\n<\/p>\n
After a strong housing market runup, the Federal Reserve<\/strong><\/a> is looking to tame this economic beast with yet another rate hike<\/strong>. Most investors see now as a time to take a step back, invest less, and hold their financial positions steady. But, are we approaching a 2009\/2010-type scenario where home prices dramatically drop<\/strong>, and deals are easier to find than ever before? On this month\u2019s BiggerNews, we bring in Kathy Fettke<\/strong>, nationwide real estate investing expert and On the Market<\/em><\/a> expert guest, to give her take on upcoming opportunities.<\/p>\n In a recession<\/strong><\/a> or correction<\/strong>, smart investors deploy their \u201cdefensive investing<\/strong>\u201d techniques, allowing them to pick up steals, not just deals, and fold properties into their portfolio that can help float them during times of trouble. Even as an intense investor, Kathy adopts the \u201caggressively defensive\u201d tactic<\/strong>, the same one Rich Dad Poor Dad<\/em> author Robert Kiyosaki told her about back in 2008. Simply put, industry experts like Kathy aren\u2019t thinking of selling\u2014they\u2019re focused on buying!<\/p>\n To wrap up, Dave, David, and Kathy give some practical tips on time management<\/strong><\/a>, and how to keep buying as you get busy<\/strong>. With only twenty-four hours in a day, these big-time investors still find ways to run business, record podcasts, and buy new deals, but only thanks to a system they\u2019ve designed. Before you know it, you might be in too tight of a timeline to actively invest, so start implementing these tips now!<\/p>\n David: Kathy: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: David: Dave: Kathy: Dave: Kathy: Dave: David: Dave: David: Dave: Kathy: David: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: David: Dave: David: Dave: Kathy: David: Dave: David: Dave: Kathy: Dave: Kathy: Dave: David: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: David: Dave: David: Dave: David: Dave: David: Dave: Kathy: Dave: Kathy: Dave: David: Dave: David: Dave: David: Dave: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets podcast show, 670.<\/p>\n
This is a wonderful time to get in. And you might even find that the metrics you\u2019re searching for are the same, because if interest rates are up, the prices are down, the cash flow might be the same as if prices were high and interest rates low. The difference is you\u2019re getting the asset for less, so over time, if you\u2019re able to re-fi at some point, whenever that day comes, when it makes sense to re-fi, your cash flow increases even more.<\/p>\n
What\u2019s going on everyone? I am David Green, your host of the BiggerPockets real estate podcast. Here today with a special episode for you. We\u2019re doing BiggerNews with my co-host Dave Meyer. Dave, what\u2019s going on?<\/p>\n
Not much, man. It\u2019s great to be back. You still have me laughing from before the recording. I\u2019m still trying to get my act together.<\/p>\n
We have a lot of fun here and that will translate into the show. But in addition to fun, you\u2019re going to get a lot of amazing information. So in the BiggerNews episodes, we have created these to bring you what\u2019s going on in the current state of the market, what\u2019s happening with interest rates, what\u2019s going on with the Fed, what\u2019s happening with the country as a whole, which markets are exploding, which ones are shrinking, the information you need to make the best decisions possible for yourself all backed by data. Which is why we\u2019ve got Dave Meyer here, because he\u2019s the data guy. In today\u2019s show, we have a special guest. We have Kathy Fettke of Real Wealth Network returning. She was our first ever guest on the BiggerNews podcast. And she comes in to talk about a term that I think is fantastic that my co-host, Dave Meyer here came up with, defensive investing.
So in our show we\u2019re going to talk about how to invest in a defensive way, which I recommend doing when the market starts to turn like it is now. Before we get to Kathy, today\u2019s quick tip is you got three options. And Dave Meyer brought this up, I thought it was brilliant, you can either play offense, you could play defense, or you can just not play the game. When it comes to investing, I don\u2019t think this is the best time to be offensive. You don\u2019t want to be just buying stuff in droves without looking at it very closely. You don\u2019t want to buy any kind of real estate or buy it anywhere. You also don\u2019t want to just sit out and not play at all, because you don\u2019t know if you\u2019re going to have a window to buy, like we have right now, this is one of the best buying opportunities that we\u2019ve had period, in the last 10 years.
So what we recommend is defensive investing and we get into that in today\u2019s show. But basically, you want to make calculated, careful and somewhat\u2026 I don\u2019t want\u2026 Nothing in real estate is ever guaranteed, but you put the odds in your favor that this will be a very solid long-term investment based on strong fundamentals as opposed to speculation. Another important topic in today\u2019s show that you want to make sure you listen all the way to the end to hear about, is time manage management or budgeting your time. Both Kathy, Dave and I give some really good information about how we get the most out of our day, how we stay productive and how we get as much done as possible.<\/p>\n
Yeah, it\u2019s a great episode. Kathy\u2019s one of the best, smartest investors out there, so you definitely want to stick around. But before we get into that great discussion with Kathy, let\u2019s talk about some of the headlines recently, David, because if anyone is out there, you all know there\u2019s just so much crazy economic news going on right now. But the number one thing has to be the Fed\u2019s decision last week. And probably everyone has heard that the Fed raised their interest rate by 75 basis points, which is basically 0.75% and that\u2019s pretty well known, that was expected. But there\u2019s something more to this press conference and the announcement. And it really to me at least, was a showcase that the Fed is not messing around. They released some forward guidance that showed that they think rates are going to go up even more before the end of the year and even more into 2023. So that shows that we\u2019re going to be in a higher interest rate environment for a while.
And if you look at Jerome Powell\u2019s press conference, he was not pulling any punches. He was basically saying, \u201cWe are going full send, we are not stopping. We are going to basically go after inflation, even if it causes a recession, even if it causes job losses or a decline in the housing market.\u201d And people have always speculated about this, but he basically said it more clearly than I think we\u2019ve heard it articulated in the past. So I\u2019m curious, David, what do you think of this really emphatic release by the Fed and what this means for real estate investors?<\/p>\n
Well, this was clearly a warning shot. When you see a warning shot you know things are getting serious. It\u2019s not, \u201cOh we might be coming into the enemy or a battle.\u201d It\u2019s likely going to happen. So it doesn\u2019t mean to run, tuck your tail and hide and panic and let fear overwhelm you, because we still live, in my opinion, the best country in the entire world. And we\u2019ve got more tools to get ourselves out of a deep depression than anyone else. But it means that the current standard of living that we\u2019ve been enjoying and some of the perks that we\u2019ve had, probably are going to be going away. So if you\u2019ve got a job, I would count that as a blessing and I would work very hard at keeping that job, more layoffs could be coming.
If you\u2019re working in an industry that\u2019s not really forward leading or maybe you\u2019re in the blockbuster of whatever space you\u2019re in, look for a different industry. This is a time where I think big economic changes are going to be happening. What I like about what Jerome Powell did, was he was clear and upfront about the fact they\u2019re going to continue raising interest rates. When there\u2019s uncertainty, when they don\u2019t tell you exactly what\u2019s going to happen, it leads to a lot of speculation in the stock market, in the mortgage backed securities market, in the economy as a whole. So by just coming out and saying, here\u2019s what is going to happen, it does give us a little bit of an advantage as to how we can prepare for what\u2019s to come.<\/p>\n
Yeah, I totally agree. It\u2019s not what I think most people want to hear, but at least we know, because people have been speculating for a while that the Fed was going to \u201cpivot.\u201d Basically, they were going to start raising the rates up until the point where they got to a neutral interest rate and then they would maybe slow down, see what\u2019s going happen. But now the Fed is just telling us that we should expect things to keep going up. That tells me a couple things, like mortgage rates are probably going to go up a little bit more over the next couple months. So if you could get a rate lock now that might not be the worst idea.
