Ashley:
This is Real Estate Rookie, episode 356.

Tony:
Today, we have the data deli himself, Dave Meyer. You guys might know Dave. He is the host of the BiggerPockets on the Market podcast. He’s the VP of Digita at Bigger Pockets, and just an all around really awesome and intelligent guy, and I love talking to him. Today, he’s got a new book out. It’s called Start with Strategy. We’re going to talk a little bit about how strategies should be played into your journey as a rookie real estate investor. Guys, this is probably one of the most overlooked things I’ve seen rookies do, so make sure to pay attention in all of today’s episode, because you’re going to get some good stuff.

Ashley:
As always, I’m Ashley Kehr, joined by my co-host, Tony J. Robinson.

Tony:
You’re listening 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.

Ashley:
Today, we’re going to learn that investing is more than just running analysis. Today, we’ll get into three of the five things you need to evaluate when you are starting in real estate, or maybe you need to even re-evaluate to hone in your real estate strategy. So, this will include personal values, transactional income plan, and a resource audit. Have you guys done any of those before? We may even have a little bit of time to get into some market predictions from our favorite data wrangler to see what he has in sight for 2024.
Dave, welcome back to the show, and Happy New Year.

Dave:
Thank you, Ashley, Tony. Happy New Year. It’s great to be here.

Ashley:
Is this maybe your third time on the show with us? Maybe even more. I think you’re one of the few that has been on several times with us.

Dave:
Yeah, I think I have. It’s been a long time though. I feel like it’s been a year or two since we’ve done this, so I’m glad to be back and talking about this topic, which I think is particularly useful for rookies. So, I think this will be a great discussion.

Ashley:
Dave, part of the reason you are here today is because you have a new book out too. So before we get any further, I’d love to just hear a little bit about your book.

Dave:
The book is called Start with Strategy. The basic idea is to help real estate investors develop a business plan for the real estate investing business. We call it investing, but as everyone who’s getting into this knows real estate is really entrepreneurship. Just like any business person, anyone who’s starting a company, you need to have a strategy and a plan that you’re going to follow not just for your first year, but figure out what goals you’re aiming for in the long run, and work backwards to decide how you’re going to get there. The book is a framework. It’s super interactive, but also provides a lot of background context on how every individual, no matter what experience level you have, can come up with a strategy that’s personalized to you and your preferences, goals and all that.

Ashley:
Dave, do you have maybe a story that you can share with us as to a reason as to maybe why you decided to write this book, or why it’s important to start with strategy? Why did you even think of this?

Dave:
I think we all experience this in real estate, where you get overwhelmed by how many amazing choices there are. There are so many good ways to invest, and it’s hard to pick. I think I see this all the time, both I’ve experienced and see with other investors, that you don’t really know what to do first because you don’t necessarily know where you want to end up. I have experienced this quite a lot in my life. When I was right out of college, I wanted to do so many different things with my life. I wanted to travel and be a backpacker. I thought about going into finance. I wanted to be a ski bum, and I was really struggling to figure out what to do next, because I didn’t really have an idea of what I wanted my life to be in the long run.
Actually, I went out to breakfast with my grandfather, and I was explaining him my young angst about not knowing what I wanted to do with my life. He asked me a really simple question. He was like, “Well, where do you want to end up?” I was like, “I don’t know. I’m just trying to figure out what to do tomorrow. I don’t know. I don’t want to think about a year from now or 10 years from now.” He is like, “Well, you’ve actually quoted this thing from Alice in Wonderland,” but he basically said, “If you don’t know where you want to go, then your next step doesn’t even matter, because you don’t have a destination in mind, so what route you take is irrelevant.”
I’ve thought about that a lot over the last few years, and really worked on figuring out what my long-term goals are, and then working backwards into the strategies specifically in real estate that work for me. So, I asked him, “What should I do next?” He pulled out some old Alice in Wonderland quote, and basically said… I’m going to butcher this, but paraphrasing it, basically said, “If you don’t know where you want to end up in your life, it doesn’t really matter what you do next, because any path will lead you to somewhere. Unless you have a destination in mind, it’s really irrelevant.” I’ve thought about that a lot throughout my life, and it’s guided a lot in my decisions, but I think it’s true in real estate as well where people want to figure out, “Do you want to flip houses? Do you want to be a rental property investor? Do you want to quit your job?”
When really all of those answers, you can’t really come up with answers to them unless you have an idea of where you want to be at the end of your investing career. That’s what inspired me to write this book was helping people figure out what they want, and then plan backwards.

Tony:
Dave, I think you bring up a really good point, and I want to comment on that. First, I just want to clarify the quote, because I think it’s such a good quote. I actually looked it up right now. Alice says… She’s talking to the Cheshire cat. She says, “Would you please tell me which way I should go from here?” The cat says, “Well, that depends on where you want to go.” Alice says, “I don’t really care where I go.” The cat says, “Then it doesn’t matter which way you go.”

Dave:
Thank you. Thank you. My grandfather would be very proud. Happy that you actually got the quote.

Tony:
I think it’s such an important thing, Dave, for rookies to understand, because you are inundated with all these different options when you first start. There’s different asset classes. There’s single family. There’s small multifamily. There’s large multifamily. There’s storage parks. There’s everything else you can think of. Then within those, you can flip. You can wholesale. You can hold long-term. You can do turnkey. There are so many different strategies, and I think what most people get caught up on is that they want to try a little bit of everything, which maybe isn’t bad to begin with just to see which makes the most sense for you. But I think after a time, you’ve really got to dig deep into one strategy to get good at that thing.
The goal is that it does align with your long-term goals of where it is you want to be. I always tell people, “When you’re investing in real estate, you’ve got to look at what your motivations are. Is it cashflow? Is it tax benefits? Is it appreciation? Is it you want to just have a vacation home, and someone subsidizes the cost for?” All those things tie into what strategy makes the most sense for you. So I guess for you, Dave, after you had that conversation with your grandfather, what was the realization you had about what does Dave want out of real estate investing?

Dave:
It took me a while, and ultimately, when I was maybe 22 at the time, I felt very conflicted about two different paths in life. Part of me really just wanted to be a heated nest. I’d like to ski, and I just like to hang out with my friends, so I wanted to do that. The other part of me has a lot of frankly just financial anxiety, and so I really wanted to make a lot of money to have more stable income. I felt very torn, and ultimately just decided that my goal for my career in life was to find a way to do both. I really was dead set on having fun, having great relationships with my friends and family, but still making money and not making a trade-off, because it’s easy to make a trade-off.
If you want to make a lot of money, you can work a lot of hours, or you can just have fun, but that comes with financial consequences. So, I set out to find a way to do this, and then I discovered real estate investing, and I was like, “This is the way that I’m going to do it. It’s a perfect way to strike the balance between living a life that you actually enjoy, and providing yourself and your family with financial security.” That’s what got me into real estate in the first place.

Ashley:
You just mentioned having some anxiety. How does that actually play into making that decision?

Dave:
I mean, I think I just ultimately… Realistically, my upbringing, my parents were fine financially for a while, and then it all exploded and melted down very quickly for my family, and put us in a difficult situation for a couple of years. That just stuck with me, and I always had this feeling that your career could go away. My dad lost his job for a while, and I just didn’t want to be in that position. It always sort of stuck with me, and I was always hustling and trying to make side businesses, and working two jobs in college and after school even. That was great, because it made me feel better about my financial situation, but I also was in my early 20s, and wanted to do stuff.
So, I felt like I really needed to find a better balance, and not just only focus on this financial anxiety that I have, and find a healthier way to deal with it than overworking.

Ashley:
We have to go into break here, but real quick, where do we actually start with this? What is the starting point? You had mentioned you need to know where your destination is. What would you call that starting piece? If we’re on the game board of we’re playing some Alice in Wonderland board game here, and we’re trying to pick, I’m envisioning Candy Land in my head. Which way do we want to go? What is that first step, that goal, that destination, the big Candy Land castle? What do you call that, and how should everybody be looking at that as their first step?
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Okay, welcome back from our short break. Dave is going to get into your first step. We had mentioned playing the game Candy Land. You’re trying to figure out your path. There’s the Candy Land castle at the end. What is that? What is the game piece? What is the first thing that you need to decide and build out and plan before you can actually build out your whole strategy? Dave, what would you call that piece?

Dave:
For me, the whole place, the destination you’re trying to achieve is what I call a vision. I try and re-craft this every single year, try and make sure that I’m still pointing in the right direction, but there are subcomponents of vision. You have financial goals. You might have what your job is going to be, some professional goals, but for me, the first thing I always reevaluate is what I call my personal values. I know this doesn’t necessarily sound like real estate investing, but I think it’s super important to figure out why you’re investing, and why you’re doing this in the first place, and what you actually value in your life.
This is common in businesses, right? We don’t talk about it as much in real estate investing, but every Fortune 500 company has values. They have a mission statement, and so I encourage people to do that for themselves. It’s something I do for myself by creating or tweaking my own personal values each year to make sure that everything I do in real estate or really in my whole professional life is aligned with the life that I want to live.

Tony:
Ash, I know for me, I probably haven’t done a good enough job of creating a value statement, I think, for my real estate business. Have you put any thought into that, Ash?

Ashley:
I actually had a consulting company that I was working with last year that helped me with doing a little bit of planning and writing out my mission statement and the vision for the company, because we were hiring for a couple of virtual assistants. It was the thing that I procrastinated on the most.

Dave:
It’s really hard.

Ashley:
Out of all of the stuff that I had to get to them, that was the thing. They’re like, “You know what? We’re going to send you this form. Just fill out this form, and we’ll help you do that, and even fill them.” They pieced it all together by doing a really good job of asking me certain questions that could help them understand, “Okay, we think this is what you would want your mission statement to be.” Then I would read it, and tweak it, and change it a little bit, but that helped me. But as far as sitting down and drawing a blank board, or Googling other companies’ core mission statements, their values, what are their five pillars? Always been very difficult for me to do that, because I’m just like, “Just sit down and do the work.”
I don’t care, whatever company culture, things like that, but I know that it is really important, and things that you should do. I definitely learned a lot last year doing it with that consultant.

Tony:
I guess, Dave, what’s your guidance for that rookie investor who’s maybe never taken the time to sit down and think about values? How does one even come up with that list? Is it 50 values? Is it five values? Just walk us through maybe some tactical secs and actually putting that together.

Dave:
Sure. Well, first, I’ll say I definitely identify with this. I came across this idea of personal values from an executive coach that I worked with for a few years, and she was like, “You have to do these values.” I was like, “Man, I’ve got so many other problems to deal with. This is the last thing I’m going to do.” Finally, after maybe six months of nagging me, I sat down and did it. It’s honestly changed my life maybe more than any other professional thing I’ve done. I know that sounds strange if you’ve never done the exercise, but the way my coach, Lauren, had put it to me was, “Your values are the things that you can’t live without in your life.”
So, she encouraged me to come up with no more than five personal values, and you really… It’s hard. You really have to think about it, but she gave me a list of basically words. It was 50 words. This is in the book. We have a template for it, but circle any words that resonate with you that are important to you. Then you basically go through this pruning process of narrowing down what things are really important to you. It’s hard, because everyone wants to… Most people aspire to have a lot of these things. They’re words like honesty, integrity, trust, adventure. Those all sound pretty good. But as we all know, as human beings, you have to make trade-offs.
You can’t be everything, and so you need to narrow down what you want. Ultimately, I was able to get it down to five things that are super important to me. I use that, yes, in real estate investing all the time, and I’ll explain that in a minute, but I just use it in my job. I use it in my friendships and how I choose to spend my time every day. I can just share them with you. For me, the five are growth, just like personal growth, adventure, freedom, mental and physical health, and meaningful relationships. I look back at those all the time. If I think about, “Do I want to write another book?” I have to decide like, “Is that going to impede on any of my values, or is it going to support my values?”
If I decide, “Do I want to flip a house,” is that working in alignment with the things that matter to me in my life or not? It really just has helped me improve my decision-making skills a lot, and that applies to real estate for sure.

Tony:
Dave, I appreciate you sharing that. One question that it makes me think of is do you always feel that those values are an equilibrium where they’re always perfectly balanced, or do you find yourself going through seasons where maybe you prioritize one value over the other? Because that’s something that I’ve found as I’ve progressed in life and in entrepreneurship and in business is that sometimes you have these seasons where you can really focus in on one piece of your life, and there’s other seasons where you got to shift that focus towards something else. So, is your goal to always keep those perfectly balanced or just to be within range, but sometimes you got to shift resources and priorities?

Dave:
That’s a great question. I wish it was easy to do all of them, and keep them all in balance, but I think it’s unrealistic. I think the key is to… If you’re going to live outside of some of your values, that it’s a conscious decision. Sometimes I’ll prioritize work, and that means I’ll have less adventures, or maybe I’ll spend a little bit less time with my friends for a couple of months, but that’s a decision I’m making to pursue another one of my values, or something else that’s really important to me. I’m not just letting this happen to me, and just making decisions willy-nilly based on whatever opportunity comes up. Because like you said, it’s impossible, but I think it’s important to know, “Okay, I’m going to take a step back from this,” but knowing that to live the life you want, you have to get back closer to equilibrium at some point.

Ashley:
Dave, you had also mentioned that one of those beliefs that were important to you was personal relationships. So, how does this impact your investing, your personal core values per se?

Dave:
The way it mostly impacts me is that I actually pretty significantly limit the amount of time I’m willing to spend investing in real estate. I know it sounds silly for someone who does this for a living, but I work full time, and so my real estate investing portfolio is above and beyond my job at BiggerPockets. I find that if I were flipping houses, or doing BRRRRs, or really trying to grow my portfolio as quickly as humanly possible, I would run out of time for the meaningful relationships that I want to prioritize. So, actually, we can talk about this later, but for me, my goal is 20 hours a month on my portfolio or less on average. That, for me, gives me enough time to pursue the meaningful relationships that I have outside of real estate.
Now for some people, that could mean being close with the people you work with. I live in Europe, and so I almost exclusively invest passively. I don’t have a lot of opportunity to build meaningful relationships with the people I invest in real estate with. So, I need to limit and compartmentalize my real estate investing so that I can find those meaningful relationships elsewhere in my life.

Tony:
All right, guys. Dave, so much good information that you’ve shared already as expected, but coming up, we’re going to cover how to audit your personal resources. But before we go there, Dave, can you tell me what exactly is a transactional income plan, and how does that add to this vision that you’ve talked about so far?

Dave:
Transactional income is just a source of making money that’s outside of investing. So, a job is basically transactional income, but there are types of real estate that are transactional as well, like flipping a house, or being a real estate agent for an example. I think one of the things that I struggled with early in my career, and I see a lot of rookies struggle with is trying to figure out what they’re going to do and if they should make real estate investing a full-time job. To me, it’s super important in your vision to figure out whether or not you want to make real estate a full-time job, or it’s going to be something you do on the side, because that will really help you narrow down the options that you have as a real estate investor to just the ones that make sense.
Some are easy, whether you work full-time or not. Others really only make sense for people who are full-time into real estate. I think making that distinction is very important and helpful for setting your strategy.

Tony:
Dave, one thing that makes me think about, so many people in our rookie audience are focused on walking away from their day jobs, and understandably so, but I think some people almost get too excited about that idea sometimes. They lose sight of how important that transactional income is to their goals of building their real estate portfolio. It makes me think. Someone shared this analogy with me before, but have you guys heard the term escape velocity? It’s like you have to travel at a certain speed to break Earth’s gravitational pool, and if you don’t travel fast enough, you’ll get to a certain height, and then earth is just going to pull you back down.
It’s a similar concept for real estate investing. If you step away from your W-II job too soon, you haven’t yet reached the speed to reach escape velocity. You’re just going to pull back down to reality. I’ve seen people, I’ve met people who have maybe pulled the trigger too soon, and then they have to go back out into the workforce again, because they weren’t quite ready to step aside on their own. So, there’s a lot of benefit to keeping your day job. I think the goal is to get to a point where you’ve 1.5x or 2X what you need to survive on before you pull that trigger.

Ashley:
Even then if you have hit that 2X, that 3X, whatever that amount is if you’re able to do both things too, and you enjoy your job, and you enjoy being a passive investor, then that’s something you can do too. I think there is that big misconception of, “I haven’t reached financial freedom until I’ve quit my job.” Well, no, that’s not true. You can still make it as a real estate investor, and still carry on a W-II. That’s even more impressive if you’re able to balance out both than just, “You know what? I have to quit my job, because my properties are so overwhelming. I need to manage them, and take care of them.”
So yeah, I agree. I think that’s a common misconception is that you need to build your real estate, and then quit your job, and then you’re free, and everything’s wonderful and great. But in the U.S., one thing is health insurance. That’s actually an incredible difficulty once you become an entrepreneur, and you don’t have that anymore. So, it’s not always just the pay. It’s the benefits too.

Dave:
I think you both hit on really important topics here. I think it’s really just comes down to what you want out of life, because I think most people say, “Oh, I want to quit, so I can work on real estate full time.” That might make sense for you, but you have to recognize in 90% of those cases, you’re just trading one job for another job. So, you’re trading your W-II job for working at real estate full time. I am making presumption, but both of you work in real estate full time. I’m sure it still feels like you have a job, right? So, it’s really up to what provides you… To me, it’s just two questions. What provides you with more resources, and what provides you with the most fulfillment?
Because if you have a job that you don’t like, but it gives you a lot of money to invest, or a lot of time to invest, or skills that you can bring to your portfolio, you may want to stay in your job, or even if you just really like your job, and you’re fulfilled by it, that’s a trade-off that you might be willing to take. So for me, I only recommend people quit their job and go into real estate full time if it will move them up on one of those spectrums. Is it going to improve the amount of money you’re going to make, or the time that you have to invest, or is it going to make you feel more personally fulfilled? Then you might want to consider it, but don’t just do it, because people on Instagram are doing it, and make it seem like that’s the ultimate goal of real estate.

Tony:
Last thing I’ll say about the personal income piece is that what I’ve found, what I’ve seen from other folks is that the fastest way to grow your real estate portfolio, unless you’re doing creative finance, or you’ve got capital partners, but if you want to use your own money from your own W-II job is to grow the amount of money you make in your day job. Oftentimes, the fastest way to do that is to leave to another company. I know for myself, I got, I don’t know, like a 45% pay increase by going from one company to the next. It’s crazy to think that someone who’s never seen you work before is willing to pay you 45% more than a company you’ve been at for years, but that’s typically the case.
There was this study. I can’t remember. I wish I knew the exact numbers, but it looked at people who job hopped every 24 to 36 months versus someone who stayed at the same job. They lined those people up after 15 years, and the people who job hopped made exponentially more than the people who stayed at the same company. So if you’re looking for a way to shovel, then focus on maybe looking at a new position with a new company.

Ashley:
Didn’t they say that’s the problem with the-

Dave:
Yeah. Can we tell that to BiggerPockets? It’s like they always reward the new customers. They’re like, “Come to Verizon, and we’ll give you a new cell phone.” You’re like, “I’ve been here for years. Give me the new cell phone. I’ve been coming here forever.” It’s like the same idea with jobs. They need to incentivize people to leave something that’s comfortable a lot of the time. So, it makes sense. I think the other thing in addition to making more money too is if you want to grow your portfolio, but you’re working 70 hours a week, can you find a job that maybe you make even the same amount of money but you work 40 hours a week? That opens up a whole lot of time where you can be looking for deals, or networking, or doing all this other stuff that could help grow your portfolio.
I just think thinking critically about your job and how it supports your investing is really important. It’s not just how quickly can I leave it? It’s, “Is this helping me get to ultimately where I want to go” For some people, the answer might be, “Yes, you should quit your job.” If your vision is, “Hey, I want to leave my job in five years,” you can make that happen sometimes. Some people can make that happen, but if you know that, “Hey, I want to keep working for 20 more years,” that’s going to open up so many more real estate investing strategies to you. You can take on more risk. You can think more long-term. More markets are going to be available to you. So, knowing where you stand on that spectrum will be super helpful.

