May 2022

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According to a recent study by TransUnion, renters in their 20s and 30s want their landlords to report rent payments to the major credit bureaus. The main reason: Gen Z renters wish to build their credit health faster.

Rent reporting has a positive impact on the industry in general. There are plenty of benefits to landlords—not just tenants—of reporting rent to TransUnion, Experian, or Equifax. For example, landlords who report rent payments to credit reporting agencies find that tenants are more likely to pay rent on time. It also improves transparency in the rental industry, especially when you interview prospective tenants. 

Survey Shows Gen Z Tenants Want Rent Reported

According to the TransUnion study published in April 2022, 27% of property managers aware of rental credit reporting were doing it.

In total, the survey included responses from 350 rental property managers and 2,039 tenants regarding including rental payment history in the credit report. 

Here are some interesting facts and figures:

• 72% of landlords say rent payment reporting is straightforward.
• Two-thirds of the landlords who do not report rent to credit bureaus state that it’s not easy to do.
• 70% of respondents said they would consider reporting rent if it meant fewer late rent payments, fewer defaults, and a lower risk of eviction.
• Nearly 50% of landlords said that rent reporting attracts more financially responsible tenants.

Why do Gen Z tenants want rent reported to credit bureaus? Here are some interesting insights from the survey:

• Only 15% of tenants, in total, have their rent payments reported. 
• Nearly 30% of Gen Z renters have their rent payments reported.
• 60% of those under the age of 30 are interested in reporting rent.
• 70% of renters who have had their rent payments reported saw their credit score increase significantly.
• 77% of renters said they would be more likely to make rent payments on time, knowing how it could impact their credit history.

According to Maitri Johnson of TransUnion, the rent reporting is a win-win for renters and rental property managers.

“With a strong push from Gen Z renters, who make up a significant portion of the renter base today, we’ll likely see reporting become an industry standard—and as a result, a critical mass of renters who can elevate their standards of living through greater access to credit.”

“Ultimately, rent payment reporting is helping more people gain access to credit that can positively change their lives,” Johnson states. “Greater financial inclusion is good for the industry and good for consumers, and I’m excited to see it gain traction.”

So, if you’re a landlord or rental property owner, there are many reasons to consider reporting rent. One reason is that rent reporting is relatively rare—73% of landlords don’t do it. This means you can set yourself apart from the competition. 

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How to Report Rent Payments to Credit Bureaus

Tenants can’t report rent payments to credit bureaus themselves. Therefore, landlords can report rent using a property management app, or tenants can use a third-party rent reporting service. For example, landlords can report payment information directly to TransUnion. 

There are several independent platforms for tenants, including Rent Reporters, CreditBoost, Level Credit, or Rental Kharma. Most of these services have a one-time fee to enroll. However, landlords will need to verify the payment. 

Another way tenants can ensure rent payments count toward their credit score is by using a credit card. Then, each month they can make a credit card payment to their landlord.

Related: Why landlords should report rent to credit bureaus.

Does Not Paying Rent Affect Credit Score?

Tenants realize that missing a monthly rent payment will affect their average credit score, like being late with any other bill. However, some rent reporting platforms only report on-time rent payments. Therefore, a tenant’s credit score may not take a hit if they pay rent late. 

Reasons for Landlords to Report Rent Payments to a Credit Bureau

Most renters are interested in rent payment reporting, making it a compelling reason to offer this service. In addition, rent reporting helps prevent late or missed rental payments. Therefore, landlords can improve their quality of service by including rent reporting in the rental agreements. 

Collect rent from tenants on time

The most noteworthy benefit of rent reporting for landlords is on-time payments. Collecting rent is the most significant pain point for landlords. So, anything that can encourage on-time payments is something positive. 

Studies have shown that seven in ten renters would make on-time payments if their property manager reported rent. Data released by TransUnion show that this figure increases to eight in ten for Gen Z renters. This means you attract more reliable renters and reduce the risk of having to evict a tenant.

Related: How much does it cost to evict a tenant?

Fill vacancies faster

Offering rent reporting as a service in the rental process sets you apart from the competition. For example, suppose there are two identical apartments, but one landlord offers rent reporting to the three credit bureaus. In that case, it’s a no-brainer for the tenant to decide on which apartment to rent.

According to some reports, 70% of rental applicants would choose the apartment that offers rental payment reporting over an identical one with the service. Therefore, rent reporting can mean happier tenants and fewer vacancies. 

Rent reporting encourages tenants to pay rent online

Providing rental payment reporting is one of the best ways to get tenants to pay rent online. Of course, the easiest way to do this is to use a dedicated rental payment app that incorporates rent reporting. But using an app for rent payments has more advantages. For example, tenants can set up recurring payments, and landlords can block a partial payment.

Even though tenants can use digital payment apps like PayPal, Zelle, and Venmo to pay rent online, these platforms have significant disadvantages. First and foremost is that there is no way to report rent. So, if you are using a digital wallet for rent collection, it may be best to consider an alternative.

Tenants can boost their credit score

Many tenants love the idea of reporting rent payments to credit bureaus. After all, monthly rent is likely one of your tenants’ largest recurring expenses. So, just how much can rent reports improve credit history? 

According to Yahoo! Money, factoring rent payments into a credit report could shoot up a score by 60 points. This could mean that a tenant could go from being a lending risk with poor credit to a near-prime score in no time—and without changing spending or lending habits. 

A high credit score means your tenants have more leverage—therefore, it’s easier to pay rent. For example, Multi-Housing News says renters with a high credit rating could pay around 10% less for financing. In addition, they can secure better terms for interest rates on credit cards.

Conclusion

Gen Z renters will keep the trend going and demand that landlords report rent to credit reporting agencies. So offering rent reporting not only makes excellent business sense. But it’s a great way to improve landlord-tenant relationships and make the rental process as simple as possible.

David Greene:
This is the BiggerPockets podcast show, 604.

Rick Shargra:
There’s really no indicator that we’re sitting in a bubble, although it’s understandable people think that because we’ve had, I believe, 122 consecutive months now where home prices were higher than they were the prior year, which ism I believe the longest run in history. So I do think market corrections could happen across the country in certain markets and certain price tiers. Do I think we’re going to have a bubble bursting? No, but the truth of the matter is nobody really knows we’re in a bubble until it bursts.

David Greene:
What’s going on, everyone? I am David Greene, your host of the BiggerPockets Real Estate podcast, the best real estate podcast in the world. Here at BiggerPockets, we are committed to helping you find financial freedom through real estate. We do that in a number of ways, one of which is on this podcast, bringing in people who have found that freedom, people who have made mistakes as well as industry experts that can help you on that journey. Today’s guest is fantastic. We have Rick Shargra. Rick is the executive vice president of market intelligence for ATTOM, a market leading provider of real estate and property data, including tax, mortgage, deed, foreclosure, natural hazard, environmental risk and neighborhood data. Rick has over to 20 years of experience in the real estate and mortgage industries, and is one of the country’s most frequently quoted sources on real estate, mortgage and foreclosure trends. He joins us today to talk about what the heck is going on in this crazy market. I am joined today by my counterpart, the always fun, always intelligent, and always aware, Mr. Dave Meyer. Dave, how are you today?

Dave Meyer:
I’m doing great. Congratulations on 600, man. It’s the first-time I’ve been here since you hit the milestone.

David Greene:
Yeah, we stepped up production quite a bit. 600 happened pretty quickly after 500.

Dave Meyer:
Seriously, it felt like it went really quickly, but the shows have still been amazing. Even with the increased production, amazing how you and Rob and everyone else just bringing value to the listeners every single week or several times a week.

David Greene:
Well, thank you. We’re trying to. Speaking of additional shows that we’re making, BiggerPockets is creating a ton of new content and that leads us to today’s quick tip. Dave, what do you have for us for today’s quick tip?

Dave Meyer:
Well, my quick tip to check out BiggerPockets newest podcast called On The Market, which is hosted by yours truly. We’ve been doing this show for, what is it, six or eight months now? BiggerNews, trying to bring you all of the recent trends and data and news that really impacts the lives and strategies of real estate investors, and we want to scale that. So once a week, now you can find it on Spotify or Apple, or we have a whole YouTube channel as well. You can get the information that helps you formulate your strategy for 2022, helps you get an advantage in any type of market, and we keep it fun. We keep it light. It’s not this dense news show, so definitely come check it out if you want to stay on top of everything that impacts the real estate investing world. I think you’re really going to like it.

David Greene:
Yeah. At BiggerPockets, we are creating an entire family full of smart people to help you build your wealth, so do check out that show and make sure you check out more of these shows. Every time you finish a video, hopefully, you have time to watch another one, because we’re putting out more and more content. A quick public service announcement from us at BiggerPockets. There’s a lot of scamming going on. We will never, any of us on this platform, will never message you and try to sell you on cryptocurrency on Forex. We don’t have a WhatsApp.

David Greene:
We are not asking for you to give us your money via social media or online portals, so please, if anyone reaches out, they’ve copied our pictures, they’ve made a screen name that looks like us, but it’s not us. Don’t send them any money. The same goes for any of us individually at BiggerPockets, as well as the company, BiggerPockets as a whole. Before you consider sending anybody money, make sure that you’ve absolutely verified who you’re talking to is the right person. All right. Without wasting any more time, we are going to get into today’s show. It should start off a little fun and then we’ll be bringing in the guest. Dave, anything else you want to add before we get into it?

Dave Meyer:
No. I’m really looking forward to this show. Rick has been someone I’ve followed for actually quite a long time, because as he’s a leading voice on real estate data, and I think you’re going to learn a lot from the show.

David Greene:
All right. Let’s do it.

Dave Meyer:
All right, David. As we just mentioned, we are going to play a quick game. It’s just called “quick takes” and I want to get your quick reactions to three different headlines I am going to read you.

David Greene:
Did you say quick three times in a row, because I am known for being long-winded.

Dave Meyer:
No, but maybe I subliminally was trying to get you to go quicker, because I know Eric will come on and tell us we’re being too slow if we don’t do this block in five to 10 minutes, but quickly give me your reaction to this. According to Redfin, the amount of market competition actually went down from February to March, and anyone who’s listening to this, a lot of this market data comes a month in arrears, so we’re talking about March data, even though we’re just ended April. It went down from 67% of all homes facing stiff competition. Multiple offers in February dropped just slightly to 65% in March. Do you think this is the beginning of a trend, or is this something you think is just a blip or an anomaly?

David Greene:
Not the beginning of a trend, it is a blip, not an anomaly. I will quickly explain this happens all the time, and that’s because of what I call “flock of bird syndrome.” Most people when they’re investing in anything, when they’re doing something scary, they like to move with the crowd. So what we find is the psychology of buyers in real estate and have often said, “Buyers drive markets. “The psychology of buyers plays a very big role in how things work out. So when people see a lot of other people making money somewhere, they tend to think, “Oh, I should go do that too. It feels safer.” It’s like crossing the river with all the other gazelles so the crocodile doesn’t get you. The problem is often by the time you see other people making money, sometimes the money’s already made. So the way it works is, well, there’s been Gazelle’s in the rivers for a long time. All the crocodile’s are now there waiting for you, so that’s the worst time, time to go in.

David Greene:
I’ve seen this phenomena happen several times in the past, every time there is a significant change in the norm. So in 2017, 2018, I can’t remember where it was, but we saw rates go up three quarters of a percent, 1%, out of nowhere, and Tara Yarbrough was telling me a lot of flippers lost money during that time because buyers froze. They were just like, “I don’t know what’s going on. I don’t want to move,” and then a couple of months go by, everybody, “Oh, I guess that’s the new normal.” They all start buying at the same time the flock of birds goes that way. We saw this happen with the shelter in place. Everyone froze, “Not going to buy real estate. I don’t know what’s going to happen.” At a certain point, they’re like, “Well, I still need a house. Nothing’s changing. I better jump in.” This is too totally expected. I told everyone on my team expect to slow down for a month or two as buyers are like, “Wow, rates went up. This is a shock. Let’s freeze and think.” When people are like, “Well I guess that’s what rates are,” they’re all going to start buying again.

Dave Meyer:
All right. We need some gazelles to cross the river. I don’t know how I feel about this. I personally get it. I think it is interesting to see what’s going to happen with rates and what’s going to see, so I’m not surprised to hear you think that people are just freezing. I have to say, man, I hope you’re wrong though, I would love to see the market get a little less competitive.

David Greene:
Oh, me too. [crosstalk 00:07:31]

Dave Meyer:
I think it’s really-

David Greene:
Yes.

Dave Meyer:
… unhealthy where we’re at. I totally respect your opinion, but I hope you are incorrect about this.

David Greene:
I hope I’m incorrect too. I would love to see the market slow down. When you’re listing a house, the way it used to work is you look at the comparable sales. You find the highest you could possibly get and you find an average one and you would try to convince your client to sell somewhere between the maximum they could possibly receive, the highest comparable and an average one. Well, now you take the highest comparable there is, you throw tens and tens of thousands of dollars on top of it. You throw another couple 10,000 as a cherry on top, and that’s what the seller wants for their house. So everything getting listed is always the new neighborhood record. What I think may happen is instead of us listing for way more than what the comps show, maybe we get back to listing at what the comps actually show and have some reason to come back into the way home prices are valued.

Dave Meyer:
All right, great, and we’re on time. Second question for you. We all know that housing inventory is extremely low. We’re going to talk about this with Rick in the next section as well. One of the main things you constantly hear about as a potential solution is upzoning, allowing people to build an ADU or to build a duplex or second home on their property. Zillow actually did a recent survey to see if home buyers were actually interested in this, because there’s this whole, “Not in my backyard,” NIMBY syndrome where people say they want it, but they don’t actually want it. But a clear majority of homeowners surveyed, 73% voice support for at least one or more modest densification options, so almost or three quarters of Americans believe in this, you can’t get three quarters of Americans to believe in and agree on anything. Do you think this will actually make a difference, and do you think we will start to see more upzoning in the next few years?

David Greene:
I think yes, if this continues, you’ll start to see it happening more often, but I think the pendulum will swing back the other way when that’s over. So you’ll start to see that more people do this and then more investors make money, and then the NIMBYs get jealous that they’re not the ones making money, and then that some new tax will be created, the ADU tax, or if you have something on your home, like a house hacking tax, that’s what I’m afraid of that may come. But in the short term, yes, I do think more local municipalities will create zoning, less restrictions and more easing of use so that people can start putting more ways for people to live in their own property.

Dave Meyer:
Excellent. That was very quick. Well done. Okay. For our last story, Fannie Mae just released a big economic survey and there was all this information in there about mortgage rates, borrowers’ appetite. You should check it out if you’re interested in this kind of stuff, but the thing that really stood out to me is that they are now forecasting a recession in 2023. Do you think we’re heading for a recession?

David Greene:
No. I think it’s more likely that we could be in a recession and we won’t feel it because prices of everything keep going up, so I think the economy in general is functioning like carbon monoxide. You don’t know you’re getting sick until it hits very, very hard. So I’ve said this before wages are not increasing as fast as the price of food and gasoline and things that we need to get by. So in that sense, it will function like a recession, even though the price of assets keeps going up. Even if you’re getting three, four, 5% raises at work, you think you’re getting a raise. You’re not, if inflation’s at eight, nine, 10%. Even at 7%, you’re still losing money, so I think what we have to accept with creating all the extra currency that’s circulating throughout our economy is you can be in a recession and not feel it’s much more like carbon monoxide, which is why you have to be listening to podcasts like this one where you’re getting this information, because it’s not like smoke that you can’t miss when there’s a fire. It’s much more silent scary.

Dave Meyer:
Yeah. I hope we’re not heading for a recession, but I’ve read and talked to a few people recently that talk about the Fed’s interest raising interest rates and they’re going to do it aggressively. Two people, both the chief economics correspondent for The Wall Street Journal, who I interviewed on On The Market and Janet Yellen, both used the words, “Getting lucky for the fed, being able to successfully engineer this soft landing that they’re hoping to do.” So I hope we get lucky, but the world’s not feeling very lucky these days to me, so I’m not feeling optimistic.

Dave Meyer:
But I just want to caution people that when you do read these things as well, like when we hear recession, the most recent real recession was the biggest recession in U.S. history. It was the biggest economic downturn since the depression, really. So even if there is a recession just to be out there, it doesn’t necessarily mean it’s going to be years long. It doesn’t necessarily going to have to be really bad. It could be two quarters of half-a-percent GDP drop. We just don’t know, but I think it’s really interesting that a lot of economists are starting to see that. Those are all the questions I got for you. I think we made it under the allotted time.

David Greene:
Yeah? It’s a new year, a new me. Right? All right. Well thank you for that, Dave. Let’s grab Rick, bring him in here and see what he thinks about the real estate market and economy as a whole. Rick, Shargra welcome to the BiggerPockets podcast.

Rick Shargra:
Great to be here. Thanks for having me.

Dave Meyer:
Rick, thanks for joining us, really appreciate it. Could we start by having you just explain to our listeners what your position is? It sounds really cool. I really like your job title, and what you do on a day-to-day basis.

Rick Shargra:
Yeah. I’m the Executive Vice President of Market Intelligence for ATTOM, a data solutions company. It’s the first-time in my career that my name and the word intelligence have been linked together, so I’m very happy about that. But my job is mostly to be out talking about these real estate market housing market trends, leveraging our data to do that. I get to go out and speak at industry events, do these kind of podcasts, meet with the press. Also, I talk to some of our customers and prospects about their data needs, their use cases, how they’re leveraging this to run their businesses, so it’s a little bit business development, but a whole lot of applied data analytics in housing and commercial real estate trends. It’s the culmination of a 20-year accidental voyage into the real estate and mortgage industries that I never set out to do, but have been fortunate and blessed to have been able to experience.

Dave Meyer:
I’m sure no one ever asked you this in all of your media appearances, but could you just tell us what is going on in the housing market and what your read is of all of the information and data that you are privileged to take a look at every single day?

Rick Shargra:
Yeah. Yeah. It’s a really different conversation than we might have had a few months ago. I’m of the opinion at this point that while we still have strong demand, we are beginning to see a bit of a softening in the housing market. Prices continue to go up, but we’ve now had nine consecutive months of existing home sales that are lower than they were the prior year. We’ve had a similar number of months where pending home sales, another metric we track, are down on a year-over-year basis purchase loan applications that the Mortgage Bankers Association tracks our lagging behind both 2020 and 2021, and we’re seeing consumer confidence at the lowest level it’s been in decades. Now that’s been affected partly by COVID and every time there’s the rumor of a new wave, we see a hit to consumer confidence, but it’s also being affected by an inflation.

Rick Shargra:
It’s being affected by the war in Ukraine, so consumers need to feel confident about entering into a long term financial commitment. They need to buy a house. Oh, by the way, with home prices going up 17% year-over-year and interest rates now being double what they were a year ago, the average monthly payment for somebody buying a house is about 26, 27% more than it was for the same property a year ago. So all of that stuff is conspiring, we believe, to start slowing demand down a little bit. Realtors I talk to joke about it somewhat. They say, “Now we’re not getting 30 bids on a house we’re only getting 20,” but you can see inventory levels starting to tick up a little bit from historic lows. You can see days on market starting to extend a little bit, so it really does look like the market is going to normalize a little bit as we move throughout the rest of 2022.

David Greene:
Yeah. I want to ask you your opinion on something. This is the stance I’ve always taken, because I’m a real estate broker myself and we sell houses. In certain markets when there’s not a ton of demand, I do think rising interest rates and other economic factors could have an impact on prices as well as availability, but in others like where I am in the California, San Francisco Bay Area, other hot markets, it’s not unusual for us to see 10 to 12 offers on a decent house, not even the very best house, even the stuff priced at the high end.

David Greene:
So if something happened that affected interest rates to where half of the buyers got knocked out of the market, we might see just half of those offers, like five to six instead of 10 to 12, which is still plenty of competition to bid way over asking price and force someone to come in really heavy to get that house, and you to have 80% of the people looking are losers every time they write an offer. Is that the perspective that you’re taking on this as well? Do people need to understand that the lack of inventory and the amount of demand is so hot that something as small as interest rate hike isn’t going to lead to the drop in prices they’re expecting?

Rick Shargra:
Yeah. Great point, and there’s a couple of things to talk about here. One is that you’re absolutely right, real estate is ultimately a local game. So what you see in the Bay Area is different than what you’re going to see in Des Moines, Iowa. It’s different than what you’re going to see in Richmond, Virginia. The second thing to point out is that the market you are talking about is not the market or the tier of pricing within that market where those interest rates are going to be particularly material. If you’re looking at the Bay Area where the median price of a home is, I don’t know, 1.2, 1.3 million, excuse me, at the high end of that market, you’re typically not dealing with somebody who’s going to be all that worked up over a point or two on a mortgage, so local conditions will dictate this. You’re also right in that five or six people bidding instead of 10 or 12 still pretty much guarantees you a good price at the end of the day as a seller, so that’s the dichotomy we’re seeing.

