May 2022

Recent widows need guidance with money issues

Recent widows need guidance with money issues


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The loss of a spouse is up there with the most challenging experiences you might face in this lifetime.

With the understandable barrage of emotions you might face, it is probably hard to imagine taking concrete steps to secure your financial future. But this is exactly the time to do just that. It is what will put you on the path to emerging from this loss with the tools, skills and strength to be at the helm of your finances moving forward.

It’s evident that money issues can be one of life’s biggest stressors — but it doesn’t have to be. Once you are ready to take control of your financial situation, there may be things you find you need more clarity and instructions on. There may be some bigger questions you have about your financial future, like how to make your money last.

You may also need help settling your spouse’s estate, transferring assets to your name, closing accounts, updating beneficiaries and planning for your future needs. For all of these questions, a financial advisor can help.

More from Empowered Investor:

Here are more stories touching on divorce, widowhood, earnings equality and other issues related to women’s investment habits and retirement needs.

Various surveys show that nearly 80% of women will at some point become the sole financial decision-maker in their life. What’s more, many widows will spend several decades controlling their own finances.

To that point, half of all women who become widowed in the U.S. are under age 59. Since the average life expectancy for women is 79, that means those women often find themselves managing their finances by themselves for at least two decades.

While some women enjoy managing their finances on their own, others will prefer working with an advisor. For those seeking guidance on key issues like estate planning, tax planning and long-term financial planning and investing, it’s crucial to work with a financial advisor who understands your unique needs and goals.

A recent study conducted by UBS found that 85% of women manage everyday expenses, but only 23% take the lead when it comes to long-term financial planning. So, even though women are proactive with their day-to-day household finances, they don’t necessarily have experience making long-term financial-planning decisions and managing an investment portfolio.

You may already have an established a relationship with a financial advisor before your spouse’s death. If you like that person, then it’s time to schedule a meeting with them to get “reacquainted” and discuss what your future financial plans are now.

However, you may end up going to another advisor who feels like a better fit. If you do decide to make a change, know that you are not alone. To that point, 80% of widows switch financial advisors within a year of their husband’s death.

Why? Because in many cases, the advisor had a relationship with the deceased spouse and never fully involved the wife in the financial-planning and investing processes.

It’s important to take your time and find a financial advisor you trust and one who understands your specific financial needs and goals.

Truth be told, anyone may call themselves a “financial advisor.” Just because someone says they are a “financial advisor” doesn’t mean that they have any specific education, background, experience or certification which actually qualifies them to give financial advice.

There are advisors, brokers, broker-dealers, certified financial planners, chartered financial analysts, certified investment management analysts, investment advisors and wealth managers, to name a few. To be sure, choosing an advisor can be confusing and overwhelming.

The bottom line is that the financial advisor you choose should be a fiduciary, fee-only advisor.

An investor study by Personal Capital revealed that nearly half of Americans mistakenly believe that all financial advisors are fiduciaries required to act in their client’s best interest at all times. But that’s just not true.

The fiduciary standard explained



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Hold or Sell, Maxing Out on Mortgages, and Investor FOMO

Hold or Sell, Maxing Out on Mortgages, and Investor FOMO


The ROI (return on investment) of a rental property is arguably one of the most calculated metrics when deciding whether or not to invest. Even veteran landlords tend to look at ROI as the sole metric that decides whether or not something is a “deal”. But, in the 2022 housing market, more and more landlords are seeing a massive boost in equity, and new investors are finding cash flow harder and harder to find. Has ROI kept its relevance?

Welcome back to another episode of Seeing Greene, where expert investor, agent, author, and real estate investor, David Greene, takes time to answer the BiggerPockets community’s most top-of-mind questions. In this episode, we touch on topics such as how to scale your portfolio on limited funds, whether or not to invest in tenant-friendly states, long-distance house hacking, and the foolproof way to decide whether to hold or sell in 2022.

Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can hop on a live Q&A and get your question answered on the spot!

David Greene:
This is the BiggerPockets Podcast show 603. I like to take a bigger perspective. I like to look at the whole country and say, “What’s going on and how does that affect individual markets?” And then when I find the market that I like, that’s when I get involved and say, “What’s the ROI on this property versus that?” I think, my humble opinion, too many people start by looking at a property, finding what cash flows, and then trying to justify buying it based on whatever macroeconomic stuff that they look at or ignore.

David Greene:
What’s up, everybody. This is David Greene, your host of the BiggerPockets Podcast, here today with a Seeing Greene episode. On today’s episode, I will take your questions, your comments, your concerns, what the people want. I will do my best to give an answer, taking my advice and perspective into account, about what they can do to overcome their challenges and how they can build wealth through real estate. If you are new to this podcast, I’d like to invite you to check out biggerpockets.com.

David Greene:
This is the best real estate investing platform in the world. We’ve got podcasts like this where we interview people that have been successful at real estate investing and share their secrets, as well as bringing industry experts to educate you on individual components to real estate investing. We’ve also got a huge forum with tons of questions that you can ask or read that people have asked in the past, as well as an amazing blog where you can read tons of articles written by other real estate investors that all want to help you do the same.

David Greene:
There’s also over two million members that are all on the same journey as you. I’m David Greene, like I said before, and I will be your host for today’s episode. This was fantastic. In today’s episode, I actually have been confronted with a little bit of smoke. There were some unhappy people that didn’t like some of the comments that I made about cash flow, and I will address that about halfway through. In today’s show, we’re also going to cover topics like scaling quickly without using hard money or what your expectations should be with how to scale safely.

David Greene:
We talk about vacation areas or areas that people are moving away from and how to find the right personality of the area that you’re in so you could pick the right strategy. We talk about looking at a deal, whether you should sell it or whether you should keep it, how much equity you have in the property, and where your biggest challenges are going to come from. And then we talk about, should I keep saving to buying this market, or should I find creative ways to be able to get a deal now before prices get higher, and more.

David Greene:
Look, today’s show is from the people for the people. You guys submitted some great questions, and I do my best to give you the answers that I possibly can, and then explain the reasoning behind why I’m giving that answer. I hope you guys love it. I hope you join me on this journey and continue liking it. Please stay connected. You can follow me online @davidgreene24. You also can follow BiggerPockets themselves on Facebook, on LinkedIn, on Instagram, on YouTube.

David Greene:
They’re everywhere. Just put BiggerPockets into a search engine and see what you get. There’s a bookstore with tons of good content. If this is the first time that you’re coming here, you’re going to love this. And if you’re someone who’s returning, thank you so much for staying loyal, for taking this journey with me, and for following along. For today’s quick tip, I’m going to ask all of you that own real estate to take a look at your portfolio. Ask yourself how hard your equity is working for you.

