Real Estate Investing in a Murky Market w/ Dave Meyer #905
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Welcome to had a money. I'm joe .

and I am mat.

And today, we're talking real estate, investing in a markey market with dave.

That's right. And not just investing in real state, but what's up on some topics for the first time, buyers out looking for a good old fashion home. But joe, investment properties mean like this isn't something that we we talk about as often as we used to, I should say, like i'm thinking about a decade ago, like rental properties, IT was like the only thing on our minds, the only thing we were talking about.

In fact, like when we first batted around the idea of starting the podcast, we even thought about making IT solely about real state. But that being said, a lot has happened since then. The the housing market is definitely not what I used to be.

There are many reasons for that. And so the question that we're asking today is doesn't make sense to continue investing in real estate. That is the topic of conversation with our guest today, dave mayer. And dave is a long time investor.

He is the head of real state over at bigger pockets as well as host of music podcast over a bigger pockets, which you definitely to check out if you want to take real state investing seriously. If you have never heard bigger pockets, you need to check this out. But they ve we're excited to have you join us today on the podcast. Thank you.

Thank you for having me. I'm super excited to be here.

Of course. Yes, dyve met night. We like to drink beer.

We know actually you live in a place where there's a lot of good beer and matter night we are even while we're drinking expensive craft beer, we're still doing the smart thing. We're saving, investing for our futures. What do you like this before? Join in the here. Now, what's your craft? The .

equivalent? Oh, it's definitely taking nice vacation. I have a nice week, but for a nice hotel. And I do live in europe, and so I get to travel quite a lot. And I do IT with reckless a ban like that.

Reckless and well, IT makes all of the sense in the world too. Like once it's you hear about folks who do a study abroad and they're like, right, i'm going to do a semester in cortona with my art program. I like you got got to spend every single week traveling basically when is just like a thirty minute or hour flight and you're basically on the other side of other side of europe. So is the travel. Is that a large a big reason why maybe you've continue to kick the cane down the road as so what do you know first is coming back stateside?

Yeah, just for some context, I moved to europe because my wife was transferred here for work five years ago, and that was part of the appeal. He seemed like a really cool opportunity to live in a new culture. But also, being in europe, you have such great access to unbelievable destinations.

And the first two years we are here is actually coffee. And so we didn't get to travel very much. And we've stayed so that we could take quite a few places off our bucket list, which has been a lot of fun.

But I will say, you know, people say the netherlands, belgium is great beer. I will tell you, amErica has Better beer. And I know I won't say that loudly outside of my home blood. I miss america. And your neighbors .

don't let them here, you say that. But I think you're right, like all this fighting words, although I think per capital, we have more great beer, but some of the being in the and the inbetween specifically is some of the best in the world that is true.

But like your average bury that you just go to in the us is so good, good. And here a lot of places you go just hand again and am style. You know it's hard to find craft beer. I think that's the problem.

Typical euro pills, exact. That is something that's pretty great. We don't talk in depth about craft beer to know the show, but the fact that pretty much any like small little town that you go to now has their own local craft berry that is put in pretty decent beer didn't used to be the case a decade o of the other things that has happened over the past decade that I certainly welcome.

Quick shout, by the way, for you, dave, but for anybody else who visits to them, there's a beer to called debby aircon, which I think means the working IT does to you. And oh my god.

I touch accident.

by the way. Yeah, totally nail that.

But seriously, the best beer shop maybe i've ever went to in my entire life.

So good. really. I don't. I've never been. I am going to look this up .

right now or when we get off the beers overseas .

to trade with. And I brought tons of great, a belgian and netherlands and bears back with me. And I was like the best thing of everyone in my life besides my my wife.

Wow, that's pretty good. Yes, I am. Oh, it's not far from .

where I live now. I know .

think in that place I am looking .

IT up right now. You can you from there and buy some cases for yourself, not be said if you send us some in the mail, but you don't have to, you don't have to .

have just text me your address.

It's I got a really take investment because fine, you are like you are all about IT feel like you are a real state investing ninja. But how did you originally get into investing in real state in the first place?

I sort of fell into real state investing. I was living in dever right after college. I D moved there for fun and was waiting tables and trying to start to figure out what I wanted to do with my career.

And was skying a lot with this guy who wound up just buying a rental property with his girlfriend at the time and was making all this money. And I just got jealous and was thinking that if this guy who was good dude, not my smart dest friend of all time, like this guy I could do IT, I feel like I could do IT. And luckily I had had some internships in college where learned financial modeling.

So I felt pretty confident in the analytics deal analysis kind of side of IT. Um and I had a job called calling for a commercial real state broker who agreed to help me and so I can just backed into IT IT was never like I was in the fire movement or I analyzed all of these different asset classes and change real estate is just I wanted to make some exciting a money and real state seemed like a good way to do IT given this was twenty ten. So is a little bit easier to find cash along deals. But we can get into how I pull that .

off if yeah okay. I would love to hear how you pull off your first deal, but i'm also curious to why real state over the stock market or starting a more traditional business? And when you're talking to people who listen to bigger pockets, why did they often choose real state? Would you say over some of those other options? But that maybe blessing aber intensive.

there's something about real stay and the tangibility, is that a word tangibilitate? I I don't know the fact that .

it's .

tangible exactly .

if you I have IT was weird. No, I I don't I never was super interest in the stock market because I just didn't understand IT whether real city one of the great benefits is to IT is that it's actually quite a simple business. You can the revenue is very simple.

