Blog

When it comes to business cybersecurity, there’s no such thing as “too small a target.” If your company uses poor cybersecurity practices, leaving sensitive customer or company data at risk, hackers can exploit those vulnerabilities to accomplish their goals—no matter how big or small your company is.

In the same way, however, cybersecurity doesn’t have to require major capital to implement. Below, eight members of Young Entrepreneur Council each share one practical, affordable way a company of any size can protect itself and its data from hackers and phishing attacks, and why these methods are so effective.

1. Set Strong Password Guidelines

A practical defense would be to set strong guidelines when employees are creating passwords. This includes mandating that all personnel use strong, unique passwords for each and every account they access. Password managers are another option for businesses looking to safeguard employee credentials and lessen the likelihood of data loss due to compromised passwords. A company’s data may be protected in large part by training personnel on cybersecurity best practices, such as avoiding questionable emails and websites. – John Hall, Calendar

2. Routinely Update Your Software

Regularly update your software, including operating systems, applications and security software. Software updates often include important security patches that address known vulnerabilities and protect against new threats. By keeping their software up to date, companies can significantly reduce their risk of being targeted by hackers or falling victim to malware and other cyberattacks. Regular software updates can be easily scheduled and automated, and many software vendors provide alerts and reminders to notify users of new updates. Additionally, companies can take advantage of free or low-cost vulnerability scanning tools to identify any potential security issues in their systems and prioritize which software updates to apply first. – Devesh Dwivedi, Devesh Dwivedi

3. Train Employees On Cybersecurity Best Practices

One of the most effective ways to protect against hacking or phishing attacks is to educate employees about how to identify and avoid them. Employees should be taught how to recognize suspicious emails, links and attachments, as well as how to report any suspicious activity. Employees should be taught to understand the benefits of regular software updates, strong passwords and antivirus software. This can be done affordably through regular online training sessions, workshops or courses. By educating all their employees, a company of any size can significantly reduce their chances of falling victim to hackers and phishing attacks. – Eddie Lou, CodaPet

4. Implement Two-Factor Authentication

One of the most affordable ways for a company to protect itself and its data from hackers and phishing attacks is to implement two-factor authentication across the board. This adds an extra layer of security when stakeholders in or outside of the company access needed information and prevents any sort of unauthorized access. This authentication process requires users to enter an additional password or code sent to their personal devices or emails immediately after they attempt to log in. So, even if hackers gain access to users’ login credentials somehow, it’d be difficult for them to bypass the extra layer of security as they’d need the real-time system-generated code to do so. – Stephanie Wells, Formidable Forms

5. Establish Your ‘Normal’

At my company, we have established a communication protocol that’s our “normal.” Anything that is outside of normal is immediately brought to the attention of the entire company. For example, we use Slack all the time to communicate. Once, a phisher contacted an employee instead via email with an email address similar to mine, and so it was immediately suspicious. We talked about this in our company and made everyone aware of such attacks. This simple communication strategy and the openness and willingness to talk about security make a huge difference to us—and it’s free! So, look for simple ways to educate people and communicate in a consistent way so that anything different is caught fast. – Blair Williams, MemberPress

6. Safeguard Cardholder Data

Don’t save credit card information in house. Cardholder data that is stored in a company’s own database is exposed to several internal and external risks, with potentially devastating results. If a company does not safeguard cardholder data, they are at risk of losing customer confidence in addition to creating a slew of legal problems. Instead, save everything in a merchant gateway vault. This way, even your employees don’t have access to the full credit card numbers. They may have access to a security token but not the full card number. Check for updates regularly and always turn on two-step verification for all employee accounts for added security. – Shu Saito, All Filters

7. Schedule Regular Backups

Schedule regular backup and recovery times to ensure that data is fully recoverable in case of an emergency. Hackers are getting increasingly creative by the day when it comes to cyberattacks, inventing ways to bypass defenses like spam filters and infiltrate vulnerabilities. A good idea would be to back up your data in the cloud. Platforms like Google Drive File Stream can help you save files stored on your computers to Google’s cloud backup system. Having an external backup hard drive also allows enough space for these utilities to function correctly. – Brian David Crane, Spread Great Ideas

8. Leverage An Encrypted File-Sharing System

One practical and affordable way business leaders can protect sensitive company data is to use an encrypted file-sharing program. Hackers and phishers will have a much easier time accessing this information if it’s shared through email or text messages. You can reduce the chances of this happening to you by investing in a tool where company data can be safely transferred and stored. Most programs are extremely affordable and can pay for themselves if they prevent just one cyberattack. – Daman Jeet Singh, FunnelKit

Ashley:
This is Real Estate Rookie Episode 275.

Tony:
So you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people’s capital. How many total investment deals have you done since that first one?

Mike:
So I owned four and I’m under contract on two right now, one of which I have already assigned. I assigned it the same day. I went under contract at 1,236. This was last week. 1,236. At 932 or 925, I assigned it for a $50,000 profit.

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

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And today I would love to shout out someone by the username of Mona Cici. Mona left us a five star review on Apple Podcast. She says, “Love it! With an exclamation mark. Thank you for sharing all the great information. The stuff that you share is so down to earth and it makes real estate investing seem achievable. I’m two years into my investment track and I don’t miss an episode.” She just says that she loves if we could do an episode about some spouse works and things like that. But she says, “Thanks again for the amazing podcast.” So Mona, we appreciate you. And for all of our rookies that are listening, if you can, please take the 37 seconds that it takes to leave a review on Apple Podcasts or Spotify. The more reviews we get, the more folks we can reach. And the more folks we reach, the more folks we can help, which is what we love doing here.
But I’m super excited for today’s episode. Honestly, Ash, it’s probably one of my more favorite episodes that we’ve done. I loved Ava Yuergens’. I don’t know which episode she was, but she was such a young hustler. But Mike is like, he is the epitome of what is that saying? It’s like, “I find that the harder I work, the luckier I get.” I don’t know what the exact saying is, but there’s a quote out there about people who work hard tend to get luckier. And Mike is the total epitome of that happening. He’s found private money, he’s found partners, he’s found deals all because of he just happens to be at the right place at the right time, but it’s all because of how hard he’s working to make that thing happen.

Ashley:
I think something that I realized from that was that these were all in scenarios where he was working. It wasn’t like, “Oh, we love meetups. We love networking events too.” Those are great and you’re going to make connections that way. But it wasn’t any of those scenarios. It was all him taking action and working on his business when these things happened. So I think it’s really awesome to listen to those things too. And Ava’s episode was episode 271. So if you guys missed it, you can go back.
So before we bring Mike on, I just want to highlight too that one of the great things about this episode is the private money and the OPM, using other people’s money and how Mike unintentionally got somebody to offer to be his private moneylender. So listen to what he did to provide value to this person without even thinking that this person would offer him money in the end.
Well, let’s give you the official welcome to the show, Mike.

Tony:
Yeah. Welcome to the Real Estate Rookie Podcast, brother.

Mike:
Thank you so much. I’m truly honored.

Ashley:
Well, we’re so glad to have you here. Can you tell us just a little bit of your backstory and who you are?

Mike:
I am from Clayton, North Carolina, little town outside of Raleigh. I recently made the transition down to Myrtle Beach, South Carolina. I started in my investing journey in 2020.

Tony:
It’s a great time to start.

Ashley:
Yeah. And what made you start then? What was that kind of moment that happened for you?

Mike:
I’m not sure if it was an epiphany or kind of like a come to Jesus talk with myself, but I hit that crossroad where I was like, “Okay, I can keep going down this path that I’ve been on and I’m going to get the same results, or I can change the game up and see if I can better my life.” I was not somebody who was big into finances. I honestly was a day by day type of guy, like paycheck to paycheck, I’ll figure it out eventually. And then 2020 happened.
I think I can accredit a lot of it to a good buddy of mine, Caleb Kennedy. He was the first person that I ever had a finance talk with. He made being frugal look cool. Instead of going out and on the weekends and stuff, he’s like, “Mike, nah.” He showed me, I believe it was his Robinhood account, and it had a very significant amount of money in there. I knew at the time we made about the exact same money a year and my account didn’t look anything like his. So I was like, “Man, how’d you do that?” He’s like, “I’m cheap. I don’t spend money.”

Tony:
Yeah. Mike, I love that story because you said he made being frugal look cool. And that is such an antithesis to what society kind of promotes. Me and a friend were talking the other day, and it’s like there’s so many people on social media who have these big followings. A big part of the reason that they’re followings are so big is because they’re posting wads of cash, and, “I got this and I got that,” and that’s just not my personality. I’m not a flashy person like that, but that’s what a lot of people were drawn to for whatever reason.
But I think if we can all do a better job of normalizing frugality and making that the cool thing, and exactly what you said where it wasn’t necessarily the car that he was driving. It wasn’t necessarily him going out on the weekends, all these crazy things. What really impressed you the most about him was his Robinhood account. And imagine if all of us had to walk around with our net worth or our Robinhood account numbers floating on top of our head and people seeing that as opposed to the clothes we wear or the cars that we drive or the neighborhoods that we live in.

Mike:
100%. I mean, it was a game changer for me because I was one of those people. I drove a BMW. It was literally paycheck to paycheck. I never thought about my retirement. I never thought about, “Hey, if I have kids, it’s going to cost 2,000, 3,000, $4,000 a month. I’m not saving 2,000, 3,000, $4,000 a month. So what am I going to do?” And so that was in February of 2020, I was like, “Well, I’m going to be cheap.” And I eliminated as many bills as possible. I started tracking every single penny that I spent.

Ashley:
How were you tracking that mic? Were you using Excel, an app or something like that?

Mike:
The good old-fashioned way, pen and paper.

Ashley:
Yeah?

Tony:
No way.

Mike:
Yes, sir. Yep, I have books now. So I literally just started writing down everything that I spent. Each month I would try and improve it, “Okay. I spent this much on gas. I spent this much on food. Let’s see if I can knock a little bit of this off.” And at the time, I was still body building, so my food was very basic. So I’d go and try and find the cheapest chicken, I’d try and find the cheapest rice, I’d buy it in bulk. 20, 40 pound bags of rice. I cut vegetables out. I was like, “Man, I just need protein and carbs and fats. Sorry, the greens ain’t working no more” and just made it as cheap as possible and I started paying off debt, because I did have some credit card debt.
I had that car, which I ended up selling, getting rid of when the economy went crazy and used car values went up. I didn’t have to pay anything to get out of it because at the time, I think I owed 26,000, 27,000 on a car, which was, now I look back, I’m like, “Jesus, Mike, if you just had the money you spent back then, you’d never have to work a day in your life.”
So that was at February. I did not own… I’d never even thought about buying a house. As bad as this seems, I didn’t think I’d ever be able to because I didn’t keep up with my credit. I used to be ashamed of all this. But now I look back and I’m proud of it because it led me to where I am today.

Tony:
And Mike, just really quick. I don’t think you should ever be ashamed of that, right? It’s like every person has a backstory. None of us would be who we are today without that backstory. So there is a high possibility that you wouldn’t be on this podcast with us right now having this conversation if it wasn’t for those decisions that you made and what you feel were mistakes if those mistakes didn’t happen. So I think there’s always a lesson to be learned. But one thing I just want to ask before we keep moving. So you went on this journey to radically reduce your monthly spend. You don’t have to tell us the exact numbers, but just were you able to cut it in half? Was it like a 25% decrease? How much were you able to bring down your expenses over that timeframe?

Mike:
Probably little over $2,500 a month.

Tony:
Wow.

Mike:
Yeah, that’s what I was able to save per month after. So I reduced it by $2,500 a month.

Tony:
Let me ask another question. Ash, I want to ask this to you, and then Mike, we can go to you afterwards, but there’s always this debate in the world of personal finance. You hear someone like Grant Cardone who says, “Don’t worry about saving money, just worry about exploding your income.” And then there are people like Dave Ramsey on the opposite and the spectrum who say, “Stop buying that $5 coffee every day.” Where do you fall, Ash? Where do you think is the right balance to strike between those two extremes?

Ashley:
I think it’s more of the mindset for that $5 coffee. It’s not the $5 coffee that’s going to make you save money and build wealth and have that financial freedom or to pay off debt. That’s not going to make a huge impact on your debt. But it’s that mindset that you’re willing to be frugal, that you’re willing to give up things, and giving up that $5 coffee will make you realize other things that you’re able to give up to save money.
And as far as the exploding your income part of it, when I was paying off my personal debt, which was student loans and farm equipment basically, and a line of credit on my house, what we did was invest in rental properties and use the cash flow. And for years, my cash flow just went to paying off of that, and I never took any money out of the rental properties. So I think that there is that other huge debate as to, “Do you pay off your debt first and then invest? Or do you invest simultaneously? How does that work?” So I think it’s very different for every person, but that’s what worked for me, is using other people’s money to buy the properties and just using the cash flow to pay off debt.

Tony:
Mike, what about for you? You went on this radical journey to reduce your expenses. Did you also focus on… I mean, obviously you did, right? That’s why you’re on the podcast. But how did you make the transition from saving everything to now pouring that into building your income?