Rick Shargra:
We are seeing signs that demand is slowing down, but there’s still enough demand that prices continue to go up, and that’ll be the case until we start to see enough inventory coming back to the market where you don’t have to be one of those five or six or 10 or 12 bidders on an individual property. So I believe we’re not in a housing bubble, I believe we’re not likely to see a market crash, not at all likely to see a market crash, but I wouldn’t be surprised if over the course of the year, we might not see some individual market corrections and your area, particularly at the high end of the market could be one. Pacific Northwest could be one. Markets like Austin, Boise, which had price increases that were unprecedented last year, we could see a little bit of a price correction in some of those markets. But everybody has to look at this in terms of what’s happening in their local market, as opposed to the kind of national numbers that we often talk about.

Dave Meyer:
Rick, I’m not much of a crash guy either. I haven’t believed that, but could you share with our audience some of the reasons and some of the fundamentals that support your opinion about the fact that you don’t see a crash coming?

Rick Shargra:
Yeah. A lot of people really try and equate what’s going on today in terms of prices and demand to what we saw, the mid-2000s, 2006, ’07 leading up to the crash in 2008, market conditions could not be any more different if you wrote them up on purpose. In 2008, we had an oversupply of homes available for sale. We had a 12-month supply of homes On The Market. The builders never got the memo, they just kept building after the market condition changed. That was followed by a flood of foreclosures entering the market, which added even more inventory, and now the builders were competing against their own properties from a year prior that were twice as big and half as expensive. It was a nightmare, really hard to get a loan back then because the lenders had basically shut down.

Rick Shargra:
The people who were going into foreclosure we people that were not only buying overpriced houses, but they were doing it on speculation. A very high percentage of them had adjustable rate mortgages. The only way they could afford the house was with a teaser rate. As soon as that rate adjusted their interest payments doubled and suddenly they couldn’t afford those properties anymore. It was a real nightmare. There was a story in our local paper here in Orange County, California about a cleaning lady who was making about $40,000 a year and had eight properties in Santa Ana, and all eight of them, amazingly enough, were in foreclosure. You wondered what the loan officer on the seventh or eighth loan must have been thinking before they approved that loan. Anyway, market conditions, fast forward to where we are today, we have a about a one-and-a-half to two-month supply of properties available for sale. That’s about a third of what we would normally have in a healthy market.

Rick Shargra:
The builders have not been building for a decade, so they’re trying to catch up. They’re having trouble building new inventory because of supply chain disruption. They can’t get appliances, roofing materials, windows, and so it’s taking them longer to bring properties to market. We have demand that’s demographically based, so this is not false demand. The biggest cohort of millennials who are the biggest generation in U.S. history are between the ages of 29 and 32. The average age of a first-time home buyer is 33. Even with interest rates being at 5%, they’re still lower than the six, seven and 8% loans that we saw back in 2008. The other thing to keep in mind is that first-time home buyer percentage is actually fairly low this time, and that’s your riskiest loan. During the build up to The Great Recession, first-time home buyer rates were in the high 40s, 45, 46, 47%. The most recent numbers I’ve seen on first-time home buyers in today’s market is about 26%.

Rick Shargra:
That means most of the sales are in the move up market, and people are tapping into the huge amount of equity they’ve built up to make fairly large down payments on their next property, which is keeping their monthly mortgage payments lower. That’s one of the metrics you look at to determine bubble is, what’s going on with mortgage payments as people are buying new homes? Another is the spread between rental prices and mortgage payments and rental prices have been going up as fast as home prices have. Again, none of the predictors that we would’ve looked at leading up to 2008 seem to be in place. Market dynamics are all different. The quality of the borrowers is extraordinary. In fact, the delinquency rates are the lowest they’ve been since the mortgage banker started tracking those numbers in the 1970s, and the economy is supporting it too.

Rick Shargra:
We’re creating jobs. Unemployment rates are very low, and usually that’s what I would look at as a trigger. If we see unemployment rates go up, typically, your delinquency rates go up. If your delinquency rates go up, your foreclosure rates go up. We’re still dealing with historically low rates of foreclosure, so there’s really no indicator that we’re sitting in a bubble, although it’s understandable people think that because we’ve had, I believe, 122 consecutive months now where home prices were higher than they were the prior year, which is I believe the longest run in history. So I do think market corrections could happen across the country in certain markets at certain price tiers. Do I think we’re going to have a bubble bursting? No, but the truth of the matter is, nobody really knows we’re in a bubble until it bursts.

David Greene:
Yeah. I love the point you made that this looks like how it looked in 2009, 2010, or maybe actually say the run up to that, so 2000 through 2005 or ’06, but the fundamentals are vastly different. For those on the outside looking in who just see the symptoms, you’re like, “Oh, that looks like the same symptoms as when I had a cold.” But for those of us that live in this world where we’re doctors, we’re like, “This is not the same virus. This is not the same kind of cold, even though the symptoms are the same,” and I get a lot of almost anger when we say, “Yeah, the market is still fundamentally strong.

David Greene:
People are getting 30-year fixed rate loans that they can afford. Their job is very secure. Rents are going up. There’s a lot of money flowing into real estate that makes it a desirable asset,” and they just don’t want to hear that. What they want to hear is there’s a crash. So I’m always trying to figure out how do you connect with those people who want to believe we’re going to have a crash, while at the same time recognizing, who knows? It could be. One thing that I’ve not heard spoken of wanting, oh, go ahead. I’ll let you say that. I’ll ask you my question next.

Rick Shargra:
No, just, I couldn’t agree with you more. I actually get really frustrated and my encouragement to anybody who’s watching or listening to this conversation is, anybody who’s selling you a guarantee of a crash is doing that because they’re trying to sell you something. I spent 24 minutes of my life that I will never get back watching a video that a colleague sent me as proof that there was a crash coming, and I wanted reach into the computer and ring the guy’s neck because he was-

David Greene:
I know feeling.

Rick Shargra:
He was misrepresenting the data. He was coming to false conclusions. Every forecast he was making, I could have refuted very, very easily, but there’s a lot of this misinformation out there, and people really have to be careful what they sign up for. There was a guy who was predicting millions and millions of foreclosures a year ago, and I had people sending me that because yeah, since the beginning of the pandemic, I’ve been out saying we’re not going to see another tsunami of foreclosures. People just knit together really lose math, and it ought to be criminal because they’re charging thousands of dollars for courseware and training programs that are really going to just suck people drive of their money without returning any potential benefits. So it’s a pet peeve of mine and the press gets caught up in it to predicting millions of foreclosures, tens of millions of evictions, and now we’re going to have a housing crash-

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
I guess you never go broke with a negative headline, but I’m sorry, it’s a pet peeve.

David Greene:
That’s my point. That’s what I want everyone listening to this to understand. Think about the last time you got angry at someone that said, “Don’t buy, a crash is coming.” The people that said that four years ago, five years ago, are you mad at them now that you lost out on five years of … ? No, it never happens. But if one person says you should buy and the market drops, you hate them with the fury of a thousand suns. It’s always the safe bet to go for the person who says, “There’s a crash that’s coming, you should wait,” and so that’s why so many of them do that, and they play into the fear. You said it, the media, every article, “Interest rates rise, is a recession looming? Tons of inventory will be flooding in the market.” Everyone likes to see that, and so that’s why media prints it. They’re not printing it because they believe it, they’re printing it because you will click on that, because that’s what people want to hear.

David Greene:
So we have to think about where we’re getting our information from that’s, and Rick, what I love is you’re giving data to support your opinion. It’s not, “Well, I’m just angry the housing prices would go up, so I’m going to find some way to vent that anger and say that they’re going to be going down.” Your theory on foreclosures is the same thing that I’ve been telling people for so long. To be honest with you, I’m going to let you share it. But when I would share it with someone and they would act surprised, I often thought, “How did you not see this?” It’s not hidden, it’s that they wanted to believe foreclosures were coming. So the obvious answer that’s right in front of them that no one’s going into foreclosure got tons of equity in their home, when market’s this hot, you’re getting equity while you’re in escrow. Even if you couldn’t make your payment, you’re going to make a whole bunch of money selling your house, because how fast it’s rising. Like “How did you not recognize that?”

David Greene:
But it’s this blinders that we put on where we want to believe there’s a crash coming, because it is hard to get a deal. It is frustrating. There is a ton of in the real estate space right now. Before we get into the foreclosure thing, I wanted to get your opinion on a question I haven’t heard asked very often. I remember in the last bubble, much of the wealth being created that was flooding into the real estate market was from the real estate market. It was home flippers. It was real estate agents that were crushed it, it was loan officers that were making ridiculous amounts of money, giving away all these loans. It was people that worked in the real estate space, making a ton of money and then they would invest it back into real estate, or they would go buy a boat, an RV. There were all these HELOCs where you could pull money out of stuff.

David Greene:
So it was this house of cards that the minute you couldn’t make money, when homes lost their value, the people making money by selling homes lost their money and the whole thing imploded on itself. But now what I see is more money coming out of tech, more money coming out of entrepreneur ventures like crypto investing and the NFT craze that we’re seeing. There’s people that are literally being millionaires because they bought the right cryptocurrency, and it’s a silly way to be making money. It’s not sustainable, but it is happening. Then you see money flowing from the overall wealth of the economy, the stimulus that we’ve created, where it’s just made so many people wealthy without them having to earn it the old fashioned way.

David Greene:
You got to find a place to park that money that feels safe, and smart people recognize real estate is a better long-term bet than buying some NFT that you’re hoping goes somewhere, or investing in a cryptocurrency that you hope becomes something better. What I’m getting at is it seems like where the money is coming from that’s going into real estate is coming from more sustainable places. You’ve got institutional capital, you’ve got hedge funds, you’ve got smart people parking their money into these areas where people are migrating to. Do you think that is another sign that the fundamentals are stronger, or do you think there’s something I’m missing there?

Rick Shargra:
No, I think that’s very well said. There was a lot of internal momentum, if you will, during, during that build up to the housing bust and the flippers then were not the flippers today. Actually, those flippers were more similar to what we saw with Zillow offers in the last year where it was an arbitrage model, “I’m going to pay full value or even too much for a property and count on increasing market prices to be able to make my margins.” Our data shows that the average gross margin on a flip was right around $60,000 nationally.

Rick Shargra:
Obviously, it’s going to vary market to market. We saw a heightened amount of flipping activity, but these flippers are making their money by going in and repairing a property and then being able to sell at a higher price because they’ve added value. If you’re flipping in an arbitrage model, your risk is much, much higher. Zillow lost $300 million in a quarter by mispricing houses and having to sell them for less than they paid. That was what we saw in the 2005 to 2008 flipping model, so when those profits started to derive, you saw the whole house of cards start to crumble. You’re absolutely right.

David Greene:
Yeah.

Rick Shargra:
A lot more institutional money coming in today. A lot more, I would say, cautious and thoughtful money coming in from individual investors. A lot more focus on longer term investments from people buying these properties. We published the RealtyTrac website, which has foreclosure data on it. Mostly individual investors use it and we surveyed them. Over the last year, we’ve seen the percentage of people doing single family rental investments continue to grow and actually begin to outpace the fix and flip percentages. So something like 60% of the investors we surveyed last time we’re claiming to be rental property owners, as opposed to flippers. To me, that’s a more long-term, conservative approach to investing, and I think we’re seeing a little bit more of that. So again, very different model and there’s a lot more capital being generated in other parts of the economy beyond real estate that had been supporting the real estate growth that we’ve seen.

David Greene:
The last point I want to make before I turn it over to Dave is I think in that 2000 through 2006 crazy, ridiculous rush we had, what people were banking on was speculation. They were speculating that the home would continue to increase in price. They had one extra strategy, which was, “I will buy low and sell high.” They did not understand cash flow. They did not understand the fundamentals of owning, managing, investing in real estate. Like you said, they weren’t improving the property. It was buy a brand new home from a home builder, wait six months and sell it to make $100,000.

Rick Shargra:
Yep.

David Greene:
That concept of speculation got somehow married synonymously to appreciation. So now when people hear the word “appreciation,” they assume that means speculation, right? Like one exit strategy, all your eggs in one basket, if one thing goes wrong, you lose the whole deal, but I’ve never seen it like that. I think appreciation applies to both rents and the value of the home, and you make money in real estate from it appreciating, but that doesn’t mean you do it foolishly. It still needs the cash flow. You still have to have enough money to hold it long term. I just noticed that a lot of the same people they get angry about, “There is a crash coming!” they get angry at the word appreciation. The minute they hear it clicks like, “Oh, that’s speculation. That’s bad.”

David Greene:
I got warned about that a long time ago. Have you seen that as well? At one point, HELOCs were synonymous with bad investment decision. Like a HELOC means you’re losing your house. We’ve finally gotten far enough away from it that people don’t automatically think HELOC means a death sentence to your family’s finances, but it feels like that same idea of buying a house and waiting long term for it to go up in value is getting labeled the same way that speculation was when people were trying to day trade real estate.

Rick Shargra:
Well, actually the last thing you said is probably the most accurate metaphor for what we saw. These were people that were literally trying to day trade real estate and that’s the wrong asset class to do day trading on. You’re just not going to see your values appreciate. Again, a company as big as Zillow, a multi-billion dollar company with multi-billion dollar valuation that’s been in the real estate market, that made its bones with a product called the Zestimate that’s supposed to give you at least an approximation of home value, and they managed to lose 300 million in a quarter by doing that kind of arbitrage, so it’s not a good play. I know a lot of flippers. They’re still very successful at what they do. We’ve seen actually an uptick in flipping activity in our data, but it’s people that know what they’re doing. It’s people that know how to price property. They’re going in and they are buying low and they’re fixing things up and they’re selling high, but again, a lot of the value that they generate is because they’re going in and making huge physical improvements in a property.

Rick Shargra:
They can just do it cost effectively and in a way that pencils out at the end of the day. Again, I think the investors in today’s market are a lot more thoughtful. They’re a lot more educated, I hope, and we’re not seeing lenders take on the reckless risk that we saw lenders take on 10, 15 years ago. That’s been the other big part of the difference is lenders have always been expected to provide the adult supervision at the party, and during that housing boom it was like they went away and left the kids home for the weekend and tossed them the keys to the liquor cabinet right before they left, and then we were all surprised at the outcome, so very different lending market. The CFPBs had a lot to do with that, putting restrictions in place, but even the commercial lenders, the people who specialize in bridge loans and investor loans have really tightened things up. So a lot of the risk that was inherent in those old models just doesn’t exist in today’s lending market.

Dave Meyer:
Rick, I want to get back to something you mentioned earlier. We’ve talked a lot about why the fundamentals are very different from the two thousands and why you don’t believe if there is a crash. You have said, though, that you think there could be market corrections in individual markets. Just for the record, based on our diatribe about people calling crashes a correction and a crash are not the same thing. A correction is a modest decline in prices that is usually part of a norm economic cycle. So can you just tell us a little bit about why you think, counter to what you just said that you don’t think there’s going to be a crash, what are you seeing that suggests that there could be some market corrections out there, and if you’re an investor, what to look out for in those markets, you think there might be corrections in?

Rick Shargra:
The latter question is harder to answer than the former. I’ll be honest with you, this is an arbitrary definition on my part, but I look at a correction as something in the neighborhood of a five to 10% price drop, and it will then recover. You mentioned normal economic cycles. There’s a lot of people involved, or wanting to get involved in real estate today who candidly haven’t been around long enough to see what looks like a normal housing cycle, and those cycles follow a predictable pattern. You see demand increase, as demand increases, you see more sales; as sales increase, you see prices go up, and then at some point prices get to a certain level where people look at it and go, “No, that’s too much money,” and then demand slows down and prices come back down with it, and you have those normal cycles. I believe we’re starting to see a little bit of in certain markets across the country, as we hit, what I call an “affordability wall; the combination of home prices going up, of interest rates going up, there’s a certain borrower.

Rick Shargra:
Who’s going to look up and say either, “I no longer qualify.” “I can’t afford that property,” or, “That’s just too much for me to be comfortable with right now. I’m going to take a step back and see what happens, or I’m going to look farther away from that property. I’m going to look at a smaller property and scale back.” Ultimately, that has an impact on demand. Lower demand ultimately has an impact on pricing. If you look back, and I did this, I don’t know I was doing this, but about a week ago, I happened to be looking back at 100 years of home prices. It’s funny when the 30-year fixed rate loan became legal in 1954 for existing homes, most people probably don’t know that before that you couldn’t get a 30-year fixed rate loan, is when we started to see prices take off, because now you could amortize your costs over a much longer period of time. If you look at that, we’ve only ever had one cycle where prices fell significantly in 100 years, and that was during the crash leading up to The Great Recession.

Rick Shargra:
If you remove the drop and the significant increase we had during that period of time, we’re right about where the historic trends say we should be in terms of home prices, but even though prices historically have always gone up, it doesn’t mean they go up consistently. There are going to be times in markets where prices up for a while and then market conditions change and they come back up. Would I be surprised to see parts of the Bay Area where home prices have been off the charts, or parts of the Pacific Northwest, where we’ve had incredible competition for housing over the last few years, or markets like Austin, or some markets in Florida see a little bit of a price decline, particularly at the higher ends where there’s not as much competition? No, I wouldn’t be at all surprised to see that. Do I think it’s the foreboding of a huge crash to follow? Not at all, really, but local investors need to become experts on their local markets.

Rick Shargra:
You want to look for things like population growth or decline. You want to look for things like job growth or decline. You want to look for things like wage increases. Are they keeping pace with, with local prices, with inflation? Inflation is the wild card, by the way. That’s really the X factor here. I believe that persistently high rates of inflation will hit people harder on the margins, so your low end of the market, particularly your FHA borrower is going to have a hard time affording to buy a house because they’re having a hard time affording to buy gas and food. That will have an impact going up the food chain to a certain extent where people are going to have to take a step back and see when they can get their finances in order, because everything is costing them eight, 10, 20% more than it did a year ago. Again, normal cycles, don’t see a crash, but local conditions will vary, but you really have to become the local market expert, much more than I can be a local market expert on 3,140 counties across the country all at once.

David Greene:
I’m so glad you mentioned what you just did, because rates going up will affect the FHA buyers significantly. They probably we’re barely able to afford houses in their area, rates jump a point or two, they can’t buy a house at all.

Rick Shargra:
Yeah.

David Greene:
Rates do not affect a person in my position.

Rick Shargra:
Right.

David Greene:
Right? So the house becomes a little less affordable. The cash flow is a little bit less. Maybe I have to put more money down, it is still vastly superior to anything else that I can invest in-

Rick Shargra:
Yeah.

David Greene:
… so I’m going to keep buying. That’s what I want to come across is that while this may make it harder for the average blue collar, mom-and-pop investor trying to claw their way out of their W2 position, which is our audience, that’s who we’re trying to help, this does not make things harder for Blackstone that can go borrow money at one-and-a-half percent, and has a 10, 20, 30 year horizon. It doesn’t matter to them if they make a little bit less money in years, one or two, and that’s who your competition is now, these iBuyer programs with tons of money flooding into them. I wish that this rate hike would cause a decrease in prices. As an investor, I would welcome that. It’s really hard to find property, but it’s not going to. They can go up a lot. For someone doing a 1031 exchange, they made $800,000 and they got to put it somewhere, okay. So they make less of a return, is that you, Dave, you got 800 grand you’re trying to figure out where to park?

Dave Meyer:
Yeah. Yeah. I am trying to park some 1031 money right now.

David Greene:
That’s been fueling a lot of the run up in prices is, it’s this self-sustaining ecosystem where, we have a city in where I live called Modesto, California, and it’s not the nicest area. It’s like maybe an hour-and-a-half away from the Bay Area. But if someone sold their house in San Jose for $800,000 and they got to park that money, and if they can’t, they’re going to pay 300 grand in taxes, they will gladly pay 50 to a 100,000 more than market value for that fourplex in Modesto. You have all these Modesto investors that are like, “Man, I can’t get a return. What kind of an idiot’s paying that much money?” They don’t see the big picture. They don’t see that idiot is saving $300,000 by buying that property or buying in the nicer areas because they know in five years it’s going to get ahead. I like that you’re mentioning this macroeconomic understanding and inflation-

Rick Shargra:
Yeah, and-

David Greene:
… it’s ripped. Go ahead.

Rick Shargra:
… and cash is king. So I think for investors who do have cash, market can conditions are absolutely tilting in your favor right now. We know that somewhere between 16 and 70% of investor purchases are funded with cash, because you don’t really care if mortgage rates go up a point or two, because you’re not financing.

David Greene:
Yeah.

Rick Shargra:
Even if you’re doing a bridge loan and rates are ticking up a little bit on those, it’s a very short term phenomenon. You can usually built that into your prices and pencil it out. But what you’re also talking about is interesting to me, because it’s one of the reasons home prices have risen as rapidly as they have, because we are seeing people not just invest in properties in Modesto, but we’re seeing people move from high-price markets to low-price markets. I call it the Boise factor.

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
Boise, Idaho had property values on sales go up 45% last year. Now I will guarantee you there’s nothing happening in the Boise economy to organically drive prices up 45%, but somebody sold-

David Greene:
Unless you call Californians moving there organic-

Rick Shargra:
That’s organic, and that’s exactly what’s happening, driving the locals crazy because they’re they can’t afford to buy a house now. I’m scared to death what’s going to happen when the tax assessor gets around to adjusting prices.

David Greene:
Oh, man.

Rick Shargra:
You don’t even think about this.

David Greene:
That’s true [crosstalk 00:46:28].

