Afford Anything - How I Bought 20 Houses, Debt-Free, While Serving Overseas in the Military - with Rich Carey

Episode Date: June 25, 2018

#136: Rich Carey is a military millionaire. He's spent his career in the U.S. Air Force; he's currently stationed in Seoul, South Korea. He was stationed in Germany before this. He'll retire after this. Most of his fellow servicemembers, upon taking a military retirement, start a second career. But Rich doesn't need to. He's financially independent, thanks to his 20 rental properties. He bought most of these properties while stationed overseas. He's renovated them from afar. And he's bought everything with cash. To say his story is impressive is an understatement. Every week, I get emails and messages from readers who say things like: *"I'd like to buy a rental property, but everything in my city is expensive!"* *"I'd like to buy a rental property, but I'm not handy. I can't do any of the work myself."* *"I'd like to buy a rental property, but I only make a middle-class income."* *"I'd like to buy a rental property, but we're a one-income household."* *"I'd like to buy a rental property, but we have two kids, and they're expensive."* Rich's story illustrates how someone with a middle-class income can invest in rental properties from out-of-state. He earns a military salary. He lives in Korea. He's the sole breadwinner in his family. He supports a wife and two children. He's definitely not taking 2 a.m. toilet-fixing phone calls. In fact, he hasn't even seen several of his properties. As you'll hear in the interview, my friend Emma and I visited Montgomery, Alabama about a year ago. Rich's properties are located there. During our visit, I sent Rich an email, saying "Hey, I'm in Montgomery!," and he replied with, "Cool, I just bought another house there! You're welcome to drive by and see it from the outside." This means I've seen houses that he hasn't. *His* houses. ____ How did Rich start investing in rental properties? How did he grow a portfolio of 20 rentals? How could he build this free-and-clear, without taking out any loans? And how does he manage this from Germany and Korea? Find out in this interview. ______________________________ For more information, visit the show notes at http://affordanything.com/episode136 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, your focus, your energy, your 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 behaviors 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 Pant. I'm the host of the Afford Anything podcast and the founder of Afford Anything.com. And today we have a real estate focused episode. Now, the vast majority of our episodes are not about real estate investing. So if that's not your jam, don't listen to this one. Search through our archives. We've got a ton of great episodes about other topics, everything from starting businesses to investing in the stock market. Check out any of those.

If you are into real estate investing, you're probably going to really like this one because joining me is a guy by the name of Rich Carey, who, and I am not making this up, this is totally true, he owns 20 houses all completely free and clear, totally debt-free, and he bought all of those while serving overseas in the military. So Rich Carey is a full-time military service member. He is currently stationed in Seoul, South Korea. At the time that I met him, he was stationed in Germany. and from various posts around the world, he has purchased 20 houses, which provide him with a really solid income. As he says later in this interview, these houses grow, ballpark around $15,000 per month. So to everybody who has ever said, oh, I really want to become a rental property investor, but there is nothing cheap in the city that I live in because I live in Manhattan or I live in San Francisco or I live in Seattle. rich is proof that you don't have to invest where you live.

I mean, I get that it's scary to invest out of state, but this guy invests out of country. So let's talk to Rich right now to learn about how he's done this, how he has built a portfolio of 20 rental properties as a military service member who's working full time in a very important job that is based in foreign countries where even basic things like making a phone call. You know, he's in a totally different time zone. So how has he done this? And what advice would he give to anybody else who wants to follow along that path? Let's find out right now. Here's Rich Carey. Hey, Rich. Hey, Paula. How you doing? I'm excellent. How are you? I'm doing great. It's a little bit early where I am, but I'm surviving. So tell everyone where you are at this moment. I'm in the military, and so obviously that has me living in all these different places in the world. And currently, I am working in Seoul, South Korea.

Nice. Before this, when you and I met, you were in Germany, yeah? Or you were based in Germany. I was. We met in Ecuador while you were in Germany. Exactly, yeah. And so I came to this FinCon conference that I think we've both been at, I've been at twice now. I came from Germany, one year, and then Korea the next. So, Rich, you know, I want this to be a conversation about financial independence. I'm going to cut to the chase here. You're about to retire. How old are you? So I'm 43 years old. 43. And you're going to retire in two years? Yes.

Walk us through your story. Who was 18-year-old Rich? And how did he get to where he is today? Okay. So when I was 18 years old, I think when I was in college, I had a bunch of crazy ideas of different careers that I wanted to pursue. And kind of a lot of different things going on in my life. When I was in college, I had this idea of being a doctor. And that's kind of something I went through. when I was in college I worked in an emergency room at a children's hospital.

While I was doing that job, it was a teaching hospital. I kind of came to realize that being a doctor, seeing what the doctors were going through, and kind of realizing how much schooling was involved, you know, maybe that wasn't going to be for me. And I had a friend who had given up on pre-med. He went into ROTC, which is like a program where you can join the military from. and he told me like I'm going to be a pilot you know I left this whole thing about becoming a doctor and now I'm going to become a pilot in the air force and I was like are you kidding me like can I do that and so I'll make like a very long story short I ended up going into this RLTC program where where I can

become you know going to the Air Force as well I actually ended up getting what's called a pilot slot I ended up going to pilot training I ended up for a short of time, you know, in the pilot trainer. And while I was flying around, I ended up flying with a really bad cold and actually ended up blowing my eardrum out. So I ended up having to leave pilot training and looking for a new career field. So anyway, I ended up in a different career in the military, the one that I'm in now, which is a law enforcement type career. And that's what I've been doing the last 18 years. In that time frame, I've lived all over the world. I lived in Japan for five years. I lived in Germany for three years. I lived in Guam for two years. I've

always wanted to invest in real estate. And it was really hard to do it first because I was in Guam, which is this tiny little island in the middle of nowhere for my first assignment. And I didn't want to buy there because there were so many typhoons and earthquakes there. In fact, my first apartment in Guam actually was destroyed by a typhoon. So I'm actually glad that I didn't. buy anything there. When I got to my second assignment in the military, which was Washington, D.C., I bought a house immediately, and that's kind of what started my, I'd say my career, my passion with real estate. How did you have the money to buy that first house? Was that your primary residence at the time? Yeah, so it was my primary residence. And my wife was working a little bit at the time.