Mike:
Well, I knew real estate was the way out. It was about that time in… Actually, it hadn’t gotten till the end of the year because I set a goal that February, I said, “By the end of this year, I’m going to buy a house.” So I was eliminating debt, improving my credit score, saving money. I paid off all those credit cards, paid off a ton of debt. And December 30th of 2020 is when I closed on my first ever house. I utilized the first time homeowner’s loan. So 0% down, just paid closing costs. And I already had that mindset of, “Okay, what am I going to do with this property to make me money?” I’d heard of flipping houses. I have friends that had rental properties and stuff, but I still hadn’t started digging into it.
But the house was built in 1998. It was outdated. So I was like, “Look, I know I can add some value to this. I could do new floors, new paint, new everything, and it’ll make it worth more property.” And the neighborhood that it’s in is immaculate. Golf course neighborhood. When I was growing up, I called it the rich kid neighborhood. So I was proud of that. I knew I was going to do something with it after, but it was during that process that I started learning about real estate. When I was closing on that house, I stumbled upon BiggerPockets and I was like, “Oh, financial freedom.” Because I started saving money and everything, paying off debt, but I’d never heard the term financial freedom before and the thought of something else paying for my bills, it just resonated. I was like, “Okay.” I took every bit of energy that I had that I was putting into bodybuilding and focused it on real estate.
It was a complete… “Well, see you later. I’m going down this path now.” Because I’m the type that if I like something, I want to learn as much as I can about it. I just obsess about it. I just started learning so much. And I knew right then, I was like, “Okay, this is what I want to do. This is how I want to get to that place in life. I want to buy real estate.” So 2020 got closed of my house December 30th. 2021 starts, and that is when I was like, I still didn’t know a lot about real estate. I didn’t know about private money. I didn’t know how to structure deals, do creative finance, wholesaling, any of that stuff yet. So that’s when I was like, “All right, how can I save more money faster?” And I stumbled upon the vending machines. I was looking at different asset classes. I looked at ATMs, vending machines, online businesses. Vending machines stuck out because of the cash-on-cash return.
I met a guy. So I bought my first location at a car dealership from a friend of mine. It made like 300, $400 a month, and I paid $4,200 for it. So about a 10% return on your money. So I’d do that for three months or so. But these were really old machines and they couldn’t utilize credit card readers. So I flipped those, ended up selling that location for $5,000. Took that 5,000, I was like, “Okay, I’m going to buy a couple more machines, but cheaper.” And so I ended up meeting this guy, older guy that lived in town, and that was what he did full time. He had 110 machines running at the time. He was making really good money off of it. And he’s like, “Mike, I got one location that does $800 a day.”

Tony:
What?

Ashley:
Wow.

Mike:
And I was like, “What? $800 a day for a vending machine.” So I check out this setup. This was incredible. He found a farm that was 15 miles away from anything, no gas stations, anything like that. So all the farm hands that would get shipped in there to work on the farm, they lived off the vending machines. I think he had six or seven out there.

Ashley:
Wow, that’s so interesting. Yeah, I’ve thought about vending machines. You see people post about them on social media. It might be a great thing for my kids to get involved with, but that’s what I’ve always struggled with is finding the location of the vending machine. So I love this strategy that you’ve got your first property and then you’re also looking for other ways to supplement your income. Were you working at this time and did you have a W2? What were you doing besides the body building>

Mike:
Yes, ma’am. I was working full time. So I’ve been in the pharmaceutical industry since 2014. I was a, what’s called quality investigator, but basically it’s a glorified technical rider. When they had any systemic issues or product issues, I had to justify to the FDA that we had our standards in place, that our SOPs were good and that it would not affect the product in any way. So I’ve been doing that since 2014. And then, yeah, on top of that, I was coaching wrestling too. So I was investing, coaching, body building, doing all this stuff at once.

Ashley:
Let me ask you this question because this is out of my own curiosity, because I think sometimes people struggle to make this connection. So I want to ask you, are there skills that you acquired from your W2 job that translated over to real estate, that you think because… The word that stuck out to me was SOPs. That can really help you in your real estate business, is creating those standard operating procedures, building those systems and processes. So did something like that or other things from your pharmaceutical job, which you would not think has anything to do with real estate, were there some things, some tasks that you would do or skills that you had learned that have helped you with your real estate business?

Mike:
Oh, 100%. Besides the standard operating procedures, I think it was the way that I had to write and talk throughout my drafts that transferred over to how I talk to people like sellers when I’m trying to buy a property. And then I systemize how I go after these properties also. And the structure, I think the structure of it all, I’m very quality mindset. So my business is run that way. I want to be able to provide the best. And then pharma, you have to do the same thing. You have to provide… Everything has to be identical. So I try and emulate that with my business. So it transferred very well.

Ashley:
I want everyone listening now that maybe thinks that their job doing whatever won’t translate to real estate in any reason, look at Mike as an example. He took his pharmaceutical job and has taken skills from that for his real estate. So just take the time after this episode to write down maybe three things that you do now in your day job that can help you with real estate investing. One of those things might even be that it’s just a W2 that can help you get that first loan, that first mortgage. So Mike, you had mentioned that you did a first time home buyer loan. Can you maybe talk about that a little bit? We hear a lot about an FHA loan where it’s three and a half percent down. What was kind of different about your loan that you did 0% down?

Mike:
It was 0% down, and they just offered a… I think you had to pay a prince or a mortgage insurance on it. So every month is like 80, $90 extra a month. But if you can compare it, yeah, long term it might be a little bit more expensive, but instead of putting that three and a half percent down or 10% or 20% down for a conventional loan, that saved me a ton of capital up front. And I used whatever I had left to buy vending machines to create more capital.

Tony:
Yeah, Mike, you’ve done a great job of, and this is what we’re talking about, of kind of attacking it from both sides where you went after this kind of debt reduction journey to kind of bring down and save more money, but then you also focus on, “Okay, how can I create more income?” So you got the first property, you got into it for a relatively small amount, then you go into the vending machine business. So just for clarity’s sake, Mike, that first property, since it was owner-occupied, were you able to generate revenue from that property or was that one just as your own primary residence?

Mike:
That was my primary residence. I had thought about doing some house hacking and renting it out, but I was like, “I don’t know.” I was making pretty decent money. At the time I was in a relationship, so she was living there also and we didn’t want roommates.

Tony:
Yeah, no, totally understand. Yeah, I got a wife and kids too. I don’t know if I want roommates either. So at what point did you say, “Okay, let’s get that first investment property,” and what did that journey look like?

Mike:
So 2021 was basically my education year. I don’t know, I might have had a little bit of analysis paralysis, but I wanted to learn as much as possible. And I knew getting into it, I was going to hire a coach that I was going to spend the money to find somebody that’s been in the game and kind of get underneath their wing and learn as much as possible so I don’t make a ton of mistakes. And I was watching the podcast. It was a 45-minute drive to work for me one way. So in the mornings I would watch the BiggerPockets podcast, and then I stumbled upon the Rookie Podcast and it changed my life completely. So that was an hour and a half I was spending a day educating myself.
One of the podcasts, a guy by the name of Pace Morby was on there and he spoke to me. I knew right then I wanted to hire him as a coach and get into his mentoring program, and I did. So that was on November 14th that I heard the podcast because I listened to it that morning. I listened to it all the way home that afternoon. And then two days later I joined up on his SubTo community. That really skyrocketed my education. I felt confident in my skills from everything I learned in there. So that was November of 2021. Well, April. So at that point I started telling people, “Okay, I’m getting into the real estate game.” I’d got my real estate license during that time because I thought that that would help me find investments and stuff, which is a completely different game that I have now realized.
I just started having the conversations. Everybody I knew that had rental properties, I was blowing them up. “Okay, how’d you find this? How did you finance it? How do you find off market deals? How do you tell how much equity’s in the property? What’s an ARV? What’s a comp?” I’m trying to learn as much as possible in talking to these people that have already done it.
I think it was April 15th. April 16th, I get a text. It’s from my buddy Seth Brown, “Hey, check this out” with an address. And I look at it and it’s a little duplex built in the 1960s. I was like, “Okay, what’s up?” He goes, “I think this lady might sell.” I was like, “Well, ask her if I can call her.” That was on a Wednesday. Picked up the phone, called her, she said she was willing to sell. I said, “Okay, Friday, I’m going to come check out the property. If it’s indecent shape, I would love to buy it from you. We could discuss the price.” She goes, “Yeah, that’s fine.” So that Friday I drive to Lexington. It’s about two hours away from where I was living, and I picked up my first property.

Tony:
So Mike, we got to pause here, man, because there’s a lot of good things that we got to dive into. So first, I don’t even know if you realized this, but one of the things you said really stuck out to me is that you started telling everyone around you that you were a real estate investor. You didn’t have any deals yet, right? You hadn’t closed in anything, but you started to identify as a real estate investor. I think that mental switch is one of the most important things that our rookie audience can kind of take away from what you just said, is that until you adopt the mindset, until you adopt the identity that you are a real estate investor, it’s hard to really step into those shoes. And lo and behold, Mike, as soon as you made that mental transition to say, “All right, I am a real estate investor,” now you’ve got your friends reaching out to you saying, “Oh wait, Mike’s looking for deals. Let me share this to Mike.” That one little interaction leads to your first deal.
So again, if there’s one piece of advice for our rookie audience, it’s even if you don’t have that first deal, share with everyone you know that you are a real estate investor now, that you are looking for deals, that you are looking to invest. Because you never know who they may know and you don’t know who the people that they know who they know. So there’s this large community that you end up tying yourself into. So tell us about that first deal, Mike. I don’t want to brush past this. Were you able to use creative financing to secure that deal? Was it something else? Walk us through how you kind of funded and put that deal together.

Mike:
So I got extremely lucky because this was a home run. I’m talking Mark McGuire 1998 home run. Out the park, okay? So I go talk to the lady. Super sweet, it was great. I cut to the chase, I said, “Ma’am, how much would you like for this property? What do you think is a fair price for this property?” She goes, “Mike, I’d take 60,000.” She paid 30,000 for it 20 years ago.
But I guess we got to backtrack for a second. The reason he called me, my buddy Seth who is my business partner on that deal, he works for a company that they go in and fix foundations, crawlspaces and foundations. So he was there giving her a quote on how much it would cost to get the foundation because it was sagging a little bit, it needed a decent amount of work. And she’s like, “I don’t have that kind of money for that.” And he goes, “Well, I know somebody that might buy this as is.” And he sends me the text, we go from there. So I ended up getting it under contract for 65,000 because I purchased an easement to the right of the property that she also owned.
We put $17,000 into the foundation, which we were able to finance out over a year because he worked for the company. So we didn’t have to come out of pocket with that. We also put $5,200 into just update in one of the units. Painting it, fixing some of the minor stuff in there. We split that 50/50. Everything on this property we split 50/50. And then I went about finding the money to pay for it because I wanted to do a BRRRR on the property.
So me talking to everybody about I’m a real estate investor even though I hadn’t done a deal, a friend of mine’s dad reached out to me one day. He’s extremely successful. He’s now a mentor to me. Extremely successful. Owns, I think he’s right at 30 doors. So he’s the guy I see myself wanting to emulate. He calls me out of the blue one Saturday, “Hey, Mike, meet me at this coffee shop.” I was like, “Yes, sir.” I show up and he goes, “Look, look man, I’ve seen what you’ve been doing.” He goes, “I’m going to loan you $100,000.” He’s like, “You’re going to pay me 6% and use that to get started.” So it was awesome. That was a game changer for me.

Ashley:
Was this a handshake deal? Did you guys actually put together a loan agreement or anything like that? Maybe give us an insight of to that conversation of talking about doing the lending? Were there certain requirements he had or was this the easiest thing you’ve ever done?

Mike:
No, it was really easy. He already had paperwork drawn up for it. So he wanted 6% on it. And then it was just, I think I put him in first position on the note so that in case something happened and I wasn’t able to get the money out, then I wanted to back him because he’s a friend also. He wasn’t just a private moneylender. But it was extremely easy. It kind of came out of left field and-

Tony:
Hold on, Mike. I want to give you a little bit more credit because maybe that conversation was easy, but everything up until that point wasn’t, right? I just don’t want our rookie audience to get stuck on the fact and say, “Oh, well Mike had a friend who gave him $100,000. He’s special.” But no, it’s like everything you did to get you to that point is the hard work that most people aren’t willing to do, right? This person saw you hustling to reduce your expenses. This person saw you hustling to build relationships. This person saw you find a really great deal, which takes hard work and work out the numbers so that it’s a home run. So there’s a lot that goes into, so I don’t want you to shortchange yourself there.

Mike:
Yeah. There was a lot that happened up to that point also. When I was getting my real estate license, I called him out of the blue and I was like, “Hey, do you mind if we meet for lunch?”
“Yep.” We meet. And I was like, “I want to do business with you. Any way that I can help market you, I’m going to do it. Teach me what you need to teach me. Every deal that I get from my real estate license, you’re my mortgage guy.” Because that’s what he does, is mortgages. We had a lot of conversations in between those points. I also went out and found deals for him. So I would shoot him a deal, “Hey, what do you think about this?”
“It’s not for me,” but then, well a couple of them are ones he wanted to pick up. So I provided value to his life.

Ashley:
That right there, that was before he offered you the money, correct? Yeah? So that is such a great key element to our listeners and just showing how you went and you provided value first. It wasn’t you asking for money for him to lend to. You taking those steps led up to that moment where he came to you to lend you money. I think that’s a very important to mention and just a awesome strategy to make a connection with someone and to make it genuine. You honestly wanted to provide value to him by sending him deals, doing moans with him, things like that. I think that’s probably a big reason as to why he did want to lend to you.

Mike:
I agree. And he knew I respected him a lot. Like I said, he is a mentor to me. He’s just somebody that I want to be like. Every time I saw him, I was asking him questions, “Okay, how does this happen? How do I do this?” He’s just taught me a lot. That day he really skyrocketed my real estate career.

Tony:
Isn’t it crazy how one conversation can have that impact and kind of change everything? I want to go back to the deal, Mike, because… This is something I’ve never really thought about doing Ash, I don’t know if you have, but you guys found this deal because the current owner didn’t have the capital, didn’t have the know-how to solve the foundation issues. And to them it was easier to just give the property away as opposed to them doing it themselves. It’s like Ash, I wonder what if we just started a campaign where we just looked for all the houses across America that have foundation issues. How many off-market great deals do you think we could find if we were able to go to a seller and say, “Hey, don’t worry about fixing the foundation. We’re going to buy it from you as is.” You could probably get a ton of off market deals that way.

Mike:
Oh, definitely. See, we didn’t have to pay full price either because he worked for the company. So we got it at about 50% of what is the quote to the general public. So that saved us a ton. So right now that’s $17,000, 65,000 purchase price, and then 5,000 in minor stuff. So ARV on that property, 140,000. So at 70%, that’s 98,000. I hit a full BRRRR, 100% clean BRRRR.