Rick Shargra:
But what’s driven partly by this work-from-home phenomena that COVID led to. Sorry, David, go ahead.

Dave Meyer:
No, I was going to say actually on our other show, On The Market, we were just talking about this, that Idaho just became the least affordable state in the entire country, surpassing Washington and California for this exact phenomenon. People are going there. It’s not actually leading to an improvement in the local economy to the point where wages are going up for people, but the cost of living is absolutely exploding there.

Rick Shargra:
You sold a house in Silicon Valley, you walked away with $800,000 and you bought a house twice as big and Boise for 400,000, and you really don’t care that you paid 40% over list because you have the money, right? It’s a phenomenon that doesn’t have a long life expectancy. I do think in some of those markets, that’s one, St. George’s Utah of all places. Phoenix, we saw similar patterns in markets like that and they’re due to settle down. We probably could see some price adjustments in those kind of markets, but people ask me, “What are the next hot markets?” I always ask for a show of hands, “Who had Boise and St. George’s Utah on your bingo cards last year, because you’re the person I want to ask about what the next hot market is.” I had neither of them.

David Greene:
Well, this is why this is a good conversation to have, because if you’re buying a property that will support itself through cash flow, it’s not risky speculation to try to determine, “Where do I think demand is going to go?” So I do think about this. We just bought a property, my co-host of the regular podcast, Rob and I, in Scottsdale, Arizona, and I was very big on that because so many people in California are constantly talking about not liking it here, wanting to go to a place with different demographics, different political bend and different home prices. If you’re wealthy in California, that’s where you want to go. You want to go to Scottsdale. So I can see how like when Boise is too much, well you’re in the desert, so you have to understand that’s a completely different scenario. But in general, the people, like New Yorkers, they don’t want to be in New York right now.

Rick Shargra:
No.

David Greene:
They’re all going to South Beach.

Rick Shargra:
Yep.

David Greene:
Right? There’s probably going to be a trend. The people in New York moving into Florida, that will be their version of Boise because the taxes are better and they can still work from wherever they are. If you’re trying to figure out, “Where’s a market I can get to before everyone else does?” I do think that’s the game you got to play, because if you just want to say, “Oh, let me just go to a city and find a house on Zillow and buy it,” good luck. It’s very, very difficult. So you have to understand the psychology of the people that are moving, figure out where they would want to be and then get there before everyone else does, and hen get a very strong, fundamentally sound deal that you could afford to keep for the long term. It’s definitely made investing a lot more complicated than it was in the good old days-

Rick Shargra:
Oh, yeah.

David Greene:
… when we were like, “Send out some letters. Someone will reply offer to buy their house.” We were all getting hung up on, “Oh, but the roof needs $4,000 of repairs. I don’t want to have to deal with that,” and now we’re looking at it like, “Man, why are we stuck on those details when we see what it’s turned into now?”

Rick Shargra:
You’re happy to find a house you can buy.

David Greene:
Yeah, that’s right. There’s 12 other people that want it. It’s the Hunger Games. You got to hope you’re the one left at the end,

Dave Meyer:
Rick, before we go, I want to come back to something, you, David and I were actually chatting about before the show, but you had some really interesting insights into the foreclosure market and how investors should navigate that. Could you tell us a bit about that?

Rick Shargra:
Yeah. Unfortunately, my foreclosure background goes all the way to my beginnings of my career in the real estate and mortgage industries. I spent 10 years with RealtyTrac, during the foreclosure crisis and we were publishing the largest database of foreclosure information at the time. I can tell you that during that cycle, there were a couple of very unique things going on. One was that 33% of all homeowners across the country had negative equity in their properties, not just foreclosure borrowers, all homeowners, so that’s how far home prices had fallen. Virtually everybody in foreclosure was upside down. Because of that, they couldn’t sell their home unless they got a short sale approved, which was an incredible hassle for people.

Rick Shargra:
Although we did see short sales go up a bit during that cycle, very little was selling at the auctions, because the lenders were trying to get the full amount of debt back on a purchase, and investors simply weren’t biting because prices were too high, so a huge percentage, much, much higher percentage than normal of properties going into foreclosure ultimately, went back to the banks, or went back to the lenders and they became REO assets. So people that were successfully buying and flipping or buying and renting foreclosure properties during that cycle waited for the repossession. They knew the bank was going to be hanging onto these properties for a while. A little known fact is, a lender doesn’t have to take the law loss on a property they foreclosed on until they resell it. So in a lot of cases, the banks were simply hanging onto these properties to defer their losses, because they were under such incredible financial duress during that period, and the best deals were typically found in those REO assets. This market, again, could not possibly be any more different than that market.

Rick Shargra:
There’s a record amount of homeowner equity across the country, $27 trillion of homeowner equity, just a ridiculously high number. To David’s earlier point, I think we’re going to start to see a return of cash out REFIS, and even some HELOCs as people start to tap into that equity, largely for home improvement, because they’re not going to move because they don’t want to buy a more expensive house with a more expensive mortgage. Anyway, this cycle, according to our numbers at ATTOM, about 90% of borrowers in foreclosure have positive equity in their homes. There is no reason for those borrowers to lose a home and lose more of that money to a foreclosure auction when they can sell it in a huge seller’s market. So for any investor who’s looking to participate in the foreclosure market this time, you need to find those borrowers, those homeowners, in the earliest stage of foreclosure possible and reach out directly to them, or work with a realtor who specializes in working with distressed homeowners, and have the realtor reach out to that homeowner and try and execute a deal before that foreclosure auction.

Rick Shargra:
The other thing I will tell you, and I spent five years working for auction.com back in the day is that the auction companies are reporting record sell through rates at the foreclosure auctions. Normally, 30 to 35% of property sells in an auction. Today, that number is between 65 and 70%. So if you think about the fact that most homeowners in distress should be able to sell a house before the auction, 70% of the properties getting to auction or selling at the auction, that doesn’t leave very many properties going back to the lenders. So your strategy as an investor, this cycle has to strike way, way earlier in the food chain in before that REO takes place, before that repossession takes place and there will still be deals out there, but you’re going to have to get to them much, much earlier.

David Greene:
That’s a great point. I’m glad that you shared it. It’s very easy to look at it at a shallow level and say, “Oh, foreclosures are coming. I’m just going to wait.” But in a market like this, it doesn’t go to foreclosure, they sell it, unless they just are ignorant and they don’t understand. Then it goes to the courthouse steps and then a non-ignorant person buys it. You’re not seeing inventory sneak all the way to the very end like before. I looked at it like back then the market was saturated with homes. You said it perfectly, there was too much supply. It was like, imagine soil that is just completely saturated with water. You pour a bucket of water on that, and there’s nowhere for it to go. It just floods over and there’s too much of it. Well now it’s like pouring a bucket of water onto the sand at the beach.

Rick Shargra:
Yeah.

David Greene:
It doesn’t matter what type of water it is. It’s so thirsty. We have such a demand for inventory that it just sucks up right off the bat, and so waiting for that overflow to run to you to get a great deal isn’t the same strategy. Really, the only answer I can see is we need to build more houses. We need to make it easier for builders and developers to create more inventory in the places that people are moving to. Outside of that, it’s difficult to see how real estate is going to stumble for a very, very long time, so we just have to be creative.

David Greene:
As people listening to shows like this that are getting the inside scoop on what they can do to be successful, Rick, I really appreciate you being here to share some of this information with us because it’s the facts that matter. It doesn’t matter how angry you are or you want to believe there’s a recession coming, or somebody on YouTube is ranting about the next time, and if you don’t know what you’re listening to, you hear that you’re like, “Yeah, I’m going to wait,” and four years go by and prices are twice what they are right now. It just seems incredible, and you’ve lost a lot of money. Like we said, nobody gets angry at that person.

Rick Shargra:
That’s the person they should be the angriest at. Now the numbers are the numbers, and there’s an old cliche in real estate, which you’ve probably heard before, which is that the best time to buy a house was 15 years ago, and the second best time is today.

David Greene:
Mm-hmm (affirmative).

Rick Shargra:
If you have a long enough outlook on this, or if you’re not looking to do that arbitrage model and buy today and sell tomorrow and hope for the best, typically, for most people real estate’s a pretty good investment, if you know what you’re doing.

David Greene:
There you go. Dave, any last words?

Dave Meyer:
No. Thank you so much, Rick. We’re definitely going to have to have you back either on BiggerNews once a month or on our other show, On The Market. You’re a wealth of knowledge and appreciate your really analytical and data-focused approach to helping everyone understand the housing market.

Rick Shargra:
I appreciate it. I enjoyed the conversation and yeah, let’s do it again soon.

David Greene:
Thank you very much, Rick. This was awesome. All right, and that was our show with Rick. Man, that guy is just a gem. What a wealth of knowledge and insight. What did you think, Dave?

Dave Meyer:
I loved it. I think he provides a really well-reasoned, sober analysis of the housing market, because there’s so much going on, and it’s understandable, really to who be confused about what’s going on, but that’s why we do these shows, to bring on people who are experts and who have the data and the experience to help us interpret it. I learned a lot from Rick. I think he has a very good read, similar to how I see the housing market personally. I hope everyone got a lot out of it. What do you think?

David Greene:
Yeah. I feel like it’s so hard to know who to believe, especially, so you’ve got the increase in social media, the increase in content being made on platforms like YouTube and TikTok. You’ve got a lot of thirsty gurus that are out there trying to get attention and they’ll say whatever it is, it grabs your attention. It is very common to hear some people say, “Buy other rails that you can,” and others to say, “Don’t touch it. You’re headed to a crash.” It’s in absolute polar opposites, and you don’t know what’s to believe. So in an environment where you have all of this confusion, my advice is you ground yourself in facts. numbers can’t lie to you. Numbers are not sensational. They don’t scream and say, “Watch me, click me, follow me.” They don’t ask for your money, and so that’s what I trust. When you find a person like Rick, who based their information off of numbers, I feel much more comfortable, and that’s why we wanted to bring him in front of the audience today.

Dave Meyer:
Absolutely, and that is exactly what On The Market our new podcast is all about. It’s about presenting you this information in an unbiased, logical way so you can understand what is going on without all of the sensationalism out there. I like that you called them thirsty gurus. I think that is a very funny way to refer to gurus because they’re a thirsty bunch.

David Greene:
I just made it up right now, actually, so sometimes my own-

Dave Meyer:
I like it.

David Greene:
… genius only comes out in a spontaneous creative moment. This happens when they make sure the green M&Ms are not in my bowl.

Dave Meyer:
This is why, the green M&Ms slow you down?

David Greene:
Well, there’s an old theory about it, there was a group like Van Halen or something where they were considered divas because they didn’t want green M&Ms in their bowl. I was pretending like I was a diva there.

Dave Meyer:
Oh, oh no, not a diva. You’re a man of the people.

David Greene:
Thank you for that. So are you, and if the people want to fall more of you, the man, where can they find you?

Dave Meyer:
I am most active on Instagram where I am @thedatadeli. I know it’s an absurd handle, but I really like data and I like sandwiches, so I’m sticking with it.

David Greene:
You’ve married two beautiful things together, and you threw alliteration in there. It’s incredibly profound how you’re able to do that.

Dave Meyer:
Yeah. Well, do you know Kaylee who works on the publishing team at BiggerPockets?

David Greene:
Mm-hmm (affirmative).

Dave Meyer:
She came up with it. She came up with it in two seconds. She was like, “You love data, and you love sandwiches, datadeli, obviously.”

David Greene:
Man, at BiggerPockets we got a bench deeper than the Golden State Warriors. The talent just oozes from everywhere. If anybody wants to follow me, hear more about what I’m thinking, maybe you’re like, “Man, I really wish David Greene could have talked more, but Dave Meyer forced him to give very short answers and I wish he could expand,” well one-

Dave Meyer:
Yeah, blame it on me. It was always my fault.

David Greene:
It’s our producer trying to make sure you guys have a good show because you complain when we go too long, so it makes sense. But if you wanted to hear more, go to the comments on YouTube and say, “I wish you guys would’ve expanded on this point,” or, “I wish I could have heard more of this,” or, “I wish you would’ve asked this question,” and I will do my very best to get you the information that you’re looking for. You could follow me online everywhere on social media at DavidGreene24, there E at the end of Greene. You can also message me on BiggerPockets, or you can find me on YouTube at David Greene Real Estate.

David Greene:
The point is we want to give you all the information we possibly can at BiggerPockets. We want to flood you with value, and if we can’t do it on this hour to hour-and-a-half podcast, there’s other mediums where we can still get you what you need. So give us a follow, let us know what you thought and make sure you’re also BiggerPockets. Please share this podcast with anybody that you love. Subscribe to it when you hear when a new episode comes out and keep following us because we just get better with age. All right, I’ll get us out of here. This is David Greene, for Dave, not the thirsty guru, Meyer signing off.

Dave Meyer:
I need to get something that attaches to my chest so when I move, the mic moves with me-

David Greene:
Oh, yeah. Like a gimbal for yourself.

Dave Meyer:
Yeah. I move around a lot. [crosstalk 01:01:10]

David Greene:
You’re like Axle Rose from Guns ‘N Roses doing this snake when you’re recording.

Dave Meyer:
Yeah.

Dave Meyer:
(singing)

David Greene:
Yeah. That’s really good, actually.

Ken Zener, KeyBanc research analyst, joins ‘Power Lunch’ to discuss the affect of tightening cycles on the housing market, how much further homebuilder stocks could fall and more.

Mindy:
Welcome to the BiggerPockets Money podcast show number 297, where we talk to Robert Farrington, a college investor, about paying for college.

Robert:
So there’s all these pie slices that you could have bigger slices of some, smaller slices of others, but they all go to paying for college. And my ideal for you would be to minimize the student loan slices and maximize all these other slices before you get there. Of course, everyone’s passed a little different but there’s a lot of ways to get there.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen and joining me today is David [Perrey 00:00:31]. David, what’s up?

David:
Not much, just learning about college.

Mindy:
This was such a fun episode. I’m so excited to jump into it. David and I are here to make financial independence less scary. That’s just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

David:
Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or start your own business, we’ll help you reach your financial goals and get money out of the way so that you can launch yourself towards your dreams.

Mindy:
David, I love Robert Farrington and I’m so excited that he is back here today. I very selfishly had a ton of questions for him about paying for college because my daughter is a freshman in high school. She will or will not be going to college, who knows? It’s up in the air right now. But if she is going to college, I want to be able to pay for it in a way that doesn’t cost me a ton of money. And he had a lot of really great tips today. I’m so glad that we had him on.

David:
Well, and for me being in the military world and a veteran, we don’t really have to spend time learning about how to pay for school and everything, because we’ve got all these awesome tuition and GI bill benefits. So it’s one aspect of the financial spectrum that I’m not super educated in at all. So I learned a ton through this, including the fact that I chose the wrong investment vehicle for school, for my kids. So, hey, it is what it is.

Mindy:
But now you can not further compound the… I don’t want to say bad decision because it’s still a good decision, you’re still putting money away for your kids, but you’re not going to put any more money into that account. There’s other opportunities now for you to choose from. So that’s great.

David:
Absolutely.

Mindy:
Today we are joined by Robert Farrington. Again, we went 266 Robert Farrington less episodes. He came on episode 267 to talk about the pause in the student loan repayment. Almost immediately after we recorded that episode, they changed all the rules again. So we decided we should have Robert Farrington back to talk about his area of expertise, which is paying for college and college loans and student debt and all the things that are associated with going to college. So, Robert Farrington, welcome back to the BiggerPockets Money podcast.

Robert:
Hey, thanks so much for having me back. I’m honored that I made the cut to come back again. So this is great.

David:
It was close.

Mindy:
Many short episodes later.

David:
I mean….

Mindy:
It wasn’t close at all. He was great last time. Actually, let’s talk about that really quick, the student loan repayment. That was paused until March 30th, May 30th? I can’t keep up. It’s so hard to remember.

Robert:
May 1st right now, as of today but by the time we record this, because that’s what happens after we record a show, it will likely be extended again. And the word on the street is it will be extended again, probably until the end of the year.

Mindy:
This episode is releasing on May 2nd so we are recording a little bit earlier. I’m not sure exactly when they’re going to announce the student loan repayment moratorium extension, but I bet they will, because they always do right after we record so look for that. And again, if they don’t, make your payments… So, okay. How smooth was that?

Robert:
That’s some solid advice right there. I like it.

David:
I made that exact point in my Facebook group the other day. And of course, you don’t always get met with the… sometimes you get met with some resistance with that statement. But what I was trying to imply is, look, hey, if you make your payments, while this might happen, then at least you’re setting yourself up for success. Because if you bank on it happening and it doesn’t, you’re just hanging yourself out to dry.

Mindy:
Yeah. And in episode 267, when Robert last joined us, he gave some tips for what you need to do to prepare yourself to start your payments over. Again, remember a lot of these payments have been completely withdrawn, all your information is gone. Maybe you’ve moved because it’s been two years since you had to make a payment so just… you want to make sure that all of your information is updated. And Robert gave a lot of really, really great advice. So again, if you have student loans and you are coming up on this end of the repayment moratorium, you need to listen to episode 267 for all the great advice that Robert shared there. But today, we’re looking forward, we’re looking at paying for college and we’re looking at the cost of college in general. So a couple of weeks ago on Twitter, there was an article that’s called: Here’s what I wish someone told me before I racked up $180,000 in student loan debt by Dominick Bagnato.
And I’m not going to read the whole article to you. You can read it yourself, but there’s a part in the beginning. It says it is a singular detailed anecdote of one 37 year old’s journey through his student debt. It is meant to inform any reader who is interested in the student loan debt conversation about its personal realities and it is especially meant to be read by an audience of 17 year olds and their parents who may be making decisions about college right now. Because so many of us have been told that we need to go to college, but hardly any of us has been given an example of the true cost of that choice. Many people barely considered the decision of whether or not to go to college at all, before launching into the decision of which college to attend. Even then, the true financial costs and eventual life costs are rarely ever explained.
So Robert, I want to look at that last bit for a moment. Many people barely consider the decision of whether or not to go to college at all before launching into the decision of which college to attend. I grew up in the 80s. I know you guys are shocked, because I look so young, but I grew up in the 80s. And when I was in high school, you graduated from high school and then you took the summer off and went to college. That was it. There were no other options. High school then college, it wasn’t an option to not go to college. We didn’t talk about trade schools. We didn’t talk about military. We didn’t talk about anything, high school college to the end. And for so many years before I graduated and even after I graduated, that was the same story that people were being told. So what are some considerations for when people shouldn’t go to college?

Robert:
Well, I think you hit it on the head. I kind of view it as a pendulum and I think the 80s were the start of the outward swing, where everyone had to go to college. It’s also when you saw a decline in trades of… Every high school used to have an auto shop and a wood shop and all these things and then all those things started getting replaced with technology and because every kid had to go to school. Well, our high school district nearby here in San Diego actually just announced they’re bringing back auto shop. And so I think that pendulum is starting to swing back a little bit in terms of the extreme of everyone going to college because, you’re right, not everyone needs to go to college. But, I want to put an asterisks there because the data still says, even through today, that the average college graduate with a bachelor’s degree earns anywhere from $300,000 to a million dollars more, over their lifetime, so we’re talking over 40 years of working after college than a non-high school graduate.
The question is what is the net present value of $300,000 to a million dollars? Because you get to a number and if you spend more than that number, it’s going to be a negative ROI on your college degree. And there’s also the personal factor in that. Some people really just want to work outside and not have a desk job, that is how they wired as a person, right? And so maybe there’s alternatives there. But the problem is we don’t expose our kids to it like we used to expose them. Kids don’t know that you could go work for the power company and make $200,000 a year, but yet can, going out and being a line men and climbing the pole, you can make a hundred to 200,000 bucks a year and that is a solid income.
But we don’t tell our young adults that today, right. Everyone has to go to college, that’s the only way you make money and it’s just not true. So do people need to go to college? Yeah, I think 40 to 60% of high school graduates probably should go to college, but then I think a good chunk of them probably don’t need to and there’s other options, the trades, starting their own business, joining the military. I bet David loves that one, but there’s a lot of options in that, there’s that other 40% that I think would benefit from doing something else, not racking up the student loans, not racking up a bunch of debt and going out and earning.

Mindy:
I love that you put a number on it, 40 to 60% of high school graduates don’t need to be going to college. I think that’s… First of all, I love that you said that and I’m so shocked that you would say that because when I was growing up, it was a hundred percent. So it’s weird to hear somebody acknowledge that not everybody should go to college. And I know that I’ve said it before too, but it’s nice to have somebody to agree with me.

David:
So I’m glad that you mentioned the trades and I’ll say from an investor standpoint, I hope that the pendulum is swinging because where we are right now, people are all worried about materials and costs and whatever, but I’ll tell you, for renovations, I mean, good luck finding a master electrician or a master plumber. So I have an electrician right now on a job site and he has been slacking and we’re going to end up having to let him go. We can’t find another permit to replace him or electrician to replace him on the permits. It’s like we’re kind of stuck and so there’s a massive shortage. And even here in Missouri, I mean, the amount of money I just paid a plumber for a two day job, that guy’s making great, great money, more than I am and for plumbing.

