March 2023

Manga has been the fastest-growing category in the US comics market for the past dozen years, outpacing the growth of everything except graphic novels for young readers. Despite there being more manga than ever available to English-language readers, the amount that makes it over to these shores is just a fraction of the total produced by Japanese publishers.

Readers whose appetite for content exceeds the selection offered by publishers like Viz and Kodansha on legitimate apps know they can find what they’re looking for online, but only on legally dubious pirate sites. That leaves room for new companies offering ethical fans legal access to unseen and original material through licensing arrangements with smaller Japanese publishers, as long as the pricing is affordable and the selection compelling.

Azuki is one of several recent entrants into the market. Co-founded by five young industry veterans (Adela Chang, Abbas Jaffery, Evan Minto, Krystyn Neisess and Ken Urata) in 2019, the virtual company launched its app during the pandemic and has seen steady growth, an infusion of capital from Y-Combinator, and a burgeoning assortment of new titles. It has grown to an extended team of several dozen, and still operates virtually rather than out of an office.

“We had all worked at [Sony-owned anime platform] Crunchyroll and had kept in touch,” said cofounder and CEO Abbas Jaffery. “We asked ourselves what we’d want to see in a manga app, since we all saw similar problems in the existing models, and put in a lot of sweat-equity to build the app.”

At launch, the subscription service featured manga series from Kodansha International and Kaiten Books, and quickly expanded to include more publishers as well as exclusive titles directly licensed and localized by Azuki. Today, Azuki offers over 200 series including The Yakuza’s Guide to Babysitting, BLITZ, Gacha Girls Corps, Attack on Titan, Fire Force, and additional publishers like Futabasha, Micro Magazine, ABLAZE and Star Fruit Books. According to the company, the site has hosted over a million unique active users since launch and served up more than 30 million pages of content.

While the Azuki app is subscription based, the company just announced a program to distribute download-to-own ebooks of its original and licensed content on BookWalker, AmazonAMZN
, Apple Books, and Google Play Books, starting with My Dear Detective: Mitsuko’s Case Files and Turning the Tables on the Seatmate Killer!. The first volume of each series will be available for pre-order on BookWalker, and they’ll go on sale on March 23. Pre-orders for other platforms will go live in the coming days, according to the company.

“We want to provide people with a wide range of manga to read, and a wide range of how they can read it,” said Marketing and Licensing Director Evan Minto. “We do our own scouting of titles that subscribers will like. That curatorial approach gives us the mindset of a publisher, not just an app.”

Azuki has a narrow path to navigate in the digital comics space, which is dominated by Amazon’s comiXology service (which offers manga alongside other kinds of comics), dedicated manga platforms like Shonen Jump and Viz, and Korean-based Webtoon, which offers material optimized for mobile, vertically-scrolling format.

Minto says the combination of Azuki’s subscription model ($4.99 per month for unlimited access), emphasis on localization by professional teams of translators, letterers and editors, curation of diverse subject matter, and passionate approach to the material can help differentiate it from the rest.

“We offer a better discovery experience, because manga can get lost in other kinds of content,” he said. “A subscription model is different from the pay-by-chapter or download-to-own because it encourages people to try new material.” In addition, it allows fans to know that they’re supporting the creators rather than the hosts of the pirate sites.

“We feel we can provide more value in the manga market and help it grow faster,” said Jaffery. “We’re not even to 25 percent of where manga can be in the English-language market.”