Ashley:
Awesome.

Mike:
So that’s what we did. I went and I borrowed the purchase price from my investor friend. I paid him 6% up upfront. Even though it was an annual 6%, I was like, “Nope, I want you to have this up upfront.”

Ashley:
So you prepaid him for a year of interest?

Mike:
Yes, ma’am. Yep.

Ashley:
Wow, interesting. I don’t think we’ve had anyone talk about that just to make it more secure or more advantageous than saying, “I’ll make the payments to you,” it’s kind of we always talk about how to sweeten the deal with a seller to get them to accept your offer, but that’s a different unique strategy with a private moneylender too.

Tony:
Was it prepaid interest, Mike, or was it points that you paid up upfront? Was it separate from your ongoing interest payments or was it actually just the interest and you said, “Here it is upfront”?

Mike:
Just the interest here upfront, yeah. I wanted to provide value to him up front too and show, “Hey, I’m here to do good business. I want all of us to win.” And that’s how I am with all of my private moneylenders now. I was able to get one private moneylender literally off of Snapchat. He was a friend of mine. I posted one of the deals and he’s like, “Are you doing that now?” I was like, “Yeah.” He’s like, “Man, I’ve got a ton of cash that I need to invest. Let me know if you have any deals.” Two days later I give him a call, “Hey, I got a deal.” He sends me a check for $90,000 right after.

Ashley:
That’s it. I’m downloading Snapchat.

Tony:
Yeah. That’s where all the private moneylenders are hanging out. I’ve been on the wrong platform this whole time.

Mike:
Yep. I gave him a good deal.

Ashley:
I’m deleting Instagram. I’m going to Snapchat.

Mike:
And I gave him a great deal. I gave him 40% of our net profit on that deal.

Ashley:
Wow.

Mike:
So it was like a one-month turnaround. I think he’s going to make like $8,500 or something like that for a one-month turnaround. So where are you going to find something paying that well?

Ashley:
Mike, I want to talk about the rehab, about doing the rehab on these properties. Did you have any experience in construction at all? Maybe talk us through what you do for rehabs. Are you hiring general contractors? Are you using friends? Are you doing some of the work yourself? You just said you did turned over a house in one month, that’s pretty efficient. So what are some of the things that you’re doing for rehabs?

Mike:
It depends on the property. So that was the only one we’ve had foundation issues with and that’s how we got in the door there. I have made some mistakes along this journey. I’ll be the first to say it.

Ashley:
So have we all, especially with rehabs.

Mike:
Very expensive. Very expensive mistakes. I made the mistake of thinking just because someone was a friend, that they would do good business. I had a couple GCs that I at the time considered friends and they came in, did horrible work, and it set me backwards a lot. I think if you’re going to do it, you have to keep friendships and business completely separate and you have to treat them… For me, it’s been hard to find very reliable GCs. I don’t know how you guys’ markets are, but where I’m at is just nobody takes pride in that work anymore, I feel like. And they can charge top dollar and I’ll pay top dollar. I want quality work. That’s my mindset. I want my properties to look incredible because they will never look like something I wouldn’t live in. And I expect that from anyone that works with me to give 100%. I’ve had a couple situations where it cost me a lot of money. They came in. I paid up front. That’s something I’ll never do again for general contractors. Twice I paid up front and they disappeared.

Tony:
Yeah, that’s unfortunate. We talk about this all the time. It’s like the entrepreneur in me wants to start a GC company that focuses on real estate investors. Literally, if I’m just the one GC that picks up the phone when the client calls, I’ll already be in the top 1% of the 1% of all general contracting companies.

Mike:
Amen.

Tony:
Mike, so you get this first deal, you seem to do really well with it, right? You have this amazing first deal using other people’s capital. It seems like now you’re kind of building a relationship with private moneylenders. So if we can just pause really quickly, how many deals have you done since that? You did the primary residence in 2020, then you did the first duplex. How many total investment deals have you done since that first one?

Mike:
So I owned four and I’m under contract on two right now. One of which I have already assigned. I assigned it the same day. I went under contract at 1,236.This was last week, 1236 at 932 or 925, I assigned it for $50,000 profit.

Ashley:
That’s amazing.

Mike:
Thank you.

Tony:
Yeah. So your wholesaling now as well then, Mike. So you’re finding deals for yourself, but you’re wholesaling. So of those four deals that you’ve kept so far, two of those I know you used private capital to fund. What about the other two? How did you fund those two?

Mike:
Private money. Yeah, so the two I have under contract right now, we’re just going to turn and BRRRR. We’re just going to wholesale those out because we’ll make a good chunk of change like that one $50,000 profit. The other one’s not as lucrative. It’s only like 10,000. But we’re trying to stack it up right now because we don’t want to continue to have to go out to private moneylenders. We feel like in the next six months to a year, we’re going to just stick in the wholesale realm and then maybe do a couple flips, then next year get into a little more flips because we want to transition away from single family homes and duplexes and stuff. We want to get into the storage facility asset class. I personally want to buy a couple oceanfront condos for Airbnb for my own portfolio, but right now it’s just about stacking up capital. I made the decision this past week that I was going into investing full time, so I’ve left my W2.

Tony:
Congratulations, man.

Mike:
Thank you.

Tony:
We got to get like a little bell that we can ring for our guests when they quit their job. You got that on the soundboard?

Ashley:
I have my little soundboard. I don’t know what any of the buttons are, so this is going to be a surprise as to what sound it makes.

Mike:
[inaudible 00:38:29] it.

Ashley:
Hand clap. There we go.

Tony:
There we go.

Mike:
I act like I’m super happy, but guys, I’m so scared. This is the first time since I was like 16 about having a full-time job, you know?

Tony:
Yeah, it definitely is a scary moment, right? Ash and I have both gone through that transition of the last couple of years. And it definitely is, I think, a scary moment. But once you realize that you’re able to provide for yourself and provide for your family with your own… Not your own two hands, but it’s like with your own work, it’s almost this relieving sense because now you’re not tied to what someone else thinks of your value, right?

Mike:
Exactly.

Tony:
Now you’re not tied to what someone else wants to pay you. The upper limit of what you’re able to earn is squarely on Mike’s shoulders, or it’s on Tony’s shoulders, or it’s on Ashley’s shoulders and it’s not on XYZ corporation for them to say, “I feel like Mike is worth this much money. I feel like Ashley’s worth this much money.” Or, “Tony, you’re going to get this much more money.” It’s 100% on you. So there is this fear, Mike. But dude, once you kind of break through that fear, it’s almost this liberating feeling because you realize you’re in control.

Mike:
I can’t wait. I mean, I just recently moved down here to the beach too, and this is something I’ve wanted my entire life. Since I was a kid, I was like, “I have to live at the beach.” And then back in December I was like, “You know what? I had a talk with a friend of mine, very successful.” He reminds me a lot of you guys how positive and just uplifting type guys, the ones that you just want to be around all the time. Well, we had a talk and he’s like, “Mike, I see where you’re going. I know you want more in life. You got to get away. You have to just go somewhere, start over and just focus on this new life.” So back in December I made the jump and it’s just been incredible since. I’ve met some absolutely fantastic people here that are super successful in the real estate world and they’ve taught me so much.
I’m like Luke Rotvold off the phones now. That guy is an animal, so I’m just chasing him so hard right now. This is coming from a guy that I used to hate cold calling with a passion. Now I blast it few hours a day just going. And it’s from being around people that I’ve seen utilize that that are… My good friends, Kevin and Lance down here, Lance is over a hundred deals a year. So that’s something that I want in my life. I want those kind of numbers. It’s just building that confidence. When you’ve got the right circle, they’ll help you build that confidence.

Ashley:
Mike, I want to ask, what are some of the steps that you did to decide that now was the right time to quit your job? Is there anything that you have to prepare for now as to, like the first thing I always think of is health insurance. What are people going to do for health insurance? So can you talk us through some of the things that made you decide now is the time to quit?

Mike:
I think that deal I did last week. It was literally a nine-hour deal. I got it under contract. Nine hours later I [inaudible 00:41:41] it for 50,000 profit. I was like, “Mike, if you were able to do this 40, 50, 60 hours a week, there’s no telling how much you can make.” I loved what I did. I worked for some good people, but it wasn’t my passion. I just don’t want to be 65 years old and look back and go, “Man, I wish I’d have just chased, give everything I could to real estate, to something I was passionate about.” But with health insurance and stuff, I’ve got a good amount of money saved up now. So I guess I’m going to have to find a good policy to jump on. I haven’t really thought about it yet.

Tony:
Now you’re scared of it, right?

Mike:
Yeah, no.

Tony:
Mike, I wanted take us to our Rookie Request line, but before we do, I just wanted to ask one final question about the private money piece. I guess two questions. First, what kind of rates are you offering to your private moneylenders today and has that shifted as the inflation has played an impact and the feds been raising interest rates? Have you seen your private moneylenders asking for higher rates? And then the second question is, what documents do you typically use to formalize that relationship?

Mike:
So we actually had a lawyer draft up something for the loan and all the money. One of our deals, we didn’t have any paperwork at all. It was just purely a handshake. But I try and pay them as well as I possibly can because I want to establish the trust, the loyalty and show like, “Hey, Mike knows what he is talking about. He just gave me a 15% return on my money in 60 days.” We do something where we’ll guarantee six months. So okay, say we got the money loan for 10% on $100,000 or whatever the amount is. We’ll go, “Even if we turn this around in two to three months, you’re getting paid for six months no matter what.” So it’s beneficial to them. And it just all really depends on the deal, I feel like. My private money guys have not tried to stiff me or tried to go higher on the rates. I think they see that I’m going to pay them well.
So there’s enough food on this table for everybody to eat and I want to make sure my guys are taken care of because then if I need something I’m taken care of. So we’ve got really lucky with that. We got one private moneylender through another friend. It was all because my business partner, Josh Cotton, was sitting at a coffee shop on his lunch break cold calling, okay? This lady walks up to him and goes, “Sir, are you a wholesaler or an investor?” He goes, “Yes ma’am, I am.” She goes, “That’s funny because my husband does the exact same thing every night. You guys should meet.” Well, we meet and just hit it off. It was awesome.

Tony:
Mike, your story is so crazy, man. It’s like there’s all these kind of serendipitous moments where it’s literally the byproduct of you guys working hard. Who goes on their lunch break to cold call? It’s a very special type of person that does that, but that single action kind of creates this domino effect. It’s the wildest thing, man. So if there’s one thing that I would want the rookie audience to take away from your episode, Mike, it’s that if you work hard enough, good things tend to happen. And you’ve proven that just over and over and over again, man. So I want to take us to the rookie request line here. So for all of our rookies that are listening, you guys can always phone in your question, just give us a call at 888-5-ROOKIE. If your questions are good enough, we might just use it on the show. So Mike, are you ready for today’s question?

Mike:
Yes sir.

Tony:
All right. So today’s question comes from Andrew and his question is, “My name’s Andrew. I’m calling from New Jersey. The question I have for you all basically is how you differentiate your entities? I work with two partners and we have one specific entity that is carry almost everything. Everything is under one entity when investing people’s money, private moneylenders, or investing in off-market properties. I’m wanting to know if you guys differentiate those. Do you have two different types of entities? How do you handle that? Hope to your answers. Thank you so much for taking my call.” So I guess the basic premise of that question is Mike, so you have properties that you’re holding, you have your wholesaling arm, you have partnerships. How are you structuring between your entity, your partner’s entities, and then the different activities in your business?

Mike:
I set them up in different LLCs. Every one of them is in a different LLCs. So I’ve got the property with Seth that’s in one LLC. I’ve got our actual business that’s an LLC. And then I’ve got what we hold because I’ve got properties with Josh, my one business partner, then with Seth. So we have different LLCs for that too. I just separate everything completely. And then with my own personal portfolio that will go into its own LLC.

Tony:
Ash, it look pretty similar for you too, right?

Ashley:
Yeah. Each partner has a different LLC, each business has a different LLC. The development in the rehab has its own business, even though it works on the properties that are owned in one of the rental LLCs.

Mike:
It keeps the numbers easier I feel like.

Tony:
Oh, totally. We separate all of our active income from our passive incomes. All of our rentals are in one set of LLCs. All of our active income from our flips and our events and our coaching program and all the other active things that we do is in a separate LLC. So yeah, it can get pretty crazy with the entity stuff. So Andrew from New Jersey, if I had one piece of advice to you, I would go talk to a good CPA and go talk to a good attorney in your estate and kind of give them the layout and the breakdown of your business and the different things that you do. They should be able to help you set things up in the right way.

Ashley:
And I would get them, if you can, on the same call too.

Tony:
Totally.

Ashley:
That’s the best, yeah. Okay. So Mike, we are moving on to our Rookie Exam. The first question is, what is one actionable thing rookie should do after listening to this episode?

Mike:
Go out and talk about it. Have those conversations. Tell your friends, tell your family, “I want to get into this, I want to become a real estate investor.” And then the next thing is hire a coach. Save yourself a ton of time and hire a coach. There’s always going to be somebody that’s better than you at everything in life no matter what. So why waste the time making all of these mistakes when you can just go hire a coach and eliminate it?

Tony:
Question number two, Mike, what’s one tool, software, app or system that you use in your business?

Mike:
Mojo Dialer. That is my bread and butter.

Tony:
I love Mojo. Can you explain what Mojo is, Mike, for folks that aren’t familiar with that software?

Mike:
It’s the system that you use to cold call. I’ve got a triple line dialer on there, so I’m able to call three numbers at once. And then if one picks up, that hangs up the other two. Just so you can get as many calls in as possible.

Tony:
Yeah, Mojo’s fantastic. I was trying to set up a wholesaling arm early last year, so we had Mojo for a little while. Yeah, the way that you’re able to run through all those numbers in a relatively quick period of time is pretty crazy.

