't want the work part of

998
00:43:58,880 --> 00:44:01,600
Speaker 2: this to freak you out, because like buying the right property,

999
00:44:01,760 --> 00:44:04,600
Speaker 2: finding it at the right price, and managing that property effectively,

1000
00:44:04,640 --> 00:44:06,839
Speaker 2: that can just be a great way to grow your

1001
00:44:06,880 --> 00:44:09,880
Speaker 2: net worth over time, and again, depending on where you

1002
00:44:09,960 --> 00:44:13,439
Speaker 2: live and where you are with your financial goals, now

1003
00:44:13,560 --> 00:44:16,480
Speaker 2: might actually be a really solid time to buy a

1004
00:44:16,520 --> 00:44:19,400
Speaker 2: great property. But we recorded this episode made this a

1005
00:44:19,440 --> 00:44:21,879
Speaker 2: topic because we wanted to make sure that you were

1006
00:44:21,920 --> 00:44:24,600
Speaker 2: equipped with all of the different factors to think through

1007
00:44:24,960 --> 00:44:28,160
Speaker 2: before taking the plunge, right before entertaining the idea of

1008
00:44:28,239 --> 00:44:30,239
Speaker 2: all right, maybe it maybe it's time for me to

1009
00:44:30,320 --> 00:44:34,080
Speaker 2: get fansy with my investments, and I don't I shouldn't

1010
00:44:34,080 --> 00:44:36,920
Speaker 2: have even said that, because I think a part of

1011
00:44:36,960 --> 00:44:38,520
Speaker 2: what we wanted to do with this episode is to

1012
00:44:38,600 --> 00:44:41,440
Speaker 2: be realistic about where the market is currently. But we

1013
00:44:41,520 --> 00:44:43,640
Speaker 2: don't want to build up investing in real estate as

1014
00:44:43,680 --> 00:44:47,560
Speaker 2: this massive, unattainable thing. It's honestly, it truly isn't all

1015
00:44:47,600 --> 00:44:49,840
Speaker 2: that complicated. We think it's something that you can do

1016
00:44:49,880 --> 00:44:50,440
Speaker 2: as well.

1017
00:44:50,280 --> 00:44:52,239
Speaker 1: But it's also not the savior that's going to lead

1018
00:44:52,239 --> 00:44:54,160
Speaker 1: you to financial independence, like a lot of people would

1019
00:44:54,120 --> 00:44:55,880
Speaker 1: say too. So we want like a rational, level headed

1020
00:44:55,920 --> 00:44:58,640
Speaker 1: approach to real estate, which is kind of what we're

1021
00:44:58,680 --> 00:45:00,120
Speaker 1: trying to do today. I hope that helps. But I

1022
00:45:00,120 --> 00:45:01,719
Speaker 1: think one of the other things too, Mat don't want

1023
00:45:01,719 --> 00:45:03,320
Speaker 1: to say is that that we were talking about the

1024
00:45:03,320 --> 00:45:05,800
Speaker 1: harsh realities of investing in real estate, and the truth

1025
00:45:05,840 --> 00:45:08,080
Speaker 1: is that the current marketing conditions make it more difficult.

1026
00:45:08,120 --> 00:45:10,680
Speaker 1: But I think some of the harsh realities are also overblown,

1027
00:45:10,920 --> 00:45:14,000
Speaker 1: like three am toilet malfunctions and your tenant calling you.

1028
00:45:14,320 --> 00:45:16,719
Speaker 1: Some of the horror stories that you hear from real

1029
00:45:16,840 --> 00:45:19,359
Speaker 1: estate investors are a little over the top as well,

1030
00:45:19,560 --> 00:45:21,680
Speaker 1: And so I just want people to know that going

1031
00:45:21,719 --> 00:45:23,520
Speaker 1: into it, it's not like you're getting a call from

1032
00:45:23,560 --> 00:45:25,680
Speaker 1: your tenant twice a week in the middle of the

1033
00:45:25,760 --> 00:45:29,160
Speaker 1: night because your house is on fire or something like that.

