Afford Anything - Ask Paula - What Do You Think of Real Estate Crowdfunding?

Episode Date: August 6, 2018

#144: Today I’m answering your real estate questions! First up, Rich asks: What are your thoughts on real estate crowdfunding versus investing in a traditional REIT and non-retirement account? He doesn’t want to give up the time it takes to manage a rental property. He wants to spend more time with family and friends, and his eventual goal is to generate enough passive income to transition into becoming a social worker. Rob asks: As a real estate investor who also invests in index funds, how do I decide what percentage of my net worth to allocate towards the stock market versus real estate? Anonymous asks: How do you maximize value in real estate? Is real estate worth the sum of its parts? Should you strip out some of that before you sell a property to maximize its value? Laura asks: How did you develop your real estate course? How do you market a course? I answer these questions on today’s episode of the podcast. Enjoy! For more information, visit the show notes at http://affordanything.com/episode144 For more details, visit the show notes at http://affordanything.com/episode144 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else. And that's true, not just for your money, but also your time, focus, energy, attention, anything in your life that's a scarce or limited resource. And so the questions become twofold. Number one, what matters most? And number two, how do you align your daily decisions to reflect that? Answering these two questions is a lifetime practice. And that is what this podcast is here to explore.

My name is Paula Pan. I'm the host of the Afford Anything podcast and the founder of a Ford-A-A-Fort-A-A-Worthand-A. Anything.com. Every other week, we interview a guest, and on the weeks in between, we answer questions that come from you, the listeners. Now, among these episodes in which we answer your questions, half of those episodes are about anything related to money or work or life, and the other half of the episodes are about real estate specifically. Today's episode is one in which I answer real estate specific questions. If you're interested in this topic of real estate investing, listen on. And if not, don't worry, 75% of our episodes are not about this. So check out some of the other

stuff in our archives where we talk about everything ranging from starting a small business to index fund investing to finding meaning in your work. If you are interested in real estate investing, listen on because our first question comes from Rich. Hey, this is Rich from Kansas City. I'm a 40-year-old professional in corporate America. First, love your work. Second, I want to get involved in real estate. estate, but I'm not willing to give up the time it will take to buy a property and to manage it. Time to me is my most important asset. I want to spend more time with my family and friends and doing the things that bring joy and energy to my life and others. I have begun investing

a small amount in real estate crowdfunding. In the future, I'll have the opportunity to invest a lot more, but wanted to get your perspective on real estate crowdfunding versus investing in a traditional read and non-retirement account. My main driver, as being able to generate passive income that will allow me flexibility to transition to my dream job of being a social worker. Thanks, Paul. Rich, first of all, I love your approach. You know exactly what you want. As I say in the beginning of every podcast, we make decisions about what to do with our most limited resources and time and really beyond that even energy is our most limited resource. So the fact that you

are clear about what matters most to you and what does not is amazing. So congratulations. So congratulations for being so clear and deliberate about how you expend the most precious asset that you have, which is time and energy. Second, I would ask you, why is it that you're interested in real estate? I understand that you'd like to develop passive income and you'd like to develop out your investments, but why are you interested in real estate specifically? Real estate is not necessary to achieving passive income or to achieving financial independence. You can certainly get there without it. Lots of people, many of the guests who have been on the show have gotten there without it. Now, I'm assuming that perhaps one of the reasons that you're interested in it is because it's a way to diversify. So your portfolio, for example, might consist of equity index funds that invest in broad market, U.S. and foreign stocks. Your portfolio may have some bonds.

And then you're probably, I'm guessing, looking for a different asset class so that you can ideally fill your portfolio with various low correlation assets. There is a notion called modern portfolio theory, which is built on the idea that the aggregation of low correlated investments will produce better portfolios. So what that means is that if something affects one particular asset class, it doesn't necessarily affect a different asset class. Broadly speaking, stocks and bonds tend to be inversely correlated, meaning as one goes up, the other goes down. While real estate, on the other hand, has a relatively low correlation to the stock. market. If you look at a graph of the Kishiller Home Price Index and you compare that to a graph of the S&P 500, you'll see low correlation. So I'm presuming that that is the reason that you're interested in investing in real estate. But that might not be the case. I mean, it might be that

you're attracted to some other aspect of it, such as historically lower volatility, or quite possibly you might be interested in it for the educational aspects. I don't know. But I guess where I would start is by asking, why is it that you want to add this level of complexity to your investment portfolio, given that time and energy are limited and given that it at a basic level is not necessary. I'm not saying that you should or shouldn't. I'm just saying first stop and ask yourself why, because that was the first question that popped into my head as soon as you said that.