Ashley:
We’re going to take a short break real quick, and then we’re going to be back and just follow up talking about a resource audit and what you can do today. Then we’re going to go into a little bit of 2024 predictions.
Welcome back to the show. Dave, the third thing that we wanted to finish up here and talk about is doing a resource audit. So, what is this that something somebody can implement today? Maybe is this something you’re going to continuously do throughout the year or maybe once a year?

Dave:
Resource audit is basically looking at the various resources that you have today to contribute to your portfolio. This is really just helpful in figuring out what you should do next. As we were talking about earlier about, money or capital is obviously a very important resource for real estate investors. It is a capital intensive business, and so knowing how much capital you have is super important, but one of the things I personally love about real estate investing is that you can get by or get started. Even if you don’t have capital, there are other resources like time and skills that you can contribute to a portfolio to help you get started. As long as you have one of those three things, you’re able to build a portfolio.
Just a small example, when I got started, I had no money. I had no skills, but I had a lot of time, and so I used that time to go find deals. I used it to self-manage a property that I basically only earn sweat equity in and that was able to get me started. So, even if you’re new and thinking, “I want to get into real estate in 2024, but I don’t have a lot of money,” figure out what you do have, because there are things that you can contribute. If you have time or skill, like I said, you can find ways to use those resources to get into real estate, but for me, the first step is just figuring out what you got.
You got time. You got skills. You got money. If you don’t have any of them, it’s going to be hard, but if you have at least one of those three, there is a path forward for you.

Tony:
Ash and I talk about this in our book, Real Estate Partnerships, where every real estate deal, it’s like a puzzle, and certain people have certain puzzle pieces, and they’re missing other puzzle pieces. So if you have time, if you have the ability to analyze deals, maybe you’re lacking capital, or maybe you’re lacking the ability to get approved for a mortgage, go find someone else that can plug those pieces in for you, and then the two of you work together to take that deal down. If the inverse is true, where maybe you have the capital, you have the ability to get the debt, but you’re a physician who works 90 hours a week or something crazy like that, and you know you don’t have the time, go find some young college kid who just graduated, or something like that who’s got an abundance of time that can do that legwork for you.
So, it’s all about finding that puzzle piece that matches with what it is you’re missing as a real estate investor.

Dave:
That’s such a good analogy. It’s so true, and it changes over time. If you start without capital, that’s okay. You just hustle and learn some skills, use your time. For most investors, I find that that’s how almost everyone I know started is they didn’t have a lot of money, but they just hustled their way into it. Then over time, as you have more capital, usually, you buy other people’s time, or you buy their skillset to help you grow. So, that’s why I think it’s useful to do this once a year. Just be like, “All right, now I have less time than I used to have, but I have more capital. So, given that reality, I need to change my portfolio in X, Y, Z ways.” So, it just helps you figure out what to do next.

Ashley:
Dave, how do you evaluate those skills for yourself? When you’re looking at yourself, what skillsets do I have? Is there a way to do an evaluation on yourself?

Tony:
Just to preface that, I think it’s such an important question, Ash, because a lot of rookies, they’re not self-aware as to what value they bring. So, I think this is going to be super practical advice, Dave.

Dave:
Oh, good. I think this is… Again, I agree with you Tony. This is one of the things that most people overlook, because there are a lot of skills, and I think… Basically, in the shortest example, I have a list of skills. I have one in the book, but you can really look on BiggerPockets. I’m sure there’s other places of lists of skills that you need. I think the two important things to think about are, one, how good am I at it today? Two, how hard would it be for me to learn this skill? I think that’s the one that people really overlook, because it’s easy to start and be like, “I’m bad at all of these, and I’m going to try and learn all of them.”
That is where so many people go wrong. I went deeply wrong here. I was like, “I’m going to be super handy. I’m going to start building staircases, and drew in drywall.” I’m so bad at it. I am just awful. There’s no reason I should spend any time doing that, and so I go through these lists, and just say to myself just as an example, finding deals, that’s something I’m okay at. I’m not great at it. I know people who work full-time in real estate who are much better at that than I am. I have a network, so I’m not going to probably do that much time like learning how to do outreach to off-market deals. I’m going to rely on other people to do that.
For deal analysis, that’s something I’m good at, and that’s something I’m going to contribute to my portfolio. When I talk about finance and tax, that’s actually something I have professional experience with, but I hate it, so I’m going to pay someone to do it. I don’t want to learn how to do it. I think it’s just really important for people to be realistic about, one, there’s a lot of things you need to do that need to get done, let me say. You don’t need to do them, but that need to get done for a real estate portfolio to be successful. You do not have to nor should you do all of those things.
So, I think it’s really important to just focus on the ones that you like and that come easily to you, and to outsource the other things. It will save you a lot of time in the long run. Honestly, it might seem like it’ll save you money to try and do everything yourself, but take it from thousands of investors who have tried to do everything themselves. It does not save you money.

Ashley:
I can definitely relate to that too. Dave, I do have a question though as far as when you’re picking your skillset and the things you actually are going to do for your first property, your first business, whatever it may be, is there a preference you have, or a way to differentiate choosing between something you want to do but maybe know nothing about, and have to take the time to learn or something that you do know but you don’t want to do it? You had mentioned finance and taxes. You know that stuff. You could do it but you hate it, but maybe compared to doing drywall, whatever, you’re actually super passionate about it.
You want to learn it. It would be fun to get your hands dirty, but it’s going to take you longer. You’re not going to do as good of a job of doing it as someone. So, is there any kind of balance where maybe you should do something you hate doing, because you do know it? I guess, just what are your thoughts on that as far as putting a value add to what your skillset is?

Dave:
That’s a great question. I think it comes down to what other resources you have, because if you don’t have a lot of capital or time, and you’re really relying on your skillset to grow your portfolio, you may have to contribute something you’re not good at. I can imagine or know people who are contractors who don’t really like it, but they want to get into real estate. It might be a good way for you to get in to use your skills as a contractor at the beginning while you build up those other resources. So, I think there are things like that. I also think there are certain skills that every real estate investor just needs to have at least a baseline of.
To me, I call it portfolio strategy, but that’s just what we’re talking about here is, one, just understanding where you want to be and how real estate can get you there, I think, is super important. Deal analysis, everyone needs to be able to do at least a basic level of deal analysis. You can’t really outsource that. I do think networking is also another skill that people overlook that you can’t outsource. You can’t have someone make relationships on your behalf. So, I think there’s certain things like whether you like it or not, you probably should learn those skills. Whereas things like taxes or property management, those things are easily outsourced.
I guess that’s another way you could look at it is taxes, property managers, lawyers. Those are all things, contractors. You can hire those people easily. Could you hire someone easily to analyze single family rental properties for you? Probably not. I think that it’s probably just worth learning for yourself. So, I would think about it that way.

Ashley:
That’s great advice. The one thing that I would add to it too is your own time and the value on your time. If you’re considering,,, you say you have your W-two. You have a side hustle, maybe a remodeling business, so you could go and you could stop remodeling for other clients. You could go and you could work on the house that you’re flipping yourself. Well, what is actually the time value trade-off on that? As a contractor doing luxury remodels, are you making $100 per an hour? But if you go into your own flip, and you do the math, and after three months of flipping this house, you only ended up making $50 an hour, so would it been more cost-effective to actually just hire somebody else out to do it, and then you go and maintain doing your flips, and then you ended up netting the same amount, $50 or whatever it may be, because they were able to work all day, and then ended up selling the property in a month instead of the three months, because you had to do it at night?
Things like that too, I think, are important to take into consideration as to your time value. That even goes back to quitting your job. Are you going to be working more hours but actually making less being a real estate investor, because you’re spending more time on it than what you would if you would actually go to a W-2, and you could hire out?

Tony:
A lot of times, Ash, I think, does come down to the numbers and what makes more sense as you lay everything out. I think the mistake that a lot of rookies make is that they just go with their gut, and they don’t really back it up with a deeper analysis here. One thing I just wanted to comment on, Dave, you mentioned being able to outsource the networking. I actually read in this book, and it was called… I think it was called Book Yourself Solid. It was an old marketing book that I read years ago, but he actually did have this process for outsourcing some of his networking, where he had someone on his team that every month, they would just send out emails to people in his database or whatever it was. It’d be something simple like, “Hey, Dave, see you got a birthday coming up this month. Hope all is well.”
Then when they replied, he would reply himself, but he had his team going through and send an emails through his inbox for these different little things, and he would just reply when those came in. So, super ninja trick and probably beyond what our rookies are working on right now, but it could be an easy way to build that out. All right, what I really want to talk to you about, Dave, and what I’m most excited to hear your thoughts on are your predictions for this year. Obviously, 2023 was a crazy year for real estate. We came off this high that we saw in 2021 and early 2022 where interest rates peaked to their highest in decades.
I know I lost money on a flip, I have friends who lost money on flips. We have commercial real estate is going through this crazy cycle. What are you seeing for 2024? I guess first what I’ll ask you is where do you think interest rates are going to go? Are they going to hold steady? Are they going to go up? Are they going to come down?

Dave:
Oh boy, my favorite topic. Let me just tell you, I actually did very well in interest rate predictions in 2023, and very poorly in 2022. So, let’s take that with a grain of salt just so everyone knows. My general feeling is that interest rates are not going to move as much as people think. They’re in the high sixes as of this recording. I’m going to give you a broad guess and say I think they will end with the first number still being a six at the end of this year is my guess. I’m hopeful that they might come down into the low sixes, but I just want to explain that a little bit. We hit about a high of 8% average 30-year fixed mortgage rate in October of 2023.
They’ve come down a little bit. As bond yields have fallen, the Fed has signaled that they’re going to cut rates next year, and that’s encouraging. All of that is very encouraging. The thing is the market, mortgage companies and bond investors who really set mortgage rates are already pricing those things in. So, a lot of the declines that we are expecting or that the Fed is signaling are now priced into mortgage rates, and so we’ve already experienced some of the benefit of what is planning to happen next year. If the Fed stays on course and does exactly what they said they’re going to do, which let’s talk about their track record over the last three years, never happens. So if they do that somehow, then we will probably have mortgage rates right where they are right now, but the Fed…
This signaling is exactly that. They’re not saying they’re going to do three. They’re very data reliant, and so they’re going to change things as they need to, and as inflation and the labor market change. My guess is they will cut rates a little bit, but we just don’t know. So, I think it’s a little early to say that rates are going to get down as the fives. Hopefully they do, but I think that’s a little early to say. My guess is that they’re going to be more stubbornly high than, I think, a lot of people are hoping for.

Ashley:
So, we should buy a house right now, or we shouldn’t?

Tony:
That’s what I was going to hit on too, Ash, because I think what a lot of people are doing right now is that they’re waiting to buy that first real estate investment, because they want to see rates come down to whatever rate. But my thought is that once rates dip, it’s going to be a bloodbath, because you’re going to have so many people that are sitting on the sidelines jumping back into the market, and we could get to a point where people are going 10K, 100K over asking again like it was a few years ago. You can always refinance your rate, but you can’t refinance your purchase price. I can’t go back to the bank, and say, “Hey, I know I bought this for 300,000, but can I actually rebuy this today for 250,” and the bank’s like, “Okay cool.”
So, Dave, what’s your advice to the rookies? Should we be waiting for rates to fall? Should we be pulling the trigger today? What’s your thoughts on that?

Dave:
I generally just don’t believe in timing the market. That’s just like I study this full time, and I don’t know what’s going to happen. I just want to make that very clear. So, I believe more in just buying when you have the time and the financial resources to do it, because at least if you’re like me and investing on a 10 or 20-year time horizon, then you’re probably going to be fine whenever you do it. I do think, Tony, there is some wisdom to what you’re saying that prices… I think there is a good chance that if we rates fall, we’re going to see a very significant increase in competition. I think that is one of the more likely outcomes for 2024.
Not necessarily will happen, but I think there is a good chance that happens. So, buying now when rates are they have come down is wise. I also just think when people talk about “rates coming down,” I find that people have wildly different expectations of what that means. I’ll just say this, I think if we ever see mortgage rates in the three percents in our lifetime again, that I would be surprised, and something will have gone terribly wrong with the economy. I just don’t think that’s going to happen. So, could they come down to the fives? Yes, but realistically, they’re going to come down slowly. So, you have to think about what’s your strike price? Okay, they’re at six and three quarters now. You’re waiting for six a quarter. You’re waiting for five and a half. You could be waiting two years for that.
During that time, who knows what could happen to the housing market. So, I just think ultimately, rates, they do matter. It is important, but they’re on, I would say, a positive trajectory now where we’re probably not going to get back up above maybe in the low sevens. So, if you find deals that make sense, you should go for them. Then if rates happen to go down, you can refinance. I think the two things I always say to people is, one, don’t count on rates to go down. If your deal doesn’t make sense, and you’re like, “I’m going to buy it, and then when rates go down in six months, I’ll refinance. Then my deal will pencil.”
I don’t generally recommend that, because no one knows if rates are going to go down. It’s something that’s outside of our control. The other thing is if a deal makes sense with high rates, then it’s going to make even more sense in low rates. So if you can find a deal right now, you might as well buy it, and then it can only go up from there.

Ashley:
I think where some people got into trouble and could get into dribble is where they’re over leveraging themselves, and then they’re at the point where they have to refinance somehow, or they have to put financing on the property, and when they ran their numbers at the property having a 4% interest rate, and now all of a sudden they have to actually get an 8% interest rate. That has caused a lot of trouble the last couple of years, especially now if somebody went and they were rehabbing a property for a year, and now they’re trying to go and refinance, and the rate is very different from when they bought it. In New York state, here, it can take you three months to actually close on a property, and that’s normal window of time.
So, those three months, if you were buying a property the end of 2021, and then didn’t close until 2022, even right then was starting to make a difference, then you have to rehab your property, and then the rate increased. So, the best thing you can do is make sure you have multiple exit strategies on a property that you’re not over leveraging yourself. You have some kind of backup plan if you are going and needing to refinance. Like Dave mentioned, he’s long term buy and hold most of his investments, where he’s not worried about having to go and refinance and get a rate. If the deal works, the numbers pencil, the day that he’s buying it, what it’s at and what his interest rate is, great. That’s awesome.
You could always go and refinance for that lower rate, but you’re not at risk of having to be told, “Sorry, you’re going to have to pay this higher interest rate.” There’s also five-year arm loans or even seven-year arm loans where your mortgage is fixed for a certain amount of years and then it becomes adjustable. That’s where other people will get into trouble too is that they got this lower interest rate for the first five years, and then when those five years are up, it’s going to adjust. So, we actually did that on one property, where it’s a seven-year arm, and for seven years, it’s like 5.12%, which is a great rate. We got this a year ago, great rate at that time. In seven years, that interest rate could go up to 13%. It has a max of 13%, and then I think a floor of 6%.
That would make just a tremendous difference in someone’s mortgage payment if all of a sudden they haven’t planned for that year seven, and they have to go and refinance, or it goes to that adjustable rate. But even if you’re going to refinance, you’re most likely going to be that high rate too, so having some way to get private money or have the cash to pay that off, things like that. So, you want to look at as to, “Should I invest now because of the interest rate, or shouldn’t I?” It’s based upon what your strategy is, and that’s all basis of today’s episode is start with strategy. So if you’re holding onto that property, who cares?
Like Tony said, you’re going to buy it for cheaper right now with the higher interest rate so that when you go and sell it in 20 years, because you’re ready to go move to the beach, and sell everything, you’re going to have paid less for it than somebody who waited and wanted that lower interest rate, but yet they had purchased their property for more.

Dave:
I think, Ashley, you made a lot of great points. One thing I wanted to second is that people focus a lot on what rates are and if they’re up or down. I think there’s benefits to both, right? It’s more affordable when rates are low. There’s less competition when rates are high. So if you’re a real estate investor, there’s pros and cons of each. For me, the thing I root for, I obviously have no control over things, but if I had my druthers, I’d root for just stability or predictability. I think we’re getting to that point where rates are going to be more stable. That is just what you need to make a decision, because as you said, Ashley, that makes it so that if a deal pencils, and you have to still wait two or three months to close, you have a reasonably high confidence that you’re not going to be looking at a totally different monthly payment than you were a couple of months ago.
Unfortunately for the last two years, year and a half, it’s been really volatile and hard to make decisions. So, even though I’m not sure which way rates are going to go, if they’re going to trend up a little bit, trend lower, I think they’re going to be a lot more stable, and the band of that rates is going to narrow. So, that just makes it easier for people to make decisions. To me, that’s one of the most important things in getting back to a healthy housing market, more than rates going down to 5% or 4%. I think, predictability really matters a lot in the psychology of home sellers and home buyers.

Ashley:
Well, Dave, thank you so much for such incredible insight. We really appreciate having you on the show. Can you let everyone know where they can find your new book, Start with strategy?

Dave:
Absolutely. Go to biggerpockets.com/strategybook. That is where you can find the book, and it comes with all sorts of bonuses. If you actually order it now, but it’s still pre-order, you get a free planner. So, it’s like a journal that goes along with the book, where you can actually develop your own investing strategy and business plan. If you buy that, if you go to biggerpockets.com/strategybook now, you can get that completely for free, which is a great deal. If you use the code strategy 356, you’ll also get 10% off.

Ashley:
Oh, we always love a good discount here on the Rookie podcast. You can use that 10% towards your first investment property.

Tony:
All right, guys, before we wrap here, I just want to give a quick shout out to someone that loves to say five star review on Apple podcast. This person says, “Best real estate investing podcast of all time.” They say, “I listen to this show every chance I get. I can’t wait for the new episodes to air. I always find value in some way, shape, or form. I’m fairly new to real estate investing, and I love when you guys talk about partnerships. You guys always seem to have something I need to hear on a regular basis. I love the podcast. Keep on giving back. I can’t wait to be on your show one day.”
So guys, if you haven’t yet, please do leave us an honest rating review on whatever platform you’re listening to. We’d love to read your review here on the show for the rest of the listeners as well. The user who left that podcast review was Nick@rei216. Nick, we appreciate you.

Ashley:
Thank you so much, Nick. Dave, thank you so much. Another great podcast to listen to is On the Market podcast, so make sure you go check out Dave and his crew as they talk about current and up-to-date information that you need to know as a real estate investor. Today’s episode was amazing, and we learned all about starting with strategy. We went over three of the five things that you need to start. The first thing was personal values. Second was transactional income plan and how to present that, and then also completing a resource audit on yourself.
Well, I hope you guys are an amazing new year so far. I’m Ashley, and he is Tony, and we’ll see you guys in the next episode.

Dave:
Hi everyone. Welcome to On the Market. I’m your host, Dave Meyer. Joined today by Henry Washington, Kathy Fecky and James Daynerd. It’s good to see you all. First time we’re all back together after the new year. Hope you all had a wonderful break. Kathy, did you do anything fun?

Kathy:
Oh, well, I hosted 20 people for four days, so.

Dave:
Wow.

Kathy:
Sure. It was fun.

Dave:
That sounds very ambitious. Well, James, I know you’re in Australia. You’re looking very tan. Glad to see you.

James:
I am not happy to be back. I could have stayed over there in Australia, but I am happy to get on with 2024.

Dave:
And Henry Washington. Henry, did you do anything fun over the break?

Henry:
I did. We actually took the kids to Pensacola, Florida. Every year my dad goes out there and rents a place and then my sisters and her kids fly in and we bring our family and so we all hung out for the new year and had a good time. My sister has four boys and she’s pregnant with her fifth child and I have two girls and I learned that girls and boys are different.