David Greene:
We have seen a big increase in prices, as well as rises in rents, but home values and the rent you can get for a property do not appreciate at the same pace. Oftentimes values outpace rent. When that happens, you can sell a property and buy two or three more, spread your equity out over several different properties, so now you’re going to be appreciating at a faster rate, and most importantly, increase the cash flow that’s coming back to you.

David Greene:
We have a metric that we call return on equity, where you look and say, “Hey, with the money that this property makes me in a year, if I divide it by the equity in the property, how high is my return?” Many of you will find, if you look at your current portfolio, your equity is not working very for you. I’d love for you to sell that property and go buy a couple more. Get that cash flow higher and spread the wealth out over several more properties. All right, that’s all I had for the quick tip. Let’s bring in our first question.

Sharon Pace:
Hi, David. My name is Sharon Pace. I’m with 4p Homes based in Galveston, Texas, and looking to figure out better ways to scale in our business. We’ve flipped four properties already. We have two more that we bird into short-term rentals, but looking to find out how we can scale faster, but yet smarter in this, I guess, market that we’re in. We’ve been using hard money and private money, but we’re finding it’s harder to pay back our private money lenders when we’re trying to refinance out of these deals. Looking to figure out how to gain more capital and scale a little bit faster. Thanks.

David Greene:
Hey, Sharon, thank you so much for this question. I love how honest you’re being. What I’m hearing you say is, hey, we got a good thing. We’re buying short-term rentals that cash flow really well. Obviously we want a lot of them, but we’re not able to get them as quick as we want. Because after we refinance at the end of the BRRRR, the repeat, the last R, is kind getting slowed down because we can’t pay off our entire hard money note that we took to buy the house.

David Greene:
We can only pay off part of it, which means it’s tougher to get money to go buy the next deal. Let’s break down how you ended up in this situation and what my advice will be for you to improve it. First thing I want to say is there’s this theory that in most things in life, you’re looking for three benefits, but you can only get two. For instance, if you want a contractor, you want one that works fast, does a great job, and is cheap. Those are the three things you want. Pick two of them.

David Greene:
Because if they work fast and they’re cheap, they’re not going to do a great job. If they do a great job and they work fast, they’re not going to be cheap. That’s just the way that life tends to work. Because if you’re really good and you’re really fast, you can now charge more for your services, so you stop being cheap. At different stages in our investing career, we have to value different elements differently. When you’re new, cheap probably matters more and maybe fast matters more, but you don’t get great quality of work.

David Greene:
And then you start to want more quality of work and you realize the speed’s going to go down. And then ultimately you realize price is the least important. You want the other two? Let’s talk about how I look at scaling. You can do it quickly, you can do it safely, and you can do it profitably. Which of those two do you want to highlight as far as what you’re going to do? Because you can’t do all three. If you want to do it fast, you’re going to sacrifice on doing it safely or on doing it profitably.

David Greene:
If you want to do it profitably, you’re going to sacrifice on doing it safely or fast. Here’s part of what I think that you may have been led astray. There’s a couple rules to BRRRR. A lot of people think that when you BRRRR, you need to pull 100% of your equity out every single time, all your capital or more to put in the next deal. If you don’t get that, then that means you did it wrong. I don’t know where this came from, because I wrote the book on BRRRR and I say that makes it a home run deal.

David Greene:
If you get all your capital out, you crushed it. You should never expect every single time you swing the bat to get a home run. If you normally were going to put down 25% and you leave 16% in the deal, even though you may think you failed, you’re still better off than if you put down 25%. If you leave 11% in the deal, you’re still better off than if you put down 25 or 30%.

David Greene:
Maybe your expectations when you first started to think about scaling were off because you thought you were going to buy a house, fix it up, rehab it, payoff all the money, get all your money back, and bam, be right into the next deal. And you’re finding that adding value to real estate is harder than you thought. I think a lot of people are in this boat. And here’s why I think that happens, where that comes from. When you’re evaluating real estate, the easiest part to evaluate tends to be the cash flow.

David Greene:
I can look at the income. The expenses are relatively easy to control and understand. The only expenses that are really hard to control would be things like vacancy and repairs. The rest of it, more or less, you can sort of account for it. Cash flow is the easiest thing to calculate, and therefore gives us the strongest filling of security. The ARV, man, that’s tough. You depend on appraiser and you don’t control it. You don’t know what comp they’re going to pull from. The rehab, wildly unpredictable.

David Greene:
Sometimes they go fast. Sometimes they go slow. Sometimes they find stuff. Sometimes they don’t. Sometimes they come back and say, “Hey, we actually don’t have to fix that. It’ll be cheaper.” Other times they come back and say, “You need to borrow a whole bunch more money. There’s a lot more that’s wrong.” Rehabs are very tricky to control. Now, in a BRRRR, it’s all about the appraisal on the rehab. You’re adding value to the property through the rehab, and then you’re hoping it appraises for as much as possible to pull the money out.

David Greene:
This is where BRRRR investors get messed up is they approach it like buying hold investors that are only having to calculate one metric, which is just cash flow. We’re having to juggle several balls as a BRRRR investor. You’re having to juggle the cash flow you’re going to have at the end. You’re having to juggle the rehab and how you’re going to add value, and then you’re having to try to make sure that you get the highest appraisal possible. With more ball as in the air, it’s more likely that you’re going to drop one.

David Greene:
And if you look at it like you have to have a perfect finish, you’re going to think you’re doing something wrong. But you’re not doing anything wrong. You’re still better off than the traditional buy and hold investors if you’re leaving less money in the deal than they did. You’re just not going to be able to scale as rapidly as what you thought. Now, what I think that you will find is as time goes by, rents go up. Your operating system becomes slicker, smoother, and more efficient, so your expenses go down.

David Greene:
You will start making more money on these properties. They will become profitable. That will give you more money to buy more property with. If you don’t have a perfect BRRRR and you end up still owing some money on the note, you’ll have cash flow from the properties to make up the difference in what you weren’t able to pay the hard money lenders that you’re talking about. Basically if you give yourself a couple years to build up some momentum, you’re going to find that what you think you don’t have right now will be naturally happening.

David Greene:
I say this to people all the time is they just think it’s going to be easier than it really is to get started. Every new agent thinks that they’re going to walk in and in their first six months they’re going to sell 12 homes. And if I say it’s going to be hard, they go, “Okay, maybe in my first 12 months, I’ll sell 12 homes.” And then they find that they don’t sell maybe one or two houses for the whole year. It’s very tricky. But when you’ve been doing it for 10 years, it’s very hard to fail. You just have leads coming in all the time.