Dave:
Welcome to today’s bonus episode of the BiggerPockets podcast. We’ve seen continuously new record highs for home prices for the last several years, and that is not necessarily where you want to buy. That is often why money is made during a corrections because you have an opportunity to buy below market value.
Over the last couple years, we are very, very clearly in a seller’s market. You know this because the rebidding wars, right? That means that the seller could just pick the highest offer. Sellers could really dictate the terms of any transaction. That has completely changed. What’s going on everyone? I’m Dave Meyer. I’ll be your host for today’s bonus episode.
We are giving David Greene a very well-deserved day off, so I can talk about one of my favorite topics, a topic I’m super passionate about and I’d like to think an expert in which is how to invest during a market correction. I think we all know that the housing market is very uncertain and a little bit confusing right now, but there are really good ways to invest if you can identify the right types of opportunities.
There is risk in today’s market for sure, but with risk comes reward, their sort of counterbalances for each other. And investing successfully during a housing correction is all about spotting the right opportunities and using the right strategies and the right tactics that are appropriate for this type of economic environment.
If you guys don’t know me, I work full-time at BiggerPockets as the vice president of data and analytics. I host the On The Market podcast, which comes out Mondays and Fridays. I’ve written a book called Real Estate by the Numbers. And through all of these efforts, all this stuff that I do and spend most of my life doing, a lot of what I do is study the housing market.
I talk to experts all the time. I look at data to try and understand what is exactly going on in the broader economy, what is going on in the housing market, and I try to make sense of it so that all of us as real estate investors can use the appropriate tactics and to know how to invest appropriately with the least amount of risk, the best amount of upside during this type of market condition.
And so through those efforts, and even though we are in a confusing economic time, there are absolutely still good ways to invest in real estate right now. This is not just an academic exercise for me. I am also a real estate investor. I’ve been investing for more than 12 years now. And I’ve already done two deals in 2023 even though I know that we’re in a housing market correction. And I can do that confidently because I know which tactics and strategies to use.
So to share all the information that I have gathered and that I use myself in my own investing, I recently created a webinar for BiggerPockets and how to invest during a housing market correction. So basically we’re going to replay that webinar for you today and we’re going to go over some really important topics.
First and foremost, we’re going to talk about what exactly is going on in the housing market right now and why it is happening. I think there’s a lot of fear out there about the housing market because if you don’t really understand the fundamentals that are driving the housing market behavior right now, it can be a little bit confusing. So we’re going to talk about what is going on.
Next, we’re going to talk about the strategies that you can use to mitigate what is going on in the current environment and then I’m going to actually help you learn how to find good deals in this market, analyze those deals, and ultimately execute on the opportunities that are coming right now. Because I want you all to know that there are actually good opportunities right now.
With the risk and the uncertainty that comes in this kind of market, a lot of people jump out of the housing market and that means there are better deals, there are better opportunities for the people who know how to adjust and invest in this environment. So without any more ado, we are going to jump into this webinar so you can learn how to invest during a housing correction. Do you feel some sort of economic or financial anxiety right now?
I know this is really common, A lot of people are feeling that. So if you’re feeling that way, that is completely normal. Maybe you’re worried about a recession, a lot of people are talking about that, or inflation has really had an impact on you, or you’re worried about a layoff or a job loss. These are genuinely stressful things. Why are they stressful? Because they’re out of our control, right?
As people, we get stressed about the things that we don’t have an impact over, that we can’t directly control. And for most people, money and finances and whether or not you get laid off are out of your control. But what if it were different? What if you had control of your financial future? What if you had more time to spend with your family and doing the things you love?
What if you earned money passively from sources other than your full-time job? What if you had the freedom to do what you want, when you want and with who you want? Well, that my friends is financial freedom and it’s really at the heart of what we’re going to be talking about today on today’s webinar. Because today is all about how to achieve really any financial goal that you have through real estate investing.
And we’re also going to talk specifically about how you can do that, how you can kickstart your investing journey really during any market conditions. By the end of this webinar, you will have a plan to build long-term wealth, yes, in today’s housing market conditions.
I know it might seem daunting to get started right now, but by the end of this webinar I promise you, you will have a plan and you will see that there is great opportunities to build long-term wealth even in today’s housing market conditions. Plus, we also have some great giveaways for you at the end. It’s something I don’t think I’ve ever given away before, so definitely stick around for that.
For today’s agenda, basically what we’re going to start with just talking about what in the world is going on in the housing market in 2023. That’s going to be first and foremost because I think if you understand that, if you understand what’s going on in the market and the fundamentals, some of the economic conditions that are driving the behavior and things that we’re seeing in today’s market, it will help you overcome any anxiety you have about the current day market.
Then we’re going to talk about what business plans work in the current market. If you know a little bit about real estate investing, you probably know that there’s a ton of different ways that you can invest in real estate, but only some of them work in today’s market conditions.
You can’t just go out there and buy anything, certain types of strategies, certain types of properties, certain types of tactics, probably not great for a correction like we’re in right now. But there are plenty that work during a correction, so we’re going to cover which ones you should be thinking about and focusing on given the current market conditions.
And then lastly, we’re going to talk about how to find those good deals. So once you know what’s going on in the market and what business plans work in this type of economic cycle, then you can go out and find the deals that work in this type of market and you can pursue them.
So that is today’s agenda. If any of you don’t know me, let me just quickly introduce myself so you know who is talking to you right now. My name’s Dave Meyer. I’ve worked full-time at BiggerPockets as the VP of data analytics. I’ve worked here at BiggerPockets full-time for more than seven years now, but I’ve also been a real estate investor for more than 12 years.
I mostly invest in rental properties. I also invest in syndications, I do some lending. I’ve been in short term rentals. So I’ve done a little bit of it all over the last couple of years and I’m really excited to share some of that experience with you. I also host On The Market podcast.
It comes out every Monday and Friday on the BiggerPockets podcast feeds. And if you like the type of information we’re talking about today, some of the data, market conditions, that’s what we talk about on On The Market, so you can check that out. I’m also the author of a book called The Real Estate by the Numbers, which teaches you how to analyze deals like a pro.
We’re going to talk a lot about deal analysis today because that is super important to today’s market condition. So I’ll share some of my expertise about deal analysis today, and that’s me. If you want to connect with me after this, you can always do that on BiggerPockets or you can find me on Instagram where I’m @thedatadeli.
I love data as you are going to see over the course of this podcast, but I also love sandwiches. It’s my other passion, so that’s why you get the data deli. But if you don’t have any questions or want to ask me anything after this webinar, the best place to do that is on Instagram where I’m @thedatadeli, check it out.
So before we get into this, so let me just tell you a story about how I got started investing in real estate. And as I said, I started over 12 years ago. I started buying in early 2010. And it’s hard to remember right now, but that was a very uncertain economic time. The housing market really started to go down in 2007 and 2008. It was still going down at that time, and so it was really uncertain.
When I first got started, I knew exactly zero people who were actively buying real estate. And when I told some friends and family that I was intending to get into real estate at a rental property, most people thought I was crazy because the market hadn’t bottomed. It was still really uncertain what was happening with housing prices. But I knew that over the long run housing prices really always go up, even though 2008 was just so you know, the worst housing crash I think I’ve ever, than I’ve ever seen data for in the United States.
And so even though I saw that, I knew that housing prices over time, asset prices go up. And so I did a couple of things back then to protect myself and to ensure that even though that I was buying in uncertain market conditions, that it was still a good investment. So the first thing I did was I bought well under the list price.
I knew that the market hadn’t bottomed yet and I was a little bit worried that prices could fall a little bit further. So what I did was when I offered on properties, I offered below what the current market value was. That way if prices fell a little bit further, then I would have some cushion on my equity. The next thing I did was I earned money from things that don’t really concern housing prices.
And we’re going to talk a lot about this today, that housing prices do not equal profit. There are many other ways that you earn returns as a rental property investor. So I made sure that I bought a property that headstrong cash flow, that I earned money for amortization, otherwise known as loan pay down and value add.
I was able to make the property more valuable than it originally was through concerted and specific actions. And I also got great tax benefits which weren’t in any type of market conditions. So I focused on these things even though the market was really uncertain and I didn’t know what was going to happen and I pulled the trigger.
And now looking in retrospect, I can tell you what happened, and what happened was the value of my property actually went down after I purchased it, not by a whole lot and I was protected against it because I bought under asking price, but the housing market, at least in Denver, didn’t really bottom until 2011 and I had bought in 2010.
So for a short period of time there I was seeing my property value go down at least on paper. But it didn’t really matter to me because I was earning really good cash flow, I was still getting amortization and I was doing value add. I was getting great tax benefits. And 12 years later, I obviously don’t really care that my property value went down temporarily because over time, as the housing market always does, and we’re going to talk about that a lot today, it went back up. And you only lose money if you actually sell the property.
Right? The housing prices only matter at two points, when you buy the property and when you sell the property. What happens between those two things, of course it matters sort of emotionally, but it doesn’t really matter. And when I sold the property, this property I sold back in 2018, it had gone up literally three times the amount. So yes, it went down a little bit. I bought it for something like $457,000, something like that. That’s very precise. I bought it for about $457,000. In 2018, I sold it for well over a million dollars.
And I’m not saying that’s going to happen for every deal, but yes, it was a little bit concerning that housing prices went down, but housing prices go up over the long run and I was easily able to recover that and more because I had a long-term business strategy. I also want you to know that I wasn’t just buying deals back then. I am practicing what I preach. I have done deals already this year in 2023, even though I know the housing market isn’t a correction.
I study this for a living. I know we’re in a correction, but I’m still doing deals because I know these things. I know how to analyze deals given the current market conditions. I know that housing prices do not equal profit. There is a lot more that goes into rental property investing than just the value of your assets. And I also invest using the specific business models that work in any market conditions.
So that’s what I’m doing. But let’s get to you. Right? Should you be buying in today’s market, right? Let’s get to the elephant in the room and talk about what is going on in today’s market. I want to just start by telling you this, that every experienced investors I know, it’s not just me, but every experienced investor I know is active in the market right now.
And that is because experienced investors, generally speaking, not every single person knows this, but experienced investors know a couple of things. People have been through some market cycles generally know these things. The first thing is that money is actually made during a correction. Right? You don’t necessarily want to buy at the top, which is where we’ve been over the last couple of years.
We’ve seen continuously new record highs for home prices for the last several years, and that is not necessarily where you want to buy. That is often why money is made during a correction is because you have an opportunity to buy below market value. And of course, I really want to stress this a lot today over the course of this webinar is that you cannot buy just anything. Don’t go out and just buy any home that you see. You need to buy smart.
But the lesson here is that corrections create opportunities, right? Risk and reward, it’s like yin and yang. They balance each other out. So yes, is there risk in the market right now? Yeah, there is risk that the market is going to go down. But that risk also creates opportunities. You just need to find them. As the great Warren Buffett, one of the most famous investors in the world said, “Be fearful when others are greedy.
Be greedy when others are fearful.” And I think others are fearful right now. And I know it’s logical to be fearful in some ways right now, but if you know what experienced investors know, you’ll see that there are great opportunities right now. The main reason there are opportunities is because we are now in a buyer’s market. This is something that confuses people a little bit so let me just take a minute to explain this.
But what it means when I say that we are in a buyer’s market, it means that buyers have the power. Right? It’s that when you’re going to negotiate, usually one side or the other has more leverage. Either sellers have the leverage, that’s a seller’s market or the buyers had the leverage and that’s a buyer’s market.
Over the last couple years we were very, very clearly in a seller’s market. You know this because there were bidding wars, right? That means that the seller could just pick the highest offer, that buyers were often waving contingencies like their appraisals or their inspections and sellers could really dictate the terms of any transaction.
That has completely changed. We are now in a market where buyers have the power, buyers are being able to negotiate really great concessions. Buyers are getting sellers to pay down part their rate on their mortgages. Right? So buyers have the power. And today, you’re going to learn how to use that power to your advantage.
The other thing, I said this a few times and I’m going to keep saying it, the other thing that experienced investors know right now is that housing prices do not equal profit. And I know it’s easy to focus on housing prices, but there is so much more to real estate investing than housing prices. There are actually five different ways to earn money, and appreciation, which is really housing prices, is just one of them.
It’s also the least important, which we’re going to talk about. But I just want you to know this isn’t stock. This isn’t buying a stock, this isn’t buying crypto. The price of an asset isn’t the only consideration in real estate investing. You need to factor in other things like cash flow and amortization, value add and tax benefit. So that is why so many people I know are active and why I think you should at least consider buying in today’s market.
So let’s just dive into, let me just explain for a few minutes what is going on with the housing market. Because there’s a lot of understandable fear, but I think I really find that if you understand the fundamentals, what is driving this behavior, fundamentals of the housing market, it can help you overcome any market anxiety that you have.
So we need to discuss this because you, I’m sure you’re all wondering, should I really be investing? What happens if prices go down? And these are very reasonable questions. So let me just explain what’s happening in the housing market. Over the long term and the history of the United States, housing prices typically go up, they trend upward.
Over the long run they have always, always, always gone up. Now there are times when it goes down, that’s known as a correction. There are time when it goes flat as well, but over the long run it is normally a relatively boring and predictable thing. Housing prices go up slightly above the pace of inflation. Now what’s happened since 2008, since after, in sort of the aftermath of the great recession is we’ve been in a low interest rate environment.
And what happens when interest rates are really low is it makes leveraged assets like real estate, things that you take out loans on. That’s what leveraged asset means. It makes them, the value of them go up. So we’ve seen asset values go up a lot from 2008 to 2020. Then when we got to 2020, things basically just went on steroids. It’s the same situation in a lot of ways, but it was just even more dramatic, right?
Interest rates went even lower than they have ever been. And then we also had the combined impact of all this money printing, all this increase in monetary supply which just made affordability skyrocket. And affordability is a really important factor in the housing market, because when more people can afford to buy homes, generally speaking, more people want to buy homes. Right?
We are now at a part where millennials, which is the largest demographic group in the United States now are reaching their home, peak home buying age. So a lot of people want to buy houses right now. And in 2020 with all this money printing and super low interest rates, a lot of people jumped into the market.
And I think this is something that people miss is that in 2020 and 2021, even though prices were going up a lot, it was one of the most affordable times in US history to buy a home. Because interest rates have a huge impact on affordability, so does all the increased monetary supply. And though, even though prices were going up a lot, it was still really affordable.
When I think about the housing market, I like to think of it as a scale sometimes, right? Because there’s not one thing that is impacting housing prices. Right? It’s not just mortgage rates, it is not just supply, it is not just affordability, it is all these different things. And from 2020 to 2022, literally every single variable that I can think of, every important factor that impacts the housing prices was putting upward pressure on the market.
It was all on one side of the scale. Right? Everything from bond yields, mortgage rates, demand, inventory, supply, how much money people were making in crypto and stock markets. All of those things contributed to the housing market going up and up and up and up. And that’s basically what happened up until June of 2022.
But then things obviously changed. Right? The fed in response to high inflation started to raise interest rates. And that has a negative impact on affordability. And affordability, like I just said, is super important in the housing market. And when affordability turns negative, it puts downward pressure on pricing. So ever since mortgage rates started to go up, we have entered what I would consider and I would call a housing correction.
Now this doesn’t mean that everything is going to crash necessarily. Right? As I just said, when I think about the housing market, I think of it as a scale. Right? There are different variables and they balance out to impact prices. So whereas in 2020 and through 2020, the first half of 2022, everything was pushing prices up. Now some of the major factors have moved to the other side of the scale.
Right? Now, demand and affordability are putting downward pressure on the market. Right? That doesn’t mean that everything is pushing down. Inventory, supply, demographics are still sort of on that upward pressure side, but we are now in a much more normal market where certain macroeconomic conditions are pushing the housing, are putting upward pressure on the market and certain macroeconomic conditions are putting downward pressure on the market.
And this is normal. But right now I do think there is more pressure downward and that’s why we’re seeing prices to start to come down. Prices have definitely come down on a seasonally adjusted, inflation adjusted basis since its peak in June of 2022. I don’t know what’s going to happen, but personally I believe housing prices are going to continue to fall through 2023.
And that’s okay. We’re going to talk about that. It is okay that prices are going to fall. As I’ve said, I’m still investing and I still think there are opportunities, but this is what I want you to know. I’m explaining this because I want you to know that this is not 2008. There are very considerable differences between what is going on. And yes, housing prices are going to come down, but I personally don’t think that there’s going to be this foreclosure crisis that we saw in 2008.
I don’t think there’s going to be selling, forced selling which caused the extended decline of housing prices in 2008. To me, this is all about affordability. And as soon as affordability improves in the market, we are going to see people jump back in the housing market’s going to bottom and resume probably it’s boring growth. I don’t think it’s going to explode again, but that boring predictable growth that we as investors actually really like.
I love boring, predictable growth. And so to me, this is really an issue about affordability and there are still, the thing that encourages me and why I’m still buying is that there are still very strong long-term fundamentals for the housing market. Even though we were in a short-term correction, I think there are three things that really point to better housing prices and that a resumption of those long boring gains in housing prices over the long run.
The first one is housing shortages. Experts estimate that the US is somewhere between three and seven million homes short of how many homes we need for people. If you know anything about supply and demand, when there is a shortage of supply that puts long-term upward pressure on prices. So I think that’s something that encourages me that home prices are going to go up again after this correction.
The second is demographic demand. Right? I just said that millennials and Gen-Z are starting to hit their peak home buying age. And there are a lot of these people and they want homes, they want homes just as much as everyone, but they’ve been priced out of it and they have a lot of demand for these homes. So once they can afford it again, I truly believe that millennials and Gen-Z are going to jump back into the housing market.
And the third one is credit quality is really high. The reason in 2008 that the housing correction got so bad and turned into a full-blown crash for several years is because the loans that people were using to buy homes were absolute garbage. People were not qualified to be taking out the loans that they were. There was really no chance that a lot of these people were ever going to be able to repay the loans that they had taken out.
And that is not true anymore. Credit quality is extremely high right now. And even though we are entering a correction, foreclosures and people going into forbearance and defaults are still very, very low in a historical context. So I’m going to say this again, the correction that we’re in right now is real. Housing prices are going down. But the correction is affordability problem.
It is not some fundamental problem with the entire housing market, it is a problem with one part of the market, which is affordability. And affordability problems get resolved in one of two ways. And I want to just be clear, they do get resolved. So basically the two things that can happen is one, home prices could go down. Right? That would help improve affordability. We’re already starting to see that.
That is one symptom of an affordability problem, is housing prices start to come down. The other way that this gets resolved is mortgage rates come back down because that has a huge impact on affordability as well. And those are the two different things that can happen. And in reality it’s probably going to be a combination of the two.
We’re probably going to see housing prices come down in 2023 and then we’re also probably going to see at some point in either late 2023 or some point in 2024, we’re going to see mortgage rates come down into the low 6%s or even the high set 5%s. And that’s going to restore affordability into the housing market and it will probably bottom out and start to grow at that slow and boring predictable rate again.
So what happens during this type of affordability correction is that certain markets, the ones that are really unaffordable, think markets like I don’t know, Seattle and Austin and San Francisco, New York, the markets that are very unaffordable are probably going to come down the most over the coming years.
Because this is an affordability crisis, and those cities, they’re all very, every city is very different. And those cities are probably going to be impacted the most. On the other hand, there are certain markets that are still relatively affordable and if you don’t live in one of these cities, you probably find this hard to believe, but it is true. There are still markets where you can find affordable homes.
I think of a city like Philadelphia where you can see that these markets are still relatively affordable for the people who live there. And these markets will probably stay flat, they might go down a little bit or stay relatively flat and some of them could keep growing. I just read something recently about how home prices in Boston are still going up.
So we’re going to see different behavior in different markets. And to me, it’s really dictated by affordability. Now the question many of you are probably wondering is when is this going to end? When are things just going to become easy and simple and predictable? And I’m sorry to say we don’t know. I know that you were hoping that I have some crystal ball and I could tell you when the market is going to bottom, but I just don’t know.
But the thing that you shouldn’t know is that that’s okay. It is okay that we don’t know it’s going to bottom because there are still ways that you can invest in today’s market and we’re going to get into that. So let’s get into it. What works in this market? Let’s talk about business plans and tactics that work for investing in this type of affordability correction that we’re in.
So the first thing to me is planning past the uncertainty. So I know it is uncertain what’s going to happen this year in 2023. It’s kind of uncertain what’s going to happen in 2024. I don’t know what’s going to happen with housing prices, I just told you that. But I know I feel very confident that five years from now housing prices are going to be higher than they are today.
10 years, they’re going to be even higher than that. So I look at long-term business plans as the best possible option during a correction. And to me, rental properties are the best long-term option out of all the different real estate investing options. And I’m not saying that flipping doesn’t work. I know people are making a lot of money flipping right now and short-term rentals still can work.
There are always deals that work. But to me, for newbies, for people who want to think about the long-term, I highly recommend rentals right now because they are designed through the type of long-term hold period that work best during this type of correction. And long hold periods reduce risk, right?
We’re seeing market volatility right now, but if you hold for a long period of time, you get to take advantage of that long trend that housing prices go up. And if you hold for a long time that increases the probability that when you’re going to sell you’re going to sell for a higher price than you bought for. I’ve actually done some research that shows that if you hold a rental property for seven years or more, there’s almost a 0% chance that you sell for less than what you bought it for.
Obviously it depends on all these different things, but when I did that for rental properties, there’s about seven years gets you to a 0% chance. When you do it for a stock market, it actually goes up to 20 years. So when you look at real estate prices, they really are relatively predictable over the long run, not over the next year or two, but over seven to 10 years it is relatively predictable.
The counter to that though is if you want to buy real estate and sell it in the next year for a quick buck, that now is probably not the time to do that. That’s pretty risky. If you want to do a flip and you’ve never done it before, I personally wouldn’t do that. But if you want to buy a rental and hold it for at least five years, seven years, 10 years, there are going to be great deals for you right now.
The key to buying right now, the number one thing you need to do is buy below asking price. If you think your market is going to go down by 5%, make offers 5% below asking price. Right? That just makes sense. Right” If you think, “Oh my god, over the course of the next year it might be 10%. My market is really risky, it’s unaffordable.
I’m going to go 10% below asking.” If you buy 10% below asking and then the market goes down, you still have cushion, right? You have an equity cushion and you’re still benefiting from it. So you’re not 10% below where you bought it, you’re actually just in line with where the market goes over the next year or two.
And don’t worry about the exact number, no one knows how far your market might fall, but if it’s five to seven percent, make a 7% offer under asking. If it winds up 5% under asking, that’s okay. My property value went down when I bought my first deal. But you want to get close to where you think the market might bottom to give yourself that equity cushion.
And I want to, I’ll stress this again later, but you have to be really, really patient, right? There is no frenzy anymore. There is no need to waive contingencies, to be the first person to go see a property, to make the first offer. You can afford, and you actually need to, not just afford to, you have to be patient right now.
You need to wait, you need to negotiate, you need to find the right deal. Not every seller is going to take an offer below asking, especially on the first offer. If they just put their deal or house on the market five days ago, they’re not going to take a 7% below asking, but we’ll talk about how to find the right deal. So just be patient, know that right now. Again, know that housing prices do not equal profit.
This is super important. And I’ve said it and I’ll say it again, I’m going to return to this right now and talk about the five other things that we, how you make money in real estate. So there are actually five ways and market appreciation like the asset value, the value of your asset is just one of them.
And the thing is that about market appreciation is that this is, when I talk about market appreciation, I mean basically the price of houses going up by market forces like macroeconomic trends. But the truth is that experienced investors don’t underwrite or plan for any market appreciation.
Maybe the rate of inflation, but personally I don’t plan on it above in the rate of inflation, even during good times. Most experienced investors know that appreciation is the least reliable way to make money in real estate. No one is counting on this. I write about this in my book Real Estate by the Numbers pretty extensively and that it’s just true that no one really counts on this.
The things as an investor you want to focus on are the ones that you could directly control. And market appreciation, I’m sorry to say, is something that none of us control. But the good thing is that there are four other things that you can control. The first one is value add. This is sort of like flipping or renovating a property.
It’s basically you look for properties that need renovations and the pull point of it is to improve the property by more than you pay to make the improvement. So maybe you buy a house that needs some help, you put 50 grand into it, but by putting that $50,000 into the property, you raise the value of that property by a hundred thousand dollars.
So let’s just say you buy a property for 300 grand, you put 50 grand into it, but all of a sudden due to the value that you’ve created in that property, that property is now worth $400,000 and you’ve just earned yourself a $50,000 profit by adding that value. This is basically the premise behind fix and flip. And it also works with rental properties.
A lot of rental properties need improvements, they need a nicer kitchen or new bathrooms or to add a bedroom. So these are things that work really well in these types of corrections because the prices on properties that need rehab fall further than properties that are in really good shape.
So if you go out and look for new construction or a really prime location, a great property that’s beautiful and already really nice, the prices on those tend to fall less even during a correction than the ones that need a lot of work. And so that’s why value add works in a correction is because prices tend to fall pretty far for these rehab, these homes that need rehabs.
All right. The next profit driver, the next thing that earns you a return as a real estate investor is cash flow. We all love cash flow, right? Cash flow is why so many people get into real estate investing and it’s what? It’s the lifeblood of financial freedom because it can replace the income from your full-time job. Cash flow, if you don’t know what it is, it’s basically the money you receive every single month from rent above and beyond your expenses.
So if you collect two grand a month in rent and you have $1,500 a month in expenses, then you make $500 a month in cash flow. I’m just making that up, but that is what it is. And the great thing about cash flow is that it is not really market dependent. If your housing prices are going up or down over your first year, you’re still getting cash flow, right? Rents are extremely, extremely sticky.
Even during 2008 to 2011 when housing prices went down more than 20%, rent really never went down. Rent is extremely sticky even during a recession, even during a correction. And so cash flow, you can still be earning a great return on cash flow even during a market correction. So that’s something you should absolutely be focusing on right now is value add is great, cash flow is always important.
I never recommend someone buy a property that doesn’t cash flow. We’ll talk about how to analyze deals in just a minute about so you can make sure that your property is cash flowing well. The next one is amortization, which is basically some people call it loan pay down as well, but it basically means when you pay your mortgage using the rent that you collect, your tenants are basically paying down your loan for you.
And that means when you go to sell your property several years from now that you owe the bank less when you sell it. So that actually earns your return, it’s somewhere between three and 5% depending on the loan. But the great thing about amortization is it is also not market dependent. Right? So as we’ve already talked about, cash flow, not market dependent. Amortization or loan paid out, not market dependent.
Value add does really well in a market correction. So these are three ways that even buying during a volatile time in the housing market, you could still be earning really good returns that are probably above and beyond what you would earn in the stock market.
The last one is tax advantages. And it’s not necessarily like income, you don’t really earn a return for tax advantages, but it means that you get to keep more money than you, more of the money that you make you get to keep. And real estate is, I mean this is just generally true, real estate is the most tax advantage asset class out there.
There are a lot of different ways that you can use real estate to keep more of your income every single year. And again, this is another one that is not dependent on what is happening in the economy. So you get value add, you get cash flow, you get amortization, you get tax benefits regardless of what is going on in the housing market.
The only thing that’s impacted by the broader market is market appreciation, which most experienced investors agree is the least important of these five profit drivers. So if there’s one takeaway from this section is that not all profit drivers, not all of the ways that you earn returns from real estate investing are impacted by market volatility.
The last thing I want to say about things that work right now, I said focus on all these different profit drivers, I’ve told you to buy deep, and the last one is that financing strategies, there are other ways to get better financing. And I know a lot of people are daunted by the high mortgage rates, but a lot, you see these headlines that people are paying six and a half percent or 7% in some cases, somewhere around there.
But right now you can find a lot of different creative ways to finance your properties. The number one rate is rate buy downs. So because it’s a buyer’s market, you have the power to negotiate. A lot of people are having their sellers do some negotiating with the seller to do something called a rate buy down where the seller basically pays some money up upfront to your bank to lower your interest rate.
There’s something called the 2-1 buy down where basically the seller pays a couple thousand dollars on your behalf and then your interest rate is 2% lower for one year and 1% lower for another year. So right now you can be getting a mortgage rate in the fours or fives for the next two years and then you can refinance later. There’s also great seller financing and create a financing opportunity. So I really recommend you learn a little bit about this.
I’m not going to get into all the details today, but I really think you should not focus on that headline mortgage rate until you talk to a mortgage broker, because… Or a real estate agent, because they’re going to tell you that that six and a half, seven percent is not necessarily what you’re going to be paying for the next few years. You can probably pay something lower than that and then refinance later.
So definitely take advantage of that. But overall, when we talk about the things that work during a market, here are the main takeaways. Number one, find deals that make money regardless of market appreciation, right? This is true even not during a correction. You don’t want to find deals that need to appreciate in value from market appreciation just to make money.
You want to focus on deals that make money from cash flow, from value add, from amortization and to take advantage of the tax benefits. That is definitely true. The number two takeaway is time is your friend. Right? You want to hold deals for a long time to smooth out market volatility. Right? If you’re looking for short-term deals, probably not a great time, they’re pretty risky right now.