Kathy:
Yes, they are.

Henry:
That energy is impressive.

Dave:
So maybe you’re happy to be back.

Henry:
Yes, it was chaotic in the best way, but it was fun to watch.

Kathy:
You got to watch your breakables for sure.

Dave:
I’m glad you all got to spend some time with your families. And now we’re back to kick off the year with one of our headline shows to sort of cover some of the news that has gone on over the last couple of weeks while people were off for New Year’s. Today we’re talking about four very important and interesting news stories. We’re going to talk about recent labor market data. We’ll talk about the negative sentiment that seems to be pervasive across the American economy, corporations building towns for their employees and the pros and cons of buying a house in 2024. So let’s get this kicked off with our discussion of labor growth. If you haven’t heard, the US economy added 216,000 jobs in December and the unemployment rate held steady at 3.7%. Just for the record, 3.7% is very low. And through 2023, the United States recorded a net gain of nearly 2.7 million jobs.
Now those gains came from different parts of the economy, but mostly came from government, which was 52,000 jobs, healthcare, which is 38,000, social assistance, 31,000, and I was actually surprised to see construction up 17,000 and all of this with a backdrop of wage growth, which is actually a bit of a change. We’ve seen wage growth now up 4.1%, which is now higher than the rate of inflation, just a little bit, but that’s a change from how it’s been over the last couple of years. So Kathy, let’s start with you. What do you make of this labor market report?

Kathy:
It’s more of the same. We’ve had robust job growth all year that has just shocked so many economists and there’s lots of reasons for that. I think one theory, and I agree with this theory, is that we’re just still recovering from COVID. So a lot of the robust job growth was a recapture of the jobs that were lost, reaction to the reopening and as we move forward, we’re going to be, I think, coming just back to normal. So that’s the way I read this. There’s other factors of course, but wage growth being one, that when you’ve got people making more money, they tend to spend and consumers have been spending and that fuels the economy and that creates more jobs, right?

Dave:
One of the theories I’ve heard about this surprisingly strong labor market is this concept of labor hoarding, which is basically that companies are more hesitant to lay people off during this economic cycle than they have in previous because of the really tight labor market that happened in 2021, 2022 when no one could hire. Henry, I know you have people on your team, you work with a lot of contractors, do you sort of see this going on in the economy?

Henry:
I’m seeing the opposite. I’m getting calls from people looking for work. I’m getting hit up all the time by contractors and subcontractors. They want more work, more volume. I was just literally driving down the freeway yesterday going to breakfast, this was Sunday morning and I passed four different construction company trucks out in their work vehicles, so I assume they’re going to job sites on a Sunday. So I was just thinking there’s so much work out there for people. The ones who want the work and are good at marketing are getting the work and the ones who aren’t good at marketing are having to call and try to find people to send them jobs. So I’m kind of seeing the opposite and anytime that I post for a position or an opening or something, we’re inundated with applicants and people wanting to do work right now. And so I’m seeing that it’s like people are hungry for work and there’s work to be had.

Dave:
Well, that’s probably a sign of a good economy. I hope that’s good. People are hiring people taking that job. That’s pretty good. I know the labor market is important for the macroeconomic situation, but for real estate investors, they might not be super familiar about how this might impact them. James, do you follow this closely and how does it impact the way you make your investments?

James:
Yeah, no, I mean the labor market and pricing behind that, it has everything to do with real estate investing in general. I mean so much of what we do is based on the cost of what you need to do to improve that asset, whether it’s a fix and flip rental property or it could even be a large multifamily, it’s about the costs that go in. Those core costs will affect your numbers so much. And to kind of touch on that labor hoarding, I do feel like that is going on in a lot of the construction companies right now because what we’re seeing is we’re seeing, just like Henry said, that people are actually requesting more bid work right now and it has fallen, their workload has fallen. But that’s what the larger companies that have staffed up heavily over the last twenty-four months to keep up with the demand that was going.
Our smaller contractors who don’t need as much work and volume, they are actually are being a lot more stubborn on their pricing. They have not budged as much and they’re still kind of increasing it because they don’t need the work and just because there’s a low amount of work out there, they’re still able to get those jobs. But our bigger companies have been wheeling and dealing much more. Those are our big siting companies, our clearing and grading companies, they have a lot more bodies on staff. These people get paid better too and they want to keep everybody working so they can get through this little blip in the market is what they’re seeing.
And we’ve seen pricing, especially on a new construction, we had one of our clearing and grading contractors, he called us and said, “Hey look, I will do this last portion of this job for free,” because he had so much profit in there, “if you get me lined up with another job right away.” Because he just wants to keep it going because none of them want to lay those people off because hard to find when the market heats back up. And so I do think that labor hoarding is happening, but it’s working to our benefit in a lot of different things with the bigger trades that we have to hire.

Kathy:
To Henry’s point about applicants, our Director of Finance is retiring after 20 years and we just thought, boy, how are we going to replace her? She’s been so awesome. So we put out the job description and we got 350 job applicants for this position and we were really surprised and we were a little bit under, I would say what would be the going rate. And several of those people said we were willing to take less money because we love that you’re a remote company. So that was interesting. I think people really got used to being able to live wherever they want and they’re looking for companies who can provide that.

Henry:
People got comfortable working with no pants, I mean.

Dave:
Are you wearing pants right now, Henry?

Henry:
I mean let’s just not scroll down, guys.

Dave:
Let’s keep the cameras where they are everyone. All right, well super interesting. I think another thing just for investors to remember is that while the labor market doesn’t directly touch housing prices or things like that, it is a good sign for rents, rent growths, vacancy, occupancy rates, those kinds of things. When people remain employed, that is a good sign for income for real estate investors. So we just covered our first story, which is all about the labor market and how surprisingly strong it is and how that impacts investors. We’re going to take a quick break, but after that we’re going to hear about why Americans, despite some robust data, are just so unhappy about the economy.
Welcome back everyone. Our next story is about Americans being displeased with the economy. Now there are a lot of macroeconomic indicators that we talk about all the time on the show that are going well. GDP is up. We just talked about a strong labor market, but Americans have low sentiment and they’re kind of dissatisfied due to high prices. Inflation over the last couple of years has really eroded spending power, housing super expensive, all that kind of stuff is going on. And so I’m curious, what are some of your theories about why the headline numbers look good but people aren’t feeling it? Henry, let’s start with you.

Henry:
I think you really kind of said it. I think we’re in an age of information overload. I think we’re moving away from print news now and it’s all on demand news and everybody’s fighting for the eyeballs, the attention and the clicks and the way to get that is you have to have an attention grabbing headline or story. And so a lot of the stories that you’re seeing are really click baiting and around like, “Hey, the economy’s terrible, housing prices are through the roof and affordability is going crazy and no one can afford to buy a house.” And that’s going to play a role when you have the media painting pictures, sometimes that things are extremely negative.
And I’m not saying that affordability isn’t a problem, and I’m not saying that people aren’t struggling in this economy, there are, but there are people struggling in every economy. And I think if you just want to put a headline out about, “Hey, the economy’s doing pretty all right and let me show you why it’s not as bad as people think it is.” That story’s not going to do as well. And so I think people just really have to educate themselves fully on the issues and dive a little deeper than the headlines. And I think people will start to see that things aren’t as doom and gloom as maybe a news headline might lead you to believe.

Dave:
I read about this Tik Tok trend where people are calling it the silent depression and we can get into that, but the headline was the people were saying that this is the worst economy in US history and I think this is what you get when younger people who are not trained in this perhaps or even look at history, make economic projections. So I wouldn’t follow that particular one, but I think is there something to this? Because the GDP, you look at labor market that sort of looks at the whole pie, right? The pie is growing, but I think there might be something to the fact that not everyone feels the way that that pie is growing equally. Kathy, do you have any thoughts on that and how that might be playing into this?

Kathy:
Yeah, absolutely. My first thought when I just saw the headline and hadn’t even read the article was that it’s social media. That’s the big difference is that everybody has a voice now and before, how could you be heard if you had complaints? Who would you go complain to? Your employer? So everybody has a voice and everybody, not everybody, but yeah, everybody’s an expert now and they think they know everything without a degree in that topic. So not that you need a degree, but maybe some experience would be helpful too, or knowledge or history. But I would say one of the biggest things is that in 1949 there was the fairness doctrine and that was basically a law that required, I’ll read it, that broadcasters cover controversial issues of public importance, that they present contrasting viewpoints and that there’s equal time for both viewpoints, adequate airtime, and that is how, when I had my degree in broadcasting and I worked at Fox, I worked at CNBC and CNN and ABC 7, and when I worked at Fox, there was no slant.
In fact, most of the people I worked with were pretty liberal because it was in California and if we did not show both sides and clearly, boy you’d get chastised and probably fired. Now in the eighties, the fairness doctrine was abolished, 1987 by the FCC, and in 2011 it was just completely removed from everything. So add to it social media and other outlets, other ways for people to get news where it would be really hard to enforce this thing anyway, right? It would be super hard to say you didn’t tweet both sides, so it’s just outdated, but that’s the big difference. There’s always been unhappy people. Now though those unhappy people can see what everybody else has and they get jealous and frustrated. And so it’s just, again, social media, technology I believe is really what it comes down to.

Dave:
That’s a great point about this, you can see how other people are living, and we should also mention that most people on Instagram overinflate their lifestyle and make it look like they’re doing all these glamorous things all the time that maybe they are not. But I also, I’m just curious what you guys think, we are real estate investors, we own assets, we have largely benefited from a lot of the economic growth over the last couple of years, but I can see how young people who don’t own assets, in a lot of ways did miss out on a lot of the wealth creation over the last couple of years. And I think there’s something that is something to be frustrated about.

Kathy:
Yeah, but if you really go back and look at history, home prices doubled almost every decade. It’s not new. And in the eighties it was actually more expensive. It was harder to buy than today, less affordable. So it’s not new, it’s just that people could see more and are frustrated. But even back in the eighties, there were ways to get into the industry if you really want to study it and find out and talk to, listen to BiggerPockets episodes and see how people with nothing suddenly have something. It just takes effort, knowledge, and education, right?

Henry:
Yeah, I would have to say I definitely don’t agree with that, Dave, because if you think about I love seeing the memes that’s like, “Man, I should have bought a house in 2008, but I was too busy playing in the playground.”

Dave:
Exactly.

Henry:
But when you think about that, yes, the young people might’ve missed the opportunity to buy in 2009 when everything was down, but they didn’t miss 2020 when the whole stock market was down and had an opportunity to buy, and they’re not missing right now when it’s a great opportunity to buy real estate and there’s more access to information to educate them on how to make these smart investments. In 2008, you couldn’t just hop on the internet and find an expert in something you wanted to learn about and take action on that information. It wasn’t that easy. You had to go to the library and know the Dewey Decimal system in order to get information.

Dave:
Nope.

Henry:
And so I would argue that it’s easier now for them to take action and there is still plenty of opportunity.

Dave:
That’s a great point. I understand some of the frustration with the economy, but I hope people don’t get completely tune it out. To your point, that’s what’s really dangerous if you just write it off as hopeless, then it really will be unfortunate and you could get left behind. Well, if you’re all wondering where James is, he, as usual is having technical problems, so we’re going to carry on.

Kathy:
Poor James.

Dave:
Henry, Kathy and I for these questions that we’re going to move on to our third headline, which is that corporations in the US are bringing back company towns. This article from the Future Party talks about how Google, Meta, Disney, NBC and several of Elon Musk’s companies are developing “company towns” where people can live and play just a stone’s throw from where they work. These projects are designed to alleviate the high prices and lack of inventory in the housing market. What do you guys think this means? Do you think this is a trend? Do you think this is smart? Henry, what do you think?

Henry:
Is it a trend? I guess you can call it a trend. Is it going to put a dent in the housing problems that the country is facing? No, it’s not, but it’s happening because I am literally seeing it happen in my backyard. Walmart is building a new home office campus facility that’s going to house all of their buildings. It’s going to have housing and hotels and apartments, and so this is happening in more companies than just the ones that are mentioned there.
These companies are fighting for talent, they’re fighting for young talent because if you think about all of these companies, include Walmart in that list, it doesn’t matter what these companies sell. They’re all technology companies. They’re fighting for young technology talent and young technology talent, if you go look at what Google provides currently in terms of office facilities and YouTube, they have beautiful, all-inclusive facilities, state-of-the-art technology. And so I think a lot of it is these companies are all competing for that same young talent, and so if one is providing this thing, they’re all going to start providing those same amenities. So I think it’s less to do with housing and more to do with talent retention.

Kathy:
Yeah, I just want to say Elon, if you’re listening and I know you are, I would love to partner with you on this project. I think it’s incredibly cool. Listen, I have a 24-year-old. She’s living in Denver now in a building that is mostly young people. She loves it. When you get out of college and you’ve been living with young people for four years and it’s so fun and all of a sudden you go and you’re not, you’re in a suburb somewhere. I mean, it’s brilliant to build communities where people can live near work, have a community, social life and not have to commute so far. I love it.
Now, California has been trying to do, this is called the California Forever Project, and it’s in Solana County just north of San Francisco, and they’re trying to create this, but California ain’t the place you’re going to get it through. There is so much resistance in a place where housing is so expensive and you need more supply, they will stop you every step of the way. I know this because we’ve developed property in California and it’s so hard. The resistance is incredible from the very people who actually want cheaper housing. So will it happen in California? I don’t know. But maybe some of these other areas that are more open to development, it could happen and I think it is fabulous. I love it.

Dave:
All right. Well, I’m just going to disagree, Kathy. I have two things to say here. First of all, if we’re trying to create affordable housing in the US, I don’t think Meta employees and Google employees are the people who are struggling to buy houses right now. They’re probably the most highest paid people in the entire country. And the other thing is I just think this is a clear way to try and stop work from home. They’re like, “You can’t work from home, but if you want to hang out with your boss after work, you can do that as well.” I don’t know about you, but for me, I love my colleagues at BiggerPockets, but I like a little work-life separation and I don’t know if I want to go to work, leave and then just see everyone I just saw at the bar and at the school and at the restaurant and at the grocery store. So it’s not for me, but maybe people will like it.

Henry:
For the record, Amsterdam is more than a little work-life separation. You went all the separate.

Dave:
Yeah, I did a six-hour time difference in an ocean. That’s how I took advantage of myself.
I agree with you, Kathy. The general sentiment, when I was out of college, I lived in, it was a small building in Denver, but it happened to be just all young people and it was super fun. I totally agree with that, that idea of building community and having that community. I just don’t know if I would personally move to a place where that community was focused around my job.

Kathy:
Yeah, that’s a good point.

Dave:
James is back. He’s looking like a deer in headlights, so we are going to surprise him with the fourth headline and see what he has to say when we come back from this break.
All right, James is back. We’ve given him a chance to catch his breath. The fourth headline and our last of today’s show is the housing market, pros and cons of buying in 2024. This comes from GOBankingRates, and the key points here are that right now, at least, I don’t know if this applies to all of 2024, but let’s just say right now at this point in 2024, this article points to less competition, there’s slightly more homes on the market, baby boomers are starting to sell their homes. Those are the good parts. And the cons are that prices are still at record high and competition is still reasonably high, and people generally, as we talked about, have some economic concerns. So James, what do you make of that list of pros and cons? Is there anything else you would add to that?

James:
Well, I think the pros are that right now, as you’re looking for a home that you can almost kind of bank that your mortgage cost is going to get lower in the next 12 to 24 months if you buy now, and that is with the Fed’s signaling that they’re going to cut rates throughout 2024 and maybe into 2025. As long as you can make it budget today, that means you just have upside in a house. And that I think is the major pro.
The con right now is just the payments are expensive when you’re looking at a house. No matter what, it costs a lot more. I mean, I just closed on a new house for myself, what, three, four months ago, and the monthly payment is shocking, but I know when rates come down maybe 2%, my payment’s going to fall nearly 15% on what I’m going to be paying right now. And so as long as you can afford it today, then you can actually forecast down the road for the budget easier.
The benefit is there’s opportunities in certain areas. If you can buy something that’s a little bit dated, the pricing is substantially less. And I can say that because I just bought a home in Southern California, which I would never be able to buy 24 months ago without multiple offers. Now, this property did have multiple offers, but it had multiple low offers and it sold about 10, 15% off list. Most of the offers were about 20% off list. So there is opportunities as long as you can wait it out and you can go through that slow transition through life of buying a property below market, renovating, increasing it, and then getting that payment down when the rates start to fall.

Dave:
That’s a good point. Henry, what do you think?

Henry:
Boy, oh boy. James is absolutely right. The pros here, all right, and the additional pro is yes, if you buy now, 45 days ago, people were buying and they were hoping that rates come down at some point in the next year or two, but now it’s more, you don’t want to say guaranteed until it happens, but now there’s more certainty around the fact that that’s probably going to happen. And so you know that if you can get in now and afford it that you’re going to be able build wealth, you’re going to be able to bank some appreciation, right? It’s almost forced by the government. And so you have this very, very unique opportunity.
What I would argue on this list is it says the cons and that the cons are that housing prices are high and that con that housing prices are high, is a con based on history. But if we look at the future, housing prices are low because if and when those rates come down and the demand in the market for homes increases, then the values of those homes go up. And if the values go up, then the prices are higher than they are now. So I would argue that now you can get in and you can buy where you can get a home at a lower price point and with less competition and capture some equity when the rates drop.

Dave:
That’s a great point, Henry. And I’d also say that record, homes aren’t record high in every market. There are definitely markets where they are below all time highs. And that just adds to what Henry and James were just saying, is that in some markets, you actually can get a discount. Now we’re all talking about these things, playing devil’s advocate, it’s going to be hard for any of the four of us to disagree that it’s probably a good time to buy. So Kathy, I’ll ask you this, do you think the, let’s say the first quarter of 2024, do you think that’s going to be the best time to buy this year? Like right now?

Kathy:
Wow, I don’t know.

Dave:
Henry’s nodding vigorously while Kathy’s speaking, just so everyone knows.

Kathy:
I don’t care. I look at the numbers, right? I look at the numbers, it either works or it doesn’t work. But here’s the question I would ask you if you’re renting and looking to buy and feeling frustrated is how frustrating is it to pay rent every day to somebody else who is taking that money and paying off their mortgage? So which one do you want to be? Do you want to be the person who is paying for your living and in 30 years now you have no payment? Because all of that money has gone into your living. You’ve paid off your loan. And the same if you buy a property and a tenant is paying off your debt for you. So you just have to ask yourself that question, what’s better? In 30 years, do I want to still be renting? And what do you think rents are going to be in 10 years, 20 years? What do you think home prices will be in 10 or 20 years?
Now, you have to hold, remember, if you’re looking to buy a home and you think you’re going to be there a year or two, maybe not. But if you’re going to buy it and live there for a while and raise a family, or if you’re going to maybe live in it for a little while and then leave it, but rent it out, doesn’t matter. It doesn’t matter. Because I ask you to just go on FRED, just type in FRED, that’s the Federal Reserve of St. Louis, and type in existing home sales numbers and look what home sales or prices, I’m sorry, prices, not sales, existing home prices and see how they’ve gone up every decade, usually doubling.
And I’m talking about, I’ve been around a while you guys, decades, and I can tell you that the house that I grew up in was $50,000 in the San Francisco Bay area. The next year it was 100, the next decade was 200, it doubles. So why would that suddenly stop? Tell me why. I don’t know. I don’t have a good reason. I think the government isn’t going to stop printing money. So you can make the choice, keep paying rent or pay it to yourself and pay off your mortgage.