David Greene:
All these people know who you are and they’re just coming to you. You actually need some help with your business. Remember that as you’re building your portfolio, it will always be harder than you thought in the beginning, but it will get easier than you thought the longer that you do it. Okay, next question comes from Nadia Chase. This is a written question. Number one. What do you think about investing in an area where people are moving away from like Joshua Tree, California and the surrounding areas?

David Greene:
Number two. Where do you research whether or not a market will appreciate over time? All right, let’s start with question number one here, Nadia. It’s a bit tricky because you’re sort of asking two different questions. You’re saying… Well, you literally did ask two questions, but part one was two different parts. You’re saying, “What do you think about investing in an area that people are leaving? “And then you’re saying, “What do you think about Joshua Tree?” Those are actually different questions.

David Greene:
I’m largely opposed to investing in an area where population is decreasing. In most cases, if you buy real estate and you have significant reserves and you do it wisely, you don’t lose, unless the one Achilles heel is you can’t get a tenant. If half the population was abducted by aliens and just disappeared, if you see what happened in Detroit where the entire industry was based on one table leg and the auto industry collapsed, all those jobs leave, there was nothing you could do at that time if you owned in Detroit to not lose money.

David Greene:
There was no tenants. Nobody was living there. You absolutely want to pay a lot of attention to where people moving, how much rent are they paying, what kind of wages are they earning to determine what kind of they can pay, what jobs are paying those wages, and what’s moving to those areas. I talk about this all the time, which is kind of part two of your question. But Joshua Tree is a vacation destination. That’s what makes this different. People largely buy short-term rentals in that area.

David Greene:
I don’t think I’d be looking at are people leaving Joshua Tree. I would be asking of the population that vacations in Joshua Tree, which largely are going to be living in Southern California, the Los Angeles area, how many of them are leaving? Because people leaving an area doesn’t necessarily change real estate values a whole lot. It depends on the demographics of the people that are leaving.

David Greene:
When the Bay Area, there’s a lot of expensive housing that’s paid for by people that are executives of really wealthy companies like the Google, the Netflix, the Amazons. If those companies move their headquarters out of Silicon Valley, I would be very concerned about the luxury real estate. I would think it would have to change because the people who own it are leaving the state. Now, let’s say that people are leaving the state that are at lower income brackets. That tend to be people who rent.

David Greene:
They don’t own. I would be concerned if I own some of the low income multifamily properties in the area because your tenant pool is the one that’s going to be leaving. The question I think you should be asking is, are people leaving Southern California? Because yes, a lot of people are. The City of LA is falling into disrepair. There’s a lot of people that are very unhappy about how it’s being run. I don’t know it’ll stay that way, right? At some point, usually the pendulum swings the other way and people come back.

David Greene:
But for right now that’s true, the population is decreasing. But we have such a shortage of housing, it’s not really changing home prices. We still have more people that want to buy than people that want to sell even with everyone leaving. And that’s why we haven’t seen a decline in prices. The question would be, are people leaving Southern California that would vacation in Joshua Tree? I haven’t seen any indication of that being the case. The vacancy rates are very low for that area.

David Greene:
The demand is very strong. I think people that host this podcast, Rob Abasolo and Tony Robinson, are literally building and developing a lot of tiny homes in that area, and there’s a ton of demand. It’s not as simple as are people leaving or are people coming in. You got to look at what type of people are leaving and coming in, what demographic they’re in, and what type of housing that they are using. As far as where I research that, well, a lot of it, to be fair, I learn from people I know in the industry that do the research.

David Greene:
I’ll spend a lot of time talking to multifamily people that are super good, that have to know this type of stuff. I’ll ask them what they see and they’ll just… They’ll tell you everything, right? These guys are analytical nerds that love to talk about it. I get a lot of my information from there, but I know they get their information from places like the US Census Bureau and even places like online news sources like Fox Business News or CNN Money, Yahoo! Finance.

David Greene:
Those types of places will often post articles that talk about where people are leaving and where they’re moving to, where home prices are going up and why. I, as a real estate investor, I’m a little unique in the sense that I don’t just focus on what’s my ROI on this one property if I run it on a calculator. I like to take a bigger perspective. I like to look at the whole country and say, “What’s going on and how does that affect individual markets?”

David Greene:
And then when I find the market that I like, that’s when I get involved and say, “What’s the ROI on this property versus that?” I think, my humble opinion, too many people start by looking at a property, finding what cash flows, and then trying to justify buying it based on whatever macroeconomic stuff that they look at or ignore. If you fall in love with the property because you really want that cash flow, but it’s in the Detroit, you find yourself wanting to buy it even if the numbers are saying don’t do it.

David Greene:
I just removed that temptation from my life. I look at the big picture. I see what’s going on in Detroit versus what’s going on in Birmingham, Alabama, or what’s going on in Madison, Wisconsin, or what’s going on in Lakeland, Florida. And I say, “Hey, I like those areas,” then I niche it down to which city would I want to buy in or what part of town. Then I niche it down to what price point. Then I niche it down to what type of property. Then I niche it down to what can I actually get under contract instead of the opposite way. Hope that that helps you a little bit and good luck in your investing journey.

Mike:
Hey, David. I’m a newer BiggerPockets Podcast listener and recent pro member. Looking this start building some momentum. Now, I currently live in Renton, New York City. My career allows me to work remotely on the East Coast. Now, I’ve been wanting to relocate out New York City, given the cost of living here, but I still want to be in the city with a strong social scene and quality of life, so think Boston, DC, North Virginia, Richmond, Raleigh kind of deal. Now, here’s where my question comes in.

Mike:
I’d like to start some real estate momentum by investing in a duplex or triplex to relocate into. Now, given where the market is today for these cities and that they’re not in close proximity to me, it’s harder for me to scope out and evaluate rental opportunities. What would you recommend for somebody looking to start their real estate journey while relocating?

Mike:
Should I stay patient, be creative, continue looking for that duplex, triplex remotely, or perhaps invest in a condo in one of these cities instead and continue my rental hunt when I’m living in the city I’d like to invest in. Thanks, David.

David Greene:
All right. Thank you, Mike. This is a very practical question and I like that you’re asking it. If I hear you correctly, you’re saying, “I want to leave New York and I want to move to one of these other cities. Should I go buy the duplex, triplex, fourplex that I want so I can house hack in that city and stay here until I find it, or should I just go buy a condo in that city and live there, and then start looking for my next property once I’m already there?” I don’t know that either of those are your best options or your only options.

David Greene:
I think you can get a lot of work done from where you are. My advice would be you start looking for people to help you. I don’t know this because you didn’t mention it, but it sounds like you’re doing the typical consumer. I go on Zillow. I go on Realtor.com. I look at houses. I try to figure it out. I call that analyzing it, even though I’m not sure of what I’m supposed to be looking for. I don’t know the area. I don’t know if I’d want to live there. I spend a bunch of time noodling it in my head.