The expenses are limited. You're not reinventing something. And all of the Operations, all of the strategy are things that you can borrow from someone.

You don't need to be some stock picking genius or anything to succeeded real estate. And that simplicity really appealed to be, especially when I was Young and I had always been somewhat entrepreneurial. I had started a few businesses, uh, in high school and colleges, little things.

But I liked the idea of just figuring something out for myself, and real estate just seemed to be prime for that. And this was in twenty ten. And so things were pretty cheap, and finding casual was relatively easy. And IT felt so tangible to me that I could buy the deal and even with pretty conservative underwriting, could increase my income by two or three hundred dollars a month, which at the time was really meaningful to me.

So one of the things you just said I was out of was simple and straightforward. I don't know how closely you monitor, like the real state social media space, but I feel like if you is just like this sort of endless rabbit trail, and I feel like there are a whole lot of different pitches as to how reinvesting state is being presented. But i'm curious, I will aid do you to keep up with different influences over there?

Oh no. Okay, that might even call me a real state influence. So which is Cindy. But I am on instant put .

in a more forthcoming way in a less pe .

yeah like the hype and the thank you. I feel like folks are getting steer wrong. Like what do you see is like the predominant message that you think a lot of folks might be hearing as as supposed to what's actually accurate out there?

Yeah, there is there so much, but I think that i'll just be real with you guys. I think that a lot of influencers make real estate more complicated seem more complicated than that is because that's their business model.

They rely on convincing people that they have some secret that only they know and that being part of their masterminds or their group is going to unlock some secret thing for them, and that you could should pay them five or ten thousand dollars to be a part of this community. The reality is that on bigger pockets, we give almost all this information away for free. We just have a different business or a media business.

And so we thrive, and we can be honest because our whole business depends on us giving good advice, not convincing people that we know something that no one else knows. And so I would just you know, not all of them are bad. I have a lot of friends who have courses that are very repeatable and really, really good. I would just cautioned people who are wanted get into real state investing about just like think about people's motives and why they're saying the things that they're saying. And in almost all cases, especially if you're new, you can learn everything you need to about real state for free.

Yeah that we had a question not too longer on the show where a list or was considering hanging up for one to get exactly how much the real day course cost. But I pressure was five six years like ten grain plus and and he hadn't really read a book or listen to pocket or like some of the basic things that you would advise someone to do.

Before you even consider signing up for something more in depth that cost that much money, they go for the low hanging fruit first at least. And honestly, for most people, that's probably as probably all you need. I'm current day you wrote a book called start with strategy and you talk about how people like Normally need to consider how much money they have to invest but what they want out of becoming a real estate investor.

So what do you mean by that real state? The thing I love about IT is how flexible IT is and how you can really design a real estate portfolio around pretty much any goal that you can imagine. So for some people, if you want to be a tycoon, you can do that.

Those courses might teach you how to be a tycoon. I think for most people that I encounter, which is many hundreds or thousands of real state investors all the time, are people who just are Normal and who have full time jobs and who want to either augment their income. They want to provide some hedge against a job that may be uncertain or volatile, or they want to move up their retirement by five years or a decade, all of which are possible through real estate.

Some people want to quit their jobs in five years, some people in twenty. And knowing what you're overall in long term objectives, st will allow you to create a portfolio that's right for you. And to me, that's been one of the most single eye opening and biggest unlocks for me in real estate investing because I at first sort of felt bad about myself in my portfolio because you go on social media and I don't have hundreds of doors and I don't aspire to start a fund anytime soon. I mean, I will never say never, but I have absolutely no plans to do that.

Set your sites too low, dave.

Yeah, but like, yeah, maybe I am and i'm fine. No, I like I think that was sort of what changed my whole real state investing world is realizing, like I don't on that. And that's okay. I have a great, very profitable real estate investing portfolio because I figured out why I was doing this in the first place and sort of worked backwards to design a portfolio that is designed to meet that specifically. I love that you can cater to your lifetime le.

and you can find that portsoy that's right for you. And what you say there about building a backwards like figuring out what you want the end to look like and be okay, how can I get there? But for some people, they do when you know you said that like you had no no desire to be like a typhoon, like there might be some folks out there who want to be real estate moguls. And so how do you help those folks to think about how rapidly to acquire some of these additional properties as they are looking to to RAM things up with, like with you agree with the advice out there that that says, hey, let's just find this strategy and this approach that works and this repeated as quickly as possible.

Yeah, I think you can do that if you want to scale really quickly. I do recommend people to really try. I master one element of real estate.