Ashley:
Okay. Our last question for the Rookie exam is, where do you plan on being in five years?

Mike:
I want to be on the beach all day long, relaxing, letting my passive income pay for everything. My goal is to personally at 40, I want to say I’m getting up, I’m going to work because I want to, not because I have to.

Ashley:
I think that right there is something that will resonate with a lot of people. And that really does change your life. There’s the fire community where it’s Financial Independence Retire Early, but when most people get to that point, they don’t actually want to retire because they want to work at some passion project or keep working at something that excites them and fills them with joy and passions.
Okay. Well Mike, thank you so much for coming on with us. Can you let everyone know where they can reach out to you and find some more information about you?

Mike:
Yeah, so we have a small Instagram page called Valiant Acquisitions LLC. And then I have my personal page, it’s larson910 on Instagram.

Ashley:
Okay, cool. Well we really appreciate you coming on sharing all of your information. Definitely added a lot of value, so we appreciate it. Thank you, Mike.

Mike:
Thank you, guys. This means a lot to me.

Ashley:
I’m Ashley, @wealthfromrentals. He’s Tony, @tonyjrobinson and we will be back on Saturday with the Rookie Reply.

© 2023 CNBC LLC. All Rights Reserved. A Division of NBCUniversal

Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes, and Market Data and Analysis.

Data also provided by

By Neil Hare

If you’re like most business owners, you’re looking at the Silicon Valley Bank (SVB) and Signature Bank collapses and wondering what it means for your access to capital—but perhaps not in the way in which you originally thought. The question of whether your money will be safe at your bank has, for the most part, been answered affirmatively by the government. But the question of where you’re going to get an influx of capital this year if you need it, is not looking positive.

To date, the explanation for the SVB collapse is that it had gobs of cash deposits from its startup clients during the recent boon, and like most banks, it invested it in the safest bet you can make: U.S. Treasuries. The problem was SVB bought longer-term Treasuries, meaning they couldn’t be converted back into cash quickly and easily.

Ben Lozano, CEO and cofounder of Bay Area fintech startup SMBX and an expert on the bond market, explains, “SVB had a classic liquidity crisis. They issued short-term loans to their customers and bought long-term Treasury bonds at low interest rates. When the rates went up quickly, those long-term bonds lost value and so, they were basically insolvent. Depositors lost confidence and started withdrawing their funds.”

It remains to be determined why the tech community, which is not risk averse, decided a run on the bank was necessary.

While it largely seems like there isn’t an endemic banking crisis like in 2008 and everyone’s deposits are safe, banks are already starting to change their risk models for lending. This means your ability to borrow money for a line of credit or to invest in your business is going to be much tougher for the foreseeable future. Banks will be offering less money at higher interest rates and with more demands from your balance sheet.

How to plan for the cash crunch

This crisis may force you to seek alternative sources of funding, so you must plan accordingly. As we learned during Covid, make sure your books are in order. Remember that the vast majority of American businesses did not get much or any of that government bailout money. The Small Business Administration (SBA) issued roughly 5.2 million Paycheck Protection Program (PPP) loans out of a total of 30 million U.S. small businesses—and that doesn’t include solopreneurs, independent contractors, and gig workers.

The main reason that businesses were shut out of PPP was simply that they didn’t have their tax returns, P&Ls, balance sheets, and other documentation ready to go at a moment’s notice. Getting these items prepared does cost time and money, but not as much as you may think.

Accounting software, like QuickBooks, is available for as little as $15 per month. Also, some accounting software comes with invoicing, credit card, and other forms of electronic payment acceptance, and even marketing tools. Credit card companies, in addition to providing access to capital, offer many other services and helpful information on managing your business. Check out Mastercard’s Master Your Card and Digital Doors programs, for example.

Your local community will definitely have resources for finding affordable service providers. For example, in Washington, DC, the Coalition for Nonprofit Housing and Economic Development (CNHED) provides technical assistance, including free accounting and legal advice to small businesses, among other things, to ready businesses to apply for loans.

Steve Glaude, president and CEO of CNHED says, “There are many organizations on the national and local levels that provide free or low cost technical assistance for small businesses, including Community Development Financial Institutions (CDFIs), which provide a range of financial products and services to underserved communities. I’d advise businesses to find a CDFI in their community and start a conversation.”

Other resources include SCORE and its free mentorship program, Small Business Development Centers (SBDCs), chambers of commerce, and municipal economic development offices.

More articles from AllBusiness.com:

Grants and bank alternatives for debt funding

So, where else should you look for funds outside of your bank? For starters, it’s always worth checking if there is government grant money available. Covid relief funds, like the Small Business Opportunity Fund and Community Navigator Pilot Program (CNPP) authorized by President Biden in the American Rescue Plan Act, are still working their way through the system to state and local governments. The best place to find information on these federal grants is the SBA.

If you can’t find grant opportunities, you can always apply for an SBA loan. While the process is often long and arduous, the interest rates are very competitive and the risk models are lower than conventional banks.

There are also organizations, like Hello Alice, the Accion Opportunity Fund, and even private companies like FedEx, which offer small business grants and vast libraries of “how-to” content. These grants are often small amounts and are typically issued in a lottery format, so they are not overly reliable, but worth looking at.

Finally, crowdfunding is now becoming a much more viable option for debt funding. SMBX, an online marketplace that connects small business owners with everyday investors, for example, can help businesses borrow from $25,000 to $5 million dollars in debt at competitive interest rates with terms ranging from one to 10 years. An added bonus to crowdfunding is that promoting your business as a strong investment is also a unique opportunity to market your products and services. Plus, your investors are more likely to support your business over the longer term and protect their investment.

“We’ve seen a tremendous uptick in issuer listings the first quarter of 2023, even before the banking problems began,” says Lozano. “I think businesses are starting to realize that they can access the capital they need, engage their customers and keep wealth in their communities in a way they can’t do with traditional banks.”

Unfortunately, with inflation still problematic enough to cause ongoing Fed rate hikes, the corresponding banking crisis, the war in Ukraine, and other issues disrupting supply chains, a recession or down market this year is looking likely. It is critical to learn the lessons of Covid and get your affairs in order. If there’s a storm coming, the time to fix the roof is when the sun is shining.

About the Author

Neil Hare is an attorney and President of GVC Strategies, where he specializes in small business policy, advocacy, and communications campaigns; follow him on Twitter @nehare and on LinkedIn. See more of Neil’s articles and full bio on AllBusiness.com.

It was bound to happen, and it finally did. 

Last month, according to a new report from the National Association of Realtors (NAR), real estate prices finally went negative, 

“The median existing-home prices for all housing types in February was $363,000, a decline of 0.2% from February 2022 ($363,700), as prices climbed in the Midwest and South yet waned in the Northeast and West. This ends a streak of 131 consecutive months of year-over-year increases, the longest on record.”

All good things, right? Though at first, this might sound odd. I myself wrote back in September last year that prices had finally started to decline. But those were month-over-month prices. In normal times, even when the market is flat, prices tend to increase in the summer months and decrease in the winter months. 

However, over the last few years, real estate prices have simply been on an almost straight trajectory upward, leaving the typical seasonal cycle in the dust. That trend ended last year. But despite monthly prices declining, the more closely monitored year-over-year price index was still up. Now, for the first time since the bottom of the Great Recession, year-over-year prices are down. 

The average price of a home in February 2023 is ever-so-slightly lower than there were in February 2022.

Of course, 0.2% (or $700) is nothing to lose your head over. Especially when you look at the overall trend, that last, tiny little dip is the current “housing crash.”

It should be noted, however, that this is in nominal prices. When taking inflation into account, prices are down a bit more substantively. As Bill McBride notes,

“In real terms (using CPI less Shelter), the national index is 4.6% below the recent peak, and the Composite 20 index is 6.3% below the recent peak in 2022.”

Oddly though, on a month-to-month basis, prices actually rose in February for the first time since the middle of last year. After prices had fallen for seven straight months from their high of $413,800 in June 2022, they rose from $361,200 in January to $363,700 in February. 

Again though, it’s important to remember that, all things being equal, prices tend to fall in the winter and rise in the summer. So, this is likely just seasonal variation at play here. Even still, it may be a sign that the housing market is beginning to stabilize despite the high rates. But, even if prices were to stand still where they are through the summer, it would mark a decline of over 12% by the time we get to June.

Fewer Listings Buoying the Housing Market

As I’ve noted before, substantially fewer people are listing their houses than last year, which is keeping supply down and thereby buoying housing prices. As Fortune points out,

“…only 349,294 U.S. homes were listed for sale in March 2023. That’s below the 437,270 listed in March 2022—a period that was infamous for its tight supply—and far below the 478,100 listed in March 2019.”

Those are declines of 20.2% and 27%, respectively. Nothing to scoff at.

While listings for February were up compared to January (again, remember seasonality), new listings are still well behind the last few years (with the obvious exception of when Covid first hit in March and April of 2020). 

Despite the fewer listings, inventory is still up 15.3% year-over-year due to declining sales, although it ticked back down last month. February supply is 2.6 months compared to 2.9 months for January. Oddly enough, this is still considered a seller’s market. Usually, six months is considered a balanced market, although it’s been a long time since we’ve seen that. In my humble opinion, four or five should be considered balanced.

Where Are Things Likely To Go From Here

Housing collapses all but require a large number of delinquencies and foreclosures. That’s what happened in 2008. Today, however, most homeowners are sitting on fixed, low-interest debt, making such a collapse unlikely. After all, why sell if you have a 3% mortgage?

And as the following chart from Black Knight’s Mortgage Monitor makes obvious, mortgage delinquencies are still near record lows. 

Other than the short-lived spike upon the arrival of Covid-19 and the subsequent lockdowns, delinquency rates have been quite low since the end of the Great Recession. And right now, they are running a full 1% below the 2000-2005 average.

The only thing that could cause a major spike in delinquency is either a substantial increase in unemployment or runaway inflation at levels far higher than even the rates we’ve seen recently.

The unemployment rate still sits stubbornly at 3.6% despite dramatic rate tightening, multiple bank failures, and a slew of high-profile layoffs. 

The Fed has been stubborn in sticking to a high rate policy to quell inflation, even going so far as to raise the discount rate by 0.25% after Silicon Valley Bank and Signature Bank failed. So, unless the U.S. dollar loses its status as the reserve currency of the world (not a completely unrealistic concern, unfortunately), runaway inflation is quite unlikely. 

Given the Fed pretty much stated aloud they wanted to cause a housing correction and are willing to cause a recession in order to quell inflation and housing prices, we should expect a continued softening of the real estate market but without a 2008-style collapse, other than perhaps in commercial real estate.

Of course, no one has a crystal ball. Maintaining high cash reserves and investing cautiously in the turbulent waters we are likely to continue swimming through is advised.

Find an Agent in Minutes

Match with an investor-friendly agent who can help you find, analyze, and close your next deal.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

A common mistake that many companies make is using a “one-size-fits-all” approach to its marketing efforts. Said another way, the company comes up with one marketing strategy, uses mass marketing techniques and the same messaging to everyone that sees its advertising. Yes, that is a simple approach, and saves you time and efforts required to customize your messaging to specific sub-audiences. But if you are looking to maximize your return on marketing spend, that additional upfront investment in building customer personas (sub-audiences) and a customer journey flow (from upper funnel to lower funnel) will pay back in spades. So, don’t be a penny wise in the short run and pound foolish for the long run. The more you personalize your messaging to the exact target, and where they are in the buying process, the more it will help you put your marketing efforts on steroids. This post will help you learn how to do exactly that.

What is a Customer Persona?

A customer persona is the sub-audience of users that are buying your product or service. If you are a consumer business, maybe that is men vs. women buyers, or older vs. younger buyers, or which target products they are most interested in (e.g., coffee drinkers vs. tea drinkers). If you are a B2B business, maybe that is customers from one industry or another, or buyers at different levels of the organization (e.g., executives vs. lower level managers) or different size of companies (e.g., enterprise vs. small business). Every single one of these sub-audiences, should receive marketing messages from you that are directly relevant to them.

What is the Customer Journey?

The customer journey is the path in which a customer researches, considers and ultimately purchases products or services. A customer that is researching to figure out what it needs is typically upper funnel, a customer that knows what it wants and is considering various vendors or solutions is middle funnel, and a customer that is price shopping and ready to pull the trigger is lower funnel. Why does that matter? Your marketing messaging should be tailored to where they are in their customer journey.

Someone that is upper funnel needs to know why they need a solution in the first place, someone that is middle funnel needs to know your product is better than others in the market, and someone that is lower funnel may be stimulated by a promotional offer to save 10% if they purchase by the end of the month.

And the marketing tools you use to communicate with them will be different—from mass marketing tactics (e.g., TV, radio, print, search engines) for upper funnel down to one-on-one marketing tactics (e.g., emails, phone calls) for the lower funnel. So knowing your customer journey and which media are best to communicate with your targets is a critical component to personalizing your marketing messaging.

This article I wrote on mastering your marketing funnel and media mix may help you with this process.

What does Personalizing Marketing Actually Mean?

Personalizing your marketing means you need different marketing creatives for each sub-audience. Let’s say you have three core personas and three stages of the marketing funnel, that would be a total of nine different creatives that need to be created (not just one). And in those creatives, use images and copy that actually will resonate with that sub-audience. So, if speaking to men, use male models in your creatives. If speaking to older people, put older people in your creatives. If pushing a specific industry use case, speak to that industry expertise in your creatives. If speaking to executives, promote the strategic benefits of your product, vs. the more tactical functionalities that would be better promoted to lower level employees. You get the point—don’t spray and pray. Be laser focused with your targeting and messaging, and good things should happen to accelerating your sales.

What Can You Expect to Happen from Personalization?

With every layer of personalization, you can expect to increase your conversion rate, and ultimately your sales. So, as an example, let’s say the one-size-fits-all approach allows you to convert 10% of your leads. Layering on the customer personas may allow you to convert 20% of your leads. And further layering on the customer journey messaging may allow you to convert 30% of your leads. The better you sharpen your pencil, the higher your resulting revenues will be. Any good marketing agency can help you here.