But that this is going to put a lot of downward pressure on housing prices for a while. If we were in this place where the Fed was going to take their foot off the gas, maybe coast for a while, more markets would probably be able to be resilient against that. Now, if we see two years of high rates, I think that\u2019s going to put a lot of pressure on housing prices. But like David was saying, that just means you just need to change your strategy, it doesn\u2019t mean that you need to get out of the game at all.<\/p>\n
And there\u2019s a few areas that this might benefit us. It\u2019d be nice to see food prices stop going up so fast. Asset classes that are highly financable, like cars and homes, it should keep the prices from going up faster, maybe even push them down. And the last piece I\u2019ll say is savers could finally be rewarded. When is the last time that putting money in the bank and saving it was actually a viable option? It\u2019d be nice to see some of that come back, especially for the aging part of the demographics, where people have retired and they\u2019re living on fixed incomes. They were planning on getting return on that money and it\u2019s been a big goose egg for a long time.<\/p>\n
That\u2019s a really very good point, I totally agree. And for people who haven\u2019t been able to afford houses, some markets might decline and you might be able to get into that. So that\u2019s in my mind, going to put sustained downward pressure on prices. On the other side though, there\u2019s this other dynamic in the housing market that might put upward pressure on the housing market. And again, the housing market, there\u2019s all these forces. Some put downward pressure, some put upward pressure, no one knows exactly what the mix is going to be. But I just want to present that not everything is pointing down. So this is other dynamic that\u2019s going on where new listings, which is basically just the number of properties that are put up for sale, are down 18% year over year, which is a lot.
People do not want to sell their houses right now, and we\u2019ve been speculating about this for a couple months, this idea of the rate lock where people are going to be locked into these low mortgages. They don\u2019t want to sell into a declining market to only get a mortgage at a higher rate and that doesn\u2019t sound very good to me, so I understand why they would do that. And if inventory flattens out, which it is already in some markets or starts to decline, that could at least put a backstop on some of the declines that we might see or level it out, I don\u2019t really know. But it\u2019s just this really interesting phenomenon that\u2019s going on, because right now everything is so weird and interesting. But curious, are you seeing this in your market and what do you make of this?<\/p>\n
I\u2019m seeing this in a lot of markets, because as you know, I invest long distance. So I study a lot of the different markets and I\u2019ll say if real estate has a relationship status on Facebook, it\u2019s complicated.<\/p>\n
It\u2019s super complicated.<\/p>\n
There\u2019s a lot of things that factor into this and that\u2019s why I get frustrated if someone says, \u201cOh, rates are going up, prices are going down.\u201d No, rates going up affects demand, but a lot of other things affect demand. And then you\u2019ve got supply, you actually got to balance both of these. So this is a clear indication that supply is not increasing. So even if demand is decreasing, it doesn\u2019t necessarily turn into a difference in size.<\/p>\n
Exactly.<\/p>\n
Because supplies are\u2026 And why wouldn\u2019t supply stay the same? Do you want to go sell your house at your 2.99 rate and go get into one that\u2019s seven and a half and probably not that much cheaper of a price? It\u2019s no reason for people to go put their house on the market and sell it. So what I would tend to see when this phenomena happens, what I observe, is that less houses come on the market, but they also don\u2019t sell as fast. So at this point you\u2019ve still got the majority of buyers that are hanging out in the background saying, \u201cI want to see your prices come down.\u201d Sellers are over there, like, \u201cWell, the Cop show my house is worth this.\u201d The days on market starts to go up. So you\u2019re in a bit of a standoff, it doesn\u2019t necessarily mean prices drop. And my strategy in that standoff, like I talked about in today\u2019s show is that I go after the houses that I want the most with a very aggressive offer. And I look for the seller that isn\u2019t getting interest from anyone else or who just flinches before I do.<\/p>\n
That\u2019s very good perspective. Man, I love your analysis saying that Facebook, it\u2019s complicated. It\u2019s like, why did I pick this year to start a podcast about the economy? It\u2019s so complicated. I guess in some ways now, it\u2019s needed to more than ever. And I hope to people listening to this, this is helpful. But it\u2019s like, why couldn\u2019t I start a podcast about predicting the housing market five years ago? It\u2019s like what\u2019s going to happen? It\u2019s going to go up. What\u2019s going to happen? It\u2019s going to go up.<\/p>\n
Real estate used to be like the Golden Girls, you knew what you were going to get every episode.<\/p>\n
Exactly.<\/p>\n
It was fairly predictable, right? It\u2019s turned into Game of Thrones. Every episode you\u2019re like, what radical, amazing change is going to happen between one podcast and the next one?<\/p>\n
Nothing is safe.<\/p>\n
Yeah.<\/p>\n
Nothing is safe. We have no idea what\u2019s going to happen next, it\u2019s just a free for all. But like you said, that\u2019s why this episode is so good. It doesn\u2019t necessarily mean\u2026 Oftentimes when there\u2019s more risk, there\u2019s more opportunity. When people are afraid, that\u2019s when you often have less competition. So there\u2019s pros and cons to the situation.<\/p>\n
Right.<\/p>\n
So that\u2019s why it\u2019s all about just staying informed and knowing what\u2019s happening and adjusting your strategy, because there are good things about what was happening a year ago and there were bad things about that. Right now there are good things about what\u2019s happening right now and there are bad things about that. It\u2019s just about being cognizant of which way the wind is blowing and adjusting accordingly.<\/p>\n
Yeah, if you missed an episode of Golden Girls, you could still watch the next one and you\u2019d be fine. You missed an episode of Game of Thrones, you\u2019re lost. So don\u2019t miss an episode of the BiggerNews podcast or any of the other podcasts, because things are changing rapidly.<\/p>\n
Yeah, if you missed an episode of Game of Thrones, I would call in sick to work, because you couldn\u2019t go, because everyone would be talking about it and you\u2019d missed the whole thing. Yeah, you can\u2019t go.<\/p>\n
If you don\u2019t know what Jerome Powell said, you are way behind what everything else is happening in the market.<\/p>\n
Exactly.<\/p>\n
All right. Our third headline to bring up has to do with you Mr. Dave Meyer and your new book Real Estate by the Numbers, analyze like a pro and get a holistic view of your portfolio. Tell me a little about this book and why you wrote it.<\/p>\n
Well, thanks man. So I wrote this book with Jay Scott. You know Jay, right?<\/p>\n
Mm-hmm.<\/p>\n
Yeah, so Jay and I wrote this book, because we are both numbers nerds. No, but really, basically we looked at the market and I get a lot of questions about analyzing deals, about learning some of the math, some of the formulas that help you analyze deals. And I didn\u2019t find any one resource that was helping people holistically understand it\u2019s not about math and formulas, it\u2019s really about the concepts and the ideas behind investing, compounding the time value of money and using all the tools that your disposal as an investor to be able to look at a deal holistically. I don\u2019t know if you see this, but sometimes I talk to people and they\u2019re like, \u201cCash on cash return, cash on cash return.\u201d That\u2019s all they care about. Or they talk about force appreciation, force appreciation, that\u2019s all they care about. Both are good things, but you have to be able to look at deals and real estate in this holistic sense.