And I think there's two different ways to do that. You can either get really good at one type of deal, so maybe be great at flipping or multi family self storage or whatever. The other way you could do IT is get really good at a specific market.

So for you guys, for example, just mastering the atlanta market. And then if you're super good at that physical, you know, geographic location, then you can flip into multi family and short tormentors all within because you understand the market so well. I do just think that it's important for people to realize that scaling quickly and risk go hand in hand.

And so if you want to scale very quickly, but there's nothing wrong with that. You're gonna have to take on more risk that might be in the form of risky your deals, IT might be using more leverage, IT might be taking on partners that you don't know as well. All those are fine.

They just come at risk. And if you're comfortable that, but if you are not, you're gonna have to move slower. And these are just some of the tradeoffs that you need to think through as you build up your portfolio.

So the three of us do I want to hold you are but I think are probably in that same sphere about when we started realist investing and we were investing um at a time where finding deals was not terribly difficult um so I kind of felt like ot and fish in a bear sentient finding the most right at me at the time I didn't .

but definitely in retrospect IT certainly feels like there .

were just everywhere if I could go share and turn back time like I would go back more properties right so and how would you say buying real this change um and and how does that change your advice to investors?

IT has changed. IT was very easy to find deals in twenty ten. And the flip side that was very difficult to find loans. IT was very difficult to find financing back then. And so I think there always tradeoffs.

There was I think there was like the sweet spot t like twenty thirteen, twenty fourteen where the credit markets were a little Better and deals were still easy to fined. To me, that was like the the dream time. But I still think there are great deals in real state investors.

I do believe the chAllenge there are real chAllenges with IT right now, too. I just think it's all about expectations and goals because for me, i've actually bought more deals this year than I have in the previous couple of years combined. And it's because I just recognize that my goal is to have rental properties that are gonna a be hitting their stride and you're gonna a supplement my income when I want to retire, which I think is like ten or fifteen years from now.

And so i'm looking at the real state market and saying, I don't think Prices are really going to go down. And yes, interest rates aren't great, but there's not a lot of competition right now. And i'm able to buy deals that I think have good intrinsic value at a Price that I don't think i'm going to see again.

And does that mean i'm going to make a huge profit this year? Probably not. But I only buy cash in deal. I'm not going to buy something that's gonna lead me. And I do think that you know over the next couple of years, this is going to turn into a very strong investment.

And I can do that because I take this long view, not everyone is going to do that and not, you know, there's a lot of rhetoric and the social media ACE in this industry about quitting your job in two years or three years. That's just not going to happen to be out is like unless you're starting with ten million box, like I just don't think that's going to happen for most people right now. And I don't think that's what most people want.

And I think resetting of expectations to say, hey, real state is you want to work hard or work at this for ten to fifteen years, you're going to be in a phenomenal place. And I don't think that changed at all over the last time, you know, since when I started. All right now, real, it's always been a long game.

And yeah, it's a little bit harder to find you know have the confidence in that right now. But I firmly believe that still true. Yeah.

still lot of opportunities to be had. I think i've heard you describe what's happening now as a stalemate. And so IT seems like we've got fewer buyers. We've got fewer sellers. Like why have can you kind of explain the state of the market and why things kind of slow down so much?

Yeah, it's it's a very strange time in the real estate market, especially if you don't spend all day looking at data like I, right? Basically, what's happened is during covet, we had a huge influx of buyers to the market. This is due to low interest rates, which makes things more affordable, but also due to demographics.

We this is often overlooked. But in you know the milenio now the largest generation, the united states had their peak combine agent about twenty twenty. And so there's the big demographic hill and a lot of people wanted buy homes right now when interest rates went up, we start to see that affordability leave the market.

Uh, and so that part of dominant has declined considerably. Millions and literally millions people have been Priced out of the market. Um but what and that part seems obviously that is a really intuitive thing.

Prices went up, less people can afford to buy homes. Demand goes down. The confusing part, at least on the surface, is why Prices haven't decline. That, right? Because you think demands gone, Prices should go down.

But what has happened is that low affordability caused by high interest rates has also cause supply to go down, meaning that people don't want to sell their homes. And this is one of these unique characteristics about the housing market, because seventy percent of people who sell their home go on to buy another home. So when buying conditions decline like they have, IT doesn't just hurt demand, but IT sort of weirdly impact supply.

And so we've seen just a slowdown in the total market where there's just not a lot of buyers, there's not a lot of sellers. But as of right now, in november twenty, twenty four, even with high interest strates, there are more buyers than there are sellers and Prices are still going up modestly. And we can talk about forecasts into the future, but that's the best summer I can give quickly of where we stand today.

That's I think that's helpful. We want to talk mostly about real state investing here, but I do want to ask a question about a lot of our listeners ers who want to buy. And we I feel like someone has me the question, what are you hearing the most on the holiday I podcast right now? I said, if you had to boil IT down to one thing, it's a lot of people who want to buy a home and aren't sure whether not IT makes sense or whether they should continue renting or not. So if someone's been sitting on the sidelines and they're saying i'm waiting for Price reductions or am waiting for rates to go down or hey, i'm seen this disparity between rents and what i'm going to pay to own home, the mortgage, all the other things included like this, renting continue to make sense for me for potential years to come. Even though homeownership is something I desire.