David Greene:
By the time I come to some kind of conclusion, somebody else bought the property. I think we could just improve your system. I think the first thing you need to do is find an agent in that area that you feel comfortable with that’s going to hunt them for you. I think the second thing you need to do is go visit whichever city you think you want to move to and get to know that area because you’re going to be living there.

David Greene:
Now, I do say in long distance investing, you don’t have to visit the area you’re going to, or you don’t have to visit the property, right? There’s still some value in visiting the area if you don’t know it. But that’s for investment property. If you’re be living in it and you want to know what type of places it’s close to, you want to know if you like the restaurants that are close by or how busy the streets are. This is your quality of life, so you definitely want to go visit that place and see which part of town you want to be in.

David Greene:
When your realtor says, “Hey, I found a triplex. It’s over here,” and they see it on a map, you can tell from that map what you’re actually getting and if you like that part of town. Now, when you visit, meet with the realtor. Maybe meet with a couple realtors if you don’t get a good vibe off of the first one. Then when you go back to New York, they will send you the properties that you could potentially buy. Now, you’re in a position where you know if you’re going to like it. Analyzing it makes a lot more sense.

David Greene:
You can put one under contract. I don’t think you need to move to the area and buy a condo to learn the area. I think you can visit it. Now, if you’re the type of person who just says, Nope, one or two visits won’t do it. I need to really soak in the entire atmosphere and get a feel for it,” then, yeah, moving there and buying a condo would not be a terrible idea. You just got to make sure that the condo you buy has a solid HOA. They’re not in any kind of trouble.

David Greene:
It’s in a good area where you think that if you decide you want to rent it out, you can still make some money on it. That there’s some demand. I would recommend buying a two or three bedroom condo, not a one bedroom condo, so you can rent it out by the bedroom after you leave because they’re a little bit tougher to cash flow. But I don’t think that the two options you presented are your only options. Build your team. Find out from your lender how much you can afford and what your payment is going to be.

David Greene:
Go learn the area. Find out which parts are zoned for multifamily, because that’s where your duplexes, triplexes, and fourplexes are going to be, and go drive those areas and see if you like it. See what’s within walking distance. And then tell your realtor, “Here’s the preferred places I like to live, tier one, tier two, tier three. Send me the listings that come from there,” and you can take it from there. Good. Look on your search, buddy. All right, we’ve had some great questions so far.

David Greene:
Thank you for submitting these questions. I’ve got some comments that I’m going to read from previous episodes. I’d love it if you could leave me comments on this episode. If you’re watching this on YouTube, please tell me what you think, what you would like to see, what you didn’t like and what you did. Now, I’ve asked this on previous episodes and you have been faithful in responding. We actually got a lot of comment on a particular show that I did where I talked about cash flow and how I think people have erroneous views of cash flow.

David Greene:
One of the comments comes from All Phase Landscape & Building Services, Inc. and they said, “I really am disturbed by how BiggerPockets has abandoned cash flow as the most important thing in investing. It feels like they have gotten too rich or too California to remember the fundamentals for smaller investors. Literally everything said in this podcast was in stark contrast to Brandon’s freedom number concept and the fundamentals laid out in his book.

David Greene:
I understand the game has changed since then, but only because we’re at a different point in the cycle. It feels a lot like 2007 right now and I’m not banking on appreciation. If it happens, that’s just a bonus. Why is cash flow unreliable if you are analyzing setting aside money for management, repairs, CapEx, and fixed expenses?” Now, this I assume is coming from when I talk about how so many people or maybe too many people think that they’re going to buy a handful of properties and retire and not have to work anymore.

David Greene:
And if they just find a couple of properties, they can be done. We’re seeing massive changes in our economy with inflation in rules regarding real estate and in the way that real estate investors are being treated. The tax code could be changing. I think, this is just my opinion, that the way things have worked for a long time is going to be changing. I think that there could be a point where the way real estate investing work changes, and I’m trying to put people in a better position to not end up losing their properties.

David Greene:
Now, here’s my opinion, this is not BiggerPockets. This just me as David. Cash flow is amazing. I love cash flow. I invest for cash flow. I like cash flow, but I believe cash flow in residential real estate is intended to stop you from losing the property. It is not intended to grow you wealth. What I’m getting at here is if you’re cash flowing $200 or $300 a month, it takes a lot of properties to be able to have a significant amount of wealth that gets built from that cash flow.

David Greene:
If your goal is to quit your job, it takes a lot of properties before you can quit your job if each of them is making 200 or $300 a month. When you own that many properties, like I have, it becomes a full-time job to manage those properties. What happens is you trade one secure job for one less secure job because your W-2 income is reliable, in most cases, and your rental income is not in almost every case. When I say it’s not reliable, what I mean is things break you didn’t anticipate.

David Greene:
Tenants trashed your house that you couldn’t have accounted for. You don’t know what’s going to go wrong. Everyone that’s bought rental property will admit, you catch them at an honest moment, when they first bought their property, they didn’t do as good as they thought. Things broke that they weren’t aware of. This still happens to me today. Sewage pipes that you didn’t know that you should get checked on end up leaking and cause significant problems.

David Greene:
Trees need to be pulled out of a property that you didn’t realize. There’s a rat infestation that you didn’t realize. Like lots of stuff happens. And if you get a couple properties and quit your job thinking that, “Hey, I’m making 300 bucks a month in cash flow. I’m good on six different properties,” you’ll find that $300 in cash flow rarely comes in every single month. What I’m trying to advise people against is prematurely celebrating the win. You’ve got a couple properties.

David Greene:
That’s great. You’ve got some momentum. You’re learning how to be a better investor. You’re building your skill level. Don’t quit and become a vampire sucking all that cash flow to pay for your living expenses right away. Continue to build. When I talk about appreciation being how people build wealth, that is partly referring to the value of a property going up. You will build wealth faster from that than cash flow, but I’m not only referring to the value of the property.

David Greene:
I’ve said many times, appreciation applies to cash flow too. The properties that I bought that at cash flowed $500 a month when I bought them, now cash flowed $2,000 a month over like eight to 10 year period. I bought them in areas like California, like Arizona, like Texas that were growing. People were moving there. Wages were growing in those areas. Rents went up faster there than they did in other parts of the country where nobody was moving to.

David Greene:
Once they’re going at 2,000 a month instead of 500 a month, I can now start to rely on that cash flow more. If I want to quit my job, like I did when I quit being a police officer and I got into a commission-based system, that cash flow was much more reliable for me to do it. And that’s all I’m trying to highlight here. No one at BiggerPockets and me is not saying don’t care about cash flow. We don’t know what’s going to happen with our economy. We don’t know if a recession is coming.