Dave:
All right. Well, thank you all so much. This is a very thoughtful and interesting conversation. Hopefully everyone learned something valuable that they can apply to their investing situation themselves. And if you did, please make sure before you go to leave us a five star review. It’s the beginning of the year. We want more reviews. I’m going to be honest about it, and we really appreciate it if you took a minute and went on either Spotify or Apple to give us an honest and hopefully good review if you like this show. On behalf of Kathy, Henry and the ghost of James who just disappeared from our recording studio again, we appreciate you listening and we’ll see you next time.

Speaker 5:
On The Market was created by me, Dave Meyer and Kalen Bennett. The show is produced by Kalen Bennett, with editing by Exodus Media. Copywriting is by Calico content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

Henry:
What’s going on everybody? Welcome to On the Market podcast. This is Henry Washington and I am here with Kathy Fettke and I am introducing the show because Kathy and I are here to celebrate Dave Meyer’s new book, Start With Strategy.

Kathy:
Yeah, whoo-hoo.

Dave:
Thank you. Thank you guys. I appreciate you doing this.

Kathy:
Well, I think Henry and I want to understand how you’re able to come out with another book after giving an amazing keynote that I know took a lot of preparation, and a year-end completion and forecast. I mean, how do you do it?

Dave:
Just deep-seated anxiety about being inferior and not accomplishing enough. I don’t know, if you want the real answer.

Kathy:
You can put those fears to rest, I think.

Dave:
Oh no, I’m just joking. I’m lucky that I really like what I do. I really enjoy being a real estate investor and in my job at BiggerPockets and on this show, I get to talk a lot about data and market research, but I’ve also been a real estate investor for more than 13 years, and in the course of those 13 years, I’ve learned a lot about how to develop a strategy that works for me and my particular lifestyle.
For those of you who don’t know, I live in Europe, so I have to adjust my portfolio accordingly. I’ve gone to grad school, I’ve done all sorts of different things throughout my career and I’ve had to build a portfolio that is conducive to the things that I want and my particular goals. And so I decided to write this new book, Start With Strategy, to help people no matter what your background is, figure out what real estate investing strategy is right for you and put together an action plan to go out there and achieve it.

Henry:
I think this is amazing, because as someone who was new not that long ago I was one of the people that asked, how do I get started and what should I do? Not realizing that there’s no one-answer-fits-all for someone starting out. It really is dependent on you, where you’re currently at, what your goals are, where you’re going to invest. And then now as someone who is asked that question by people, it’s really cool to be able to have a place to point them to and say, this is how you go figure that out, so kudos to you.

Kathy:
And for somebody like me who’s been investing since before either of you were born I think, no 25 years ago-

Dave:
I don’t think that’s true.

Kathy:
Well, let’s see, you were in preschool maybe, but even so strategies change and you can have a plan and then 2008 wipes it all out and you got to start over and make sure you’re on course. Again, so many people just have their nose to the grindstone and forget to look up and make sure they’re still on track, or they even know where they’re headed. Why am I doing this? So many times people just flip, flip, flip, flip, forget to invest some of that money.

Dave:
Well, thank you both. I really appreciate it and I think anyone who teaches real estate or has been around this industry long enough, understands the idea here is that there is no right strategy. And that’s one of the main premises of the book is that there is no right strategy. There’s only the right strategy for you. Just like there’s no right perfect market, there’s only the right market that works for you in your particular situation. And so the book helps you figure out what your personal goals are and then matches you with the right strategies and tactics to help you get there. So we’re going to talk all about some of the frameworks and give you some really good information even if you don’t read the book about how to identify a good strategy.
But if you do want to check out the book, go to biggerpockets.com/strategybook and we are doing a special pre-sale. So if you actually buy before the launch, you’re going to get a free strategy planner. It’s a workbook that helps you actually create a plan. It’s like a business plan and you can write it all out in this planner, so you would get that for free. You’re also going to get live group coaching calls and all sorts of other bonuses. So make sure to check it out at biggerpockets.com/strategy. If you want to grab the book, make sure to use the code, START177, that’s START177, because that will give you 10% off the book and all the bonuses.
So to me there are basically three big broad elements that comprise real estate investing strategy. The first one is vision, which is basically where you’re trying to go and what you’re trying to accomplish. Because I’m sure as you two know, there are very, very different goals. Some people just want to modestly improve their financial situation, other people want to be tycoons and everything else in between. Some people start with modest means. Some people start with more means. And so I think the first step in strategy is establishing that vision.
Next, once you have a vision and know where you want to go, that’s when you pick what types of deals you should be pursuing. I hear people all the time be like, should I get into short-term rentals or flipping? And I’m like, I don’t know. I don’t know what you’re trying to accomplish. And so that’s why vision comes first and then what I call deal design comes second. And one of the things I love about real estate so much is that whatever your vision is, you can design deals that will work for you regardless of what your vision is.
And then the last step after vision and deal design is portfolio management. And I think this is one of the least discussed parts of real estate investing strategy, which is what do you actually do day to day? I know we all love to talk about buying deals, that’s surely the sexy part of it, but what about allocating your resources or mitigating risk or deciding if you should sell or refinance or how you’re going to scale? So if you combine these three things together, vision, deal design, portfolio management, those are the three things you need to create a personalized strategy that will help you reach financial freedom, whatever that means to you. If you guys are cool with it, I’d love to just go back and go through each of these vision deal design and portfolio management one by one. So let’s just start with vision. Does this sort of concept resonate with you, Kathy?

Kathy:
Oh, my gosh, a hundred percent. Our visions need to be looked at every year. So read this book every year in January maybe ideally, to revisit do I have the same vision? Because we change, we grow. When you’re single, you might have a different vision than when you’re married, and then when you have children, and then when your children are gone. And there’s so many phases of life, so revisiting the vision, it’s not stagnant. It changes all the time, not all the time, but over time. Like right now, one of the visions I have is, I’m not so interested in owning little rental properties all over the country anymore. I’m consolidating some of that and doing vacation rentals so that my family can get together and use those together, because my top priority is family time, but also to make income. So again, I wouldn’t have done that 10 years ago, because I was buying those little houses to get to a point where I could do this now.

Henry:
Yeah, Dave, I love that vision comes first for a couple of reasons. One is, I think a lot of entrepreneurs in any industry learn the lesson later after they’ve started their business, that they should have designed their business around the life they wanted to live and not design their business around how much money they want to make doing that thing. And so you become this entrepreneur and you end up becoming a slave to your business, because all you were focused on was growth and making money, when really what was truly important to you was being able to make money but not at the sacrifice of the time that I want to spend with my family.
And so when you think about on the front side what that is, if you want to prioritize time with your family, well then that will dictate the types of investing maybe that you should get involved in, or it will dictate the amount of processes and procedures you need to put into your business. So it may be harder for you to get to that money because you’re putting in so many automations on the front side, but the end result ends up in you living the life you want to live. And you can’t do that without a vision first.
The other thing I love is that personal values is the first question. Defining what those values are to you and letting that be a guide. And then I love that the first question is, what are your values? And the second question is, okay, but how much money do you have? Let’s be realistic about it. Let’s be realistic about how we’re going to approach this.

Dave:
I think it’s really important. People in real estate often call it finding your why. I call it personal values. But this might seem a little woo-woo so Kathy it’s right up your alley, but it’s not because every Fortune 500 company has values too. And if these companies, huge corporations, think it’s important to start with their vision, their values, then you should be doing the same thing. Real estate investing is entrepreneurship, and you should be investing with these end goals in mind. Just like Henry said, I’ve never flipped a house. I don’t know if I ever will, because it’s just sounds really annoying to me to be honest, and I just don’t want to do it. I have a pretty hard and fast rule that I try to keep my real estate investing at 20 hours a month or less.
You guys were joking about how I write books and write articles and stuff. Well, I’ve made a very conscious decision to not allow my portfolio to take up a huge amount of my time, because I have other professional interests other than investing in real estate. And so I think it’s really, really important, although it doesn’t sound like investing, to really get a clear idea of why you’re doing this and what you’re trying to accomplish.
And then to Henry’s point, then you got where the rubber meets the road is, all right, what do you got? And I think the key thing about the book is yes, we need to know how much money you have, but I go into this in the book, but money is not the only resource that you can commit to realize your vision. There’s also time and there’s also skill. When I got started, I had zero money. I was waiting tables. I literally didn’t have a bank. All my money was in my nightstand in cash and I had no skills whatsoever. But I had a lot of time. I had a lot of time where I could go look for deals and run the numbers and network, and I used that to start my portfolio.
And the point of the audit part of the vision where yes, you do talk about how much money you have, is you need to figure out what you can bring to your portfolio. Because you don’t need to have money, you don’t need to have time, you don’t need to have skills per se, but you do need to have one of the three. Sometimes you hear people like, I’m really busy, I’ve never invested in real estate and I don’t have a lot of money. How do I get started? Unfortunately, you can’t under one of those situations. So you need, as part of your vision to figure out which of those three resources you’re going to contribute. If you don’t have money, that’s fine, but you’re going to need to spend time on your portfolio. If you don’t have time, that’s okay, but you’re going to need to have money, you need to bring something. It’s literally a law of physics that you can’t create something out of nothing. And so what is the something you’re going to bring to your portfolio?

Henry:
So your book just doesn’t teach us how to hit a button and then we get properties that make money.

Dave:
I really wish it did. I wish there was a button that just wrote a book for you. That would be very easy too.

Henry:
I would buy that right now.

Kathy:
Having the vision actually makes the action part happen. I’ve had so many people come to our meetings at Real Wealth and they had no money and no time, and I just said, but just keep coming, keep learning. So they had obviously enough time to learn and to attend events and talk to people. And then they started to see the opportunities. They started to change the way they think. So the more that we get clear on that vision, the more you’re able to see that opportunity, and I can tell you people that I would look at and say, man, I don’t know how they’re going to get started, and then the next year they would somehow make it happen. They would either come into money, maybe there was an inheritance, maybe they got a new job, maybe they got a side job. So it’s like the education, that might even be above vision, right?

Dave:
Absolutely. But I think the point, if you have a vision and you do this audit where you look at your time and money, then you can identify your weaknesses. If I had done these audits when I first started, it would look pretty grim. I didn’t have a lot of resources, but I was still able to get clear about what I want. And that provided the motivation to get those resources. I did work a side hustle, I did educate myself to learn the skills, which is the third resource that I could contribute, because ultimately you have to get specific.
And I think there’s a tendency for people who are just getting started to be like, I just want a bajillion dollars, or I just want to quit my job. And in the corporate world, we do a lot of things about goal setting or smart goals or OKRs, these type of things where the point, the philosophy is, that the more specific you get about the goal, the more likely you are to achieve it. And I think that’s super important here. So don’t just say you want a billion dollars. If you do want a billion dollars and that’s a carefully thought out number, fine. But I think for most people it’s somewhere less than that. And what you’re actually after is not necessarily money, but it’s some lifestyle that you’re envisioning and so go write that out.
For me, I’ve always just wanted to travel a lot and real estate has enabled that to me, because I set that as a goal back in 2016. I said, I wanted to move abroad and I created a real estate scenario that worked for me. And you can do that by creating a very specific vision, whatever it is. I really think there are real estate strategies that work for you, but you have to spend the time and do some soul-searching honestly to think about why you’re actually doing this.
All right, so after vision, that’s when it comes to what I call deal design. And I think this is the part where people think it’s very fun, but this is where you align the different types of real estate investing out there with your specific vision. And I called it deal design for a very purposeful reason. People often call it, finding a deal. And I do think that there is obviously a big part of real estate investing that is identifying properties that you should buy. But I call it deal design because I just love this about real estate that there’s so many different levers you can pull to create a deal that works specifically for you.
Even if you know want to buy a rental property, how you manage that rental property, how you finance that rental property, what market you buy it in, what class is it in, what business plan you use to operate it, are all different ways that you can adjust this particular deal to fit your vision. And so in the book it goes through deal design and it basically explains the pros and cons, trade-offs of different types of real estate investing and helps you align with what your vision said.
I’m curious what you guys think about this. Henry, I know you do a whole bunch of deals. How do you think about designing deals that are going to work for you in your long-term strategy?

Henry:
It’s essentially what I did without knowing I was doing it, when I got started. What I wanted to do when I got started was to solve the problem of helping people find deals, because that was my safety net, if that makes sense. I knew if I could get really good at finding deals that I would be able to then keep the ones I really like, but then solve a problem that every investor says they have, which is it’s hard to find deals. And so it forced me to design my business in a way that was going to bring me those good deals and then that allowed me to do exactly that. I could then monetize these deals in the ways that I wanted to, that fit my investing strategy.
My investing strategy just happens to be long-term buy and hold, and fix and flips where I feel like I want to do that. But it all came from me designing my business in a way that was going to bring me the things that I wanted. And so it all turned out to feel like it was intentionally done, because the plan was upfront.

Kathy:
Listen when you get started, and I don’t know how many people listening are just starting or already have their strategy, but I can tell you when I started, I was so overwhelmed with excitement and overwhelm confusion, because I would go to local REA events and I would hear one guy talk about multifamily, and then the next week it would be a flipper, and the next week it would be a note guy, and then the next week… It was so many ways to make money and all of them are so sexy and all the speakers were so successful that I just wanted to do it all. But that’s not the way to go. Start with a strategy that you most understand or that you’re most excited about, and get really good at that and then you can go onto the other ones. Because it’s so easy to jump in these things that look great, but maybe you don’t understand enough and that’s when the strategy doesn’t work.
I, for some reason, I don’t know the 10th event or whatever, I heard this guy talk about his single family rental portfolio and I was like, I can do that. There was something about it.

Dave:
That’s the one.

Kathy:
That’s the one and it was the one, it still is the one. I’ve done lots of other things, but it’s a great time to be in single family, especially today, so it resonated. But go and find out about all the different strategies and then pick one.

Dave:
That’s a perfect anecdote, Kathy. I think so many people want to consider every possible strategy and that is just so overwhelming. There’s actually this great book I read called The Paradox of Choice. I won’t get too far into it, but it’s like basically everyone thinks they want a lot of choice, but when you get presented with a lot of choice, you just freeze. And it’s just one of the reasons for analysis paralysis.
And so I think the real point of the deal design phase of strategy is narrowing down all of those amazing options. And there’s no right or wrong, there are so many great options, but narrowing them down for just the ones that fit your vision and that as Kathy said, you can reasonably execute on. I totally agree with you, Kathy. Being a host of a podcast, we get to hear from the coolest people ever talking about the coolest stuff that they’re doing all the time. And every time I get off this podcast, I’m like, dammit, I should be doing that.

Kathy:
Why am I not doing that? Yeah.

Dave:
I have to ground myself a little bit and be like, okay, no, I can’t go out there and do what Henry’s doing or Kathy’s doing or any of our guests are doing. They’re not me. They have different circumstances and I got to stick to the plan that I’ve put in place.

Kathy:
A hundred percent. There’s so much FOMO in real estate, especially when you see all these things on Facebook and Instagram.

Dave:
Totally. Yeah, I mean this is a whole nother point, but I just think one of the reasons I wrote the book in general is just like, you’ve got to run your own race. You hear all these people telling you, you got to do this strategy or this is the only way to make money, and it’s honestly just nonsense. There are plenty of ways to make money, as long as you just dedicate yourself to being good at the things that you do and you actually want to do them, you’re going to do all right.
All right, so the last step of portfolio strategy after vision, which is where you want to go, and then deal design, which is like the how. Vision’s like where you want to go, deal design is how you’re going to use real estate to get there. And then portfolio management is like, what should I do and when should I do it? And where should I be doing it? Where should I buy deals? What does my buy box look like? Should I be selling, refinancing? Getting into the nitty-gritty of managing your portfolio.
And for me, this is the thing that took longest to get good at, or at least disciplined about in my real estate investing career. I was very focused on buying stuff. Everyone always asks, how many doors do you have? They don’t ask, do you have proper risk mitigation practices in place or anything like that because it’s not sexy, but it is super important. And people always want to know, should I buy, should I sell, should I refinance? And really these things come down to the same ideas. What are you trying to accomplish? What is going on in your portfolio? And so in this part of the book I created an entire Excel workbook that you get for free as part of the book that helps you track your portfolio and see how well different deals in your portfolio are doing, and give you some information to make these decisions. Do you guys look at your portfolio on a regular basis? Kathy, just curious, how often are you looking at what’s going on and how do you use that to make decisions about what you’re doing each and every day?

Kathy:
So coming back to the beginning, it’s like it’s so important to know who you are and what you’re good at. And I’m fortunate enough that I’m married to a man who loves to put together spreadsheets and analyze. So as a couple, and we try to teach people this all the time, especially couples, sit down once a week and look at your portfolio together. Hopefully one of you is a spreadsheet person. If not, get a bookkeeper or someone who is and sit down and look at it.
Rich and I once a week, we spend an hour look at our portfolio, look at asset protection. Do we have the right trust in place? Do we need to have a meeting with somebody to make sure? And then all that stuff doesn’t come up on date night, then date night could be date night and don’t talk about these things. But absolutely, yeah, we try to look at it every week because you can lose sight of, wow, I really have a lot of equity in this. It’s just dead equity. I could put it to you somewhere else. I mean, life changes quickly. Got to look at it regularly.

Henry:
Yeah, that’s exactly what I do. I look every week at my portfolio. Part of that is because that’s when I have a staff meeting every week, and so it forces me to look at the ongoing projects that we have. But that also gets me looking at my rent role and gets me looking at the property management reports and seeing vacancies and how all that’s being managed. So every week we’re taking a look at the portfolio as a whole, both on what we are owning and keeping and what we’re actively turning over. I

Dave:
I love that, because even if you only have two or three properties, sometimes you get so fixated on one that’s maybe a problem property, you’re spending all of your attention there and you’re missing opportunities or risks in other parts of your portfolio and you don’t recognize it. It’s not just about identifying vacancies or things. As Kathy said, sometimes you realize there’s equity trapped in a property that could be deployed elsewhere.
That’s actually, Kathy, why I started doing this tracking and created this spreadsheet. When I first started investing, I bought this four unit in 2010 or ’11 or something and I was so proud of how much equity was in it. I was like, oh my god, when I sell that one day I’m going to make so much money. And for three or four or five years I was like, this is going to be amazing. And then I joined BiggerPockets full time and I realized, oh my God, I have just been wasting all of this money. I could have bought all these other properties. I could have been using my resource so much better. And it was sort of this awakening that I committed to myself that I was never going to get caught in that situation again. So it’s not just about the boring stuff of looking through reports, it’s about finding opportunities and where your portfolio can continue to get better.

Henry:
I completely agree. I talked about this matter of fact at the BiggerPockets conference, I think it was Lika who had brought it up. The whole point was we were talking about deals and getting more deals, and one of the points that was made is the whole point of getting deals is to produce more income, build more wealth. And there’s not enough people talk about growth in terms of managing your current portfolio and seeing what optimizations you can make within that portfolio. And especially in a time like this where it may be more difficult for you to get that monthly cashflow, but what if there was some small updates you could make to existing properties that allowed you to get more rent and that allowed you to create more cashflow in your existing portfolio. Is that money better spent doing that than going out and buying a property where you’re probably going to break even right now at a 9% interest rate? So without having a vision and a structure and a portfolio management sitting right in front of you, it may be harder for you to do that.

Kathy:
I mean, that’s how our whole business even began, is I live in California and I would talk to people when I would go to those RIAs at these events and people would be like, oh, what do you mean you can’t cashflow in California? I cashflow. I’m like, how? Oh, we have the property paid off. Okay, I’m so glad to hear that you’re cashflowing.

Henry:
That little tidbit.