And so that\u2019s what the book\u2019s about. Super excited about it and thanks for letting me talk about it quickly. We\u2019re also going to have a couple of shows about this. Jay\u2019s coming on, I think next week or something, so we\u2019re all going to talk about the economy. Jay is super knowledgeable about recession investing, so definitely stick around for that. But yeah, I should just mention that it\u2019s in presale right now and if you\u2019re interested in the book, you should buy now, because you\u2019ll get 10% off if you use the code Dave. And Jay and I are both giving away coaching. We\u2019re doing a webinar for anyone who does a presale. So definitely check that out if you\u2019re interested.<\/p>\n
Well, I want to thank you for writing that book, because I can\u2019t say how excited I am enough that you\u2019re bringing attention to the fact that real estate is about more than just cash on cash return.<\/p>\n
This is your thing.<\/p>\n
We typically call cash on cash return, ROI. Yeah, because if you\u2019re just looking at it, real estate\u2019s not much more appealing than stocks or some bonds or NFTs or crypto or a lot of other things that are out there, that all provided cash on cash return. Real estate makes you money in so many different ways that if you\u2019re only focusing on one out of those, I basically have 10 ways that I think real estate makes you money, you\u2019re missing out on 90% of the benefits of it, theoretically. So I\u2019m glad that somebody is bringing attention. It\u2019s not that cash on catch return doesn\u2019t matter, it\u2019s that it\u2019s not all that matters. You don\u2019t want to miss the forest for the trees.<\/p>\n
Exactly.<\/p>\n
And as I understand it, Dave, you\u2019ve been doing a little bit of a tour talking about the book and the information that\u2019s in it. So if you guys would like to hear Dave on the Rookie podcast, keep an eye out for the October 8th release. And then he will also be on the regular Bigger podcast show on October 11th, where he gets into how to think an investor. And Jay Scott\u2019s on that interview with Rob, it\u2019s really good. And if you guys like, I throw my 2 cents in there after the fact, a little bit of a reaction style to the interview that you all recorded. So everybody keep an eye out for October 8th and October 11th releases that have to do with Dave\u2019s book. And Dave, if people want to get the book, where can they go?<\/p>\n
Just to the BiggerPockets bookstore, go to biggerpockets.com\/numbers. And again, if you do it now, you can get 10% off, which is great. And yeah, thank you guys for having me and Jay on the 10th and 11th. We\u2019re both super excited and proud of the book, think that there\u2019s a lot of value there. So thanks for letting us come talk about it.<\/p>\n
Right on. I\u2019m sure it\u2019s a great book. Can you give the code if people want to get a discount?<\/p>\n
Oh yeah, it\u2019s Dave like my name, D-A-V-E.<\/p>\n
D-A-V-E, there it is. All right, let\u2019s bring in Kathy and let\u2019s talk some real estate.<\/p>\n
All right, well Kathy Fette, welcome back to the Real Estate podcast for BiggerPockets. Thanks for coming here.<\/p>\n
Oh, it\u2019s always an honor to be with you guys.<\/p>\n
Well, I have the pleasure of seeing you all the time Kathy, because we\u2019re on the other BiggerPockets podcast, On the Market together. But this is a reunion, because I think it was maybe about a year ago you were our first guest ever for BiggerNews. And since then, David and I have been doing these shows once a month and we\u2019ve been having a great time bringing market data and trends to the masses. So thank you for helping us start this part of BiggerPockets.<\/p>\n
Oh it\u2019s so fun. On the Market show is just a blast, but I also learn a lot every time from the other co-hosts.<\/p>\n
Well, today we are going to talk about defensive investing. And David, this is something I hear you talk about a lot on the show, about the differences between defensive and offensive investing. For anyone who hasn\u2019t heard this framework that you use, could you recap it for us briefly?<\/p>\n
Yeah, a lot of it comes from my personality. I think I\u2019m perceived by people as being aggressive, go buy, I often get told, \u201cWell, he\u2019s a real estate agent, of course he says you should buy houses.\u201d But I\u2019m buying them myself at the same time. My personality just tends to be more conservative. I always look at the what could go wrong. I\u2019m always thinking about the downside, I\u2019m trying to protect against it. And when I\u2019m investing, I\u2019m typically not chasing after the highest return I can get. I\u2019m usually looking for the safest option. But because I look at the property itself, the area, the asset class, whatever it is as being safer, it allows me to take action more freely. I don\u2019t have that little, what we call the drunk monkey in your head screaming at you saying, \u201cDon\u2019t do it, this could happen. What if this? Everyone\u2019s going to think that.\u201d
By literally choosing asset classes that are more recession resistant or areas of the country that have stronger, long term outlooks, even if they don\u2019t look as desirable right now, I find areas where other people are not flocking to, so I don\u2019t have as much competition. I don\u2019t get into that situation where 12 people want the same house. And I can also invest with confidence that I\u2019m going to feel really good about this investment in five to 10 years versus really good right away. I find that when I analyze deals, this is not always true, but in general, you usually have a tortoise or the hare approach. There\u2019s deals that on the spreadsheet look amazing in year one, you\u2019ve got a 20% ROI, 15% ROI, sometimes short term rentals that can get into 40, 50% ROI.
But over a long period of time they\u2019re in areas that are not growth oriented. People are not moving there, businesses are not moving there, wages are not increasing there, supply is not constricted, so they can just keep building more homes. And you find that in 15 or 20 years your house is worth very close to what you paid for it before. Versus areas that don\u2019t look amazing up front. This would be the tortoise approach, that a lot of people see the cash on cash return and just gloss right over. Those over the long term can look really, really good. A hyper example I could give you would be investing in Malibu. Kathy knows that area, she\u2019s in Southern California. It\u2019s very difficult to find anything that would cash flow probably at all, let alone solid in an area like Malibu. But if you hold it for 10 years, it\u2019s very difficult to find anything that isn\u2019t going to make you obscene amounts of money.