Now, if you have asked yourself why and you do have a good reason for deciding to add this element into your portfolio, then the second question becomes, as you asked, a comparison between REITS, which for those of you who are listening who aren't familiar with that, that stands for real estate investment trusts. The question becomes REITS versus real estate crowdfunding. To answer this, let's first spend a moment describing what both of these options are. Now, real estate crowdfunding, this has become popular in recent years. Crowdfunding is a situation in which an investor, an ordinary investor like you or me, goes typically to a crowdfunding website in which you will see different real estate deals that are offered by different types of companies.

Now, each deal will have a description of what it is, whether it's residential or commercial, and it will offer projected returns. And those projected returns will vary depending on the deal. They could be as low as 6% or as high as the offer to triple or quadruple your money. Of course, these deals range from conservative to aggressive. Now, if you find a deal that you like, the way that it works is that you as the investor put in a certain amount of money of your choosing, and this money gets pooled with money that comes from other investors, that money is used to fund the deal, and ideally, if everything goes according to plan, you receive your projected returns. The timeline that this can take can be as short as six months or as long as five years or more. And again, that projected timeline will be listed on the deal. Now, part of the reason that crowdfunding has grown in popularity recently is because prior to 2012, a person could not crowdfund for real estate online.

But in 2012, the law was changed such that accredited investors were allowed to invest online. Now, to become an accredited investor, you need to have at least $1 million in net worth, or you need to earn at least $1 million. earn at least between $200 to $300,000 per year. So a small pool of people were in 2012 able to start entering into real estate crowdfunding deals through the internet. And then four years later in 2016, the law changed again to allow all investors, not just accredited investors, but anyone, your cousin Sue, your cousin Billy, to participate in this online. And so the practice of real estate crowdfunding for the average ordinary Billy Bob down the road is very new, as it's only been legal since 2016. As a result, it does not have a long history that we can reference. Reeds have been around by contrast for an incredibly long time, whereas crowdfunding is the new kid on the block.

So in terms of comparing historic performance, there's just not enough data there. So because we can't compare historic performance, the thing that's left really is to look at crowdfunding alone in a vacuum and say, all right, what does common sense tell me about these deals? Well, first and foremost, you're making a smaller number of bets, most likely. Hypothetically, let's say that you go to a crowdfunding website. You go to Realty Mogul or you go to Fundrise and you pick a couple of investments that fit your risk profile and what you're looking for. You choose a 200-unit apartment building in Indianapolis, and you choose office space in Minnesota, and you choose another 300-unit apartment complex in Texas, and another one in Florida and another one in Idaho, right? So let's say you found five things that you've looked at and you've decided that you're going to place an investment of $5,000 on each of these five things. Well, in this example, your risk is concentrated. You are an investor on a project in which the project sponsors are probably a company that you are not familiar with or one that you have not worked with in the past. They may have a limited operating history. The projections and forecasts that they make are hypothetical, as all projections are. They may need to end up raising additional capital, which would dilute your owner's ship stake, or in the worst case scenario, the whole thing might collapse and you may not receive

your principal back, your principal investment back. Those are some, not all, but some of the risks that you carry. When you decide to become an investor on a small handful of projects, you really have no idea how those projects are going to go. They may do very well, or you may realize the risk of loss of capital. Each specific real estate project does not work in averages. each specific real estate project is unique. And a multitude of variables ranging from the location of the property to the type of property that it is, to the organization and skill and talent of the sponsors or issuers, all of those will affect the outcome.

And so that type of project-specific real estate crowdfunding is an arena that has significant risks, also the potential for some good rewards, and also a limited history, and ultimately the way that those funds are handled at the day-to-day level, that's out of your hands. I think one of the big benefits of real estate investing, this kind of goes back to the question that I asked in the beginning, which is why do you want to diversify into real estate? I believe that one of the big benefits of real estate investing is that you have the ability to make, if you're buying your own properties, you have the ability to make those decisions. whereas if you are going into either a crowdfunding or a REIT situation, you do not have the ability to make those daily decisions.