She was working when we were in D.C. Now, of course, I had the normal salary for a second lieutenant. and the first lieutenant in the military. At this point in our careers, and this is like in 2000, 2001, I wasn't doing anything intentional. I wasn't following a certain blog, or I don't think there was blogs back then. I wasn't following a book or anything,

but I was being very frugal with my money and we were saving and we were trying to invest well. But at the time, I had enough money for a 10% down payment. We financed the other 10% at a slightly higher rate. I think it was a 7% rate, you could finance the other 10% of that total 20% down payment for 7%. And then our loan on the house was at 5.5%, which at the time I thought was super, super low. And we bought that townhouse for

$280,000 in 2003. And I actually thought that that was an absurdly high price and that was probably going to be the biggest mistake of my life. I mean, I was, I didn't sleep for weeks. And I thought for sure that, you know, it would never go up in price again. I turned out being very wrong about that. Two years later, you know, it was already worth 400,000. And I had realized like, wow, this real estate thing's crazy. And so what happened next? You found yourself in Alabama, of all places. Yeah, well, there's a big jump between there and Alabama. Got the real estate bug in D.C. Before I moved away, I tried to buy a second house, but the prices are rising too fast and I kind of chickened out on that.

I won't say chickened out, but just realized maybe it won't be smart to end up paying so much more just a year or two years later. And then later in my career, it was about, I think, 2013, I ended up moving to Alabama. At this point, I'd been renting out my townhouse in D.C. for several years, I think 10 years. And while it was a decent rental, it didn't actually provide a very good return on investment because it's a high cost of living area. So when I got there, I kind of realized very quickly from meeting another military member there that I could buy houses here probably with cash because they were much cheaper than D.C., rent them out,

and my return on investment would be much, much, much higher than what I was making in D.C. And that got me very excited. And so that's kind of what I've been doing since 2013 as I've kind of capitalized on that. So since 2013, you've been buying houses in Montgomery, Alabama. And you're now up to 20 houses. I'm up to 20 houses, yes. And kind of what's been unique about what I've done in Montgomery, Alabama, is these 20 houses are, they're all paid off. When you say paid off, did you have a loan on them initially or did you buy them outright in cash?

I bought them outright in cash one by one, but I have to sort of quantify that. So I ended up, I lived in Montgomery, Alabama for 10 months for a military assignment. And in that time, I bought six houses. Now, these houses ranged in price from 30,000 to 45,000. And this was in 2013? Yeah, which was a very affordable house. Yeah. As we talked about earlier, I was a very frugal person.

Me and my wife were. We were savers. We were investors. we always put lots and lots of money aside. We didn't take fancy vacations. We didn't buy new cars. We kind of just like had this cash saved up. Another thing that we'd done earlier in our career is I had paid off that townhouse in Washington, D.C.

So that was also providing not just was it paid off, but it was providing an income to us. So the rent that was coming in was money that I was just, those cash that I was just throwing into the bank every month and investing. So that allowed me to buy those six houses while I was there. Right. Well, yeah, so six houses at, say, an average price point of about $40,000 per house, that's $240,000, which on one hand, it sounds like a lot. But on the other hand, when you frame it into the context of the year was 2013, so you were, what, 15 years deep into your career already with a history of living below your means and saving and having a fully paid off rental property already. When you frame it in that context, $240,000 is attainable.

It is, yeah. And we did it. I mean, my wife really only worked for the first, maybe just a year or two at the beginning of my military career. And then really she was unable to because of the places that we lived. So we really had to live below our means and try to put as much money as a way as we could. Because we had this goal of paying off the loan quickly, and we pay the mortgage quickly. And we paid it off in about six years. So what we did after we paid those, we bought those six houses, now these six houses

are giving us rental income. And so is this property in D.C. We sold that property in Washington, D.C., because it wasn't making as much money each month for us in cash flow, you know, as a percentage as the ones in Montgomery, Alabama were. We took that cash from that, $400,000. One house in D.C. buys 10 houses in Montgomery, Alabama. So, you know, that gets me from 6 to 16.

And then sort of the, what I think of as snowball cash flow from those 16, you know, I've gone from that to 20 in a relatively short amount of time. And you've done all of this while based in other countries. You've done all of this from Germany and South Korea. Yep. I've done a majority of that work while in Germany. you know, after leaving Montgomery, I was in Germany for three years, I sort of like set up systems with my real estate agent that I had been working with while I was there in Montgomery and my management company and the contractors that I had been working closely with, I had set up sort of a

system where once I was in Germany, I could still buy houses and utilize all their services from afar to keep adding, you know, buy a house, get it, get it remodeled, get it rent ready, get movers moved in, hand it over to the managing company and just add it to my portfolio. And I was doing this all from afar, which is, it's a problem that a lot of real estate investors have. Everybody's kind of like, I live far away from, you know, from a place that's affordable. What do I do? So I kind of had to solve that problem myself because I'm in the military.

Yeah. And so I'm just going to tell a quick story here. So last year, Emma Patti, who was a guest on episode 66 of this podcast, she and I went to Alabama for three days, really to try to figure out what part of Alabama we wanted to invest in. And we had narrowed it down to either Birmingham or Montgomery. And the only reason we were considering Montgomery, Rich, was because of you. It's because you and I have, we've known each other for several years. We've talked extensively about real estate. And it was hearing your story that made me think, yeah, I should go check out Montgomery. So Emma and I went and we went to check out Montgomery and Rich, I'd emailed you to say, hey, we're going there. And you wrote me back and you were like, cool, I just bought a house. I haven't seen it yet. Can you drive by the outside and let me know if it looks okay? No, that's true. I haven't been back once since 2014. That's just like the way things are. I mean, I kind of think that's just the future of real estate, at least for a lot of people, it is for me. There's Skype, there's videos, there's pictures, there's people that I trust

and gotten to know and trust and have a working relationship with. I don't really need to see these things with my own eyes. I just need to know that I'm making money each month and know that I have renters in there and know that problems are being handled. I have had to deal with challenges and I have had to have, you know, tough talks with real estate agent or tough talks with management company or get rid of contractors, but, you know, it's been working. Right. Wow. So I've seen more of your houses than you have, I guess. That's true. Yeah. Well, you'll be happy to know that, at least from the outside, they all look great. Great. Thank you. So real estate is the how. Right. But the underlying why is, I'm assuming, a commitment to financial independence.