David Greene:
We don’t know if laws are going to be passed that limits how much you can raise your rent or how much you’re allowed to make as an investor. There’s already talk in California of like taxing short-term rental income an extra 25% by the state. If you ran your numbers and you said, “Hey, I’m good to go. I can retire. I have three short-term rentals,” and then that law gets passed, you’re looking for a job again. I’m just trying to keep everybody safe. I’m not saying don’t chase cash flow.

David Greene:
I’m saying don’t let cash flow become the savior to the life you don’t like. Continue to build your skills. Continue to work hard. Find ways to work at things that you like more. Don’t get a handful of properties and say, “Oh, I’m done. I’m at the front of the race and I can stop.” That’s what the hare did when it was racing the tortoise. You want to be the tortoise, slow, steady, continue to live beneath your means. Don’t let lifestyle come in. Continue to accumulate properties. Over time, you fix up those properties, less things break.

David Greene:
You get more stable tenants. You realize which areas work and which areas don’t. Your rents increase. Your cash flow grows, and then it stabilizes and then live on the cash flow. All right, next comment comes from John Moore. My first few properties didn’t really cash flow much 10 to 15 years ago. I used to feel lucky if I could use some of that money to go out to dinner or buy some new tools once in a while. But now I live on it and don’t miss running my painting business one bit.

David Greene:
All right. Oddly enough, John here is sort of highlighting the point that I just made. When he first bought the property for the first 10 to 15 years, they didn’t cash flow well. And if he had been looking at, hey, I need to buy a property that after all my expenses and setting aside money for maintenance and setting aside money for vacancy and setting aside money for CapEx and setting aside money for what ever surprises come and having the money that I need to spend myself on this property, he probably never would’ve bought anything, because real estate tends to not work that way when you first buy it.

David Greene:
But buying it and continuing to run his business, he bought more and more properties. I presume he got better at doing it. He bought in better areas. He got better deals. He had better management. And after 10 to 15 years, just like what I said, his cash flow probably grew similar to how mine did. And at that point, John exited the game and he said, “I don’t want to run the painting business.” This is the right way to do it, everybody. Now, a lot of my advice is coming from the fact that we don’t know what the government’s going to do.

David Greene:
They’re printing so much money. We don’t really know if we’re at the top of a cycle, or if we’re actually at the bottom of one. They might print a bunch more money and we could have another run in prices. Just take a second and think for a minute, what was housing worth 30 years ago? When someone that you know bought their house 30 years ago, what did they pay? All right? My parents bought their first house about 35 years ago in Manteca, California, and they paid $62,000.

David Greene:
That house right now would probably be worth 500 to $600,000. It’s gone up times 10. That’s without all of the money that’s been printed and the ridiculous amounts of inflation we’ve had. I would expect over the next 30 years that what I’m buying to be worth more than 10 times what I’m paying for it now. I know that sounds insane because I’m talking about a $2 million property being worth $20 million, but that’s because we’re looking at $20 million from today’s lenses, right?

David Greene:
When my parents first bought that property, maybe it would’ve cash flowed like $17 a month or something, but what was $17 worth back then? It would certainly be cash flowing more a lot now. Again, play the long game. Don’t get a little bit of cash flow and immediately quit your job, lose your safety net, go all in on drinking the beach or sitting at the beach and drinking Mai Tais and living the dream and telling your boss that he should shove it. Okay? Cash flow is great, but it’s very unreliable.

David Greene:
I have problems happen in properties all the time. I notice that certain areas problems don’t happen, certain areas they do. If I quit after my first three years of investing, I’d be stuck with a bunch of properties right now that don’t cash flow well because something’s always going wrong. Because I kept in the game and I kept buying, I learned what areas work better, what areas work worse, which neighborhoods. I got better at investing and now my cash flow is more reliable. All right, next comment.

David Greene:
“California is so frustrating for investors. Yes, I look long-term and don’t plan to sell, but we have rent control in Los Angeles. Even worse, restrictions are placed on rent with duplex and multifamily properties. How can a person upscale beyond single family homes if these restrictions are in place?” This is from Higher Spirit. That’s a great point. Southern California, particularly Los Angeles, is known for these type of rent control policies.

David Greene:
And to be frank, there is a lot more vitreal towards landlords now than I think there’s ever been. There’s hate groups out there that target real estate investors, and at times they’ve even targeted BiggerPockets because we raise rent when it comes to the market rent. Now, different people have different political opinions on why that should be.

David Greene:
But what I would like to maybe posit for you to all think about is if you buy a property and you expect the cash flow to be a certain amount, and then the government changes the rules and say, “Nope, now we’re going to put rent control. You can’t raise the rent,” but your taxes keep going up and inflation keeps going up, and that $400 a month that you thought was really good money is now worth the same as $200 a month after inflation, you can find yourself in a big jam.

David Greene:
Can you guys see where I’m getting at here? It’s dangerous to get a couple properties and think that you’re good to go, because these restrictions do get put in place. Higher Spirit, to you, here’s something I would think about. If you’re going the multifamily road, that might not be the best market for you to be investing in. Okay? That’s a great market to house hack in. You own the house and you rent out parts of it. You are keeping your own living expenses really, really low.

David Greene:
You’re generating additional rental income for yourself and some of those rules to protect tenants don’t apply the same because you own the house as your primary residence. You have more rights in that case than being a pure landlord. What I’m getting at is different markets have different strategies. We talked about Joshua Tree earlier. That’s clearly a short-term rental strategy. House hacking wouldn’t work that great in Joshua Tree because there’s probably not a ton of people looking to live there all the time.

David Greene:
That’s a vacation destination. LA is strong on the house hacking side. It’s strong on just owning versus renting, if you just buy a house and you’re not even an investor. It’s going to be a lot weaker on the cash flow side. If you’re looking to scale something and grow more cash flow, you probably want to get out of a market that has those kind of restrictions and get into a different one. I would recommend my book Long-Distance Real Estate Investing because I lay out the systems that you need to invest in a different market.

David Greene:
Now, I do invest in California. I live here. Someone mentioned to California, that’s probably a shot at me because I live in California, but I also invest in other states. I know I have different strategies in the different areas that I’m going to. I don’t think that that should be any kind of a shock to people. You should expect different children to have different personalities, right? Well, every market I invest in has its own personality.

David Greene:
Real estate has a personality itself, and we want to use a strategy that works best for the personality of the market that we’re in. Some of them are long-term plays where you get a lot of appreciations. Some of them are shorter term plays where you’re going to get a lot more cash flow. Sometimes it’s a short-term rental play. You’re going to put more time, but you’re going to get a higher return. Other times it’s a set it and forget it. I’m not going to make a ton of money, but man, it’s going to be easy.