Now I\u2019m not advocating everyone goes and invests in Malibu, obviously that\u2019s for a very specific avatar of investor, but it does highlight the point. And on the other end of that spectrum could be a turnkey property. \u201cOh this looks great, we\u2019re just going to go into someplace in the Midwest, there\u2019s houses everywhere. They just build them nonstop. I\u2019ll go buy one of those and my cash on cash return can look really good.\u201d And then as the house is falling apart, it\u2019s not appreciating, you can\u2019t pull money out of it to fix up the roof, fix up some of the capital expenditures you have. Rents are not going up, because there\u2019s so much supply that demand never outpaces it and you hit the opposite results. So I try to avoid either extreme, right. It\u2019s a spectrum and you want to figure out where to fit, but defensive investing is this idea that you are looking at long term fundamentals and delaying gratification and making investment choices with that perspective.<\/p>\n
And is this something you do always or is this a reaction to current market conditions?<\/p>\n
That\u2019s a really good question too. In general, I lean more that way, but in different markets I play the game very differently. So in a market like this one, which we never know if a market\u2019s going to crash or if it\u2019s going to climb, you can\u2019t tell and I\u2019ve just made peace with the fact that I don\u2019t know. But there are markets where odds are, like the one we\u2019re in now, it\u2019s likely to go down more before it goes up at least significantly. The Fed is announced they\u2019re going to continue rising rates, they\u2019re trying to slow things down. You\u2019re getting an issue where home sellers don\u2019t want to put their house back on the market, we can go into that later, because they\u2019re going to lose that 2.99 rate that they have. They\u2019re going to have to get into a higher rate. And then there\u2019s not a lot of inventory to choose from. So when I think we are more likely to be headed down, I tend to invest more conservatively.
This is where I would pick the areas that I think are going to be safer long term where I see people moving to, even if the cash on cash return doesn\u2019t blow me away. If I see that\u2019s an area that in general Americans are trending towards moving into, it\u2019s got a favorable tax environment, it\u2019s got a favorable business environment, the demographics show that people and businesses are moving in that direction, I will favor that over an area, maybe a C class neighborhood. Now if we\u2019ve just had a crash like what we had in 2009, 2010, 2011, I feel much better if I\u2019m going to get into some of those C or C minus neighborhoods because you\u2019re almost at the point where you\u2019ve got nowhere to go but up. So in general, the philosophy that I preach is if it\u2019s post crash, you can be much more liberal with what you buy.
You can go after areas where price points are lower and it\u2019s easier to get into that area and the cash on cash return looks really good, because even if for some reason you don\u2019t love it, you\u2019re going to ride the elevator up and you can exit if you have to. But if you\u2019re at a point where you\u2019re thinking it might crash, you actually have to get extra conservative, because those A class properties, those A class locations, they don\u2019t get hammered like the D class areas do. If you just think about whoever\u2019s listening from wherever they live, the best neighborhoods in your city or the best cities in your state, the last time we had a crash, they had a dip. The worst areas were decimated. So we\u2019re at that point where we\u2019re looking like we could be heading over a cliff, nobody\u2019s really sure, I want to be extra conservative about the areas and the asset class that I invest in at a time like this.<\/p>\n
Kathy, what do you think about this framework of defensive versus offensive investing?<\/p>\n
A hundred percent, everything he just said. But I\u2019m opposite by nature, I tend to jump into things. I\u2019m a quick start, if you follow the Kolbe personality test. I need enough research and then I\u2019m ready to jump in. Fortunately, I\u2019m married to someone who needs all the information, so we help each other out, he slows me down and I speed him up. Otherwise, we probably wouldn\u2019t own hardly any real estate if I weren\u2019t in the picture, so that\u2019s good. Listen to your spouse and listen to each other and each other\u2019s fears and that can actually help you both move forward, that\u2019s just my little marital advice. But back in 2005 when I didn\u2019t know anything about out-of-state investing, I did have Robert Kiyosaki on the show and he gave me some fundamentals that I\u2019ve stuck with since then, which is almost 20 years. And of course, if you don\u2019t know who that is, that\u2019s the author of Rich Dad, Poor Dad who\u2019s changed many lives.
So I was lucky enough to have him on my show and at the time it was a San Francisco radio show before podcasts. And he was really explaining the dynamics of what was coming and it was so shocking that nobody could see what he could see when it was so obvious. And David, I was a mortgage broker back then and I knew something was wrong, it didn\u2019t pass the sniff test at all. Being able to give teaser rates, not even the full payment to qualify people, knowing that when that payment adjusted, they would never ever be able to make that payment. But those were the loans, that\u2019s what people were getting. So it\u2019s intuitively like, this is going to fall apart. But the headlines were saying the opposite and even real estate experts were saying it, that it was going to be fine. But Kiyosaki was saying, \u201cOh no, no, no, these are going to reset in 2007.\u201d So he had already sold all of his high price real estate. He made a killing in the growth markets.
But then when he knew when these loans were going to reset, it was in the books. People knew when that was going to happen. He just sold everything in the high price markets and bought in Texas. So I was like, \u201cWhy Texas?\u201d And he explained it\u2019s the biggest job growth in the country, the biggest population growth as a result. And yet home prices are still 26% undervalued compared to incomes there. The prices had not gone up as fast as the incomes, I mean, what a scenario. So it made sense to me and being a quick start, I\u2019m like, \u201cRich, I want to go to Texas-\u201d<\/p>\n
\u201cI\u2019m moving to Texas.\u201d<\/p>\n
And [inaudible 00:24:56]. Not even moving, I just was like, \u201cLet\u2019s go.\u201d We ended up coming home with five properties, because if you remember, you could get loaned on investment properties an unlimited number with no money down. So yeah, I bought five of them in that trip. We went back and bought more and this was at the top of the market, it was 2005, 2006. And yet when everything crashed a few years later, those properties stayed rented, because like you were saying, we bought in really good neighborhoods. We had A class schools, it was near jobs, it was near new infrastructure growth. This is really important to me, if you know that a city is investing billions of dollars, billions of dollars in their infrastructure, they have been studying that for decades of where growth is going, they know. That when you see that new infrastructure coming in, it\u2019s like, \u201cOh okay, this is a really a growth area.\u201d
So it just made sense to us, we helped thousands of people do the same. And it was like being on a, I don\u2019t know, if you\u2019re in a movie and you\u2019re watching this earthquake happen and some people are in the middle of it that it caves in and the there\u2019s other people on the side just watching them fall. That\u2019s what it felt like on those Texas properties. The ground was shaking but we were fine except for the properties that we didn\u2019t follow that advice on. The California properties we kept or we bought three properties in Boise where there was two employers at the time, it didn\u2019t make it through that.<\/p>\n
Wrong bubble for that one.<\/p>\n
Wrong bubble, yeah. It would\u2019ve been better to wait, yeah.<\/p>\n
This bubble would\u2019ve been good.<\/p>\n
Exactly. So those fundamentals we\u2019ve carried, that\u2019s really how we built our company and the foundation of look for those things, look for where the job growth is. And I don\u2019t mean a little, I made the mistake and Dave knows, of following job growth to North Dakota during the oil boom. But I tell everybody, never invest in an area that\u2019s dependent on one industry. Well, I did and then the rug got pulled out, oil prices crashed and I\u2019m stuck with land in North Dakota. So when you go to other places, you look at, we really still like Florida, Orlando, Jacksonville, these areas have diversified employment centers now. They didn\u2019t 10 years ago, it\u2019s a different market today. So really sticking with those dynamics of job growth, population growth and affordability and infrastructure, I feel really comfortable even investing today and we are, we\u2019re going big actually. We think there\u2019s some amazing opportunities today.<\/p>\n
Can you tell us a little bit about, obviously not the specific opportunities if you don\u2019t want to, but just the characteristics, what are the trends and the data points that get you excited about opportunities in this type of market?<\/p>\n
Well, I like to see, like I said, I think the government controls a lot more than we realize, this is not your parents economy and is not your grandparents\u2019 economy. This is a very manipulated economy and a lot of it is, we\u2019re just the puppets of the puppeteers who control the levers. And right now those levers are saying we\u2019re going to crash this economy. I mean, Jerome Powell just came right out last week. I was way more positive a month ago as you know, Dave.<\/p>\n
Same.<\/p>\n
And then he comes out and he is like, \u201cNo, we\u2019re going to kill it. We\u2019re going to kill jobs.\u201d<\/p>\n
He\u2019s not messing around anymore, yeah. That was like, \u201cAnyone thinks I\u2019m messing around, I\u2019m going to crush your dreams right now.\u201d<\/p>\n
Oh, he\u2019s really totally fine with that.<\/p>\n
But honestly, as an investor it\u2019s better, right? Now you know where we stand. It\u2019s obviously not great for prices in the housing market, but personally, at least for me, especially if you\u2019re trying to be defensive like we\u2019re talking about today, it\u2019s better to know what they\u2019re intending to do rather than being in limbo.<\/p>\n
Yeah, I really had this rosy belief that the central banking system wasn\u2019t on a mission to make lives worse. And again, I know that bigger picture, maybe they don\u2019t, maybe that\u2019s not their intention. But for the Federal Reserve, which is the banking system, it is not a government entity, for them to just flood the market with so much money and buy mortgage backed securities to keep rates low for so long, to stimulate a housing market that was already stimulated, it didn\u2019t need that help, to then just drive\u2026 Everybody knows if you keep rates low, it\u2019s going to make prices higher, because payments are low, people can afford more. And you also know that when you pull that back, it\u2019s going to do the opposite. So they\u2019re the ones who flooded the market with money and kept rates low and now they\u2019re like, \u201cOh, maybe we shouldn\u2019t do that. We\u2019re going to take all that away from you. Sorry, I gave you some candy, I\u2019m going to have to take that back. You can\u2019t keep that.\u201d And you\u2019re just like, I already maybe swallowed it.