Kathy:
Exactly. But I’m like, but I’m buying all these cashflow properties in Texas and your property is a $1 million in California, but making $3,000 a month and you could triple that. You could triple your cashflow pretty much overnight. So portfolio management has been my thing for, again, 25 years because I’d scratch my head and be like, people aren’t counting the equity as money.

Dave:
Totally.

Kathy:
Right? Yeah. You wouldn’t put that much money down on a property and think it’s a good deal, but somehow because it’s there and you didn’t, that it doesn’t count. I don’t know.

Dave:
Yeah, absolutely. I think it’s such a good point. Imagine you had 50 grand, maybe you could use that as a down payment on a property that might get whatever, 2 to 3% cashflow right now in most markets if you’re lucky. But maybe you can add an ADU or finish out a basement or just do a cosmetic rehab that’s going to increase rent and pay yourself off relatively fast and you can actually earn a better cash on cash return by putting that money into your existing portfolio, than you would acquiring something new.
And I know this took me a long time to figure out, because we, in the real estate industry, people talk a lot about doors and honestly, I just hate that. I think it’s so crazy that people focus so much on doors, because you can have a lot of crappy properties and have a lot of doors. And honestly, some of the people I know who have fewer doors are making a lot more money, because they’re extremely efficient with their properties and they’re very good at operating their businesses. So I don’t know, I’m going on a diatribe there, but I just think managing your portfolio, being very aware of what’s going on in your portfolio is going to really help you achieve your goals. Honestly, with less work, it’s going to make less headache and make it easier for you throughout your investing career.

Kathy:
I just want to jump in and say that you nailed it, that a lot of times it’s something else driving people, like ego versus the actual vision. And that ego for so many years was, I have hundreds of doors. And you’d go to these events and people felt bad if they’re like, well, I only have 20. I must be a big loser. But then you find out later that these people maybe just invested in a syndication. They don’t own 50 doors or 1,000 doors or-

Dave:
Exactly. It is such nonsense, yeah.

Henry:
Real estate investor mass.

Kathy:
It’s a lie.

Dave:
That’s actually one of the reasons I wrote the book is at one of the BiggerPockets conferences, someone came up to me and was like, Hey, I’m just a newbie. I only have 37 doors. And at first I was like, are you freaking crazy? You’re more advanced than 95% of the people here. But honestly, it kind of made me sad. I was like, man, you’re sitting here having accomplished a lot that more than most people ever will, and you’re feeling apologetic about that or some reason that you haven’t accomplished something.
And it just makes you realize it’s driven by ego, because I’m sure that person is probably doing well financially. And hopefully maybe this part of this book will normalize the idea that you don’t need a certain amount of doors, you don’t need a certain amount of time, you don’t need anything in particular. Whatever it is that you want, just go pursue it and find the real estate investing strategy for you. But don’t go pursue a ton of doors just for the sake of it, because honestly, I could buy a lot of doors right now and it would probably worsen my portfolio performance than if I just focused on what I got or remained really disciplined to what I’m trying to accomplish.

Kathy:
And what you’ve been accomplishing is travel. You just got back from Thailand, so pretty cool. I would say you’re on target.

Dave:
Exactly. Exactly. My real estate plan is working. I’m proud to say that. All right, well thank you both so much for coming here and talking about my book. I really appreciate you taking the time.

Kathy:
It’s really cool and it’s going to help a lot of people, so I’m glad we could talk about it and share it.

Henry:
Yeah, thank you. It was a fun exercise to go through. I literally have it sitting up. It’s been opened on my screen for a few days and it’s really cool to just have all these metrics right in front of you in an organized way, so I think it’s going to help a lot of people.

Dave:
Awesome. Well, thank you. And if you are interested in building your own real estate investing strategy, getting all the frameworks and exercises that walk you through all the important decisions that you need to make as a real estate investor, make sure to check out the book. The presale is still going on. You get all those goodies that we talked about at the beginning, and you’ll also get my eternal gratitude for buying my book. If you want to grab the book, go to biggerpockets.com/strategybook, and when you’re there and checking out, make sure to remember to use the code, START177. That’s START177 because that will get you 10% off the book and all the bonuses.
Thank you all so much for listening. We will be back in just a couple of days with our normally scheduled episode of On The Market.
On The Market was created by me, Dave Meyer and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico Content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

Mindy:
Today’s show is about a 36-year-old online entrepreneur who started his entrepreneurial journey after amassing $150,000 in savings in his 20s working in the gaming industry and as a financial advisor.

Scott:
You are going to learn the power of what a baseline level of frugality coupled with using that frugality to empower you to take calculated risks, also known as testing hypotheses, what that can do to turbocharge your success and allow you to build a business that reaches millions of people.
And while you might not be able to become the next YouTube star, you can certainly replicate our guest Humphrey’s formula for success. And we hope that you come out of this with some ideas for hypotheses that you can and will test in 2024.

Mindy:
Hello, our dear listeners, and welcome to the BiggerPockets Money Podcast where we interview Humphrey Yang and talk about his path to over a million YouTube subscribers and a successful content business. Hello. Hello. Hello. My name is Mindy Jensen, and with me as always is my “makes money both on and off the internet” co-host Scott Trench.

Scott:
Thanks, Mindy. It’s great to be here with my “always has a World Wide Web of opportunities to make money” personal finance co-host Mindy Jensen.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe that financial freedom is attainable for everyone no matter when or where you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, or start your own nine or 10 businesses, with most of them failing and one succeeding, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Without further ado, let’s bring in Humphrey. Humphrey Yang is a former financial advisor turned YouTube financial superstar. With over 1 million subscribers, Humphrey shares video explainers breaking down complex financial concepts and telling stories about the tech and finance worlds. Humphrey, welcome to the BiggerPockets Money Podcast. I am so excited to talk to you today.

Humphrey:
Awesome. Thank you for having me, Mindy and Scott. How are you?

Mindy:
We’re doing good. I’m doing good. Scott, I shouldn’t talk for you. How are you doing, Scott?

Scott:
We’re doing great. Humphrey, we’d love to start off with hearing a little bit about your upbringing and what your family’s relationship with finances was like growing up.

Humphrey:
Oh, yeah. So I got a lot of my personal finance, I guess, interest from my dad. My dad grew up very poor in China. And my dad’s really old also. So this is a fact that some people know maybe from the channel, but my dad’s in his 90s now. And so he actually grew up during a really rough time at the time that was in China, and he grew up very poor, without any money to even buy food some days.
And so for him, I think he immigrated to the United States when he was in his early 40s, I believe, after a stint in the Air Force and flying for some airlines. Excuse me. And money has always been an interesting subject because I feel like my dad views it in terms of a scarcity mindset. So in his view, having money meant safety, which meant he never had to go hungry again. And he didn’t want his kids to experience that.
And so throughout my entire upbringing, money has always been a pretty central topic in just conversation, like this is why you need to save all your money. This is why you should not spend money frivolously. This is why you should be frugal. Because you never know what’s going to happen. This is why you don’t really want to get into debt because debt can erode your money. And if you make a few mistakes, you could lose it all.
And so for us, growing up, me and my siblings, it’s always been like we view money from a scarcity mindset. And I’m now trying to reprogram myself to more of an abundance mindset if you will, because I also am probably more risk-averse than your average 35, 36-year-old because of what I’ve been taught from my parents.
I feel like money is usually a subject that you learn from your parents and your family. So for me, I need to break free from that mindset in particular.

Mindy:
Do you find yourself being more frugal because of your upbringing or more spendy because of your upbringing?

Humphrey:
Definitely more frugal. So, usually, if I’m going to buy something, I always think about do I actually need this item? Will this item actually fulfill my needs in some sort of way?
And if the answer is even a shadow of a doubt a little bit no, then I might hold off on that purchase, at least for 24 hours, sometimes up to a week. And then I see if I still want it after a week or maybe even a month. And if I ultimately still want that thing, then I will go and buy it. But if it’s not a huge necessity, I oftentimes just don’t. I just opt for not buying it.

Scott:
Humphrey, did this mentality around frugality translate to a rapid accumulation of wealth in your college years and right afterwards?

Humphrey:
Yeah, I would say compared to my peers, yes. I always think I could be better, obviously, and it also depends on how much money you’re making. But that’s all wealth is; it’s just the difference between how much you spend versus how much you make. And if you’re able to accumulate a big difference of that and invest it accordingly, then you are going to become wealthier than someone else might be if they’re spending the majority of their income.
So I would say yes, I think that… I still go into it these days with… If I make $10, I try to only spend $2 to $3. Obviously, that’s sometimes not very realistic because rent is so expensive, food is so expensive, and all these things.
That’s my goal, that’s my ultimate target, but oftentimes it plays out a lot higher. I might spend seven of those 10 dollars. But the idea is that at least a 30% savings rate is still way higher than the average American does. I like to view any savings percentages over 15% as a win. And so if I’m overshooting my target, I’m going for eight and I can only save four, it’s not the end of the world. Right?

Mindy:
So do you feel like you’re depriving yourself of things? Do you wish you could spend more and feel guilty when you do? She asked as though that was her exact same story.

Humphrey:
Yeah. There’s a lot of things that I could spend money on. I’m going to Phoenix this weekend. I could have bought a first-class ticket, but I decided to choose economy instead.
Or I can eat a $30 lunch every day if I wanted to. I’ve done the math. I can spend $30 on lunch every day and not have to worry about it, yet I go to Chipotle or I go somewhere that’s really cheap because I know it’s easier, or I make food at home because it’s going to save me X amount of money.
Sometimes it’s just like, I like to not spend money because it’s more fun that way. I don’t know why, but that’s the deal, I guess.

Mindy:
It’s a game. It’s a game, and you’re like, “Ooh, how little can I spend today? How little can I spend this week?” You play these games with yourself because when you’re saving money, then that’s better, according to these frugal rules that we tell ourselves and that our parents tell us as they’re raising us in frugality.
Because I’m a grandchild of the Great Depression, so kind of a similar situation with your dad. I also don’t spend the money that I could spend because why would I? I could just save it instead.

Humphrey:
The other thing is that sometimes you have to think about why you’re saving. And so sometimes I’m irrationally frugal. It’s like, okay, I’m not going to take it with me when I pass away, so what’s the point half the time? But I feel like I still have so many more years left in my life, knock on wood, that I’d rather save it for now. So let’s see where I can get to.

Mindy:
Okay, so how do you break out of that mindset? Have you tried to break out of that frugality mindset and spending on things? This is a work in progress for me too.

Humphrey:
Yeah. I think a really good exercise is to… I put in a Google Sheet or a spreadsheet what my dream spend is per category. So if I didn’t have to worry about money at all, how much would I love to spend on every single category?
Do I want a $7 coffee every day? How much is that going to cost me? Do I want a $30 lunch every day like I just talked about? How much is that going to cost me? Dinner, I do the same thing. How much money do I want to spend on clothes? And oftentimes what you’ll find is that you don’t actually need that much money to hit your dream spend, or it might be closer than you think.

Scott:
I try to spend a percentage of the passive income that I’m generating and save essentially all of the active income. That makes me feel good and sleep well at night. That probably resulted in way too much sacrifice for the first 10 years of that journey, but that’s because I’m very hardcore and have that kind of mentality.

Humphrey:
That’s amazing. So, basically, you’ve gotten your passive income to a point where… Is it your fund money or you’re just completely living off of your passive income now?

Scott:
I spend less than my passive income, the passive income that I generate. I just also work this full-time job many hours a week because I love it here at BiggerPockets, perhaps like you with your business. You’re a highly successful entrepreneur.
And one of the reasons why I wanted to ask about the frugality and spend so much time here on this is because I believe, I have a hypothesis, I like to test, and you can tell me I’m wrong, that there’s a huge interplay between this long-term habit of frugality and discipline with your spending and the opportunities that have been presented to you in the twists and turns in your career. Can we hear about it and let me know if that’s close?

Humphrey:
Are you saying that the long-term compounding of frugality leads to better opportunities or are you saying that it affords you better opportunities in a way?

Scott:
Both. I think it allows an opportunity, for example, to start a YouTube channel to be an opportunity and not a risk.

Humphrey:
Yeah, I definitely agree. All the risks I’ve taken in my life are due to a safety net that I’ve accumulated over time, and knowing that my cost of living is so low that I don’t need that much to survive. And I’d like to keep my means, or sorry, my cost of living… I’d like to keep the amount that it takes to run my life as low as possible in order to take more risks in the future. Yes, definitely.

Scott:
Well, can we hear about your career and the college years and what you’ve been up to in order to get to this point?

Humphrey:
Yeah. So I didn’t know what I wanted to do in college. I went to the University of Washington for two years, and I was kind of depressed up there because it’s so rainy. And so I actually transferred to a school called Loyola Marymount University in Los Angeles when I finished up.
And I finished up at the end of the financial crisis of 2008. I actually graduated in 2009, so jobs were hard to come by at that time. I spent some time in Asia for six months afterwards on a study abroad program just trying to strengthen my Chinese. It’s a very procrastinating thing to do.
And then I came back to America and lived with my dad for a long time. And I just didn’t know what I wanted to do, but I was interested in a few things. I got my degree in finance, so I was interested in finance. I was also a big video gamer growing up, so I also wanted to try a career in gaming.
And my first job out of college was customer support for a Facebook game company. They made Facebook games similar to FarmVille if you remember those. I did customer support there for a year or year and a half. And then I ultimately didn’t like that job because it’s customer support.
I was interviewing with Merrill Lynch at the time, at the same time, and I got a position as a financial advisor. So I was a financial advisor for about a year to a year and a half as well. I got my Series 7 and 66 while I was there. And then after that, I practiced for about six months.

Scott:
Was the financial advisor role… Sometimes those can be very high-commission roles and sometimes those are salaried roles. Which one of those was it for you?

Humphrey:
They gave me a base salary of $49,000 a year, I believe. This was in 2012, 2011/2012, with the expectation of it transitioning slowly over the course of four years into a commission-only salaried role. And I think a large portion of the role was to prospect your network and try to get assets under management for Merrill, and that was basically their program.
It was called the PMD program. In exchange for the Series 7 and 66, the expectation was you’re going to be prospecting clients after you’re fully licensed, and you might work on a team, and you might help some of the more senior advisors.

Scott:
What happens next?

Humphrey:
Yeah. What happens next? A lot of uncertainty. I wasn’t sure what I wanted to do. I definitely wasn’t happy at the financial advisor role. I just realized that a lot of these… not Merrill in particular, but a lot of these big banks and their financial advisory programs, what they do is, in terms of investing, they just put you in standardized products that are approved by the big firms.
And so a lot of these big products are typically some sort of fancier ETF or a mixture of ETFs that are low-risk, predictable for their clients. And a lot of the financial advisory business was managing the relationship.
I think we had one advisor who was very successful who said, “I don’t actually manage money. I manage relationships. I manage expectations and I manage relationships. And people are happy. And that’s who they call. They call me when things are not going well in the market, for example.”
Obviously, I still think financial advisors are good for certain use cases. For example, if you need estate planning, tax planning, certain college fund planning, if you have specific situations, then you might need a financial advisor. That’s what I tell my friends that are looking into one.
However, if you’re just looking for investment returns, I’m sure you guys have heard that active fund managers don’t ever beat the market or most of them don’t beat the market, so you might as well just invest in a low-cost S&P 500 index fund. I still believe in that. And it was reinforced to me that way when I learned about that at the job.

Scott:
I always wanted to be a financial advisor. That was one of the things that I was really… Because I’ve always loved personal finance if you can tell from this podcast here. But I realized pretty quickly into the first year of my career that becoming a financial advisor was doing that kind of stuff.
It’s almost a little disheartening, isn’t it? A lot of people love talking about this, help people build wealth. It’s a shame that such a huge percentage of the industry monetizes with those AUM fees or, you didn’t even mention this, but life insurance products for example, and not the nitty-gritty helping people actually plan their estates and do that kind of work. That is really where I think the real value is added to the clients’ lives.

Humphrey:
Yeah. I definitely agree with you. I think there are definitely some advisors that are doing, I don’t know, God’s work, and they’re actually helping people with their finances. But a large percentage of the industry is just, “Yes, let’s get your assets under management, let’s charge you a fee, and let’s put you in some products. And we’ll have a call once a quarter, and hopefully, that’ll be that.” Yep, so that’s that. And then I guess you wanted to know what I did after that, I suppose?

Scott:
Yes, please.

Humphrey:
Yeah. After that, I did an investment banking internship for six months because I thought it was better finance if you will. I don’t know if that meant anything. But at this point, I was kind of lost in my life, I suppose.
And then I decided I wanted to go back into video games. So it was like 2014, I find a new company that a friend refers me to, it’s called Machine Zone. And I start off there as a quality assurance specialist, but then quickly I get a job helping them with monetization. So I’m about six months into this job, into the quality assurance, and I get a job switch to monetization.
And Machine Zone was a really interesting company. Machine Zone was Y Combinator-backed, and they had just raised a bunch of money because their games were monetizing very heavily. Their flagship game was called Game of War, and their second flagship game was called Mobile Strike. And if you remember those two games, they had Super Bowl commercials back in 2015/2016.
Arnold Schwarzenegger was in one. Kate Hudson, not Kate Hudson, Kate Upton was in another one. Mariah Carey was in one. This was the rage back then.
As a monetization specialist, what I was doing was I was designing in-game packages, in-app purchases packages for people to buy whenever they logged into the game. So whenever you log into the game, you would get an offer thrown at you like, Hey, do you want to buy this package for 50 bucks? These are all the in-game items you get.
You had to manage it a little bit. You want to make sure you’re not putting too many great items in the package so that it’s ruining your in-game economy. And you also have to title it and make a cool piece of art. You want to make it look as beautiful as possible.
And so I did that for two straight years, and that was a pretty grueling job. It was almost like a trading desk because we got real-time stats of how much money was being spent in the video game every single minute. And there were hourly targets and there were daily targets, and there were monthly targets of how much money we needed to make every single month in order to continue our upward growth trajectory.
And this game was pulling in a couple of million dollars a day. This thing was crazy. At one point, this company was valued at $5 or $6 billion in its heyday. And I helped sell these in-ad purchases.
So I got a lot of real-time feedback, real-time data. I learned how to A/B test really well. I learned how to look at this data and make experimental inferences about what was going on. And I would say this period in my life, which was two straight years of almost 24/7 all the time, really taught me a lot about just marketing, psychology, data analytics, A/B testing, everything that you could think of to grow a business, I would say.

Scott:
Awesome. And so what years were you there and then what’d you do next?

Humphrey:
Early 2014 to late 2016. So it would’ve been two years and change maybe. In 2017, I started a business called YourOwnMaps. I wanted to sell posters online. I don’t know why. A friend of mine came to me and said, “Hey, we should sell some posters online.” I’m like, “Okay.” Well, I quit my job and I wanted to start my own business.

Scott:
Okay, perfect. I want to ask about this transition. So you’ve been working for a couple of years. Is this the point in your journey where the frugality that’s an underpinning behind all of this career progression begins to pay off and affords you the opportunity to take a risk on a business?