And so with either option, whether you go with crowdfunding or REITs, you are seeding control of how that investment is handled to the issuers or the sponsors of that project. And it is up to you to evaluate whether or not you think that they are up to the task. And with crowdfunding in particular, because you might be only choosing a small number of projects, that there's a higher level of concentration there. When you put your money in, going back to the equities example, when you put your money in a broad market index fund, that money does as well or as badly as the overall stock market. When you put your money on a 300-unit apartment complex in Jacksonville, Florida, the performance of your investment will be related to the performance of, that specific apartment complex in Jacksonville, Florida. And that's just the inherent reality around the notion of real estate crowdfunding. All right, so let's discuss reeds.

At a conceptual level, a reet is kind of comparable to a crowdfunding situation. Because a reet fundamentally is a company that owns or operates or finances income producing real estate. And so a reet also gives its investors a chance to participate in the real estate investment market without owning properties of your own. However, reits are traded on national stock exchanges. Now, there are actually reits, not to make this too complicated, but there are reits that are not traded on stock exchanges. So there are public non-listing reeds and there are also private reits. But for the sake of answering your question, I'm assuming that you are referencing reits that. that are traded on stock exchanges.

And so that's what this answer is going to cover. Now, with a REIT that is traded on a public stock exchange, you've got exposure to a bigger company doing a bigger basket of deals. And by law, REITs must pay out at least 90% of their taxable income to the shareholders. Actually, a lot of REITs pay out 100%. But by law, they must pay at least 90%. So REITs are arguably a way to spread your money out further among a larger collection of properties

and essentially make a dividend play. Reets vary in sizes. I mean, to qualify as a reet, a company must invest at least 75% of its total assets in real estate, derive at least 75% of its gross income from real estate, pay out 90% of its income in the form of shareholder dividends, and have at least 100 shareholders, and it must be a corporation with a board of directors.

So there's nothing in there that says, hey, a reet has to be gigantic. But there are currently more than 225 reits that are publicly traded on a stock exchange, and they have a combined market cap of over a trillion dollars. So the reits that are out there that are being publicly traded are large. They're not required to be, but they are. That's just the fact of the matter. And so by investing in a reet, your money is diversified further as compared to, say, concentrating your investment on an apartment complex in Brooklyn.

And that has its pros and cons. If you have specific local knowledge about that apartment complex in Brooklyn, then perhaps you do want to concentrate on that one particular real estate investment and crowdfunding gives you a way in which you can do it. But just know that when you're comparing crowdfunding into specific projects with investing on a stock exchange, you're talking about two very different types of concentrations of exposure. So I hope that that was helpful.

Again, I'm not going to tell you what to do, but those are just some of the elements that you can think through as you're making this decision. Thank you so much for asking that question. Now, one great way to learn more about real estate and business is by reading. 88% of financially successful people read at least 30 minutes per day. And our sponsor, Blinkist, gets you there faster than you can imagine. Blinkist is the only app that takes thousands of the best-selling non-fiction books and distills them down to their most impactful elements. So you can read or listen to them in under 15 minutes all on your phone. Plus, you can listen anywhere. I like listening to Blinkist when I'm at the gym because I can just get on the

treadmill, set it to kind of a comfortable walking, fast walking pace and learn while I'm also moving. The Blinkist Library is massive. So they've got timeless classics like Think and Grow Rich, as well as current bestsellers like The Four Hour Work Week or Drive by Daniel Pink. By the way, I recommend checking out. There's actually a really cool book about extinction. It's called the sixth extinction. It won the Pulitzer Prize. Check that out. It's fascinating. So Blinkist is

constantly curating and adding new titles like that from best of lists. So you're always getting powerful ideas in a made-for-mobile format and 5 million people are using it to expand their minds 15 minutes at a time. So right now, Blinkist has a special offer just for our audience.