1034
00:45:29,200 --> 00:45:31,799
Speaker 1: And I think that those kinds of things, it's kind

1035
00:45:31,800 --> 00:45:34,400
Speaker 1: of like how maybe we freaked out about crazy stuff

1036
00:45:34,440 --> 00:45:36,719
Speaker 1: in Halloween candy and like the eighties or something like that.

1037
00:45:36,840 --> 00:45:39,080
Speaker 1: It's like it became this full blown panic from I

1038
00:45:39,120 --> 00:45:40,319
Speaker 1: don't know, if you go back and look at.

1039
00:45:40,280 --> 00:45:41,920
Speaker 2: It on Halloween candy panic, It's not.

1040
00:45:41,880 --> 00:45:44,120
Speaker 1: Like it was a real problem, right, but we made

1041
00:45:44,200 --> 00:45:46,759
Speaker 1: it into this thing and countless articles written about it,

1042
00:45:46,760 --> 00:45:49,960
Speaker 1: countless discussions on stuff like The Today Show or whatever.

1043
00:45:50,239 --> 00:45:53,720
Speaker 1: But while the occasional inconvenience does happen as a landlord,

1044
00:45:53,880 --> 00:45:56,560
Speaker 1: don't let those stories and don't let those the hyperbolic

1045
00:45:57,000 --> 00:46:00,279
Speaker 1: nature of some of those discussions scare you. Put fear

1046
00:46:00,280 --> 00:46:02,920
Speaker 1: into your heart, like prevents you from even kind of

1047
00:46:02,920 --> 00:46:03,759
Speaker 1: thinking about doing this.

1048
00:46:03,960 --> 00:46:06,239
Speaker 2: Yeah. Absolutely, man, all right, let's shift gears. Let's get

1049
00:46:06,280 --> 00:46:08,240
Speaker 2: back to the beer that you and I drank during

1050
00:46:08,400 --> 00:46:12,759
Speaker 2: this episode. And this is an US alive. I think

1051
00:46:12,800 --> 00:46:14,440
Speaker 2: that's how they wanted wanted us to read it.

1052
00:46:14,920 --> 00:46:16,680
Speaker 1: This is that you're hired. I think this is the

1053
00:46:16,680 --> 00:46:17,680
Speaker 1: beer by mckller.

1054
00:46:17,719 --> 00:46:18,799
Speaker 2: What were your thoughts on this one?

1055
00:46:19,040 --> 00:46:21,799
Speaker 1: Yeah, I wasn't too impressed, hoping for more.

1056
00:46:21,880 --> 00:46:24,440
Speaker 2: It's a Belgian wild ale, by the way, and I.

1057
00:46:24,480 --> 00:46:26,920
Speaker 1: Like wild a lot typically, but this one was like

1058
00:46:27,040 --> 00:46:30,239
Speaker 1: kind of like a brown ale with a little bit

1059
00:46:30,280 --> 00:46:33,480
Speaker 1: of funk, kind of sweet it. I don't know, man,

1060
00:46:33,680 --> 00:46:34,200
Speaker 1: it hit it.

1061
00:46:34,719 --> 00:46:36,719
Speaker 2: I'm a little surprised, I guess because I'm I am

1062
00:46:36,719 --> 00:46:37,600
Speaker 2: in agreement with you.

1063
00:46:37,680 --> 00:46:37,960
Speaker 1: Okay.

1064
00:46:37,960 --> 00:46:40,840
Speaker 2: It kind of had like this like like it definitely

1065
00:46:40,840 --> 00:46:44,600
Speaker 2: had the funkiness going on from the Brett that Breda nomiases,

1066
00:46:45,000 --> 00:46:47,719
Speaker 2: and it had the fruity sort of Belgian vibes going

1067
00:46:47,760 --> 00:46:50,880
Speaker 2: on that you typically can expect with Belgian.

1068
00:46:50,920 --> 00:46:53,160
Speaker 1: It was something. Yeah, it definitely had like Belgian yeast

1069
00:46:53,160 --> 00:46:55,359
Speaker 1: flavors es going on. So I had this weird kind

1070
00:46:55,360 --> 00:47:00,719
Speaker 1: of like stinky funkiness combined with like funky fruitiness. And

1071
00:47:01,800 --> 00:47:04,040
Speaker 1: I've never ever described a beer this way, but it

1072
00:47:04,080 --> 00:47:08,040
Speaker 1: reminded me of like a baby's dirty diaper. Well, now

1073
00:47:08,080 --> 00:47:09,880
Speaker 1: you're selling everybody on it, you know.