What would do you say that i'm going to make a lot of social media people angry with this, but I actually think renting makes sense for the majority of people right now. And I know as a real state investor and whose someone who has owned primary residence, that may sound hypocritical. But if you just do the math and there is very easy math to do and you can go on bigger pockets, actually built a buy rent calculator that you can check out there or just google, there's plenty of them. IT is just cheaper to rent right now and especially if you invest that money into something else.

So I think that's the big cavy out is if you're just going if you're going to say that to suse around number, if you had fifty grand to invest in a primary residence, if your choice is invest that into a home or rent, but not invest that money into the stock market or into rental property, i'd say put IT in a home that like that's a Better investment. But right now, if if what I recommend to people is to rent and bia rental property, I rent right now. I've been renting for the last five years um and I think it's worked really well for me.

I still buy property but just not as a primary residence or I read i'm not a stock expert, but I do invest in index funds if you are going to rent and put money into index funds, that could be a Better decision right now for people. That's, I think, broad advice. But the second thing i'll say is that really comes down the math comes down to how long you intend to stay in a home.

And it's usually like five or six years. If you intend to stay more five or six years, it's usually Better to buy. Um so those are two variables to think about as you make that decision for yourself, as how long you would anticipate staying in at home and what you would do with the money for the downpayment.

Should you not buy home hundred percent? That is always what IT comes down to. Are you disciplined enough to not take that money completely squander IT? If so, maybe you're fine running.

You can do the hit the easy button, sticking your money in the market. But speaking of markets, I think you started looking at your first property deal there in denver, but you don't live there anymore. We're going going to talk about, uh, investing in different market from where you live.

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I were back from the brakes, still occur with dave, mayor of bigger pockets, talking about investing in real estate, even win kind of wearing a funky market. And dave, as met a litter to you, invest in denver, I think, is that the only market that you own properties in?

No, I started in buying properties in the middle st. In last few years, and I also invest in indications passively all over the country.

okay.

So how do you think about location and the potential profitability of investing? So to say, someone out there there's listening that now we live in a land like should we invest in lander? Shall we be looking to another part of the country? Because, hey, I know I heard since the nati is a great market or something when IT comes to the hit closure, something closer to the one percent rule can to be a Better idea for people to invest in a market that isn't their hometown.

Yeah, I think the short answer is yes. IT can be Better to invest outside of your home market. But I would also say that all things being equal, IT is easier in your home market. So the way I often advise people is to, again and know, this is why, this is why my book has called start with strategy. I'm not trying to pitch the book, but I really just think people need to think about their goals first.

So this is like if your goal is to get cash flow and you can't find cash in your market and you should absolutely look somewhere else, if your goal is for great appreciation and you can get that in your home market, then invest in your home market. If you can get even close to the national average or Better for casual appreciation in your home market, I would say do that because you're going to a have a lot of advantages, just knowing the neighborhoods, being able to drive somewhere, you know, just knowing the town IT just matters and IT helps. But someone who has done both, both invested in a local area and invested long distance.

It's not as hard as you think to invest long distance. And depending on your goals, IT can really make sense. I'll just give you an example, like I started buying in the midwest because I wanted to baLance out my portfolio.

I have a lot of appreciation centric deals where I am investing places that are growing and they're expensive and they're probably going to go up in Price, but they're not the best cash flow. I wanted to augment that with some deals that provide cash flow and are likely to grow at least a little bit, but maybe not as fast as some of those other markets. And so I chose the market in the midwest and by there as well so that I can have a baLance of portfolio of different deals.

Um that's for me. I've been doing this for fifteen years. I think for people who are just starting whether you the biggest thing is whether you choose to invest in your backyard, in your home market or somewhere else, start with one, and don't obsessed about what the best deal is. Just find a place that has pretty good fundamentals and where you have a team that you can trust that like a property manager in agent handy man, like those are the two things that you really need is like solid economic foments als and a good team. That's what I would build around.

So obviously, you're all about getting folks the right people in play. So I guess for somebody who's looking at that very first deal though, i'm assuming that you're down with them self managing the property as they're learning the ropes.

Yes, that's what I did. I think IT teaches you a lot about the business. I self managed for nine years, ten years um yeah.

And so you learn a lot about the business and you don't need to do with that long. I think if you're getting started, I do IT for a year too, because you'll learn what good looks like. And for me, I learned what bad looks like.

I was just not handy know. And I learned what things I wanted to outsource, what things I felt I was good at. And he continued to focus on in my portfolio. And that whole that just taught me a lot.

But a steep .

learning curve IT is, you know, it's steep but short. I would say, yes.

you learn a whole lot really exactly. If you try to skip that and you try to hire somebody you miss out on even knowing what questions to ask the person you're trying to hire, like you need that couple of years. I think of managing your own property to even know how to proceed moving forward as a real thing.