Tracking Is Critical

Setting up the customer personas, journey and creatives is only part of the exercise. The other part is tracking the results from each of those sub-audiences. So, when setting up your campaigns, tracking URLs or other conversion metrics, make sure the appropriate tagging and tracking is in place, so that your CRM can easily see how the different personas are performing at driving sales. You may learn that each persona behaves equally the same, and deserves equal attention. Or, you may learn certain personas are outperforming others, and needs your oversized attention and budget, redirecting efforts away from your other underperforming personas. So, in all cases, the devil is in the details, and you need to be tracking and optimizing everything.

Closing Thoughts

The concepts presented in this post are “table stakes” in the marketing world, and it amazes me how many early stage companies have absolutely no clue here. If you are not doing it, you are potentially wasting a lot of your marketing dollars. Or at a minimum, not driving an ROI as high as you ultimately should be. So, either hire a strong marketing team, or engage a strong marketing agency, for your business. They can help lay the groundwork here, and ultimately tee you up for maximum marketing success. Good luck!!

—

George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.

This article is presented by RentRedi. Read our editorial guidelines for more information.

When it comes to investing in real estate, you may be tempted to stay close to home, and this is understandable. You’re more likely to understand the market and feel more comfortable being nearby while looking for tenants or collecting rent. It may seem daunting, but several real estate investors find it lucrative to seek out markets in other cities or states in order to secure more affordable investment properties. 

Now, there are several options available to you when it comes to the management of real estate investments: managing yourself, hiring a property manager, or hiring a property management company. Regardless of what you choose, chances are in our tech-driven world that some type of software will be employed to conduct business operations. 

Setting up software or tech to manage your properties ensures that when it’s time to place a tenant in your rental and deal with finding tenants and collecting rent, you’re able to present yourself as a capable and professional landlord—even from miles away.

Tenants Can Apply to Your Rental Online

One of the first steps you’ll need to take after securing your long-distance rental property is to actually find tenants. Naturally, the easiest way to do this is to list your investment property on syndication sites like Zillow, Hotpads, Trulia, Realtor.com, or Doorsteps. People searching for apartments or rental properties frequent these popular sites. You can use property management software to syndicate listings with the push of a button. Keep in mind if you use sites like Zillow to post your rental, you will incur a posting fee. This has been rolled out by Zillow for all 50 states.

From these sites, applicants can request to apply to your rentals. Typically applicants will fill out a form with their name, phone number, email address, and a message. After you’ve collected this information, you can use property management software to generate an invitation to a formal application if you’re interested in the applicant.

Additionally, you might consider exploring using Facebook Marketplace or Craigslist, as potential tenants often use these sites as well to search for rentals. If you’re using sites like Facebook Marketplace or Craigslist, potential renters will likely direct message you, but you can gather their contact information to send out an application.

Screen Tenants from Miles Away

When it comes to screening tenants from long distances, there are several steps you can take. The most obvious is the rental application. Landlords will typically create or download an application they can use to collect more information about the tenant. Typically, this application will host tenant information such as personal information, employment history, financial information, and anything else that might be relevant to determining whether or not the tenant will be good for your rental.

Along with an application, landlords will typically run a background check on the tenant. If you’re unsure of how to run a background check, most property management software will have a built-in background check process you can use to easily screen tenants. You can also use sites like TransUnion to screen tenants as well.

All of these—rental applications and tenant screenings can be conducted online if you’re long-distance, so you don’t necessarily have to be on-site to hand out paper applications.

Collect Rent in Another City or State

Importantly, collecting rent is a key process in managing rental properties and one where tech can be the most beneficial if you’re long distance. After all, you won’t be able to use the traditional methods of plain old paper checks or physical cash. 

However, as technology is becoming more prevalent in the real estate investing world, you can easily collect rent online without having to physically be near your investment properties. And, property management software is a great way to collect rent (versus apps like Venmo or PayPal) because it offers much more features for landlords than money transfer apps do (e.g., completing the listing and application process described above.)

Property management software can be used to generate rent charges for the duration of your lease, have tenants set up automatic transfers of money, track all your payments in one place, and even supplies accounting features that help you during tax time. Your tenants can typically pay with their bank account or card, so rent is submitted electronically and doesn’t require any hand-offs or driving around to pick up checks or cash.

Software to Help You Manage Investment Properties Long-Distance

If you’re interested in adopting tech into your long-distance property management process, one software that can help you manage all aspects of your investment properties is RentRedi.

When it comes to listing your unit and collecting applications, you can use RentRedi’s software to list to Realtor.com and Zillow. From these sites, applicants can express interest in your property. After you have potential tenants with interest in your rental, you can then use RentRedi’s software to invite the tenant to formally apply to your unit using RentRedi’s in-house application. (This makes it easier to not have to dig up or create an application of your own.)

Importantly, after your potential tenant has completed the application, they can complete a TransUnion background check from RentRedi that provides you with a credit, criminal, and eviction check. When you’ve chosen a tenant to fill your unit, then you can use RentRedi’s software to send, sign, and store leases. Then, collect rent with automatically populated rent charges to the tenant app and tenant auto-pay. You can even set up maintenance personnel with free teammate accounts or sign up for maintenance coordination that enables you to outsource maintenance requests altogether, so you don’t have to worry about being on-site for maintenance issues as well.

All of these aspects of managing investment properties can be done online with property management software like RentRedi.

RentRedi is offered for free to BiggerPockets Pro members, who can sign up right from their Pro page. If you’re not a BiggerPockets Pro member, consider signing up for all the extra content, insight, and tools you can use to manage your investment process—from purchase to management. 

Get started using RentRedi today!

This article is presented by RentRedi

RentRedi is a modern, end-to-end property management software transforming the real estate and rental property industry. 

RentRedi provides over 15,000+ landlords with simple and effortless web and mobile apps for online rent collection, tenant screening, listings to Zillow and Realtor.com, signing leases, maintenance & accounting management, and unlimited properties, tenants, and teammates

For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to TransUnion, prequalify & sign leases, and submit maintenance requests.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

You know how important building trust is to the success of your brand. I have written repeatedly about ways to use onsite content, thought leadership strategies and social media to do that. Trust will keep your customers coming back again and again.

But there is something beyond trust that will make those customers ardent supporters, even when there are hiccups in your relationship. By “hiccups,” I’m referring to things like when it takes longer than usual to deliver a product, or the product has a defect when they get it. Moving beyond trust means gaining your customers’ deep respect and generous approval. In a word, it’s “admiration.”

Admiration for your brand is the ultimate customer commitment. You earn it among those who perceive your brand as a solution to their problems, a business they’re proud to partner with and a builder of community. These customers aren’t just loyal to your brand. They love it.

You can have trust without admiration, but you can’t have admiration without trust. If you’ve invested in earning the trust of your customers while building your brand, take the next step. Pull them solidly into your brand’s orbit by earning their admiration. Here’s how you can.

Give Them Agency

Customers purchase products and services that will solve their problems. Take Gabriela, who wants to swap out her old kitchen faucet on her own but can’t get the nut loosened to remove it. After a little Googling, she figures out she needs a basin wrench for the job. She buys an Acme basin wrench, which promises to do the trick.

Gaining admiration, though, requires more than just providing solutions. To earn it, your brand needs to empower your customers by giving them agency. Let’s go back to Gabriela, who can’t get the basin wrench to do what it’s supposed to. Instead of leaving her frustrated, Acme’s website provides a video tutorial that shows her how to make it work. She loosens the nut, replaces the old faucet, feels great about herself and shouts it to the world.

Acme gave Gabriela agency, not only by supplying the tool she needed, but by showing her how to use it. As a result, Acme earned not just her trust, but her admiration. In a world where so much seems outside of people’s control, giving your customers agency lets them take some of it back.

Involve Their Senses and Win Their Hearts

The way to win your customers’ admiration is by engaging their curiosity, rousing their senses and giving them a sense of delight. I know this touchy-feeling talk makes some brands’ leaders roll their eyes. But remember, you’re trying to win your customers’ love, not just their business.

Sensory marketing is grounded in the principle that customers make decisions based on the involvement of their senses, whether they realize it or not. Look for ways your brand can appeal to as many of them as possible, like including a scent of lavender in your packaging or a wrapped chocolate with the pillows you sell. Or create high-quality video content with sounds and images that customers will forever associate with your offerings.

Depending on what you sell, you may need to get creative here. The good news is that opportunities to create content that grips the hearts and minds of your customers are endless. Just remember that what you do to leave your audience with a lasting impression isn’t just about giving them what they want, but what they didn’t even know they needed.

Build a Community

Everyone wants to have a sense of belonging, whether they’re buying a membership, a condo or a pizza. Building community makes people feel less alone in an increasingly fragmented world. Plus, having a team is the stuff diehard brand rivalries are made of: Mac vs. PC, Pepsi vs. Coke, Star Trek vs. Star Wars.

To win over customers to your brand, use content and social media to make this construction project easier than ever. Respond to customer comments, reviews and ratings to let them know you’ve heard them, and use platforms to encourage dialogue and user-created content. Reward and encourage loyalty to your brand, and you can make admiring customers brand ambassadors. If you make a mistake somewhere, not only will these customers be undeterred, they’ll stick up for you.

Building community also requires involvement in activities and events outside your products and services but true to your brand’s values. Doing good for others and for the world gives your customers one more reason to love your brand.

Beyond Trust

You might have thought building and maintaining customer trust in your brand is the ultimate achievement. However, to create truly ardent customers, you’re going to have to earn their admiration. It won’t be easy. But winning their hearts will create a relationship that’s built to last.

David Greene:
This is the BiggerPockets Podcast, show 747. First off, if you don’t know what I mean by portfolio architecture, it’s the idea of seeing your portfolio of homes as one organism as opposed to every individual house as its own organism. You want to have some short-term rentals that spit off a lot of cash and some traditional boring rentals that provide very steady cash flow to protect you in downtimes. You also want to have properties that maybe don’t cash flow great, but they build a lot of equity for you, you’ve built a lot of equity into. You want to have some properties that over a long period of time, are going to make a bunch of money and some properties that in a short period of time are going to provide cash flow to get you through that long period of time.
You want to combine them all together, so that’s portfolio architecture. What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, here to help you guys make money through real estate and find financial freedom with a Seeing Greene episode for you today. First off, I’m proud of myself that I remembered to turn the light green before we start recording. If you want to see what I’m talking about, check us out on YouTube where you can catch the video portion of this podcast. Second off, if you’ve never heard of a Seeing Greene episode, these are shows where you, the listeners submit your questions directly to me about what goes on in my head, how I buy real estate problems that you might be having and you don’t know what to do when you should jump into the market, how you should jump into the market.
Every single thing that you’ve thought and said, “I love this podcast, but I wish David was here right now. I’d ask him this.” I could be here right now. You just got to go to bigger podcast.com/david and submit your question, and we make this show for the people and by the people. Today, we have a fantastic episode. I go a little bit longer, so please, there’s a reason I did that, check it out. Listen all the way to the end because we give something very, very good advice and stuff I know a lot of people are thinking about. We cover what to do when you think you’ve got a deal, but the area isn’t great. So in this question, I kind of dig into the three things that I use when I’m analyzing should I or should I not buy this deal?
There’s another question about when to add diversity to your portfolio and when to stick with what you know. This is a question a lot of people struggle with, should I just keep doing the same thing forever, for infinity or should I branch off into something else and win? Then, how I filter my news to form my thoughts on everything. One other people said, David, “Where do you get the information that you’re basing your perspective on,” which I thought was amazing, and I share some information about how you guys can do the same is more simple than you think, but also more powerful than you think. All that and more on today’s show. Before we get to our first question, today’s quick dip is I swivel at my chair to keep my energy up for you.
How do you keep your energy up and what actions do you take that help you move forward? How can you contribute more to the community of those around you and put some of your energy into the BP community? Let me know in the comments on YouTube and this quick tip will make much more sense if you listen all the way to the end of today’s episode. All right, let’s get to our first caller.

Cory Meals:
Hey, what’s going on, David? My name is Cory Meals. I’m a real estate broker associate and team leader here in North Texas. I’m also a real estate investor, and my question for you today is how can I leverage the current equity that I have in my property so that I can go out and buy more property to put into long-term debt? The idea is right now, I have 40 to 50% equity in all of my properties. It’s duplexes and a single family property. It’s roughly a million dollars in equity that’s just kind of sitting there. I don’t want to refinance these properties because I have 30 year fixed notes on them all in the low to mid 3% interest rates. They’re all cash flow grade and I don’t want to sell them either. I’m not looking to trade up. I want to figure out how I can tap into this equity.
Every lender I talk to says that they won’t take a second position to give a line of credit. They won’t give any kind of secondary loan so that I can go out and buy more property. There’s opportunities out there that I’ve seen here and there, and I just want to be ready to strike whenever I come across that great deal. So anyways, I’m looking for any end sighting you have on this. Also, for all of you BiggerPockets listeners, if you all are looking to move to the North Texas area, specifically Sherman, Texas, I’d love to help you out. Once again, my name’s Cory Meals. Thanks for taking my question, David and I’m looking forward to hearing the answer.