Go to blinkist.com slash Paula to start your free trial or get three months off your yearly plan when you join today. That's Blinkist spelled B-L-I-N-K-K-S-T, Blinkist.com slash Paula to start your free trial or get three months off your yearly plan. Blinkist.com slash Paula. Do you want to earn a good interest rate on the money that's in your checking account? Check out Radius Hybrid Checking, which is a product from Radius Bank. Radius hybrid checking will pay you 0.85% APY on balances of $2,500 and up. To put that in perspective, That's 17 times greater than the national average.

According to the FDIC, as of February 2018, the national average was only 0.04% APY. So you can earn 17 times more than the national average. And if you have a balance of 100,000 and up, you can earn 1.2% APY, which is 24 times greater than the national average. Now, this is not some type of flashy introductory rate that's going to expire. These rates don't expire, and there's no cap on the balances that earn this rate. In addition to that, Radius Bank will give you freedom from fees. There are no monthly maintenance fees, no minimum balance requirements, your first order of checks is free, and you can access free ATMs worldwide. To open an account online in less than five minutes, go to radiusbank.com slash Paula.

That's R-A-D-I-U-S-Bank.com slash Paula. Radiusbank.com slash Paula. Our next question comes from Rob. Hi, Paula. This is Rob from San Diego and Las Vegas. Really enjoyed the podcast and the blog. Thank you so much for having it there. I have a question about asset allocation. As a real estate investor who also invests in index funds, how do you decide what percentage of your net worth should be invested in the stock market or the bond market and what percentage should be invested in real estate for cash flow? Rob, that's a fantastic question. I don't think there is a answer to that question. When it comes to asset allocation with regard to the assets that you have in the market, meaning your allocation of equities to bonds, there are plenty of broad rules of thumb around that. For example, one common rule of thumb, and I'm saying this for the benefit of

everybody who's listening, there's one common rule of thumb that says your age in bonds with the rest in stocks. So for example, if you're 30 years old, you might want to have 30% of your portfolio in bonds and 70% in equity funds. such as stock index funds. If you were 40 years old, you'd have 40% in bonds, 60% in stock funds. That's one particular rule of thumb. There are also modifications on that that say 110 minus your age or 120 minus your age, but 6-0.5 a dozen of the other, they all basically have a range of what that asset allocation

is often recommended to be as a broad rule of thumb when it comes to the split between the equities portion of your portfolio and the bond portion or fixed-income portion. or fixed income portion of your portfolio. Now, where there aren't many rules of thumb is, Rob, the question that you asked, what overall percentage of your portfolio should go into market investments generally as compared with rental properties? There's no rule of thumb for it. And so, again, in the lack of that broad rule of thumb, we're left with the question of,

well, what makes sense in your personal situation? And to answer that, I think you have to start with the end in mind. What are your goals? What are you going for? Is your goal to accumulate a net worth of X amount, such as an overall net worth of $1 million or $2 million? Or is your goal to achieve a particular amount of passive residual income that comes in every month through wherever that may come? Dividends, the 4% withdrawal rate, rental property revenue. So anytime that you're talking about investment strategy, well, you can't have a strategy until you have a destination in mind.

You can't have a, you can't make a roadmap without a destination. If your goal were passive income, then you might want to more heavily tilt your investments towards either rental properties or dividend producing stocks or equities that are held in a taxable brokerage account such that you could withdraw them without having to go through all of the rigmarole that a person has to go through when they're withdrawing money that's in a retirement account, right? So if that were your goal, if your goal were to actually live on the income that comes from your investments, then you would have a certain strategy. If on the other hand your goal were something different, if your goal were to accumulate a particular net worth and you didn't really care what form that came in, well, then you would be making different decisions. And so I guess this is kind of a long way of saying there's no right answer. I do think that you are heading in the correct direction by virtue of the fact that it sounds. though, you're doing both. And one of the ways that I like to do it is max out my HSA, max out any retirement accounts that I'm eligible to contribute to after doing that, extra money that I have

left over at this point goes towards rental properties. Now, that's kind of an aggressive tactic because for a lot of people, once you max out some retirement accounts, you don't have anything left, or maybe you don't even have enough to max out their retirement accounts. So my strategy is specific to me based on the assets that I'm not. I'm going to be able to the assets that I have had in the past in order to invest. But certainly you could do a modified version of that, not just you, Rob, but anyone listening, could do a modified version of that in which you might decide, you know what, this year, I'm going to max out my Roth IRA and my HSA, and then after that the rest of my money I will put towards rental properties. That would be one way of doing