Humphrey:
Yeah. Yeah, it definitely did. I think I had at least $150,000 saved up. I was living at home too, which was great because I’m not spending any money on rent. I have $150K saved up. And I’m like, “Okay, I can quit my job for a few months. I can think of something.”
I wanted to start a business, and I didn’t know what to start. So, January 2017, a friend of mine comes to me. He had just came from Europe and he was working for Facebook. And he was like, “Hey, I’ve seen this business model in Europe do really well where they sell these custom posters of these maps, and we could do that here in America.” I was like, “Okay, great. Let’s do it.”
And so I didn’t know what I was doing, but I knew that I could do… I’m always a big believer that I can learn how to do anything. And so we spent a few months developing the website and what it will look like.
I spent a couple of months looking for a supplier, so someone to print the actual product and then ship the products to end customers. I guess I’m kind of fast-forwarding a little bit, but it was a tough time of six months of not sure what to do. I spent about $20K on the website initially of the $150K. I still had $130K.
Of course, I was still spending money eating food and seeing my friends and doing entertainment stuff. But because of the frugality, that definitely afforded me that opportunity. And I could have done it for another year or two without making any money at all and been totally fine.
And so that’s what I tell some people who want to do something entrepreneurial on their own. It’s like, you need at least a good nest egg of six months to a year of living expenses for a real shot at these things. Because my own business wasn’t even successful until maybe month nine. And so if you’re thinking… And that’s good, by the way. A lot of these businesses don’t break even until year three.
And so, for me, I was lucky in that we started to make some profit right away and see some success there. I still wasn’t drawing that much money from the business. My first year salary was maybe $35,000, 38,000. And then the next year was 40, 45. It showed me that I could do it, but it showed me that I also needed to think of something different if I wanted to make more than $40,000 or $50,000 if that makes sense.

Scott:
You were mapping out the journey to financial independence.

Mindy:
Oh, Scott, what a terrible pun.

Humphrey:
Yeah.

Scott:
Sorry.

Humphrey:
Good pun.

Scott:
Thank you for the groan. I appreciate it, guys.

Humphrey:
Yeah. So I did this business from 2017 to middle 2019. And at the same time, I’m trying all these other different types of things. I tried to create a budgeting app. I hired someone on Upwork. I’m trying different things. I wrote an E-book on how to email market, and I tried to market that on Twitter. And then I also tried dropshipping, which I failed at. Dropshipping was way harder than actually starting a real business, in my opinion.

Mindy:
Wait, but the guys on the internet say that you just start it and you make all this money. What do you mean? That’s not true?

Humphrey:
I think it’s a really great way for people to get into online E-commerce for a very low price point, but it comes with a lot of risks, and I think it’s more of an art form to do it right correctly. And what’s funny is that if you become really great at dropshipping, you actually just want to create a white-label business or a real E-commerce business.
So it’s like you’re doing all these steps to just get to where I already was at. So for me, I was happy doing just the straight-up E-commerce business. But dropshipping is hard, definitely not easy. And I think it’s hard not because of selling the product. I think it’s hard because of the logistics behind the scenes.
The products are coming from China. If they’re coming from China, it’s like a three-week ship time. And so now you have to deal with customers that are pissed off at you because of the three-week ship time. And then you have to deal with the payment processors that are getting charged back from those customers because the product’s not coming in time.
And then you have quality issues, and you have all these… It’s just not the best model if you want to have a great experience for the customer. But it’s a good model for those entrepreneurs that are trying business for the first time and they don’t have more than like $3,000 to spend.

Scott:
So you tried an E-book, we have a dropshipping business, we have a map business. What else is going on here? And how many of these initiatives go on until you settle on making videos?

Humphrey:
Yeah. I probably had four to five different initiatives from 2017 to 2019 that I tried, some with other friends, some by myself. I also did some consulting on the side just to make an extra income.
I would consult for this one marketing company. It was, at the time, called MarketerHire. And so other E-commerce businesses would hire me to help them with their email marketing or their marketing in general. And all these principles I learned from the video game business, by the way, just marketing and psychology.

Scott:
A/B testing, right? That seems like that’s a huge competency.

Humphrey:
Yeah. And it’s actually not too hard, but then it’s understanding if the data that you have is statistically significant and making hypotheses about the next test and next iteration. So it was about middle 2019 that I was like, okay, maybe I should try making some videos on YouTube.
Because I’d just listened to a Naval Ravikant podcast, and he was all about scaling yourself through either code or media. And I was like, okay, let’s try some YouTube videos. I really believe in what he says there.
So I tried three YouTube videos, they went nowhere. I had 10 views on each one because I sent them to all my 10 friends. I kind of gave up on it, to be honest. I made three. I was like, “Okay, that was a good try. Whatever.” It was just another initiative at the time.
But then I caught myself watching TikTok in 2019, and this was at a time when people my age weren’t watching TikTok. It was mostly teens, I would say. And I would watch it every night before bed. I thought it was pretty funny and I was pretty addicted to it.
And then at some point that fall, it kind of dawned on me like, hey, I should check if anyone’s making personal finance videos on TikTok. And nobody was. There was one video. I searched #PersonalFinance. There was literally one video. And there was one guy making videos about stocks, and they weren’t that good.
So I said, okay, if I can be first to market on here, maybe I can get some traction and get people over to my YouTube channel. And then eventually, I can make YouTube videos. That was my whole goal. And so towards the end of 2019, I decided to have a goal of making 30 straight TikToks in a row, 30 days.
I think on day 11, I had a video that got 100,000 views on day 11, and that got me like 1,500 followers. And I was like, “Wow, that’s cool. That’s way more than I’ve ever gotten on YouTube.” And I think on day 17, I had a video go viral and get 3 million views, and I got 100,000 subscribers, sorry, 100,000 followers on TikTok at the time from that one video.
So by the end of 30 days, I had 120K followers on TikTok. And I was like, all right, well, I’m going to keep going because clearly there’s demand for this type of content. And so by the time the pandemic actually started, I already had 350,000 followers, which was great.
And then I had nothing to do because it was COVID, there was nothing to do. So I was like, oh, I might as well just keep making a video every day because it’s like, dude, I’m already here. There’s nothing else to do. It’s easy to make a video. It gave me some purpose throughout COVID.
At that time, I started to slow down on the maps business because it wasn’t doing that well anymore. And so it just was a slow shift towards video creation. And then at the same time during COVID, I started to make YouTube videos again, and I’ve just been going ever since.

Scott:
They say that nine out of 10 businesses fail, and so your approach is to start 10 businesses.

Humphrey:
I probably tried 10 different initiatives, for sure, throughout my life. And they might not have been great initiatives, but at least a month here and there, a couple of months here and there, etc. Yeah.

Scott:
I mean, if you think about it, it took you three years to find what worked for you with these things. You kept your expenses really low. You applied a skillset and the scientific method to a variety of different businesses. And when you hit one, you went all in, and you love it, clearly, with it, and it’s been super successful.
I think that should be inspiring to folks. If you can actually commit the capital and have the time and space to try these initiatives, you can fail six, seven, eight, nine times over a two or three-year period and hit a winner on that. That’s not unachievable for a lot of folks, I think, listening to this.

Humphrey:
Yeah. I definitely think it takes more than one shot. I have friends that take one shot at something and they give up. But I also think I had an unfair advantage because I was able to live at home. Not many people can live at home for free in the Bay Area. I was saving $2K, $3K a month on rent.
And I was okay living at home. That’s another thing. And some people in their early 30s might not want to live at home because of embarrassment or whatever, and it didn’t bother me. Before the podcast, Mindy asked me if I was married and have kids, and the answer is no because I probably spent four of my prime years living at home and not really dating.

Scott:
Well, let’s get into your processes for making these videos. What was it? You just stick a camera, take a look at it? How did it start and what is it like now?

Humphrey:
Oh, yeah. It’s way different now than when it started. When it started, I’m literally making a video about any topic that comes to mind that I think is remotely financially personal finance-related. And there’s no thought behind the topic. It’s just like, “Hey, that sounds interesting. Let’s make a video about that.”
Or, “Airbnb is IPOing this week. Why don’t we make a video about that?” Or, “The presidential election is here. Why don’t we make a video about that?”
Some of those topics could be good, but I was literally just turning out… There was one video I made that was comparing the difference between Bitcoin and Pokémon cards as an investment, and it was just a bad… That’s such a bad topic, but I thought it was great at the time.
So in the beginning, it was very much like, let’s just make whatever and see what sticks. And I still think that’s a really great method. You’re testing all these different things and seeing what sticks and what doesn’t.
But as I’ve gotten better at YouTube over the years, it’s definitely more methodical in terms of what topics we choose. And topic selection is, I think, one of the most important things on YouTube because it determines your market size. If you make a topic about coconut water from Bali or something like that, the ceiling for that might be 100,000 views.
But if you made a video about the toxicity of carbonated water, I don’t know, I just saw you drinking a bubly, you might be able to get 2 million views on that because it’s a way wider, broader topic. I always think about market size now when I think about making a YouTube video.

Scott:
I have a mini fridge with nothing but cherrybubly in it right next to my office. That’s not a joke or an exaggeration.

Humphrey:
Well, there you go.

Mindy:
If somebody is listening to this episode right now and thinks, “I want to be the next Humphrey Yang,” what is your advice to somebody who wants to start making money online?

Humphrey:
Yeah. So if you want to do YouTube videos, my advice is always make searchable content in the beginning. Have a library of 50 to 100 searchable video topics at the beginning because that builds you a strong base.
You know that certain topics are always going to be searched. For example, what is asset allocation? That is a great video that you can make that’s four to five minutes long, talking about what it exactly is. If you think about it, if you have 50 different topics like that, like what is asset allocation, what is risk, what are some of the index… what things should you look for in index funds? All these searchable-type topics, eventually, every one of those videos is going to start compounding for you with views over time, and you’re going to build a nice base of views on your channel over the course of a year or two.
And then that’s when you can start to play around with the types of topics you can do to try to hit more trendy type of topics and try to capitalize on high viewership. It’s like, imagine you had a channel with 50 of those financial explainers. I’m just talking about finance because that’s what I got.
And then all of a sudden, Silicon Valley Bank crashes, you can make a Silicon Valley Bank video which would’ve gotten you an outsized number of views, and then people would be interested in all your other topics because it’s financially adjacent. And then you can build your brand that way. I think too many people just give up on their YouTube videos.
I was about to give up after video three, but I think Ali Abdaal says this, he’s a productivity YouTuber, he says it takes 50 to 100 videos. And I think even Mr. Beast has said, “Hey, if you’re trying to become a YouTuber, make 100 videos and then talk to me. Don’t talk to me before 100 videos.” So I think it takes a long-term mindset of let’s do this for a really long time and see what happens, and then adjust.

Mindy:
Is this just you doing this or do you have a team? Is there a bunch of people behind you helping you out?

Humphrey:
It’s mostly me and an editor. So my editor has been with me since November 2020, and he actually reached out to me in June of 2020. This was very early on. I had no YouTube presence. I had 500,000 people on TikTok maybe, and he just DMed me cold and said, “Hey, I’d like to edit for you one day.” And I kind of ignored him for a few months, and then I needed one in November.
I edited my first 100 videos myself probably, and then I hired him. And then he’s been working with me since. And he’s actually improved his editing skills so much, and he definitely wants to learn. He’s someone who’s entrepreneurial as well, so we get along really well.
And a huge reason why we have so much success is because of his animations on the channel. If you notice, a lot of our videos are animated quite well. And he’s an editor plus animator, which is hard to find. Usually, you have to find two different people that are editors plus animators. But he taught himself animation throughout the last three years. So, very thankful for him.
So it’s just me and him, and then I have a guy that helps me make thumbnails, and that’s it. And I’m trying to find another editor so that I can come out with more videos next year.

Mindy:
Okay. Well, that leads me to my last question. What is the future of your content and your financial journey? Where are you going next year? What are you focusing on?

Humphrey:
Yeah. I have a lot of financial YouTuber friends. They make a lot of money. And sometimes I feel bad because I don’t make as much as them. And I think they make a lot of money because they’re hyper-focused on their niche. They might sell a product or they might offer a service, or they might offer a course or something like that, and they’re able to capitalize on that. They might have better affiliate links for the certain niche that they’re in.
I still don’t know how I feel about selling a course. I don’t love it. I think a lot of the information that you can get online is free anyway, so what would my value of a course be? Maybe it would be to concisely condense everything so it was just really easy for you and really easily served.
But right now, I don’t think I have a product or a service or a course offering that really fits my channel perfectly that I could offer to my audience. So right now, I’m not creating a side business off of the audience right now, off of my channel.
And so my goal is still to do YouTube in five, 10 years. And so I really want to continue to grow the presence that I have online, continue to grow viewership. And I think sometimes just making videos is all I need to do. I think that all the biggest YouTubers, if you look at Marques Brownlee in the tech space, he’s been doing YouTube videos for 15 years.
He hasn’t really sold a product or a service too hard either. He has a merch line ish, but it’s not like he’s got a flagship product or a flagship business that he runs on the side. His main business is videos. And for 15 years, it has worked. So, clearly, there’s that business model that works. It’s like, let’s just make great videos, and I just want to keep doing that.

Mindy:
That’s fantastic. You need to protect your audience. You’re not selling anything right now, and that’s what your audience loves. You’re giving them great content without just bombarding them with stuff. You’re genuine in your delivery.
And when somebody is trying to sell something and be skeezy, that comes across. It oozes out of every pore that they have. And you’re like, “Nope. Next.” I don’t know if you know this, you’re not the only guy on YouTube. There’s no shortage of guys on YouTube. So they’ll just go find somebody else that they connect with better.
On the other hand, you have an audience, and they watch you because they like you. They want to learn from you. So if you have something that aligns with what they’re looking for, even if it’s all over the internet for free, there is a value for somebody whose voice that they appreciate gathering it all together in one place for them to find this information.
If you do do a course, give them $200,000 worth of information for 20 bucks, not 20 bucks worth of information for $200,000, because there’s no shortage of those guys either.

Humphrey:
Yeah. I think it’s just I haven’t found something that aligns with me perfectly just yet, and I’m definitely searching for something like that. I know it’s part of my longer-term vision. But for now, I don’t feel an immense pressure to do that right now.

Mindy:
Yeah, you don’t have to. How about just a T-shirt with Humphrey Yang’s face?

Humphrey:
I don’t know if anybody’s going to buy that.

Scott:
Humphrey, before we adjourn here, is there a place where people can go find out more about you?

Humphrey:
Yes. Please subscribe to my YouTube channel, it’s Humphrey Yang. And then I also have a newsletter, it’s called Hump Days. It’s on Substack. So we come out with business news twice a week for free, Wednesdays and Fridays. Humpdays.substack.com. That’s perfect. That’s where you can find me.

Mindy:
Humphrey, thank you so much for your time today. This was so much fun. And we will talk to you soon.

Humphrey:
Cool. Thank you, Mindy and Scott, for having me on BiggerPockets.

Mindy:
All right. Scott, that was Humphrey Yang, and that was super fun. I love his story. I felt a kinship with him with the whole growing up frugal and now saving everything you have. Yeah, we both need to work on that a little bit more. What did you think of his story?

Scott:
I thought it was dangerous because I have a clear and obvious bias for how I think is a really good formula for building wealth, and he largely fit right into that bias by spending so little, finding opportunities to increase his income, saving a bunch, and then trying 10 entrepreneurial journeys, which is my dream blueprint for success. If only he’d house hacked as well, but he got to live for free, so I guess that’s part of it. But yeah.

Mindy:
He kind of house hacked.

Scott:
Yeah.

Mindy:
He hacked his housing by not paying anything.

Scott:
Yeah. It does not make a rule, but I just think it’s such a high-probability path for success. And you can swap out the living with the parents with a house hack, for example, and have many of the same opportunities there in many parts of the country, probably not San Francisco where he’s from, but in many parts of the country.

Mindy:
Yes. And he mentioned unfair advantages. I think that everybody has an advantage. I don’t like the phrase “unfair” because everybody has an advantage. Take advantage of your advantages. There’s a lot of people who have advantages. They don’t take advantage of them. They don’t use them at all. They just let them sit. And then it’s just a waste.
So if you have an advantage, use it. Use what you have to further… Scott, you have a big brain. You use that in your day-to-day life. You use that in your job. That’s giving you an advantage over anybody else that was going to be CEO. They didn’t have the same brain that you had. And therefore, they’re not CEO. It’s just what you have. You use the tools in your toolbox to further your career, to further your steps. So yeah, when you have something that you can use, take advantage of it.

Scott:
Well, thank you for the big-brain comment, Mindy. I really appreciate it. I also have incredible admiration for your enormous brain and the ways that you put that to use. And I’ll throw in another one for you, which is your community. You’re an incredible community builder, and you use that advantage in a lot of “unfair” ways to bring happiness, joy, and business into your life, and business opportunities. So, love that in so many ways.
I do want to throw out a question here. What hypothesis, Mindy, are you going to test in 2024?

Mindy:
I am going to test… Wow, Scott, put me on the spot. What are you going to test while I think of one?

Scott:
I am going to test the hypothesis that there are a large number of people who are losing money investing in passive syndications at this point in time because of the market dynamics and unfortunate realities of higher interest rates, and that those folks are going to take this opportunity as a lesson and spend a large amount of time learning how to run the nuts and bolts of analysis on passive investment opportunities like apartment complexes and syndication deals like self-storage, like debt funds, and that there’s an opportunity for BiggerPockets to provide an educational platform that does very rigorous analysis on those types of deals and helps people make really highly informed decisions about what the bet they’re actually making is in those types of things.
So we’re going to call it Passive Pockets, and we’re going to launch it sometime in 2024. That’s my hypothesis.

Mindy:
My hypothesis that I’m going to test throughout the entirety of 2024 is that spending on things that bring me joy or that make my life easier is not going to hurt my overall financial position and will, in fact, make my life better. So I am going to do that. And I have started and stopped and started and stopped. And I’ve got a list of things that I want to accomplish next year, and spending money to get them done is now going to be the way that I go, as opposed to doing it all myself.

Scott:
Those who are listening here, thank you so much for joining us today. We’d love to hear what your hypothesis that you’re going to test for 2024 is. Please share that with us in the Facebook group at facebook.com/groups/BPmoney, and we’ll be looking there.

Mindy:
All right, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That wraps up this episode of the BiggerPockets Money Podcast. He is Scott Trench, and I am Mindy Jensen, saying toodles Goldendoodles.

Scott:
If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at YouTube.com/BiggerPocketsMoney.

Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

Ashley:
This is Real Estate Rookie, episode 355. My name is Ashley Kehr, and I’m here with my co-host, Tony J. Robinson.

Tony:
And 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. And today, we’ve got another amazing guest, Dayna Hicks. And I love Dayna. Great, great, great guest, just a lot of good energy and her motivations for getting into real estate are so pure. And so just, you guys are going to see why we love her story so much. But also want to give a quick shout out to someone that left us a five star review on Apple Podcast. This person goes by the username of HammondsFam, and this person says, “I have deep dived into real estate investing for the past three years and I’ve been listening for years. And this podcast always has great info that I can leverage in my life and in my real estate journey.”
So if you are part of the Real Estate Rookie audience and haven’t yet left us an honest rating or review, please do, only takes about two to three minutes, but it does have a huge impact on the show. And we just might read your review on the show like I did for this one.

Ashley:
If you are interested in joining a boot camp with BiggerPockets, you can go to biggerpockets.com/bootcamps. Okay, well today joining us on the show is the incredible Dayna Hicks, a shining star in the BiggerPockets multifamily boot camp. We are so excited to have Dayna here to talk about her experience and her journey and dive into the exciting world of multifamily investing. So Dayna, welcome to the show.

Dayna:
Thank you. Thank you very much.

Ashley:
Let’s start off with telling us a little bit about yourself and how you got into your real estate journey.

Dayna:
Well, a little bit about myself is I was in high school and in Seattle, Washington. That’s where I spent most of my years, and that’s where I say I am from Seattle, Washington. I ended up getting pregnant very young age, 18, and right out of high school. And just decided that all the hardships that I had growing up that I wanted to help people. And I started very young. I was the youngest foster parent in Seattle. I think I was 21 when I started doing fostering. Started with relatives first and then getting into the actual foster care system. At 23, I think I was on a board, a foster parent association board, which is a very big… Washington is very big now, but we started it back then and I just got to wanting to advocate for youth in foster care as I learned more and more about it.
So my life has been, over the past 40 years, has been always involving foster care while I’m doing my regular work. I’ve always had kids, usually five to seven kids at a time.