Robert:
Well, and you’re spot on. I recently had a plumber as well and it was the youngest plumber I’ve ever had. He was in his late twenties, right? And I’m like, why did you do this? He’s like, well, I never wanted to go to college. I liked working with my hands. He’s like, I got a job with a big plumbing house. They paid for all my apprenticeship, showed me how to do it. I worked with them so I was zero debt. He’s like, I was 22 years old and he’s like, I was making 80,000 bucks a year at 22 and then I just kept getting experience. And then soon I was doing gigs on the side and working on Saturdays outside the job. And then he is like, then I started my own company and he is like, it’s great. But he has no debt and is making good money. Now, is he saving it? I don’t know. But at the same time, he has that potential to earn and he’s debt free and it’s a great gig, right? And there’s a huge demand for it.

Mindy:
Enormous demand. And you hit the nail on the head. He signed with a big plumbing company who can’t find anybody, so they paid for him to learn how to do this.

Robert:
Yep.

Mindy:
He’s in plumbing college, no cost to him. 100% scholarship.

Robert:
And I think that’s the thing. The question to me isn’t necessarily, do you need to stop learning after high school? The answer is no, you need to keep learning and bettering yourself and getting an education. The question is, do you need to pay a fortune to do it? Because there’s a lot of alternatives today, whether it’s the trades and apprenticeships and that kind of thing or a coding academy, if you’re into tech or whatever, right? There’s so many different ways now that you can learn how to do things. Shoot, you could probably watch YouTube videos, become a freelancer and do other things like that as well. There’s a lot of options. Now, what’s right for you is going to vary, right? Because there’s also some people whose personality is like, I need to be in a seat in a classroom because that’s how I learn and I can respect that. But there’s also people that need to learn from being hands on, that can do other things and can self teach and different things like that.

David:
And I think people need to… I used this phrase before we started talking, people need to look at the decision to go to college as more of a business decision than a hobby decision. And so the plumbing thing ties in perfectly with that. If you look at it from a strictly business perspective, this guy is taking a job where he has no risk because he is getting paid to go through this apprenticeship, that they are paying for. He has no risk out of pocket, no cost, no nothing, with a pretty much guaranteed job on the other end because they just paid you for all this so they’re going to hire you. Versus… And there are definitely degrees like that, right? If you make it through as an architect, a lawyer, a doctor, you make it through any of those schools, engineer, whatever, there’s a really good chance that you are going to get employment on the other end.
But there are also degrees that you can take that are fun or they are exciting or they’re something you’re passionate about, but there’s not necessarily a guarantee for income on the other side. And not to say that you can’t do very well, you can do what you love, you can travel, you can do whatever but when you’re taking on a hundred, $200,000 in debt and you don’t know what the end… what the opportunity is on the other side, that’s a massive risk and you’ve got to make sure the up side’s there. Otherwise, it’s just a bad business investment, right? It’s…

Robert:
And that’s how I like to frame this. I do like to frame the how do you pay for college discussion in terms of ROI, return on investment, right? So if you know that you’re going to make 300 to a million dollars more over your lifetime, the net present value of that number is anywhere from $30,000 to $80,000 and that’s just the math, right? So if you’re going to make a million dollars more over 40 years, your net present value with interest rates and you do all the calculations, don’t spend more than $80,000 or else it’s going to be a negative ROI. Now, that’s not to say that there’s a lot of fringe benefits to college education, right? But I do think a lot of those are overvalued, right? So you hear this thing of your network and the experiences and it’s who you know and… I’ll give that to you.
If you’re going to Harvard and you’re going to rub elbows with all of the future supreme court justices or whatever, there’s probably some value to that. But if you’re also that person, you’re probably not borrowing that money to do it too. So, there’s a big trade off on that front. If you’re going to actually borrow the money and you’re going to do that, you need to think in an ROI mindset. But I also don’t want to dismiss anyone from taking on any individual career. But I do think it’s important people to think creatively about how you get there. So for example, maybe you need to go to community college for two years, which is free in almost half of the states in the United States, right? So you can go to community college for free. I mean, you got to pay for books but the tuition and stuff is free and then transfer to a four year school.
And so you can maybe knock out a degree for 10,000, 15,000 bucks now and now you’re almost guaranteed an ROI on your education. So the question is, how do you want to do it, right? I don’t want to dismiss anyone. If you want to be an art history major or whatnot, go for it. But on the flip side, you need to think creatively, potentially on how you get there so that you don’t screw yourself up financially. Because the worst thing I see for people is… I always like to think of the outcome, right? So let’s just say you graduate in this degree you love and you went to film school, like the guy in the article that you mentioned, but you’re going to hate your financial life for the next 15 to 20 years after you graduate as a result of that choice. Now, do you want that or would you rather take a little weird approach for two years when you’re 18 to 20 and then enjoy your twenties and thirties in doing a career you like, right?

Mindy:
Yeah. I think it’s really unfortunate that we ask 17 year olds and 18 year olds to make these life decisions and to saddle themselves with these life altering debts that they will be paying for 15 and 20 years or declare… Well, you can’t even get rid of them with bankruptcy, can you? But it’ll mess up your credit.

Robert:
Rarely.

Mindy:
It messes up your credit if you don’t pay them, right?

Robert:
Well, it’s not even that… Of course, it messes up your credit.

Mindy:
Yeah.

Robert:
And yes, it’s rare to declare bankruptcy and if you’re able to, it’s typically because you have a lot of other issues going on, such as a disability or other things. So maybe your life didn’t work out the way it should have, but there’s probably other extenuating factors.

Mindy:
Okay. So, I mean, it’s hard to get rid of these loans other than paying them off or getting them paid off through other means. And it’s really frustrating to see that these kids are… I was 17 when I graduated high school. I chose fashion design as my major. Everybody who has listened to this already knows. They know that I don’t enjoy… I don’t care about fashion. Right now I’m wearing old clothes from my husband, which are comfy and it’s cold outside.

David:
For the record, he’s very fashionable and they were fashionable for him, right? Nobody is questioning [Carl 00:17:11].

Mindy:
Nobody is ever looking if it’s any fashionable. He looks like a bum all the time.

David:
Oh, my spirit animal.

Mindy:
I mean, I love him, but yes. So it’s not my passion at all. I chose it because it was interesting at the time. And if I hadn’t had parents who had been saving for my college, maybe I would’ve chosen a different path because I would’ve had to pay for it myself. But also maybe I would’ve continued and then had to pay for it myself, I don’t know. It’s just I’m very fortunate that they had the money for me to choose. I wish that they would’ve been a little bit more forceful, do something that isn’t dumb because it was really a bad choice for me. And I have said this before and I’ve gotten emails from people who are like, I love my fashion design degree. I’m like, then it’s your passion and that’s great. It wasn’t my passion. It’s almost like if David chose fashion design, it’s not David’s passion either.
I mean, of course, you can’t tell by the snazzy way he’s dressed today, but it’s just… there’s a lot of things that I could have studied that would’ve been better off for me. I mean, I ended up in a great position, but I could have been a lot better. And I wanted to get this in really quick before we moved on, episode 251, we spoke with Preston Cooper who did an exhaustive study, 30,000 degrees he reviewed, is college worth the cost? This 30,000 variable study says sometimes. And he said that-

David:
Yep.

Mindy:
Studying engineering, it doesn’t matter what college you go to, it doesn’t matter what kind of engineering, always worth studying. And studying psychology, almost exclusively a bad decision.

Robert:
Yep. I love that study. I love what Preston does over there. And it’s solid data. So think about what you want to do, Mindy, because I also think, what do employers look for? So all of us here have hired somebody, all of us here are looking for answers. Warren Buffet just said this last week, I’m sure we can find the interview, but he is like, the number one thing I look for is communication skills. And number two is problem solving skills. I don’t really care how you figure it out, but if you can’t talk to me and you can’t solve my problems, I’m not going to hire you.

Mindy:
And that’s a lot of employers.

David:
I couldn’t even tell you. I have two W2 and a 1099 that work in this office. I don’t even know if any of them have a degree, didn’t even ask, don’t care.

Mindy:
Elon Musk, when he was building SpaceX, he had some… his core people and he’s like, oh, we need somebody to do this and one of his engineers said, oh, I’ve got a friend, but he doesn’t have a college degree. He’s like, I don’t care. I just need somebody to accomplish this and a lot of the SpaceX guys have… I’m sorry, a lot of the SpaceX employees have college degrees but also a lot of them don’t, they’re just passionate about this thing and they can get it done so what does it matter?

Robert:
Well, and I also think a lot of young adults, especially when they’re 17 and making this decision, don’t realize how fast the value of that piece of paper, that your degree is, declines in the workplace. So when you’re a senior in college, the value of your degree is the highest it will ever be. You’re using it to get your first job after college, people care, whatnot. Two years later, no one cares. Your second job after college, no one’s asking you about college. They’re asking you what you did at your job to get your next job. And here’s the scarier part is, if you didn’t get a job within the first year after you graduate college, that piece of paper is probably a weight on your ankles, because people are like, you got a college degree and you haven’t gotten a job a year after graduation. What’s going on? Why is this happening? Right? So I mean, that value just falls like a rock, very quickly.
And then by the time you’re in your thirties, no one’s ever going to care and ask you where you went to college, it’s all on your experiences and your jobs and what you’re going to do and what you’re going to bring to the table.

David:
And so it’s… I don’t want to call the student loan world predatory, but-

Mindy:
I will.

David:
If you think about it context, right? If you were a bank, Mindy, and I was 17 and I had no credit and I had no income, but I was like, you know what? I’m probably going to make $150,000 in four years. Can I get a mortgage?

Mindy:
No.

David:
Can I get a car loan? Can I get a credit card?

Mindy:
You can get a credit card.

David:
But you can… I mean, maybe. Yeah, a prepaid.

Robert:
A $300 limit, they’ll give you 300 bucks.

David:
But they will flex for this and people… And not just student loan companies or whatever, but the entire industry pushes. I’ll tell you, I actually, at some point if I ever get really emotional and feel like being mushy gushy on a show, I wrote a five paragraph essay when I joined the military. Basically to be like, would you please leave me alone? I made a decision. It’s okay. The world’s not going to end if I don’t go to college because of the pressure that I was feeling my senior year of like, what’s wrong with Dave? Why is he… And the amount of pressure you put on people to go this one direction and then you’ve got these companies who are lending to this person who has no business getting a loan.

Mindy:
Well, but look at this [crosstalk 00:22:20] you can’t… This loan doesn’t go away. If I give you a mortgage and you don’t pay the mortgage, I take the house back. Your mortgage is now gone and I can sell the house. If I do the same-

David:
And seven years later, my credit’s good.

Mindy:
If I do the same thing with the car, I can repossess your car. I can’t repossess your credit, your college degree and you can’t ever get rid of this loan.

Robert:
Well, because remember guys, so the collateral of a student loan is your future earnings. So why do you get this loan? Well, because they know the data says that you will earn more after graduation. And if you don’t pay these student loans, the collateral is I’m going to garnish your wages, I’m going to take your tax return, I’m going to take your social security if you let this roll that long. In some states, if you have a private loan, I’m going to sue you. I’m going to take your house. I’m going to put a lien on it. They can collect on your earnings. And if you don’t make a whole bunch because you didn’t graduate college and you didn’t materialize out this life, it becomes even more problematic, right? You get stuck in this vicious cycle of debt collection, wage garnishment, yada yada. And so if you want to talk about student loan relief, generally, those are the people that probably need the relief because you get stuck in a vicious cycle that you can never escape. But for most borrowers, it can be positive too.
Because when you want to talk about this example, if you said, hey, I’m going to make a million dollars more in my lifetime, it only takes $50,000. That’s actually a good investment. So student loans necessarily, aren’t a bad thing, but just like any other debt, it’s an investment and you want to try to minimize the amount you borrow. You want to maximize your equity in the investment, which is your earnings over time and you got to think about it. And so there’s ways to offset the student loans you borrow, because I’ll also say even today, over 30% of graduates graduate college debt free. So and this is from a four year institution. It’s not like everybody has student loan debt. There’s still a good third of borrowers or third of graduates that don’t have student loans. The average amount of student loans in America at graduation is roughly $30,000.
So on average, most people should be okay with their student loans because in most jobs, $30,000 of student loan debt, low monthly payment, $200, $300, it’s not going to cripple you. Where you see it all because our media loves to hype the extremes is the extremes, right? So it’s the people that don’t graduate and have student loans. It’s people that have massive amounts of student loans. It’s the people whose life courses don’t work out like they say or the guy in the article that borrowed $130,000 of private student loans to go to film school. There’s these extreme outcomes that get the attention on social media, the mainstream media whereas I would put out that 80% of student loan borrowers are just fine, everything’s working out like it’s supposed to. If you asked them, can I get rid of my student loans? Of course, they’re going to say yes. It’s no different than if I said, hey, can you get rid of my mortgage? Yeah, you can. But it’s not going to change the outcome of everything, right?

Mindy:
Okay. That’s interesting. I’m glad you brought that up. I didn’t realize that 33% of grads graduate without student loan debt. And is that people… parents paying for college or them working through college or scholarships and things like that?

Robert:
All of the above. And so, there’s a lot of ways to pay for college. And I like to view it like a pie and you have all these slices of the pie, right? So you might have your own savings as a student. Your parents might have saved some money for you in a college savings account or whatnot. Your parents are probably still working when you’re in college and maybe they’re putting a little bit to it. You are probably working in college and you can put a little bit to it, right? And then you get scholarships and grants and then you get to student loans, right? And so there’s all these pie slices that you can have bigger slices of some, smaller slices of others but they all go to paying for college. And my ideal for you would be to minimize the student loan slices and maximize all these other slices before you get there. Of course, everyone’s passed a little different but there’s a lot of ways to get there.

Mindy:
So in episode 64, Zach Gautier came on and shared basically a laundry list of ways you can pay for college. And I don’t want to rehash that now, but I do want to recommend that if you have kids that are going to go to college almost at any time, listen to that episode, there’s tips in there for things you can do when your kid’s in elementary school and middle school and things to consider during high school that can give your kids a considerable leg up on scholarships and even how to earn college credits during high school, many times for free. So basically if you have kids of any age, that episode is worthless and again, that’s episode 64 of the BiggerPockets Money podcast. This episode is geared more towards the high school age kids and their parents, people who are getting ready to pay for college. David, my co-host today went a different route for paying for college. David, from military to millionaire group, how did you pay for college, David?

David:
I didn’t, the military did. Someone else did. I mean, so that was one of the main reasons I joined the military. I didn’t know what I wanted to go to school for and I didn’t have money. So I figured in my head, well, if I don’t know what I want to learn and I don’t like school anyway and I don’t have any money, I probably shouldn’t do this right now. And so I was like, well, I’m going to travel the world. And so I joined the military. And to just briefly touch on why that’s such a great idea. So the military, they pay for college two ways, right? They have tuition assistance while you’re in and so you can earn tuition assistance to continue going to school. In fact, they incentivize it. It actually looks really good for promotion, for you to have an associate’s degree.
I have an associate’s degree, didn’t pay a penny, never paid a cent…. Well, I take that back. I paid for one course because I deployed and I failed out of the class because I left the country and I forgot to close out the school or the class. But I got that all reimbursed once I got it all figured out. So I never paid for anything, got my associate’s degree, never went any further than that because I still didn’t like school and got financially free and realized I don’t need to go to school anymore. But I have friends who earned all the way up to a master’s degree through tuition assistance while in the military, enlisted officer, whatever it doesn’t matter. And then you still have, regardless of what you do with tuition assistance, that does not touch your GI bill.
And so you still have the ability to pay for a four year degree at a state level school or a certain percentage for private school and however that breaks out plus housing allowance plus whatever. And the real benefit there is that you can transfer that to your kids. So if you get to eight years in the military and you reenlist again, at that reenlistment, you can transfer 1% to each kid and to your spouse and whatever. And then you can tweak those percentages forever after that. And so you could then say, okay, well, now I want to slide this one up to a hundred percent because the other kid didn’t go to school or slide them up to 50 and 50 and they each get half paid or… And then even, it extrapolates even more out of that if you get VA disability, if you reach a hundred percent, there’s chapter 35 benefits where a lot of states will pay for your kids’ school for being a disabled veteran.

Robert:
And you say, also beyond the tuition, you can get base housing allowance, so you can get some stipends to live. You can get a book stipend. I think if you live in a rural area too, they’ll move you to the nearest college for 500 bucks, they’ll even pay to move you. There’s a lot of benefits with that GI bill that you can also pass on to your children like you said, but you’ve got to do it right. Right, David?

David:
Yeah. And that housing allowance correlates to where you live. Now, if you do remote, it’s a flat fee no matter where. But if you live in that place and physically go to school… So I had a friend, I say friend, a guy that I enlisted when I was a recruiter who’s now a friend. He went to school in Denver. He’s from Missouri. He went to school in Denver because he thought Denver would be a cool place to live. And the housing allowance made it so that he left Denver with a four year degree, no debt and he had a place to live off his housing allowance the entire time because his housing allowance was so much more there than it is here and then he moved back here. He was like, all right, cool, that was a fun four years.

Robert:
Yeah. Solid benefit. So again, there’s another way to pay for college and think about it. And again, you can either go your college yourself or if you’re lucky enough to have a parent, make sure your parent transfers that GI bill the right way so that you get that. Or if you’re in the military and you have young kids and you’re thinking about getting out, you need to do it before you mess that up.

David:
Yeah. It has to be done right at a four year reenlistment unless you’re commissioned and then you can do it at any time, as long as you have four years remaining on your contract or obligation.

Mindy:
And do you have information about that on your site, David?

David:
Probably.

Mindy:
Wow.

David:
I think so.

Mindy:
Okay. Thanks. [crosstalk 00:30:54]

Robert:
Well, Mindy, we definitely do. We’ll get it to you in the show notes so there you go.

David:
College has never been one of my main vocal points because everybody in the military has it paid for so they don’t have to talk about it too much because it’s like, eh, it’s paid for, all right, move on.

Mindy:
Okay. Well, I am trying to share this with people who aren’t in the military so luckily, Robert Farrington has you covered. Thank you Robert, from the collegeinvestor.com and we will include show notes. We will include links in our show notes, which can be found at biggerpockets.com/moneyshow297. Okay. I have a whole bunch more questions for you, Robert.

Robert:
Let’s do it.

Mindy:
Some of these are rather selfish because they are for me because I have a 15 year old daughter, she’s a freshman right now. So we do have some time, but we don’t have a lot of time because she’s a freshman already. I have currently saved as much for my daughter’s education, as you have saved for my daughter’s education, as much as David has saved for my daughter’s education, which is to say-

Robert:
She’s loaded now.

David:
How do you know how much I saved?

Robert:
Yeah.

Mindy:
Which is to say zero. I know that you both have contributed $0 to my daughter’s college education as have I. I am financially independent so I am not worried about paying for her college. She is a very good student. I am not worried about scholarships available for her and grants and things like that. But I would rather not put $115,000 into the pockets of the college if somebody else would do it for me. So should someone be saving for college? And when should somebody make the decision to save for college or not save for college?

Robert:
Well, so first off, I like to go with the Yes model and I call it the yes model because the Y is you. And I don’t think anyone should save for their kids until they save for themselves first. So take care of yourself first. It’s like the airplane, right? You got to put the oxygen mask on yourself first, before you put it on your children. And there’s a lot of ways to pay for college, we went through a bunch of them, you have the whole other podcast episode of it. There’s so many ways to do it, but if you don’t save for yourself, you’re just going to hurt your kids later on. You’re going to be a burden for them. You think you’re doing all this wonderful stuff of putting them through college and maybe taking out loans in your own name to pay for your kids, see it all the time and these parents do that.
And then, lo and behold, they’re 64 and they’re like, I can’t retire. We’re going to have to move in with our kids because we didn’t save any money, things get ugly so take care of yourself first. Then if you want to save for college, look at education savings accounts. For example, a 529 plan is a great way to save for college, even with your older kids, because a lot of states offer tax credits and tax deductions to contribute to them. So if you were just going to write a check to your college, I would write a check to the 529 plan, get your state tax deduction and then write the check to the college, so from the 529 plan. So, don’t dismiss a 529 plan even if you have older children. Yes, the goal of the plan is right to save early, let the money grow tax free, compound and pay for college.
But there’s still benefits for you if you have kids approaching paying for college. Part two of that is I love 529 plan gifting. And what I mean by this is, let all of your friends and family help you save for your kids college. So I’m a minimalist. I hate when the kids have birthdays, especially younger kids, your older kids, probably less so than mine, but they get 30 presents and it’s really annoying. And they play with one of them, maybe two and the rest of them just get tossed to the wayside, it’s a waste of money, everything is dumb about it. And so one of the things that we’ve done and actually all of our friends groups have done the same thing, is we don’t do any gifts. In lieu of gifts, we donate to everyone’s 529 plans. So don’t go to Target and spend 25 bucks on a Lego set, send $25 to the kids’ gift and just show up at the birthday party because honestly that’s all the kids want.
They just want to run around with their friends and bounce in a bounce house. They don’t need all the crap and the crap can actually go to their college. And honestly, by doing this every year, they get about 500 bucks a year from aunt, uncle, cousin, friends, whatnot. And then that just grows tax free all the way there. And so there’s a lot of services that do this, we like [Backer 00:35:23]. A lot of the 529 plans have finally started getting up to par and doing this themselves, you don’t need to use a service. But there’s ways to gift and it’s a wonderful way to do it in lieu of actual presents. Because the kid will still get an actual present. I promise you, mom and dad, sibling will still get them something, but they don’t need 30 things, right? So that’s another way. And then, yes, there’s grants and scholarships and other things as you get closer but I think, Mindy, you wanted to say something?