David Greene:
All right, thank you, Cory. Well, you’re making your journey a little bit of an uphill battle here because I like the question of how do I get the equity out of my properties, but the two easiest ways are both something you don’t want to do. So let’s take a quick step back and just talk about what equity is. Equity by definition is the difference between what you owe on a property and what it’s worth. So you’re saying that the properties are worth much more than what you owe. There’s about a loan of around 40 to 50% of the value of the property. So you basically have 50% in general of your property has equity. All right? What is equity at a philosophical standpoint? That’s a better question. Well, if you can learn to look at money as energy like I do, it makes a lot more sense.
When you go work a job, you work eight hours, they pay you $200 for your work, you basically have $200, which is a store of the energy that your labor and your time created for you. Okay? So we know that money is money, but I stopped looking at it the way that I used to because inflation has run rampant and now, I don’t know what money is even worth. What’s $200? Well, it’s worth a lot more than it was 10 years ago. It’s worth way more than 30 years ago. At 100 years ago, $200 was probably more like $10,000, right? It’s crazy, so you can’t just look at money as having an inherent value. You have to look at it as a store of energy. Savings, money in your bank account under your mattress is a bad store of energy. It loses value, right? So inflation is actually bleeding away at the value of cash.
When you look at equity, what that is, is energy that has been moved from your savings account into a property and it tends to grow. It grows because the loan’s getting paid down. It grows because the value of real estate tends to go up over time and it grows because cash flow that that property kicks off creates a return. So equity either grows money better than if it’s in your savings account or it just bleeds less. A lot of us don’t realize if inflation’s at 30% because that’s how much money we’ve added to the supply and your real estate went up by 15%, you still lost 15% of your money. It’s very hard to track exactly what inflation is. We use the CPI, but that’s not the most accurate thing.
Now, I’m not going to go too deep into macroeconomics right now, but I did want to just highlight the point that many of us think that we’re wealthier than we really are because we’re like, “Oh, my property improved by 15%.” Well, if inflation was really at 25 to 30%, you still lost money, but you lost way less than if you just put your money in the bank. Now, if you add leverage into real estate investing, that starts to sway it in your direction. Okay? So your question is how do I get the equity out of my properties? What you’re really trying to do is take the energy that is being stored as equity in these properties and put it out into buying new properties where it can be amplified even more. And there’s four ways that you add equity when you’re buying a property. The first is what I call buying equity.
This is just buying a property below market value. The second is what I call forcing equity. This is also referred to as value add, you force it to become worth more by something that you do to improve the property. The next is market appreciation equity. This is buying an area where prices rise faster than the average in the country, and then, the fifth is natural equity or inflation where it just becomes worth more because the dollar itself becomes worth less. So I do want you to reinvest that money, but the two ways we normally get access to that energy is either selling the property in a 1031 and moving it from the property, it’s into a new property. Now, the 1031 is just a way of moving your energy that’s more efficient.
You don’t lose as much of the energy in the transaction because you don’t have to pay the taxes, which takes away. The other one is a cash-out refinance where there’s still some energy loss because you’re going to pay some closing costs on that, but it’s very insignificant compared to how much energy you can gain if you go get the four ways that we build equity in another property. So you sell a property that’s somewhat maxed out, you get another property at less than market value, adding equity, then you add value to the property, adding equity. You buy it in an area more likely to grow and appreciate than the surrounding areas, adding equity and then, you continue to benefit from the same inflationary pressures that you got with the last one, which continues to add to equity that you were already building.
When you do real estate right, every transaction like this, every time you move your energy, creates a bigger and bigger and bigger snowball. Your problem here, Cory, is you don’t want to have to sell or refinance your properties because you like the rate you have and you don’t want to sell, which leaves you with limited options. You’re going to lenders and asking for a second positioned loan, so if anyone doesn’t know what that is, this is a loan taken on a property based on the equity of it, which some lenders would be willing to do. If you have 50% of the equity, they’ll give you another loan and put a second position lean on it. Many of them don’t, especially with uncertainty in where the market is headed, okay? It’s actually really hard to get financing right now because while all of us are like, “Is the market going to crash?” We’re getting all excited.
The lenders are like, “Is the market going to crash?” They’re getting nervous. They don’t want to lay it on real estate, which to be fair, we’ve warned you guys about for a long time, at least I know I have. When the market turns around and there’s amazing deals and everyone is excited because there’s a crash, it’s super hard to get financing, you’re probably don’t have a stable income in your job, it becomes very hard to invest in real estate when we think it’s going to be easy because we think we’re going to get properties at discounted rates. Based on what you’ve said, you have two options. One is putting a HELOC on investment properties, which is incredibly difficult to do. The only advice I have for you on that is to go to a local credit union or savings institution, but still it’s very hard to get those.
I remember looking for a solid year before I finally found a credit union that would do that on my HELOCs and I don’t have any of those right now. I’ve already refinanced those properties out of that or something you might not be thinking about is private lending. You can go borrow money from people on the private money and give them a second position lean on your properties and borrow money from them. Now, the rate is going to be higher probably than what you get at a bank unless you find a person who is happy to give you a 6% loan or 7% loan, even though that’s less than what a bank wants, it’s more than what they’re probably getting on their money in the bank.
So if you don’t want to sell and you don’t want to refinance, the only option that I think that you have here other than getting lucky and striking gold, finding someone that will give you a HELOC on an investment property is the private lending route. The advice I’m going to give you is just consider selling. I don’t know what the reason you don’t want to sell is, you know better than me, but if you can sell one property and turn it into two to three that each one of them, you build equity in those four ways, let’s say you just take two ways. If every property you buy, you get less than market value so you get a good deal and you add value to it, you’ve now increased the equity on each one that you bought. And so if you sold one and bought three, you’ve won six different times over, okay?
Then, if it’s in a market where the money continues to grow, that’s a third way you’re building equity, now, you’ve won nine times over and that snowball will continue. If the reason you don’t want to sell is because of the interest rates, I’m just going to advise you not to let that be the reason you keep a property. That might be an okay reason not to refinance. You like your 30-year rate, you don’t want to get out of that, but selling a property and reinvesting your proceeds into something bigger and better with a value add component in a better location and that you bought it less than market value, that’s how you’re going to build bigger wealth. So thank you Cory for reaching out. Good luck to you on that my friend. Our next question comes from Aaron and Evan both in Baltimore.
“Hey David, a friend of mine and I are huge fans and are ready to take action on our first property. You constantly say to buy the nicest house in the nicest area you can, and of course we’re doing the exact opposite. We have the opportunity to buy an off market property for 150K that if listed, would sell for around 180K. It is a duplex, both unit is rented by the same tenants for about five years in total, pulling in 1650 a month looking good against the 1% rule. Rents to the tenants have never gone up and could marginally without risk of losing the tenants. So it seems this is a no-brainer, but what is our actual strategy here? In terms terms of actual cash flow, it’s not a whole lot of dollars and in terms of appreciation, that’s a little unclear because the neighborhood is not great.”
“We are super excited to get our first property and simply trying to figure out how to prep to get the second. What say you?” Well, thank you both Aaron and Evan for running this one by me. All right, let’s start off with the big picture and then, whittle it down into the small. I look at real estate as building wealth in three ways, and so there’s three things that I ultimately factor into what I’m going to buy. The first is the cash flow, the second is the equity, the third is the headache factor. Very simple. So if a property cash flow is great, but there’s not a whole lot of equity, I might buy it. If a property doesn’t cash flow, great, I want to see a whole lot of equity in that deal or maybe I get a little bit of cash flow and equity, so I’m happy.
The third one is usually going to be the decision factor for me, and that’s going to be the headache. I don’t ever want to own real estate in rough neighborhoods. I don’t want to own real estate in any situation where it’s going to take a lot of my time and energy and attention. It becomes too expensive. Now, this does work when you’re buying your first deal because right now, you have a lot of time, you have a lot of energy. Anything is better than where you’re at, so when you compare the property you’re looking at to where you are with no properties, it starts to look good. It’s kind of like gas station sushi. You’re hungry. Is gas station sushi the best? No, but is it better than being hungry? It could be, so it starts to make sense, but if you’re comparing this to a real sushi, you wouldn’t touch that stuff, right?
The problem with gas station sushi is it’s the unintended consequences that you could not predict that are going to take you down. That’s what I’m worried about in this deal. So here’s what I am seeing, Seeing Greene, as you’re telling me about the deal. In terms of actual cash flow, it’s not a whole lot of dollars. So cash flow, one of the first three reasons I’m looking to buy a property isn’t there. In terms of appreciation, it’s a little unclear because the neighborhood is not great. Okay, so you’re not getting appreciation from either natural … you’re not getting equity through appreciation as natural equity, which is inflation or market appreciation equity, which is buying in a great area because it’s not a great area, okay?
So those two ways you’re not getting equity, what about the other two? Is there a value added component to this? It doesn’t sound like it. If it’s not in a great area, you could dump a lot of money into this property. It’s not going to really increase the value and you’re not buying a lot of equity. You’re buying it from 150, it’s worth 180, sure, there’s $30,000 right there, but if you ever had to sell it, that 30,000 would pretty much have to go right towards realtor fees and closing costs and everything else. So you’re kind of breaking even and you have a headache factor, so there’s no cash flow, there’s no equity, and you have a headache. To me, this is a hard no. A very easy no. Don’t buy this property. Probably a reason the person is trying to sell it to you, there’s probably a reason they haven’t increased the rents for five years.
So you’re looking at that with rose colored glasses like, “Oh, I could bump the rinse and the tenants could still afford it.” Well, the current owner might have done the same if that was possible, who knows the reason that they haven’t bumped it. Maybe they’re just a super nice person, but maybe they think that the tenants are going to leave and they can’t afford the vacancy. I don’t see any reason that you should buy it, and I see a lot of reasons that you shouldn’t buy it. I’d much rather see you and your partner get something in a better neighborhood where you’re going to get better tenants, where rents are going to go up more overtime, where cash flow is going to increase, where the value is going to increase and you’re not going to have a headache factor and just be more creative with how you make that deal work.
Can you house hack in a really good neighborhood and put 5% down on the property and rent out the rooms or make ADUs and rent those out? Can you do something that is less comfortable than just buying a rental property but more profitable, because as I always say, when it comes to house hacking, comfort and profit are opposite ends of a spectrum and you got to figure out where on that spectrum you’re comfortable existing. So thank you for the question. Thank you for submitting this. I’m sorry that I can’t tell you to go for it, but I don’t think you should go for it. Not on what I’m hearing right now. Hopefully, this saves you a lot of money and a lot of headache and a lot of time, and you keep your capital for a better deal that is likely to be coming your way. Right now, it’s not a time to rush and jump into real estate.
This temporary little stall that we’re at from pushing interest rates higher and higher is putting more leverage in hands of buyers and less in sellers. So time is on your side for right now. Thanks very much guys. Give me an update on how that deal works out. Our next audio clip comes from Mark in New Jersey.

Mark:
Hey David, this is Mark from Northern New Jersey. Thanks for taking my question. I love the show. I love BiggerPockets, I’ve been a fan for years. So quickly before the situation, my wife and I have good paying jobs, stable jobs. I’m in law enforcement actually, and we both make total of about 300K. We have no outstanding debt. We have good credit scores and we have low monthly expenses. Our experience, we’ve been house hacking for a couple years now. She’s seen the power of it. We own two duplexes, both with owner-occupied financing, low interest rates. We don’t have a ton of equity yet that we’d be able to pull out, but they are appreciating and they do spit off some decent cash flow and reduce our expenses.
So we’ve gotten that experience. Everything has gone really well. I have a great team from Realtor. I do currently manage my own properties and I enjoy it and continue to do so and I have great contractors. My question is, and the problem is I want to scale up to something a little bit bigger between four and seven units. I do know that that’ll start crossing into the commercial lending. However, the down payment, because things around here are so expensive, is quite large and we do have about 100K to put down towards our next rental property. However, I’m trying to think of creative ways to go about purchasing the next one. We were thinking about having some sort of seller carryback maybe on the next … on the 10 to 15%. The rest of it, I’m not sure how that would work with financing the other 80 to 75% or also raising private capital either from our friends and family, but I wasn’t really sure exactly how to do that.
I do … at least how to approach that, I would like to do straight debt and not any equity in the property. Any help, I’d appreciate it. I do plan and continue to work. I don’t plan on leaving my day job. I love my law enforcement work for now. So yeah, appreciate it and I’d love to come on and talk more about it if needed. Thank you.