Because you're, you know, you're balancing this not only with a full-time military career, but also, you know, you're making phone calls and sending emails from a drastically different time zone. Right. As just as you're doing this interview from an uncomfortably different time zone. Yeah. It's 6 a.m. where you are right now. So in order to to have the motivation to do that, you had to have a compelling why. Was it always financial independence? Or what was the thing that got you up at 5 a.m. or 6 a.m. to send emails before you went in for military duty.

I was just buying real estate and knowing that I needed to do something to, I think, maybe feel more secure. I always had this idea that what if I don't make it to a 20-year retirement in the military? Like, what if they kick me out before I get to 20 years, you know? The military does that sometimes where they'll kind of be like, wow, we've got too many officers, too many, you know, soldiers, let's get rid of some. And then they don't have to pay them these expensive retirements. And so you also have that kind of fear like, well, what if I don't get that 20-year retirement that everybody else gets, I better have something lined up to sort of help. And also, almost everybody, I mean, almost everybody, it's probably like 98% in the military

when they get that 20-year retirement, they go back to work. Like the following week in a similar job, sometimes the same job, instead of a uniform, you're wearing a suit. And you just go back to work and you just keep working because who retires at 42 or who retires at 38, you know, you keep working. You've got kids in school and you have cars and you have loans and you still want to take vacations and you still want to travel and you still want to do things. And most people aren't set up to retire at that point. I think I just had this idea early on. Like, I want to actually be able to retire at the 20 year point. I just had that idea in my head. I didn't really see anybody else doing it, but I had that idea.

And then about, it's probably been more than two years now, maybe about two and a half years ago, while Googling random stuff on the web, just kind of surfing around and reading about finance articles, I ran across Jim Collins' blog, the J.L. Collins' NH blog, you know, the author of The Simple Path to Wealth. And he talks about FU money, right? FU money and financial independence. as sort of a movement and like a not just his blog but like there's other people that are writing about this and there's a community and that there's there's like-minded people that are all doing this together and i was like whoa like what is all of this who are these people and then my

first thought was is are there other blogs like this other other people like this come to discover there's you know there's like mr money mustache and there's like you know there's facebook groups and choose FI. There's like this big community of people. I guess you could say they're like me, you know, they want to, they want to live frugally and save and invest and retire early and have the freedom to pursue the things that are important to them and they don't want to be married to a salary job for the rest of their life. And I think you also sort of understand from being in this world if you unnecessarily take out loans and unnecessarily oversteenely oversteen. spend and, you know, live in a big house that you don't need and buy fancy cars that you don't need

and expensive furniture that you don't need, you wouldn't necessarily add maybe decades of work onto your life unnecessarily. And I realized this by, I mean, I knew this kind of personally, but I'd never seen it written down in a blog, and I'd never seen a community of people like this before. And so that really shocked me. And then I ran across your blog, Paula, which has, kind of the same. From my perspective, you were like a real estate blog, but also a blog that talked about, you know, you can afford anything, but you can't afford everything. It's kind of the same concept of you've got to pick what's important to you. You can't spend on everything you want and still retire early. You can't live in a big mansion and drive a Ferrari and still retire in 10 years.

And so that really hit home with me. When I saw your blog, I was kind of like, oh, she's also blogging about what she's doing with real estate. And then actually, inspired me to start a blog about what I was doing with real estate. So I've done that as well. Let's dive deeper into the numbers, if you don't mind. Sure. Because I mean, I don't know how open you are. I don't want to push in terms of talking about numbers, but I know there are a lot of people who are listening, who are interested in trying to reverse engineer what you've done to figure out what that would look like for them. Okay. Again, quickly, just doing back of the envelope math here, You've got 20 properties. We'll assume that at the time of purchase, they were averaging maybe $40,000 per property. That would put us at $800,000 in terms of the amount of cash that you would need in order to own 20 properties free and clear.

Right. And what strikes me when I think about that number is that there are a lot of people who will save as they're pursuing financial independence over the years, they may. end up accumulating $800,000 in index funds. Right. But having 800,000 worth of free and clear high cap rate real estate is different than having 800,000 in index funds. Right. Yeah. Can you explain why? I mean, I know what I would say, but I want to hear the way that you would frame it. Yeah. I've heard a lot of people talk about this 4% rule. And this is kind of a, I want to say it's definitely a fire thing, you know, financial independence, retire early. It's a topic that has talked about a lot. And there's something called the Trinity study, which did this study that if you

had a nest egg of like a million dollars and it was in an index fund like the S&P 500, and it was just sitting there and you had it at retirement, if you were to withdraw 4% a year, that could conceivably last you the rest of your life. And then, And there's caveats with that, but it should last you the rest of your life with a very high likelihood. And then I think you even, I think, I think you've done a podcast maybe somewhat recently where you maybe went into detail on this, if I remember, right? I did. Yes, I interviewed Dr. Wade Fow, who was a professor of retirement income at the College of Financial Planning. Right. And so we had a lengthy discussion about the nuances of the 4% rule of film.

Okay. So I guess if I have 20 properties, I'm going to read. recage this for my simple mind. If I have 20 properties and then they're worth 50,000 each, would that be a million? Let's do that for my simple, very simple math in my head. Sure, 20 properties, 50,000 each. You've got $1 million worth of property. Yeah, okay. So that's maybe what I've put into them. And I think a good thing about that is I've bought them all at 20 to 30 percent discount. So they're probably worth more. You know, they're probably worth 1.3, 1.4 million. So we can we can sort of make that assumption. These properties, you've probably talked about this before, but I'll go over the 1% rule again, right? I don't want to buy a property unless it's going to pass the 1% rule.

And this is a problem that I would have had, had I known, this is a problem with the property that I bought in D.C. I bought a property for $280,000. And if it was going to pass the 1% rule, it would have rented for $2,800 a month. And then I would have known that it was going to make a decent return on investment. it did not rent for that much. So I'm just going to do a quick time out here for listeners who aren't familiar with the 1% rule of thumb. This is a rule of thumb that states that when you are analyzing rental properties, your first pass at whether or not a property merits further consideration is the question, does this property collect gross monthly rent of at least 1% of its purchase price? So in other words, for every $100,000 worth of house, does it rent for at least $1,000 per month?

Oh, thanks, Paula. Yeah, I kind of died into that too quick, so that will help people kind of know where I'm going. So $280,000 for the house in D.C., it's not passing the 1% rule unless it's renting for $2,800 a month. It didn't. It rented for $2,000 a month. So it really wasn't making that much money. I didn't know that rule at the time. I bought a house, lived in it, moved away, and then running it out.