Mindy:
I did. I want to talk… go back to that 529 plan where you have older kids and you still get a tax deduction. So let’s play pretend.

Robert:
Yes.

Mindy:
My daughter is in the ambiguous stage of college education right now and she’s like, I totally want to go to college. And then the next week she’s like, I don’t need a college degree. I could just go be a body piercer. And I’m like, Ooh, let’s go back a week. Not that I don’t want to support her hopes and dreams but maybe we could not make this decision at 15.

Robert:
Well, here’s the thing is, so a 529 plan on the flip side, doesn’t have to just be used for a four year college tuition. It can actually be used for trade schools, apprenticeship… So she wants to go be a body piercer, that’s cool. She probably has to do some kind of trade school or a beauty school or something to get that licensing, right? I’m just making this up but there really is a school for this kind of thing. And again, that can be used with 529 plan money to pay for that. And you can also pay for it with a tax free, potentially depending on your state. I’m in California, California does not like their residents to save for college. They do not offer any tax breaks, but Colorado, I think, Mindy, you’re in Colorado, right? Am I right? And so Colorado offers a 20% tax credit up to 500 bucks, it looks like to… Colorado, one of the most generous tax deductions with no limit. So up 20% of the amount you contribute to your 529 plan in the State of Colorado so there you go.

Mindy:
Explain what that means like I don’t know what that means.

Robert:
So you can get 20% of the amount you contribute to your daughter’s 529 plan as a state tax deduction on your state tax bill.

David:
Wow.

Mindy:
So is that for my Colorado 529-

Robert:
529 plan.

Mindy:
Now, do I have to use the 529 plan in Colorado for a Colorado school? Or can I use it for anywhere?

Robert:
You can use it for anywhere.

Mindy:
Oh.

Robert:
So, if she wants to go to Penn State or whatever it happens to be, you just write the check out of your plan to pay for that and you got your Colorado state tax break. There’s no federal tax breaks for it, but there’s state tax breaks, depending on your state.

Mindy:
Oh, I see.

Robert:
About 30 states offer it.

Mindy:
If only I had a tax break.

David:
It’s like money laundering but your kid gets a degree.

Robert:
Exactly. And so 529 plans, they get a little bit of flack because people are like, well, what if my kid doesn’t go to college, right? There’s ways to access the funds but there is potentially a 10% penalty for non qualifying withdrawals. But that list of what qualifies keeps growing and growing and growing every year. So like I said, you can use it for K to 12 education now, you can use it for student loan repayment, you can use it for trade schools, apprenticeships. You could switch the beneficiary to yourself and you could take one of those cruises around the world where you learn on the cruise. I mean, there’s so many different things you can do these days. Go ahead, David. Sorry.

David:
Oh no, I was just… For Mindy to let her know I… If you do a non-qualified withdrawal, right, you get slapped with a 10% penalty. In Mindy’s situation, would that be slapped with a 10% penalty plus you repay the 20% that you saved in state taxes or is it like, hey, I put a hundred thousand dollars in this 529. I got a 20K tax credit and oh, now I got to pay a $10,000 penalty. I’m still on top.

Robert:
Yes. So it varies on your state. So Colorado’s penalty is a recapture of any state tax deduction you received on the earnings, right? You do pay a 10% penalty on anything on the federal level. So yeah, it can be bad, but like I said, there’s a lot of options to go around it in terms of creating… You can change the beneficiary on the plan, you could use it for your next… your younger siblings, you can gift it to somebody else. You could hold onto it, let the money grow and change it to your grandchildren and basically set up an education trust effectively, that you can use this money over time. And there’s so many options with it. So it’s like, yes, there are some drawbacks, a hundred percent, everything has some trade offs. But on the flip side, the list of ways that you can use it keep growing and the options to use it keep growing.

Mindy:
Well, I think that’s a very valuable tip for people who are like me and didn’t save anything for their kids, but still want to help their kids out. I mean, that was a very generous gift that my parents gave me by paying for my college. So if I can pay for my children’s college or at least part of it, I would like to do that. And then if I can pay into a 529 plan, does it have to sit there for any length of time? Or can I put it in there and then write a check?

Robert:
It depends on the state. So some states do have a one year waiting period, other states don’t. And I don’t know the nuances of your state’s plan, but check with your state’s plan and see what those nuances are but some states will let you just put the money in and literally just turn around and send the money out. Some states do have a one year waiting period on that transaction so you might have to use it for their sophomore year of college, if you’re listening to this now and you’re a little bit behind, but hey, every little bit can help and you can save a little bit in taxes and maybe have that money grow a little bit as well.

Mindy:
Yeah, no, that’s a great tip. Okay. So you said yes. Y-E and we didn’t get to S yet.

Robert:
S is just regular savings, right? So you have these tax deferred accounts, like a 529 plan, a [Coverdell 00:41:03] savings account. Some people like a Roth IRA to save for college, I’m not necessarily a fan but it’s a valid option. But then there’s just regular savings. So S is just regular savings. And this is valuable because honestly, there are a lot of other random costs associated with going to school, traveling to school, moving there. So travel’s not a qualified education expense so if your kid goes to an out of state school, you got to figure out plane tickets, right? There’s just random things that are always associated with this. They want to go to Cancun for spring break next summer, right? Who knows? But this is what kids do. So just having regular savings is an important part of it as well. And that doesn’t have to be your own savings, right? That could be, you can make the kids save. You can do other ways, but having some cash outside of an education savings account, even if you do save in one, is still a valuable option.

David:
I like it. So you mentioned Roth IRAs and some other stuff. What about just normal index funds? Do you see any pro or con to that, other than-

Robert:
Yes. But again, who owns it? So you can have a UGMA, which is a uniform transfer to minor, uniform gift to minor act account. So they’re beneficial, but you could run into some [kiddie 00:42:14] tax issues. So right after they make 2000 bucks a year in earnings, you’re going to have to start paying the kiddie tax, which is going to be at your tax rate and it gets complicated. And so that’s where it’s again, not a bad thing, right? And it’s also going to totally cost them on any type of financial aid they’re going to get, because anything that’s in the child’s name as an asset is the highest value of it. And they basically… I mean the effective way they calculate it is they expect you to pull all that out and liquidate it. Retirement assets do not count on the FAFSA, the free application for federal student aid.
That’s why people like the Roth IRA, but there’s other drawbacks that comes with the Roth IRA like how do you get money into the Roth IRA, right? Very hard to get money into a minor’s account, right? Because what? Are they going to model for you or whatever, all these jokes that people do to get their kids money into a Roth IRA. Or if it’s the parents’ Roth IRA, I hate seeing it because you’re going to take money out prime growth years. Your kid’s in college when you’re probably in your late forties and fifties. And that’s when you need your Roth to compound and grow and then you don’t want to be pulling money out of that to pay for your kid’s school. So there’s some drawbacks there. And plus the distributions from it now count as just regular income on the student. So if you pull that out, there’s no… On the FAFSA, it counts as regular income and it’s just going to totally trash their financial aid. So it might work for their freshman year on the first year you withdraw from the Roth IRA.
But for any future years, if they qualified for any financial aid, you can just basically kiss it goodbye.

David:
Okay. So hypothetically and asking for a friend and all the other cliche caveats that you make when you’re clearly making admission of having done something yourself and don’t want anyone to know, if you had rolled all of the… Oh, what should my name at payment so we got through the pandemic into UTMAs for your kids. Would there be a place that you should roll that, that would be better in this scenario? I’ve got…

Robert:
Okay, it’s not a bad thing, right? But you just realize you’re going to start paying tax on it. It’s a taxable, a brokerage account. And it’s going to probably be taxed at your income level, which doesn’t really necessarily benefit your kids, right? Because of the kiddie tax. So the question is, what are your goals, right? So maybe you put some of that into a 529 plan for them, right? And save that. I mean, I’m always a fan of you could do and, doesn’t have to be this either or thing. You can have some 529, some taxable… If they work a little bit, put some into their Roth IRA as well. I don’t know if you have them doing some work for you, but there’s the potential for that and there’s just a lot of options.
So I’m a big believer in the and. Realize though, we’re having this discussion. So you’re probably not going to qualify for a lot of merit financial aid. And I think a lot of people get very hung up on that point. It’s like, how do I get the most financial aid possible? Well, it’s like if we’re having these conversations of how do we maximize a 529 and a UGMA and all these things, you’re probably not in a financial situation that’s going to earn you much merit aid. On the flip side, you should still be applying for the FAFSA every year because that’s how you unlock student loans, if you want to get those. Part two is there might be a lot of… Sorry. I was saying merit aid, I meant need based aid, but there’s a lot of merit aid out there so your kid can go apply for scholarships, apply for grants that they might qualify for, just based on their ability to write an essay or volunteer in their community or because you work at a certain organization, there’s a lot of potential there for that type of aid. There you go.

David:
Because you’re going to give me your GI bill.

Robert:
Or you give me your GI bill and whatnot, but even then, there might be stuff outside of it. What if your kid wants to go to a private school? I think the GI is $23,000-

David:
Yeah, it won’t cover it all.

Robert:
A year for private school, which is amazing, but it won’t cover it all, right? So…

David:
Well, thank you.

Robert:
Yeah.

David:
For helping my friend.

Mindy:
Okay. I have a question because either we didn’t recover this last time or I didn’t remember. You said retirement accounts don’t count toward FAFSA. My retirement accounts as her mother-

Robert:
Right.

Mindy:
And her retirement accounts as a child don’t count towards FAFSA so-

Robert:
So when you list it all out, it doesn’t count as anything that’s going to be required to be used as on the FAFSA form. Correct.

Mindy:
When you’re saying retirement account, you’re talking about 401k, Roth IRA, Roth-

Robert:
IRA.

Mindy:
Roth accounts.

Robert:
All of them.

Mindy:
Okay.

Robert:
Traditional and Roth. Yes.

Mindy:
401k, IRA, the TSP from the military?

Robert:
Correct.

Mindy:
What about the 457 plan?

Robert:
Yep. Uh-huh (affirmative). Any other retirement… any qualified retirement account does not have to be reported on the FAFSA as an asset.

Mindy:
Well, that is very delightful news because that’s where, I think, 50% of my holdings are in my 401(k) and I’ve been worried. I mean, this is such a good problem to have, but I’m going to be having RMDs when I’m 72, just based on the balances now.

Robert:
Right.

Mindy:
And not being able to get-

Robert:
Sure.

Mindy:
Any sort of financial aid wouldn’t kill me…

David:
But financial aid is nice.

Mindy:
Yeah. Financial aid is nice. I will take any dollar that I can get. Now, FAFSA has nothing to do with scholarships.

Robert:
Well, it can’t-

Mindy:
Or merit?

Robert:
It can, so yeah.

Mindy:
Merit scholarships

Robert:
Need based.

Mindy:
FAFSA’s need based.

Robert:
So not for merit based. FAFSA is going to unlock need based scholarships for you. And it depends. So the need based scholarships are going to be what’s awarded by the school or potentially your state. Some states offer scholarships to low income students, different things and all of that gets unlocked by the FAFSA. So you fill out the FAFSA, it goes to your school’s financial aid office and depending on how much your expected family contribution is, which is the very bottom number that’s calculated, which effectively is, if you have a lot of money, you’re not going to get much. If you have a little bit of money, you’re unlocking more potential for aid and that aid can include scholarships and grants that are need based. But there is still a lot of merit based options and merit based ones are the ones you apply for just because they exist. And they don’t really have anything to do with how much money you have.

Mindy:
Is there any point where filling out a FAFSA is just a waste of time?

Robert:
No, everyone should fill out the FAFSA every year, starting the year before you go to school all the way through graduation. Because at the end of the day, it unlocks federal student loans. You can’t get a federal student loan without applying for the FAFSA. And so in a worst case scenario, let’s say everything hits the fan and your life doesn’t pan out, and you lose all your scholarships and whatnot, by having the FAFSA end, you can apply for that federal student loan at the last minute if you need to, or even halfway through the school year if you need to, and that way you can at least finish your school, but I’ve seen it happen. Even these kids go on athletic scholarships, right? And then they get injured and then they lose it for the second half of their year. And that’s where having the FAFSA and things can come in handy. So always fill out the FAFSA. It’s annoying because it’s another form you have to fill out, but it’s super beneficial and it doesn’t really take that long.

Mindy:
Does it cost any money to apply for the FAFSA or fill it out or whatever?

Robert:
No. So the FAFSA stands for free-

Mindy:
Oh.

Robert:
Application for federal student aid. I love it.

Mindy:
Okay. Well.

Robert:
But I will tell you that there are a lot… it’s not a bad question because there are a lot of scams and things out there and people will prey on you. I can fill out this… I can get you a student loan and it’s like, there’s no application fee, you just fill out the FAFSA, it’s online, it’s quick and easy. It does ask for a lot of information. I will tell you, if you’re a parent listening to this, it might be weird but you do have to share your income and your assets and things like that with your teenager, that you might not have done before. So I’m a big believer in having these conversations early. None of this should be a surprise at this point in time, your kids should know how much you make, how much you have and they should know how much is going to be paid towards their college. But if you haven’t, you’re going to show them when they fill out the FAFSA so it’s going to be a conversation you’re going to be having.

Mindy:
Okay. Yeah. I was surprised to learn that you have to pay to apply to college. I didn’t realize… I mean, it makes sense because somebody’s got to go through the applications, but Colorado has free application day every year and that is the day to put your applications in because then you don’t have to pay. I mean it’s 250 bucks to apply to go to a college, right?

Robert:
It varies, so that’s very high. Usually it’s $25 to $50.

Mindy:
Oh, okay.

Robert:
And this is where it could be a problem, right? And so I’m really anti application fees for college because it does hurt low income students, right? If you’re already low income having to pay… You want to apply to six colleges, right? Which is kind of a recommended amount. Well, if it’s a $50 application fee, that’s $300. And if you’re a low income student, yeah, there’s typically waivers and other things that you can get, but it’s just another barrier to entry and it’s so silly because these application fees literally earn these schools no money. And they already have so much money that they’re building amazing aquatic centers with lazy rivers but yet we have to nickel and dime these kids to just apply to your school. I don’t understand.

David:
I want to go to that school.

Robert:
Just float on the lazy river while you [crosstalk 00:51:45]. Yeah.

Mindy:
Definitely, lazy river.

David:
[inaudible 00:51:47] is exactly what would do if I went to school.

Mindy:
Okay. Let’s get back to talking about colleges and how to pay for them. What are some options besides student loans? You’ve mentioned grants and you’ve mentioned… Well, you mentioned scholarships. We’ve talked about loans. What is the difference between a grant and a loan and a scholarship?

Robert:
Okay. So a grant is given to you because the program exists. And so typically grants are a Pell grant, right? You are low income, your financial aid office, you’re automatically qualified for Pell grant because you’ve filled out the FAFSA, that’s all that’s required. About half of states also offer a similar type grant. So California does offer a Cal grant. And this is another grant that, if you’re a low income student, you just get it by filling out the FAFSA and it goes to your school’s financial aid office, it’s just free money. A scholarship is very similar except you typically have to apply for it. So it’s free money except there’s usually an application process or some other qualifying criteria to it. Many schools will offer scholarships, but they’re donated and they’re usually used on behalf of something, right? So this is for the student that does this.
Or if you’re applying to an engineering major, you get this. Every school has got different scholarships and then there’s also just the scholarships that you apply to, that are out in your community. And these are the ones that are merit based. So I love scholarships because they are they’re relatively easy to get. I won’t say they’re so easy, but they’re relatively easy to get and it’s just free money. And a lot of it goes unclaimed. There was a study by Fast web a few years back that said $6 billion in scholarships go unclaimed every year. Isn’t that just shocking to you? And I see it. So I don’t know about you guys, but I run a scholarship on the College Investor called the side hustling student scholarship and I give 2500 bucks to an entrepreneurial student. And my only requirement is that you write me a thousand word essay about how you’re entrepreneurial.
I don’t really care what you do, sell stuff on eBay… A couple years ago it was a girl that went to sing national anthems at the County fair and I mean, but she sent these cool pictures of her doing it and she was getting paid for it and it was awesome. I love the stories, but I get maybe 80 applications a year and I will tell you that 50% of applicants don’t even follow the directions and I just delete their applications right away. And so you’re really in competition with 40 people maybe to get 2500 bucks. And everyone that I’ve talked to that runs a scholarship says the same thing. It’s shocking how few people actually do the work to get the scholarship. And so you might think it’s impossible to get scholarships, but your odds of actually getting one are one in five, one in 10, they’re very good. And so it just becomes a numbers game, right? If you apply to 10 scholarships, you’re probably going to get one or two of them, but nobody does the work.

David:
Right. I’ll validate this from the other side. My wife is a high school counselor and she runs the scholarship section… There used to be the senior counselor always doing the scholarships, got overwhelming so she does scholarships every year now for the school. And every year, same thing. It’s like, oh, scholarships were due three days ago. Why are you sending me this now? And it’s like, yeah, yeah, they’re there.

Robert:
They’re there. It’s able to do it, but you do have to put the work. You got to follow the directions. You got to write that essay. And so the harder part I think is finding these scholarships and so you need to go on Google and search for them. You need to check with organizations, check with your parents’ company, a lot of large companies offer scholarships to their employees’ kids, are you part of any local groups or organizations or nonprofits, especially the larger nonprofits in your community. Is your family part of a union? A lot of the unions offer scholarships to their union members’ children. So there’s so many out there, but you do have to spend the time and do the work to get those scholarships. And they’re out there and they’re possible.

Mindy:
Do grants and scholarships have application fees typically?

Robert:
They should never. So grants, no, it all is done through your school’s financial aid office. Scholarships should never have application fees. However, some of these scholarship search sites and stuff sometimes make you pay to be a member and stuff and I’m totally against it. And I don’t think you should ever pay to apply to scholarships. And typically if the scholarship is on these search sites that make you pay, you can also usually apply not going through the site. You just got to find the company or organization that is running the scholarship and they typically have it on their website as well and there’s no cost involved. So there are some companies that do try to take advantage of it, but you should never pay for either.

Mindy:
Okay, good. I’m glad I asked that. Are there any services that can help you write your essay or get you started on the path to your scholarship application process?

David:
Virtual assistance.

Robert:
Yes. I mean, there’s definitely companies out there that help you with these essays. I’m mixed on it. I don’t think there’s going to be any more value that this company can offer than you can do yourself. On the flip side, maybe you do hire a virtual assistant, like David said, to help you edit your essay because I see a lot of crappy essays. The story’s good, but could someone go through and put some paragraphs in there instead of a wall of text, right? [crosstalk 00:57:15] Maybe have someone… Yeah, have someone help you spruce it up, I think is a wise thing. And if you don’t have a family member or a friend or a teacher or a guidance counselor that can help you, yeah, maybe you pay a virtual assistant or something to help you. But I’m 98%, you just can do it yourself or have your network of friends and family or your school.
Literally, this is what your school is supposed to do if you’re in high school, they have people at the office, the guidance counselors, things like this is their job. They’re here to help you get into college, use them.

Mindy:
Okay. So when is my daughter applying for college? She’s a freshman right now. She’s just finishing up freshman year.

Robert:
Mm-hmm (affirmative).

Mindy:
When is she starting to apply for scholarships?

Robert:
Now, for many merit ones. So you’d be surprised on what’s out there and you can start stacking your scholarship dollars early. And I’m a huge fan. If you can find these in your community, start searching for them, apply to them. You don’t need to have such an urgency about it, but if you can start putting $2,000 away every year, right now, it can go a long way to help, right? I’m kind of a view of scholarship time and work time. So as a freshman, she’s probably just a year away from being able to work a lot in the summer. Because I don’t know about your state, but California is 16 is kind of where you have to be, to get a job at like a Big-box store or anything like that. So if she’s only 15, this year should be the scholarship year. Let’s spend the hours of the summer finding and applying for those. And then next year, balance it out.
I get some actual full-time employment during the summer, my go hustle and then a little less time applying for scholarships, but taking some of that, the money she earned and saving that away as well, is hugely beneficial. Not just the money, but the skillset as well, I think goes a lot farther as well.

Mindy:
Yeah. She’s working for a friend. She makes jewelry and she makes something like $15 an hour at age 15 when she’s not really able to go out and get another… she could probably work in a retail position, but we’re at the tail of the COVID. I don’t really want her to work in a retail position right now.

Robert:
Well, and I just think, I mean in our area and granted everything’s a market base, but the starting pay of a cashier at Target right now is $18 an hour in our area. If you want to go work at Chick-fil-A, it’s $21 an hour to work at Chick-fil-A. If I was a high school sophomore right now, I would just be crushing it and doing that because that’s a lot of money when you’re young, because you can put away, even if you’re working 20 hours a week, that’s a substantial amount. And even if you blow half of that on the dumb stuff you do when you’re 15 or 16, you still got a nice amount left over to pay for college and do other things.