Anyway, these are interesting times and I follow what the Fed says and I believe them. And this time we\u2019ve got to be really defensive, way more defensive. I\u2019m already defensive now, because I\u2019m older and I think that my natural tendency is to dive in and just go for it. But as you get older and you\u2019ve taken losses and you\u2019ve had to start over and I\u2019ve had to start over several times, once you get to my age, you don\u2019t want to start over. So already I was being careful for the past decade, because it was really hard going through 2008, I never want to do that again. Anyone who did doesn\u2019t want to do it again. So I was already staying low leverage. This is defensive to me, low leverage. I got sometimes no debt and sometimes super cheap debt, long term rates, 30 year fixed.
Rich and I would have these fights, I\u2019d be like, \u201cHoney, why don\u2019t we just get a lower rate at a 10 year arm?\u201d And he\u2019s like, \u201cNo, the 30 years not that much more, just lock it in then you don\u2019t have to worry, we\u2019re old.\u201d It\u2019s basically what he is saying. So low leverage, long-term debt that\u2019s fixed so you don\u2019t have to worry about that variable. And lots of reserves on hand, lots of reserves and I personally either want to buy properties that are fixed up like new or brand new, because then you don\u2019t have so much of those issues of repairs to worry about. And believe me, I bought plenty of old houses that cash flowed great until they didn\u2019t, I guess plumbing broke and I spent 20 grand fixing it. So those are the keys to me in defensive investing. I\u2019m not worried about this, because we\u2019re super low leverage and have reserves and we\u2019re in strong markets and in good properties in those markets that people want to live in.<\/p>\n
So David, I know you just went on a buying spree I think, I don\u2019t know if that\u2019s what you would call it, but it seems like it. What defensive tactics did you use to make sure that you were cushioning yourself against potential price declines?<\/p>\n
I\u2019m still on that spree actually. It slowed down from where it was, but I put a property contract yesterday-<\/p>\n
Nice.<\/p>\n
That I\u2019ve been working on for about a month and a half. And another one I\u2019m really close on. So part of my strategy has been, rather than seeing a property and going after it with everything you have, that was the way you had to do it the last seven years. There was no light stepping around this thing, you couldn\u2019t throw jabs, you had to throw in your offer a knockout punch and if you didn\u2019t get the deal, you weren\u2019t getting another chance. I look at it now I got a lot of lines in the water and I\u2019ve got some sellers that are interested and I\u2019m waiting as the news tips in my favor I guess there\u2019s so much to say, I want to make sure I don\u2019t just go in rabbit trails all over the place, because we\u2019re talking about defensive tactics here.
But I guess one of them would be not falling in love with any one particular deal. I\u2019ve got a lot of them that I\u2019m interested in. They\u2019re all A class properties, I probably never would\u2019ve even had a chance to get in the last seven to eight years, because they got so much interest, everybody wanted it, that I can go after them now. And I\u2019m not writing an offer with the intention of getting it accepted on the first try. I used to do the opposite, I would tell people, if you want that asset, if this is a good asset, give it everything you got, you one chance. You\u2019re like Eminem in Eight Mile. This is your shot, do not miss your chance to blow. Now I really look at if an offer is a jab, I\u2019m looking to see how my opponent reacts to that offer. I want to know what the seller does. If they accept my offer on the first one in the markets I\u2019m investing, at least I went too aggressive, right? That was a mistake.
So I\u2019m writing them low and I\u2019m waiting to see who\u2019s going to come back. And so this particular deal was listed at $1,175,000, it\u2019s a 5,000 square foot cabin in a really, really good location in Blue Ridge, Georgia, which is where people in Atlanta would go to visit if they want to go to the mountains. A beautiful property, several acres of stream running through it. And it has a massive four car garage with a livable, two bedroom, one bathroom space above it, that garage can be converted in the living space and I basically could double the square footage of the house. It\u2019s a really good borough opportunity, in a really good location, in incredible condition. Like what Kathy said, I don\u2019t think that there\u2019s one thing that I would need to fix about this property other than a couple mosquitoes that hang around that stream that seem to love me.
But I\u2019m not just going in and writing a strong offer. They were listed at $1,175,000 and I wrote an offer at $1,000,050 and I asked for about $35,000 in closing cost credits and they said no. And so I waited and I waited and I waited and what do you know? Jerome Powell comes out and says, \u201cInterest rates are going up, unemployment\u2019s going to go up. The economy\u2019s going to take a hit.\u201d Fear courses through the entire seller\u2019s market. This property and three others that I had offers in all came back that same day and said, \u201cWe\u2019ll accept your offer that you wrote a month and a half ago.\u201d So you have the combination of sellers sitting on the market realizing that their house isn\u2019t selling, with this news coming out, that it\u2019s going to be even worse. And then I\u2019m in a position I can say, \u201cWell, that was my offer a month and a half ago. Rates have gone up, their house has been sitting longer.\u201d
I have my agents go back and try to negotiate it down. So instead of the $1,000,50, I ended up getting it at \u00a31,000,025 with even more closing costs. So now I\u2019m getting it a little bit under a million when it was originally listed a little under $1,200,000. And this is a property that is going to bring in a ton of short term rental. I\u2019m going to double the size of it. The cash on cash return will not look incredible right off the bat, because short term rentals typically need a little bit of time to build up your client base. You have to get some tweaks, this one was currently not being used as a short term rental, so it doesn\u2019t have reviews. But it\u2019s in an area seven minutes from downtown that everybody wants to visit. Basically, I\u2019ll almost double the revenue by taking that other structure and converting it into living space.