But if you’re looking at deals that you’re going to own for two, three, five years, then these are really good opportunities because you’re buying well below low market value. And even if things go down a little bit over the next two or three years, over the long run, they are going to appreciate in value and you’re going to get to take advantage of all five of those different ways you make money with rental property investing over a long period of time.
The last thing is to also take advantage of creative financing. I just did a deal a couple weeks ago, I’ll just tell you what I did. I bought a home or I participated in a deal where we bought the property for 30% below peak value, 30% below. Right? Most experts, even the people who are the most pessimistic about the housing market, do not think the housing, that prices are going to fall 30%.
So I’ve just bought something that is 30% below peak value. So I might already have earned some equity in this deal. And when the market starts growing again, it’s only going to go up from there. This is a very heavy value add deal. That’s why I was able to get it for so cheap is because like I said, deals that require renovation and value add are going to fall further than other types of properties during this type of market condition.
So I was able to negotiate this one. And then it has a five to seven year business plan. We’re planning to hold this thing for a long period of time. And that means that we’re not too concerned about if our value, property value fluctuates over the next couple of years because we’re planning to hold it for at least five to seven years.
And we are very confident that asset values are going to grow a lot, a lot from the point where we bought it at, because we bought it super, super low. So hopefully that just helps you understand how I am thinking about it, how I’m using these business plans in today’s market. So once you know, you understand some of the strategies and tactics that work in this type of market conditions, let’s talk about how to find good deals today.
For this, I like to use something called the LAP System. Brandon Turner came up with this, but I love it, so we’re going to use it. LAP stands for leads, which is basically looking at a lot of properties. Analysis, which basically means find from all the leads that you get. So you look at a hundred different leads, you need to go the analysis phase where you’re going to start breaking down the specific deals and figure out which ones are right for you.
Then you have to pursue the ones that are good and then that leads to success. Right? So it’s about being a funnel. Right? You need to look at a hundred deals, maybe you analyze 10, you pursue two, and you actually succeed on one of them. Think about your deal flow in terms of this funnel. Because the first deal you analyze probably not going to be the right one even in good market conditions, but in this type of market conditions, it’s even more important that you look at a lot of deals, analyze all of them and only select the cream of the crop. Right?
You only want those couple of deals that are going to be really good for you in these market conditions. Because there’s a lot of garbage out there, and that’s absolutely true. And at any marketing conditions that’s true. But right now there’s a lot of garbage and you don’t want to be stuck with that. You have to find the right deal.
So where do you find these leads? The first place to look is on market deals, right? Look for on the MLS, it is the simplest thing in the world. Just here are two tricks. Right? And the MLS is just like Zillow or Redfin or Realtor.com, just people putting their houses up on the market. And I know over the last couple of years it’s been hard to find deals on the market. One of the benefits of a correction is that there are deals back on the market right now.
You can go on the MLS and find cash flowing deals on the MLS right now. My two tricks for looking at the MLS when you’re doing this are one, look for deals that have come back on the market. So sometimes deals fall out of contract. And in those situations, sellers are usually pretty frustrated and they just want to get over it, right?
Imagine if it were you and you had a buyer lined up like, “Oh, I’m going to sell my house. This is going to be amazing.” And then right at the end, the deal falls through. You’re going to be pretty frustrated and probably pretty willing to negotiate with the next person who comes along who’s willing to buy your deal. So look for those deals. There are filters on Zillow or Redfin for deals that have come back on the market.
The second thing you want to look for are deals that have been on the market for a long time. Because again, these are going to be situations where you have the most leverage. Like I’ve said, you’re looking at a buyer’s market and you want to exert your leverage as best as possible. Right? And so the best way to have leverage is by a seller who’s not able to sell. And how do you know that they’re not able to sell?
It’s because their deal, their house has been sitting on the market for a long time. So look for those two things for on-market deals. Deals that have come back on the market and deals that have been on the market for a long time. The next thing to look for is off market deals. And these are still good. And off-market deals are great, but they’re honestly not as important as deals as it was a couple years ago. In 2020, 2021 it was almost, it was basically impossible to find cash flowing deals on the market on the MLS.
It happened, but it was pretty rare. You had to really search for them. So a lot of people, a lot of investors resorting to off-market deals, driving for dollars or working with wholesalers. And those still are good, especially for value add projects, you can still do those things. But you can still, you don’t need to go off market anymore. And that is one of the great things about a correction.
Like I said, there are benefits to being in a correction, and this is one of them. You can find deals on the market, which is really good. The key for all of these things is to negotiate, right? Sellers are still in their mind. They’re anchored to the idea that they could sell for what they could back in June of 2022. That is not true. They can’t sell for that.
The market has changed, the market is correcting. As the buyer, you need to nicely and in a productive way convince them that that price is no longer reasonable and that you need to buy under market value, that you need rate buy down so you can pay a lower mortgage rate.
This is what really matters is that you negotiate. Whether you find the deal on market or off market, you really need to negotiate. And that is why it is always important to have a great investor friendly agent because agents are often doing the negotiations on your behalf.
Obviously, you need to know what you’re doing to work with your agent and tell them what kind of offer you want to make, what sort of concessions you want to ask from, from the seller. But having a great investor friendly agent is super important for that. If you want to find one, you could do that on BiggerPockets. We have a free tool to meet investor friendly agents.
It’s biggerpockets.com/agent. You can check that out for free. I’ve found agents there. It’s really helpful and that helps with your negotiation. But remember, when we’re talking about our deal funnel and the LAP system, the highest part of the funnel is leads, right? But remember that most leads, they don’t make good deals.
And that’s okay. If you find a lead and you’re like, “Oh, that seller doesn’t want to sell to me for the price,” that’s fine. Don’t get frustrated. That is part of the business, that is part of the gain is that most leads don’t make good deals.
You have to analyze each of them to find those special deals that are going to be the best for you and that are going to help you build that long term wealth. Deal analysis is my favorite topic in all of real estate and is why I wrote a book about it. And we’re just going to, to talk about deal analysis and how you take the leads, how you go from working with your agent, working off market to find these leads, to picking the ones that work in this type of market.
I’m actually just going to, we’re going to go through a deal analysis together. So I’m going to just switch my screen share here. Hopefully this just works. So we’re going to go to the BiggerPockets calculator. So as you can see here on my screen, I use this BiggerPockets calculator all the time because it is a varied handy tool to be able to take all those leads that you have and analyze them.
When we’re talking about the LAP system and you have all these deals and all these leads, say you have a hundred. To find one good deal, you might need to analyze, you might need to look at a hundred different leads. You need to be able to analyze deals quickly. Right? If you’re building a spreadsheet for every single lead that you’re doing, it’s going to take you months. That’s never going to happen.
So I use the BiggerPockets calculator because it allows me to analyze deals really quickly and hone in on the properties that I actually want to make offers on and ultimately buy. So here’s what it looks like. I actually am going to go to the BiggerPockets, they have this place where you can find deals and just look for different types of deals.
And I wound up picking out one before. It’s this deal here in Memphis, Tennessee. You can see that I just went in here and looked for things, but people love Memphis. I’ve never actually been there, but people seem to love it. And I found this deal kind of interesting because it’s a new construction built for rent. This is a really common strategy built for rent right now.
I’ve never done it before, but I thought it’d be fun to analyze this one. So let’s just do this. So the first thing you need to do to do deal analysis using the BiggerPockets calculator is just to put in the street address. So we’re talking about Ardmore Street. What do we got here? 35, 32 Ardmore Street. You just click that in.
Actually, the calculator’s going to fill that in for you and we are on our way. So look, next what we want to do is I like to add a photo just so I can remember in my mind. When you’re looking at a lot of deals and a lot of leads, the addresses kind of sometimes get messed up in your head. And so I like, I’m just a more visual person I guess, but I remember the photo.
So I’m going to just upload this photo here so I can remember what this house looks like. It’s kind of cool looking house. So now we do this, I’m just going to hit next. So we’re well on our way, we’ve just entered the address, now we’ve entered in a photo. Now it’s time to get down to the numbers, my personal favorite part. So purchase price. So let’s go back here and see, what did we say?
Let’s just assume right now that they are offering 157. That’s what they want to buy it for. But as I said, we’re going to buy deep on this property. We are not going to just offer a purchase price. So I’m going to say 145. I don’t know if that’s a good deal, guys. I’m really, just over the course of this I’m not going to be super precise with my numbers.
I’m trying to show you how to analyze these deals so you can do it for yourself. But let’s just say that we want to offer 145 instead of 157. Purchase closing costs, I’m going to put about $4,000. And if you’ve never bought a deal before, you might be wondering, “How do I know $4,000?” Well, I’ve bought a lot of deals, so I know that for myself.
But on the BiggerPockets calculator we also have these help tools. So if you look over here and hover on this stuff, you can see that there’s some tips to fill this out. So you can see that typical closing costs are around one to 2% of the purchase price. So the property can differ depending on location and financing. So if you’re unsure, one and a half percent. So I’m going to do about 2%. Actually, I did more than 2% just to do that.
You can rehab your property if you want to. If you’re doing a value add, you’re going to want to click here and say rehab your property and put in your after repair value. That’s how much you think the property’s going to be worth after you put some money into it. And then you need to put how much repair costs are going to be. Because this deal is a build for rent, it’s the brand new construction, I’m not going to be rehabbing.
We’re not going to be using the value add strategy. Instead, I’m going to be focusing on those other profit drivers of cash flow, amortization and my tax benefits and we’re going to see if this is a good deal. I honestly have no idea. So I’ve never done this, so we really are just going to figure this out ourselves. Then let’s go down to loan details.
So if you look at the left side here, you’ve seen we’ve already put in property info. Now we’ve done purchase. Now we’re going to go to loan details. As an investor, if you’re not going to own or occupy, you usually have to put 25% down. I know 20% is normal, but if you’re living in the house. I’m not going to live in this house, so I’m going to put 25% down and my interest rate I’m going to say is 6%.
I know I would love a rate buy down, but I’ll get to that in a minute. Right now, actually let’s even put six and a half percent, let’s just say six and a half percent. That’s about what market rates are as of this recording. And I’m going to do that over 30 years, right? Again, if you don’t know what loan points are, if you don’t know what loan terms are, you can click on these help buttons and they’ll help you figure those out.
Guys, we’re going pretty quickly and I’m talking a lot and now we’re up to already up to the fourth of fifth steps here. So you can see how easy honestly it is to analyze deals. The next thing we need to do is figure out our rent income. And this is often the hardest thing for people is to figure out what things are going to rent for, but there are two ways to do this.
You can go on Apartments.com or Zillow or whatever and just look around your area for comps, but you can also use the BiggerPockets rent estimator, which I’ve pulled up here, which can do this for us. So I’m actually just going to go back and just enter this property in again and show you how to do this. So all I need to do is enter the address into the real estate rent estimator and hit search address, it’s four beds, two bath, and I’m going to search address.
And right here what it tells us that our median rent is 1030 and what we can do is then decide if that’s an appropriate amount. So when I click around, I can see all the comps in my area and I can see that just down the street there’s one similar property renting for more than that, at 1075 or a couple blocks away, we have one for 1250, we have one for 1335. And honestly, what this is showing us is the median rent.
That means it’s the median, the middle quality product, which is important, but because this is a new build, I actually think it’s going to be a little bit higher than this. So I’m going to just enter at 1100, right? I think that’s a fair number. I want to just point out on the listing, they say the projected rent is at 1450.
Based on what I just learned from the BiggerPockets calculator, I don’t believe that, so I’m just going to say 1100 because just given my experience, I think 1100 is probably about appropriate. When during other types of times you can enter annual income growth. And over the last couple year rent have grown by crazy amounts, but I personally don’t think that’s going to continue and so I’m just going to put 2% in which is about the pace of inflation normally.
I know inflation is way higher right now, but I just don’t think rent growth is going to go up that much. And because I’m a conservative investor, definitely want to be conservative in this type of economic conditions. I’m only going to put very modest 2% annual income growth. I also want to point out that I left it like that for property value growth just at 2% here too because I don’t want to forecast market appreciation. I said that a couple times.
I don’t count on market appreciation, and so I’m putting that assumption into the calculator to show that I am not banking on housing prices going up a lot to earn my return. Next, we have property taxes. I’ve looked this up. It’s about 1500 bucks per year. Insurance in this area, I looked this up before the webinar, just so you guys know. I haven’t run the numbers, but I looked these things up so I could do this quickly.
If you want to do these for yourself, honestly, Googling it is really easily. For most properties you’re able to just Google it and they’ll give you the exact property tax number. Insurance is a little bit harder, but I just recommend Googling it. Google single family home property insurance in Memphis, Tennessee, and you’ll get a pretty accurate number. Before you actually go buy a deal, you need to get a quote and an actual number.
But when you’re at this phase where you’re looking at all these leads and you’re trying to analyze and whittle it down to the ones you’re actually going to offer on, doing these ballpark numbers are generally okay, at least that’s what I do. For repairs and maintenance, I’m going to do 5%. Again, this is new construction, so I don’t think repairs and maintenance are going to be really high. I like to put 5% for vacancy, 5% for capital expenditures.
If you don’t know what that means, CapEx capital expenditures is kind of like repairs and maintenance, but for big items like a new roof or a new boiler. And because this is new construction, you’re probably not going to need to do that anytime soon, but I still like to put money away for that because you’re going to need to do it one day, right? We’re talking about long-term holds here.
That’s the business model that works during a housing market correction, and so if you’re going to hold this property for five to seven years, something’s going to break, right? That’s just part of the business. You’re going to need a new hot water heater. That will definitely happen if you own it for 10 years. And so you better off just putting that money away right now and planning for that than getting stuck and not knowing what it is.
I don’t live in Memphis, so I’m planning for management fees of about 8%. And then since this is a single family home, when I get to this section about utilities, I’m putting in zero because my tenants are going to pay all this. I actually usually pay water and sewer, so I’m going to just put 25 bucks in there. I don’t like to buy places with HOAs, so I’m going to put zero.
Garbage, I’ll put zero and zero. Right? You guys can adjust this as you need. If you’re going to buy a place where you’re going to pay the utilities, you need to put those numbers in. And again, I recommend just Googling that for your area. If you are unfamiliar what a four bedroom house costs for electricity per month, you could just Google it. It’s honestly really easy. And then we’re done.
That was it. I mean, if I wasn’t just blabbering on here, I would’ve done that in probably two or three minutes. Because I’m trying to explain it, maybe it took five minutes. But let’s look at this deal. Okay. All right, this is a bad deal. This kind of happens with that, but I wanted to do this on purpose to show you. What we’re just looking at here in this deal is that it would net negative $90 per month and negative 3% cash on cash return.
So this is obviously not a deal I would buy as is. And I honestly, I kind of suspected this. New construction tends to not be great investments, so I was kind of curious. But I did this for a reason because as I was talking about, most deals that you analyze are not going to be good, but there are two things that you can do.
If it’s just a no-go, it’s a terrible deal, it’s never going to work, just forget about it. You can just move on. But if you see that there is potential, and I think there’s potential in this, what you can do with the bigger pockets calculator is meek your deal, right? There’s a common saying among investors that great deals aren’t found, they are made. And let me just show you what I mean.
I just made up a number that I was willing to, that I was willing to pay for it, but what if I bought well under asking price? Let’s say we went down to 137,000. What happens then? Okay, we’re still negative at 51% or 1.6%. That’s still not going to work for me obviously, and I don’t think the seller’s going to go well below that. Let’s just say 135. Maybe they would offer that, that’s still a negative cash on cash return. But obviously that’s not good enough for me.
So what I’m going to do instead is imagine that I can offer or negotiate a rate buy down. So remember I said there’s a very common thing going on right now where you negotiate with a seller for them to pay down your mortgage 2% for the first year. So let’s just say, I mean, let’s just say that I did it by 1%. What happens if I go down to 5.5%. Right? Does that mean that it goes positive?
Yes. Now it is $23 a month in cash flow and 75 and 0.75% cash on cash return. Probably still not good enough for me, so I’m going to see what happens if I get them to rate buy down by 2% for the first year. That would get me to 4.5%. That would give me an $85 a month cash flow and 2.71% ROI. Probably still not good enough for me. Right? But this is getting closer, so we’re getting closer.
So what would work for me? I think the last variable that really matters here is cash flow. Remember, these people who listed this said that they think that the cash flow could be 1430. I put in 1100, but I’m not really that sure. So what I would do in this scenario is I would say, “What cash flow do I need to get?” Here’s a good deal.
If I could get the rental income to 1265, I could earn $200 a month in cash flow, a 7% cash on cash return and I would be earning on an annualized basis 14% per year. That is well above what the stock market returns. Stock market returns eight to nine percent. This is even during a correction, even during market conditions where I’m forecasting almost no rent growth and almost no appreciation. I could still be well outperforming the stock market.
Will the seller accept this deal where I offer them 135 and they do a rate buy down? I don’t know. I need to still go out and call property managers and see if it’s realistic for me to get rent of 1265. But now that I’ve analyzed this deal, I know what a good deal looks like, right? I know, I’m not going to offer what they’re offering me. That’s not appropriate in this type of market.
What I’m going to do is go to them and say, “I know, I, as an investor, I’m an informed investor and I know the exact numbers that are make sense for me to buy this deal. Here’s what they are. I’m going to offer you 135. You need to do a rate buy down for two percentage points.” And then on your own you need to independently verify the rental income and see what you can actually earn.
There was a big range on the BiggerPockets calculator when I showed that. I’m going to jump back over that. You can see here that they offered, they said 1030 per month for the median rent. But one of the things I love about this rent estimator is it says that the confidence is low, right? So that’s not great, but it admits that it’s not very sure because there aren’t great comps.
So in this type of situation, you need to go independently verify that and figure that out. So that’s why I think this calculator is so valuable and you need to run all these deals is because go and make this offer. If they say no, what have you lost, right? You know the numbers that make sense for this particular deal. If it doesn’t work on this deal, go run another 10, another 20, another 30.
And you will find, I promise you, you will find a seller who is willing to negotiate with you in this market because that is the benefit of the correction. People are willing to negotiate. So hopefully that helps. I just want to show you some other things about the calculator while we’re here. When you come down here, you can see how much money you will make on this property over the long run.
And I think this is particularly important during a correction. If you’re going to hold for five or seven years, it’s super helpful to know how much money you’re going to make five to seven years from now. So for this example, you can see that in year five that you will probably make, if you sold it, you would make $37,000 in cash for an annualized return of over almost 15%, which is incredible.
If you held it for 10 years, you would make 87K. Remember, on a property like this, you’re probably only putting in $30,000, $40,000 and you’re making 87K. So you’re tripling your money in 10 years for an annualized return of nearly 13%, which is well above what the stock market returns. So that’s why the calculator is so helpful.
You can really see how this will impact your financial future and help you on your path to financial independence. The last thing I want to share with you here today is this share button, which is a super cool part of the BiggerPockets calculator.
So if you go up here and you want to can download a PDF, so when you go to the seller, right? This is super important in negotiations, when you go to a seller and you’re trying to negotiate with you, you need to show them that you know what you’re talking about, that you’re not just making up numbers, that you’re trying to bully them around or take advantage of them.
If you go to them and say, “Listen, I need an 8% cash on cash return.” And you show them this report that shows, look, the only way that I get a 10%, 8% cash on cash return is with these numbers. I need to give you 170, 35. I need you to pay down my mortgage and this is the rent that I’m going to need to get. So I need to verify that, that seller’s going to take you a lot more seriously because it shows that you’re not just making these numbers up, you’re not trying to low ball them. You’ve actually thought about this.
You’ve come up with a number that is thoughtful and meaningful for your investment and their property. And I think it’s super helpful. It’s also great for talking to lenders by the way, or if you want to get your spouse or partners on board. The share feature is really awesome. So this is one, just one of the reasons why I use the BiggerPockets calculator. All right. Now that we’ve done that, that let’s get back to our deck here and our webinar.
So I want to ask you, now that we’ve talked about all this amazing stuff, I want to ask you, do you feel more confident in understanding current market conditions? I hope you do because I’ve explained some of the fundamentals and hopefully you understand that this is an affordability issue and the housing market is in a correction due to that affordability issue. But that’s okay.
Do you now understand what business plans work best in this type of market? Do you understand that you should be buying deep, buying well below market value? Can you find creative financing solutions? Are you going to hold your property for long term? That’s what works in today’s market. Do you feel comfortable finding and analyzing deals? Do you know that you’re going to need to be patient? You’re going to need to analyze a lot of deals to find those nuggets of opportunity.
You’re going to find the sellers that are willing to negotiate or who understand the numbers that you’re going to put in front of them using a calculator report or your own spreadsheet. You need to, are you comfortable finding, analyzing and talking about those deals? I hope so. If you do, that is great.
That is the whole point of this webinar. That is why we are here. But information is not everything, right? Now you have the information, but what happens is you need to take action too. Right? Everyone loves information, learning about things, but what really separates people who succeed in real estate investing and the people who just learn about it but never actually take advantage and start pursuing that financial freedom is taking action.
And to me, the key to taking action is finding the support you need. Right? You need these tools, you need services, you need a great agent, you need great content and education to get you a toss the finish line. And so if this is you, listen, it’s not for everyone to invest in a market correction. I personally am doing it, everyone I know who’s an investor is doing it, but it’s not for everyone. I totally understand that.
But if you are one of the people who has seized the opportunity, is willing to do the work to find the great deals right now, then the next step, the next logical step for many of you might be to consider BiggerPockets Pro. It is something that I’ve worked on personally a lot. I’ve helped develop a lot of the tools in BiggerPockets Pro. Over the seven years I’ve worked here, I’ve put a lot of my own analytical skills into the calculator. I basically help build a lot of that rent estimator that you see there.
And I truly believe in it because BiggerPockets Pro is your one-stop shop. It really has every tool you need, a one-stop shop to start, scale and manage your entire portfolio. And if you’re new to this, I can’t even stress enough how helpful it is to have all the tools that thousands of investors, tens of thousands of investors have used to successfully build their portfolio. And I just want you to know it’s not just me saying this. I’ve worked here for seven years.
I’ve literally seen 50,000 or more people use BiggerPockets Pro to become successful in real estate investing, and that’s why Bigger Pockets Pro is so valuable and I believe in it so much. Let me just quickly tell you about what it actually does. So first and foremost, it helps you analyze investment properties. We just talked about this. I just showed you how useful the calculators are.
You can analyze deals on your own, you can use your own spreadsheet, but I have a master’s degree in business analytics and I don’t even use my own spreadsheets. There’s just too much margin for error. It takes too much time. When you need to analyze the volume of deals a real estate investor needs to analyze, using a calculator just makes a lot of sense. Hopefully you see that now.
The second thing is that rent estimator, honestly, it’s one of the hardest things for real estate investors is to figure out how much income they can generate from a property. And that’s the reason we created this rent estimator. You saw it in action and how useful that can be. The next thing is we have Pro exclusive content and videos so you can get curated videos, webinar replays. The webinars just like this, they are not available to everyone in perpetuity.
Instead, that you need to, all the knowledge that you need is locked in some of these webinars and some of the Pro exclusive content that we have. You get that from being at BiggerPockets Pro. We value that at over $1,500, but it’s included in the Pro membership, which as you’ll see is a lot cheaper than that. We have a workshop. A lot of people might even, if you’re bought in on buying in a market correction, maybe you don’t have a lot of money to invest right now.
That is totally normal, which is why we have a workshop for you if you go Pro, which is investing with No (and Low) Money Down, which is taught by Brandon Turner and David Greene. They have a nine part video series that you get completely for free at BiggerPockets Pro. We’re going to give out a Finding Deals masterclass, which is super important in this type of market.
Again, this kind of stuff sells on the open market for over a thousand dollars, but again, we’re giving it away for free. That’s a theme here. Right? We basically bundle all this really expensive useful stuff into Pro for one, really affordable and usable price. We also have the Pro Badge, which honestly I feel like is something people really underestimate, but it’s really valuable.
When you’re going out and building your network, finding an agent, looking for mentors in real estate, people want to know that you’re serious. And so many people have messaged me on Instagram or whatever and they’re like, “Hey, I’ve never done anything, but I really want you to teach me how to invest in real estate.” And I’m like, “Show me that you’ve put in a little bit of effort, that you’re committed to this process and I’m happy to help you.”
And the Pro Badge is something that really helps you out in the BiggerPockets community. If you’re a Pro and you ask a question in the forums, you are way more likely to get really thoughtful responses because people know that you’re bought in, more people are going to be interested in working with you.
And it’s really, really valuable to let people know that you’re a Pro. We also have landlord documents. So if you’ve never signed a lease before, don’t know how to do a pet addendum or any of the things that you need to do as a landlord, we have a lawyer approved lease documents in all 50 states. It’s super helpful.
I’ve use them in multiple states. And I know I have a lot of friends who use these leases. They’re really, really high quality. We also have negotiated with partners on your behalf with companies like Rent Ready so you get free property management software. I can’t, this is extremely expensive for most people, but you actually get free property management software from Rent Ready just for being a Pro member.
You get discounts on your AirDNA if you want to be a short-term rental. And you get discounts on CPA courses from Amanda Han. And you also even get free access to [inaudible 01:08:41], which helps you find off market deals. If you want to drive for dollars, you get that for free all for being BiggerPockets Pro. So those are just a couple of the incredible values.
We also have amazing boot camps that you can only join if you’re a free member. You can learn from experts like Ashley Kehr and Tyler Madden, Avery Carl, Craig Curelop, all these incredible people have these boot camps where you can get really focused information about a specific topic and that is only available for Pro members.
So those are some of the features. But at the end of the day, all these features are amazing, but the number one reason you should consider Pro, it’s not any of these one individual features. It’s because it works. As I’ve said, thousands, tens of thousands of people have used BiggerPockets Pro to become financially free and to purchase real estate, unlock that power of real estate.
It really does work. I’ll just read you a quote from Aaron who said, “The BiggerPockets calculators are my go-to for analyzing property potential properties. There’s no way I could analyze the volume of properties I do without being a Pro member. I locked up my first free unit almost a year ago and now I’m selling it for almost a 70K profit that will go towards something larger.
The BiggerPockets calculators were a huge factor in making sure my numbers were right.” I love that because it’s all about, listen, he said, he’s talking about analyzing a lot of deals. That’s really important right now. And knowing that your numbers are right, those are two essential components to investing during a correction.
And so the calculators in Pro can help you with that. Patrick says, “Back in June, I attended one of the webinars right afterwards I signed up for Pro. In the next couple of weeks I analyzed a lot of deals. Eventually I found a fourplex. I got it under contract three weeks later after signing up for Pro. And a week later closed on another property that was six units.
Big thank you to you and the entire team. Final quick tip, sign up for Pro Annual. I made my money back at the closing table.” Well, I think that’s incredible advice. And I just want you to know that making your money back on Pro is honestly pretty easy. You’re probably wondering how much all of these tools and benefits cost, you know what it is? $390, right? You’re probably used to seeing courses in real estate that are thousands of dollars.
Hell, if you even bought an inspection on a single house, it’s going to be double the price of this. This is less than a home inspection. $390 is normally what Pro annual costs. It is a fraction of the price of if you acquired all these tools and services together would cost you literally thousands and thousands and thousands of dollar. But we offer it for 390.
But just for being here, for being a part of this webinar, I told you we have a couple of giveaways and I’m going to show you the first one. The first one is 20% off Pro. If you use the code, INVEST23. When you check out right now, just use the code, INVEST23, you will get 20% off and you’ll actually pay just $312, which is even cheaper. And I told you at the beginning that I had a bonus giveaway for everyone listening to this.
I’ve never given this away before. But if you go Pro in the next few days and use that code, INVEST23, you’ll get the ultimate package for my book, Real Estate by the Numbers, which is all about how to invest like a Pro, how to analyze deals like an expert. We went through the calculator. If you want to understand every single detail of how the calculator works, how to analyze deals for yourself, I think my book does a really good job.
Obviously, I’m biased because I wrote this book, but you’ll get the Ultimate Bundle, which means you’ll get a physical copy of it, you’ll get a Kindle copy of it, you’ll get an audio copy and all the bonus content. The bonus contact comes with additional calculators that you can use and resources to help analyze deals in these types of markets. So if you’re interested in BiggerPockets Pro and getting all these bonuses, which are valued well over $2,000, go to biggerpockets.com/pro right now.
Use the code in INVEST23. You’ll get all these bonuses, you’ll get my book and a year’s worth of the tools that you need to pursue financial independence and to find great deals even in these market conditions. Now if you’re already Pro, you can still get some of these bonuses, go to biggerpockets.com/pro/videos and you can find some of this bonus content there.
And the last thing I just want to say about this is listen, we know that it is concerning that you, not everyone is going to be ready to buy in these types of market conditions, but I’m just going to encourage you to go try. Go find a bunch of leads, analyze a bunch of deals, go Pro right now, and if it doesn’t work out, if you’re not ready to buy a deal, we’ll give you your money back. There is a 100% money back guaranteed for 30 days. So do it. Go Pro right now. If you’re at least even considering this, go find an agent, talk to, look at a bunch of deals and start analyzing them.
And I think for a lot of you, you’re going to realize that this isn’t that hard, that you’re going to find deals that are going to vastly, incredibly, life-changing, improve your financial position. But if you don’t, that’s okay. We don’t want to take your money if you’re not actually investing in real estate. So we will give your money back a 100% refund, no questions asked.
So I’ll leave you with these parting words. Jim Rohn, incredible person said, if you really want to do something, you’ll find a way. If you don’t, you’ll find an excuse. So if you’re bought it, if you want to eliminate some of that economic anxiety, if you want to find the financial freedom that has changed my life and changed tens of thousands of life through real estate, go do something.
Take action right now. If not, you’ll find an excuse. So I hope this helps you. I hope you helps you see that there are great opportunities buying real estate right now and helps you pursue some of the deals that I’m, the types of deals that I’m doing and a lot of my friends who are experienced investors are doing. If you want to go Pro, again, go to biggerpockets.com/pro and enter the code INVEST 23.
Thank you all so much for listening. Again, if you have questions about this, you can always hit me up on the BiggerPockets website or on Instagram where I’m @thedatadeli. Thanks again everyone. I’ll see you next time. All right. Well, that was my webinar. I hope you all learned a lot. Thank you all for listening. My main hope here is that you understand that you can invest in really any sort of market condition.
It’s really just about using the right strategies and tactics and then going out and finding and analyzing the right kind of deals so you can proceed with confidence. If that’s for you, if you are ready to go ahead and start investing in this type of climate, I recommend that you do so and you can use the BiggerPockets Pro suite of tools to get a jumpstart on your investing.
We have everything that you need from deal analysis calculators, landlord forums, property management software. And you can get 20% off. You can go to biggerpockets.com/pro. Just use the code, INVEST23. That’s biggerpockets.com/pro and use the code INVEST23 for 20% off. It also comes with a free copy of my book Real Estate by the Numbers, which teaches you how to analyze deals like a Pro, very topical and today’s environment.
So definitely take advantage of that if you are considering going Pro. Thank you all so much for listening to this webinar slash podcast. I really appreciate your time. If you have any questions about the content that we covered today or anything else at all, you can always hit me up on BiggerPockets or on Instagram where I am @thedatadeli. Thanks again. I’ll see you next time.