David Greene:
I’m going to forget that I even own the house. Understand the market you’re investing in and pick a strategy that’s going to work for that specific market and you can avoid some of these frustrations. Thank you for your comment there, Higher spirit. All right. Are these questions and replies resonating with any of you? Were you thinking the same thing, “Why does David keep hating on cash flow?” Well, I hope I just explained, I don’t hate on cash flow.

David Greene:
I hate on the way that people look at cash flow as it’s going to be their savior from life. Or maybe you’re like, “Yes, praise David. I have been thinking the same thing and this makes sense.” Whatever it is you’re thinking, we want to hear your honest perspective. Tell us in the comments what you’re thinking. Maybe you didn’t get clarity on something and I can explain it more. Maybe you want to hear more about a certain topic or you hear my view and you want to know what information I’m using to present that view from.

David Greene:
I want to interact with you guys, and I want you to be a part of the podcast because this is your show. You are here and I am here to help make you money. Let me help you do that. Go on the comments. Leave one. Also, subscribe to this page and please like the channel.

Nick Vincent:
Hey, David. My name is Nick Vincent. I’m from the Shreveport, Louisiana area. I’m new to real estate. We just acquired our first property back in December of 2021. We just called a lot of for sale by owner signs until we found somebody that was willing to give us a good deal. We got the house at $50,000. I put 20% down to a 10 down. We owe 40,000 on the house. The house appraised for $78,000. There was a lot of meat on the bone when we bought it. We did about 8K worth of rehab.

Nick Vincent:
Got the tenants in there. Didn’t have to put a for rent sign up. We had some people that knew us and ended up getting into the property. That one has worked out pretty well. We just got our first rent check on it last month. I’ve also been trying to get into a partnership for a couple years now. I guess because of that deal and a couple other things that I’ve been doing, there’s a guy I’ve been talking to and we decided to go in a partnership together. I found an off-market deal, and I guess here’s kind of the meat of my question.

Nick Vincent:
On this off-market deal, we are looking… The house is $120,000. That area appraises for anywhere between 180 to $220,000. The house is actually in a really good condition. The guy just wants to get rid of the property. It’s just a very good deal. I was going to do it on my own, but I figured it was a good opportunity to get into a partnership with somebody. We’ve been talking about this for a while. The options that we have and what I’ve been curious about is, do we obtain this property using a DSCR loan?

Nick Vincent:
I was going to go through Caliber SmartVest Line. That way they’re not looking at debt to income and anything like that. And then once we obtain the property, do we then do a cash out refinance for the leftover equity that’s just sitting there and then go out and obtain more properties? Because that’s our goal is to obtain rental properties. And along the way, if we could do a fix and flip, do it. But really we want to do buy and holds and really get up to like 50, 60 rental properties.

Nick Vincent:
I see this as a really good opportunity for our partnership to get going. The options that we’re looking at is that, one, the mortgage route, or two, we have an option to where my partner can leverage his house. He’s got something that is worth about 160. We have friends with a president of a bank that is willing to give us a line of credit on that money, and we can go over there and buy that house. And then we were thinking about just selling it within a month.

Nick Vincent:
The market’s hot and that’s a really good bulletproof area. Selling the house, taking that $100,000 equity, and then going out and buying four or five other properties off of that one. Our area, we can generally get properties anywhere between the range of like 40 to 60, maybe even $80,000 and then really move from there. My question is which option is the for quickness and to just be more efficient in what our goal is, which is to just obtain more rental properties? With option one, I do have to put out some cash reserves.

Nick Vincent:
It would be about… We’re going to do a split on it. It’d be $15,000 from my reserve cash and the same for him on option one. Option two, I don’t have to do that at all. Basically I found the deal. He’s going to put up the money, then we sell it, and then we do a split on it. And then that’s going to be the money we use for our company to continue to buy more properties. I hope that question kind of makes sense in what the dilemma seems to be.

Nick Vincent:
I’m leaning more towards getting the property and renting it out, because why not? You do the cash out refinance, have a tenant in there paying the mortgage. My partner’s leaning more towards like it’ll look really good for us to go ahead and obtain a property and then sell it, and then our company be worth anywhere between 80 to $100,000 from the jump that we started, and then go out here and obtain more properties.

Nick Vincent:
But I just want to make sure that what we’re doing, because it’s such a good deal, that we’re going to be in a good position to move forward to really start loading ourselves up with as many properties as we can. We’d like within this year to get anywhere between like six to 10. And just from this one deal, I think that we’re going to be able to do that. I would really, really appreciate your advice on this situation. Thank you so much. Your content is amazing. Thank you, David.

David Greene:
Yes, my content is amazing. Thank you for that. No, that’s not true. This is just real estate that we’re talking, and I do this all the time. This is actually pretty simple. Your question is what’s amazing. You listeners that are listening, you are what’s amazing. Let’s talk about this dilemma that you find yourself in. It is the classic, should I hold or should I sell? I’ve got a way that I like to analyze this, and I’m going to break that down. I’ve probably done this before, so I’ll go through that, and then I will try to apply it to your specific situation.

David Greene:
When asking a question of, should I sell it or should I keep it, you did a good job of explaining, “If I sell it, I can get a bunch of cash and that can sort of launch me into the business. But if I keep it, I can have a rental property.” The first thing that I want to say is, what is your biggest challenge? Is it finding more deals? Is it not having enough money to buy them? Is it not getting lending? You basically want to know what your biggest challenge is and work around that. For a long time for me, my biggest challenge was financing.

David Greene:
It was just very hard to get banks to let me borrow because I had so many rental properties already. They saw it as a bigger risk. I know that’s weird because you’d think the person who owns more would be better at it, but that’s not how they see it. Like as a side note, there’s a bank that will remain unnamed in Jacksonville, Florida like six years ago that it said, “We don’t want any more exposure to residential real estate. We think it’s going to collapse. We’re only giving commercial loans.”

David Greene:
Tell me how that one worked out when it comes to residential real estate. No one really knows how these things are going to work out. But my point is, I would start with someone that would give me money and I would find out where will they underwrite. I would have to go my strategy work there. This idea of knowing what’s the most scarce resource will help you with making the decision when it’s specific to you and your partner versus just everybody else who’s listening here.

David Greene:
I’m assuming that money is probably more scarce than deals, because you’ve mentioned that you found these first two deals relatively quickly. I’m going to give you advice operating under that assumption, that it’s easier for you to find deals than it is to find money. Now we’re starting to see things weighing towards selling. It might be better. But let’s not jump to that right away. Let’s go through my ROI versus ROE matrix. When it comes to selling a property, I have clients ask me this all the time, right?