A lot of people do that. That actually isn't a smart way to approach real estate and you end up not really making much money or losing money when you do that. So when I got to Montgomery, Alabama, what I realized was that the houses there were definitely passing the 1% rule. And in some cases, more like the 2% rule. So I'll give the second house I bought as an example because it was moving ready. I bought it for $45,000 and it was moving ready. Like I didn't even have to vacuum. But for ease sake, we'll say it was going to.

rent for $900 a month. Well, that means that it's not only passing the 1% rule, but you know, you could say that's about the 2% rule because if it rented for $450 a month, it would have been passing the 1% rule. So that just means that it's making, potentially it's going to make plenty of money and it would be a good house to buy. My point is the houses in Montgomery, Alabama were making good ROI. So going back to the 4% rule for index funds, if you have a million and you can withdraw, help me out, Paula, is it $40,000 a year that you can draw? So you could withdraw $40,000 a year and like live on that.

If that's enough money for you, I think a lot of people listening might kind of be like, I don't know, I don't know, $40,000 is enough for me. That's probably how I feel. $40,000 isn't quite enough for me to want to retire from the military and then just feel like I'm comfortable. With the real estate that I have, let's say that I have real estate in the amount of a million dollars, which is close to what I have, because of the, of the 1% rule or the fact that I'm doing better than the 1% rule, and I believe that a lot of people

could do just as good as I'm doing, just finding the right locations and learning how to do real estate correctly, because of what I'm doing in real estate, because I'm using cash flow instead of using the 4% rule of index funds, I would argue that I can live off what I would call the 8% rule, which is basically I'm making an 8% ROI at least. It's probably 10, but it's real estate varies a lot. There are good months and bad months. It's at least eight consistently over each year. So I'm going to get at least 80,000 a year from that million dollars. And can I retire on 80,000 a year? I certainly can. So I guess the point that I think you're bringing up earlier that I wanted to kind of share with everybody is, I can do a lot better than the 4% rule with index funds by using

cash flow from real estate twice as good as fact. I could either retire twice as early or I can make twice as much money. Take your pick. And just to walk through the math of this for anybody who's listening who's like, wait a minute, there are lots of numbers going on. I'm not quite sure. So I'm just going to walk through an example. And Rich, correct me if you think that I'm off the mark. But let's say you have $1 million worth of real estate free and clear, which is approximately what you have. At the 1% rule of thumb, your gross monthly rent from that would be $10,000 per month. But you're doing it. a little bit better than the 1% rule of thumb. Let's say you're doing, on an aggregate average

across all of your properties, let's say you're doing 1.5%. So what that means is that for a million dollars worth of equity, you are collecting $15,000 per month gross. And that's very close to the truth. Okay, cool. All right. So every month you are grossing about $15,000. Now let's just say, roughly speaking, that half of that is going to go to all of the operations. overhead, the property management, the maintenance, the repairs, et cetera, vacancies, all of that. And then the other half of that is yours to keep. If you keep about half of that, then that's seven or eight thousand dollars per month of free and clear net cash flow after expenses. And so when you look at that seven or eight thousand dollars per month, that's significantly

more about double what you would be getting if you were putting, if you had that same million dollars in index funds. That's exactly right. I mean, there's other things to look at too, and there are things that I don't want to depend on them and bank on them, but certain people, over certain periods of time, are also going to make a lot of money off of the appreciation on that real estate. You know, that real estate could go up in value, and that's kind of another bonus, too. It could go up a lot in value, and that can be very helpful as well. One thing that I've done in my properties that is different than what a lot of other people have done is I've paid them all off. That's not necessarily something you have to do. For me, it brings peace of mind.

You know, I can survive a large economic downturn, like another, if there was another huge housing bust, and there was a problem with vacancies or rents in my area, I'd be able to survive that. My houses are all paid off. I don't even have any loans to pay every month. I don't have mortgages to worry about. But for those people that have mortgages and have set it up to where they have enough cash flow, it can still work. It's just sort of what your risk tolerance is there. I've just gone to, maybe for real estate investors, I've gone to an extreme and paid off all of my properties. But I think having the goal of having them all paid off by the time you actually want to retire can be a pretty good strategy. At least that's my feeling on it.

So I agree with you. I tend to be of the school of thought that, number one, when you're analyzing a property, you should always analyze it from the point of view of a person. who owns it in cash, i.e. you should never use financing to justify a mediocre deal or, you know, depend on leverage to make a bad deal look good. But there are a lot of real estate investors who disagree with us. And Rich, I think part of the reason that you and I have connected so well is because we do occupy the same kind of rare school of thought when it comes to leverage in real estate investing. Another thing that's kind of tricky about this, I'm giving you guys this math about how it works with my 20 houses and Paula, you explained it extremely well.

And so it compares to the 4% rule, to maybe the 8% rule, kind of easy to see how in my case real estate is getting me to where I want to be much faster or at least with more money. I mean, you can do it with loans, but if you still have, if I have 20 houses and they all have 30-year loans on them. You know, if all my houses right now had loans on them, I wouldn't have the cash flow to do this. You know, there would be a lot less cash flow. I'd probably have to have 80 or 100 houses, you know, at this location to come up with

that cash flow. Or I'd have to have some of them paid off. You know, I'd have to scale a lot higher numbers-wise with mortgages to make it work, I guess, is my point. And that can be more complicated and that can also be more risky. But there's varying levels of risk, you know. maybe half your stuff's paid off or a third of it or you have a certain level of half of your portfolio paid off or make sure that you have enough equity in each property. There's a lot of different ways to look at it.

But my simple mind, I just like having them all paid off. We'll come back to this episode after this word from our sponsors. Do you run a business or have a side hustle in which you sell physical items that you have to ship to customers? If so, you probably know that getting your orders out there. door quickly can be tough. So check out shipstation.com. Here's how it works. Whether you're using Shopify or Squarespace or Etsy or over 75 other popular selling channels,

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You can check them on your phone. They've got a really simple and easy to use iOS mobile app. If you want a free unrestricted 30-day trial, head to FreshBooks.com slash Paula. Again, 30 days, free, unrestricted free trial by going to FreshBooks.com slash Paula. And when they ask, how did you hear about us? Mention Afford Anything. That's freshbooks.com slash Paula for a free 30-day trial. So, Rich, as I listen to your story about how you accumulated this impressive real estate portfolio,

there are three points within the narrative that strike me. Number one is during those 10 months that you lived in Montgomery, Alabama, when you bought six houses over the course of 10 months. And in order to do that, you needed about $240,000 in cash. So that's kind of like point one of the narrative where I still have some questions there about where that $240,000 came from. And we'll table that for a second because I also want to talk about the other two points. So then the second point in your narrative is going from House No. 6 through House No. 16. And as you explained, you did that by selling the property in Washington, D.C., which you owned free and clear.