There are countless successful entrepreneurs and thought leaders in the world today, each with a wealth of information and experience to share. Thankfully, many of them have written books that detail their most powerful thoughts, ideas and lessons. The difficult part comes in choosing which ones to read.

For the members of Young Entrepreneur Council, the following nine books have been some of the most impactful for their businesses. Below, they discuss these books and why they believe every entrepreneur should read them in order to become better leaders for their teams.

1. ‘Smarter Faster Better: The Transformative Power Of Real Productivity’

Every person on my team is required to read Smarter Faster Better: The Transformative Power of Real Productivity by Charles Duhigg during their first month working with us. I recommend this book to every entrepreneur because it outlines the data, stories and anecdotes behind building a results-oriented organization and team culture. I frequently reread the chapters on mental models, goal-setting and focus to realign my personal priorities and enhance my team’s productivity. – Christopher Tarantino, Epicenter Innovation

2. ‘Start With Why: How Great Leaders Inspire Everyone To Take Action’

My favorite leadership book is Start with Why by Simon Sinek because it shows that in order to build a successful business, a leader must clearly understand their purpose and the value they bring to the world before effectively communicating it to their team and customers. The book talks about the power of purchasing psychology and how customers don’t buy what you do, they buy why you do it. This is an extremely powerful book when establishing company culture and branding practices. – Isabelle Shee, GROW

3. ‘The 5 Levels Of Leadership: Proven Steps To Maximize Your Potential’

John Maxwell’s The 5 Levels of Leadership offers a concise and clear framework for comprehending and enhancing leadership abilities. It is particularly helpful for entrepreneurs because it enables them to assess their current level of leadership and comprehend the steps required to advance to the next level. It also offers helpful guidance and examples from real-world situations on how to manage teams and lead people effectively, which is essential for business owners who are starting and running a company. – John Hall, Calendar

4. ‘Smartcuts: How Hackers, Innovators, And Icons Accelerate Success’

Smartcuts by Shane Snow is an interesting read that covers ways in which people leveraged innovative thinking and momentum to accelerate their careers and success. It’s an unconventional way of operating that encourages “lateral thinking.” Leaders can cultivate this kind of mindset within their teams as well. That way, you foster an environment with people who are looking at new ways of driving success for themselves and the business. There’s more bias toward experimentation and innovation, which are huge drivers of long-term success. – Firas Kittaneh, Amerisleep Mattress

5. ‘Drive: The Surprising Truth About What Motivates Us’

Drive: The Surprising Truth About What Motivates Us by Daniel H. Pink is a bestselling book that explores the science of motivation and how it applies to the workplace. The book argues that traditional incentives, such as bonuses and promotions, are not always effective in motivating employees and that a more holistic approach is needed. From my perspective, the book provides valuable insights for creating a work environment that fosters creativity, innovation and productivity. It suggests that the key to motivating employees is to tap into their innate sense of autonomy, mastery and purpose. By providing employees autonomy over their work, opportunities to develop their skills and a sense of purpose, entrepreneurs can create a culture of engagement and motivation. – Candice Georgiadis, Digital Day

6. ‘Zero To One: Notes On Startups, Or How To Build The Future’

Zero To One by Peter Thiel with Blake Masters is a must-read book for any entrepreneur starting out and looking to build a team from scratch. The book is great for all aspects of starting up but in particular for leadership and how you can build a high-performing, loyal team. When I was starting up, I had no idea how to convince good people to join my team and be a part of my dream. That’s when I read this book where the author talks in depth about this topic. The biggest takeaway for me was that you need to build trust and security with the people whom you are going to work with and be open about sharing your vision in as much detail as possible without any insecurities. That’s exactly what I did and it’s been five years. My core team remains with me, now growing more loyal and stronger every day. – Vibhav Singh, XTEN-AV LLC

7. ‘Quiet: The Power Of Introverts In A World That Can’t Stop Talking’

I find Quiet: The Power of Introverts in a World That Can’t Stop Talking by Susan Cain to be an important book that all leaders should read. It helps you look beyond the traditional idea of what creative and “good” employees look like and helps you appreciate the quieter members of your team. You’ll give them more opportunities and make use of talent that’s hidden everywhere. It also helps you look within yourself and realize the value of your introspective qualities. I learned that by understanding my personal strengths, I am able to become a better leader for my company. – Syed Balkhi, WPBeginner

8. ‘The Lean Startup’

I think every aspiring entrepreneur should read The Lean Startup by Eric Ries. It helps you get familiar with the problems new ventures may come across and how to come up with viable solutions. The book will also tell you how you can perfect your products or services through testing and continuous improvements so you can become a viable solution in your respective niche. This not only helps new ventures but also existing businesses like mine explore new ways to improve and grow in a respective industry. Moreover, by reading this book, you’ll learn about managing your resources and catering to customer feedback. Overall, it’s an excellent read for every entrepreneur out there who is looking to build a successful business. – Stephanie Wells, Formidable Forms

9. ‘The E-Myth Revisited: Why Most Small Businesses Don’t Work And What To Do About It’

The E-Myth Revisited by Michael E. Gerber is a must-read book for any entrepreneur, whether starting a new business or running a mature company. It is full of actionable advice and does a great job of dispelling what Gerber calls “The Entrepreneurial Myth,” or that most people who start small businesses are entrepreneurs. Running a successful business requires more than technical skills and a good idea, and this is one of the few books out there that will provide you with a rubric for success. – Jack Perkins, CFO Hub

David:
This is the BiggerPockets Podcast, show 737.

Lewis:
A lot of the things around money for me is about the relationship you have with yourself, the way you feel if you’re worthy and deserving of it, and also if you have the mindset to take on the pressure and weight and responsibility of money. And that’s where I feel like the greatness mindset plays in perfectly with money, investing and millions of dollars.

David:
What’s up everyone, this is David Greene, your host of the BiggerPockets Real Estate Podcast. Here today with a special episode for you. Rob and I are going to be interviewing Lewis Howes. Many of you know him from the School of Greatness. Lewis is a very successful online personality. He interviews some of the smartest, most successful people in the world, gleans what they are doing well, and then shares it with his audience. And we have him on today to share a lot of the lessons that he’s learned about what other people have done to become great as well as himself, and how that would apply to our real estate journey, as well as some of the personal elements of his own story where he went from rags to riches in a very cool way.
Rob, for someone listening who’s new to real estate investing, hasn’t bought their first property, maybe they’re still living with roommates and just trying to make ends meet, what are you excited for them to get out of today’s episode?

Rob:
This was a really particularly good episode because I think he broke down this idea of success, we’re all searching for success and he immediately nixes that and he’s like, that’s not what you need. What you need is greatness. And I don’t want to spoil it, but it was something that really resonated with me because I think he really got into this idea of elevating everybody around you. And that to me is what can make your real estate career great, is if you have other people that are right alongside of you, crushing it. It’s a lot more fun of a journey that way I’d say.

David:
For experienced investors, one of the things he mentioned, because he just wrote a book that’s coming out, he talks about the three steps to becoming great. Was you got to find a problem to solve, that was part of his second step. And I think we can get bored once you’ve got a little bit of success, you got a little bit more money, you get comfortable, you get out of the position that you were at where you felt like, I want to move from A to B, you’re at B, and then you just stop. And there’s always this feeling like, I know there’s more to life. I know that there’s more to me, I could do more. But you don’t have the motivation to keep going. We talk about that in the show, how sometimes pain and bad can lead to blessing. Sometimes you need that.
Well, if you could focus on the problem that you’re trying to solve, you can stay motivated, you can end up earning more money in the future and your business will continue to progress as long as you keep the attention on that and not just the balance sheet where the money is coming from. And on that note, today’s quick tip is, find your greatness. What are you great at? If you can find what you’re great at, you won’t feel like you’re working, you won’t mind the energy that you’re spending as you go about your day, as you take on new challenges and as you take the shots that everybody takes for this is a fight and you’re going to get hit in the face. And if you don’t really want to be in that fight, you’re going to find an excuse to stay knocked out versus getting back up and keep it going. So when you can find your area of greatness, you can find the will to stay in the fight.
All right, please allow me to welcome today’s guest. We have Lewis Howes. Lewis is a podcast host, a New York Times bestselling author, a speaker, a pro athlete, all around. Awesome dude. And you can check out the first time we interviewed him on BiggerPockets Podcast, episode 405. Lewis just wrote a book on greatness, a topic that is near and dear to his heart, that will be dropping on March 7th, and we’re going to be getting into that. Lewis, welcome back to the BiggerPockets Podcast.

Lewis:
David, Rob, thank you guys. Appreciate you.

David:
Thank you for that. Now usually on this show we bring in real estate experts to help break down the real life ways people have found success in the industry. It’s almost always someone who’s done well with real estate investing, helps real estate investors. Today’s show is a little different. Lewis has interviewed, I don’t know how many people, I’m sure, hundreds at this point, successful people and pulled out of them what made them successful. And he’s here today to basically share the collective wisdom of all these different people. A bit of a hive mind at this point, Lewis has like absorbed, like Ultron in the Marvel universe except not a villain. He’s got all the information of the collective world that he’s going to share with our guests today so that hopefully more of us can be more successful. Lewis, welcome to the show.

Lewis:
I’m excited. As I was thinking about this and preparing for this, bigger pockets is the thing that I wanted a lot when I was broke. I was broke on my sister’s couch and I wanted more money. I wanted to have bigger pockets to fill it up, all the money of the world that I could get my hands on. And I remember a mentor of mine early on, I was on my sister’s couch making no money, working for a mentor for free for about six months, learning, developing. And I said, hey, I’ll work for you for free for six months if you let me interview you once a week during a lunchtime. We’ll go take a walk and I’ll just be able to ask you whatever I want. That was my payment that I got, my spiritual payment. And after months of this, I remember saying to him, he ended up actually paying me a little bit to work, but eventually in the beginning it was to do it for free.
But after many months of this, I said to him, man, I could really use some money. I got to figure out how to make money. I don’t know what to do. I’m sleeping on my sister’s couch trying to figure out what I’m going to do next. How am I going to generate this money? How can I overcome the fears that I have? How can I develop skills that bring in more money? Whatever it is, I have no clue. And he told me something I’ve remembered since this day. He said, money comes to you when you’re ready for it. And I remember saying at this time, I’m pretty broke. I’m ready to make some money. I feel ready for the money. Where is it though? I feel ready. And this is something that Rob was just saying off camera about a lot of people don’t believe they are able to be a millionaire. They don’t believe they’re able to generate six figures or whatever it was.
For me, I felt like I was ready, but I truly wasn’t ready. There was something missing inside of me. There was a mindset that was missing inside of me to be prepared for the money that was coming in, the money that I wanted and the responsibility and the weight that money would have. If I wasn’t prepared for it it wouldn’t come to me. I didn’t make sense to me when he said this. Because I was like, well, I feel ready, I am ready, because I’m broke. So what do you mean? And over the next year and a half, it probably took about a year and a half until I started to generate more money and at the time maybe, I don’t know, three to $5,000 a month.
And that eventually it started to come in quicker. In the business that I was building, it started to multiply, 20,000 a month, 30,000, $50,000 months in sales for the business. And I remember thinking back to when he first told me, money comes to you when you’re ready for it. I was like, two years ago if this was coming in right now, I wouldn’t have been mentally ready, prepared to deal with the weight, the pressure, the responsibility, the taxes, all the things that I don’t know about money. I want to acknowledge you guys for being a sounding board, an investment platform of education, wisdom and knowledge to prepare people to receive more money because it only comes to us when we’re ready for it. And you guys know there’s lots of examples of people who just get handed money that aren’t prepared for it and they lose it all. They go bankrupt, they go, whatever.
You hear the stat from NFL players, 78% after four years of retirement go bankrupt. They weren’t ready for the money. You hear about lottery winners, they make all this money and then they go bankrupt or they commit suicide or something bad happens, they go depressed, they weren’t ready for it. Not that often do people who get a lot of money quickly know how to manage it and nurture their money and appreciate their money and invest it wisely. And so I wanted to start with that. That a lot of the things around money for me is about the relationship you have with yourself, the way you feel if you’re worthy and deserving of it, and also if you have the mindset to take on the pressure and weight and responsibility of money. And that’s where I feel like the greatness mindset plays in perfectly with money, investing and millions of dollars.

David:
God, that is so good. And to be frank, it doesn’t get spoken about very often. You get a lot more YouTube clicks if you say this is the secret no one will tell you about, how to make a million dollars in two weeks. Everybody wants to click on that and it doesn’t work that way like you just said, you throw 500 pounds on the bar when you’re trying to bench and it’s your second day in the gym, it’s just going to crush your rib cage. It’s not getting anything done and money is a heavyweight. Prosperity in general is much, much more difficult to manage. That was an awesome opening. I love that. Before we get deeper into your story, I’m going to give the audience a chance to get to know you as well as I have a little bit here playing a fun game called fact or fiction.
So in this game, Rob and I will take turns asking you questions. We will have to guess if we think it’s fact or fiction, and then after we’ve guessed, you’ll let us know if we’re right. All right. First question or first statement. Lewis, you’ll be commenting on ESPN for March Madness this year. Rob, let’s say you.

Rob:
I’m going to go, yes, because Lewis is a pro athlete and considering the realm of possibilities and all the crazy things he’s achieved, I think that’s a very doable thing. So I’m going fact.

David:
All right. I have a bit of an advantage here because I interviewed Lewis once before and then researched stuff about him because I thought, this is a really cool guy. Is he pulling the wool over my eyes? Because it can happen. Sometimes charismatic people are complete psychos.

Rob:
That is true.

David:
I did a lot of research on Lewis and I’m happy to report I do not believe he’s a psycho at all. I think he’s very genuine. I like him a lot. But in my research, even though he’s a pro athlete, I did not see anything that was related to basketball. In fact he played sports and was very good at them that did not use the same type of skillset that basketball requires. I’m going to go with no, only because it’s March Madness. Lewis, what’s the truth?

Lewis:
Well, here’s the funny thing, there’s nothing planned right now, but we’ve actually been pitching two ESPN to have me be a mindset teacher during March Madness because that’s when my book The Greatness Mindset comes out. So there was some talks about it. So you guys you’re both right, but right now there’s nothing yet.

David:
I think even though you saying that, I’m going to give it to Rob. Because what are the odds that anyone that we know is even getting close to pitching ESPN to be an analyst? That’s so far ahead of everybody else that I’m going to say you’re basically in there even if it doesn’t happen.

Rob:
All right, hold on. Really fast, Lewis, I think we should on air create the hashtag March mindset.

Lewis:
Let’s go.

Rob:
It’s pretty good.

David:
That’s how you know that this is a professional YouTuber because they can’t stop thinking that way. It’s like if you’re friends with Eminem, he probably doesn’t go to the diner and just order food like everyone else, right? He’s like, I’ll have the eggs and bacon, make sure I’m nice-

Rob:
And mom spaghetti.

David:
… awaken. Everything has to rhyme just as he’s talking. Rob’s like that, Brandon Turner was like that. They can’t stop thinking in terms of algorithm. Their brain is just wired that way. March mindset. All right, next statement. Lewis, you were on USA’s national handball team. All right, Rob, what do you think?

Rob:
Oh man, you’re definitely going to get the point. I think I’m going to go fact, I’m going to go fact.

David:
Lot of conviction in that.

Rob:
It’s true because that’s where I’m at.

David:
You’ve mastered the art of making a statement, but throwing a question mark on the end of it.

Rob:
I am Ron Burgundy.

David:
Yeah, that’s it. The Ron Burgundy thing. I’m going to go with true on this one.

Lewis:
Yeah, it’s truth, truth. Eight years with the USA National team. I haven’t played in the last couple years, but I’ve played the USA National team, represented America and played all over the world against other Olympic teams on my pursuit of going to the Olympics, but we never qualified.

David:
And you recently posted a picture of your handball photo, right? On your social media?

Lewis:
Yep.

David:
It was like how every kid in high school, they get down on one knee and they get that mean look on their face. They always want to like-

Lewis:
Exactly.

David:
… the tough dude. You’re like smiling a little bit and there’s no pads on. It was very different. It was the version that they would take to send to grandma, but then they keep the mean. Did you play high school football too? I bet you did.

Lewis:
I played high school, college, arena football.

David:
All right, next question. Now, a lot of people don’t know this, but you’re actually friends with Brandon Turner as well, the former co-host of this podcast, also known as the bearded one. When in Hawaii hanging out with the bearded one, you were knocked off your surfboard and avoided being bitten by a shark while surfing with Brandon Turner.

Rob:
Fact. Fact. Fact.

David:
Wasn’t there a thing in school when you have a true or false test where you would write the T but then put a little thing on it also like to make it-

Rob:
That’s totally me right now.

David:
… the true, false. You try to put both in the same letter.

Rob:
Well, it’s just so outlandish that it’s like this is a very specific fiction. So I’m going to just go fact. Put the question mark.

David:
All right. I’m going to go with fiction here because it’s so outlandish. It tempts you to think this could very well be true and what a cool story that would be. But I’m pretty sure if that had happened, Brandon would have shared this with me. And if this ends up being true, that just is a reflection of the deterioration of my friendship with Brandon. There’s a lot riding on this Lewis.

Lewis:
It is fiction. That did not happen.

Rob:
Nice.

David:
There we go. The first one Rob’s gotten wrong. All right, and this last one we know is a fact because we teased it a little bit in the beginning. At one point you lived on a couch and had $7 to your name, a handsome double like you full of confidence. That would’ve been hard to believe, but you’ve already admitted that that’s the truth. So we know if someone like you, that was at one point a professional athlete was on the Olympic team playing against other countries, best athletes, could still be at one point having $7 to your name, sleeping on a couch, there’s hope for anybody out there to do the same.

Lewis:
Well, in a sense that’s fiction, because I didn’t have any money. I was living off three credit cards and I had student loan debt, so I had no cash.

Rob:
You had OPM. You had other people’s money.

Lewis:
I had other people’s money that I had to pay off. It was not the kind that you invest in real estate with, but the kind that you’re just trying to feed yourself.

David:
You had $7 of change in the couch cushion somewhere, that-

Lewis:
Somewhere.

Lewis:
… you’d have to dive in.

David:
Maybe I did.

Lewis:
You claimed it as yours.

Lewis:
But I didn’t own it because I had to pay it off.

David:
That’s right. That’s true. There’s a lot of people with negative debt worse, and we don’t talk about that, but just because there’s broke and then there’s worse than broke, there’s owing people money broke. A lot of Americans are in that situation, and I think as the economy gets worse but people spending habit say the same, you’re getting more and more people that are going to fall into that same category. So even though not everyone has gone through the same experience, not everybody has been sleeping on somebody else’s couch, it did happen. Right? So how did you end up there and what was your mindset? You’ve mentioned I didn’t want to be broke anymore. But were you struggling with personal demons at the time that kept you from finding your way? Were you just not sure what direction to take and you were in a holding pattern until you figured out? What was going on in your head?

Lewis:
I think I’ve been struggling with personal demons up until the last couple years, if I’m being honest. And it’s been a journey of overcoming the challenges, the insecurities, the doubt that it’s held me back in different areas of life. At that time I was afraid of making money because I didn’t understand money, I didn’t know how to make it. I was playing arena football right before that. So I got injured. I broke my wrist and I had a surgery and then I had to wear a cast for six months. So from top of my shoulder to my fingers, I was in a cast, in a 90 degree angle, and that caused me to not be able to work. This was in, August of 2007 I had the surgery. So this went till March, 2008 in the cast. Then from the next year I was recovering with the wrist, with mobility and strength.
During that time, as you guys know, the housing market went through I guess the biggest crash of all time. I don’t know, one of the biggest, and just the economy was crashing. So there wasn’t really jobs for average arena football players who were injured, who didn’t have a college degree, they weren’t giving jobs to people with masters at that time. I remember people struggling, saying, I’ve got a master’s and I can’t get a job. And I was like, there’s no hope for me then. So this is 2008, going into 2009. I started to reach out to mentors and ask them about what to do. I had no clue, and I looked at my life as a sport. I got to a level of success in athletics through having great coaches. I don’t understand money, making money, getting a job, starting a business, being an entrepreneur, any of this. Why do I think I could do this on my own without mentors, coaches, or wisdom?
So I started reaching out to them. I was afraid of money in the beginning, I didn’t know why anyone would hand me a dollar, $100, $1,000, I didn’t understand what value I could bring because I was very insecure. This goes back to mindset. I felt a lot of fear and doubt, and I’m a big believer that self-doubt is the killer of all dreams, of what holds us back from having the courage to act. Whether that’s getting the career we want, making the right investment choices, getting in shape, whatever it is, it holds us back. But I seek mentorship early on and I really just said, whatever you tell me to do, I will do it to 100% to the best of my abilities. I will try to overcome these fears. I will develop new skills, whatever it is you tell me. And that’s what I did for a couple of years.
One of them told me, why don’t you check out LinkedIn? Maybe you can get a job there. This is when LinkedIn had, I think around 12 million people on the platform, early days, 2008 social media. And I started using that at wisdom and advice, and I went all in on LinkedIn for about six hours a day, literally during that time on my sister’s couch, just trying to figure out what is this platform? How do I optimize my profile? How do I connect with influencers, leaders, CEOs, people that know more than me? I ended up building a pretty large network of communities through LinkedIn and eventually started hosting networking events. Again, all these people were messaging me as I started connect with them, saying, I don’t have a job, or it’s really hard to hire the right people right now, or I’m struggling getting business and leads.
I found a problem where I said, well, let me try to connect people through LinkedIn. Then I started to connect people in person and real events. And I did this for first few events until I realized maybe I could charge at the door $5, because people are getting value. I started charging $5, then $10, then $20. Then I started doing sponsorships. Then I wrote a book about LinkedIn. Then I started doing LinkedIn consulting. I just said, how can I maximize the one thing I’m using, to add value to people and figure out how to charge for it? That was the messy figuring it out phase until things started to click after a couple years, and when I really learned about online marketing, creating courses, webinars, and selling online. That was that original journey.