Yeah, I do think that's generally true. I know people who have invested long distance successfully for their first deal, but I think you just need to just you need to do more up front education. I am some a type of person who just likes to learn the broad boundaries that I should stay within when I track, take on a new task.

And then I like to jump in and learn, hands up. I think if you're going to do IT out of state, you just need to be a little more academic about IT and study. And like, just learned the questions to ask, interview a lot of different property managers. Ideally find a real estate investor who you know or trust who can help you interview those property managers because they can teach you a lot um so that sort of the advice I give, but you can absolutely do that mean, there's thousands of people who do IT all the type yeah that make sense. So you're talking about .

your portfolio and you are looking your focus shifted to in the midwest to properties because you're looking for properties that we're going to cash loo as opposed to solely appreciate whether a rough portfolio allocation to either one of those categories that you are looking for.

So yeah, the way I think about my portfolio now is actually less between casual and appreciation and more between directing passive ownership. So when I first started the first ten years, I just buying deals and denver self managing them and and that was great. I moved to europe and I was sort of force to start investing passively either in syndications or I started doing private lending, which is kind of like I am IT is in the real state space but its a very different business than buying property um and I really liked IT and I started to realize that I could create a portfolio where I outsource the things that are profitable but but i'm bad at and I could keep in house the things that I am good at and so I am not good at value at investing that things like flipping houses or doing heavy renovations and properties.

I've never done a deal, probably never will um that not a big one um and so I investing those things passively because there are other people who you are very good at IT who am happy to give up some of my income, know I return to an exchange for what I ve done almost my entire careers. And investors just buy small multifamily properties and do plexus trip plexus copleys es that have good long term casual potential. And that's a business i've feel comfortable running even from europe.

And so that sort of how i've divided IT, and I would like to get to a point where i'm doing, maybe i'd say forty to fifty percent to act ownership long in a small multi family, twenty five percent in these passive bigs I considered in big swings. There are a little bit risky, but they have bigger upside. And then maybe twenty five percent in lending, which is a holiday thing we can get .

into if you want. I'm curious, one of the things typically the upside of investing in real estate is you the market might be less efficient, right? So you might be able to find a deal on a street in your neighbor od that you know exist, that nobody else knows exists.

And so you're able to get a deal. And then the other cool thing is you can kind of force appreciation into the property, right? If you're buying an index, fine. Sorry, IT kind of is what IT is and IT will go up over time, but there's nothing that you have very .

little impact of one vote, right?

But if you like, paint the house, renovated the kitchen, put money into the bathrooms, you have the ability to see a lot of upside in real say, which I think is what is certainly one of the selling points. But then you also look at the oral y on some of these studies of certain home renovation projects you might take on and then end up a lot of them actually end up a lot of them end up losing your money. So how do you think about being able to force appreciation into a home versus the fact that a lot of those renovation efforts might not be they they might not pay off in the way you wanted?

Yeah, that's a great question. And IT really comes down to understanding your customer in a way that I don't think a ton of realistic investors think about. A lot of times you walk into a home and you think, what would I want here? And that is not necessarily what a perspective tenant wants if you're a long term bian hold investor might not be what a guest wants if you're short term rental investor.

And so I think it's really important to figure out what people want and what they are willing to pay for. And for rental property, that's often quite different for what I would be if you're flipper and you're trying to create value in a single family home. And so there is ways to do this.

But I think talking to property managers is one great hack that's totally free to figure this out. You know, if you call up a property manager and dever, they'll tell you that having covered parking is super important or a yard for a dog because dogs are so, you know, everyone has dog in temple. Those types of things allow you to focus your investment into value ad in a way that you might not immediately know or might not be able to into IT just by, you know basing IT off your own experiences.

So I think that's really important. I think the thing that i've done in my career that has been successful is try to add capacity to homes. And this can come in a couple of different formats.

But I often think like, can you at a bedroom? Can you at a bathroom, can you add to an entirely new unit onto a property? Those are like usually slam dunk, is to add value into a property. I've bought homes where I could, you know, I bought a short term run tall, for example, that had three bedrooms. I turned IT into five, you know and know that totally changes the revenue profile of that home.

Are you at square footage? Are you turning current square footage into more ual bedroom space?

No, so I actually told. My real station, I wanted a four bedroom bigger house because I saw in the data that that's the where the revenue inefficiency, as you said, like you can get Better revenue per dollar there. And I couldn't find anything good.

So I told my agent to look for three bedrooms that that were big. And I want to have finding a four thousand square for a three bedroom house, which is just absurd. Like, yeah, it's like three bedrooms, twelve hundred square phy, but if they had a whole floor, IT was like, I think I like IT was literally twelve hundred square for a living room. Room in the basement there was a second living room. So I just turned IT into two more bedrooms, you know and so something like these .

are the inefficiencies that exist and realised the exceptional zon.

right? And you know how cheap IT is to throw up some drivers, you know was like fifty hundred box. So I didn't know the investment was almost nothing. And the amount of revenue can bring in for adding a bedroom on a short term revenue to you is crazy.