There\u2019s a ton of things about it that I really like, but I just was patient. It\u2019s like this aggressive defensiveness. I wrote a lot of offers, I wrote them aggressively, they said no. I said, \u201cThat\u2019s fine, we\u2019ll check in every week or two.\u201d Sellers are sitting there marinating in their own juices right now. They\u2019re worried, I would be too. No one\u2019s buying houses like they used to be. Now I don\u2019t want to go after the worst inventory. I don\u2019t want to go after the same properties that all the rest of my competition going after, they\u2019re still selling. I don\u2019t want go buy a short-term rental that has 500 other cabins or properties that look just like it. Or buy into an area where I don\u2019t think people are going to be continually vacationing into, or even worse an area where regulation laws could be impacted that would not let you use a short-term rental. So I\u2019m going to safer spots, no one\u2019s going to shut down short-term rentals in these vacation destinations, where everybody\u2019s renting cabins and the whole economy is dependent upon tourism.
So right off the bat\u2019s, that\u2019s a little bit of a safer shot. And then I\u2019m going after a bird deal that I can add a lot of value. I would imagine just based on the square footage in the area, I\u2019m probably going to add close to $300,000 of equity to this property, putting $60,000 into the rehab. And then the last piece is just how many different offers I have out there. You can take your time, you can wait and see which seller is most motivated, frankly. And I really like this, if I\u2019m going after grade A real estate. I don\u2019t like this method as much if I\u2019m trying to buy into C class areas or states or locations that people are not moving to.
Because even if you get the deal, it\u2019s not a guarantee. It doesn\u2019t have a big upside. You don\u2019t know what\u2019s going to happen. We might be in this situation for two to three more years before we lower rates. No one really knows what\u2019s going to happen. So when there\u2019s uncertainty like that, I want to follow the ancient principles of real estate, location, location, location. Where are people moving? Where are wages rising? Where is the highest demand going to be? And when I look backwards, what\u2019s the property I\u2019m going to say I\u2019m so glad I own this, I love having this in my portfolio?<\/p>\n
That\u2019s great, great tactical advice. I\u2019d love to keep asking more questions about this, but we don\u2019t have that much more time. And I have a couple other questions I definitely want to get to here. So Kathy, I\u2019ll ask you this, in defensive investing, we\u2019re talking about long term buying, but when we are potentially going to see increased unemployment, I mean, the Fed basically predict an increase in unemployment, we could be in a recession right now or we\u2019re probably heading towards one. How do you square defensive investing with the fact that this might impact tenants and renters? Are you afraid that rents could soften or vacancies will go up? And is there any way that you can mitigate against that?<\/p>\n
Yeah, I absolutely think there will be an uptick in foreclosures and in evictions, because again, it was Jerome Powell\u2019s really, really harsh words of just last week that I think has everybody going, \u201cOh, he\u2019s going to go for it.\u201d So again, it just comes back to those fundamentals I said. If you\u2019re in an area that has a big diversification of employment and different kinds of employers, so for example, we know that baby boomers are aging, so the medical industry is strong. I think it will continue to be strong. We are in a situation where we have a shortage of energy. So I really do believe that areas like Texas are going to stay strong. They\u2019re not dependent on energy by any means, they\u2019ve got every kind of employer is there, makes me feel comfortable. Florida, I\u2019m comfortable there, because you have still a lot, like I said, these baby boomers and now younger people retiring, now they are retiring, they weren\u2019t 10 years ago, now they are. And it\u2019s a lot cheaper and it\u2019s really pleasant in Florida and the Carolinas and Georgia and the southeast in general.
So a lot of demographic shifts happening in those areas. And diversification that wasn\u2019t there 10 years ago in terms of employment. So first of all, stop underwriting as if you know that rents are going to go up, because you don\u2019t know that. And when I see these multi-family deals come across my desk and they\u2019re like, \u201cOh yeah, rents are going to go up.\u201d Well, you know what? You could find yourself in a big problem if you\u2019re wrong. And especially if you take an investor money and you\u2019re wrong. So just underwrite things with the possibility that maybe rents will go down and that there could be evictions. And if you\u2019re in an area where it\u2019s hard to evict people, you need to keep that in mind too. I live in California where, and David you know, people can be very savvy and stay in your property for a year if they know what they\u2019re doing.
So I want to be in an area like Texas or Florida where that\u2019s not the case, where there are landlord laws and you do need to pay your rent and if you don\u2019t, you have to leave. Don\u2019t make the assumption that landlords can handle paying everybody\u2019s rent, it\u2019s not the case. So it\u2019s all about the underwriting and making sure you\u2019re in a landlord friendly area and that there\u2019s huge job diversification and a big renter pool, because again, I try to keep my properties in the median price range of what the average person can afford. And so if you\u2019re in a big market with a million renters and you\u2019re in that median price range that the most people in that area can afford what you\u2019re offering, again, I think you\u2019re really setting yourself up defensively.<\/p>\n
I think you made a really good point as particularly about rents rising in the multi-family space. And I just want to highlight it, because the assumption if we say rents are rising, that would mean rents rise everywhere in the entire country over every asset class and that\u2019s not how it works. Rents rise when demand grows higher than supply and wages increase to the point it can support a higher rent payment. Well, we\u2019ve been having builders creating multifamily properties, particularly in inner city for years. I mean, if you were in any big city in the country, you saw these cranes all over the place creating multifamily housing in downtown areas. There\u2019s a lot more supply in those spaces than demand. And so multifamily particularly is one asset that I think is exposed in more areas than single family, because we\u2019ve been building more of those units. We haven\u2019t been building as much single family housing in those same spaces.<\/p>\n
Yeah, I was actually looking at some data recently that showed that although construction permits and units are declining, David, that\u2019s actually more in single family, they\u2019re really starting to fall off. And the amounts of permits for multi-family units are pretty steady, probably because multifamily operators know it\u2019s going to take them two or three years to build something and maybe we\u2019ll be through the worst of this. But just something to note that more supply is continuing to come online there faster than single family homes.<\/p>\n
And when you hear us talk about rents are going up, that does not mean in every asset class everywhere, it\u2019s highly localized.<\/p>\n
And it\u2019s Kathy\u2019s favorite saying, right? There is no national housing market. She\u2019s completely right.<\/p>\n
And there were boom markets that everyone just went frenzied over. So one example is Phoenix where there\u2019s 19,000 new single family units coming online that may be able to be absorbed. But some areas didn\u2019t get that action, where isn\u2019t a lot of national builders going in. They don\u2019t have that new inventory coming in. So always looking at permits and new starts versus job growth, I think is really important.<\/p>\n
That\u2019s great advice. Well, we do have to wrap up here, but Kathy, do you have any last word about how to be defensive in this market?<\/p>\n
Well, I know that people are probably really scared, but I really want to leave this saying, this is an exciting time to get in. As much as it might feel like, oh this is scary, when you look at headlines, you\u2019ve got to look at, how do I interpret this? So if you are seeing prices go down, well who\u2019s that good for? That\u2019s good for the buyer. So if you\u2019re just getting in and you\u2019re a buyer, this is such a better time than last year when you had to overpay and get in line and not be able to negotiate, now you can, you don\u2019t have competition. This is a wonderful time to get in. And you might even find that the metrics you\u2019re searching for are the same, because if interest rates are up but prices are down, the cash flow might be the same as if prices were high and interest rates low. The difference is you\u2019re getting the asset for less. So over time, if you\u2019re able to re-fi at some point, whenever that day comes, when it makes sense to re-fi your cash flow increases even more.<\/p>\n
That\u2019s great. That\u2019s a great point. I mean, I didn\u2019t experience the 2008 crash. I started buying in about 2010, but that was before the bottom of the market and it feels the same vibe. No one really knows what\u2019s going to happen, but things when you look at them on paper, this makes sense. And you\u2019re just looking around, everyone\u2019s really nervous, but this is actually pencils out and it\u2019s starting to feel like the same vibe, at least to me. David, any last words for you on this?<\/p>\n
I like Kathy\u2019s point, if you had to choose between a high price and a low rate and a low rate and a high price, you\u2019re better off getting it at a lower price. Your property taxes will be lower plus you have the ability to refinance in the future. And even though we\u2019re all doom and gloom, because rates are high and the market has slowed down a little bit, still we all know that at a certain point rates are going to go back down. The Fed is purposely trying to raise them to slow the economy down and what\u2019s going to happen to the price of assets when rates go back down? It\u2019s not a shocker, we all know what\u2019s going to happen.