That freed up about $400,000. And then you used that $400,000 to buy the next 10 houses. So that totally makes sense. I actually have no questions about that. And then the third point in the narrative is then going from house number 16 to house number 20. And that's where we get into the magic of compounding houses. Right. So I think point number two is taken care of, but let's talk more about point number one and point number three.

The beginning and the end, the how you got started and the magic of compounding houses that it created from there. Okay. Your first question is kind of like, how is it that I had enough money to buy those six houses in the first place? Yeah. How did you go from zero to six? Yeah. Or I guess technically one to six since you had that one in D.C. But in terms of your Alabama portfolio, how did you go from zero to six?

I think, and this is something that I kind of write a lot about on my blog. And some people may might find it boring and some will find it fascinating. But one of the things that we've always done is just find all these different ways to not spend money, right? And find all these different ways to put money in the bank. And whenever we put money in the bank, we always threw it in a like an SDP 500 index fund. It was just our way of investing money. And that's what we've been doing since like 1999. And once we paid off our primary residence, we pay that off.

2009, 2010. Once that was paid off, then we just started throwing money like into investment accounts to be used for investing in real estate later on. So extremely frugal living, you know, not taking fancy vacations, not buying cars, not buying expensive furniture, and just putting money away. Another thing we did that was kind of interesting, and this is just an example, when I lived in Monterey, California, the military gives. gives us a certain amount of money based on our zip code or the zip code of where your base is to live each month for rent. And they were going to give us $2,300 to live in Monterey. Well, you know, we ended up finding an apartment for $1,300. And that's where we lived for

three years. So do the math. We saved $1,000 a month for three years. And that's $36,000. That's just an example of kind of a way that we came up with a chunk of change. By the way, $36,000 was more than enough money for my first house. in Montgomery. My first house was $30,000. Another thing that we did on top of this frugal living and just putting money away was I had kind of a friend slash real estate agent slash business partner ended up becoming a business partner who lived near me in Washington, D.C., and he was kind of the person that was when I was looking for another investment property in D.C., he was my real estate agent. And what we ended up doing together when I was in Japan was we ended up flipping houses together.

He was the brains behind the deal. He knew how to flip houses. He knew everything about the construction and the remodeling. And he had all the contractors and all that. And he himself was a real estate agent. But he had so many deals going on with other people. All his money was tied up. So I was the financing behind the deal.

I was using traditional financing to buy houses in our neighborhood, the same neighborhood where our townhouse was. I was buying houses that were in real bad shape and were about to be foreclosed on. I would buy those houses before they went on the market because he knew everybody in the neighborhood. And then we would flip that house and sell them. And I was making money this way that I was just putting away towards buying real estate in the future. I did that about eight times over the course of two or three years. And even though I made good money doing that, it really, because I wasn't there and I wasn't able to watch him do it and participate in it, it started to make me nervous because we kept

doing bigger and bigger deals. And ultimately, I just kind of decided, like, I think that I'm the kind of person that enjoys what passive real estate is. And that's not passive real estate. You just have to keep buying and selling and buying and selling. And I was worried that I was going to lose money someday. So the combination of that, of frugal living, finding lots of ways to put money away, and the flipping houses is what got me that money.

So I guess what I'm hearing you say is that combination of frugal living and having a side hustle. Yep, side hustle, exactly. Your side hustle happened to be in the real estate business, but a side hustle is a side hustle. Anything that makes you money, makes you money. Exactly. Yep. And then I think you had, there was that third question, right, which was the, what did you call it again? The magic of compounding houses.

Yes, and I've never heard that term before. But I've certainly, I've definitely described it as the snowball effect when it comes to cash flow from houses. If you own six houses with mortgages, and I think some of your houses, Paula, make pretty good cash flow even with mortgages, that's not always the case. when you have mortgages, the cash flow isn't as high. When your mortgage is gone, things really change a lot and kind of that 50% rule again, right? But the money that comes in, you've got to pay your expenses and expenses are about 50% of rent, but everything else is all yours. And you get to keep that and it, you know, it's kind of like it all goes in your pocket. And it makes the math a lot simpler. but it also makes how fast money accumulates for you happen a lot faster.

And so kind of did the math. Like I had six houses paid off and then I moved away. And it was like, I'm doing all the math in my head. And I'm like, okay, it's going to be 18 months until the cash flow from these six houses will be enough to buy seventh house. I'm like, okay, you know. But I kicked in my own money as well. And so I was able to buy in a quicker amount of time than 18 months. but then once I had 10 houses, the cash flow buys a house quicker than 18 months.

It's more like, you know, 12 months. And this is off the top of my head, so I don't know if it's exactly right. But it gets faster. Now I have 20 houses. Once you have 20 houses paid off, the income from those 20 houses will buy a 21st house in five or six months. I mean, that's like really fast. Now I'm buying two houses, I'm buying two houses a year just from the cash flow from the

houses that already exist. And so that is the magic of compounding houses, right? Kind of like when you talk about the magic of compound interest in the same sense that that's a, you know, sort of you get this exponential growth at a certain point. I feel like I'm hitting that exponential growth right now where I can leave it alone and let it grow on its own and do very well. And I didn't get to talk about this. We didn't get into this yet. When I retire, I have, of course, this passive income. from real estate that I'm talking about. But I also have my traditional military retirement that I'm going to have as well. It'll be about after taxes if I pay taxes.

And not every state taxes a military retirement. Some taxes give a break on that. Most states do. And I think after tax, my military retirement will be about $3,400 a month. So I'll have that as well as my income from my rental properties. So if I live frugally or find some other side hustle, right, do something with my blog or find some other way to make money, I could just leave that real estate portfolio to keep growing like I described, which is what I hope I can do.