it. So you could create an account-based approach. That's one possible way. Another possible way is if you have a job with a particular employer match, you might decide, you know what, I'm going to contribute to my retirement accounts up to the point at which I get my employer match. And after that, the rest of my savings will go towards rental properties. That would be another approach. Or you might take a look at your overall net worth and say, you know, I think I want to keep the balance of my real estate equity and my market investments at around 50-50 or 60-40. and I'm going to contribute to either bucket based on that split. I mean, there are a million ways of doing it.

And I, again, don't think that there is a particular correct answer in terms of how much you, quote, unquote, should have in market investments versus rental properties or other real estate investments. So long as you're thinking about it, which you are, and so long as you're doing both. And so long as you have some type of strategy, something that's conscious and deliberate and that, is aligned with whatever that end goal is. So I hope that helps answer your question. I realize I've essentially said the answer is there is no answer. But at a personal note, I've got to tell you, real estate may be the thing that I have become quote unquote known for. It tends to be the topic that people associate me with. But approximately around 40 to 50 percent of my net worth comes from brokerage accounts.

It's funny, I've done podcast interviews where people say, hey, aren't you worried that you've missed out on the stock market? And I'm like, no, why would you think that? A large portion of my investing behavior and a large portion of my net worth is in the market. I don't talk about it often because there's not a whole lot to say, yeah, go to Vanguard, buy some index funds, end of story, done, ta-da. So I don't talk about it much because there's not a whole lot. a lot to say about it and people don't ask me about it much because I think people generally tend

to latch on to the details of your story that tend to be unique or different and the fact that I have Vanguard accounts and some Charles Schwab accounts that is not not particularly unique or different and so as a result people don't tend to remember me for that. People tend to remember me for my rental properties, but honestly, my rental properties are only about half of my total portfolio. Now, I'm not saying that that's the allocation you should have. I just want to clarify that even the people who are known as real estate people are much more multifaceted than that, at least many of us are. So do both, invest in both in some reasonable way that is right for you. Thank you for asking that question, and I'm glad that this is something that you're thinking about.

Our next question comes from Anonymous. How do you maximize value in real estate? Perhaps with a property that is subdividable, has extra land, perhaps timber resources, the house is desirable? Is real estate worth the sum of its parts, and can you strip out some of that, or should you strip out some of that before you sell a property to maximize its value? Thanks. This is an interesting question.

So first of all, real estate, broadly speaking, produces value in two ways. It produces an income stream and it also, hopefully, may appreciate in value or rise in value. Now, that value appreciation can come itself in two ways. There's market-based appreciation, which happens as a result of broad economic forces outside of your control. And there's also what's known as forced appreciation, which is when a direct-based appreciation, which is when a direct-based appreciation, which is when a direct-based appreciation, which is when a direct-based appreciation, which happens, action that you take causes the value to go up, such as a cost-effective renovation. Now, it sounds as though from the fact that you mentioned timber within your question, it sounds as though you are concerned with the income-producing side of the equation,

and the way that that income production would affect the resale value of a piece of real estate. So let's turn our attention to that facet of the valuation of real estate. As background, when many people think of an income stream that a piece of real estate produces, people often think of rental income first and foremost. And certainly that is the most obvious answer. But as you mentioned, there are many other ways in which a piece of property might produce other income streams. For example, there's depending on permitting and zoning and all of that, there's storage, there's parking. There are allowing agreements for ingress and egress to people with, adjoining properties who want to make use of a portion of your land.

I mean, there are many ways to monetize a piece of property depending on where it's located and what the other conditions around it are. And timber, as you mentioned, is one of the many ways in which a person could monetize a particular piece of property if you have those resources. So the question that you asked, your question was a little broad. But the fact that you brought up timber makes me think that perhaps you have a piece of property and you are wondering whether or not, to harness the income stream potential from it before you sell it. It sounds, in other words, as though you're wondering, hey, do I part it out and make more money doing that? Or do I sell it in one big piece with its maximum potential

and make more money doing that? Another situation similar to that might be, hey, if you've got 50 acres, do you sell it as one 50 acre parcel or do you subdivide it and then sell each individual parcel? So my answer has to be quite broad in saying it depends on the market in your local area. There's no such thing as with the example of the 50 acres, do you sell 50 acres in one parcel or do you subdivide them into smaller parcels, chop them up and sell them? Depends on the area. Depends on the supply and the demand in that particular location.