David Greene:
Like especially if they’re in California, those are the ones I love, because they come to me and say, “Hey, I own this rental property, or I own my primary residence, David. Should you list it and sell it for me and we can reinvest the money, or should I keep it and rent it out?” The first thing that we want to figure out is if, is this a property you want to keep? If the answer is no, we look for a way to justify selling it. If the answer is yes, we look for a way to justify holding it. What goes in too, is this a property that I want to keep?

David Greene:
Well, the first thing is, is it a headache? Are you going to get bad tenants? Do you have legal restrictions like what… I think it was Higher Spirit mentioned in the comments about Los Angeles’ rental controls. Is the property itself just a money pit and things keep going wrong? Is it in an area that you don’t want to own in long-term? If the answer is, I don’t want to keep this property, that should become pretty apparent as you’re asking yourself those questions. Is it going to appreciate?

David Greene:
Is it on the way up? Are rents going up and is the value going up? Now, let’s say the answer to those questions becomes a yes, I do want to keep this property. The rents are going up. It’s appreciating. It’s no headache at all. It’s in a great location. I’ve already fixed everything up. It’s performing wonderfully. At that point, we started asking the question of, okay, how much money can we pull out of it and then go put that into the next deal? To sum this up, the first question you ask is, is this a property I want to keep?

David Greene:
If the answer is no, just sell it. You’re not losing real estate when you sell. You are gaining equity through the form of capital to put into new real estate. As long as you buy something new, you’re not losing a property when you sell it, which is how I want you to look at this deal you guys have under contract. There’s 100,000 in equity there. You’re going to turn that into more rental proper. Selling it isn’t losing a rental.

David Greene:
It’s gaining potentially more as long as you can find them, which is why I started this question off by asking, can you still get deals? Now, the next thing work on is our ROI versus ROE matrix. ROI is return on investment. Roe is return on equity. What I would like you to do, Nicholas, is to look at your average return on investment that you can get if you invest a hundred grand in Louisiana, wherever you are. Let’s say you can get a 10% return buying real estate.

David Greene:
If you have 100,000 and you can go put that into investing at a 10% return, you figure out what your cash flow would be on that money. Now we would look at if you keep the property and refinance it, what would the return be on your equity? This is the same question that we ask when someone comes to me and they say, “Hey, David, I’ve got a house worth 1.1 million in the Bay Area and I owe 500,000 on it.”

David Greene:
This is a person with 600,000 or so in equity in their property and they’re saying, “Well, it cash flows 500 bucks a month. It’s not a bad deal. I can rent it out and I can make 500 bucks a month.” Well, what I do is I run some numbers here, okay? I’m going to do that for you right now. If you have a property making $500 a month times 12 months in a year, that $6,000 a year you’re making in your return. If you divide that by the 600,000 that we have in theoretical equity, you’re getting a 1% return on that equity.

David Greene:
That means if you invested that 600,000 somewhere else and you only got $6,000 a year, you’d be getting a 1% return on investment, which is bad. In this case, even though it would cash flow $500 a month, I’m going to advise that person, you should sell that property. Buy more with the 600,000 that you’ll get a higher return on than what you’re currently getting. Basically your equity is lazy and it’s doing nothing for you. Now, some properties make your investment into that property.

David Greene:
And make no bones about it, your equity is an investment. Don’t just look at the capital you put into it, also look at the capital that’s already in it from the form of equity from what either you made it worth more on the rehab, or it’s grown from appreciation. And ask yourself, how hard is that money working? Now, if someone’s in California, you’re more than welcome to mention this when you email me or contact me and I’ll run you through this. But if you’re in a different area, look up what return on income versus return on equity is.

David Greene:
Let’s sum all of this up. The first question you should be asking yourself, Nicholas, do I want to own the property? What’s the location? Is it a headache? Is it going to cause me a lot of problems? Is it in a flood zone? Is there anything about it that I don’t like? If you do like the property, the next question would be, how much of a return would I get on this property versus if I invest that $100,000 somewhere else?

David Greene:
Assuming that the appreciation is largely equal, because you’re staying in the same market, the decision becomes pretty easy. You invest in the place where you’re going to get a higher return and more cash flow on that same money. Now, the only caveat to this would be, like I said earlier, if it’s super hard to find a deal, so you sell it and you have a hundred grand, but you can’t buy anything else, maybe it makes more sense to keep it. Or if deals are everywhere, but you got no money.

David Greene:
Even if the return would be good, maybe you can make that a hundred grand work more somewhere else. So you sell it even though the return on equity was solid. There’s a lot of things that factor into play. But I love that you asked this question because it helped me break down how my mind processes these options. I’m doing the same thing just at a bit of a bigger scale. I’m selling 30 something properties right now, and I’m going to 1031 those into different properties that are going to be in different markets where they’re going to appreciate more.

David Greene:
And I’m going to have less headache. I looked at my portfolio and I said, man, these 30 properties in this area, it’s constantly emails from the property management company saying, “This person’s not paying. COVID restrictions have affected us here. This just broke. This is going on.” It’s nonstop something all the time. When I asked the question, do I want to keep it? The answer was no, I do not want to keep it. I want to sell it. I looked at how much equity I had in the portfolio and I realized the same thing I just did with you.

David Greene:
I’m making like a 2% return on my equity. The misleading piece is I’m making like a 70% return on my initial investment. When you only look at ROI, it looks like I’m crushing it from all the rent increases that I’ve had. But the portfolio has grown so much in equity from the BRRRR-ing that I did, as well as natural appreciation that my money’s not working very hard. I’m going to sell it, and I’m going to put it into properties where it will have to work harder, get me a better return.

David Greene:
I’ll have a higher upside and less headache. I hope that you can do the same. All right, next question comes from Michael O’Brien in Canada, otherwise known as Canadia. “David, I love your show and the content has helped me get to this point. However, in discussing additional properties with my mortgage broker, he is suggesting I am close to my limit of residential property loans with my debt ratio. He said that in order to get additional properties, I will have to look at commercial mortgages with higher rates.

David Greene:
Is there a way around this? Thank you. I five properties and seven doors.” Okay, Michael, I’m going to break this one down for you pretty simply. First off, when he’s talking about debt ratio or debt to income ratio, what we’re talking about is as mortgage brokers, we look at, okay, you make this much money and you have this much debt that shows up on your credit. It doesn’t matter how much actual debt you have. It matters how much is documented.

David Greene:
We come up with a ratio that says at the end of the day, this is how much Michael has left of the money that he brings home.” We come up with a percentage. We add whatever your mortgage is going to be to that, and we make sure it stays underneath whatever number it needs to be, 40%, 45%. They kind of bounce around for different products. Then we say, “Based off of your debt, you can buy a house that costs this much at this interest rate.”

David Greene:
Now, the problem becomes when you keep buying real estate, if you’re not making money on taxes, or you’re not claiming the money, or you had a bad year on that real estate, the debt from the property stays there, but the income does not continue to increase. Your debt to income ratio starts to become too weak to get approved for additional properties.