Right, right. And as it keeps growing, your houses can start buying their own houses. That's what they're doing, yeah. If you're netting $7,000 a month from your rental properties, that's $84,000 a year, That's enough for your portfolio of properties to buy between one to two houses per year, just purely off the cash flow that they're producing. Right. So it works out pretty well. My portfolio is buying its own properties, and as properties get added, the amount of time keeps shortening. It goes from every year and a half I get a house to every year I get a house, to every seven months I get a house, to every five months.

There's enough income to buy a house. And that just keeps shortening. I mean, conceivably, you know, at a certain amount in time in the future, conceivably there'd be enough income to buy a house every month, right? That's if I just, if I kept doing everything the same in this market. Maybe something would change in the future. Maybe I go to a different market. But that's if you just ran the numbers into the future. We'll come back to the show in just a second.

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Going back to the discussion about how you got the initial capital, the combination of frugality and a side hustle. Yeah. Between frugality plus the side hustle that you had, which of the two would you say was more important or were they equally important? Well, to me, clearly, the frugality was a lot more important. If people look at me today and they're like, wow, this guy has 20 houses and they're all

paid off. He's well off. He's doing awesome. He's rich. Like, that's not the point. The real estate isn't what got me to where I am. It was the frugality. It was the saving and investing.

and the lifestyle that, you know, some people would probably argue it was kind of a, I don't know if they'd say it was, it didn't seem boring to me. I lived very well during that time, but that's what got me here. As far as the side hustle goes, what I would say about that is it earned me a decent amount of income, but that income was, I don't want to say it was luck, but I mean, when you flip houses, things don't always necessarily go your way, you know. you can buy a house and fix it up and then try to sell it and then have the deal fall through because of financing and then the second buyer comes in and it falls through again and then you end up selling it and you break even or you lose money. So I mean, the being frugal and having money in the bank, like that's a sure thing.

But from my perspective, the flipping of houses, that's a way of making money, but it's not a sure thing. I like the security of a sure thing. It's interesting that you say that this was brought about by frugality first and foremost rather than real estate because what comes to mind is that what that means is that real estate is the result, not the cause. Yes. Yeah. I think that's an important distinction to make for me because a lot of people are coming to me for advice on how to invest in real estate. And when they come to me, it's usually like, I want to do what you're doing. So help me.

But like, here's my situation. I've got like a sports car and I've already got a house that's losing a lot of money and I'm in a lot of debt. But I'm hoping I can buy more houses and get myself out of debt, right? But the problem is there are a lot of other, you could say, websites and books and even if you just kind of Google real estate and, you know, how to make money, there are a lot of people who would say, well, you can. You can sort of pull yourself out of debt.

debt and fix your financial life through aggressive real estate investing, you know, like borrowing money you don't have and using other people's money and controlling a lot of real estate and leveraging appreciation. And that's not what I'm preaching. I don't think that's a sure thing. I think that's that works for some people. And in the cases that it works really well, I would argue that there's a lot of luck involved and timing involved.

And I think that the people that it works for might not necessarily. realize that. And that's kind of dangerous. And I feel like that my approach to real estate has been methodical and conservative. I mean, it's been hard work and I've been smart about it and and sort of like, you know, I've tried different things and figured things out until I found something that worked for me. But I didn't take big risks with my money or with my grandmother's money, you know, or with friends money or with a, uh, or borrowing money that I didn't have. I earned the money first. I put myself in a safe financial position first, and then I went into real estate, which is, I think, a lot different

than it's preached to many other people. Yeah, and I think that's a very good point. And that's why I don't get along with most people who talk about real estate, because I visited those websites and I've listened to those podcasts, and they're a huge turnoff. Right, and we've been on some of those podcasts, too. And we've both been criticized for being too conservative, but I, you know, you and I share the same philosophy. We do. Yeah. So I think we could talk about this too, because it's an obvious thing that I think listeners might be thinking about. I mean, I have equity, right, in my homes. The equity in my homes is by virtue of the fact that they're all paid off. Right. You have 100% equity. Exactly. Some people will have equity in their homes because maybe they live in Seattle and maybe they bought at the right time, like, you know, four years of.

ago. And it's like, oh my gosh, you know, now I have $500,000 equity in my, in my house in Seattle, and everybody's telling me that I could, you know, take out a he lock or that I could find some way of borrowing this equity and go out and buy more houses. Like, should I do that? Well, people are telling me that, too. They're like, rich, you're crazy. You're sitting on all this money that's sitting in your real estate and it's not doing anything for you. It's not making any money for you. You could be making so much more money and you're crazy to not be taking advantage of that, you could grow this 20 houses into 100 houses, right? Especially with the background that you have in real estate, so do it. While the idea is tempting of becoming a real estate guru and all that, it's not who I am.

I don't like the idea of using debt for that reason. And also, I've seen other people get in trouble with debt. And I've seen, you know, for every one or two successful people, there are a lot more people that have gotten themselves in trouble. And you don't get to hear about those people on the podcasts. And you don't get to read about them. They don't have a voice, you know. So, and I don't want to be one of those people. You know, I want to be safe with my money. I want to be smart about it. I want to retire early and retire comfortably. I don't necessarily have to be a multimillionaire. Absolutely. How did your philosophy form? Was it through trial and error? Or did it just make intuitive common sense? It's strange how it formed because, well, I mean, I think in the case of paying off my mortgage,

this is kind of funny, but, you know, my wife's, she's Asian, she's from Taiwan, she's Chinese, she's the one who was kind of like, let's pay this mortgage off quickly. And I kind of dismissed that. I'm like, well, she doesn't know what she's talking about, you know. I'm like, that's a crazy idea. of course we're better off having the small payment every month and using the extra money we have to invest elsewhere. And then, like, I was reading Dave Ramsey's book, Total Money Makeover. And I saw that in that book, they have all the steps about, like, getting rid of your debt, which I had already done all of those things. I'm like, this is a great book. I'm already on step eight. This is great. But I've already done all these steps. So, you know, so no big deal, but I'm doing great.

But then it said, like, pay off your mortgage. And that floored me. Like, what? Like, he's saying pay off your mortgage? And then when I read further, I'm like, oh, but this makes sense. And he talked about how he had been a sort of guru in real estate who had leveraged to the hill and gotten big and made millions. And then like a crash happened and he lost it all and went bankrupt. And he's kind of like, I don't ever want to do that again.