And to the question that you asked about timber, there have got to be comparable properties, neighboring properties, that have that same set of resources. what are they doing? What type of price premium, if any, does a property with mature timber have as compared to a property that has recently been thinned? Take a look at that premium. Take a look at the difference, the delta between A and B, and then you'll have your answer. Now, that being said, there is one comment that I will make about the income potential of a property with regard to that property's resale value. Let's set aside the example of timber for a moment. We'll set aside the example of subdividing a large lot, and let's again focus on the example of a traditional rental property, we'll say a multi-unit, like a four-unit, that you're thinking of putting up for sale. Because you are selling that property to another investor, the sales price, the resale price of that property will be directly related to the type of income that that property is bringing in. If you have a four-unit building in which each unit is renting for a thousand $1,000 per month, and you can, through some combination of improvements to the property or better

advertising or better management, boost the rental income to $1,500 per month per unit, well, you'll be able to charge a higher premium for that property. Investors are going to be willing to pay more because the price of that property will be related to the cap rate on that property. And so if you can improve the cap rate on a property, then you can improve its resale value. So in that regard, if you have a income-producing property that is not limited by resources, then the more that you can boost to the income from that property, the more that property will be worth in terms of its resale value to another investor. If you have a property that you are under monetizing and you can improve the rents plus collect parking fees, plus collect storage fees, plus collect laundry fees, thereby improving the gross revenues on that property in a major way, well, guess what? Investors are going to be willing to pay more for that. So that's one of those winning leads to further winning situations where the more that you monetize a property and income producing property, the more that somebody else is going to be willing to pay for it.

Thanks for asking that question, and good luck with whatever property you are trying to sell. We'll come back to this episode in just a minute. But first, hiring is challenging. But there's one place you can go where hiring is simple, fast, and smart. A place where growing businesses connect to qualified candidates. That place is ziprecruiter.com slash afford. ZipRecruiter sends your job to over 100 of the web's leading job boards. And they don't just stop there.

With their powerful matching technology, they skisks. And thousands of resumes to find people with the right experience and invite those people to apply to your job. And as those applications come in, ZipRecruiter analyzes each one and spotlights the top candidates. In fact, 80% of employers who post on ZipRecruiter get a quality candidate through the site within the first day. With results like that, it's no wonder that ZipRecruiter is the highest rated hiring site in America. And right now, my listeners can try ZipRecruiter for free at this exclusive web address. ZipRecruiter.com slash afford. That's ZipRecruiter.com slash A-F-F-O-R-D.

ZipRecruiter.com slash afford. ZipRecruiter, the smartest way to hire. Do you want to cook more dinners at home? Check out Blue Apron. Blue Apron delivers farm-fresh ingredients and step-by-step recipes to your door. They'll send you perfectly portioned ingredients, delivered directly to you so that you can skip meal planning and get straight to cooking. And now, in the summertime, they're sending a lot of seasonally inspired ingredients.

So if you enjoy grilling, for example, you can get chicken with barbecue sauce or juicy cheeseburgers with spicy slaw. And they have partnerships with groups like master chef so that you can get cool chef-designed recipes. One of the things I appreciate about them is the convenience of getting something sent directly to my door means that if I'm coming back from a trip, I don't have to worry about running to the grocery store right away or first inventorying the kitchen, figuring out what I have, making a meal plan, making a shopping list, going to the store. So I save a couple of hours, and especially on a week that I'm traveling,

that can be pretty key. I also appreciate their commitment to supporting a more sustainable food system. They set very high standards for their ingredients. So check out this week's menu and get your first three meals free at blue apron.com slash afford. That's blueapron.com slash a F-F-F-O-R-D to get your first three meals free. Blue Apron, a better way to cook. Our next question comes from Laura. Hi, Paula. This is Laura. I was interested about your real estate course and how you went about developing that. My sister is an expert in human services and she's been developing content for her