Rob:
Sure. So you broke your arm, you’re in this new world where you’re trying to figure out what life is like outside of being an athlete, how can you work, how make money, and you’re reaching out to mentors. I’m curious, were there any low points in that journey or do you feel like as soon as you started working with mentors and grinding, you were off to the races?

Lewis:
I was already at the lowest point in my mind because my identity was shattered. All I thought I was going to do was be a professional athlete and eventually make it to the NFL. That didn’t happen. So during this year and a half, two years, I was sad. I was really sad. I also was, I turned 24 around that time and I was thinking, I am a sad grown man. I’m a 24-year-old. I don’t have my own apartment. I can’t afford my own food. I can’t pay off my debts. I don’t feel proud about who I am. So the whole thing was sad, but I knew I wanted to overcome it, and so I had the hunger, the desire, the passion to at least take action and mess up, and I knew that it couldn’t really get any worse for me. I was already in three credit cards, I already had student loans I needed to pay off. I had no money. I was on my sister’s couch. I was as humiliated as I could potentially be.
So all I knew was all I could go is up from here. One of the most humiliating points, here’s a low point for you. I started to go to Toastmasters, which is a public speaking class, because I was terrified to speak in front of a group of five people. I went to a number of Toastmasters groups to see which one was the scariest to join. And one of these had, this is one I had my cast on. So imagine going to this professional setting as a 23-year-old bum, with a shirtless sleeve because it wouldn’t fit over the cast. It was so big. So a cutoff sleeve, everyone’s wearing suits and I’m wearing baggy jeans and a cutoff t-shirt with a backwards cap walking in there, in my early 20s, everyone’s in their late 30s, 40s and 50s, suits, professionals and pro speakers.
I walk into this one Toastmaster’s club and there was some cheese and crackers and bread and whatever, hummus in the back of the room for people afterwards, no joke, after the meeting, I’m thinking to myself, I don’t have money to buy food. I start stacking and stuffing in tissue paper and napkins, all the bread and all the vegetables that were back there and shoving them in my deep pockets. I had bigger pockets with my pants. They were big baggy pants. And was stuffing this food in there with one hand and my wrist like broken, shoving it in there. And this guy comes up to me, one of the speakers of that day’s session, he comes up to me, he goes, what are you doing? And I go, I don’t have enough money for food. So this is probably a low point. I don’t have enough money to actually go buy food and I’m stuffing this for the food later in the day.
And he goes, let me just take you to lunch right now. He took me to lunch and I think he just saw something in me. Here’s a kid who’s broken literally then a cast, shoving food in his pockets. Let me take him to lunch right now. And he was like, it’s amazing that you’re actually showing up here. You’re wanting to improve, you’re wanting to overcome this, even in spite of all these things that are happening. And he became one of my mentors. He taught me public speaking. I wrote my first book with him because he had written many books. So he guided and mentored me, because he saw that I was willing to take extreme action. And I think a lot of people who are afraid to invest or make a million dollars or increase their income, they’re afraid to take the actions necessary in order to generate new skills, overcome fears and insecurities that hold them back and figure out ways to add more value to people.
Because usually they’re afraid of rejection, they’re afraid of the no, they’re afraid of looking bad and whatever it might be. That’s why for me, everything around money comes back to mindset. It comes back to if you want to earn more money, you got to increase the quality of your mindset. If you want to invest wisely and learn to understand that you’re going to lose money on certain investments sometimes too. You’ve got to be willing to develop a stronger mindset. And so that’s why it’s been a powerful journey of all these different stages since that moment.

David:
First off that you’re willing to admit that a very successful person like you walked into a Toastmasters, just hearing that part right away I’m like, I’d have to be at rock bottom. I had to go to a Toastmasters thing for college. It was a speaking class and they forced us to go to one. My kryptonite is having to go to events where I don’t know people. I’m incredibly introverted. You don’t think so because people only experience me in an area where I’m confident playing a sport, on a podcast where I get to talk. It’s so much easier. If I have to go to a place like a party where I don’t know anybody, my skin is crawling. I just want to turn myself inside out and hide. I can’t stand it. And Toastmaster is not like that, but I got to talk in front of all these people. It’s terrible.
So you go into that environment that I would’ve hated. I’m guessing you probably aren’t the guy who just walks in the room and be like, hey, you’re not Frank the Tank either.

Lewis:
I was just terrified and I was also just like, I don’t have the skills that all these people have, I don’t dress like them. I’m not old as old as them. I’m just like this young punk trying to figure out how to overcome my fear. It was terrifying.

David:
You’re like the fat kid at a CrossFit gym walking down the first day. It’s the worst feeling ever. You’re looking at all these people that are way better off than you are, and now you’re also so poor that you’re taking food from the thing and you’re grateful that there’s food, but you’re humiliated that someone sees you doing it. That’s fighting spirit, is all you can really call that. You don’t know where you’re going, you’re at rock bottom, but you’re not willing to just give up. You’re not going to say, I quit. I’m just going to slip into depression, slip into drugs, slip into just being a loser, because the world’s tempting me with that every day. What is the point of trying here? And you’re so humble that you’re willing to put yourself in that position.
I think that is, when we talk about mindset, that spirit that you had, that I will humiliate myself, I will cut the shirt off my sleeve, off my shirt, I will go to this place. I will be embarrassed. I don’t care. I have to get better is absolutely the first steps to getting out of the place we’re at. And for the people who are in a job that’s comfortable, but they don’t love it and they want to be an entrepreneur, that’s the attitude you got to have. When you’re like, I don’t care what I have to do, I will do anything to get out of the position I’m in, you’re starting on that journey. And I think we’re going to get into deeper parts. I’m going to throw it over to Rob here in a minute. But if you’re trying to start the journey without thinking that way, it’s like you’re half committed. You can’t like sign up for CrossFit unless you’re completely committed something you want to do.

Lewis:
And here’s the thing, it’s really hard to strive for more when things are good. When things are good, I was having a conversation yesterday with a guy who came and was having a meeting with me and they were recording to some content for me. He’s in his late 20s. He had a successful business that he started when he was 21, pretty young, a coffee shop in his local town, made some good money. He’s got three kids, beautiful wife. Life is really good, but he’s been for two years wanting to take the leap to do something, but he’s been afraid because life is good, but he knows it’s not exactly what he wants. It’s like there’s something calling me, but-

David:
But I got something to lose.

Lewis:
Exactly. Something to lose. When you have nothing to lose, when it’s really, really bad, when it’s bad, it’s not bad enough. It’s when you really go through an extreme breakdown, an extreme breakup, you go through an extreme near death experience or you lose your career or you go through a divorce or something like that, that’s when you can start to reflect and say, okay, it can’t really get worse than this, or I don’t want it to get any worse. And that’s when a lot of people start to act. When it’s bad, at least we’re familiar with it and we’re not willing to break through. It needs to be really, really bad in order for us a lot of times to break through. Some people have the courage to recognize life is really good, but it’s not exactly what I want. Let me start going all into my fears and my insecurities and overcoming these things. It’s rare when that happens, but it’s inspiring when people will not accept goodness and they go for greatness.

Rob:
That’s really great, and I think it’s really cool to just hear your turning point here, because you did the Toastmasters thing, someone reached out to you and they’re like, let’s go to lunch. And they showed kindness to you and they mentored you. It’s always really cool how one person who’s unlocked their own version of impossible and their own success, talking to them for a bit can do that for you too. So it seems, like for you, taking action is what got you off the couch and in the game. And you’ve built this massively successful, influential business from there. Do you think you could break down the step-by-step process of how you unlocked that success? Because I have a feeling that a lot of people at home need to hear this.

Lewis:
Well, let me first define the difference between success and greatness, because I think people, I want to create context around this first. In my mind I was extremely successful in sports. I was a two sport Allstate and high school. I was a two sport all American in college. I was a professional athlete. I played with the Olympic handball team. I felt like with the talents that I was given, and then I nurtured and developed, I accomplished as far as I could in sports. And then I felt like I did a similar transition in the business and I’ve accomplished a lot of success, quote unquote, in business in my own way, right? New York Times bestseller, top podcast, eight figure business, yada, yada. But here’s the thing, success for me by itself is selfish. It’s about me. It’s about wanting to look good. It’s about wanting to look right. It’s about wanting to win so that I get celebrated and seen and feel good about me.
That’s what I did for a long time, from sports to the business world, and it was never fulfilling. The more I would accomplish, the more money I would make, the more I would be New York Time bestseller, all this stuff, it still didn’t feel enough. It didn’t feel satisfying, fulfilling, and enough. And I said, well, maybe I need to accomplish more. I need to succeed more. And it still didn’t feel enough. And so that’s why this whole journey started 10 years ago when I started my show, School of Greatness. I said, I don’t know what’s wrong, but I’m accomplishing success and it’s not working. So let me figure out what greatness is. And to me, greatness is pursuing the goals and dreams that you still want to accomplish for you, but making sure you’re in service to those around you in that pursuit, lifting others up, inspiring others around you, helping others, empowering them and celebrating others as well.
And that’s why it’s been a journey for me, because the worst thing that you can do is win at the wrong things. The worst thing you can do is be successful and still not love yourself, in my mind. Sure, money can help you solve lots of problems, but it doesn’t help you solve the problem of accepting, loving yourself and being a good human being. It might solve money problems, but not mindset problems and emotional problems. And that’s why for me, I could tell you what I did to be successful, but it wasn’t enough for me to accomplish these goals. And so that’s why I want to talk about what I’ve reinvented for myself from studying all these great minds over the last 10 years, making a lot of the same mistakes over and over again, really until the last couple years, in order to finding peace, acceptance, and fulfillment as I’m on the journey of constantly growing and building what I’m building.
Greatness again is going after the things that are successful to you and empowering those and being in service to those around you as well. I’ll give you the steps based on that context. I don’t believe, and I don’t know if you guys actually got a copy of the book, but I’ll share a page for you on page 201 in The Greatness Mindset, there’s a graphic that talks about the powerless mindset versus the greatness mindset. So if you want to have a step-by-step approach to achieving more success, making more money and being greater in your life, this is the context of understanding where this stems from. A powerless mindset. And so think about this in terms of how you’re making money, how you’re investing in your real estate and building your career and building your business. A powerless mindset lacks a meaningful mission.
So if you don’t in one sentence have a meaningful mission clear, it doesn’t mean you can’t live a good life, but it’s just not stepping into your full greatness. So a powerless mindset that lacks a meaningful mission is controlled by fear, is crippled by self-doubt, conceals past pains, is defined by the opinions of others and drift towards complacency. For me, that is more of a powerless mindset way of thinking. Now, if we want to step into greatness financially or any area of our life, we are driven by a meaningful mission. We’re very clear in one sentence what that is, and I’ll talk about that. That is our first step. They turn fear into confidence. So anything we’re afraid of, we turn it into a superpower. For me, that was public speaking. I know David for you, that was something you struggle with also, but we say this is the obstacle I’m going to overcome and actually make it a power.
Something that made me feel powerless for so long is now something I get paid $150,000 to do in 60 minutes. But if I didn’t turn that fear into confidence and overcome it, then I’d still be held back into a powerless mindset. Overcome self-doubt, heals past pains, creates a healthy identity, and takes action with a game plan. So again, to give you context there, Rob, the first step is identifying which mindset am I currently living in? Are there anything from the powerless mindset that is holding me back or am I living more in the greatness mindset? So step one is identifying where I currently am in this place. Do I have any fears? Is there anything from my past that I’m still holding onto that I haven’t mended or healed yet? Do I have a healthy identity with myself? Do I get angry, resentful, frustrated, or am I loving, kind and generous? So what is the identity that I have of myself?
And this doesn’t mean you’re right or wrong, good or bad, either way, I’m just speaking into the greatness that is possible within you, identifying it and leaning into it. So step one is that. Step two is getting clear on what season of life we’re in. When I was on my sister’s couch, Rob, I was in a season of sadness. I was in a season of transition. I was in a season of denial. I was in a season of, who am I? Rediscovery. And I was in that season for a while. I was trying a bunch of things. I was feeling the sadness, I was feeling bad for myself, and I was trying to discover, what do I want to create next? That was the season. And all I could think of is my mission is to get off my sister’s couch. How do I make enough money to get off the couch? I couldn’t think beyond, I’m going to change the world or cure cancer. That wasn’t I part of my makeup. It was just how do I make money to get off the couch?
And I think we have to recognize what season we’re in, because some people listening or watching right now, they may only be making a few thousand dollars a month, and it’s probably hard to say, how do I become a millionaire right now? Really we should be thinking about how do I get to six figures first? How do I get to eight grand a month, because eight grand a month will help me break through the first emotional and mental money barrier. You guys know that six figures was probably the hardest thing to do first. For most people six figures is the limit. It’s the ceiling. And there’s an emotional and mental breakthrough that must happen in order for us to get there. Then hitting six figures again is easier. Then the next hurdle is the million dollars, seven figure mark, and it seems really hard.
But six figures was harder for me than it was to seven figures, because I saw myself break through one barrier first and got me to there. So there’s certain things we must get clear on. It is what do we want in this season? What is the mission for this season? And that mission can evolve over time. Mine is to serve and impact 100 million lives weekly to help them improve the quality of their life. It’s simple, it’s clear, it’s direct. It allows me to have a clear game plan and guidelines for how I act accordingly in my days. What I do in my schedule, what I say yes and no to it. It allows me to stay focused and not distracted, and allows me to measure my results. So if we’re thinking about money, just what is the clear mission you have around money in this season? I want to make my first six figures, okay, well, you guys talk about this all the time. All right, that’s 8K a month. Okay. How much is that weekly? That’s 2K a week roughly.
Okay, that’s, I don’t know, 350, 500 bucks a day, whatever this is, I can’t remember. All right, so how do I make 500 bucks a day? How do I get there? What are the steps then? What are the skills that I have? How can I generate more money? How do I package, position and receive the value that I want to put out in the world? There’s lots of strategies. You guys talk about these things. So David or Rob, why do you think most people are limited in the way that they think and feel about breaking through and either buying their first investment deal, real estate investment deal, or getting their portfolio to a certain level of investment? What is the fear that holds people back from believing they can actually make it happen?

David:
This information translates really well into where most, especially beginner real estate people are starting. There’s a desire to want to have more, but then there’s also a conflict that you don’t really deserve it. So real estate is, making money in this industry is so different than other things because you get used to this W2 mentality. I put in X hours, I made X money, and we measure our value by your dollar per hour. If I can make $20 an hour and I can get to 25, I’m now 25% better of a human being as far as the value I bring to the marketplace, and we get locked into this linear thinking. Okay? Real estate investing is much more profitable than that, but it makes no sense on that logic. There is no, I put in these hours and I got this result. Sometimes you put in a whole bunch of hours and get nothing until you finally develop the skillset and then boom, you make a whole bunch of money.
Sometimes you don’t realize that you even made money. Inflation just occurred, and you look back and you’re like, I gained $200,000 of equity and I did nothing. Right? There’s this separation, like when you’re in the matrix and you have to believe I’m in a simulation. This isn’t real, and then you can fly or jump or move fast. Once you recognize that the construct that your brain operates by was something you made is not how the world actually works, that money does not work the way that we first understood it when we were 16 years old and we babysat for four hours and made $100. Whatever it was that we were doing, you do way better. You start to recognize patterns. You start to understand that owning assets, making sure that they cash flow, buying in area is more likely to see rent increase, and none of that has anything to do with logging in hours.
What we’ll do is we’ll try to teach new investors, hey, here’s what you need to do. You need to analyze X amount of deals. What we’re really trying to get you to do is see patterns. Houses in this neighborhood at this price range, never cash flow. Or short term rentals in this area do well, but they have to be this size or they have to look this way. It could be five hours, it could be 500 hours, you’re not getting paid for the time, you’re getting paid for the skill you build on really the pattern recognition. And then creativity comes into play. Can you look for creative ways to find someone that has that asset that’s going to let you buy it from them with all the different strategies that we teach? But this idea of you got to be ready for it before it’s going to come. This is what stops people from succeeding in our world.
I’m so deep into real estate investing, I don’t look at money the same way that I did when I started. I don’t look at money as a form of currency where I trade it for something. I look at it now like a storage of energy. I traded eight hours of my time at Footlocker for $200 of a paycheck. The government took 50 bucks, I traded eight hours for $150, but dollars was just the storage of my eight hours of time and labor. Okay? If I put that $150 into a new pair of shoes, I basically traded eight hours of my life, my time, and my energy for a pair of shoes that lost value the minute I put them on and continue to lose value. If I put that $150 into a stock, it will slowly become worth more over a long period of time. If I put it into real estate and then I can leverage, I can borrow 80% of that 150 from a bank, and I can take that 150 and turn that into say like $1,000.
Then that 1,000 is going to grow over time. I’m just putting energy in places where it grows or I’m putting energy in places where it bleeds. It’s one of the two things. My mind never started to look at it that way until I got out of that linear thinking you’re talking about, and I think everyone listening has some form of where they’re living in the matrix in some way. The way they were taught money work, the way that they saw rich people and had ideas about them. There’s only so many hours in a day you can work. There’s only so many years in your life you can work. There has to be a mindset change before the money’s going to come.

Lewis:
Well, also David, I’m curious, I’ve heard a lot of people say, I got into buying a short term rental or buying a place and doing the Airbnb thing, and it was so much time, so much energy, so much hassle, ended up losing money on it. Restrictions came up, and then they give up. They stop. Because they have a bad experience. They lose money. They realize this took me three months, six months of my life away from making money, and people said it was so easy, but I’m learning that it’s extremely difficult. What would you say to someone who lost money, five years of savings and said they finally took action on their first thing, it didn’t work out, should they give up or is it just a lesson of like, okay, now you have the information of what not to do for the next time?

David:
Rob, that that’s an area that you spent a lot of time in and you’ve taken a lot of those Ls. What did you learn in that process?

Rob:
I always say that my mistakes make me millions, and that really is true. A lot of people go into real estate, it isn’t just short-term rentals. I know a lot of people that will go into a flip and they lose money on that first flip and they’re ready to pack it in. And I’m always like, you have to keep pushing through that because imagine all the greats out there who wouldn’t exist had they had a big failure. Tony Hawk, right? One of the greatest skateboarders of all time, arguably the greatest skateboarder of all time. If he had fallen and broken whatever bone, which I’m sure he did many, many times, and he had said, you know what, I’m going to stop skateboarding. We wouldn’t have the legendary Tony Hawk in part of that world.
So real estate is very similar to where you meet all of these people. I meet millionaires, mega millionaires, decamillionaires, billionaires, and all of them are that level of wealth because of the amount of failures and the amount of time they aided in real estate.

Lewis:
So did your first deal, was it successful or did your first one, did you lose money?

Rob:
It was successful, but I made a lot of mistakes in the actual hosting, in the [inaudible 00:43:25].

Lewis:
And so here’s the thing, your first one made money, and it wasn’t like a failure let’s say, or a big loss. But a lot of people they aren’t not lucky as you, but they don’t have that type of success the first time. Yours came later where you lost some money or you had some Ls or whatever, but at least you knew, but I’ve done it before so I could do it again. When it’s someone’s first time and they go all in and they study you guys or someone else and read all the books and they say, I’m doing exactly what I’m told to do and what seems like the right location and what seems like the right style of real estate investing and it doesn’t work out, what would you guys say to those investors? Because I’m sure you get that a lot in those emails and those messages, a lot of people who succeed right away, but then some that don’t.

David:
Well, it comes down to your step number two, finding your meaningful mission. If you get into real estate investing because you just want money and you think it’s a science, like if I put in this many CCs of this thing, I’m going to get this result, you’re going to fail. There has to be a passion. It has to have a power of yours behind it, and then you have to want to solve these problems if you’re going to get through that initial you suck. The example I always, I look for parallels in life where I feel like if it’s a universal truth, it won’t just apply to whatever we’re talking about. It will apply in relationships, it will apply with fitness, it will apply in all these other areas. Okay? Your first time in the gym and when you haven’t worked out, you’re going to get zero strength that you’re actually going to build.
It is a useless workout if that’s how you’re tracking it. All you’re doing is conditioning your muscles to get used to what you’re doing. So if you go in there and you throw yourself, you go for broke, you just spend a week in bed and you can’t move because you’re so sore, you didn’t get any stronger. What you do is you go in there and you know I’m not going to have any success from this first workout. I’m just going to lightly hit every muscle so that I get it conditioned working out, and then I want to be back in a day or two so I can go do it again and get that baseline built. That’s how you want your mistakes to be in real estate. You don’t want to dump your whole nest egg in your first deal, cross your fingers and hope that this goes out.
How do I get in this thing with minimal risk? And I’m excited about the passion, the power, and the problem to solve, to learn about it. Because you got to get through that initial sore phase before you start making the gains with real estate. And that’s what I love about what you’re talking about. If you’re chasing it for the money, if you’re going to the gym that first time because you want to get ripped, it’s going to be a useless workout.

Lewis:
It’s like just wanting it for the six-pack, as opposed to I want to live a healthy, abundant lifestyle. You know what I mean?

David:
And then those things are byproducts of I want to live a healthy lifestyle. You end up with a six pack.