1074
00:47:10,280 --> 00:47:13,760
Speaker 2: So like oftentimes, like the fancier diapers, they come scented

1075
00:47:13,840 --> 00:47:16,560
Speaker 2: and so they kind of have like this floral not fruitiness,

1076
00:47:16,760 --> 00:47:19,640
Speaker 2: but it's almost like there is a like a fruity

1077
00:47:20,360 --> 00:47:24,000
Speaker 2: scent kind of masking the underlying stinky funkiness. You know,

1078
00:47:24,280 --> 00:47:26,680
Speaker 2: you know what I'm talking about here. Okay, So that's

1079
00:47:26,760 --> 00:47:28,719
Speaker 2: kind of what this beer did in beer form. I'm

1080
00:47:28,719 --> 00:47:31,160
Speaker 2: not saying that this beer tasted like a baby's diaper,

1081
00:47:31,760 --> 00:47:35,000
Speaker 2: but the dynamics that you typically find.

1082
00:47:34,760 --> 00:47:37,680
Speaker 1: With your glasses empty over there. So yeah, I mean,

1083
00:47:37,719 --> 00:47:39,239
Speaker 1: maybe you're a glutton for punishment. I don't know.

1084
00:47:39,640 --> 00:47:41,880
Speaker 2: I don't I eat all my leftovers, I drink all

1085
00:47:41,920 --> 00:47:44,560
Speaker 2: my well, except that one beer I talked about earlier.

1086
00:47:44,800 --> 00:47:46,239
Speaker 2: I did pour down the drink because that one, that

1087
00:47:46,320 --> 00:47:48,839
Speaker 2: joker was bad. Yeah, but yeah, it wasn't a terrible beer.

1088
00:47:48,920 --> 00:47:50,759
Speaker 2: It wasn't my absolute favorite, and.

1089
00:47:50,760 --> 00:47:52,919
Speaker 1: So I'll just say that it was I et Yeah, Okay,

1090
00:47:52,960 --> 00:47:55,480
Speaker 1: I'm typically a huge fan of mckeller beers, but this

1091
00:47:55,520 --> 00:47:57,200
Speaker 1: one was the least ferit I ever had from that

1092
00:47:57,600 --> 00:47:58,920
Speaker 1: kind of missed the mark for us, and they've had

1093
00:47:58,920 --> 00:48:02,080
Speaker 1: some really good beers. Absolutely, hopefully we'll get on track

1094
00:48:02,160 --> 00:48:04,399
Speaker 1: with the next mckeller beer that we have on the show.

1095
00:48:04,480 --> 00:48:06,200
Speaker 2: And who knows, maybe this one was a little past

1096
00:48:06,239 --> 00:48:06,719
Speaker 2: it's it's.

1097
00:48:06,680 --> 00:48:07,799
Speaker 1: Date, could be, could be?

1098
00:48:08,040 --> 00:48:10,640
Speaker 2: Yeah, uh yeah, Well, we will link to some of

1099
00:48:10,640 --> 00:48:12,960
Speaker 2: the different resources that we mentioned during this episode, some

1100
00:48:13,000 --> 00:48:15,319
Speaker 2: of the pratt some of the past conversations we've had

1101
00:48:15,360 --> 00:48:18,200
Speaker 2: with other guests, in particular I guess we just mentioned

1102
00:48:18,200 --> 00:48:20,840
Speaker 2: Craig kure Lop when it comes to house hacking. But

1103
00:48:21,040 --> 00:48:23,400
Speaker 2: you can find those resources up in our show notes

1104
00:48:23,440 --> 00:48:26,520
Speaker 2: at howdomoney dot com. Right, but Joel, that's going to

1105
00:48:26,600 --> 00:48:29,440
Speaker 2: be it for this episode until next time. Best Friends Out,

1106
00:48:29,560 --> 00:48:30,680
Speaker 2: Best Friends Out,