David Greene:
Debt to income ratio, I want you guys to all understand this, is a metric that determines your ability to repay the money that the bank is letting you borrow or the lender is letting you borrow. What you can look at are debt service coverage ratio loans, which is something that my brokers does a lot of, where we look at the income the property to repay the debt, not the income from you.

David Greene:
If you’re going to buy a short-term rental and it’s going to generate $6,000 a month of income, we take that income and we weigh that against how much it’s going to cost to own the property, which might be three or $4,000 a month. We qualify you that way. If that’s what he’s talking about with commercial loans, that might be your only option. Typically, commercial loans are like 5/1 adjustable rate mortgages. It kind of sucks because as interest rates go up, your payment goes up.

David Greene:
Our products are 30 year fixed rate. They’re just like what you’re used to seeing, but the rate will be a little bit higher. I think in general, people make too big a deal out of this. Those rates that you get on conventional mortgages are incredibly low. They’re awesome. They’re not normal. No one’s lending money at that rate. Once you get to more properties, you should have more experience and you should be able to find better deals.

David Greene:
You should be able to make it work with an interest rate that’s maybe half a point, one point, one and a half points, whatever it is, higher. Before I went to commercial, which is an adjustable rate mortgage, I would look at the DSCR loans, which are 30 year fixed rate. I would ask your mortgage broker if they have access to those. If not, I would look for a mortgage broker that does. All right, we have time for one more question. This comes from Desmond in Omaha, Nebraska.

Desmond :
Hi, David. My name is Desmond, and I just wanted to start by saying thank you for fielding questions like this. I really love the format of the show and listening to other investors and what they’re struggling with and your insight into their situation. Really appreciate that. Kind of jumping into my question, I’m located in the Midwest. 24 years old and my background is in chemical engineering, which is currently my primary source of income.

Desmond :
I’m just getting started in real estate investing, so I don’t currently have any investment properties in my portfolio, but I’m interested primarily in buy and hold single family rentals where I ideally obtain properties using a BRRRR strategy. To give a little bit more context on my situation, I graduated college debt free in 2020. That was largely due to academic and athletic scholarships I had and working throughout college.

Desmond :
All of that allowed me to live well below my means after graduation and save a large majority of my paycheck when I started working. In 2021, I bought a single family home that I live in, proposed to my now fiance, and started saving for wedding and honeymoon related expenses.

Desmond :
I’ve known for a long time that I wanted to get involved in real estate investing and have been listening to this podcast and reading books about real estate, but I had to use the money I was saving on other important life things like buying my primary residence, getting an engagement ring, paying for part of the upcoming wedding and honeymoon and those related expenses. That kind of leads me to my question. In 12 months, I think I’ll have saved $40,000.

Desmond :
I estimate I’ll need for a down payment on my first single family rental and to cover the cost of the rehab. And then anything over that $40,000, I’ll tap the equity on my home and use a HELOC to finance. Now that I’m finally so close to being able to start my journey into real estate investing, I’m starting to have major FOMO where I see prices going up and other investors swooping in on deals in my area.

Desmond :
It makes me wonder if I should try to get creative in financing so I can start investing sooner or stick to the plan I have in place and save up now so I can start in 12 months. What’s your advice on this? Do you think I should try to get in sooner, or are there some other practical things I can do in the 12 months I’ll be saving? I’ve already started networking with other investors in my area, and I’m beginning to build relationships with real estate agents and lenders. Thanks in advance for your insight on my situation.

David Greene:
All right. Thank you, Desmond. This is a great question. I think a lot of people are in this same boat. I think you’re wise to notice that prices are going up, as well as interest rates. We don’t know what’s going to happen, but all indications are that the Fed is going to continue rising rates and that prices are probably going to continue to go up. Could they go down because rates are going up? Sure. No one knows. My best bet is that they will just go up slower than what they were going up because of rates going higher.

David Greene:
People like me are still going to buy them. Your FOMO might actually be somewhat healthy. You need to get involved. Rather than trying to save another 40K, what if you just found a way buy a house with less than 40K? My advice to you would be you house hack. You need to go buy a primary residence and put a smaller percentage down on that property, so you don’t have to save up all the money. You don’t have to go buy an investment property, put 20, 25% down.

David Greene:
If you still don’t have enough to do that, ask about different loans where there’s down payment assistance available. And if there isn’t any of that available, I would ask a family member if you could borrow some money from them and then pay it back. Now, you should have no problem paying that money back because your own housing expenses are lower since your house hacking instead of paying the rent.

David Greene:
If you’re in a position where you say, “No, I already own a house. I don’t want another one,” well, can you sell that house and use the money to buy the property you want? Can you rent out the house that you are living in now and then go house hack to get your housing expenses lower? What sacrifice are you willing to make to make this happen? You’re going to sacrifice something. My advice is you should always sacrifice comfort. Don’t sacrifice your future. Don’t sacrifice wealth building.

David Greene:
Sacrifice the fact that you don’t need at 24 years old to have a nice big house that you could be living in right now and try to get your fiance on board with how you guys are going to spend a couple years living beneath your means and being less comfortable so you can have a way better future later. In other words, there’s a way to move your money around. You have some equity in the house you have right now. You have a housing expense that you don’t need to have that you can reduce by house hacking.

David Greene:
You can lower your down payment by buying a primary residence instead of an investment property. Get your foot in the door. Then as those properties go up in value, you can access that to buy the next rental property and you can get some momentum going. Find a way to get this initial momentum that you need started by making some sacrifices. If you got through school with no student debt on athletic scholarships and working, I don’t think you’re going to have a problem with this.

David Greene:
Also, awesome that you’re a chemical engineer. My lending partner, Christian Bachelder, is also a chemical engineer, and you guys have a very unique way of looking at the world. All right, thanks again for taking the time to send me your questions. We have had a great response from our audience, and I encourage you all to ask more questions. You can do this by going to biggerpockets.com/david and submitting your video or your written question for me to answer.

David Greene:
Look, we can’t make this show if you don’t give me content to go by. I can’t help you or the rest of the community if I don’t know what questions you guys have. Real estate feels scary. It feels overwhelming. It feels challenging, but it doesn’t have to. It’s actually one of the most simple ways to build wealth there is. Let me help you do that. Let us at BiggerPockets help you do that as well. Please give us subscribe on the channel. Share this with other people that you know. Let me know in the comments what you thought.

David Greene:
And if you want to ask me a question directly, you can always find me on social media. I’m @davidgreene24 pretty much everywhere. You can also send me a message through the BiggerPockets platform. Thanks, everybody. I will see you on the next episode. Stay focused and keep grinding.

 

 

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