David Greene:
All right, thank you for that Mark. Some really good stuff there and I see the dilemma that you’re facing. All right, let’s break this down. First off, the reason that I tend to talk about residential real estate more than commercial on this podcast is because residential real estate is much more flexible than commercial. I use the analogy of it’s like a jet ski. You can change directions very quick. You have more creative cool things you can do. With a jet ski, you can do 360s, you can jump wakes, you can go fast, you can go slow, you can make sharp terms. There’s a lot of different stuff you could do versus a battleship, which there’s not a whole lot you do. You go in a straight line and you plunge through obstacles and they’re safer but to change direction is a freaking endeavor.
It takes a lot of work to slowly turn a battleship from one thing to another. Residential real estate is like a jet ski and commercial real estate is much more like a battleship. When you chart your course on a battleship, you put a lot more time into analyzing that deal, underwriting that deal, making sure your course with that battleship is dead on because if there’s an iceberg coming up at the last minute that you didn’t see or you’re going into shallow water, you can’t turn nearly as quick as residential real estate. Residential real estate is flexible. However, it’s not as resilient and it takes more work just like you got to pay more attention when you’re riding a jet ski than if you’re controlling a battleship.
You just sit back and let it do its thing. So your situation is that you’ve done well with residential now you want to get into commercial. The reason I use that analogy is there’s a lot of people that will try to take residential approaches to real estate and apply it in the commercial world and they’ll crash. You got to be very sure of where you’re going with a commercial space. It’s a much more long-term approach. It’s harder to build equity, it’s harder to make decisions, whether it’s multifamily or it’s commercial or it’s triple net, you make a decision when you buy and you’re kind of locked in as far as what you can do. You got to execute the plan you had. You’re not going to change courses like you can with residential real estate with shoppers, a lot of different ways that if something didn’t work, you could try something else.
When it comes to this commercial endeavor you got, you’ve got 100K, you need to make sure you put it in the right deal and you need to understand you’re not getting it out nearly as fast. There’s also more risk in commercial lending, especially with the mortgages because you typically get a four or five year period of time before a balloon payment is due and you have to refinance, and if you bought something at 3% and now your balloon payment comes due at eight or 9%, you might find your payment doubling or almost tripling. It can be really, really rough, when you get into this world. Your best option if you’re trying to find something creative to not spend all your money is to borrow money from other people.
This is what I do a lot of the time and it works really good with commercial deals specifically. So my partner Andrew Cushman and I will typically raise money for deals that we find and we give away equity in those deals, but that becomes tricky too. You probably don’t want to be a full on syndicator. What I’d recommend is if you find a commercial property that you like, you have a plan that’ll work, it’ll work even if rates increase from whatever you’re getting right now. You borrow money from someone, but instead of giving them equity in the deal, you pay them debt. They get a guaranteed return. They get 10% on their money, 8%, 12%, whatever. You’re going to have to pay them to get their money, but you don’t make them a partner.
You don’t want them coming along and saying, “Well, I think we should do this or I think we should do that, or I think we should sell,” and you want to hold, that makes things complicated. So going to people and saying, “Hey, I can give you a loan,” and if they say, “Well, how do I know I get my money back?” You say, “Well, you’ll have a second position lean on this property.” It’ll be secured by this property. It gives you a higher chance of being able to raise more money than you could have before, to help buy the property. You just want to be careful, because if the deal goes bad, it’s now extra bad because you’ve taken on extra debt. A lot of the time when we talk about borrowing money to buy real estate, we’re only giving you guys the rose colored glasses result.
You could borrow money, you could buy real estate, you get all the benefits of real estate and you didn’t have to put money into the deal. Well, when the deal goes wrong, it goes extra wrong. Not only did you lose all the energy and time you put into the deal and your money, but you lost somebody else’s money and you got to pay them back, so now, you lost twice as much money, okay? So this isn’t like a no consequences way to buy real estate when you start borrowing money from other people, which is why in general, I’d tell someone to lean away from that until they’ve already bought enough of the deals. Now, Andrew Cushman, who I mentioned earlier, I trust that guy with my life. He is so good at what we do. I don’t worry about borrowing money to put into deals as Andrew does.
I probably wouldn’t put money into your deal if this was your first commercial deal that you had ever done. Just something to think about as you’re going into this and if you’re thinking you only have a 100K, I don’t know that jumping into commercial is the best move for you right away because it’s hard to get the money back out of it. If I could put a 100K into a fixer upper property and I could buy it at undermarket value and it’s an area that’s likely to appreciate, you got three ways that you’re going to build equity, I’d do that for two years. Let the property become worth more, make it worth more at equity when I’ve bought it. Then I would 1031 that money into the commercial property that you’re talking about.
That would probably be an easier way to turn that 100K to 200K, 250K and then move it over, but let me know. Tell me what did you end up doing? Did you go for commercial? Did you hold off on commercial? Personally for anyone thinking about getting into commercial for the first time, the time is on your side. This is siege warfare and the other people are running out of food. Okay, the longer you wait, the easier that battle is going to be. This is not a time to rush into commercial lending because you’re going to be seeing a lot of balloon payments reset and sellers have to sell properties for discounts because they either can’t refinance or they don’t want to refinance into the higher rate.
Okay, this segment of the show, I like to share comments from our YouTube channel. So if you’re not checking us out on YouTube, consider doing that. You get to look at the green light behind me. You get to see my handsome face. You also see some of the hand gestures that I’m making as I’m talking. Sometimes I do this little thing when I’m describing the spectrum where it looks like a fish is getting bigger or smaller. Sometimes I hold up fingers when I’m making points. Sometimes I put my hand on the top of my head and pretend like I have a mohawk. Lots of things that you can see if you tune in on YouTube. Also, we want to hear from you. So if you’d like to be featured on the show, go to biggerPockets.com/david and submit your question.
All right, our first comment here, “Hi David. Thanks for producing this content. You talk a lot about inflation and real assets in the real estate field. I wonder what your opinion of Bitcoin is with regards to inflation and the hardness of money/assets. It seems like you were seeing a lot of similar things as those in the Bitcoin as a commodity space. Thank you.” Funny you mentioned that because I did talk about Bitcoin earlier today. All right, here’s my transparent view on Bitcoin. I do own some of it, very little. I’m not like a huge proponent or apologist for Bitcoin. I just think it’s likely to go up in value because like you said, inflation. I don’t think it’s nearly the same as real estate. I don’t know. First off, let me just say I don’t have hard opinions on this because I have no idea.
I don’t think it’s going to become as much of a currency as it is going to become a way that wealthy people shield their money. What’s different about Bitcoin than other cryptocurrencies, at least my understanding of it, is that you can’t make more of it. So the other cryptos can just, the same things that cause our dollar to be inflated, can cause those cryptocurrencies to become inflated. Let’s make more of them. My understanding is that the way that Bitcoin is designed, you can’t make more of it and the work it takes to mine more coins until you get to the ultimate thing is similar to mining gold. I think that’s actually why they’re calling it mining, is because it takes a lot of energy to create more Bitcoin, which makes it a better currency. You don’t want to just be able to print dollars or have quantitative easing and boom. With no effort, you’ve got more of it.
Gold is a cool form of currency because if you want to make more of it’s a lot of work and energy. It takes money to get it out of the ground. It takes time to get it out of the ground. So maybe you can increase the supply of gold by two to 3% a year by mining more of it, but think about how much money you had to spend to do that. It’s close to the amount of gold that you added to the supply. So it’s kind of a wash. I like that about Bitcoin, so that’s why I bought a tiny bit. I mean less than $10,000. I’m not talking about a whole lot of money. This is not my main investment strategy. I bought when Bitcoin went down, and if it goes down more, I might buy a little bit more of it, it’s like the only thing I do that’s play money, basically. Yes, I do think it’s different and I think some of the principles that work in real estate will work in Bitcoin for that same reason.
I think there’s a world where wealthy people who don’t know how to invest in real estate because they’re not as smart as you guys are not listening to this podcast, are not going to trust dollars. When they think about real estate, they just think about the house they live in, which doesn’t cash flow. So a lot of people look at real estate and they see the problems of it because they’re not … it still costs money to own it when you’re just forking out a mortgage, they look at money that is created through business, which business is a great way to reinvest money, but you have to … there’s risk there and you have to put time into it. So the people that are looking for a passive way to store their cash, I think that they will put it into Bitcoin because it’s easy. It’s so much easier than owning real estate.
You just click a button and you move it out of whatever you bought it, into your ledger and boom, you’re good to go. So that’s my opinion on Bitcoin. If you are wondering if I’m a fan of Michael Saylor, I don’t know a ton about him, but I do. I am a fan of his understanding of money as energy. I thought that was brilliant. I have adopted that mindset. I just think real estate works better and makes way more sense than Bitcoin, and I think all of you that are using that whole money as energy understanding will do way better with real estate than any of these Bitcoiners are ever going to do, so let’s go kick their butts. All right, our next comment comes from Jacob Force. “I love the passion, David. We believe in a system that has proven to work. Thank you for the knowledge, expertise and willingness to share.”
Well, thank you Jacob for your kind words and thank you for acknowledging my passion. “I pretty much get this way when I talk about a small handful of things. In general, I am a very isolated, introverted, stoic person but when it comes to talking about real estate or handful of other stuff, I definitely can get excited.” Mike H, “Is David pissed he got tricked by Rob Bill into investing in that mansion in Scottsdale that is not renting, while he keeps talking about not listening to gurus that sell courses.” Well, well, well. Mike H, are you trying to draw a wedge between Rob and I? No, I am not pissed at Rob and we knew that it was not going to make a ton of money right away. I was actually the one that told Rob, “This is something we’re doing for the long term, not the short term.”
So no, I’m not pissed. If I’m pissed about anything, it’s just that he really cares about decor and design much more than me and he spent way more money making the property pretty than I would. Let’s be fair, Rob is a pretty guy. Go look at him. He has to wear these faded black pocket T-shirts just to downgrade how good-looking he is with that incredible quaff that sits upon his head like the crown of a king in Game of Thrones. I’m a pretty homely looking guy, man. I look like a combination of Shrek, Jason Statham after Thanksgiving dinner and Dana White on two hours of sleep, okay? No one is going to sit here and accuse me of being a pretty person. So of course, I wouldn’t have spent as much money as him beautifying the property. No, I’m not mad and Rob is not the guru that I’m talking about selling courses.
I am pissed at gurus that tell you that real estate investing is easy, that tell you that cash flow is something that can replace your income within a 10-year period. I’m at pissed gurus that try to say, “You don’t have to do the work. You can buy my course and it will do the work for you.” Okay? So I actually have courses that I sell as well, but they’re not like $10,000, $50,000 courses and it’s very clear when you join it, you’re going to do the work. So I often relate wealth building to fitness. The people that rip people off are selling fitness is easy by the ab roller, by the thigh master. Remember those old machines from the 30s or 40s where the lady gets on it and it puts this band around her waist and it shakes her and it was like you could shake fat off?
If you guys don’t know what I’m talking about, Google that, it’s hilarious. At one point, that’s what they told people, is you just sit there and this thing shakes you, your fat will jiggle and it will burn right off. It doesn’t get you fit, and I’m not the fittest guy ever. I just got done talking about what I look like, Shrek, Dana White and Jason Statham when he’s got too much mashed potatoes in his system, but I do know that fitness does work and it’s hard, limiting what your diet is, which to me is saving money, not spending it on dumb stuff, not spending on things that don’t matter and working out really hard, which is equivalent of offense. Working hard at your job, getting promoted, starting a business, serving your clients, grinding in a healthy way are the only ways that you make money over the long term and the only ways that you get fit in the long term.
Now real estate is what you do with the money that you’ve already made. I’d rather see people put their money into a house act than put it into a course that tells them, “Ah, it’s going to be easy. You don’t have to work hard. You’re going to be financially free in two years using my system, and it doesn’t happen.” I don’t think Rob teaches people that, but there are a lot of people out there that do. Many of them compete with our podcast, so yes, I’m going to continue to sound the bell that education is good, but if your educator is telling you, sign up for my gym and you can lose weight and get ripped without a diet, without sweating when you work out without hard work, they’re probably selling you steroids and they might work for a short period of time, but the long-term consequences are not worth it, and I am a non-steroid wealth builder.
All right, Jared Franklin has our last comment, “Does your team hound you for swiveling in that chair for a whole hour? Have they tried the shock collar that activated when you swivel?” All right, Jared calling me out here, but thank you for doing that in a respectful way. That’s funny. Jared either has OCD or I have a bigger problem or we have some combination of the two where I can’t sit still and he can’t stand people that can’t sit still. If you’re not watching on YouTube, I guess there’s another reason other than my fingers or my spiky hair with my hand looking like a shark. I also apparently swivel in my chair. If we’re just being transparent, let me set the tone for being open and honest about things. It is very hard to think about what you’re going to say, say the words and then continue to think about the next thing you’re going to say.
Also, find a way to keep your energy high and present the information in a way that someone is going to hear and like. Have you ever listen to someone that talks and they say, “I’m really smart,” but when they talk, they talk like this. They use big words. It’s very hard to know at what point you should pay attention because there’s no intonation in their voice. I can’t focus when they’re speaking that way, and I think a lot of people talk that way because they don’t want to make a mistake or they don’t want to sound dumb. Okay, I’m trying to make this information taste as good as I can, keep your attention as good as I can, keep my energy high and still say the stuff you need to hear.
So what happens is it’s like all hands on deck to my brain and then, I don’t think about what’s happening with my body, okay? So I do start to swivel in my chair as I’m trying to stay in the zone. I’m trying to mentally stay focused on where I’m going with something and then, I start to fidget in ways. Okay? It’s kind of like that, I don’t know what to do with my hands thing that Will Ferrell’s character does, I think it’s Talladega Nights. It might be Anchorman, but it’s funny you’re like, “When you’re aware of it, you don’t know what to do with it.” So yes, they have not tried to stop me from swiveling in my chair. If they did, my fear is all the energy it would take to stop the swivel would make me one of those very boring communicators and people wouldn’t like it.
Personally, I think the movement is the magic. All right, you could send your real estate related questions or your job related questions. If you want to learn how to make more money at your job, that’s something I’m going to be taking on as well to biggerpockets.com/david and I’m looking forward to how I can help you. Don’t be shy, share your question, put it out there for everyone to hear. I guarantee you that someone else is thinking the same thing and you taking this action will help more than just yourself. I live by the barrel of monkey’s philosophy. You should always have one hand reaching up to people that know more than you and one hand reaching down to people that know less than you and letting the information flow along that chain so that you don’t get a big head keeping it all to yourself and you don’t get isolated thinking that you suck. All right, let’s get to our next video question. This one from Jordan Tinning.

Jordan Tinning:
What’s going on, David Greene? This is Jordan from Mukilteo, Washington. Wanted to make this video and just say thank you for stepping up and doing the podcast. I think you’re doing a phenomenal job. I really appreciate your perspective, your detail, and your strategic nature in which you attack a lot of these real estate issues and you have some big shoes to fill, but honestly, I think you’re doing a great job. That said, I am interested in learning more about macroeconomics and more specifically how that pertains to real estate investing and how we can use that to our advantage. So you talk a lot about knowing the bigger factors that are at play so that we can be smarter investors. What resources would you suggest that we look at, read and/or consume to get better at that?
The only things I can come up with are Economics for Dummies that are very boring and really don’t have any context into what’s going on today with the stimulus money that’s being printed or the Federal Reserve just printing US dollars like crazy. So what resources would you suggest? How would you go about learning more about some of the bigger factors that are at play and just looking forward to your feedback. Thanks so much for your time.