And I don't want it to happen to anybody else. And so he, you know, he's for paying off mortgages. And I bought into that. And so I went to my wife and I'm like, I had this great. idea. We should pay off our mortgage. And she's kind of like, yeah, that's what I told you before. So we aggressively paid it off. The thing with the houses in Montgomery, though, is that I don't know that I would have been against getting loans for them, but because I had the money saved up, because I've been living frugally and I had the cash, the first house was 30,000. I mean, it's kind of cost prohibitive to get a loan for

30,000. I think I even looked into getting a loan for 30,000. And a lot of banks were kind of like, we don't make loans that small. I was just kind of like, what's just easier to pay cash? And it's just faster, too. And then another thing I realized, too, and I end up talking about this a lot when people ask me for sort of strategies on buying real estate. There's a lot of strategy when it comes to buying a house is cheaper with paying cash. You beat out people who are trying to use mortgages. If there are multiple bids on a house and you bring the cash offer, you get the house cheaper than the person who's willing to pay more, but they want like a month or a month and a half to come up with their loan and to wait for their other house to sell and to wait for like five things to line up perfectly. The sellers like cash buyers, especially when they've already been screwed over in the past by waiting for a loan to come through that fell through and then they had to put it on the market again and it's not a fresh, it's not fresh on the market anymore. and there's less people interested.

And then I come along with my cash and roll in. So I just kind of found that, man, cash is just working better. And I have the cash, so I'll just keep doing this. And then, I don't know, I just kind of realized as people were pushing me to, well, you should try something in another market. You should try multifamily. You should get a he lock on what you already have and grow in other markets. And I was kind of like, that doesn't feel right to me.

I don't like this. I love that my properties are paid off. I love the peace of mind that it brings. I love not having a mortgage to worry about, especially because I'm coming up on the 20-year point in my career where I can retire, and I won't be getting my income anymore. Just knowing that everything's paid off and that I don't owe any bank anything is amazing peace of mind. And a lot of people will argue that, you know, you'll grow your wealth faster by using leverage

to buy houses. Even if that were to be true, like I don't care. care. I love the peace of mind of having property paid off and the certainty that it's paid off, but this is the income that I'm getting every month now. And it can't be put at risk by external pressures in the market or the bottom falling out of real estate again or the employment market in my city, you know, being affected by a base closing or an industry closing or like lots of different things. I'm a lot less at risk because my houses are paid off. And I love that. So that's kind of where my philosophy came from, I guess. It's just a love for that

security and that peace of mind and not loving this idea of taking these risks and having this need to get rich quick, which I don't have that need. Final question. For the people who are listening who are thinking, wow, I want to do what you're doing. I live in a place where, you know, I can't buy property. where I live, but I want to buy out-of-state properties or even out-of-country properties. And I want to accumulate a big portfolio of them. What advice would you give to those people, the people who are listening, who have that thought? I think the first thing I like to say to people is, like, where are you sitting right now financially? You know, set yourself up to invest in real

estate from a position of strength. And a lot of people don't like to hear that. So, like, I'll say that, like, well, forget this. I'll go talk to somebody else. I want someone that's going to tell me that I can invest in real estate right now. But if you're in a lot of debt and you kind of have like some other financial problems, I feel like you should like figure those things out first. You know, I feel like it's not that I'm like a huge Dave Ramsey fan. There's actually a lot of things about him that I think are a little strange. But I love his total money makeover as sort of an idea of how to approach getting out of debt. You've got to get yourself out of debt. You've got to like pay off your student loans. And if you're in a bad real estate investment already, I kind of feel like you need

to figure out how you're going to get out of that. Maybe you should sell this property or get out of it. So think about that first. Maybe you shouldn't invest in real estate this year. Maybe you should have a plan to start investing in real estate in three or four or five years. And you need to make your plan for setting yourself up financially to be ready to invest in real estate. And then, of course, investing in another market, of course, if you live in San Francisco or you live in Los Angeles or Honolulu, it is very hard to invest in your own market. You can invest in another market. In my case, I lived in Montgomery, Alabama for 10 months, and I got a chance to look around and I got a chance to make connections. It's not mandatory that you do that. I think in my case, I'm going to feel more comfortable if I spend at least a few weeks on the ground. Meet property managers, meet real estate agents, drive some neighborhoods, and kind of understand the area a little bit. But after that, the trick is you need to find a really good real estate agent that understands investing, that understands what real estate investors need.

And that is an agent who doesn't mind making lots and lots of offers on behalf of a real estate investor. And lots of real estate agents aren't willing to do that. You've got to find a real estate agent that is willing to do that for you. And you've got to find a management company that is willing to work with investors and is already doing so. And this is, again, it's something that I talk about on my website, but you want to go to a property management company and then ask them, are you working with other investors? Can I talk to these other investors that you're working with as a reference? and then talk to those other investors and use that as a way to find out like, well, this property management company be able to work with me out of state and make this work

and do they understand the market and are they doing well for these other investors as well? In my case, I set it up so that my property management company is able to supervise, like when I buy a house from afar, like from Korea or Germany, when I buy a new property, they go out and make sure that this property would make a good rental before I buy it. They make sure it's in a good neighborhood. They make sure they like the floor plan. This is the property managing company. They make sure they like the floor plan and they make sure it's in a good neighborhood.

And they sort of blessed that before I buy it. But another thing that they do is they will supervise the make ready. And in some cases, that might mean a lot of work. Like remodeling the kitchen, remodeling the bathroom. I've set up a system with them where they charge me a 10% fee on top of whatever work is done by the contractor, and they supervise all of that. That's golden for me. That's the trickiest thing about investing from afar, is how do you work with contractors and get houses ready when you live in a different country or state?

Well, I've worked that out with my property management company, and I would suggest that potentially your listeners could think about working something like that out with a real estate. agent or a property management company, some type of a similar arrangement to what I've done because it's worked well for me. Well, thank you so much, Rich. Where can people find you if they'd like to know more about you? I have a website. It's called rich onmoney.com, R-I-C-H-O-N money, rich on money.com. And just so I come there, there's a tab on my homepage that says real estate and then I

have a complete guide to real estate investing. I recommend that people that are interested in understanding a lot more about my approach to real estate. Just like read that. It's a very kind of like a long document, like a, maybe almost like a short book that links to a lot of other things on my blog. But I recommend to go there if you want to get to know me. And we will link to that in the show notes as well. So thank you, Rich. Well, thank you. Rich, thank you so much for coming on today's show. What are some of the key takeaways that we got from this conversation? Well, here are four. Number one, be careful who your teachers are. Rich and I connect as real estate investors because we share a very

similar philosophy. Both of us believe in investing in rental properties for the sake of of cash flow and cap rate. And we specifically do not believe in investing in rental properties for the sake of market-based appreciation. And we also do not believe in using the cash-on-cash return formula when we're evaluating deals. We don't believe in using leverage to make a mediocre deal look good. That's a very specific type of investment philosophy that makes us unusual in the world of rental property investors. It's, as he and I were discussing during this interview, it's the reason that we don't connect with a lot of other people in the real estate space.