That probably paid itself off in three night. yeah. Now if you listed IT for sale, too.

think about how much is .

IT takes to find a deal these days is kind of look, I mean, looking at properties maybe in a .

way that other folks aren't. yes. So I i'll just tell you what I look for.

I think there's a lot of opportunity for value add. So flipping houses, people over lucky, but it's actually quite profitable right now. I'm not really a flipper c because I have a full time job.

But if you're into that IT can be really profitable. Have you guys heard of the burn method before? So this is just this idea of buying a renta.

It's kind of like flipping, but holding on to IT. So you buy a property you rebilitate bringing up to its highest and best use, you rented out, then you refinance IT, and you just keep doing that. washington.

And that was really popular up until a few years ago, and its still should be popular. But it's a little less efficient than IT used to be. But a lot of the bird method is based on speed.

You know, you want to do IT as quickly as possible so that you can refinancing get that money out by your next deal. But as I think i've told guys, like scaling up quickly is not really my thing. I kind of want to be slow and steady.

And so i've been doing this thing I did you maybe you guys can help me i've been trying to name IT but I how like the delayed burr or the chill burr where i'm just chill and is very cold theme the childer. Um so basically what i've done is you buy a property that is occupied and then whenever the tenants leave, then you renovated and bring that up to its highest investors that bring up the rents. Then if it's a duplex, which is what i've done, you wait to the other person, leaves that, you renovate that and then over the course of without twelve over eighteen months, you've really increased the rest and then you can refinance.

And i've been targeting this because you can find deals in a lot of markets right now where that deal that you buy right off the market is at least break even cashless. So two, three percent cash on cash return. Then by the time you refinance, you do the whole work, be with seven, eight percent cash in cash turn, which is great.

And maybe IT takes you twelve months to get to that return. But for me, that's totally fine because if you get into the bath even to three percent cash and cash return, when you factor in the potential appreciation, the amOrtization, which is basically just paying off your loan and the significant taxi vantages of owning real estate, I still think this does Better than an index fund. And when you've done with the work, IT will significantly outperform an index. Fine, at least in my .

I feel which are highlighting here is like patients and creativity, those who may be the key to success, where as like, including that night, any idiot can succeed investing in real state right in twenty seven, twenty thirteen. But now IT takes maybe more than outside the box way of thinking in order to be successful. So they could we're talking about running the numbers. And what makes a real estate purchase potentially a successful investment for someone? What should they be thinking about?

Yeah so I think the number one thing we started this conversation talking a lot about real influencers. I think some of the things that drive me crazy about IT is that sort overlooking a lot of the expenses revenue side of run a deal super easy, rent times twelve, that's your income. Sometimes you have other stuff that you can run out, like a parking spot or storage space or maybe of a coin up laundry.

But whatever IT is, you can figure that out. The other things that you need to factor in, of course, your mortgage payment, but IT doesn't stop there. You need to obviously account for maintenance and repairs.

But some of the things that people miss are vacancy. Vacancy is the silent killer of any real state deal, because even one month of vacancy is eight percent of your revenue for the year that can make or break your entire year. And so vaccine needs to be accounted for.

Property management tip most of the time, taxes. And I think the big thing right now in this market is insurance. Insurance costs have been going crazy in a lot of markets. I don't know what it's like in atlantic, but I know a lot of the southeast it's been going crazy. And so that's another thing you really need to keep in iron is what's happening with insurance rates in your in your area, whether they're likely to keep going up because that can be there's not much you can do about that. And IT can really be a detriment to your businesses profitability.

no doubt. okay. Well, earlier you see something about being willing to go IT on on a limb making a forecast. Is that like, oh yeah, you know so let's go head and get you .

on the record fire.

Need to look into your Christal ball. Like what do you think is going is going to happen with the real state moving forward because of the lack of supply, household formations are are climbing. Like all of these factors combined, do you think that continue to leads to rising home Prices?

I do think there IT. We're going to continue to see a weird slow market for the next year. So is my best gas.

I am not of the belief i'm going again annoy real state, real state influencers. I don't think in monitor its are coming down that much. Even if the fed cuts rates this week, which they're likely to do, I don't think they're come down that much.

I think they're going to stay in the sixties for at least the rest to twenty twenty four and probably well into twenty twenty five. I think even in the best case in area, there may be coming into the high fives next year. And so that keeps us away from what most economists think is like the magic number of unlock king, the housing market in increasing volume, which is about five, five, five and a half percent.

So I think we're going to see more low affordability, which means we won't have a tone of buyers, but I still don't think that we're going to see any sort of like sharp decline in Prices because people don't have to sell. And they've shown over the last several years that they're not going to unless they are forced to and they're not going to be forced to. This is not two thousand and eight or people were underwater on their mortgages and couldn't make their mortgage payments.

If you look at mortgage delinquency rate, they are incredibly low. If you look at for closure rates, they are incredibly low. And people are just going to chill like I think that's what's onna happen.