Lewis:
Exactly. A lot of people when they’re getting into anything, whether it’s their career, investing, money, relationship, getting clear on their meaningful mission is using those three Ps you talked about, which is talked about in the book, your passion, your power, and then the problem you want to solve. And some people don’t like real estate, but they get into it just because they say, here’s a way to make money. You’re probably going to make a lot more mistakes if you could care less about homes or about being of service to people and providing a home for them or whatever it is that you care about.
So if you’re going about it just because you see it’s an opportunity to make money alone, by itself, you maybe could make a lot of money, but if you don’t truly have a passion or curiosity or interest, you don’t have a skillset, a power around being creative, like you said, finding deal opportunities, working with people, building relationships, all these different pieces that come to real estate investing, and you don’t care about solving the problem that’s in front of you, whether it be rehabbing or building out the portfolio and supporting your family in that way, then you’re probably going to make a lot of mistakes and say, this real estate thing doesn’t work.

David:
That’s 100% right. If you’re in a fight, you’re a boxer and you don’t want to be there, you just did it for the paycheck-

Lewis:
You’re going to lose.

David:
The first shot you take is a knockout. I’m not getting up. That’s it. You walk in there, you get shot, you get knocked down, okay, I’m out. I didn’t really want to be in here fighting Mike Tyson anyway.

Lewis:
Was that you and CrossFit, David? You just like-

David:
I never actually went to CrossFit. No, I was honest with myself. I like to go at a pace I want to go at, right? I’m building up to someday, jumping into CrossFit. But I have seen that, like in a jiu-jitsu match. If you’re like, I am exhausted, I’ll tap from a choke that it’s not actually choking me out just because I don’t want to be there. If you really, really, really want to win, you figure out a way to get through that problem. And that’s the passion that we’re talking about. You’re going to take L’s, you’re going to get knocked out, you’re going to get hit in life. When you want it, you get back up, you get in the fight, and these are the people that you hear the success stories. When you just wanted the paycheck, you won’t stick with it.

Lewis:
I’m curious for people listening and watching right now who maybe this is their first time here, hearing this show, maybe they’ve been here for five years hearing you guys talk, what are the top three approaches to real estate to dive into at this season of life that will pay dividends five, 10 years from now? And I think a lot of people get into it wanting to make quick money as opposed to thinking, I’ve got to have a meaningful mission that’s beyond just quick money. If quick money comes, great. But what is the two or three approaches to real estate investing that you see, that has worked in the past and will continue to work for the next five to 10 years with all the different economic challenges, wars happening, with the Great Reset, with the changes that are going to happen, the 2030 plan, all these different things. What are the three real estate strategies of investing today that will pay dividends in the future for people?
Is it flipping? Is it buying single properties? Is it duplexes? Is it quads? Is it buying apartment buildings? Is it Airbnb stuff? What is the top three things that most people can get into right now, who are making about 80 to 130 grand a year of household income and doesn’t have a ton of money right now, but maybe they could source money, what are those three things they could do moving forward if they’re interested in this?

David:
This ties in really well with your step three, take massive, imperfect action. Once you know the direction you’re going to go in, start down that road. Rob, what are some of the things that you think are the hottest strategies for 2023?

Lewis:
And that also are going to pay dividends for five to 10 years, with everything happening, with all regulations, with changing of the laws, all that stuff?

Rob:
This is pretty topical. This one we’ve discussed quite a bit in the last month, I feel like. But in my opinion, the number one way to get into real estate that will absolutely pay dividends for five, 10, 15, 20 years, is house hacking and renting out a room or a space on your property to subsidize your mortgage. Because in my opinion, the faster you stop paying a mortgage, the faster you can use those funds to reinvest into other forms of real estate.

Lewis:
I like it.

Rob:
And scene. All right, good one. Dave, what about you?

David:
House hacking is 100% the reason, and Lewis, you hit it on the head. As the market’s heating up and interest rates are rising, we’re not seeing a big drop in prices because there’s so much competition for these assets. It’s a very strong field. The first thing I tell people is you have to get away from this idea that you are going to buy one house and make a bunch of money in year one. This has gone from a short-term game into the long-term game that real estate is really meant to be. It’s meant to be a long-term buy and whole thing. You have to be thinking five years down the road, how’s it going to be doing? So understanding that, the first strategy is picking the right location. Okay? There’s a very big difference between buying in Columbus, Ohio where it’s going to be the same price 10 years from now than what it is today, and buying in Austin, Texas, Miami, Florida, some of these markets where populations are moving into.
And so it’s not as crucial if it makes a ton of money right out the gate as you know it’s going to over the next five years. Then you can combine that with house hacking which allows you to put less money down, get a property, and you’re not as beholden to a lot of the regulations that are being put on short-term rental owners, because you own the house yourself. And then combine that with short-term rental. So if you buy a house in a location that’s going to blow up, you make it a primary residence and then you rent out parts of that house as a short-term rental, you really get all the benefits of real estate investing without as much of the risk that you see a lot of people struggling with today.

Lewis:
What if people are like, well, I like the idea, but I don’t want people living in my home, that aren’t like my family? What would be the next strategy beyond that?

Rob:
I always think that a multifamily, I’m starting to become a big fan of this, an entry level multifamily, something that’s like two to 10 units, because the cash flow from it on a long-term rental, it’s not going to be a ton. It’s not going to be quit your job money, but the appreciation that you’re going to get from that in five to 10 years, I think could make you a lot of money, hundreds of thousands of dollars in equity, in appreciation, that you can cash out and use over and over again for the rest of your real estate investing career.

Lewis:
Got you. I love it.

David:
All right, Lewis, you talk to experts a lot about what they see in terms of the bigger social and the economic trends that are going on. What insights can you share with us about what you see happening in 2023 in the business world as well as the economic world? Where do you see opportunity?

Lewis:
I’m going to give you a counterintuitive answer. I see opportunity and in mastering your emotions. From all these interviews that I’ve done, and I’ll get to why. From all these interviews I’ve done from therapists to doctors to world-class athletes, to billionaires, to brain surgeons, to all of it, I usually ask people, what’s the number one skill that anyone should develop to help them be greater? And most people comes back to mastering their emotions or managing them, having emotional regulation. I think the greatest opportunity is acquiring more skills inward, is learning more about how to overcome your insecurities, your fears, your triggers, so that when things happen, a war happens, a pandemic happens, something happens, you actually go into peace, you go into abundance as opposed to scarcity and holding back. You actually expand into whatever opportunity is in front of you with courage as opposed to retreating.
And I think that’s something that happened to me in 2008, when the economy was going through everything, I was in this phase for a year and a half just trying to figure it out. And I was in hoarding mode. Let me save what I have, which was nothing. Let me just keep it all together. And I remember saying, when this happens again, never ever again am I going to want to feel this feeling of being broke or feeling scarce. And so I said, from 2008 until 2020, I prepared myself emotionally for 2020 without knowing that’s what was going to happen. And my business continued to expand over the last three years because I was expanding internally, emotionally, and I was working on emotional regulation. One of the things that I talk about is really healing and mending the different things that cause you to be reactive or scared or holding back, and empowering yourself with whatever skill that is for you to be able to be ready, because the next time something happens, 2023, 25, 27, and things crash, are you going to pull back?
Are you going to see the opportunity you guys talk about and actually lean in and say, this is my opportunity, now I’m going to take the risk, now I’m going to jump in at the right timing. That’s what I see. It’s a counterintuitive approach, but I feel like from all the people I’ve interviewed, and even I’ve been to some very powerful masterminds in the last couple of months, with some of the biggest names that you guys would know in this industry. And behind the scenes even some of them are doubting themselves at this stage. They’ve got all the money, they’ve got all the success, but they’re like, well, now what do I do? And it’s like, go back to working on yourself. Go back to improving the emotions that hold you back. I think that will give you power anytime anything happens in culture, society, economic crashes to act and seize the opportunity.

Rob:
It really seems like the recurring thread here, just hearing your journey and your process, the idea of going from broke to millionaire really is mindset, and it’s the ability to overcome just doubting that you can actually achieve what you want.

Lewis:
I think it’s mindset, and it’s, again, I go back to this analogy. You have probably both met a lot of people who’ve made a million dollars and they neither lost it or lost a lot of it. And it’s hard for them to come back and bounce back. Because some people can break through to accomplishing the success of the millionaire status, of the multimillionaire status. But I’ve interviewed a lot of people who have fallen back and going bankrupt after doing that. What got them there, they forgot to keep breaking through mentally. They forgot to keep breaking through and sustaining the mindset. They fell off the wagon and they lost it all. This is why I’m a big fan of having a coach or multiple coaches in business, having you guys as a coach for people, when they listen to you every week and they have you as mentors, guides, coaching them, you’re encouraging, you’re bringing wisdom, you’re bringing lessons, and you’re keeping people on track.
But when we try to just do it all on our own, I think it’s really hard. It’s hard to make a million dollars on your own. It’s hard to invest on your own, unless this is all you do and you obsess about it, it’s really hard to sustain it at a great level. We just witnessed, I don’t know when you guys are airing this, but we just witnessed recently LeBron James breaking the all time scoring record, right? And after his first championship, he didn’t say, you know what, thanks coach. You got me here. I don’t need a coach for next year. I think I can go win this championship on my own now. He didn’t say that. He actually put millions of dollars a year into investing into more coaches, more experts to support him to stay at the top. And it’s one of the reasons him, Jordan and all these guys were able to sustain greatness and stay up there.
That’s why what you guys do is so important. And everyone needs to be listening, if you’re investing in real estate, you want invest in real estate, you need to listen to this show weekly to stay on top of what’s happening. What are mistakes am I going to make sure I avoid by listening? And how do I stay on top of mind? I need the encouragement, I need the accountability. We need these things. And that’s all part of mindset.

David:
All right, so the three steps to breaking down the process of how you went from broke to millionaire was identify your mindset, then identify your season or find your meaningful mission, right? The passion, the power, the problem to solve. It can’t just be I want money, it has to be something deeper behind it. And then number three, take massive, imperfect action, which is my favorite thing because perfection creates paralysis. No one ever does it. LeBron James still doesn’t play perfect. This is a little clip I’ll add before we move on. When you try to play a game perfectly, you focus on minimizing mistakes. And so if you never dribble, if you never shoot, if you never pass, if you never do anything, you could play a perfect game and be outperformed by the person who went out there and scored 50 points but they missed some shots, they made some turnovers, they got beat on defense a couple times.
When you’re in the throes of the game, mistakes are going to happen, but you get paid by how many things you did right, not how many wrong things that you avoided, right? That mindset hurts people when they’re like engineers specifically, when they work in an industry that mistakes cost money and then they try to get into entrepreneurship. Money doesn’t respect that. Money doesn’t flow to people who make the least mistakes. It flows to people who take the most action.

Lewis:
Exactly. And you think of the greatest baseball players, 70% of the time they fail, right? They strike out, they miss, they don’t hit the ball. And if you’re focused on failure you can’t get into flow.

David:
That’s good.

Lewis:
You cannot get into flow of whatever action you’re doing if you’re focused on failure-

David:
That’s so good.

Lewis:
… if you’re focused on success or if you’re focused on the judgment of other people. And these are the three fears that cause us to doubt ourselves the most, whether it’s investing, whether it’s starting a career, launching a business, the fear of failure, success and judgment. And when we get clear on identifying which one of that is for us, for me I was never afraid of failure of success. I was crippled by judgment. The opinions of other people. What are they going to say when I make this investment? What if it doesn’t work out? They’re going to say, I told you so. You’re an idiot. What were you thinking you were doing? I’m sure a lot of people in real estate who’ve made a mistake and lost money for that year heard all those things from the people in their life that said, you should have invested in this, you should have done. You should have saved your money.
What were you thinking about starting this real estate dream of yours? That’s crazy. And look at the results you created. If you have that fear of the judgment of other people around you, friends, family, peers, of making the mistakes, then it will cripple you from actually taking action. And you cannot get into flow if you’re afraid of failure, success, or judgment. And that’s why we got to learn to identify which one holds us back. And then we talk about how to break through that and overcome it.

David:
Perfectly said my man. If people want to find out more about you or get your book, where can they go?

Lewis:
The Greatness Mindset, they can get the book on Amazon or Barnes & Noble, or you can follow me at Lewis Howes on social media or the School of Greatness Podcast for more.

David:
And Rob, where can people find out more about you?

Rob:
You can find me on YouTube at Robuilt. R-O-B-U-I-L-T. Same thing on Instagram. And what about you, Dave?

David:
I am davidgreene24. The most boring handle of everybody here. You can find me on all social media there. Lewis, my last question for you before we let you get out of here. If my goal for 2023 is to grow a head of hair like yours, what’s the first thing that I can do?

Lewis:
Man, just implants, man. Just do implant therapy and you got the head of hair, man. I’m sure you got enough back hair to just pluck it and put it up on top of the head right there. You know what I’m saying?

David:
Two birds with one stone.

Rob:
But that’s going to take you from millionaire to broke. That’s the only catch.

Lewis:
All right, Lewis, thank you so much for joining us. I appreciate it, man. It was great to see you as always. Hopefully that book does well and we have you back on.

Lewis:
Appreciate you guys.

David:
This is David Greene for Rob, the comedian, Abasolo signing off.

Andy Walden, Black Knight vice president, joins ‘The Exchange’ to discuss mortgage demand and the housing sector.

By Rieva Lesonsky

Despite how they’re often treated, entrepreneurs are not a monolith. Instead, they’re driven by various motivations and approach business differently. This is illustrated by the annual Small Business Growth Trends report from Keap, which reveals four unique types of small business owners. To get more insight into these entrepreneurial types, I talked to Clate Mask, the CEO of Keap.

Rieva Lesonsky: What were the unique types of business owners identified in your Small Business Growth Trends report?

Clate Mask: Our survey found that entrepreneurs fall into four different segments:

Overwhelmed (28%): These entrepreneurs struggle to manage and grow their businesses and worry about their ability to succeed.

Gratified (26%): Gratified small business owners genuinely enjoy working in their businesses. They feel successful and believe they can handle whatever challenges come their way.

Growth-Focused (25%): This group has achieved a certain level of success and is hungry for more, focusing primarily on growing revenues, increasing profits, and bringing in more clients.

Connected (22%): Connected entrepreneurs wear their small business pride like a badge of honor. They’re deeply committed to their clients and emotionally invested in their businesses.

Lesonsky: Why do you think so many business owners feel overwhelmed?

Mask: Entrepreneurial overwhelm is nothing new; we’re just acknowledging and discussing it more today. The reality is business owners wear all the hats in their companies—set the vision, manage the team, coordinate with vendors, execute tasks, take meetings, respond to customers, answer for all mistakes, and more. They might have a partner or support staff, but the buck always stops with the owner.

The mountain of tasks they’re responsible for puts enormous pressure on them. They rarely have enough time to handle all the company’s needs and never can get around to their wants. When you think about it, it’s actually a wonder that any small business owner doesn’t feel overwhelmed.

Lesonsky: How can overwhelmed small business owners gain more control?

Mask: Investing in systems is critical for small business success and entrepreneurial sanity, and also why we started Keap many years ago. Systems—more specifically, automation—can change everything. Business owners can regain control of their schedules by investing in automation tools for sales and marketing, scheduling, e-commerce, reporting, and more. Plus, they gain the peace of mind that comes with knowing nothing important is falling through the cracks.

Lesonsky: I was surprised only 22% say they’re committed to being deeply connected to their clients and businesses. Why do you think that is?

Mask: Again, this just comes back to the available hours in the day. I think if you asked every small business owner which of these entrepreneurial types they’d like to be, they’d all aspire to be “Connected,” maybe in conjunction with “Gratified” and “Growth-Focused.” But, connecting with your clients takes time, which most entrepreneurs don’t have a lot of. They’re operating in survival mode.

Lesonsky: How important is it for small business owners to pursue growth-focused initiatives?

Mask: “If you’re not growing, you’re dying.” This maxim is not only true for people but also businesses. Even if your revenue is steady, factors like inflation, increased competition, and lifestyle changes can push your spending up. So if you’re not actively pursuing growth in your company, odds are you’re actually losing revenue—or setting the stage to do so.

More articles from AllBusiness.com:

Lesonsky: But if most entrepreneurs are in survival mode, how can they focus on growth?

Mask: There’s no choice—they have to. Prioritizing growth-focused initiatives is a key part of surviving while failing to do so often leads to the shuttering of so many small businesses. So, make sure you take the time to nurture leads, follow up with customers, upsell when possible, and regularly find new customers.

Lesonsky: Any tips for how entrepreneurs can get to the “gratified” stage and genuinely enjoy working in their businesses?

Mask: I’m really passionate about the topic of work/life balance, probably because so much of my early time as an entrepreneur was spent getting the equation all wrong. With the benefit of hindsight and tools to support me, I now truly enjoy working in my business.

I have four secrets to success in this area. Numbers one and two go hand-in-hand: automation and delegation. These two practices get anything off your plate that shouldn’t be there. So even if you think every client quote or phone call needs your Midas touch, you’re better off focusing on your core strengths and leaving your team or your technology to handle the rest.

The third trick to enjoying working in your business is not working around the clock. Yes, you have too many tasks and not enough time. But sacrificing sleep and well-being will only cause you to self-destruct.

Remember that embracing automation and delegation will free up more time for you. Use that time to handle what needs to be done in your business and then the remaining time to unplug, be with loved ones, focus on your physical and mental health, etc. You will only enjoy working in your business when you’ve learned to set boundaries, so it doesn’t consume your entire life.

The fourth secret is getting a business coach. I could beat this drum all day long, but trust me when I say that having a qualified coach who can challenge you, guide you, hold you accountable, and strengthen you where you’re weak can catapult you—and your company—into the stratosphere.

About the Author

Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.

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Ashley:
This is Real Estate Rookie episode 267.

Andrew:
Whenever I get a property under contract, I always put a request, a public record request, in with the city or the town and request inspection information or housing violations and that gives you all the history on the property going as far back as you request, and that gives you insight into any legal issues that you’re having, any trouble tenants, any issues with the building. Just that alone will give you insight into what to look for when you do the inspection, or it might give you insight into tools you can use for the negotiation and to ask for money off. So that’s kind of one tip that I think a lot of people don’t do, but it’s really important with acquiring and doing your due diligence on a property.

Ashley:
My name is Ashley Kehr and I’m here with my co-host Tony Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Want to start today’s episode by shouting out someone by the username of Naftali B and Naftali said, “Great show. Thank you, Ashley and Tony. I really enjoyed listening to your show. You provide great tips, insights, and provide a true path for rookies to start investing in real estate. Keep those episodes coming.” For all of our rookies that are listening, if you have not yet left us an honest rating and review on Apple Podcast or Spotify, please take the two minutes and 17 seconds it takes to do that. The more reviews we get, more folks who can help, and that’s what we like to do here at the Real Estate Rookie podcast, is help people.
What’s up, Ash? How you doing today?

Ashley:
Well, I just want to give a little warning for this podcast. If for some reason you hear fake throw up noises or you hear a bell ringing, my oldest son stayed home from school today and he had three demands for me this morning. He just wanted Tim Horton’s hot chocolate, a Tim Horton’s breakfast sandwich and a bell to ring so that he didn’t have to yell mom and could just ring the bell. I went out and did my little errands this morning and I got the chocolate, I got the breakfast sandwich. I could not find a bell, so I got a cat collar with a little jingle bell on it. So he has a little cat collar that he is shaking or ringing for me when he needs me in his room.
Usually on Tuesdays, Tony and I record all day, and so this is our last one and right before this he said to me, he’s like, “Well, how long is it going to be?” and I was like, “I don’t know, probably an hour and a half,” and he said, “Well, do you think you could just say, “Oh my God, my son is throwing up. I have to go.” I said, “I don’t think I could do that.” He’s like, “You can try it.”

Tony:
So was he fake throwing up in the background?

Ashley:
No, no, no. I didn’t hear it at least and I do have my noise-canceling headphones on, so I don’t know, maybe it did come through the microphone. Or the little cat collar dinging.

Tony:
That’s hilarious.

Ashley:
If you guys hear anything in the background, that’s full disclosure for what it is.

Tony:
I love that he’s like, “I need a bell so I can beckon you when I need something.”

Ashley:
I know. Then I’m even worse for trying to fulfill that request, I guess.

Tony:
I wish Sean would ask me for a bell. I’d be like, “Boy, if you don’t get your foot up and come in this living room …”

Ashley:
Well, the thing is whenever he is sick, he always just like, “I want to go outside in the barn,” or, “I want to go out in the shop. I want to go outside and do this,” or whatever. So the fact that he actually wanted to stay inside, I’m like, “Eh, he must actually really be sick.”

Tony:
Well, cool. Well, we got a good episode for today. We bring on a guest by the name of Andrew Freed, and Andrew’s got a really interesting story. He talks about how he feels like he raced most of his 20s and then had this awakening with what he calls the purple pill, so if you guys want to sit around and figure out what the purple pill is. Then he goes on to outlay how he’s built a portfolio of 18, about to be 24, units over the course of just a couple of years and just the entire story and his framework of about working on himself first to become the type of person that can invest in real estate, I thought was really eye-opening.

Ashley:
That personal development he did as to looking at his life as I’m living the American dream, I have a nice W2 job, I bought a condo, I can do whatever I want basically. He came to that realization where, “Even though I have everything that I’m supposed to …” when you graduate college, you get your job, everything, you buy your house, he’s like, “It just wasn’t fulfilling to me and I realized that I’m actually still living paycheck to paycheck and what happens if I lose my job? I have to go get another job.” That had instilled a fear into him so he talks about that whole progression and how he realized those things and just how he’s been able to grow his portfolio in a short period of time. He has a strategy that he’s doing to implement lines of credits to help him further his strategy, but also stresses on the importance of having reserves and different exit strategies in case you do get over leveraged with yourself.
Well, Andrew, welcome to the Real Estate Rookie podcast. You want to just start off telling us a little bit about yourself and how you got started in real estate?