own online course. And she knows that there's a market for it that these trainings are really needed and that people pay a lot of money for experts to come to them when online modules would probably be more effective and more cost efficient. But she doesn't really know what to do after the content production. How would she go about sort of marketing these materials in a way that would make sense? So if you have any ideas, we'd appreciate it. Thanks. Laura, okay, so first of all, I wasn't sure whether I should put this question in the Ask Paula Real Estate episodes or if I should put it in the Ask Paula and Joe episodes that are about other topics. But since this is not a question that Joe would probably want to chime in on, I figured I would put it into a solo show in which I'm only answering the question. So that's why I slated it for here. And so you kind of asked two questions. One was what was a process of developing it. And the second is how do you market it? Process of developing it was more intense than I could describe for a few reasons. Number one, I wanted to make this as comprehensive as possible. I wanted to make this.

I wanted to make this the absolute one-stop shop for anybody who is interested in residential rental properties, buying, buy and hold investing in residential rental properties. And so I brain dumped everything that I know about it and organized all of that material. And what effectively that meant was that I wrote, I would need to go through all of the transcripts and kind of add up all of the words. But I can tell you the module on analyzing a property, that module alone came to 40,000 words, which is, the length of a short book. So I would guess that overall I probably wrote, I'm guessing somewhere in the neighborhood of 150,000 words to maybe 200,000 words. I mean, I've got multiple books worth of material in there. And that by itself, getting all of that written down, organizing it, editing it,

itself takes a long time. And then on top of that, I had to then produce video material around all of it. And then, of course, the best teaching is interactive. So producing worksheets, checklists, quizzes, questions that we can ask the students to test their knowledge of the material, developing everything around how to take this from just a presentation of information into an interactive learning experience. That took a considerable amount of effort. Then to add on to all of that, The need for hiring a developer and a designer because we wanted to, we didn't just want to use one of those platforms like Teachable. We wanted to do all of this in-house to make it extremely professional and smooth and easy to use and not make it just another pump and dump kind of a run-of-the-mill thing. This is the first product that Afford Anything has ever released and I want it to be high quality.

And so the amount of work that that required was far greater than I had ever imagined. And the self-doubt and the fear was just astounding. It was way worse than anything that I thought it would be. So it's been an incredible, intense, high-pressure two-year experience, two and a half years at this point of creating this. And I would – so to answer the first part of your question, it's not something that I would take lightly, if anybody is interested in doing something like this. If I could go back and do it again, I would probably have promised a course that only covered a portion of rental property investing.

Like I might have said, you know what, this particular course is going to cover purely how to find and analyze properties. It'll take you right up to the point at which you buy it. That way, I wouldn't have had to then also produce modules for how to renovate and how to manage tenants and, you know, taking you all the way through A to Z. If I could do it over again, I would have done that because that would have halved the workload. But I didn't. And I promised the A to Z and I want to keep my word. So it's been a very intense couple of years, but I've learned a lot. And I would just say to anybody who wants to do this, be prepared for what is going to amount to a much bigger project than you probably think it is.

Then as far as the marketing, I haven't even gotten there yet. I have put so much of my headspace into the production that I have have. no plans really for marketing or sales or I figure I'll get to that when it's time to launch. Or actually, honestly, I'll probably do a first launch and then see how it goes and then iterate on the marketing and sales from there. I honestly haven't really thought about marketing and sales that much because I only have one of me. I've got a small team. There's Erin who has been instrumental. She's a part of the Afford Anything team. She's our chief sanity officer. But there's only so much that we can do, and I feel like attention splitting is a way to do neither thing well. So I suppose my advice would be do the first thing first, which is create your material,

create something excellent, something that you are willing to put your name behind. Once you do that, give it its first launched, give it its initial launch, see how it does, and then you can improve upon it from there. But one of the major things that I've learned is that it's okay to do things in phases. I do not like the concept of just releasing a minimum viable product. I don't want to be known for only doing the minimum. So I want to start with an excellent product, but I have learned that it's okay to start excellent