And I know that's frustrating, frustrated for me too, but I don't think we're going to see any resolution to this sort of stock housing market at least in the next six months. Um it's really hard to forecast after that. I will say that I think in certain markets, we will see Price to clients, but modest ones, you know two, three percent, eighty four percent.

While other markets continue to grow, we've seen the midst west in the northeast continue to be very strong, where the southeast, particularly florida ah and we also see texas seeing modest to clients. And if moderate, stay high for longer, will probably continue to see some more declines. But I don't I never have seen a crash in the cycle, and I still don't see IT coming.

Of course, there's all sorts of geopolitical uncertainty, all this crazy stuff that could know right exactly like a black swan, always possible. And Frankly, IT feels more likely now than IT has in a long time. But if you're just reading the fundamentals of the housing market, IT looks like we're infer some more flat, slow year.

Yes, I love seeing, by the way, that be manipulated. And it's like four closures up twenty percent, which means six people in the five people exactly like really, truly almost nobody is at risk of four holder these days because of what's happened with, you know what the rate that people i've locked in, what they paid for the home and what the home is worked.

Now nine percent, nine percent of is the amount of four closures we have compared to twenty ten. It's just not even close.

which makes total sense. And are we get just a few last questions to get to with you day? I'll get to those right up for this.

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right? We are backing of great talk in a real estate investing in a markey market with dave mayer. Dave, earlier you talk to maybe this be like our rapid fire sort of section, we will see how rapid we can keep IT.

But you talked about the time mine and you said, okay, mate, like ten to fifteen years. I'm curious, why did you choose those numbers? Is that because you do have a lot of .

fifty year mortgages on the properties? No, no. I just think that I thirty seven and I think maybe around fifty years old, this maybe when else stop working full time, I don't think I ever like truly retire.

And yes, people likes to work. But you know, i've been working in full time and investing on the side and write in books and doing all this stuff for a lot years. And at a certain point i'll probably want to slow down and OK. I think between age forty five and fifty, i'd love to just know that when the time comes in aside, you know, i'm tired that I can do that without having a really think about IT too hard.

More about lifestyle, you less about numbers totally.

Yes, exactly.

How do you think they've about ten screening? I feel like that is the thing that gets talked about not new enough, but that can be kind of make a break for real state masters.

I think it's crucially important to find tenants who are the right fit for your property, and that can be different for every property, every asset class. But I really recommend people set string criteria of what they're looking for and stick to IT. And I know I said earlier that vacancy is like the silent killer of real state deals, but actually eviction is how .

is very .

a big worse. I actually just did a show on this. I have an analyst who works for me, and I asked him, figure out what the average eviction costs, the a landlord. And on the low side, it's like sex ground and that's yeah you rather .

have a month or super expensive of that place sitting vacant than having router.

That's right. And you will be much less stressed honestly, what they can see. It's frustrating.

But you i've fortunately in fifteen years, I had to do one of action. But it's so trustful, it's a terrible situation. It's a terrible situation for tenants to. And so I think that's the thing about tenant screening that's so important is like you don't want to put someone in a situation where they are unlikely to be able to pay and beat their obligations. And so it's sort of on you as a property owner to make sure that you are finding a tenant where there's mutual benefit and mutual interest and ability to to meet the obligations of the contract.

That's that's so good. I I really like you're perspective there. You like you are helping them succeed potentially by saying, no, I do. I think it's going to work out yeah.

yeah, that's exactly right. It's like you don't you know I think that it's tempting to be A O this really person is willing to pay, but like are they able to pay? Yeah but I just think as a property owner of an obligation to your customer to make sure there's a very high probability that you that is a win win situation yeah are .

the million delegations day ah is real estate investing passive or not?

No, I don't think that is. I will say I invest in syndications and some fun. Do you want to explain with those are by .

those you mention that time and I know some people what that means yeah yeah.

So direct otherness of real state, which is like buying property with partner managing IT, even if you hire property manager like I have vest in out of state, have a property manager, it's not passive. I do almost nothing helping honor. I spend maybe five hours a month on IT, but I still takes work, and, you know, I still have to pay attention.

Syndications are when a bunch of investors pull their money together to buy large assets, a multi family building or an office building or whatever. And in those types of deals, there are typically two classes of investor. One is called the general partner, often referred to as a gp or a sponsor.

That's the person who finds the deals, makes all the decisions, actually does all the work. And then there is a classic investor called a limited partner, also called lp, where you basically give money and then do nothing. And so I invest as an lp in some deals.

Again, this is sort of my way of exposing myself to multi family and to value add investing. So I invest in a lot of places where people, you know, the my partner will, by a distressed multifamily property fix IT up, get IT up to speed and then sell IT off and hopefully we all make some good money. Um but those kind of deals are very, very passive because once you write the check, you don't have any rights really.

You just wait until the lp is that they're sell in the property and hopefully you get your cash. So that is about as passive as a guess. It's kind of like buying an index fine, right? Like you pick the find. And then once you do IT, you kind of just take your hands off of the way.