Andrew:
Absolutely. I first want to mention I’m ecstatic to be here. Bigger Pockets was instrumental in my success in real estate. I found my mentor on Bigger Pockets. I found many syndicators on Bigger Pockets, and I’ve gotten all of my questions answered. So I literally wouldn’t be here today without Bigger Pockets, so I just want to say thank you.

Tony:
Yeah, man, and just really quick, on behalf of Bigger Pockets, you’re very welcome. I think Ash and I love hearing stories like that and even though our podcast is relatively new, we just get to take the credit for all of the other things that Bigger Pockets has done. So we appreciate that, man. But no, seriously, I think Ash and I both, we were products of the Bigger Pockets community before we became hosts. So we know firsthand just how influential of a platform this is and then how many lives have been changed. So Andrew, we appreciate you sharing that as well, man.

Ashley:
I mean, we’re still the biggest Bigger Pockets groupies there are. Still to the …

Tony:
Well, sorry, man, I didn’t mean to get you off track from your story, but I just wanted to comment on that. I appreciate that.

Andrew:
Of course, of course. A little bit about myself. I’ve been in real estate for about a little over two years now. I’m a multi-family buy and hold investor. I’m currently up to 18 units in Worcester, Massachusetts. I’m about to close on a six unit, so I’m about to be at 24 units. I’m also an investor focused agent. My first year I closed about 10 deals and I’m also a W2 certified project manager, which really those skills really fit well with the real estate investor. That’s kind of where I am and what I’ve done over my course in real estate.

Ashley:
When we were at the Bigger Pockets conference, Tony and I did a workshop thing and we had somebody raise their hand and say that they were in their W2 job now they were a project manager and they just felt like they had no skills for real estate and they wanted to partner with somebody but didn’t know what they could bring to the table. It was just like, “Wait, you’re a project manager, tell us a little bit about what you do.” The next question we asked, “So who here would love somebody to manage the rehab project for them?” Every hand shot up in the room, but it’s such a great skill set to have. Do you want to tell us a little bit more about how you’ve used project management into your real estate investing?

Andrew:
Yeah, absolutely. I mean, at the end of the day, it really comes down to being proactive, following up constantly and time efficiency. Some of the principles I live by on a daily basis is the Paretos principle, which 20% of your inputs create 80% of your outputs. Every single day in the morning, I’ll figure out my year goals, I’ll break it down quarterly, monthly, weekly, and what can I do today? What three, five items can I do today to get you to my goals? Those are usually high impact items like walking properties, making offers, talking with brokers, talking with lenders. I avoid time-wasting things like organizing my email and things like that. Time efficiency is at the precipice of being a good project manager, and it’s truly what you really, really … I mean, it’s a great skill to have in real estate as well. I mean, all of us wear 20 hats and we all have the same amount of time in the day, so we have to be very efficient with that.

Tony:
I love the idea of the Pareto principle, and I think it doesn’t get enough love and it’s so easy to be busy and not be productive. I think most people, especially when you’re dealing with limited time, if you’re looking to be a real estate investor and you also have a day job, you also have family commitments, you also have maybe community commitments, whatever it is, you need to be able to be exceptionally productive with the little time that you have available to work on your real estate business. I guess my first question, Andrew, is how did you make the determination or how did you come to decide what was that 20% of activity that was going to produce 80% of your results?

Andrew:
That’s a great question. More or less kind of the activities that get me to closer to my goal. We all need money to buy real estate, so I utilized lines of credit. Maybe that’s locating partners, maybe that’s underwriting deals. It’s whatever next steps I can get to that are going to get me to my goals. I always wanted to be an entrepreneur at heart, I always wanted to control my future. I mean, maybe that was just a result of my last name being Freed, but I really felt the need to really take control of my time and really create the reality that I want. I took many entrepreneurship classes. I even wrote a business plan for my master’s program. But at the end of the day, my entire network have the middle class mindset, get a good job, work for a good company, make good money and I really took that to heart.

Ashley:
Was there one thing that made you … was there a moment where you can remember this was the thing that made you want to change?

Andrew:
I mean, the real moment that really hit for me is when … come around COVID. I did everything right when it comes to achieving the middle class dream. I got a good job at a prestigious organization. I made six figures. I had my own condo in Boston. I really did everything you needed to do to “achieve the American dream.” At the end of the day, I really looked at my life, really looked at my net worth, and I realized at the end of the day, I’m still paycheck to paycheck. Maybe I have six months of savings, maybe a year of savings. But at the end of the day, if they fired me, I would rely on that job six months, 12 months later. That really frightened me. That really frightened me to death, to be honest with you. I kind of ate the purple pill, I read Rich Dad, Poor Dad and that really opened my eyes to the possibility of the world.
I very much drowned my ambition in video games. In video games, I always kind of created the character I wanted, created the avatar I wanted, focused on the skills that I wanted, and I really wasted a majority of my 20s in that state of mind. However, after reading Rich Dad, Poor Dad, I came to the realization that at the end of the day, life is a video game. Why create a character in a virtual reality when I can create the avatar and the person that I want to be in this reality? That was kind of the real turning point for me, and that really kind of gave you the ambition to really go full force in the real estate.

Tony:
Just really quickly, I just wanted to say I appreciate you being transparent about you almost looking for this escape with gaming and I think it’s going to be a different escape for every person, but I think all of us find ourselves getting lost in these things that are entertaining or they make us feel good momentarily, but in the reality they, at least the amount of time we’re putting into it, detract from our ability to achieve our goals long term. Maybe for some people it’s TikTok, maybe for other people it’s Netflix, maybe for some people it’s … who knows what it is, but everyone has their vice that can in the moment feel like a good thing, but really it’s hurting you from achieving the goals that you want in life.
I guess my question is how did you break that habit? Because I think so many people have these things that they’ve established in their lives, these rhythms that they find themselves in, and it’s so hard to break free from that because the momentum’s been building for so long. How did you change your mindset and then change your behavior to say, “Hey, I’m going to break away from this negative habit,” and really focus energy on something more fruitful?

Andrew:
Many people want the rewards of the external environment to give them their dreams, but at the end of the day, if you want the external environment to give you what you’re looking for, you really have to look internal and you have to really cure those inner demons first before you can expect the external world to provide what you want for your dream. The way I did that was I spent a good two to three hours in self-development every single day. I’m trying to create the avatar, the character that I want to create to bring the reality to this world that I want. Every single morning I’ll spend an hour doing Miracle Morning, I’ll meditate, I’ll write, I’ll scribe, I’ll go through my yearly goals and figure out what I can do that day to get me to my goals.
Really the most important thing that really brought me to this next level is just practicing gratitude. All of us are really lucky to live in the United States. We’re literally the top 1% of the 1% of wealthy people in the entire world. So just being grateful for what you have and the opportunity that has given you really has really pushed me to really go after my goals and not rest until I achieve them.

Ashley:
That’s such a great point. I can find myself sometimes just sitting in my car and frustrated over something or stressed about something or just in a bad mood, and if I just focus on a couple things that I’m super grateful for, a smile just appears on my face and you feel that energy build up in you. I remember going to a conference where somebody led a seminar about just how you are positioning yourself. If you’re hunched over and then everybody, sit up, put your shoulders back, and you already feel better about your situation and things like that. I think those are just such little, easy things, but you forget sometimes, you don’t always do it. But Andrew, you’re getting into that habit of doing it every single day, feeling that grateful, expressing that gratitude for what you do have, and it can be the smallest of things.
I remember when my kids went to private school, we did it during COVID so they didn’t have to go virtual and they could go in school, but there was no bus system and I was like, “Every day I’m going to have to drive them to school and I’m going to have to pick them up. Every day.” I had a friend who didn’t even know I was going through this situation who said to me, “Oh, I’m so lucky with this job that I have. I get to drive my daughter to school every day. I get to do that, I get to spend those 20 minutes in the car with her,” and I was just like, “Wow, I’ve been thinking about it so wrong.” You need to be grateful of that I get to … I don’t have anything else to do. I can go and drive my kids to school. I get that time with them and that I’m able to do that where not everyone has that opportunity. I was looking at more of an inconvenience when it really wasn’t.
So I think that’s great. Hal Elrod is the one who writes that book, Miracle Morning, that you were referring to. Great book for anyone that wants to check that out.

Andrew:
I think that’s a great point. I mean, just going back to that, I mean just being very conscientious of where your thoughts go and the fact that whether you’re ruminating on something negative or whether you’re ruminating on something that will get you towards your goals. So that really has been instrumental for me, is kind of controlling where my thoughts go and focusing on things that get me towards my goal and literally pushing that behind you. For your example, you were focusing on the negative, like, “Oh, this is wasting my time. I’m driving my children to school.” But if you just switch that and focus on the positive, “I get to spend time with my children, I get to enjoy them in the morning, I get to enjoy their spirit driving them home,” that really changes the whole dynamic of the situation. It really puts that gratitude in the forefront, for sure.

Ashley:
Andrew, what do you think is the biggest impact you’ve had from this, implementing the Miracle Morning and expressing gratitude and scribing all these different things? Are you actually tracking any of this? Are you looking and seeing, “Okay, I’ve been doing this for 100 days now and I see an impact …” on your productivity or whatever it is?

Andrew:
I do definitely utilize a habit tracker. Every single day. I’ll have my nine, 10 items what I want to do, and I really focus on getting them done in the first two, three hours a day. Once I actually tackle those habits, everything else seems easy. When you really tackle hard things early, hard things throughout the day just go with the flow. That’s kind of been really good for my success is really just tracking those habits, really focusing on them on a daily basis.

Ashley:
When you started doing this, was this before you got your first deal and that’s kind of helped you lead into that? Or was that after? You want to maybe talk about the first deal?

Andrew:
Yeah, absolutely. I mean, this was all before my first deal. I really got into mindset. I really got into habit tracking. I really got into education, learning as much as I could. I think I listened to all 600 or 700 Bigger Pockets podcasts. I really did focus on that, but it really led me into my first deal and the fact that it set me up with the right partners, it put me in the right market and it gave me the right strategy. I ended up utilizing the house hack strategy. I opened up a line of credit on my one bedroom condo in Boston, around $200,000, and I used that as seed money to buy my next seven deals. I bought two house hacks. I invested in two, three families, I bought a five family, I invested in two syndications. I’m currently closing on a six family right now. To your point, those habits gave me the confidence to really go after my dream. I didn’t have to question whether I had the knowledge or whether I knew the right people. It really gave me the confidence to experience failure and really just thrive.

Tony:
Andrew, so many good things that you just said right now. I just want to take a quick second to unpack some of that. You said those habits gave me the confidence that I needed and it’s such an important idea for our rookie listeners to understand because so often we have these goals that we set and the goals seem almost so far-fetched because it’s like, “I don’t know anyone that’s doing those things. I’ve never done that myself. Is it even possible? Is it just a dream?” The question isn’t always like, “What do I need to do to achieve those goals?” The question we need to ask ourselves sometimes is, “Who do I need to become in order to achieve those goals?”
You are the perfect picture of what that looks like because before we even started talking about analyzing deals or choosing your market or doing this or doing that, the technical stuff of about real estate investing, you looked inward and said, “What do I need to do internally with inside of me? Who do I need to become if I want to be the type of person that can invest in real estate?” I just really wanted to call that out because I think it’s such an important concept for our Rookie listeners to understand. Then one other follow up question, when you had this, I guess, enlightening moment, this awakening inside of you and you went through these changes internally, how much time passed from that moment until you actually got that first deal?

Andrew:
I think I read Rich Dad April, 2020, so a month after COVID. I had all this time in my hands and when I was getting sick of video games, like, “Oh, I’m going to pick up this book.” Honestly, that book literally tears were rolling down my face. That book really changed my whole mindset and it really just showed me that I was honestly just avoiding my dream of entrepreneurship because I was scared of failure. When it comes to real estate and getting a deal under contract, you could do all the prep work you want, you could do all the due diligence, you never know what’s going to happen until you’re closing that property and you have that property, you own that property more or less. It’s really important to just be confident in your ability and know that you’re going to tackle any issue that comes your way. That confidence is instrumental to any rookie. I mean, you just have to be confident in your ability to really just anything that comes your way, you can definitely tackle. Sorry, [inaudible 00:20:45].

Tony:
No, no, it’s okay. No, I think it’s another important point is that repetition builds confidence and the more you do something, the more confidence you start to build in yourself to actually do that thing successfully. I think so many people have this … I don’t know, this warped sense of what it means to make progress towards something. But first is that we need to understand, we have to do the work initially to build that foundational level of confidence and understanding, and the second piece is that as you move through these steps towards success, more often than not you are going to make some mistakes and some things are going to go wrong.
Does that necessarily mean that you failed? Not really, right? Because mistakes and missteps, that’s part of the progress or the process towards success. But I think we have this fear that we build up to say if I make a single mistake, it means I’m a total failure. But I’m assuming, Austin, that a lot of that work you did about your mindset and your gratitude and the habits you were building helped you understand that failure and mistakes are part of the process.

Andrew:
Yeah, absolutely. I mean, I learn my best lessons when I fail. When I make a mistake, I know I’m not going to make that mistake again because I’m fully aware of it. I value, I appreciate failure on a daily basis and I know that that’s going to make me a stronger person and that’s going to allow me to take on bigger and tougher challenges throughout my investing career.

Ashley:
Andrew, I want to know what kind of hats you’re wearing in your business. Are you managing self-managing? Are you outsourcing the property management? Are you hiring contractors to do rehabs? Are you finding deals yourself? Do you have a wholesaler? Do you have real estate agent? What does that kind of look like? Because you have a full-time W2 job, what other things are you doing for your business besides just being the investor?

Andrew:
Totally. I couldn’t even change a light bulb, so I absolutely contract out all of that work. But everything else I do, I’m an agent, I source all of my own deals. I’ve gone a majority of my deals on the MLS, but I’ve gotten a few off market as well. I self-manage all of my units, so all of my tenants have my number, they reach out directly to me. For my W2, technically that’s a 40-hour work week so I do that as well. This all comes back to time efficiency, focusing on the 20% of inputs that create 80% of the output and all of my careers or my jobs are really focused on the tasks that are really instrumental towards my success in that particular field.
For example, for my W2, I’m a finance guy. I have to make sure my projects are budgeted correctly and are spending in accordance with the trend, and that that’s essentially what I focus on is the money side of it. Because everybody’s going to poke me once we go in the deficit, everybody’s going to poke me once we’re losing money. So I really try to focus on profitability.

Ashley:
Does you think that it gives you that little edge up because you’re focused on that compared to maybe somebody else who’s not really tracking their budget, that that’s where you’re seeing the real value in your investment is because you’re taking the time to be so detailed and that’s where you’re kind of seeing your return on investment there?

Andrew:
I mean, as you both know, the work is in the due diligence and being proactive. If you do your work upfront to make sure the project runs smoothly, that everybody’s on the same page, that all of your tools are readily available if things come your way, the projects a lot of times just run themselves. As long as you’re monitoring your rehab or you’re monitoring your long-term rental or you’re monitoring your clients, as long as you set them off on the right track and monitor them on a weekly or a monthly basis to get them back on track, that’s really the key to being a successful project manager and really have wearing multiple hats is just being extremely detail-oriented and being proactive.

Tony:
You mentioned, Andrew, about being proactive and doing the work up upfront was what you said. I love that phrase because I think doing the work up front is one of the most important things a new investor can do because if you do the right work up upfront when you’re analyzing the deal, when you’re sourcing the deal, on the back end typically the management becomes a little bit easier. So I’m curious, Andrew, with the 18 units you have right now and plus another six on the way, what does a deal look like for you and where do you see these opportunities coming?

Andrew:
It’s all about systematizing and automating the acquisition side as well as the stabilization side. In regards to the acquisition phase, there are some key metrics that I look at when it comes to buying multi-family units. One of the easiest metrics that I think everybody can utilize with quick underwriting is what is your fall in cost per unit? Say, for example, the unit costs $125,000 and it’s going to cost you $15,000 per unit to bring it to stabilization. Your all in cost for that unit is 140,000. If units in the area are trading for 200,00, 250,000, you barely have to underwrite that deal to know you’ve got a good deal. The other key metric I use is post stabilization cash on cash return. I like to ensure all of my tenants are month to month to ensure there is a quick path to stabilization, but by utilizing those two metrics, I can really underwrite properties extremely quickly and know if it’s a good deal or not.
Then if it is a good deal, then I can kind of dig in deeper. That’s kind of on the acquisition side. Once I actually get a property under contract, I’ll just give you a couple tips of what I do, but this one tip I think will save people thousands of dollars. Whenever I get a property under contract, I always put a request, a public record request, in with the city or the town and requesting inspection, inspection information or housing violations and that gives you all the history on the property going as far back as you request. That gives you insight into any legal issues that you’re having, any trouble tenants, any issues with the building. Just that alone will give you insight into what to look for when you do the inspection or it might give you insight into tools you can use to leverage for the negotiation and to ask for money off. That’s kind of one tip that I think a lot of people don’t do, but it’s really important with acquiring and doing your due diligence on a property.

Ashley:
I want people to really listen to that because that is a great piece of advice I don’t think a lot of people talk about enough. The first time that was introduced to me was purchasing a campground. I actually had the building inspector for that town call me. He got my attorney’s information and asked for my information and called me directly to say, “I heard you’re interested in buying this property and we really want to see it turned around. I just wanted you to know here are all the issues with it.” It had a sewer treatment system if we had all of these things that didn’t pass inspection that were failing and he’s like, “Stop into my office, I’ll give you the history of everything.” He’s like, “I just want somebody to come in who’s actually going to take care of the property and pay the taxes on it,” and things like that.
But it really was … so there was things that obviously weren’t disclosed that we never would’ve known about unless we had gone and got those public records from the town hall there.

Andrew:
Yeah, I mean I got a property under contract and in that report it mentioned the roof leaking. That was a really good point for me to point my inspector on and really focus on those issues. So it’s incredibly powerful, as you mentioned, with doing your due diligence because I mean, every property has the history and most of the time the town or the city has that information.

Ashley:
Here’s another one too that I’ve seen come up too is any health code violations, like problems with the water. If a tenant had called and said that they want the water tested, things like that, or also rats, a rat infestation, calling and saying that there’s a rat infestation, the landlord hasn’t taken care of it, things like that. Just going back through that history and the rat thing had been taken care of, but it was just like, okay, is the whole house … all the wires chewed up from rats living in the walls of that property, and just one more thing to check on.

Andrew:
Then once you actually acquire the property, you do due diligence, which make sure you always get the estoppels by the way, for multi-family [inaudible 00:29:21]. You want to make sure the tenant signs off on the rental amount because that’s almost more important than the lease.

Ashley:
Can you just tell everyone what an estoppel agreement is real quick?

Andrew:
Estoppel agreement is essentially the tenant signing off on the rental amount, who’s responsible for the utilities, whether they’re paid up to date. Get as much information on that estoppel as possible and have the tenants sign off on it because if they sign off on it’s going to be way easier to have that conversation with them when you show them their signature.

Tony:
Can you also spell estoppel?

Andrew:
I can. E-S-T-O-P-P-E-L.

Tony:
There you go, man. I remember the first time I heard it, I had to ask that person that told me about the estoppel agreement five times, because I didn’t understand what language they were speaking in and I had to google it to really understand. I just want to make it easy for the folks who to listen to google that later if they need to.

Ashley:
I feel like that was me because I feel like you’ve asked me to spell it before. Unless we just asked you to spell it because of [inaudible 00:30:17].

Tony:
Yeah, just because that first situation, I know I was so bad at trying to understand how to spell it. Phonetically, I couldn’t figure it out.

Ashley:
At one of your events, Tony, you should do that as a competition, the first person to spell estoppel correctly.

Tony:
That’s not a bad idea. Andrew, go ahead, continue with the stabilization piece on the properties.

Andrew:
Once you actually acquire the property, you know have to stabilizing and when it comes to stabilizing, you just want to make sure you develop the stabilization plans weeks in advance, like what’s your plan to get this to stabilization? And one of the key important pieces of information is ensuring tenants a month to month. As we all know, leases go with the building. If the whole building’s on year leases, you’re not going to be able to stabilize that or get the rents closer to market until a year occurs. So set up your stabilization plan and then develop a welcome letter with how they’re going to pay rent and I like to ensure all of that is automated. I use apartments.com and all of that just automatically deduct from the account on the first of the month, who they reached out for maintenance requests.
Then I also like to set up a meeting with them, really to establish rapport, explain the rules of the property as well as have a conversation about where rents are and where they need to be. I usually utilize the binder strategy to get the rents closer to market. I know most real estate investors kick out inherited tenants, but a majority of my portfolios is actually inherited tenants. I think 11 of my 18 units are inherited tenants and most of them are close to market. The way I really did that was I utilized the binder strategy on day one. I went to them and I explained, “This is market, this is what you pay, what do you think’s fair?” It’s usually human nature to choose the 50% mark. So a lot of times they’ll choose right in the 50% mark and then at that point I explain to them … first of all, I asked them, “Is there anything I can fix in the building that would make your experience better?”
Usually it’s something small like change the thermostat or change my faucet, which I’m always happy to do because that really establishes the rapport up front and that really gets their buy-in for the rent increase. Then I also kind of address what I’m going to do to improve the property and then I go about it, I go about my stabilization plan, I improve the property, come around six months, eight months later I have another binder strategy conversation with them and I get them closer to market. At that point, maybe they’re $100, they’re $200 below market, I’m okay with that, because the turning unit literally costs 10 to $15,000. How long is it going to take me to get a return on investment on $100, $150 difference? It’s literally going to take me seven, eight, nine years.
Before I kind of get tenants, I kind of do that calculation in my head, what makes sense and it’s worked extremely well. As I mentioned, a lot of my portfolio are inherited tenants. Everybody pays me on time, everybody treats my unit right and it’s been a great experience.