Mindy:
That’s true. Yeah. I forgot that they’re paying a lot more than the $3.35 an hour that minimum wage was when I was working at Dairy Queen.

Robert:
And then I would also say, a lot of people dismiss this, but a lot of bigger companies also offer the same kind of benefits that David was talking about in the military, tuition assistance programs and things like that. So if you work for Target, Walmart, Amazon, these companies and you keep working… Starbucks, I think does it as well, you can leverage those companies’ tuition assistance programs to help you pay. So if that’s your part-time job in high school and college, shoot, you could be leveraging some dollars there to help offset your college costs.

Mindy:
That is a really great tip. I didn’t realize that they gave tuition assistance. Now, does tuition assistance mean you still have to work here while you’re going to college?

Robert:
That’s what tuition assistance is, yes.

Mindy:
Okay.

Robert:
So there’s tuition assistance programs and there’s student loan assistance programs. So the tuition assistance programs that a lot of these companies are offering is you’re working for us and we’ll give you money to your college while you’re working for us. Some companies now are offering student loan assistance where it’s like, you’ve already graduated, you have some debt and they’ll help you pay off your student loans, while you’re working for us. Some companies offer both, but if you’re looking for a part time job in college, and you have a choice of where I’m going to work, I’ll go to Target or Walmart or Amazon because they will give me up to 5,000 bucks a year to my college, even if I’m only working 20 hours a week and that’s a huge benefit.

Mindy:
Yeah. That’s great. $5,000. I mean, that’s free… Now, is that free $5,000 or is that $5,000 and then they take taxes out?

Robert:
Tax free.

Mindy:
Oh nice.

Robert:
Yep.

Mindy:
Nice. And when you said start now and stack scholarships, are scholarships sending her a check? They’re not sending it to the college that she’s designating?

Robert:
It’s both. So you can just take the check. Some scholarships will send it to your school, but if you don’t have a school yet and you’re younger, they’ll just send it to you. I will put the asterisks there that more scholarships than not are going to be taxable for you. And so a lot of people don’t realize that you will get a 1099 and these scholarships will be taxable. And the amount of scholarships that are taxable are about 48 to 50% of all scholarship dollars are technically taxable. And because that’s what’s actually reported to the IRS, I would probably venture that more are supposed to be taxable and people don’t know and or don’t report it.

Mindy:
Okay. So is it taxable to my daughter, not me?

Robert:
Correct. She earned it, it’s her money, so yes, it would be taxable to her.

Mindy:
Okay. And if she’s not making enough money to pay taxes, then she doesn’t pay taxes?

Robert:
Correct.

Mindy:
Okay. I like that. I like this a lot. Wow. I learned a ton. Robert, this was so helpful. David, do you have any other questions for Robert? I feel like I’ve hogged him the whole time.

David:
No, I mean, this is great. Student loans, as I had mentioned, is not something that’s my wheelhouse expertise so I was just taking it in, asking a couple questions and living it up. This is… Man, I mean, every time we hang out… I became a fan of Robert’s. I told him I was going to throw this out there or I wasn’t going to throw this out there, but I was looking up whole life insurance research and I stumbled across the College Investor. And Robert wrote one of my favorite articles ever on the pros of term over whole and I loved it. And so we were talking about it before you jumped on, before we started recording and Robert does such a great job of breaking things down to… I mean, his blog is just full of great articles and great content with great breakdowns and the fact that he was able to just, on the top of his head, explain net present value, so much knowledge there so definitely tap into it.

Robert:
I’ll say too, while we’re talking about it, if you’re out there and you have someone telling you that a whole life insurance or permanent life insurance is a good way to save for college, please run away because it is not a good way to save for college, but I see it all the time because they’ll always fear monger you on all these alternatives. We already talked about the pros and cons, right? There are cons to a 529 plan and there are cons to a Roth IRA. And so then these sneaky salesmen come in and they’re like, oh, well, I got this amazing thing here and it’s not amazing because you have lower returns, more fees, you’re paying for insurance and you’re technically getting a loan out of your dang insurance policy to pay for this, it’s all dumb. Just don’t do it.

David:
Well, the best life insurance is being financially free.

Robert:
Just don’t die. No.

David:
I think, was it [crosstalk 01:04:47]?

Robert:
That’s it.

Mindy:
Well, yeah, I don’t want to die either.

David:
I think [crosstalk 01:04:48] personal neighbor. He said, I’m self-insured or the best life insurance is self-insured, meaning you’ve got a few money.

Robert:
Yeah.

David:
Like, Eh.

Robert:
Exactly. And there’s a purpose for it and saving for college is not that purpose. So it’s kind of [inaudible 01:05:06] but I guarantee you that there’s someone out there that’s listening to this podcast that has been pitched on it because I see it on social media a lot. And it’s not a great alternative to the other ways to save.

Mindy:
Yeah, no, I think we covered a lot to do. This was super fun. Robert, is there anything that we forgot to ask you or that you would like to add before we let you go?

Robert:
No, I think it’s just really hammering home the point of thinking about it as an ROI. And so on the student side, is what’s your goals? What’s your dreams? What do you want to do? Keep it loose, but don’t necessarily spend a whole lot to get to your end goal, right? Because when you’re 17, 18, you don’t know what you’re going to be when you grow up. We’re kidding ourselves here when we think that of our young adults. They have some ideas but things change. They learn as they go. So if you spend less, you’ll have a better outcome when you change it all up. And now if you’re the parent listening to this, realize that college is not the end all be all to everything when it comes to this. And just because someone said in your family that they should go to some elite private school, there’s a mathematical cost to that.
And unless you’re cutting that check, you shouldn’t put that on your kid, that force them into something that’s going to really jeopardize their finances for the next 10 to 20 years of their life, because that’s what happens when they borrow and they get these student loans and then they’re indentured servants to their loans for a long period of time, trying to pay it off, when they could be enjoying their life. We kind of ragged on that article a little bit that you brought up at the beginning of the show, but he did make some good points. If you’re struggling with debt, whether it’s student loan debt or any other kind of debt, it does delay buying your first house and it does delay you starting a family and it does delay all these things. And as a parent, you probably don’t want that for your children. You want to, just like you’ve done for the first 18 years of their life, you’re trying to give them the best.
Don’t suddenly set them up to fail for the next 18 years, right? You want to make sure that they’re set up for the best there as well. And spending a fortune on school might not be the best way to do that for them.

Mindy:
Thank you, Robert. Thank you for your time today. No, this is great. I love the reminder to people that college is great, for the right person, for the right student, but college isn’t the right choice for everybody. Way back on episode 44, we talked to Tinian Crawford, Captain DIY on Twitter, who I love dearly. He’s an electrician. He went to college, he got his associates degree, which is a two year degree in just six short years because college was not the route for him. And now he’s living his best life. He’s doing electrician work. He actually worked at a college for a while, which I thought was kind of funny, but now he is out on his own. And he’s like, I’m booked solid, from now until the end of my calendar. And as soon as I open up more time, I’m booked solid. And it’s a great choice for him. He makes the money that he wants to make. And college was not the right choice for him. And college is not the right choice for a lot of people and trades… Oh my goodness, you can make so much money in the trades.
And when you do, when you’re an electrician in Missouri, David needs you or just do it yourself, David, it’s not that hard.

David:
Yeah. I can’t find them. It’s not that the electricity is hard, it’s that the signing for a permit without being a master electrician is… I can’t do it.

Mindy:
There.

Robert:
That’s it.

Mindy:
I just signed it for you.

David:
If I could forge those docs, trust me. I’ll be… All you got to do is… Anyway.

Mindy:
I would never suggest you forge documents, David, you should always go by the book.

David:
You just got to go buy some plumbers crack sign jeans and you’re good. That’s how you wanted to wrap up the show.

Mindy:
That’s exactly how I wanted to wrap up the show. Thank you. That’s how Robert wanted to wrap up the show too. He was really, really generous with his time and now we’re ending on a plumber joke.

Robert:
It’s all good. No, go be a plumber seriously.

Mindy:
Yeah. I could seriously be a plumber, that is-

David:
But we’re not ending yet.

Mindy:
Well, actually we are because we don’t really… This isn’t really a money story so we didn’t really do the famous four.

Robert:
I feel like I did the famous four last time, didn’t I do the last song a month ago?

Mindy:
Robert. Okay. Ask him that one.

David:
What’s your favorite joke to tell at parties?

Robert:
I don’t know but I just came back from Disney World. So I’m going to tell you my favorite joke to tell my daughter, because that’s what I got on the top of my head right now, is why can’t you give Elsa a balloon? Because she will let it go.

David:
Awesome.

Robert:
There you go. That’s what you get to end it with, now you know, David.

Mindy:
No, I have a good student loan joke. Post Malone has started his own student loan company. It’s called Post Malone’s postpone Malones. Oh that was-

Robert:
Postpone Malones, love it.

Mindy:
I’d like to take a moment to say thank you student loans for getting me through college. I don’t think I’ll ever be able to repay you.

Robert:
There you go. Yes.

Mindy:
But I [inaudible 01:10:06].

David:
That sounds like a Hugh joke.

Mindy:
It does sound like a Hugh joke. Hugh Carnahan. He tells terrible jokes.

David:
He’s a friend of mine. He always posts in the BiggerPockets Facebook groups these ridiculous… you’re just like…

Mindy:
Horribly bad jokes. Hugh, you’re terrible.

David:
Did you Google worst financial puns and then you’re like, I’ve got content for a month.

Mindy:
Okay. From episode 297 of the BiggerPockets Money podcast, he is the inimitable Robert Farrington. The other guy is David Perrey and I am Mindy Jensen saying, give a hoot, don’t pollute.

David:
This is the BiggerPockets Podcast show 601.

Jason:
The whole big concept of action versus mindset versus frame is really the mental environment you’re operating in. Like in the past when I did coaching, it was coaching clients around action and mindset, action, action, action. Now all of the focus I do is really helping people shift their mental environment because the right action in the wrong environment will never ever work.

David:
What’s going on everyone. This is David Green, your host of the BiggerPockets Podcast. If you are looking to find financial freedom through real estate, you my friend are in the right place. BiggerPockets is a community of over two million members where we have one simple goal, to help people find financial freedom through real estate. We do that by bringing in experts in the field that have done it before, we do it by bringing in stories of people that can inspire you, that you can follow in their footsteps. We provide as much information as we possibly can about how this world works. And we also do what we do today, where we bring in experts in mindset that will help you develop the right way to look at yourself and the world to achieve the goals you have and put into practice the information that we give you. Here with me today to join me is my good friend and co-host Rob, Robert Abasolo. Rob, how’s it going?

Rob:
Hello, hello. Man. Dude, we are right over 600 episodes here on the BiggerPockets network. Can you believe it? It feels like just yesterday we started this thing.

David:
That’s exactly right. We are picking up steam. You know, ever since Brandon Turner stepped away to focus on other things, we started creating more content and different kinds of episodes. And one of the things that we focused on is bringing more detail into these shows. We want them to feel more like a masterclass in a specific topic than just the same story of a different successful investor. So what one thing we’d like to know is if you like that, please leave us a comment. You can do that on YouTube by following BiggerPockets there, leave us a comment, tell us what you thought of today’s show, what you’d like to see more of. You can also do it on the BiggerPockets website itself. Now, speaking of Brandon Turner, we actually have his coach with us today. You all may know that Brandon has his famous text letter Behind the Beard.
Well, today we have the man who was famously behind the beard and his success. Someone mentioned countless times by Brandon Turner. It is his coach, Jason Drees. Now I’ve met Jason a few times. I’ve talked with Brandon more than a few times about the stuff that he gets from Jason and implements it. So much of this information is sort of filtered to me through my relationship and friendship with Brandon, and Jason joins us today to talk about how to realign the way that we think so that we can hit our goals. Rob, what were some of your favorite parts of today’s show,

Rob:
Man, you know, he really drove it home for me on a lot. I think this really came at a great time for me because I feel like my mindset has changed a lot over the last year, several times, and talking to Jason really reassures me. One of the things he harps on here is that we should be going after, we should be following our emotion, following what excites us. What real estate project out there scares us? What’s something that we don’t think that we can possibly do, that’s what we should be pursuing. Not necessarily the most logical path, right? Don’t necessarily always lean on logic and the analytics and the numbers, which obviously there’s a case to be made for that, but go after what scares you and that’s kind of what we’ve been doing here, right?

David:
Yeah. One thing he mentioned that I haven’t heard anyone say before is we often talk about mindset, and what Jason said is that mindset isn’t something you can actually change. You can only change your frame and then your mindset will follow. And he gets into this idea of what a frame is, how to affect it. The view that you look at the world through, the lens that you see things and then the lens that information comes back to you is really where it starts. Brandon Turner and I often talk about this as identity. Whatever you see yourself as will determine what steps you take.
Now, if you are only here to learn about real estate investing, that’s okay, you still want to listen to the show because at the end of it, you want to make sure you listen all the way to the end, Jason actually breaks down Rob and I’s partnership, our goals for buying real estate and how this information could be used for us to practically take steps to achieve our goals. So you don’t want to miss that, especially the awkwardness as we’re asked questions that we’ve never really asked each other or ourselves up until this point. What did you think about that, Rob?

Rob:
That’s right. Yeah. Today we actually get a look deep into the crystal ball of the future. And David, I don’t think you necessarily liked who you saw in the crystal ball.

David:
No, I had my little Disney moment there. I was like, oh, is that the case? And also it felt eerily like looking at my own head because my head’s kind of in the shape of a crystal ball. So that was a double doozy for me.

Rob:
Well, for what it’s worth, I like the shape of your head.

David:
I that’s pretty much why it picked you as a partner. That’s my one litmus test that I just need to see passed, and you passed it. All right. Before we move on to the show, let’s get today’s quick tip. Today’s quick tip is buy Jason’s book. It’s put out right now by BiggerPockets publishing. It’s called Do The Impossible. If you want a life that looks like Brandon Turner’s, get a book written by his coach and get some of the same coaching that he got himself. All right, Rob, before we bring in Jason, anything you want to add?

Rob:
You know, there’s always pressure for me to add some insightful tidbit here, but no, I got nothing, man. I think we should just dive straight in.

David:
I think that shows that you are a secure person and that you’re able to say no, because you know you bring enough value as is, and you bring plenty in today’s show. So everybody the buckle up, strap yourself in, grab the handles because you are in for a wild ride with Brandon Turner’s mindset coach Jason Drees, Rob Abasolo, and me, David Green. Jason Drees, welcome back to the BiggerPockets Podcast.

Jason:
Thank you, David. Quite has changed since the last time I was here and it’s exciting to reconnect.

David:
Yeah. There’s a little less beard down low and there’s a little more hair on top, you see my new co-host here is …

Rob:
I’m working on it.

David:
Yeah.

Rob:
I’m working on it.

David:
You got a ways to go before you become Gandoff. So Jason, you wrote a book for for BiggerPockets, and I’m sure that a lot of Brandon’s success comes from the stuff that’s going to be in this book. So we would all like to know what is this book about?

Jason:
So this book is really kind of the foundation of my coaching methodology, but really it’s how I understood I’ve created the success I’ve had. The book is called, Do The Impossible, and one of the things I’ve noticed being a professional coach for close to 10 years is that probably 95 to 98% of the people I meet, they’re simply not aiming high enough. They’re just not aiming high enough. So this book here basically is written to kind of give people the foundation of what their full potential is, how to start playing life at their full potential and more importantly, the power of mindset and how to shift it into alignment with playing at that level.

David:
Yeah. You know, this topic of mindset has come up a lot. Brandon and I started a mindset oriented episode maybe a year and some change ago, because we realized that just telling people what to do over and over and over is what people think that they need, but so many people have the knowledge that’s needed and they’re not actually doing anything with it, that it’s actually a mindset problem. You have to adjust that first before the knowledge and the information that we’re giving somebody’s even useful to them. So do you mind kind of maybe expanding on that concept that while people may think that what they need is answers or knowledge, it’s usually not the case.

Jason:
Yeah. Because mindset is this elusive thing, and I’ll tell you, it’s really strange being an expert in something that most people don’t understand what it is. But mindset is literally, the simplest way, it’s like a point of view. It’s your thinking. And it occurs in your brain and it’s how you view things. And one of the models I kind of use is like as human beings, especially achievers, and if you’re listening to this podcast, you’re growing and expanding your life and you’re working towards it, as human beings, I’ll give you my little graphic here. So imagine a small circle, we’ll call this action. And as human beings, a lot of times we think about action, hey, I want to hit this target. I want to get a new property. I need to push up the level. So a lot of times the action comes, but what happens if the action doesn’t work or you don’t know what action to take, right?
That’s where we get to the next layer, which is mindset, because of the mindset, your point of view, your experience, your level of thinking, determines the actions you can take. And that’s where people start to understand, they’re not creating the success they want, or the results they want, it’s somewhere around mindset. So that’s really the first component to start creating more success is to understand you are capable of more than you currently think. So it’s really a game of how much can you evolve your mindset? Because when your mindset is in alignment with a target, then you hit the target.

David:
So do you find it’s better to sort of take an offensive approach and say, I’m going to tell myself I am worthy of this, or is it a defensive approach where you have to remove self-limiting beliefs that are stopping you from thinking it? What’s the way that you tend to approach that?

Jason:
It’s kind of a combination, right? The interesting thing is that I have come to understand that limiting beliefs and the emotion we feel around limiting beliefs is actually a symptom of misalignment, right? There’s times where we have flow, where we have naturally inspired action, and there’s times where we have resistance and we have procrastination. That actually has to do with alignment. So there’s times when you actually have to shift the limiting beliefs around them. And one of the most interesting things that I’ve learned over the past 10 years is I used to work for Tony Robbins and I was a Tony Robbins coach, and as Tony Robbins coach, we would focus on mindset and action, we’d focus on beliefs. And we would literally say, okay, well, why don’t you start cold calling to find off market deals? Well, I don’t like cold calling, right?
And then a coach would say, well, what type of data are you going to be if you don’t follow through? Right? So the coach would use leverage of pain and pleasure to force misaligned action. And what I’ve discovered about 14 months ago is there’s actually a level that’s beyond mindset. So you have action, you have mindset. And then you have another level which I call frame and frame is you, right? Frame is you, because your mindset is here, it’s in your mind. And your brain is a computer that looks through everything in the past. So as you’re moving forward, it’s constantly comparing anything forward to how does it compare to the past? And what I’ve come to realize, and it’s kind of hard to explain, but I wouldn’t believe this unless I’ve proven it so many times. So what I believe your frame is it’s you.
Now, you and me, we’re made of atoms. Our bodies is energy, right? We also know that life responds to us. Sometimes life responds to us great. Sometimes life responds to us in ways that isn’t good. And what I’ve discovered is that life responds to you based on your frame. You can also think of your frame as like your expectations, right? And what I’ve discovered is that as human beings, we think action creates your reality. But what I’ve proven is that your reality creates your action, because your frame creates your mindset that creates the action. So if a person is feeling limiting beliefs and their resistance to cold calling or raising money, that’s because they’re in a mindset that’s misaligned with that, which is in a frame that’s misaligned with the target. So if you shift the frame into a frame of alignment, the mindset will shift, and then those limiting beliefs literally become irrelevant, just like that.

Rob:
So I’ve got some questions for you, Jason, because this actually really hits home for me specifically.

Jason:
Yeah.

Rob:
My life has really evolved and changed in a lot of big ways over the past 24 months, and I feel for me personally, that I was a completely different person three months ago, and I feel like I was a completely different person from that six months ago, and then nine months ago, and 12 months ago. Every three months, I feel like I have a completely different mindset change. So obviously I’m the still person, I’m being hyperbolic. But from the way I think about things, the way I think about business, the way I think about financials, the way I think about investing and all that kind of stuff, it really does change day to day for me, because I’m in a spot where I’ve set all the goals that I’ve always had in my whole life. And I hit them and it’s because I run full force, and so I’m kind of curious, for me at this point, I had a whole five to 10 bullet point list here of all my goals and I keep hitting them. And so now I’m wondering what’s next for me? I don’t know how to evolve my mindset when I feel like I’ve hit my goal. So how does that play into something like this?

Jason:
Goal setting or-

Rob:
Yeah. Goal setting into-

Jason:
[crosstalk 00:13:12] Growth expansion.

Rob:
Yeah, do you feel like goal setting is a healthy way to change your mindset or is that something that holds us back? Because it kind of sounds like you were saying, when you’re framed in a box here, it’s a little tougher to escape from said box.

Jason:
Yeah. Goal setting is absolutely a powerful tool, and it also depends on where you’re setting goals. What I’ve found to be true is that in order to hit your goal, you have to evolve into the mindset that’s in alignment with the goal. What I’ve found is instead of going through and picking apart limiting beliefs one after another, you can actually shift your frame and instantly get into alignment. And what I would say to most people who are consistently growing and expanding, I’d say, well, fantastic, Rob, because that’s what’s going on right now. We’re all growing at an accelerated rate. And the questions I use with my clients to do goal setting is we ask the question, what do you want? Which we all ask. The only problem with that question is that question is based on past reference. So you say, what do I want in 2022? Your brain’s going to give you an answer on 2021, the second question to ask self is what is possible? And when you ask yourself what is possible, you’ll actually get an answer that’s based on external reference. Okay. Now, if you’re above external reference, you won’t get that, but most people are not. The third question, and this is the question I would ask you actually, Rob, right now is what would be an impossible target for you to hit this year, impossible, but would be a lot of fun anyway?