Yeah so that is fairly passed, but also probably not what most folks are thinking of, I guess, as thinking about doubling and getting into the little state.

Also, a lot of do diligence required if you're invest in that way to totally.

And I don't recommend people start that way. Yeah, there is no liquidity, which is really important to know. Like you can get your money out. You can't sell your share to someone else like you're in the minimum investment.

fifty k have to be an accredited investor. There's a whole lot of hurdles you have to jump through too.

yes. So that stuff is passive, and I don't recommend people start there anyway. Um I think the spectrum of how passive direct ownership is is big, right? If you want to be a flipper, that's a job.

If you want to buy you know A A long term rental that's in your market, good, you could probably spend less than ten hours a month on IT. You know it's not like some crazy time investment. So you just going to have to think about what time you're willing to put them.

Nice day earlier you mentioned the by rent calculator that you'll have over at bigger pockets. And of course, you've got your you get multiple podcast now. But what else can folks learn about you.

which APP to yes, check check out of bigger pockets or if you you're into the economic data news, you can follow me on instagram where i'm at the data delhi um where I share a lot of my um work. Could I do a bigger pocket? It's doing housing market analysis and all that.

Awesome day. We've really appreciate your journals today. mam.

Thank you so much. The absolutely thanks for everything.

joe. Nicer dive back into a topic that is sort out the root of out of money in some of the things that attracted aster, at least talking about personal finance on a personal level back in the neighed od hanging out on the from porch, drinking the beer, being like, right, let's talk about talk about our rentals. You will know that the alleys do IT.

I still love talking about realist, because I and I think part of that is what day was talking about kind of the simple, accessible. Everybody has had to pay rent at one point in time for a place to live and see if you can go visit IT is changeable exactly. So I think that's why people are attracted to IT. But was your big takeaway from this combo?

I think mine was when we were talking about some the different real state influencers out there and how they tend to over complicate the process. And we want as consumers slash investors, in this case, we want things to be so easy and we let that what a consumer nature overcome our approach to investing and truly like IT doesn't need to be packaged and placed into a course and deliver to you over six weeks.

Instead, he can just be something where you're like looking for a long time. You're looking at a specific market. You become an expert on that market and specific properties and you're able to spot the deals and you say, I wait a minute, that's actually really that's Price really well, IT isn't have to be more complicated than that.

If you know what the rents are going to be for a nice three, two in an area that has hide demand, maybe it's in a great school district. Whatever the parameters are, IT can be as easy as that IT doesn't necessarily have to be this thing that you have to take some sort of you'd to join a master mind, drop five figures in order to become a successful real state investor. Dave points, that's what they want you to think.

I know, I know because they make IT their money either is Better. exactly. So I I appreciate that day was able to highlight that because that similar, how is that you? I approached investing real.

That's why we wanted to have David unto because we think he's just one, he's way smarter than us. But then two, he thinks about real stay in the way you and I think about real estate, just a much deeper level because he eats and breeze at every decay so um I think my big take away was when he talked about the flexibility of real state, right? And he said that's what most people want and there are a hundred ways you can slice this thing up.

IT doesn't have to look like somebody else's approach to real estate. But as long as you keep that in mind and say, hey, guess what, maybe my route to becoming a corner, quote, real estate model that makes sense for kind of the goals I want to achieve is buying one property every three years until I get five property. So they say fifteen years down the road.

That's cool, man. Like if that's what you want to do and that's the approach you want to take, that can be incredibly, that can be successful for you. You don't have to own hundred properties in order to be some awesome over the top real state investor owning a handful of properties for a whole lot of people met.

And when you look at the numbers, that's the average realist investor owns some more between two ten rental properties. That is the vast majority of real state investors across the country. So I think a lot of people put a butcher pressure on themselves to oil.

A successful real estate investor looks like this. That's understand the case. And there is a lot of flexibility inside a real estate investing to be able to achieve what you wanted achieve. Now what someone else says is successful rate.

The beer you and I enjoy today was an attention, please, which is a db ipa. By bird, I is what you think thought this was kind of light.

a little bit weedy, a little bit of light. Lemon, five.

So when I was going, oh yeah, I think ah I told pick up on the the sharpness that you get from the like the limit I think that's from the switcher um but tropical notes for sure. But overall, I wasn't a heat train of this. And I onder Alice. I noticed the date on here is a little bit older, has like that older ipa sort of metal. I tend to IT on .

the elves so long.

Yeah, I think so kind of a obama because I was looking for enjoying the heck out of this one. But maybe I did not like IT also says on here, it's pillow and so which I tender see is like a soft and I like this like sharper. The base of ipa is not like overly litter, but ones where you can really the hot presence shine and through.

You don't really get that with this one here. Sometimes you want to just cut s to the chase to the house. But i'm glad, even still glad you I got to enjoy this today on the podcast head over over to the show notes at how the money that com, where you can find some of the different links that we mentioned during our discussion with dave myrie of bigger pockets fame, don't your conversation today? But body, that's gonna be IT for the episode until next time. Best friends are our best friends out.