Ashley:
Oh, my gosh.

Dayna:
… plus my own kids. So I had five natural kids and in between all my kids, I had foster kids. So I’ve always had kids in my house. And just a funny thing about that is I never wanted any kids, not even my own kids. I never even babysat as a teenager. But these guys kept flocking. And so I always learned in church when you’ve got one finger pointing at another problem, you’ve got three pointing back at you. What part of that problem can you solve?
And so that’s kind of how I got into foster care and working with youth. And so getting into multifamily was trying to provide affordable housing for these young people that couldn’t get it. And I figured most of it, because they didn’t know the obstacles. And so if I could help them get through the obstacles, then they could eventually get the affordable housing. And then also it was a nice way to have a kind of slow and steady income too.

Ashley:
Dayna, what an incredible start to your story here. That is amazing, providing that to your community. So along that journey, was there one moment in time where this was your aha moment, “I need to change. I need to change my life. I am going to change other people’s lives.” Was there any moment like that where you realized you needed to get onto this financial freedom journey?

Dayna:
I can’t tell you exactly what year that was, but I remember just reading it in church. When you go through your spirituality during your 20s, it changes to your 30s, your 40s, your 50s. So it gets deeper and deeper. But at one point I remember thinking back like, “Hey, back in the biblical times, everybody handed their kids down something.” My generation, we didn’t have any parents that had anything to hand down. And I said, “Well, I got to do this for my kids. I’ve got to pick this back up. We got to start this.” And so I wanted to have something to hand down to each one of my kids at my demise. They would have something that would perpetuate them forward.

Tony:
I love that Dayna. Family’s a big motivator to try and get us to build something because when we’re gone, we’re gone, but we can leave those things to kind of help our family. And Dayna, there’s some similarities between your story and mine. I had my first son when I was 16 years old and funny enough, he just turned 16 yesterday, so he’s at the age now that I was when I had him. But I remember, gosh, my son might’ve been two or three years old and I’ve shared this story before, but he had gotten super sick and I had to rush him to the doctor’s office.
My bank account was in the negative and it was a $15 copay for him to get seen by the doctors and they turned him away because I couldn’t cover the $15. And for me, that was a moment for me where I was like, “Holy crap, I really need to figure things out and make sure that I’ve got a good financial foundation for him moving forward.” And that’s really played into all the decisions I’ve made after that point. So for you, I mean, did you have one of those moments where like, “Man, this can’t be the life that I’m going to live for me and my child?”

Dayna:
I think that was a lot of my life, just growing up not having money. My mom didn’t have money, I didn’t have money. We just worked, lived paycheck to paycheck, but always having to count pennies that if I write this check, is it going to clear? If I put my bank card in this thing, am I going to have enough money? My calculation says I should have $10 over, but I might only have two. So I think that, coming through my 30s and I’m saying, “Hey, we got to do something different and figure out what that difference is.” And some of it was just doing a self-assessment. And I didn’t really start doing that till my mid-40s, the self-assessment like, “You know what? I’ve been at this job and they offer a 401k plan and I never bothered to invest in it because that was more money out my paycheck that I didn’t have.”
So there’s actually a moment when I was young with my baby and going to a welfare office to get money to be able to survive and I met this older lady. And one of the things she said to me was, “After you had this baby, you are not going to be able to do anything and you’re not going to amount to much because you made this choice to have this baby and you’re so young.”
And I just remember staring at her and not understanding what that meant and why she told that to me. And I came back and told my mom and just didn’t know what to do with that. But that stuck with me for a… It still sticks with me. I can say it [inaudible 00:07:11] and I can see her face. Don’t remember her name anymore, but just remember that. Anytime I came up against the obstacle as I… Was this the hill I was going to die on and she was going to win.

Tony:
Yeah, it’s such a crazy experience having a kid young Dayna because it really does change your perspective on life. And what I’ve found is that there are typically two types of people when it comes to teenage pregnancies. There are those who use the teenage pregnancy to become an excuse as to why they can’t achieve certain things, and then there’s a group of people who use the teenage pregnancy as the motivation to say, “Well, no, I’ve got to achieve this because I became a parent so young.”

Dayna:
Yep.

Tony:
And I get everyone listening isn’t going to go through that same experience that Dayna and I went through, but we probably all have something that’s happened to us in our lives where we get to make that decision, is this going to be the excuse as to why I can’t achieve what I want achieve or will this become the reason that I have to achieve those goals in that situation we always get to make within ourselves?

Dayna:
Yeah. One more piece to that is, I went on to go to the University of Washington and was able to go up for about two years, two and a half years, but this was that motivation. She said I wasn’t going to be anything and I went on to university, had my own apartment, able to make it through school with a baby.

Ashley:
Well Dayna, thank you so much for sharing that story with us. We are going to take a quick break with our show sponsors, but when we get back I’m going to talk more about your why and dive into your first deal.
Okay. Welcome back from our short break. We are here with Dayna and she’s going to talk to us a little bit about her why, the reason for her to start real estate investing, to build this financial foundation for herself. So Dayna, you talked a little bit about your welfare story, being in that office at that time and how that was a huge motivator. Along your journey, were there any other things that kind of highlighted you as to like, this is what I want to do. You had mentioned previously you wanted to help people. So talk a little bit about how multifamily and investing journey started out with creating that why.

Dayna:
So I needed to create something to leave as a dowry for my kids, should something happen to me. That was the first part of it. Nobody in my generation, in my family, who has done that. So I had to kind of create that, because we didn’t know what that looked like anymore. I only could read it in stories and say, “Why don’t we do that?” And so pick that up and try to do that. The second part of it is that I have been truly involved with foster care since I was in my very young, early 20s, 21, and I’m still currently involved and have recently just adopted a set of brothers in order for them to stay together.
But wanted to make sure that these young people as they venture out past 18, that they have a place and a path to go and affordable housing. And I thought I could provide some. If each one of my apartments could be an affordable house for a teen, then that was still me giving back.

Ashley:
Can you tell us what are some of the resources that you used to find out about real estate investing? Did somebody tell you about it and why did you specifically choose real estate along your journey?

Dayna:
I don’t remember the initial part, but I remember hearing Rich Dad, Poor Dad. And I had that book in my library for years. It’s just one of those books that I went and pulled it out. Like I’ve got this book, maybe I should read it. And so I started with reading that book and it kind of opened my eyes to, hey, I can do this a little bit differently. I don’t have to have a PhD. I don’t have to have a master’s degree. I can do this.
So I read that, which led me to follow another writer, which was One Rental at a Time. Someone told me about that and brought me that book and I read that, which led me to BiggerPockets. Then, I kind of dinked around in BiggerPockets for a little while and I said, “Well, I’m going to actually join this, just jump in and join this.” And when I did, I saw the multifamily part and I said, “This is exactly where I want to be.” And so I joined that group and man, it’s been awesome. It has been so awesome.

Ashley:
Just to clarify, did you join the boot camp before you got your first deal or was this after you had gotten a deal?

Dayna:
I joined the boot camp after. I was in the middle of a deal, but I had already had two apartments by then.

Ashley:
Okay, cool. Yeah. So getting the knowledge for that first two apartments, that was just from being on the BiggerPockets website. Were you in the forums? What are some things that a rookie investor can do if they’re trying to take the same path as you? What are some of those steps that made you feel comfortable and confident to actually take action?

Dayna:
Be prepared to jump off the cliff and just go with whatever goes. I think if they were to do it again, I would make sure that they definitely invest in their education piece. Read. Get something that makes you want to say, “Oh, I can do this,” or, “This is what I want to do.” It doesn’t have to be multifamily. It could be single family, it could be commercial, it could be whatever it is that you want it to be.
But make sure you find something that you are excited about because then you’ll continue to invest when it’s not so exciting, that you’ll continue to invest that time to get to the next exciting spot. And get with a group of people. That has been the most awesome piece that I ever learned is [inaudible 00:12:39] was an accountability group and I have an awesome accountability group.

Tony:
Yeah, I think surrounding yourself with other like-minded individuals, especially at the beginning of your journey is so, so important because the chances of you having someone in your life, in your close personal circle that’s also investing in small multifamily is probably pretty small for the average person, or that’s flipping or wholesaling or short-term rentals, whatever strategy it is you want to go after, the chances of you having someone is probably pretty small.
So when you can tap into these online communities, whether it’s BiggerPockets, Facebook groups or wherever you want to go, now you’ve got a sounding board, right? Now, you’ve got a group of people that you know who have already achieved what it is that you want to achieve, and that makes the goal seem more realistic to you.

Dayna:
It does.

Tony:
When you can shake hands with someone, when you know someone personally that’s already done it, gives you the confidence that you can do it as well. But Dayna, I want to set the table a little bit. I just want to make sure that I’m understanding the timeline here. So when did you get that first piece of real estate and just kind of walk through the timeline from there.

Dayna:
So I started this all pre-2016. It started with me purchasing my own personal property, kind of lining up like a year and a half before that. I lined up some things was doing with Rich Dad, Poor Dad, and I was able to get into my personal property. And it’s a blessing story along the way too. I refinanced and paid a bunch of things off. Then I came back on 2020 and got a HELOC because now I was ready to buy something. And I didn’t even know I could get this money without learning from my BiggerPockets group.

Tony:
Wait, so what year did you buy the house, the primary residence?

Dayna:
My primary house was bought in 2018. I refinanced in 2019 and paid off everything.

Tony:
And then you did a HELOC in 2020.

Dayna:
Did a HELOC in 2020.

Tony:
Wow, that is crazy. So I just want to pause here for a second just to make sure that our rookies are tracking, right? So you bought this home and within a year you were able to refinance to pull cash out, to pay off whatever it is you need to pay off. And you still had enough equity left in that property so that a year later you could go out and get a HELOC, which I’m assuming you then used to fund your real estate investments.

Dayna:
Correct.

Tony:
God. So guys, you hear people say that your primary home isn’t an investment and for some people maybe it’s not, but look at what Dayna just said. She very much leveraged her primary residence to fuel her real estate investing and I’ve met tons of other investors who have done the cash out refinance, who have done the HELOC to go out there and fund the purchase of their real estate business. So it is possible if you do it the right way. So Dayna, man, I love that. What a crazy three years for you, that was.

Dayna:
Then I turned around and used a small amount of that money to purchase my first triplex and I closed that deal on December 31st, 2021. So that was a triplex, two bedroom, one bath, with people already in it, paying rent. And then four months later, I took the other part of that HELOC and I fell into this duplex that we ended up making a triplex right near La Salle College. It’s a half a block away and it was also two bedroom, one bath and we built in the basement so it was a studio. And closed that in 2022.

Ashley:
So Dayna, let’s start with that triplex and kind of break down the numbers and dig into that. Maybe I’ll throw some rapid fire questions at you and we can kind of go into a deal dive here. But where was this located? Was this in your market? Where was the deal located?

Dayna:
The deal was located in my… My market is my home area, Philadelphia.

Ashley:
What is the purchase price on that property?

Dayna:
The purchase price was 253K.

Ashley:
And how did you finance it?

Dayna:
Regular mortgage in my name with 20% down.

Ashley:
Okay, and then that 20%, was that cash you had saved up or was that from your HELOC?

Dayna:
The cash was from my HELOC.

Ashley:
Okay, and what did you do with the property?

Dayna:
It was already fully rented, so I just did nothing.

Ashley:
Awesome.

Dayna:
I raised the rent. I think I raised it up $100 to get them, because they were below market rent, so they were all seniors in there, so I knew I couldn’t just jump all the way to the top or they wouldn’t be able to afford it. Once again, it was back to affordable housing and I got to really like my tenants. And then every year, I do something for them. So I rehab one area in their apartment and I raise the rent up 100 bucks. So I’m slowly bringing it up, but I’m also bringing my apartment up and they’re taking care of it and they love it.

Ashley:
What a great strategy, and let’s talk about that a little bit more of, you find great tenants and what you’re willing to sacrifice to keep them instead of raising the rent to get that max cashflow that you want, but instead of the longevity of having somebody that’s going to stay for 5, 7, 10 years is worth it rather than having a turnover every single year because you’re trying to really max out, or you get somebody in there who destroys it. So can you tell us how you approach them with this small rent increase and why you decided to actually keep those tenants in place?

Dayna:
Well, how I did it is I decided… After having conversations that I decided what my budget was going to be and there was the three apartments, so I said, “I’ll just invest $10,000 into it. That will be basically 3000 per unit.” And then I divided that in half. I said, “1500 is going to be for labor and whatever I can get done for the other $1,500.”
They were kind of small. So we started in the kitchens. Oh, and these ladies were [inaudible 00:18:07]. We didn’t do a complete remodel. We did a refresh. Some of it was painting the cabinets, replacing oven hoods, adding lighting, adding some extra sockets, painting walls, and one kitchen needed a new floor and we put in new flooring. So it was just little things that just brought into a new kitchen. They were so ecstatic.

Tony:
I was just going to say, right, they’re probably so appreciative of that, right, because whoever this last landlord was just collecting the rent checks and not really worrying about their quality of living.

Dayna:
Correct. Correct.

Tony:
But to your point, if they’re good tenants, you want to try and keep them. Ash, it makes me think for you, right, because obviously you’ve got a lot of long-term rentals as well, and I know some of yours are affordable housing. How do you strike that balance between trying to maximize rents versus maybe keeping them a little bit lower, but having that tenant that you know is going to be a good tenant, how do you strike that balance?

Ashley:
100% would rather get less rent and have a better tenant that is going to stay a long time, not have to deal with the turnover. Even if somebody keeps the apartment in perfect condition, we just had a police officer move out of one of our units. She had only lived there for nine months. She had signed the lease month to month because she was trying to buy a house and she took wonderful care of it. Well, she put holes in the wall and at the time that she moved in, there was a third party property management company managing the property. And they had told her, “When you leave, you have to fill the holes with mud.” Well, she did that. She followed the rules. Well, it has made it worse for our contractor because now he’s trying to sand them down. The paint didn’t match. All this horrible stuff has happened and it was just like, “This was supposed to be the perfect turnover, ready in a day. Here we go, next person in.”
But because there’s always these little things that can come up with any turnover, so I would rather eliminate turnovers and just getting a good tenant in that’s going to stay long and that’s going to not trash the place and that continues to pay. They are worth keeping and not increasing the rent. It was probably like my third rental maybe, and it was the house that I used to live in before we built our house. And Dave had come to me and he was so excited. He was like, “I rented out the house. You don’t have to worry about it. I took care of it, everything. They’re going to pay $700 a month.”
My jaw dropped. I’m like 700, we could get $1000. Utilities are included. And I just was like, “Are you kidding me?” And I was so devastated. That was in 2016 and they are still there. We have not had one turnover in and they take great care of the place. They never need any maintenance done, anything, they take care of it. And so looking back at it now, I would way rather have that than have somebody new in every single year.

Tony:
Yeah, it’s weighing that balance, right? Now, Dayna, I’m curious for you, because you jumped right into multifamily. I think a lot of working investors who are listening feel that maybe they need to start with a single-family residence first, but your first purchase was a triplex. What made you feel that that was the right strategy for you and how did you build that confidence to start with three units from the very beginning?

Dayna:
I think when I was in my reading, I was understanding this concept that you could start single family, but it’s either 100% rented or a 100% empty, and that just weighed in. I said, “Well, that’s not good.” But if you had a multiplex, your vacancy is a lot lower. The chances are them both being empty at the same time are not there. And also, you always have some income coming in. In my area, because Philadelphia is a pretty populated city, duplexes and triplexes are common. They were in the same price as a single-family, small row home. So I was getting more bang for my buck for the amount of money by going into a triplex.

Tony:
Well, let’s talk a little bit about that, Dayna, because you said that they were common in your area, which is the opposite of where I’m at. There’s no small multifamily where I live in California. But how did you come up with your buy box? How did you know what type of multifamily was the right type of multifamily for you, location, size, all those things. What was your buy box? How did you come up with it?

Dayna:
Well, I started with just what my pricing range was. I didn’t have a whole lot of money, so I wanted to put like $50,000, $60,000, my 20% down. So they kind of told me what my range was, 250, 300. So it was enough money for any small row house, but then I saw triplexes and duplexes in the same amount so I just became a little greedy and just said, “Okay, if I could do this, if I could do this and get it, would I be willing to pay a little bit extra?”
Because it wasn’t that much. We’re talking about $10,000 or more to get into a triplex versus a single family home. So I said, “Well, let’s go for the triplex. You want to get there, why not?” Then, there’s three people paying and for sure I won’t have to pay the mortgage because somebody will be there to be able to pay it. And that’s kind of how I got there.

Ashley:
When you were looking at markets and the location of finding multifamily, what were some of the factors you considered? Did you hone in on a specific zip code or area code or neighborhood when you were searching?

Dayna:
I did. So one of the things when they’re teaching you about finding your market, first thing I needed to do is make sure that it was like in 30 minutes of me, because I knew that we were going to have to be hands-on with this. Well, 30 minutes is still inside of the city in Philadelphia, unfortunately, so you can’t get out of Philadelphia in 30 minutes. So it just made sense to find an area that was really close. I didn’t necessarily have a particular neighborhood. There was just some that I was going to stay out of, but I just looked around and then I found some not too far from my house, and I still look around all of Philadelphia, but I just kind of look at my buy box now and what the area in the neighborhood. So Philadelphia is my market.

Tony:
Did you ever look outside of Philadelphia or were you committed to just investing in your backyard, and if so, why?

Dayna:
I have glanced, but I’m not there yet because when I go outside of Philadelphia, the price starts to go up. So I’m just not there yet.

Tony:
Gotcha.

Dayna:
And I want it to be close where I can still have hands on. Since I’m just starting, I just needed it to be close that I can shoot across town if I need to or not, didn’t want to be too far.

Ashley:
Dayna, how many times have you had to shoot across town to take care of your property?

Dayna:
Not very often.

Ashley:
Yeah.

Dayna:
Not very often. I’ve got some good tenants.

Ashley:
Good.

Dayna:
I’ve got some good tenants. Now, they’ve had some issues, but I also learned about my vendors in my boot camp, and I already had that, but I didn’t have everything organized, so they helped me organize that. So I have some vendors that, when they call me and tell me something’s going on, I call them and tell them, “Go check it out. Let me know what we need to do.” They give me the rundown of what we got to do, and most of the time, they can take care of it and it doesn’t require me.

Ashley:
I think that’s a common misconception with a rookie investor is that it’s, you have to invest near you and it’s scarier to invest out of state. But ultimately, most of the time, you are not going to be going to your properties anyways. You’re going to be having a handyman go there. In some circumstances, maybe you’ll go and you’ll assess the situation, but there’s nothing you can do anyways. You have to call the plumber, so you might as well just send the plumber in the first place instead of going there.
One thing is definitely convenient if you do have a turnover, being able to show it yourself, things like that. But the difference between having a property close to you and a property out of state or out of your market that’s farther away, it can be exactly the same as far as finding those people who are boots on the ground. And a lot of times, you don’t even need to go to the property at all. You will learn and realize, and sometimes you just go because you’re curious.

Dayna:
My other two choices that I haven’t… I just look, but I’m not there yet, is in North Carolina around the Charlotte area and Atlanta, Georgia. And that’s because I have some friends and families around that area too that I can kind of… If I need to pop in there, I have a place to land in and some confidence that they could help me in an emergency.

Ashley:
Dayna, when you were searching for properties, what was your buy box? What is your list and has it changed? I mean, the first property you bought was during COVID and after that the market has definitely changed. So could you go through what your buy box is and how you’ve had to maybe pivot or change it since your first investment?