Rob:
Okay. Wow. Listen, I’ve thought about this a lot. So would this be a financial goal, investing goal, or just kind of just throwing everything out there?

Jason:
We could do it in each area, but I just figured, I’d throw it back out here to see what comes up.

Rob:
So right now I currently have about 14 properties in my portfolio. I would say an impossible, in my mind, goal for one year from now would be to get to a hundred units.

Jason:
Okay. That sound exciting?

Rob:
Yeah. Yeah. It does. It does, because it would basically take the four years, four, five years of investing that I have and effectively quadruple the rate at which I achieve that, right? Because I did that over four years. So doing it in a year, to me, it sounds not really quite as feasible.

Jason:
From your current, but is it physically possible?

Rob:
Yes. Yeah, definitely. If I start going down on the route of, you know, bigger fundraising, syndications and all that kind of stuff.

Jason:
Yeah. Yeah. So if you started to aim at that target now, did you notice David, how he got excited when he talked about that?

David:
Yeah. You could hear the change in his voice, his tone.

Jason:
Yeah. And what that question does is it pulls up an intuitive answer and that’s like we start to follow our excitement. So when you ask about goal setting, there’s a concept I use called, known and unknown. Now Brandon talks at length about goal setting and visionary and all of that stuff. I don’t do it at all, because there’s two different places you can set goals. You can set goals on the known and you can set goals in the unknown. The simplest example I can give you is that let’s say you’ve got a new, new listener. They have a day job. They want to replace their day job with real estate income. They make $10,000 a month, they read David’s book and they’re like, okay, I need a hundred bucks a door. I need a hundred doors. I could probably do two this year, three next year. So I could probably a hundred doors in five to seven years. That’s known, like from today’s point of view, that’s known.
They could map it out backwards. 10 offers per deal, 10 properties per offer, et cetera. And you could like map it out backwards. Now that’s known. At the same time, that real estate investor also knows that they could get into a single deal or deals that generates $10,000 in passive income in five to seven months. They just don’t know how. The book that I’m using, the Do The Impossible book is really about how to get an alignment with those unknown targets that radically accelerate you, and when you’re doing goal setting and the known, you can absolutely set goals three years, map them out backwards, but when you’re setting goals in the unknown you have to do them one step at a time because life literally only gives you those targets one step at a time.

David:
So Jason, can you give us a hypothetical example of what an unknown goal might be? And then what some of those mile markers, like you mentioned, would be to get to that unknown goal?

Jason:
Well, absolutely. Right. My business last year did two and a half million in revenue and my impossible goal right now is to do 10, to quadruple this year after almost tripling last year. Do I know exactly how to do that? I don’t know. I’ve got one on one coaching, I’ve got group programs, I’ve got live events, I’ve got certain people here, but I have no idea which, am I going to be more successful pushing all my energy to our live event or one-on-one coaching or group coaching program or focus on books? Like, I don’t know. Right? Now I can make a guess from this situation, but what I want to do is follow the process of life to get the most exciting result, because what I’ve proven over the past couple years is like, I’m literally following my excitement.
So if I’m looking at all of those right now, it’s like, okay, what’s the plan for the year? If I look at the plan for the year to hit 10 million, I have no idea. I would just be guessing. Now, if I say, what would be my number one target it in the next 90 days? What’s the most exciting thing I can work on in the next 90 days? I actually start to get different answers. So you basically start to pull intuitive direction and excitement out, so you start to walk that path of accelerated targets.

Rob:
So that is very interesting, Jason. I actually was just talking to a friend about kind of a similar head space here. And he’s said, I don’t know, maybe he was following you on Instagram. But basically he was telling me to set your goal, like take whatever you want to make. In his instance, it was a monetary goal. So four million he’s like, I want to make $4 million next year through my Airbnb investments, my real estate investments, another company he’s starting. And he said that he found this quote or someone he knows told him, take that goal and then 10X it, and that’s going to be 40 million dollars. Set your goal for 40 million dollars. It doesn’t really matter if he can hit that 40 million or not, but then to retroactively work backwards and figure out how he can get to that 40 million, because that’s a really hard goal. But once he maps out how to get to 40 million, getting to four million dollars really isn’t quite so scary anymore because he already figured out the big, bad beast down at the $40 million mark.

Jason:
Yeah. And that’s an example of thinking from a different point of view or different perspective or different frame to start generating different thoughts, and really what this is really about, the whole big concept of action versus mindset versus frame is really the mental environment you’re operating in. Like in the past, when I did coaching, it was coaching clients around action and mindset. Action, action, action. Now all of the focus I do is really helping people shift their mental environment, because the action in the wrong environment will never ever work, right? And the simplest example I can give you about a frame is like, as far as being in an open frame is like, you can be walking down the street and someone can walk up to you and say, Hey, you look like a very nice, a nice upstanding citizen and reach out and hand you a million dollars in cash.
Now, what’s your reaction, right? Do you say, thank you. Do you say what’s the catch? Do you say I can’t take this, right? Now, regardless of what you say, just because that scenario is not likely, doesn’t mean it’s not possible. The average person walks around with expectations that things like that aren’t possible, so things like that don’t happen. When you live in a reality where anything is possible, then you start to see opportunities and connections and you start to open up. So you start to operate in a frame that’s more open and then you see ways to jump up in success.

Rob:
So I think in a sense, it kind of is the mindset of anything is possible, but that almost feels like very lofty and like a little tougher to really live by. But is that a mindset that we should be kind of adhering to that anything, like legitimately anything is possible and we just have to be open to those opportunities presenting themselves, or do you think there’s also a little bit of work that we have to be putting towards it to opening up those things that are impossible?

Jason:
That’s a great question. What I’ve found is that the frame you’re operating in creates the reality you’re operating in. So you both are successful than the average person out there, I know that you’re high level performers. And you’ve seen a lot of people who have limited points of view financially, right? They think money, it’s hard to make money, that literally, your environmental expectations, your frame determines what you think. And what actually happens is your frame determines the frequency of your brain, which then determines your thoughts, which then determines if you have naturally inspired action or you have procrastination, or you’re in alignment or fear. So what we don’t realize is that we are every day creating our operating mental environment, and most of us are resistant to what’s fully possible based on our past references. So the more you start to open and operate with a more open, more possibility based point of view, then you start to see things. And when you start to see things, then you have different ideas and different ideas create different actions, different connections, and it kind of snowballs.

David:
Do you think you could give us an example of a client you had, or even if it’s just a hypothetical one, of what their frame was like before this made it into their world, and then how their frame shifted that led to more success so we can see what this would look like in real terms.

Jason:
One of the frames that I’ve been talking about a lot, at least a lot recently with my clients is about overwhelm. Now, as you create success in life, you start to get to a point where you have more stuff and I’m sure everybody on this call has been overwhelmed before. If you’re in a place of overwhelm, it’s almost like there’s too much stuff going on. Too much stuff is too much life, but the reality is a lot of people resist overwhelmed, but the reality, the point of view, the frame that I like to point out is that the way you get overwhelmed is because you were so successful in the past, you’ve created more stuff than you can manage. So that, to me, sounds like a good thing. And overwhelm also, if you’re in overwhelm, which is a frame of overwhelm, you’re looking at the world and the current reaction is like, I can’t manage all this. If you’re in overwhelm, it means it’s possible for you to not be in overwhelm.
So you can also see overwhelm as the indicator to level up and shift your mindset. As in, the feeling of overwhelm is the indicator of the presence of an elevated frame. So a frame shift can be simply as simple as a point of view that literally blows away every roadblock and limitation that the previous point of view had. That’s as simple as a frame shift is, but when you start to make that shift, you start moving, you start thinking differently.

Rob:
I think that makes a lot of sense, personally. I think one of the easiest ways, correct me if you have kind of other points of view on this, but this is where I think someone like a mentor can come in and really help somebody. Because for me, there have been so many points in my life where I had limiting beliefs, especially about real estate and investing in this, oh, I can’t do that. I can’t finance that. I can’t finance that. And then you talk to somebody that’s done it, and you talk to someone that’s done it 10 times, and you talk to someone that’s done it 50 times. And then they’re just like, what are you talking about? Of course you can. This is all you have to do this, this, this, this, and it’s so clear for other people.
And I think having someone that you can talk to, or be a sounding board for, that to me has always helped me in my scenarios. And I think that’s probably why I’ve had so many mind shift changes this year, because I’ve spoken to so many people in my space, whether it’s content creation or real estate or investing that are all better than me. Not as a person, but in their space. They’ve mastered it. And they talk to me and they inspire me and I’m like, whoa, I had no idea that was possible. And then I see other people doing it. I’m like, well, I guess it is now. I guess it is possible, and that’s what I’m going to try to do you. And so for me, that’s always been very helpful is just kind of connecting with people that are in the same niche, but are just maybe 10 steps ahead of you.

Jason:
Mentors are a very powerful part of the equation, right? Because they can show you what’s possible. One thing that can happen though, is when you have a high level mentors like both of you and David, and David’s here kicking out real estate investor strategy 500 because he is got so much experience under his belt, a version 500 strategy doesn’t run on a version one mindset. So sometimes if you ever wonder why your mentor strategy isn’t working for the mentee, it’s because their mindset may not be high enough to run the strategy. And that’s actually a good a place where coaching comes involved to help the mindset evolve. But it’s like, you want to coach on your team, you want a mentor on your team, right? That’s a great equation.

Rob:
And can you explain to us just briefly what that difference is?

Jason:
Mentors are experts in strategy, where they typically have done something you want to done before. So they literally have a result that you want to achieve or they have expertise in the actual strategy. What a coach does is a coach helps evolve who you are, evolve your mindset. So it’s not just strategies. It’s like the mindset, because mindset generates and run strategies. The coaching evolves the mindset of you to a higher level. So you can run higher level strategies.

David:
I’ve noticed in many times in life we want to go to who we think is the most successful person we can find and say, teach me. And once I started training in jiu jitsu, I noticed, like I’m learning from a Gracie, who’s a family that’s known for bringing Brazilian jiu jitsu into the United States, and he’s been doing it since he was like four years old. It’s his entire life, under insane pressure his entire life. I can only imagine being a Gracie and doing jiu jitsu. You just have a target on your back all the time. Right? And so when I’m trying to learn, I quickly realized he’s the last person in this gym that I need to be asking questions of. He was six years old when he was learning what I’m learning right now. It is lifetimes ago that even entered into his, he has, like you said, a completely different mindset.
He’s looking at this from such a different lens, right? I’m learning a technique and he’s trying to teach me in the scenarios when I might use it and how it’s better than another one. And I’m like, I actually just need to practice moving my body in that way over and over and over until I get muscle memory down. I can’t even hear what you’re saying. And so what you’re describing right now, Jason, I see this happen and things other than just in real estate, it’s kind of a life thing where it’s not always best to go to the most successful person you could find and say, show me how you do things, right? Like you said, the information they have doesn’t work on the operating system that you’re running. You have to start with where you are at and work on improving your operating system. You have anything you want to share on that note?

Jason:
That’s a great point because when you think mentor, you’re like, oh, I need to go to the person way up here on the top shelf. But the reality is, a mentor is simply someone who’s done something you’ve done before and it could be just a peer of yours or a neighbor. Sometimes you just hear something that gives you one distinction that’s a game changer. So I would say, I tell people like, look for mentors and look for them everywhere, and it’s not like you have one mentor, you may have a mindset mentor, a sales mentor, or a business mentor, a family mentor.

David:
So now when it comes to deciding like what goals do I want to set? Where do I want to go? I know one of the things that you talk about is using emotion as an indicator or a guide for some of those decisions. Can you elaborate on that a little bit?

Jason:
Yeah. That’s a great question. And when we talk about alignment, because what I found is that hard work doesn’t create success. Alignment creates success, alignment with success. Hard work increases your chances of getting into alignment with success, that’s what I found. And simply through trial and error of my own, I’ve worked and had company had failed and failed and failed like year after year after year, I had things that didn’t work, didn’t work, didn’t work, didn’t work. And then all of a sudden, in 2019, I hit a wall and I quit and I’m like, all right, I’m going back to sales, I’m not meant to be a coach, nothing’s working. And then after I quit the next month, everything started flowing in. And that’s when I started to realize that hard work doesn’t create success, alignment with success creates success.
What I’ve discovered over to time is like, okay, well, if we know alignment with success creates success, how do you know when you’re in alignment? We have an internal guidance system. We all have a guidance system and they’re called emotions, right? But most of us are conditioned to follow our thinking over our emotions, because what if that thing that you’re procrastinating, you don’t want to do, what if you’re not supposed to do that? Or it’s supposed to be done a different way. So what I’ve found is that when you follow your emotions, you can actually dial into better targets because sometimes we’ll feel, we’ll think I need to do this target first before I do this one, because I’m super excited about a multifamily deal, but I think I need to do a single family first. That particular person should go straight for what they excited at even if it seems like a different target or contradicts their mind because the internal guidance is really the best path to success.

Rob:
So there are instances in your mind where it does make sense to kind of follow the excitement versus sort of I suppose the logical next step, because it does make sense to a lot of people getting started, for example, single family home, maybe I do one of those before multifamily. We do see it all the time though, people do start multifamily often, but it could be because they’re excited and they’re willing to make it work in that instance.

Jason:
Yeah. Like do you want to spend your life doing things you’re supposed to do or spend your life doing exciting things?

Rob:
Yeah. Usually the exciting thing I think. I think that’s how I’ve always approached it. I very much like to be uncomfortable. I don’t know why. I’m sure my wife and I’s life could be a little bit easier if we just took the logical step. But I do like taking big swings because I think being able to go after something that scares you a bit really, really can guide a lot of success. That’s how it’s felt for me. So you speak a lot about the sort of the resistance here and the misalignment, how does one go about removing that? Definitely understanding here, follow the excitement, but if you are misaligned, how can one prevent something like that?

Jason:
Well, you can’t prevent it because it’s always going to happen, and the faster you grow, the more you’re going to get out of misalignment, because as you start to grow, imagine this little axis is time and this is growth and the average person grows like this and as you grow and grow and grow, you need to integrate the parts of you or the lessons or the experiences that are not at that frequency of the higher level. If you’re growing at an accelerated rate, you’re going to have to integrate faster and faster and faster. So the way to continue moving is to be open to the alignment and open to when the resistance comes up, know that you’re getting out of alignment. So when resistance comes up, the best thing to do is really to stop and just breathe.
And the simplest way to frame shift out of that is just to get a sense or imagine the version of you that’s not in resistance. Frame shifting is that easy. So can you get a sense of a version of you that in this situation wouldn’t be feeling resistance right now? And with a little focus of your attention, you actually start to shift your frame and you start to get an alignment. So the first step when resistance is literally just stopping and breathing, because a lot of times we get we’re pushing and pushing and pushing and when we stop, we start to see things differently and that allows us to kind of move into alignment.

Rob:
Is there ever an issue with something like this where, because I agree, I think you hit a groove and you’re like, okay, anything’s possible, I’m chasing this, hey, it’s working. Hey, I’m really good at this. Hey, I’m now very confident about this. Is there ever a moment where resting on your laurels and letting your guard down can really lead to misalignment? Is that something that’s possible for somebody that is a high performer and someone that’s absolutely crushing it or does that tend to be a more rare case because they figured it out?

Jason:
Does like resting or pausing take them into resistance? Is that what you’re saying?

Rob:
Well, I guess overconfidence is the question here, right? Can you be perfectly aligned like we talked about and you’re crushing all your goals and now you’re so over confident that, is it possible that you’re over confidence can lead you down the path of misalignment?

Jason:
Well, I think overconfidence can lead you to comfort, like overconfidence, like there’s confidence, like you’re certain you can hit the target, like being in a state of certainty and confidence of like, yes, I can hit the target. That is a pure state of alignment right there. Can you be over overly confident? Like what does that mean? Does that mean you’re a hundred percent certain, but then you’re not open to flexibility or what does that actually mean?

Rob:
Sorry? Is that rhetorical or are you actually asking me right here?

Jason:
Yeah. Because you say overconfident, I’m like, what does that mean, over confident? Because I hear, one sign of alignment is certainty. I’m confident I can hit the target. That’s part of it. We all have different paths in life and you may be overly confident, excited, confident, things are working great for three months and you’re like, things are going great, I can relax for a month. And if I relax for a month, things may shift, but that’s also the natural process of life. It’s not necessarily a bad thing. You may be killing it, killing it, killing it. You take a little break and all of a sudden you stop killing it. But then that little discovery from the break period from restarting is what kicks you into a higher gear anyway.

Rob:
Yeah. I think that’s what I was wondering because I think that it, for me, it’s very tough to stop, right? I’m doing what I set out to do and I feel like if I stop, I’m no longer going to be able to hit my goals because I’m no longer working towards them, but it can lead to burnout. And so I have found myself taking a few more breaks and resting and kind of just digesting the world in front of me a bit, and that seems to have given me inner peace and mindset. So yeah, that answers my question.

Jason:
Yeah. And I would say like, do you have to keep working for your goals to keep working? Or are you in a frame that’s so aligned at a level where deals just find you now without doing anything, because those are both frames and you get to choose which frame you’re going to be in.

Rob:
Yeah. I think that’s the part that I’m trying to figure out if I’m being honest. I’m trying to figure out how hard do I have to work? Because I work very hard and I like it. I like this world. I like the ability to be creative and I find that creativity is what fuels me. But obviously hitting your goals isn’t everything, spending time with family is everything too, and that’s probably where I’ve kind of been pushing myself more towards is that side of things.

Jason:
What I’ve found that works best is to work in the way you want to work. If you like working hard, then work hard. If you work hard because you think you’re supposed to, well, that’s something different, right? I like doing big things. I like working hard and I also like playing hard. So the more that I follow my own unique desire and my path for work, and what I give to my team, what I do to myself, the more I do it my way, the more success I’ve seen come through, because every one of us is different and everyone is viewing our lives from different, unique perspectives. So however else someone else is doing it is irrelevant. And what really matters is what is the way that you want to do it?

David:
That’s such a good point. And I notice, I get this emotion that is not good when I hear, I don’t know how I’d describe it, like frustration or there’s just a sense of you’re asking the wrong question when maybe our listeners or people that want to learn how to invest in real estate, say, what am I supposed to do? What’s step one? What’s step two? They’re they’re looking for an instruction book that’s fool proof, that if they just do these things, they will end up where they want to go. And I’ve never understood why. I knew that was the wrong question, but I think what you’re describing right now might be answering that, it’s because not everybody is going to enjoy doing the same things. They’re not going to be good at the same things. And it’s not going to work the same way for a lot of people. I think what you’re talking about is what Brandon would often refer to as, does this feel light or does this feel heavy? Is that one of the tests that you give when trying to determine what someone should do?

Jason:
Well, part of it, right? But really you can’t, and I talk to people, investors all the time, like you can’t out plan the risk. It’s just there, you can’t. So when you get those investors who are asking, I get that, and my hallucination right or wrong and why you’re frustrated is because they’re asking you for the secrets that you worked your butt off to create. And it’s not that you don’t want to share those. The first step really is a decision to play the game, to play the game. I’m going to do it. And you’re asking what step one is-

David:
Commitment.

Jason:
Step one, yeah, are you committed to the result? That’s step one, right? And it’s really frustrating, it is to me too, when people ask for your advice or your mentoring and they’re not taking the action or not willing to do the work.

David:
I would say that’s the definitely a part of it. But it’s not just that, Jason, it’s also what step one for David Green was, is not going to be the same thing as Rob Abasolo. We have different goals. We’re going to use the same vehicle to get there, but there’s an infinite number of ways to put it together. And my personality led me down the path that I’m taking. There are aspects of real estate that I love, and there are aspects that I just cannot stand. So when you mention, work hard at the things you want to work hard at or something, I started thinking about how I used to love being a cop, and I could work a 20 hour shift as a cop and I would love 19 and a half hours of it. Even though it was hard work, it didn’t feel hard. I loved doing it.
I loved saving money. So it was not as hard for me to delay gratification and not spend because I loved watching my bank account grow and that feeling of progress that I was getting towards a goal. There are other people that don’t have my makeup and maybe saving money is very difficult for them. They might have a different relationship with money. They look at money like it’s a way to make friends or it’s a way to have fun or enjoy life. So that person’s goal might involve raising money from other people to put into the deal, not just saving up their own money. And when we ask that question, what’s the blueprint, I just want to follow it. It’s absolutely forsaking the fact that you’re a unique individual with unique skills that you’re going to have to use those to get towards your goal.

Jason:
A hundred percent, right? The success formula is make a decision and do everything you can to hit it. Adjust as needed, right? And if you don’t know what direction to go, A, B or C, which one’s more exciting? Which one feels heavy, which one feels light? Use your guidance system.