And we will be talking about this moment in time, like, oh, I wish I had bought when I had the chance, that was a nice little window and now prices are high and all of these buyers are back in the game and there\u2019s multiple offers and iBuyers and hedge funds are going to come right back in. It\u2019s going to push out the mom and pop. So you can look at higher rates as a curse or you could look at it like a blessing, it\u2019s a bit of both. But the key is when you\u2019re following podcasts like this one, getting information like this, that you play your hand according to the cards that you\u2019re dealt at the time. Right now we have higher rates, we have an opportunity to get houses at much less than I think what their inherent value would be. It won\u2019t be that way forever. When rates do go back down these properties that we\u2019re talking about buying right now, they\u2019re going to be worth a lot more.<\/p>\n
All right. Great advice from both of you, thank you. I think this is super helpful. I mean, what you\u2019re saying makes total sense, I notice more opportunity. Every single investor I speak to says there\u2019s more opportunity right now. I think this is just a universal observation by people who are super active in the market. But at the same time, because there\u2019s so much uncertainty, it makes very logical sense to be a defensively minded investor at this period of time. All right, so we\u2019re going to move on to another segment. It\u2019s a little bit different.
It\u2019s not about real estate per se, but it\u2019s about sort getting your mindset right to be a real estate investor. And we\u2019re going to talk about time management. Both of you obviously very busy people, David, you host this podcast, Kathy, you\u2019re on two podcasts, you\u2019re both actively investing, running businesses, You speak at every conference in the country. Kathy, we\u2019ll throw this to you first, could you give us a quick tip on how do you manage all this stuff? You\u2019re doing so much stuff. How do you manage your time in a way that allows you to accomplish all your goals?<\/p>\n
Well, have to look at leaders of large corporations and ask how do they get it all done? And they get it done, because they have good people. So that started 15 years ago when we started growing Real Wealth and my first person was a bookkeeper, because I was just like, I handed her box of stuff, I\u2019m like, \u201cI don\u2019t do this part.\u201d And that was like, \u201cOh my gosh, she does this better and she\u2019s good at it.\u201d So I was like, \u201cWhat else can I offload?\u201d And so that\u2019s been the key to success, is getting people that are better than you at certain things you\u2019re not good at. Instead of like, \u201cOh, I\u2019m going to go hire my mom or my sister for this thing that they don\u2019t know anything about.\u201d I\u2019ve done that a few times, not my mom, but friends. And it\u2019s like, \u201cNo, get someone who\u2019s really good at it, has done it before.\u201d I wouldn\u2019t want to hire a new bookkeeper who has never done that, I was going to get a really good one.
So I have a personal assistant, she handles my email, she handles my scheduling. We ended up hiring investment counselors to talk to investors, because there\u2019s no way I could talk to thousands and they\u2019re\u2026 So it\u2019s good people. On a personal level, one of the big changes that Rich and I have made lately is your day starts the night before. It\u2019s an interesting philosophy and I forget who said it or what book we read about that. But we were getting a little lazy, having a lot of wine at night and watching a movie and it was probably a COVID thing and up till midnight. But we both wake up naturally around five, so we weren\u2019t getting enough sleep. We were a little hungover, I mean, not really, but even just a glass of wine affects me. So now we go to bed early, we don\u2019t watch TV only on the weekends, don\u2019t drink wine midweek. And get up early, fresh, able to focus, do some yoga, some meditation, exercise, and just start the day looking at the calendar, what do I have planned? Structure it properly and that works way better.<\/p>\n
That\u2019s great. Still like those wine nights every once in a while.<\/p>\n
Oh yeah, for sure.<\/p>\n
You got it, you still got to do it, but for the most part-<\/p>\n
Weekends.<\/p>\n
You got to be disciplined.<\/p>\n
Yeah.<\/p>\n
What about you, David? How do you manage this?<\/p>\n
All right, I\u2019ve got four tips that I can share for time management.<\/p>\n
Ooh.<\/p>\n
So the first thing I\u2019ll say is to be completely transparent, it is pretty much every day that I have 20 things to do and enough time to do 12. So part of my life is just accepting that eight of those things are not going to be done. So you have to figure out how you can get a little bit of progress done to buy yourself some time. Or prioritize what needs to be done or see what action can be done that might cover two of these things, because sometimes that\u2019s the case too. Tip number one, don\u2019t be reactive. This is how most people live their lives. They wait for something to come to them and they go, \u201cOh, there\u2019s a fire I got to put out.\u201d And they just jump right into it, okay? It\u2019s very common for everyone else in the world to feel that whatever their issue is, should be as much of a priority to you as it is to them, even if it\u2019s their own fault that they got into that mess.
So when someone comes and says, \u201cHey David, can you look at this? Can you do that? Can you fix this problem? This just happened, ah.\u201d I immediately say, \u201cThis needs to be scheduled on the calendar. This is not a thing that I have to stop what I\u2019m doing and jump into this, just because emotionally it would make you feel really good if I prioritize this over what I\u2019m doing.\u201d Which leads me to tip number two. Schedule everything. I have times in the day scheduled to bring me all of these problems that popped up that someone needs help with. I tend to tell the leaders in my company that they do this with me and then they also do it with the people that are subordinate to them. You don\u2019t want someone texting you to say, \u201cWhat do you do when a buyer does this? What do you do when the contractor says this?\u201d You write that in a Google document.