Tony:
Ashley, I’m curious because, Andrew, we’ve interviewed a lot of people and I don’t think I’ve ever heard anyone phrase it the way that you just did so articulately is that sometimes keeping a tenant below market rents is better than turning that property and increasing the rents. Ashley, for most of your properties, do you go along that same line of thinking where you’d rather keep that tenant in place even if they’re paying a little bit less in market rent?

Ashley:
Yeah, especially when first purchasing the property because there’s so many upfront cost when purchasing the property. You have your closing cost and you just … maybe there’s some maintenance or repairs that need to be upfront just like your attorney fees, all these things. My property management company, for every new property you add on, there’s an upfront fee, things like that to do. So keeping them in and also the property management company charges a leasing fee, which is one month’s rent, so the turnover of that. You have to pay them to go and change the locks, things like that. I’ve definitely kept people in properties. I usually like to give them an option where maybe I increase their rent a little bit or they have the option to vacate the property. But I’ve rented units out trying to get the max dollar and I ended up getting bad tenants because it wasn’t at market rent so the pool to pick from was very slim and it was people who thought they could afford but actually couldn’t afford and then ended up being non-paying tenants.
That’s a big thing that I’ve realized over the years that sometimes it’s actually better to be a little bit below market so you have a larger pool of tenants to select from. But I’ve heard it other ways too, that the more you push the price, then maybe you’re only going to get the people that can afford it and you’ll get a higher quality tenant. For me, I’m just not investing in high end areas, I guess, where I have that kind of white collar, W2, high income earners to select from.

Andrew:
I mean, just to your point, a lot of my units I’ll allow cats and dogs because if you remove cats and dog, you’re literally removing 50% of your tenant pool. Then as you both know, a lot of these large multis will have pests, will have rats. Right. I actually love cats because if there’s a cat in the unit, you’ll never see a mouse.

Ashley:
That’s true.

Andrew:
I welcome cats. I literally don’t even charge a cat fee.

Tony:
I was just going to say, Andrew, just to clarify because you mentioned the binder method, but can you just in one sentence just to define what that is because you talked about it in passing, but just for folks who aren’t familiar with that method, what exactly is the binder method by definition?

Andrew:
Yeah, absolutely. More or less it’s just you’re having a conversation with a tenant and you’re really just showing them what market rent is, what do they pay, and then you just have a conversation with them on what they think is fair. Like I said, most of the time it’s human nature to choose the 50% mark because even if it’s like … say it’s 2000 is market, they’re paying a thousand, even if they choose 1500, they still know they’re getting a deal. If they have rented an apartment right down the road, the same exact apartment, it’s going to cost them $2,000. A lot of times they will actually implement the rent increase on themselves rather than you having to implement it, which is really key because you want them to buy into it.
If you force it on them, there’s going to be less buy-in and a higher likelihood of them having to be evicted or you having tenant issues. That’s the binder strategy in a nutshell more or less and I like to use it twice. I’ll use it initially and then I like to use it later on once I approve the property, address some of the issues that the tenant have and show them that I am working to make the property better. At that point, the second binder go around tends to be pretty successful as well.

Ashley:
Andrew, do you want to take us through one of your deals for us? Do you have one in mind that you want to kind of go through the numbers?

Andrew:
Totally, totally. I closed on this three family with a partner back in June, 2022 in Worcester, Massachusetts. We got the three family for $500,000. It was relatively turnkey, it was in great shape. The real value add there was rents were far below market. Our strategy there was two of the tenants were on Section Eight month to month and then one of the tenant was just a normal tenant. So we gave them the welcome letter and we met with them and our strategy there was kind of contact Section Eight, request a rent increase and get it closer to market, which was a successful strategy. We actually ended up doing that in two or three months. The last unit on day one when we met them, they said, “I just lost my job, I can’t afford rent.”
But we knew that the second unit was the first unit’s mother, so rather than kicking out, we’re like, “Oh, why don’t you move in with your mother?” So she ended up moving with her mother. We got that vacant as in one month and we rented that for 2150. We rented the Section Eight, brought the second unit up to around 1950, and then the third unit was a one bed, we got around 1250. So the pity on the building is around $2,500 and the current revenue, after about three months of stabilizing the property breaks out to around $5,300. It was pretty good. Honestly, it was way easier than we expected. Just being empathetic and kind to the first floor tenant really cemented ourselves to be able to really stabilize that building in a quick manner. We were expecting to go through an eviction process.

Ashley:
What do you think that property is worth now now that you’ve increased the rent? You purchased for 500,000, what would you say the value is on it now?

Andrew:
That’s a three family, and as we know with residential, those are based off the sales comps approach. In this sideways or downward market, the value is probably pretty close to where he bought it, maybe 10, 20K higher, but it’s a fantastic cash flowing property. But to that point, that’s really why I’m focusing on five plus unit buildings moving forward because I really want to focus on the buildings that have value based on the income approach so I can get rewarded for the great stabilization that I do. If I stabilize these three families, if it produced 3,000 in revenue and then suddenly it produces 5,000 in revenue, the building is really not going to sell for more a lot of times. But these five plus unit buildings, if I increase the revenue from $4,000 to $8,000, I have the ability to … it’s based off the cap rate, it’s based on the income. I could refinance a lot of my money out, I could sell the building, I could 10-31 it. It gives me a lot more escape strategies and it really rewards me for my stabilization ability.

Ashley:
So really it’s how the appraisal is done is what you’re looking for is to using the sales-based approach or the income-based approach and when the appraiser is going to use that on the five plus units, you’re seeing it more of an advantage to you because you’re doing that forced appreciation by increasing the income. Even though there may be properties around you that are still selling for $500,000, but you’ve increased your income on that property, which is going to you … they’re not going to look at those comps for … compare it to that, it’s going to be the income on the property to show its value.

Andrew:
Yeah, and it just allows me to keep up the velocity of my money. I have more ability to take money out of that deal and put that into my next deal, which is that’s essentially how I’ve built my portfolio is utilizing the equity of all my properties. I mean, how long would it take you to save 20%, 25% on a $500,000 property? It would take most people three, four, five years. The only way most real estate investors scale is utilizing their equity and that’s kind of how I scaled and I’m planning on scaling in the future.

Ashley:
Andrew, how did you find your partner on this deal?

Andrew:
I found my partner in my meetup. I actually host a local meetup in Worcester, Massachusetts, and I met them there and I saw they were doing big things. They owned about the same amount of units I had and we just kind of connected. Then one day he just asked me, he’s like, “I see this great deal in the MLS, you want to walk it?” I’m like, “Sure.” So I actually walked the property. It was relatively turnkey, which honestly that’s kind of what I like to purchase is I like to purchase properties that maybe have minor cosmetic upgrades, maybe one CapEx item, but more or less they don’t require a lot of money to stabilize. It’s more on the management side. Rents are way below market. That’s kind of how I focus on stabilizing property and this kind of fit right into that bucket. I walked the property, it looked great, I looked at him and he looked at me like, “Let’s do this,” and split 50 50 and it was a great deal.

Ashley:
That’s awesome. Thank you for sharing that.

Tony:
I also just want to comment, Andrew, on the meetup. I am a huge proponent of new investors leveraging meetups both as attendees but especially as hosts as a way to build their network and their local community. When you made this decision to start the meetup, did you have a big online presence or this massive network of real estate investors you already knew? If not, how did you go about promoting that meetup and getting people to actually show up?

Andrew:
I like to say this was completely intentional, but just like everything in life, it was just a random act. I was actually looking for a mentor was kind of my real goal. I was looking for a mentor. I ran across a local mentor in Lowell, Massachusetts, which is about 45 minutes away from my city, and during one of his meetups he mentioned, “I’m trying to start a meetup in Worcester, but I’m trying to look for a venue. Can anybody help me out?” I really took that to heart and that weekend I went to about six or seven different venues. I took video, I took pictures, I sent it to him and he was like, “Wow, I’ve been asking somebody to do this for eight months. Nobody did it. Do you want to be our first guest at this meetup that I’m starting?” I’m like, “Yeah, absolutely, I’ll be happy to.”
So I ended up being the first guest and after that he asked me to actually host it and that’s kind of how I first started with that mentor. But I mean, more or less it was just trying to provide value to other people and in doing so, value was provided back to me.

Tony:
Ashley, me and you talk all the time about how new investors can find mentors by providing value first. Andrew, what you just described is the ultimate perfect example of a way to provide value to someone that you hope will in term provide value to you in the form of mentoring of some shape or form. The fact that this person was standing up in the room saying, “Man, I’m really stuck. I can’t find a place to do this thing,” and you spent an entire weekend doing it for him and then sent him all the information that he needed, those are the kind of things that endear someone to you to make them want to take time under their busy schedule to say, “Andrew just did this for me. Law of reciprocity says I want to pour back into Andrew now.” Man, dude, you’re such a hustler. I love that story.

Andrew:
Thanks. I mean, be honest with you, I didn’t even want to be a real estate agent. I literally just became a real estate agent to provide value to my mentor, to provide value in the form of commissions and then I could … I’m essentially his employee, so under the auspices of being one of his real estate agents, I can give them a call and ask him any question I want. To your point, when you’re looking for a mentor, don’t think what they can give you. Think what you can give them and provide value to them, and once you provide value, then ask for something in return. But as we all know, these very successful people don’t have a lot of time and if you’re not going to give them any direction, you’re not going to provide value, a lot of times they don’t have incentive other than the goodness of their heart to pour into you.

Tony:
One other thing I wanted to touch on was just the lending piece. What are some things that maybe new investors might not know about the lending side of getting into commercial real estate?

Andrew:
The amazing thing about commercial real estate is it combines finance. If you partner with two or three people, it combines all of your finances together to show you have the DTI to get a loan on that particular property. A lot of investors like myself, after you buy a certain amount of properties and you don’t have two years of rental income, your debt to income ratio catches up with you and it’s really hard to get loans. But a nice hurdle, a nice cheat code to get over that is to partner with people on deals and they combine all your finances together in one package and then that really gets you over that DTI hump. That’s another reason why I kind of went from small residential to commercial so I could really utilize partners to get over that DTI hump for sure.

Ashley:
Andrew, thank you for going through that deal with us. I think there was some great little tidbits in there that everyone can learn from and congratulations on that cash flow. That’s awesome. It sounds like a pretty cool deal just for doing a couple months of increasing the rent.
I want to take us to our next segment. This is the Rookie Request Line. You guys can give us a call at 1-888-5-R-O-O-K-I-E and leave us a voicemail. We may play your question on the show. Today’s question is from Tom in South Carolina. “Hey, guys, love the show. Just trying to get in the process of getting a HELOC on my primary residence. I am just wondering what kind of paperwork you should have already to bring to a local bank if that’s the route you’re trying to take and what you should be bringing prepared to talk about. Love to hear you guys’ input. Thank you.” So basically, Andrew, he wants to know what kind of paperwork, what should he have prepared to bring to the bank to get that line of credit and should he have knowledge of anything else that he should be prepared to talk about?

Andrew:
Well, before you actually apply for the HELOC, make sure you’re actually getting the best HELOC possible. The way I recommend that is kind of identifying all banks in a 50-mile radius and call every single one, see what HELOCs they have available, see what’s best for you because not all HELOCs are created equal. From my first HELOC, I had a ton of equity. There’s HELOCs that offer you better terms at 80 to 85% equity. If you have a lot of equity, those are really good options. If you don’t have a lot of equity, they’re actually HELOCs that go up to a 100%, but those have worse terms. It depends on your needs and how much equity you have on what the right HELOC is for you.
Regarding HELOC, that’s just a normal mortgage. More or less it’s a lien, so it’s everything A normal mortgage would need, your tax returns, your work information, things of that nature. A lot of times the great thing about HELOCs is they’re interest only, and people don’t really realize this, but when you’re actually going for loans, they take into account the minimum payment when calculating your debt to income ratio. So HELOCs, you can actually borrow a lot against it and it doesn’t actually detriment you too much when you go to lenders because they only take into account the interest on that money and not the principle plus interest, if that makes sense.

Ashley:
Can you touch as to how many lines of credit have you done, Andrew?

Andrew:
I did one line of credit on my one bedroom condo in Boston. I bought it in 2015 for 222. It appreciated to around 400,000. So come around COVID, I opened up a 200K line of credit. I utilized that to buy, I think, my next seven deals. My first house hack, I used my line of credit for my down payment on that. I think I did that with an FHA of 3.5% down. I used about 40K from there. Then once I was in that property and I was actually ready to house hack to my next property, I always recommend this before you move from one house hack to another house hack, open up a line of credit on that house hack. They have 100% HELOCs up to three to four families.
I actually opened up a $75,000 line of credit on my first house hack before I moved to my second house hack. I’m actually planning on opening up a line of credit on my second house hack before I move. It’s really important to have the ability to access that equity and as many of us, we got amazing first lien loans. Most of my loans are like 2% to 4%. I want to keep that loan. That is a huge asset, but I want to utilize that equity and I do that via lines of credit. Yes, lines of credit have higher interest rates, maybe seven, eight and a half now, but your overall blended rate across both of those loans, your first lien and your second lien is by far lower than going to the refinance process.

Ashley:
That’s a great point, that blended rate is looking at it in that scenario as to taking the two rates and bringing the average together and comparing it as to if you were to go refinance, pay the closing cost, pay the higher interest rate than that 2% or 3% that you currently have on your mortgage.

Andrew:
When it comes to growing and scaling, I really think of it like a hedge fund more or less. So when I’m actually opening up these line of credits and I’m borrowing at a 7% or an 8%, I just have to ensure whatever I’m moving those money into, it provides a higher return. I’m arbitraging one return from one fund into another fund and that’s really how I’ve been able to scale. Ever since I’ve gotten into real estate, it took me around 10 years to accumulate $250,000 in net worth. In a period of two years, I three Xed that through utilizing arbitrage and more or less thinking like a hedge fund. Like how can I borrow one pot of money and arbitrage that into a higher return? It’s been a very effective strategy for me, and I highly recommend people do that as long as they’re doing it in a safe way.
You have a decent amount of reserves. Maybe you have a 401K to fall back on. Maybe your parents will support you if you get in rough times, but you have to have a backup plan if you are planning to use leverage. Otherwise, it’s not a smart decision.

Ashley:
That right there is a great disclaimer, and I’m glad you said that because I think people get excited about the, “I don’t have to have any money to invest in real estate. I can just leverage this property to move to this property and go and refinance and do lines of credit and all these things.” But you’re right, you still have to have those reserves in place and tapping into other assets such as your 401k, you’re able to draw a loan from your 401k if you absolutely needed to. Or if somebody has a brokerage account, they could take a line of credit against their brokerage account, things like that. So knowing what your actual liquidity is in this situation, if things do take a turn for the worst is where can you pull money from to get yourself out of that bad situation I think is very important.

Andrew:
To really scale and grow in real estate, you really have to utilize the compound effect. For all the property that I own, for all the rental income that I get, I literally have taken, I think, about $200 from my properties in cash flow. I literally just let that recycle and compound, and I really live off my W2 income. I recommend people all the time, in regards to real estate, your W2 is really an asset, right? Because it gives you a flexibility to go after the best loan products. As we all know, in real estate, debt is your highest line item, that’s your most expensive line item. If you can get the best deal in debt, you can actually make deals work that don’t work for other people.

Tony:
Andrew, I’m so glad you touched on recycling that profit back into the business because most people, I think they take money out of the business too soon. For us in our business, we had, I think, 14 properties on Airbnb before we took a single penny out of the business and every other dollar was going back into the business to help fund the next deal, to renovate our existing properties, to make improvements, have better experiences. That decision to hold off made all the difference because now there was a snowball that started to form. Even now, we’re at almost 30 properties on Airbnb, we still take a relatively small salary from all of those properties, and the majority is going back into now mostly people. We’re been hiring a lot of people to help put the systems and processes in place to be able to continue to scale this business.
So if you’re listening and your goal is to build a large portfolio, I think it is prudent to try and reinvest as much as you can back into the business early on so that you can do a little bit better down the road. Andrew, I want to take us to our next segment here, which is the Rookie Exam. These are the three most important questions you will ever be asked in your life. Andrew, are you ready for these three questions?

Andrew:
Let’s go.

Tony:
All right. Question number one, what’s one actionable thing rookies should do after listening to your episode?

Andrew:
Take action. Take action. My biggest advice to new investors is start shooting out offers, cast a wide net. My advice to you for that particular strategy would be look at properties with 40 plus days on market, start writing up offers 50% of list price and just shoot them off, shoot them off. You’re literally casting out a wide net and you’re seeing who’s willing to bite, who’s willing to negotiate, who’s motivated to sell. Once you have somebody on that fishing line, you got to pull them in slowly. Maybe they’ll veer off, maybe they’ll get rid of the line, but at that point you really figure out who the motivated sellers are and you really can go after the properties that make sense.
That would be my advice, is really focus on those tasks that are going to get you to your goal. Does that mean get a line of credit? Does that mean underwrite deals? Does that mean walk properties? Does that mean talk with lenders? Does that mean reach out to brokers? These are the things that get you to your goals. If you’re just posting on social media and you have no deals done, stop it. Focus on the activities that will get you your first deal.

Ashley:
That’s a great point, because even I’ve done this before when I’ve started different businesses or little side hustles, is I get caught up in my logo design, I need to order my business card. It’s like you don’t need any of that to get started.

Andrew:
Get that first customer. That’s the key. Get that first customer.

Ashley:
What is one tool, software app or system in your business that you use?

Andrew:
I love apartments.com. Whenever I take ownership of a property, I ensure all of my tenants sign up for apartment.com and they’re set up an autopay. First of all, rent collection. When you own 18 units, you got to chase people down for checks. That’s an absolute time killer. When I set up people on apartments.com, I literally just sign on on the first of the month, I see if their payment’s processing or not. If it isn’t, I just shoot off quick texts. A lot of times it’s just tech issues. They fix it, ba-da bing, ba-da boom, I get paid. My rent collection, I don’t know, it probably takes me, I don’t know, 20 minutes a month. But if I didn’t have that software in place, if I was collecting checks, if I was collecting cash, that would literally take hours upon hours every month. It’s all about time efficiency and utilizing strategies to really automate your management of your properties.

Tony:
All right, Andrew, last question. Where do you plan on being in five years?

Andrew:
Well, first of all, one of my ultimate goals is to help 100 people reach financial independence. If I did that, if I gave to the world that, I feel like I’d given more to the world than what I took and I could really die happy. That’s one of my ultimate goals is really to mentor and help others achieve that financial independence. My next goal, and along those lines, I would love to start syndicating large multi-family. That’s definitely down the path for me for sure. Then lastly, I want to travel. I want to visit 100 countries. I want to see the world. I want to experience everything this world has to offer. That’s kind of what I envision my life to be like in five years.

Tony:
Sounds like an amazing five-year plan, and I don’t think I’ve heard one so … I don’t know, energizing since we’ve been on the podcast, man. So I love that, Andrew.

Andrew:
Thank you.

Tony:
Let me finish up by giving a shout-out to this week Rookie Rockstar. This week’s rockstar is Homer Olivarez, and Homer says, “Today we closed on our first deal. We’re officially landlords. This is the first of many to come, but we officially took our first step towards financial freedom. We can’t think Bigger Pockets and everyone in the forums enough for all the help. This will be our first house hack and we are also first time home buyers.” Now here’s the cool part about Homer’s story. He says, “We came into the closing table with zero money and are actually getting a check written to us for about $580. When they say you can buy a property with low and no money down, we were able to experience it firsthand.” So Homer, congratulations to you on that amazing first deal.

Andrew:
That’s just a testament to everything Bigger Pockets does good community. You guys really make a difference in people’s lives and you probably help millions of people reach financial dependence. You literally work for one of the best organizations I know of and I’m internally grateful to you as well. I would not be where I’m at without you guys, so thank you.

Ashley:
Well, we feel incredibly grateful that we’re the ones that get to sit here and get to interact with the guests because I mean, it’s the guests that give the real value. We just use our curiosity to pick and probe more as to, “How are you doing that?,” because we wanted to that. But thank you, we appreciate that, Andrew. Can you let everyone know where they can reach out to you, find out some more information about you?

Andrew:
Absolutely. You can follow me on Instagram and investorfreed.com. You can definitely reach out to me on LinkedIn or Facebook at Andrew Freed. I’m also an agent in Worcester, Massachusetts. I focus on investment property, multi-family, so feel free to reach out.

Ashley:
Well, thank you guys so much for listening to this week’s episode. Andrew, you brought tremendous value to our listeners and we really appreciated having you on. If you guys haven’t already, make sure you have joined the Real Estate Rookie Facebook group and are subscribed to our YouTube channel, Real Estate Rookie. Please leave us a review on your favorite podcast platform and tell us what you’re doing in your real estate investing career because we love to read them on the podcast. I’m Ashley @wealthfromrentals and he’s Tony @tonyjrobinson on Instagram, and we’ll see you guys next time.