David:
And that’s really what I wanted to get at is that like for Rob, he loves to create. And the time I’ve known Rob, he has used that phrase probably 12 times. So I know in his heart, creativity is incredibly important and I’m looking forward to getting to know you better, Rob, where I can find out what it is in you that you’re trying to get out through creativity. I think that’s very cool. But I also see just like my former co-host, the infamous Brandon Turner, that time with family is incredibly important to you, right? Like Brandon would with things that, to me, I never even thought twice about because I didn’t have family in the equation. So he would have to approach problems differently than how I would approach them. And that’s sort of what I wanted to highlight is it’s so important to start with where you’re saying Jason, because we all have different motives that are driving us.
We all have a different end result we want. We all want financial freedom through real estate, but financial freedom for the purpose isn’t anything in a value in and of itself, it’s what you do with that freedom that’s going to give you value. So you’re going to structure your portfolio differently. You’re going to go about it in a different way. And I think part of what’s really cool about setting a goal like this is it forces you to sort of learn things about yourself on the way. It forces you to trim the fat off of your own steak, in a sense, as you’re trying to push towards that goal. Usually every big goal that I’ve ever set made me a better version of David because in order to hit it, I sort of had to jettison the parts of me that were not helpful, useful to others, bringing value, and I had to double down on the parts of me that were focused on other people or good in general and that’s just another reason why trying to find a blueprint, just show me the shortcut, I just want to do what someone else did. You’re robbing yourself of the entire journey that makes your skills and what you’re trying to do in life so powerful.

Jason:
That is, yeah. That’s like so true, right? And everybody’s a unique, you’re not here for the destination. We’re here for the journey. And the reason I love getting people towards impossible targets is because when you start playing at the level of impossible target, it’s not really just hitting big targets. It’s really following your own path in life, doing it your way. And when you start to follow your excitement and your path, that’s where your success comes, your impact to other people comes, your financial success, when you start doing it your way. And the first way to do that is to start moving past all the limitations from your past that have prevented you from playing that way. So you can do more. You can be more. Follow that path. Absolutely. And along the way you evolve to be that person, a hundred percent.

David:
All right. So if I have to create systems and models and guides for the agents that I’m trying to teach and how to sell these homes, I have to get clarity on what worked for me in the past, what our clients are looking for. Then I have to influence the amount of agents it’s going to take to sell thousand homes. In order to do that, I have to become a stronger leader. I have to care about people more. And so what I love about when you set a big goal is it forces you to become a better version of you to get there. I think it’s one of the ways that capitalism, when it’s done well, contributes so much because if you want to have more wealth, if you want to build more money, you have to become more valuable to other people. You have to think less just about yourself, or you have to indulge your vices less. And so that’s why when you hear successful people that like, it’s never enough. It’s not always the money. I mean, sometimes it is, absolutely there’s people that get caught up in that, but for others, it’s the growth. That that might be the most addicting feeling of all.

Jason:
It is, right? And the higher you aim, the faster you’re hit with growth. So it’s really a game of saying yes to more, how fast can you get back into alignment? And then how do you continue that journey? And people ask me, how do you do that? And I call this like walking your path to greatness, your own unique path to greatness, are you playing at your full potential, going after impossible things, and doing it your way. And some people are afraid of that decision to walk the path to greatness, and what I do is I basically give myself no other option. That’s the only option is to walk the path of greatness, to explore my full potential, because if I’m going to be, I don’t know how long I’m going to be here on this planet and this body, so I made as well, make the absolute best of it as I can. And sometimes there’s a little growth and sometimes there’s a lot of growth, but it’s always growth and expansion to become something more. It’s always an evolution.

Rob:
Yeah, for me, I think just the way all are talking about it is very, it really hits home for me because I think growth is kind of seeing how you react when things go wrong. Similar to what y’all were saying, people always reach out and they’re like, Hey, give me the shortcut, give me the one line shortcut that’s going to make me a real estate pro like you. And what I always have to tell them is you don’t become a pro at anything by things going right. You become a pro by everything going wrong. And so you have to be willing to accept failure as part of your growth. And that, to me, everyone sees portfolio and content, they’re like, yeah, you’re crushing it. But I’m like the only reason I’m crushing it is because I failed the whole way and I just adapted to those failures to enable my success.

Jason:
Absolutely, right? If you would’ve talked to me 10 years ago, I would’ve said I’m going to be a race car driver flying in jets all over the planet, and I’m not. That was my path to get here that it was failure, failure, failure, failure.

David:
Yeah. And that’s why having a humble spirit is so important, because if you’re going to learn from failure, you have to be okay with it. You can’t interpret failure as you having low worth yourself because you failed. It’s bringing me back to jiu jitsu again, I was just training yesterday and I was training with a black belt, and what we would do is we would just start to spar and then he would stop me in the middle of it and say, do you see what you just did right there? Why did that happen? And I would work through, I left too much space between us. And he said, yeah, when you leave space, I can do this. Do you see what you just did right there? It was literally everything I did wrong. He just kept bringing up. But by the end of the session, I now know don’t do all those things, right?
That’s literally how we get better. He didn’t stop me and say, you did that thing great every single time. Those really aren’t the things that I need help with. And so I think that just sort of is a testimony to why mindset is so important. You got to be okay with having your mistakes pointed out. You’ve got to be okay with making mistakes. You can’t interpret those like you don’t have worth as a human being because someone’s pointing out where you did something wrong, and when you’re in that mindset, you welcome that feedback. You welcome the mistake. You go out there and you take action, and you screw up and you’re grateful because it helps you get on the right path, and I think that’s why somebody like you, Jason, is so valuable in someone like Brandon’s life and in a lot of our listeners’ lives where you can help cultivate that mindset where you don’t fear failure anymore. You almost look forward to it because it’s getting you to success faster. I think, Rob, is that more or less what you’re kind of getting at?

Rob:
A hundred percent. For me, with the platforms that you and I have, David, and just being able to impart any amount of experience, I can at least look at my failures as there’s a silver lining. Silver lining is I’ll be better from it and hopefully, maybe I can help someone else not fail in the same way, and if I can do that, then it wasn’t a failure at all, because we’ve helped people, we’ve enabled people to be the more successful version of themselves.

David:
So Jason, at this segment of the show, I would like to know if you’d a live framing exercise on Rob and I. So Rob and I are partners. We buy real estate together. We have a very big goal that feels impossible for this stage of our partnership, and I would love it if you would sort of break us down and let everybody hear, this is what it looks like when you go through this process.

Jason:
Okay. Do I have permission to coach you?

David:
Yes. Just please be gentle.

Rob:
Don’t slap us around too hard. Don’t mentally jiu jitsu us too hard.

Jason:
Won’t make you tap. Make you tap. So what’s the target?

Rob:
I think David and I have set a loose goal, I think we’re open to collaboration here, but I think we’re looking to close on a property every single month. It’s probably going to take a little bit of systems and collaboration to get to that point. It’ll probably take a couple more months to get to the point where our systems are fully lined up. That’s our big lofty goal. We want to do one luxury property every single month.

Jason:
Okay. And when do you want to do the first one?

Rob:
We’re in it. We’re doing it right now. We’re in escrow on a property in Arizona and we just had inspections and we’re set to close sometime in April.

Jason:
Is that a stretch goal or is that an easy goal?

Rob:
Initially it was a bit of a stretch goal. What do you think David?

David:
Well, I think getting one under contract was, I don’t want to say easy, but it was definitely possible. But repeating that every single month for the rest of the year would be a stretch goal.

Jason:
So let me ask you this. What are you after by closing one property a month?

David:
I think one of the things that would stand out to me is by doing it every month, it will full force us to maintain our communication and contact with each other. We will have to build, I mean, we have a system we’re using right now, but the word system is often overused. It’s not just about having something, that’s being good at doing it. So it will force us to get good at the rhythm of how we’re playing this game and how we’re working towards our goals. It will also give us more, what do I want to say here? Like kind of a case study to be able to share with the BiggerPockets audience, this is what we’re doing, this is what we’re learning, this is what went well, this didn’t go well, a steady stream of information that we can dispense.

Rob:
Yeah. And another really important thing for us is when we talked about our strategy, we were like, oh, what if we buy five houses a month? And this and that. But now I think we’re actually looking to heavy up on the luxury properties because it’s arguably, even if it’s the same cash flow, we think it’s going to be more, but it’s less work than managing five to 10 smaller properties that add up to that luxury property.

Jason:
Now, how are you feeling about this target now?

Rob:
Better, better, because we’ve actually done it. So we’ve gone from being conceptual to talking about it for a couple months to now we’ve actually implemented it. And so now there’s something tangible to hold onto so that when we know we want to replicate it, we’ve done it once before and we actually have tangible evidence and experience to guide us.

Jason:
And David, how are you feeling about that target right now?

David:
I feel more excited about it talking about it. I can see one of the things that jazzes me up about any opportunity is the concept of synergy. So I really like it if I can have success in one area that will also make a lot of other things I’m trying to do easier, kind of like the concept in the one thing. And so being able to have success in this field will make this podcast better. It will add more value to the BiggerPockets audience. It will make Rob and I’s relationships stronger. It will obviously build more wealth, but it will open up doors for ways that we can show other, we’re sort of trailblazing in this sense, because I don’t know anybody else that’s really pursuing what we’re pursuing, the way we are. We’ll have to be raising money to do this. So it’s going to stretch. That’s one of the areas I think that makes it feel extra hard is I’ve never raised money at scale before. I’ve done it for individual properties, a couple hundred thousand here, there, but now we have to have a steady stream of that coming in every single month.

Jason:
Are you thinking high enough? You thinking big enough?

David:
I think we came up with this goal as this is a pretty stretch goal for right now, for the very beginning. I don’t think in a year or two that this would be very difficult to hit. I think we would reevaluate that goal once we found like we were hitting it successfully.

Rob:
Yeah, for me, I would say, I have never purchased a property of this size. It’s really quite, quite expensive. It’s 3.25 million dollars, and every property that I’ve purchased, for the most part, the average is sub a million. So to go to something three times more expensive, I’ve already hit a really big goal. Like that to me was, okay, 3.25, that’s out there. That’s big. That’s so much bigger than what I’ve done. Now, arguably, I could go bigger. And I think doing one of these per month, that seems, I’m not going to say unrealistic, but that’s a lofty goal.

Jason:
Okay. If success was guaranteed and you could not fail, would you still aim at the same target?

Rob:
I’d go higher. No doubt. I think I would want to go from buying one a month to going out, raising a lot of money to go and build 20 or 30 of these all in one fell swoop.

Jason:
What about you, David?

David:
I would probably buy more of them that are existing properties, and I would be looking to hire more people to manage them because I can see that we would get so many of them, it would become pretty much impossible to keep the books and make sure all the work was being done. So it would turn itself into an organization if success was guaranteed. So we would need to be hiring more people and creating a more fine structure to it.

Jason:
And back to you, David, what would be an impossible, what would be completely impossible for you to hit this year, but would be a lot of fun to do anyway?

David:
With the specific goal that Rob and I have here? If we hired an acquisition manager and a person to help raise capital and just let them loose, like we’re just going to buy 10 to 15 of these things every month and this person’s responsible for raising money and this person is responsible for picking the properties and managing them. That feels impossible, but that would be a blast if we could get to the point that Rob and I were just meeting every week and picking out the 10 properties that we were going to buy and letting everybody else worry about the details.

Jason:
Do you like that target Rob?

Rob:
Yeah. Seems pretty impossible to me in a good way. I agree. I mean, I can’t really fathom buying and closing 10 to 15 luxury properties that are over two million dollars, but that’s because I’ve never done it before. And so it seems to me exciting, but also how? Like how can someone do that?

Jason:
So can you get a sense, now when I talk about frame shift, when I say get a sense, like imagine you’re at the grocery store and you’re looking straight ahead and you know the person to the left is looking at you. Right. You know, we can sense that. Can you get a sense of a version of you in the future anytime, next week, next year, 10 years, 20 years. Can you get a sense of a version of you in the future that if we brought you in today, you’d look at that impossible target and say, I can do it.

Rob:
Yeah, yeah, I can.

David:
I can.

Jason:
And can you get a sense of a version of you that’s hit that impossible target at some point in the future? The version of you that has actually hit it?

Rob:
Yeah, definitely.

David:
That’s a little tougher.

Jason:
It’s a little tougher? Okay.

David:
Yeah.

Jason:
Can you get a sense of a version of you that it knows it’s possible for other people on this planet to hit that impossible target?

David:
Yes, I’d say so.

Rob:
I think so.

Jason:
Can you get a sense of a version of you in the future that knows if other people can do it? You can do it.

David:
Mm-hmm (affirmative).

Rob:
Yeah.

Jason:
Can you get a sense of a version of you in the future that has hit that impossible target?

Rob:
Yes.

David:
Yeah. I can more now.

Jason:
Hold your awareness on that version just for about five, 10 seconds. And how are you feeling now?

Rob:
I think so purely based on just kind of running this exercise with you and taking who I am today, if I could just go talk to myself two years ago, I think I would completely blow the mind of younger Rob if he could speak to me today. And so in two years from now, I’d like to think that the same thing happen again if I could speak to that person.

Jason:
And David, how are you feeling now after that exercise?

David:
If I’m being honest, there’s some resistance that I don’t know that I would like the version of me that I’m seeing that I would have to become in order to hit that goal.

Jason:
Okay.

David:
I see somebody who would have to be way or matter of fact, a little bit sterner when it comes to the people that work for me and the goals that they need to hit. I wouldn’t be able to sort of be like the Disneyland version of David that we could be on this podcast where we’re inspiring people and we’re trying to find those underdogs and coach something out of them. When you get to that level, it’s much more like you can’t quit the underdog anymore. They have to be experienced. I wouldn’t get a lot of the joy out of helping teach people. And I think that’s where I’m sensing, like I can’t see a version of me that it would still do what I do right now and be able to do that well. I feel like the part of me that’s encouraging would get in the way of running an enterprise that big because I would allow for performance that wasn’t where I would need it to be. And then if I did sort of become like that traditional hard nose CEO, this is the way it has to be, I would lose some of the fun that I’m having right now. That’s what popped in my head when I went through the exercise.

Jason:
Yeah. That’s great awareness because that’s your present frame trying to make sense of how to do that, right? Your present point of view. But when you get a sense of version of you in the future that was able to hit the impossible goal, doing it the way you wanted and had someone else running the business and being that person that needed to be.

David:
That would be the only way it could happen. That’s exactly right. There would have to be a person between me and the people that I talked to that sort of acted like a buffer that didn’t have the responsibilities that I have that I could trust to be able to make it happen. Yeah. That’s, as you were talking, that’s what was sort of like rising itself to the surface.

Jason:
Yeah. Because either direction that you two go, it’s unknown, you need to figure it out. Whether you’re going to do one property a month or 15 properties a month, either way, you have to figure out how to do it. So in this situation, you can continue the frame shift exercise, like, okay, what’s more exciting now? Is it 15 or one? So let me ask you the question, can you get a sense of the version of you that knows which target you should aim at next?

David:
Yeah, I think I can.

Rob:
I think so too. I mean, we’ve got our goal now. Maybe we are thinking smaller. I think David and I can have a chat about this later today and say, Hey, let’s recalibrate and what’s a bigger goal that’s a little scarier than what we’ve laid out in front of us? It doesn’t have to be 10 or for 15, maybe it’s three to five, but that’s still scary, but achievable, I think.

Jason:
And that’s awesome awareness, right? And what I would also advise you and all the listeners is like, when we start to go, I had this thought process myself. I’m like, okay, how am I going to do 10 million this year? I’m like, okay, well, oh no, I’ll get my executive assistant who’s detail oriented, because I’m not, and she’s going to sit down and we’ll do two hours of weekly planning every Monday and we’ll plan this out. And I was like, wait a second, wait a second. I don’t want to do that. I don’t want it to be that way. I want it to be 10 million and fun and easy. And then I asked myself, well, how do I hit 10 million this year? And my brain told me you need to increase your impact. How do you increase your impact? You increase your impact with more focus. How do you become more focused? You put more space around the action you’re taking.
And then I started to realize I’m in a leveraged model, so the more space I create around myself and build my team up, the more power I get, the more impact for things to really explode. So when you start to say, hey, I’m going to go after something big, let’s play with that idea for a little bit. Your brain’s going to give you its old perspective on how to do it, and like David said, I don’t want do it that way. And I’m saying don’t. Find the other way. What is the way? Get curious about that because you just don’t know what it is yet. It’s a new frame and you can every day just say, hey, can I get a sense of the me that knows how to do it? Yeah. And do that for like 30 seconds. And literally you’ll start shifting your thoughts, just like that.

Rob:
Well, thank you, Jay. Thank you. I feel I got new perspective on how to approach this project specifically. I’m sure David does too. We’ll have some chats behind closed doors that’s like, we’ve been thinking about it all wrong. But I wanted to ask you just from your side of things, do you have any final thoughts or any final words of wisdom that we can impart on our audience here at home before we wrap up here? I mean, we’ve already said a lot, so no pressure, but anything that comes to mind for you, man?

Jason:
You know, I would say go after what you want and give it all you got, because what I’ve learned along the way is that the most satisfaction I’ve ever had in my life is giving it all I’ve got. It’s far more satisfying than actually getting the prize because I knew I left everything on the court, everything I could. So don’t hold back. There’s no reason not to.

Rob:
Jason, thank you so much. We appreciate your time, my friend. How can people at home, where can people find you on Instagram? Give us the finals on that too, the final details there.

Jason:
Yeah. If you’re interested in what I’m doing and you’d like to know more, I do group coaching, we do one on one coaching. You can go to jasondreescoaching.com. You can also check out my Instagram page. I have lots of free coaching content there as well. And I do launch a mindset academy group coaching program with a foundational six week program that kind of puts this in place. And one book that I’m going to give you, it’s not a business book, but it is a business book, it’s called The Alchemist by Palo Coelho, and it’s about the journey of life. And when you start to approach your career from the perspective of the journey of life, it all starts to make more sense and it gets much more fulfilling, and that book is an amazing example of that.

Rob:
Okay. Adding it to my cart right now.

Jason:
And the book, Do The Impossible is available on BiggerPockets now.

David:
Okay. My question, what is the ideal person who should buy this book and what should they expect if they do?

Jason:
That is a great question. This book is for people that want to learn how to do more and be more. So if you’re looking to expand your career or expand yourself or make more money, it’s applicable to all of those subjects, it really teaches you how to open up and play life at a higher level.

David:
Rob, any last questions from you?

Rob:
Yeah, man. I want each of us to buy this book and have our own personal book club meeting to kind of really set the foundation for our business plan moving forward. David, where can people find you if they want your own personal knowledge bombs on the interwebs?

David:
Every time I hear someone talk about a book club, I remember the office episode where they had the finer things club. They would sit around in like fancy hats and eat [inaudible 01:03:54] and talk about Pride and Prejudice or whatever. It cracks me up every time, I just picture us sitting there saying quite quite with our pinky up drinking a cup of tea. Yeah, you can find me all over social media at David Green 24, LinkedIn, Instagram, there’s a TikTok that we’re making for our team called the David Green Team. We’re going to start making more content with that. I’ve hired a social media company, actually, that’s going to help me put out more content. So thank you for asking that Rob. And then you can also message me through BiggerPockets. So I do my best to try to keep up with all the notifications I get through the BiggerPocket system, but if you’re cruising around a BiggerPockets, find my profile, send me a message on there, let me know what real estate questions you have. We live to serve. How about you Rob? Where can people find you?

Rob:
You can find me on YouTube at Rob Built, go and smash that subscribe button and the like button, drop me a comment. You can find me on Instagram at Rob Built and on TikTok at Rob Builto, and feel free to hit me up on MySpace too. I don’t know. It’s probably still out there somewhere.

David:
There it is. Well, thank you very much, Jason, for the free coaching session we got, at least I hope it’s free. I don’t know if I’m going to be getting a bill when we get done with that. We didn’t discuss it, and thank you very much for writing the book as well. I know that’s something, when I first got into educating people about real estate, I assume like most people do that the information, the knowledge is all that’s needed. If you just tell people what to do, that it’ll work and they’ll go do it. And I quickly learned that it’s more nuanced and complicated than that. And how you think the way you look at the world, what you believe about yourself, plays a much bigger role in what you do with that information. So thank you for providing value in that area that people really need. And Rob, thank you for doing a great job as my co-host today as always, and sort of sitting in the seat that Brandon Turner used to sit in, as we talked to his coach himself, is there anything you want to tell us? Jason, do you have like a fun fact about Brandon that you can share that he would not get super mad about you sharing?

Jason:
That’s not confidential?

David:
Yes, exactly.

Jason:
You know, he talks about it, but it’s pretty funny. When he told me he’s not good at raising money. I thought that was one of the funniest things I’ve ever heard.

David:
I might have to talk to you about that too, because I’m following in his footsteps and I’m going to have to be raising money as well.

Jason:
Well you know how to reach me. Yeah. It’s been an interesting journey. I remember when he was putting the money for the house in Maui together and I was like, can’t you just do this? So, it’s a continual growth and expansion for all of us.

David:
All right. Well thank you very much for your time, Jason. Everybody go get the book, do the impossible by Jason Drees, Brandon Turner’s personal success coach. This is David Green for Rob, my partner in crime, Abasolo, signing off.