Dayna:
My buy box was small, multifamily, two or three. I figured I could handle that. Somewhere under 300K initially. Now that I have two of those, then I went into, I’m going to call it [inaudible 00:26:50] it’s a transitional house, and that’s something that’s very different and I needed to purchase that, and that’s part of my why. We can get into that in a little bit.
But my box is changing. Now, as I’m getting more confident, I want to go into a bigger unit. I always like to go really small, but sometimes the big things land in my lap. So I say like four to eight units, but I’m looking at a 16. So that’s huge, huge, huge. But it changes when I get to those next levels and the next level gets bigger and bigger.

Tony:
So as you talk about leveling up, have you only used the HELOC as your debt, like 20% down HELOC to fund the purchase or have you evolved into other types of debt and funding as well?

Dayna:
Well, I did use other funding. So the first triplex of course was 20% down, HELOC, my money, and then a regular mortgage in my name. The second unit, I used a hard money loan and I got money back to actually do the remodeling, and then I refinanced that out into a regular mortgage, and that’s under my LLC.
And then the third purchase was really, really creative. Really, really creative. But I got a multifamily, residential commercial home [inaudible 00:28:07] because it’s all of that. It’s a home that’s under residential. It has 13 bedrooms and 13 bathrooms. It is my transitional home. And so that was creatively getting that financed under whatever title somebody wanted to put it under, but we got that and I got that under a 30 year also.

Tony:
Okay. So the second property, the second triplex, that was a rehab project for you?

Dayna:
Yes, it was.

Tony:
Gotcha. Had you ever managed a rehab before that?

Dayna:
Nope.

Tony:
So walk us through it quickly, Dayna, what was that process for you like managing a rehab for the first time? Let’s just start with the first question. How did you come up with your scope of work? How did you identify, here’s what I want to be done inside of this house from a rehab perspective?

Dayna:
Well, let me tell you, at the beginning, I didn’t even know what a scope of work was. So they had to explain all these things to me really quick. I said, “Okay, I can do this.” So basically, I had to list out what I wanted and I had a friend who’s been my main contractor for my house, go through the house with me, tell me what it needs. I’ve been through a lot of projects on my house with him, so I’ve learned how to start picking up some of the things that he needs up front. And we listed it out. I found another contractor group who was local and told him this is what I needed. He needed to start and I needed to start.
And so he agreed for the money I had and said, “This is what I got and this is what needs to be done and can you do it?” And he said, “Yeah, we’ll get it done.” So that’s kind of how we did it and got everything listed that we needed. Unfortunately, here’s one of the failures in that, is that I didn’t realize how much I needed to manage them. So things didn’t get done exactly the way I wanted and things didn’t get completed. So I had to end up letting him go in the midst of it and then rehire somebody else [inaudible 00:29:57] threw me out of budget a little bit and get that done.

Tony:
First, let me say, Dayna, totally normal to have to fire a contract in the middle of a job. I think every real estate investor who’s done enough rehabs has probably done that before. But how did you find that contractor initially, the one that you had to fire, and then how did you find the replacement for that person?

Dayna:
Initially, I found it through a friend who had a friend who was a contractor. So it was just kind of word of mouth and then came over and had him scope out, have a conversation, seemed like we could make it work, had enough connections between the friend that we thought it ought to work.

Tony:
And then the final contractor who finished the job?

Dayna:
I went back to my same guy who does my house.

Tony:
[inaudible 00:30:35].

Dayna:
I said, “You need to finish it for me.”

Tony:
Man, managing a rehab is definitely a big experience, especially when you’re doing three units. I guess what advice would you have to rookies who are looking to start that first rehab project, knowing what you now know?

Dayna:
Make sure you are checking your property at least every other day to make sure that you’re seeing the progress that you want. Also, make sure when they need purchases, that you understand what the purchases are for. Because when you get groups in there, they like to spend money at Home Depot just for everything, but when they walk away, they take everything that you bought. So just managing that and how much stuff you can take back and not let them walk off as you paid for that plus services, plus they took all the supplies.

Ashley:
Yeah. As detailed as you can be into what your agreement, your arrangement is, and I’ve learned that lesson the hard way too. And building out that really detailed scope of work and who’s responsible for what. I mean even delivering the materials, do they have to go and pick up the materials? Who’s paying for the materials? And then I saw someone had posted on Instagram, I can’t remember exactly who it was, but they had posted a scope of work that they were building for a project, and they said, “My first scope of work I ever did, it said new kitchen cabinets, and now it says, demo existing cabinets, new shaker style cabinets. There’s going to be four uppers and five lowers that assemble cabinets attached to the wall. Add hardware onto cabinets, put countertops on.”
It was very, very detailed as to every single thing instead of just installed new cabinets. And then they even said like, “See attached layout for the cabinet design,” and things like that. So you’ll learn more and more as you go on, and unfortunately, you’ll pay for that learning experience in mistakes. But definitely follow other investors that are doing rehabs, watch their Instagram stories. So many people share just their project management screens as to, here’s the things that I’m doing, here’s what my scope of work looks like, here’s the checklist that I’m using.
And I have found that to be a great resource along with even signing up for different softwares. So different softwares will send out newsletters. They spend so much money in research where these newsletters will give you like, here’s our checklist for doing a rehab. Here’s our checklist for a turnover. Here’s our checklist for a lease agreement. The property management software companies do really, really great newsletters with a ton of these checklists and information and things to help with your systems and processes too.

Dayna:
Yep, I agree.

Ashley:
Before we wrap up here, you did touch on the transitional housing and I’m very, very curious as to what that is, if you could describe that more for me, please.

Dayna:
So the transitional housing, like I said, it was a box building. We’re not sure-

Ashley:
What do you mean, it’s a box building?

Dayna:
It looks like a house, but it’s a real huge building. So like I said, it’s 13 bedrooms and 13 en-suite bathrooms.

Ashley:
Wow.

Tony:
It’s almost like a hotel.

Ashley:
Or like a boarding house.

Dayna:
It looks like that and it had been used for a boarding house at one time. But I didn’t want to buy it as a boarding house because those are hard to get licensed. So I couldn’t buy a boarding house. I had to buy a residential house and it couldn’t be commercial. So it was really interesting how we were going to use this. So based on how we were going to use it, that it was going to be for a foundation I’ve called Envision Success.
It was going to be a program house. So it’s still under residential, but it’s kind of used commercial where this is going to take in transient young people, 18 to 24, who have aged out of foster care or the juvenile system, something like that, out of DHS, but need a little bit more support while they’re trying to get on their feet to get their own housing.

Ashley:
Wow, that is super cool. How did you even find out about an organization that you could work with to do this?

Dayna:
Two things. One, it’s my organization. And two, the teens would age out of my care at 16, 17, hitting the streets. And they’re just kind of so tired of the DHS. I call it the ankle bracelet. They’re just so tired of one more social worker, one more case worker, one more house to go to. And they would just hit the streets unprepared. And then at 18 when there was no more funding, they would like… We don’t have any way of getting help. And so there was an act that was done about five or six years ago that allowed funding between 18 and 24 if they come back to DHS. So now they had to find housing for these people and couldn’t find it. Well, now we’re here.

Ashley:
So now your organization connects with the funding and now you’re trying to purchase this property. So how did you end up to get the finance for this?

Dayna:
We got it as a residential home, not commercial, and we went through several different people that I’ve found on BiggerPockets.

Ashley:
Wow.

Dayna:
Different brokers. Some tried this, some tried that. Somebody else in the back pocket could do this, and we got it together and it closed September 25th, 2023.

Ashley:
Wow. Congratulations.

Tony:
Congratulations [inaudible 00:35:54]. Dayna, I think you illustrate something that we’ve talked a lot about here on the Ricky Show is that oftentimes new investors make the mistake of going to a bank, going to a lender and saying, “Hey, I need a 20% down loan to buy this thing,” which isn’t the correct approach. The correct approach is to say, “Hey, I’ve got this property. It’s 13 bedrooms, 13 en-suite bathrooms. What’s the best loan product for me to buy this property?”
Because your goal isn’t to pay 20% down. Your goal is to get the best loan product for that property. So it sounds like you went to all these different lenders, brokers, banks, et cetera, explaining your situation, and then they were able to give you the best loan product for you. So I just want to get a little bit of clarity on the loan product, Dayna. So what was the down payment?

Dayna:
It was still 20%.

Tony:
20% down. And it was a 30 year loan?

Dayna:
Yes, under my LLC.

Tony:
Under your LLC. Interesting.

Dayna:
Yeah.

Ashley:
What was your interest rate?

Dayna:
8.6.

Tony:
That’s actually not bad. 2023, on a commercial loan. My last short-term rental I bought was at like 8.7 on a single family that was under our LLC as well. So the debt is under your LLC, so it’s not even going against you. Did they look at this as like an income generating property or how did you get qualified for it? Are they looking at the potential rents to underwrite it that way?

Dayna:
It was confusing, yes. In the long term, yes, they did look at that, but it took a lot of convincing. Everybody had to see the vision, and when they saw the vision, people started jumping on it. But I will tell you from the beginning that banks aren’t the number one place to go for your funding. I found that through BiggerPockets, if you work with one of your brokers, someone’s going to give you a bigger picture of how to do it.
I do get some things through banks, but it didn’t come I walked into the door of the bank. It came from my broker that says, “Try this particular bank because we have this relationship and they do things this way.” Not for me walking in the door saying, “Hey, I want to apply for a loan for a house today.”

Ashley:
That’s almost like an insurance broker. Instead of going to a State Farm agent, you go to insurance broker who can shop your insurance out to multiple different companies. Yeah, that’s a great advice for doing that for your mortgage too. Dayna, let’s talk about the numbers on this building. What was the purchase price?

Dayna:
Let me tell you the first, it’s real interesting. The listing price was 575, too high for this neighborhood. Way too high for the neighborhood. Couldn’t figure out why, but after negotiating, we got it down to where I was willing to get it at 395.

Ashley:
Oh my God.

Tony:
Whoa.

Ashley:
You’re a great negotiator.

Dayna:
Yeah, yes.

Tony:
Yeah, I want you on every deal that I’ve got moving forward, Dayna. I’m not buying a single deal until I run it past you first.

Dayna:
Yeah, yeah. And then we put 20% down, and then it just seemed like there were blessings along the way. Wanted to get it down there [inaudible 00:38:44] then we had to come up with almost a 100K. And my first silent partner is my mom, and she invested with me.

Ashley:
Shout out to mom.

Dayna:
Shout outs to mom. Yeah. And so we came up with the money together, and then it seemed like when we struggled to get all this money together, we had it, but then different things came back and we ended up getting refunds back. They didn’t need this amount of money, didn’t need this amount of money. So it was actually a blessing on how we got it.
But we got into it for 395, 20% down, and yeah, the building is ours. And we’ve got a decent mortgage on it, and we have 13 rooms to use. We’re going to start off with just 10 initially because we’re going to use one as an office, and then two in the basement needs some work on their emergency egresses before we can use those. But for right now, we have 10. 10’s plenty.

Tony:
Yeah, 10’s a lot. But Dayna, I’m sure the question that’s on everyone’s mind right now is how the heck did you negotiate almost a $200,000 discount? What did that conversation look like? What’s your advice for the rookies that are listening?

Dayna:
I think, I’m not sure of the grades. They talked about different neighborhoods being A, B, C, and D grades. So mine would’ve been in a D area if there was, or E. The price was way too high for that. Okay? It’s next to a house that might be 100K. It just doesn’t work that way. There was nothing else comparable like that in the area. So I did know my comps for that. Then, the fact that nobody in this particular area… Well, when I was trying to finance it, it’s not going to be an Airbnb. It’s not going to be a vacation home because this is not the area those people were coming for vacationing. Not at all. So there was no one coming for this.
So if you want me, these are the things. And I walked through all the things that were wrong with it. One, that it needed the HVAC to be fixed. It had a fire in it. Their windows were boarded up. There was no emergency exits. There were a lot of things. So I said before I could even look at it, some of these had to be taken care of. So he was taking care and said, “Well, how about we just wheel and deal and go down?”
My number was like around 425, but he had already dropped it down to 495 without me getting there, so that if you take it for 495. And so then I started giving him my long list of stuff, and then I just said I would do 380. And that’s my magic number. That’s where I came up my house. I just picked 380 because I know he was going to work me up. And he said 395 is where he could go. And I said, “Okay.”

Tony:
So Dayna, two super important points to call out there. So first, the listing price is just a suggestion.

Dayna:
Correct.

Tony:
And just because someone lists something for a certain number doesn’t necessarily mean that either, A, it’s actually worth that or B, that that’s the only number that they’re willing to take. And you don’t know what they’re actually willing to take until you start talking with them. Every property has a number where it works, and it’s up to you to try and figure out where that number is, and then to communicate to the seller why the number they have doesn’t make sense and why the number you have does make sense. So kudos to you for sticking to your guns and not, I guess, giving up just because the number was so far off from what you wanted, right? We’re talking a $200,000 difference almost. It’s a big difference.
A lot of investors would have just… They wouldn’t even have looked at that deal because it was so far off from where they needed. So kudos to you for doing that. And then second, I would assume that part of the reason that that seller was maybe so flexible was because of where we’re at in the market cycle right now. With interest rates in the eights, right, like what you got on this property, there’s less buyers out there right now.

Dayna:
Correct.

Tony:
So the seller probably knows that. So it makes them a little bit more willing to sell this property to you. So even though you’re buying this at an eight, Fed just said yesterday, I saw a bunch of stuff floating around the internet, that they’re going to start doing rate cuts again next year, right? So imagine what happens if you can take this 8% interest rate and you refinance down to a six. How much more juicy does that cash flow get?

Dayna:
Right.

Tony:
So for all of our rookies that are sitting on the sidelines waiting for that perfect moment, don’t do that. Do what Dayna did. Go out there, hustle, find that right, deal, negotiate. And if it cash flows at an 8%, imagine what it’ll do at a 6%.

Ashley:
I think that’s a common misconception of what you explained right there, Tony, as to now can be a great time to buy because you’re getting stuff at a better price, and you can always go and refinance later. I was at a kid’s birthday party on Sunday, and there was a mom talking about how they wanted to buy a house, but it made her sick to her stomach about the interest rates. And she just could not pay the interest rates, and they were going to wait until they were lower.
But what that means is you’re going to pay a higher price later on, even though you’re getting that lower rate, where someone could buy it now for a lower price and then go and refinance when the rates do drop. So I think that’s a huge misconception that people don’t understand, and they’re not doing the math on it, I guess. And I mean, you are taking a chance. There is the chance that interest rates just continue to go up and up and up, but hopefully you bought the property, that it is cash flowing and it’s a deal as it is. So if rates do drop, it just becomes a juicier deal, and that’s more fat on the steak for you.

Tony:
And say, the rates do go up, say rates go to 10%, now you’re going to be kicking yourself that you’re paying 10 instead of paying eight. So it’s like either way, if the deal makes sense today, you should move forward with it.

Ashley:
You know what, one more rant on that, Tony, real quick. As I was listening to a podcast today, this morning, taking the kids to school, and it was talking about sub to and how there was somebody who went and purchased a property for 850,000, and they were so caught up on the fact that they were getting it sub to, where they were getting this low mortgage payment, this low interest rate, and they were so excited that they paid the 850, what that person wanted.
The same day they closed, a house next door to them, which was a comparable property right next door, sold for 650,000. That’s a 200,000 difference that they overpaid for their property just to get that sub to financing. So I feel like it gives you something to really think about as to, are you really overpaying? I mean, you’re going to owe 850,000 on that property until you pay it off, where if you get it for 650, and even though you have an interest rate, it’s still less that you have to pay on the property or have to owe on the property. Okay, I’m done with my rant. Back to you Dayna.

Tony:
We need a new segment. We got to call it the Rookie Rant, and then Ashley, you can just go off the rails for a few minutes at a time.

Ashley:
Okay. So Dayna, to kind wrap this up, what are you going to be cash flowing on this property? What is this grant going to be paying per a bed for this property?

Dayna:
Oh, boy. Okay. Numbers here. Okay, well, so to make the numbers easy, we’ll just stick with the number 10. Basically, right now we can command for… We’re just opening it up actually this month. So the rents will command… The money for the program will command anywhere between $2,200 and $2500 per room.

Tony:
Wow.

Dayna:
And that’s because there’s a service that comes with the place.

Ashley:
Okay, I’m not even doing math in my head, but I’m thinking, “Okay, you got the property for 395. You’re getting $2,500 a month-

Dayna:
[inaudible 00:46:07].

Ashley:
… times 10.”

Tony:
Per room.

Dayna:
Per room, yes. And then my mortgage right now, currently for that is 2790, I believe. 2790.

Tony:
What the heck?

Ashley:
So almost one room will cover your mortgage payment, and then you’re most likely paying utilities for the property.

Dayna:
Right.

Ashley:
Yeah.

Dayna:
So there’s a couple of things going on in there. There’s a little split between businesses there. So for my part, for the real estate, I’m renting it to the program for 4,500, and then the program will do their existing part of that, and they have expenses. But to pay to my real estate side, they’re paying $4,500.

Tony:
Yeah. But you own the program as well, right?

Dayna:
I’m a part of the program. I don’t own it. It’s a nonprofit. So I’m a part of the program, yes.

Tony:
But it just goes to show, right? Like, man, when you find the right deal, you’re talking a 395 purchase price and you’re renting out each room for almost what your mortgage is, and there’s 10 of those rooms. That’s a pretty good spread.

Dayna:
Yes.

Tony:
It reminds me of, we had an episode a while back with DeVonna Reed and her and husband focused on sober living facilities. And same, she would go out and buy a single family home, five bedrooms, and she was renting out by the bed. Not even by the room, but by the bed, and that allowed her to really juice her returns. And that was episode 265 if our rookies want to go back and listen to it. But Dayna, I’m sure everyone listening to this episode right now is on Zillow, on Redfin searching for boarding homes for sale in Philadelphia to see if we can do the same strategy. And just quick tidbit, there is one for sale right now. I just searched boarding on Zillow.

Dayna:
Of course you did.

Tony:
And there’s one for sale right now, $350,000. And it’s got six bedrooms, 3000 square feet, commercial kitchen so there you go, guys. When this episode comes out, go check that one out.

Ashley:
The next question to follow up to that is Dayna, does your organization go nationwide, do you help connect all the dots to provide for this?

Dayna:
We are planning for that. So it’s also pretty young too. So we are planning. We’re just starting in our backyard and then those cities where we have connections. But yes, that will go also. So it’s kind of a takeoff. It’s going to take more than just me to do all of that, but that is the plan. But the next thing is, like Tony has said, is that I want to get another building for my senior home. That’s the same thing, the same concept.
And then the final one would be for, it’s called a forever home, because I also have special needs kids that come through foster care and sometimes as I’m getting older, my kids don’t want to always take on the burden of the kids, but they don’t want to see them go into foster care or some other type of care. So providing a forever home for the kids will be my final goal.

Ashley:
Well, Dayna, what an exciting way to wrap up this show here. Helping people, providing a service to your community, and also cash flowing-

Dayna:
Yes. Yes.

Ashley:
… a great amount. Yeah. Well, Dayna, thank you so much for joining us on this week’s Real Estate Rookie podcast. We really enjoyed having you on and learning from your story, and thank you so much for providing such incredible information for us and our listeners.

Dayna:
Thank you.

Ashley:
If you want to connect with Tony or I, you can find our social media handles below in the description. And if you want to learn more about Dayna or connect with her, you can also find that information there. I’m Ashley and he is Tony. And thank you for listening to this week’s Real Estate Rookie. If you haven’t already, join us on Facebook in the Real Estate Rookie Facebook group. (singing).