You have a scheduled 15 minute meeting and you go over every bullet point that\u2019s in that document that was written down, at one time as efficiently as possible. And then oftentimes we will share that document before the meeting. And so you can answer some of the stuff without even getting on a call. It\u2019s much faster to type in an answer than it is to have a conversation where you get a bunch of background details, that don\u2019t really matter. And a bunch of non-essentials when you\u2019re just trying to solve a problem. So schedule everything that you do, if it\u2019s not on your schedule, it doesn\u2019t exist. Number three, you got to know what moves the needle. Not everything we do is the same. If you\u2019re just a pure investor and you\u2019re saying, \u201cHow do I find time to analyze deals?\u201d If I sat and watched you analyze deals, you\u2019re probably analyzing a deal that I would look at before you even started and say it will never work.
This is why we have rules of thumb, stuff like the 1% rule, stuff like buying in areas where you shouldn\u2019t be buying, stuff like buying a property that\u2019s already occupied by tenants and you\u2019d be basically buying an eviction. There\u2019s certain things that automatically disqualify a deal and just putting a little bit of effort before you jump into it will help you. I personally think people that like analyzing deals do it just because it\u2019s fun. These are the high C\u2019s on the DiSC profile, the analytical people, they will sit there. And I\u2019ve had these buyers before that want to go over on a spreadsheet, all nine deals and look at every one of them in depth when they\u2019ve already decided they don\u2019t want to buy any of them. Stop doing that, if you\u2019re not going to buy it, stop looking at it. And then the fourth one is use different muscles. So what I mean by that is, if you go to the gym and you are working out, there\u2019s several different ways you\u2019re burning energy.
So if I\u2019m just doing bicep curls, I can only do it for so long before my bicep wears out. Well, I also have overall glucose in my bloodstream that I need to burn as energy to make that muscle contract. I could burn my bicep muscle out but still have glucose left over to work out another muscle system. And then I go do legs or I go do shoulders or something and all of a sudden I\u2019m not fatigued and tired anymore, I can work out that muscle. When I run out of glucose, I\u2019m completely done. So you have an amount of energy you can burn in a day that your attention can actually hold and focus on certain things and that\u2019s going to determine when you\u2019re done.
So you have to make sure you don\u2019t go into a dead sprint and burn all of that by just getting into really tough meetings to start your day, with really difficult, problematic people. Got to be careful who you let into your life in the first place that burns all of your glucose to where you\u2019re just done by lunchtime. \u201cI just don\u2019t even want to make money anymore. This is not worth it.\u201d And the other thing is I break up my day by using different muscles. I don\u2019t sit there and hammer the same muscle, because it wears out. I can\u2019t write a book for 12 hours a day. I can\u2019t be in meetings for 12 hours a day. I can\u2019t solve difficult problems and I can\u2019t review emails, I can\u2019t do any of those one thing, because I\u2019ll just get tired.
But I can break it up, so I will often record a podcast like this get done, use a different muscle by answering emails, use a different muscle by working on an outline for a book. Go step outside and take a walk while I call a couple people and talk. Get some sunshine, get some fresh air, come back in, grab a quick bite to eat, record the next piece of content I\u2019m making. And basically, I don\u2019t work out every muscle through the gym. I bounce around between the machines so that I can get more out of myself throughout the day.<\/p>\n
Wow, that\u2019s great advice. I like that idea. Sometimes if you do two or three podcasts in a row, which I think we\u2019re all doing today, it\u2019s hard. I know people probably think, \u201cOh, they just talk on a podcast.\u201d It\u2019s like you have to pay a lot of attention, it\u2019s exhausting. It\u2019s nice to break it up a little bit.<\/p>\n
How about you, Dave? Do you have any tips?<\/p>\n
Yeah, I actually do. So one thing I think I do, I don\u2019t know if I made this up, I\u2019ve never heard anyone else do it, but I have something I consider my time budget. Everyone has a budget where they allocate dollars to certain things and they\u2019re rigid about that. I have to confess, I\u2019ve never had a financial budget in my whole life. But I do try to keep a time budget and I identify things that I want to do that are non-negotiable for me. So every item on my time budget has an amount of time I\u2019m going to put towards it per week and then a priority level. So sleep, non-negotiable, got to do it. Time with my partner, got to do it. For me, I really like to exercise, so that\u2019s something that\u2019s nonnegotiable for me. But then everything else is a little bit below that.
And so for example, something that I had, some budgeting changes I had to make recently, is this year in 2022, I launched a podcast. Kathy\u2019s on it, you guys have both been on it. And I also wrote a book and that\u2019s on top of my full-time job at BiggerPockets. And so I had to look at my budget and say, \u201cThere are only so many hours in a week, how am I going to add to this?\u201d And I basically decided no more active real estate deals. I\u2019m only going to invest passively this year. And when I hear you guys talk about all your deals, I get a lot of FOMO.
But it\u2019s a decision and a commitment I made to be able to do the other things I want to do in my life right now. And it helps you stay focused, at least for me, it helps me stay focused and not chase every opportunity, because ultimately, there is a lot of opportunity. And when you see markets like this, you guys are talking about, there\u2019s a lot of different things. And I think you just need to be very intentional and deliberate about how you\u2019re going to spend your time. And that gives you a better chance of achieving the fewer things that you decide to do. So I don\u2019t know if anyone else does it, but it works for me.<\/p>\n
That\u2019s pretty good.<\/p>\n
Well, thank you both for being here. This was a fun reunion. Kathy, we\u2019re going to have to do this every Fall. We\u2019re going to do a one year anniversary of BiggerNews. And so we appreciate you being here and looking forward to having you obviously on On the Market and seeing you both in San Diego. We\u2019re filming this right before the conference, and we\u2019ll see if one glass of wine really does it for Kathy.<\/p>\n
Oh no, it\u2019s going to be a weekend, I\u2019m going to be drinking then.<\/p>\n
All right, great. Well, Kathy, where can people find you if they want to connect?<\/p>\n
realwealth.com is our brokerage where we help people acquire investment properties nationwide. And then Grow Developments, growdevelopments.com is my syndication company.<\/p>\n
Awesome. And as if anyone listening to this doesn\u2019t know where to find you, David, but what\u2019s your Instagram and YouTube?<\/p>\n
It\u2019s still not nearly as much as Brandon Turners. And even though he\u2019s off the podcast, he\u2019s still [inaudible 00:58:21].<\/p>\n
We got to get you up there, man.<\/p>\n
That\u2019s what I\u2019m saying, man.<\/p>\n
Yeah.<\/p>\n
I\u2019ll take a pity follow. I\u2019m not too proud to beg, not at all. I don\u2019t want to have to grow a beard down to my belly button just to get attention like Brandon did. So please, if you like my content, go follow me at davidgreene24 and I\u2019m on YouTube at David Greene Real Estate. And Dave, what about you?<\/p>\n
I am mostly on Instagram where you can find me at thedatadeli.<\/p>\n
All right. And last, for all of our listeners, please do us a favor, if you like this content, let us know in YouTube on the comments. We actually read those and we do take them seriously. So if you wish the show was longer, let us know. If you like the speed and the pace that we\u2019re doing it at, the length, let us know that too. If you wish we had covered a certain point in depth more, let us know. We just may do a future show to satisfy your desires at a later date. Thank you guys, both Dave and Kathy for having me on and for sharing your knowledge. I think you both gave some really good, insightful things and I will get us out of here. This is David Greene for Kathy Real Wealth Fettke. And Dave, the Derek Jeter of Real Estate Meyers signing off.<\/p>\n