David Greene:
Jordan, you are a man after my own heart. I love your take here. Guys, we love real estate investing, but I have a different approach to why I do it. A lot of people say, “Buy real estate so you can get cash flow so you can work for 18 months and never work again,” and I just don’t think that’s realistic. A handful of people can pull that off and most people never will. It’s not a scenario that’s likely to work out for you. You’re going to end up going back to work and starting over and losing years of productivity that you could have had. Okay, I look at real estate much more as a place to put money that you’ve already made and let it grow, and it does need to be the way you’re going to build wealth, but you’re going to build wealth, you’re not going to necessarily create wealth.
It is very difficult to create wealth through real estate. It’s where to grow wealth that you’ve already built, and the reason that real estate has done so well over the last 10 years is not because we’re all geniuses as much as we like to think, it’s because of what Jordan is talking about here. It’s because of inflation, and I know that a lot of people do not tune into this podcast to hear macroeconomic boring words like quantitative easing and the M2 money supply and inflation and stimulus. I get it. You just want to hear how do I get the next deal in the duplex? I do share that information. I like to share negotiation strategies specifically because I’ve spent so much time in the trenches being an agent that I’ve learned how to get really good deals.
I’ve learned how to track them down, and I do teach people that stuff all the time. Go to davidgreene24.com and you’ll see a lot of the stuff that I’m talking about here, where you can learn more. However, all of that pales in comparison to understanding what’s happening in the big world. So I’m going to give you an analogy here. I could teach you how to swim. I could teach you how to cup your hands perfectly to be maximally efficient with your swimming, how to kick your legs at just the right way. You guys, if you’re watching on YouTube, you see all these hand gestures I’m making because I’m trying to make the people jealous that are not watching the video or the people that think all I do is swivel in my chair.
I could teach you how to breathe the perfect amount of times, how to keep your head down and only come up to the side to get a breath in. There’s lots of things that I could teach you that will make you a better swimmer. Here is the problem with that, the person who knows nothing about swimming, who doggy-paddles, who catches a wave, will go way faster than Michael Phelps, who’s the best swimmer ever, when he doesn’t have a wave behind him, okay? The actual benefit of understanding what the government is doing with our money supply, what we call macroeconomics, what the dollars are doing, it dwarfs the value of being a good swimmer. Now, to me, it’s not either or. I’m going to teach you how to swim better and I’m going to teach you about the waves because why not? Sometimes waves aren’t coming, and in those cases all you can do is focus on swimming.
When waves are coming, I want you guys looking behind you, timing the wave so the wave will propel you past all the people that aren’t doing that, and that’s what macroeconomics is. So Jordan is asking for resources where he can learn more about this, I think that that’s very wise. First off, Jordan, I love your question, so reach out to me. I’d like to get you connected. You guys can do that through Instagram or my BiggerPockets account or you could submit a question on here if you have the same type of thing, but places where I go to get information about this, there’s a couple other podcasts that I listen to. One of them is Patrick Bet-David Show on Valuetainment. They talk about the news and they bring experts in to discuss this stuff.
So like I mentioned Michael Saylor earlier talking about money is energy. I specifically got that off of Patrick Bet-David’s podcast. When Michael Saylor came in, he was preaching Bitcoin, and I’m not a bitcoin believer so to speak, but I loved his perspective on money. I got a ton out of that. Another one was an episode with Richard Werner, who is the father of quantitative easing. Okay? This isn’t like these secret esoteric speakeasy communities where you can learn about economics. It’s all right out there for people to see, just tuning your reticular activating system to pay attention to it. Richard Werner is the person who I heard, who is the one that came up with the idea for quantitative easing, which was the government buying securities and other financial instruments and pushing money into the economy that did not exist, so we say print money, but they’re not actually printing dollars. They’re doing this electronically.
He’s the one who’s the first person that said, that I’d ever heard, “Raising interest rates does not stop inflation. There has never been a model in the history of economics that proved it does,” which was mind-blowing because when I was in college learning about it, this was like ECON 101, right after supply and demand, and you learned about the invisible hand with Adam Smith, then you learned about how lowering interest rate speeds up the economy or makes inflation and raising interest rates slows down inflation, and it made a lot of sense. There’s an inverse relationship. I went my whole life thinking it, and then I heard from the guy that created quantitative easing saying, “That’s never been proven. I don’t know why we all say it. It makes sense, but it’s not true. It doesn’t do that.”
I don’t want to go too long into this topic because you could tell I’m passionate about it. You guys might not care as much. Let me know on the comment if that’s the case, if you want to hear more of this stuff, but he made this great point that the money supply is what causes inflation. It just depends on how you define inflation. If you define inflation as prices going up, yes, you can slow that down by raising rates, but you cannot take money out of the supply just by raising rates. You’re going to have more money and wherever you have more of something, it’s worth less. If this is complicated, if you guys just think about diamonds. Diamonds are worth a lot of money because there’s not a lot of diamonds. Okay? What would happen if we tripled the amount of diamonds that were available to people? What would the cost of diamonds do?
It would obviously decrease incredibly quickly. We just took three times as much diamonds as what we’ve ever had and boom, in one day, those hit the market. No one would be paying 25 grand for a diamond anymore. They’re freaking everywhere, right? Maybe you buy them for like 500 bucks or something like that, maybe even 5,000. That’s a lot less than 25,000. Now, what if the financing of diamonds became super expensive? What if we said, “Hey, that loan that you used to use to buy an engagement ring, instead of a 5% interest interest rate, it’s going to be a 75% interest rate.” Well, now, even though diamonds only cost five grand instead of 25 grand, you still would … they’d be very expensive because the financing to buy them went up.
That’s what’s happening when we’re raising rates, because what happens is if the financing of 75% goes back down to five or 10%, the cost of diamonds is going to plummet with it, because you added too much supply to the market. That’s why I talk about macroeconomics. That’s what we’ve done to our money supply. Yes, we have a temporary halt right now because we’ve raised interest rates, but it’s still supply and demand that’s going to determine this, and at some point, those rates are going to come back down because some politician is going to get voted in, if he’s the one that puts them down or she’s the one that puts them down, and boom, you’re going to see the price of real estate take off again, which is why I’m not a doom and gloom person who’s saying, don’t buy real estate.
I’m saying be careful buying it right now while the rate for diamonds is 75%, because it could come down more temporarily, but long term it’s going to go up. So Patrick Bet-David is one place. I also just watched the news straight up, Fox News, CNN, MSNBC, whatever you watch, they will talk about what’s happening in the economy. The danger in the news is when you take the perspective of the network or the anchor that you’re taking it from. I don’t care about that. I want to know what Jerome Powell’s decision in the Fed was. I don’t need CNN or Fox to tell me how to think of it. I’m then going to go research different places that talk about Jerome Powell’s decision and run that through the filter that I already have from my education in economics as a whole. Barry Habib with MBS Highway is one person that I think gets it right a lot of the time.
So I follow him and then, my text letter Behind the Shine, which you guys can sign up for, it’s free. I put information in there about what I see happening in the economy, so if you guys just want a little quick hit, you don’t want to have to put a lot of time into this. Go sign up for Behind the Shine. I call it that because my head shines and Brandon’s text letter is called Behind the Beard, so I wanted to one up him and let me know if you think that my text letter is better than Brandon’s because it’s very important to me to win these petty battles between he and I. All right, our last question moving on is from Jamie. Jamie Tuske in Northern California, we’re neighbors. “Some background to help out. We’re 37 and 38 years old. Full-time W-2 jobs, making about 220K a year, and we have three kids and we live in Northern California,” which guys is very expensive in Northern California.
That’s basically the San Francisco Bay Area up to Sacramento. “We have some cash save, but would rather not touch it and we have about 110K available to use from a HELOC. I’m a project manager and I have experience rehabbing homes, so we have that advantage as well. We bought our first investment property a short-term rental this year. We use cash and HELOC funds to purchase, update, and furnish, and we currently owe about 67K on the HELOC. We like your idea of portfolio architecture and would like to expand our portfolio, either short-term rentals or long-term rentals using the BRRRR strategy and/or fix and flip, depending on numbers, preferably with multifamily.”
“One question for you is, if you were just getting started in our position, how would you move forward? Would you focus on paying off the HELOC and save more cash or move forward in purchasing more real estate and pay off the debt later? With prices declining and buyers having more advantages now, we don’t want to miss the boat and the opportunity, but we are conflicted. Just looking for some guidance on the smartest way to move forward into building our portfolio. Thank you for all you do and the content that you and BiggerPockets team puts out.” All right, thank you for that. Jamie, first off, if you don’t know what I mean by portfolio architecture or what Jamie is referring to here, it’s the idea of seeing your portfolio of homes as one organism as opposed to every individual house as its own organism. Okay, it’s not accurate to just look at how a house operates.
Let’s say that you’re running a team because a portfolio is really a team. Do you analyze the strengths of every player? Of course you do. You don’t want bad players. You’re not going to buy bad deals because you don’t analyze them. You’re not going to make money on that. That’s not all that you do. You also look at how these players will play with each other, what’s the chemistry like between them, okay? If you build a basketball team of five incredibly good shooters because you’ve analyzed them really, really well and they all shoot the ball, great. You’re still going to lose because there’s no one to play defense. There’s no one to distribute the ball to the shooters, right? They’re not in a position where their strengths can actually be used because they’re all the same thing.
Portfolios are the same way. You may build it up to having 20 short-term rental properties and you have no time to enjoy life because while they’re highly profitable, they’re also taking up a lot of your time. They’re also highly risky and highly seasonable. The money comes in big and then, it just shuts off. You’re putting yourself at risk when you build a portfolio like that. You may have 20 properties that are all small multifamily, that cash flow pretty well and they’re just steady eddies. They provide exactly what you want every month, but after you’ve got 20 of them, you still can’t make enough money to ever quit your job. You’re making five grand a month, three to five grand a month off these 20 properties, and you’re like, “I still got to work.”
That doesn’t help you either. That’s too conservative. Okay? You want to balance this. You want to have some short-term rentals that spit off a lot of cash and some traditional boring rentals that provide very steady cash flow to protect you in down times. You also want to have properties that maybe don’t cash flow great, but they build a lot of equity for you, you’ve built a lot of equity into. You want to have some properties that over a long period of time are going to make a bunch of money and some properties that in a short period of time are going to provide cash flow to get you through that long period of time. You want to combine them all together, so that’s portfolio architecture. Jamie, it sounds like you’ve just got one property, so you don’t have to focus too much on that right now.
You could get a couple more of whatever works for you before you start thinking, about how you’re going to bring different assets into your portfolio. I wouldn’t worry about if you should pay off the HELOC right away. Now, a benefit of it is you can pay off your HELOC which reduces your monthly payment and will increase cash flow to your family, but you’ll still have the capital available if the deal comes. There’s nothing wrong with paying it down, but then keeping it open so that when an opportunity comes, boom, you just pull the money out, you go by the next deal. I think you are at a period of time where there’s good deals coming, prices are continuing to decline over the short period. There’s not a rush to jump in, but over the long period, we’re going to look back at this time and say, “Man, I wish I’d bought more real estate.”
It’s a weird dichotomy we got going on. We don’t know when the bottom is coming, but we know that it’s not going to stay like this forever. It’s when rates come back down or the economy turns around, who knows it might be a year, it might be six months, it might be three or four years. I can’t tell you that, but over a 30-year period of time, we will look at this as one of the golden times to my real estate, I really believe that. So, I would look at it like I continue to analyze deals in the market where I can make money as a short-term rental. So you didn’t mention where your short-term rental is, but let’s just pick that market because you know it. Okay? I would look for other properties that would work as a short-term rental. Then out of those properties, I would look for the ones that have the best ability to add equity to.
You mentioned that you can run rehabs. You mentioned that you want to do a BRRRR or a fix and flip, which are both value add opportunities, so find the biggest best house in the nicest area that will work as a short-term rental, and then look for the ugliest one. Look for one that’s marketed poorly. Earlier in this episode, I talked a little bit about how I can … I like negotiating. I like strategies. One of the negotiating strategies that I use is I look for poorly marketed properties with high days on market because nobody else wants them. Look for the chance to get the most value add possible, then go for the throat. Write the lowest offer that you can get away with. Try to get them to counter, find the seller that has the most motivation and needs to sell.
You’ll get buying equity and forcing equity out of the same deal. Then you’ll get market appreciation equity because you pick the best market. See how simple this becomes guys, if you just have the right set of goggles to look at real estate through and you know it’s going to work after you’re done with it because it’s in a market that works for short-term rentals that you’re already familiar with, do that, get three or four of those. Then let’s have the conversation about portfolio architecture, what you need to add into the portfolio to balance out some of the risk, if you should 1031 out of two or three of them and move it into something else, but at this stage, you don’t have to worry about that because you’ve only got one property. Great question. I would love to hear how this goes.
I’d love to hear about you getting great deals under market value and adding value to them and ending up with the cash flowing rental property. So go to biggerpockets.com/david and submit an update once you get something in contract. Thank you for that, Jamie. Also, you didn’t tell me where in Northern California you are. If you guys live anywhere near me, I want to know. I do meetups out here. DM me and tell me you’re in Northern California so we can get to know each other. All right. That is our show for today. I went a little bit long, but that’s because I love you guys and I’m hoping that you got a lot of value out of this. I hope my chair swivel, didn’t throw you off too much and that more of you are checking us out on YouTube where you can watch a more animated version of this podcast.
Also, I know you guys can be getting your information anywhere, so thank you for getting it from here. I’m doing my very best to make these shows as good as I can and give you as much information as I possibly can to help you build wealth through real estate. Please subscribe to the channel and follow me. You can find me at @davidgreene24 all over social media. That includes YouTube. I go live every single Friday night talking about some of the stuff in more detail. So if you’re like, “Oh, I wish he had gone deeper into this topic. He moved on too quickly.” Come onto my YouTube, send me a message, and I will answer these questions in more depth in any way that I can. Also, check out my new website, davidgreene24.com to see some of the other stuff that I’m doing, where I’ll be speaking, where we can meet up.
Hopefully, I’ll see you guys at BP Con in Orlando this year. It’s going to be a blast. It always is, and last but not the least, keep saving that money. You never know when the right opportunity is going to come up, and living beneath your means is a very powerful way to build the right habits to build wealth. I will see you guys on the next episode, and if you’ve got a minute, check out another BiggerPockets video.