and then continually improve, continually iterate, and save some things for phase two. And so for me, that marketing strategy is going to be part of phase two. It's not a plan that I have developed yet at all. So please tell your sister I said, Best of luck with that because I'm excited for her. Anything that is worth doing is hard. And so it is hard, but I think it will help a lot of people and it will be one of my major, my most major accomplishments. So there is the pride that comes with pulling off something that big. So congratulations to your sister for undertaking such a thing. And thank you, Laura, for calling in with that question. I also want to play. play an amazing voicemail that we received from a listener by the name of Kim. Hi, Paula. This is Kim L. from Washington, D.C. My husband and I have been doing the three

principles of financial growth that you summarize in episode 139 with Kim E. Resourcefulness, the anti-budget, and frugality. We are in an upper income tax bracket, but we use those very same principles, and our experience is very parallel to Kim E's. In the last year, we've saved 47 of our aftertax income while raising two elementary school-aged children. We are in our mid-30s. It's amazing how transferable these general principals are. Thanks, Paula. Kim, congratulations. That is a fantastic savings rate. I'm really happy for you. The fact that you are doing so well, you're raising two children, you're being resourceful, you're saving 47% of your after-tax income. That's amazing. So congratulations to you. Steve, can we please get sound like that?

effects here. Firework, streamers, the whole party shabang. Well, that is our show for today. If you have a question that you would like answered on an upcoming episode, please head to Afford Anything.com slash voicemail, where you can leave a voicemail with your question, and we would be happy to answer it on a future show. You can get the show notes for today's episode

at Afford Anything.com slash episode 144. Again, the show notes available at afford anything.com slash episode 144, and you can ask a question at afford anything.com slash voicemail. Coming up on future episodes of the Afford Anything podcast, we have an interview with Rand Fishkin, the founder of maus.com. Rand's story is a fascinating one. He went into $500,000 of credit card debt. What that started as was 150,000 in credit card debt, and then the interest and late fees started adding up, and he ended up owing 500 grand to the credit card companies. And so in order to do that, he doubled down on his business. He did not file for bankruptcy. He doubled down on the business that he was starting. That business was at the time called SEO, maus.com, later rebranded to maz.com. And he grew it to the point at which it has about $45 million in annual revenue. So how on earth did some dude name Rand go from being half a million in debt to being the founder of a company that does 45 million in annual revenue?

Well, he's going to tell that story on a future episode of the Afford Anything podcast. So in order to make sure that you do not miss that interview, go into your favorite podcast player, whatever app you're using right now, whether that's Apple, Stitcher, Google Podcast, Spotify, whatever it is that you're using to listen to this podcast. hit the subscribe button. That way you can make sure that you get future episodes. We also have Laura Vandercam on a future episode of the Afford Anything podcast. Laura has been a guest on this show in the past. She is a time management expert. And she is going to be talking with us about the experience of being off the clock, how you can build more of that experience of savoring into your daily life. So both Rand Fishkin and Laura Vandercam coming up in future weeks. Subscribe to this show to make sure that you hear them. And while you are in that app, please leave us a review. As of this recording, we have 644 ratings in iTunes, which is fantastic. Thank you so much to everybody who has rated us.

Sasha IS says, thanks for such an informative podcast. My daughter suggested that I should listen and I'm glad I did. Lots to think about for the people like me. Thanks again. And she says, P.S. how can I ask a question about what you were talking about? you can do so at afford anything.com slash voicemail. So thank you, Sasha. Podcast aficionada says solid. She does great work. I like a woman who knows her stuff. Thank you. And Mitch True Blue says, if you're looking for a podcast to provide you general personal finance and or real estate investment advice, this one is a great choice for both. There's a healthy mixup of content and topics to keep things fresh, but there's great message theme consistency week to week to help you build a solid financial. Foundation without pandering to any in vogue trends or clickbaity ideas. A plus, Paula.

Thank you so much, Mitch. So thank you so much to everyone who has given us a rating or a review. If you have not done so yet, please do so in your favorite podcast app. If you're on a computer, you can also go to afford anything.com slash iTunes, which will redirect you to the page on the Apple Podcast website where you can leave us a review. Thanks again for tuning in. My name is Paula Pant. This is the Afford Anything podcast.

I'll catch you next week. week.