Frankly, that at least is in part the reason that I've spent so much time emphasizing that this is not a real estate podcast. This is why I intro these episodes by saying, hey, you know what? Today's episode is about real estate, but most of our episodes aren't, because I'm really trying to differentiate myself from the rest of the real estate investing community because frankly, I just don't get along with most of those people. I mean, I'm sure they're perfectly nice people, but we just don't share the same fundamental

worldview. The majority of people in the real estate guru seminar space, which gives me like the bleh as soon as I think about it, the majority of people in that space are just, they're obsessed with leverage and obsessed with market-based appreciation. And it just, I, duh, I just, I just, don't want to be associated with that crowd. And I'm not Dave Ramsey about it. I think that some leverage is okay. I've got leverage, but I do think that a lot of teachers in the real estate space overemphasize it.

They give it too much credence. And many of them rely on it in order to make a deal make sense. Many of them will say, yeah, if you bought this thing in cash, it wouldn't really be that great. But if you leverage into it, then you're only putting a little bit of your own cash in the deal, and therefore the returns are better. And I just don't jive with that way of thinking. And so all of that is to say, for lesson number one, be careful who your teachers are.

You cannot or should not, I hate the word should, but I'm going to use it here. You should not just blindly say, this person knows about investing, I'm going to follow what they teach. Because if you do so, they may lead you down a very dark path. And this does not just apply to real estate investing. This applies to all types of investing. I mean, in the investing world, there are people who are really into index funds, people who are into options and futures, people who are into day trading, people who are into Bitcoin, people who are into penny stocks?

So who are you going to learn from? Who are you going to follow? That's up to you. And it's a choice that you should take very seriously. Two years ago, when I announced that I was going to put out a rental property investment course. I got an email from a guy who said, you know what, I would love to take your course, but how can I convince my girlfriend that we should take yours rather than just find a cheaper one on Udeme and take that one instead? And really, this is my answer to it. Like, what strategy,

what philosophy, what approach does that other teacher have? You know the one that I have. Which one do you want to follow? Choose that you don't have to take my course, but choose the course that you take on the basis of that, on the basis of the philosophy that you want to emulate, rather than the sticker price of the course, because a cheap course can end up being very expensive if it guides you down a different philosophy and down a different road. So that's core takeaway number one. Be careful who your teachers are. Core takeaway number two, if your goal is to achieve financial independence, rental properties can be more effective than index funds with regard to, specifically with regard to that goal.

I'm going to get at least $80,000 a year from that million dollars. And can I retire on $80,000 a year? I certainly can. So I guess the point that I think you're bringing up earlier that I wanted to kind of share with everybody is, I can do a lot better than the 4% rule with index funds by using cash flow from real estate twice as good as fact. I could either retire twice as early or I can make twice as much money. Take your pick. Now, don't get me wrong. I love index funds. And so does Rich, you heard him say during the interview that he put most of his savings into S&P 500 funds.

But that being said, if you are designing an early retirement based on the 4% withdrawal rate, you will have to save more money than you would if you were designing an early retirement based on the cash flow that you can receive from rental properties. And the reason for that is because the total returns on the two assets may be the same or similar, but rental properties bias those returns in the form of an income stream, which is analogous to a dividend. And index funds bias those returns in the form of capital appreciation. So the total returns may be quite similar, but the way in which, those returns are expressed is different, and that matters in the context of your goals.

If your goal is just to build wealth, then pick your poison. But if your goal specifically is financial independence or early retirement, then biasing your returns in a cash flow-centered or dividend-centered or income-stream-centered way makes a lot of sense within that context. So that is core takeaway number two. Rental properties are particularly well-suited for the goal of financial independence early retirement. Core takeaway number three is about the magic of compounding houses. The income from those 20 houses will buy a 21st house in five or six months. I mean, that's like really fast. Now I'm buying two houses, I'm buying two houses a year

just from the cash flow from the houses that already exist. And so that is the magic of compounding houses, right? This is the concept of the flywheel spinning faster and faster. The more you invest, the more your investments grow, and that growth itself begins to grow. This is the concept of momentum. And so if you are a beginner, what I urge you is to not be frustrated or impatient with what seems like very slow progress. Because when you are standing at the beginning of an exponential curve, and you can see this visually when you look at what an exponential curve looks like, the beginning of it looks flat. And this concept doesn't just apply to investments. It applies to anything that has exponential

growth. If you think about the rate of technological advancement in our society, we've seen greater advancements in the past hundred years than we've seen in the previous millennia before that. And we've seen greater advancements in the last 20 years than we saw in the 40 years prior to that. The lesson here is that growth, accelerates. It does so in technological advancements. It does so in a colony of rabbits. And it does so in the

compounding gains that your investments make. And that's true, both in the traditional stock market as well as in rental properties. Eventually, your flywheel is spinning fast enough that your houses start buying houses. And that is the magic of compounding houses. Your investments

are self-propagating. And when that happens, you've really won the game. Finally, core takeaway number four is that, and this is probably the obvious thread that ran through the entire interview, you do not need to live in the same city as your rentals. You can invest in another market. In my case, I lived in Montgomery, Alabama for 10 months, and I got a chance to look around, and I got a chance to make connections. It's not mandatory that you do that. I think in my case, I'm going to feel more comfortable if I spend at least a few weeks on the ground.

and meet property managers, meet real estate agents, drive some neighborhoods, and kind of understand the area a little bit. But after that, build a solid team, build great systems, and run a business. What's great about rental property investing is that it is a hybrid between an investment and a business. When you're buying a share of Coca-Cola stock, you have no control over what the Coca-Cola company is doing. but when you buy a rental property, you have direct control over the people who work for that business. You have direct control over who your real estate agent is, who your property manager is, who your contractors are, the level of repairs and maintenance that you give to a property, the level of preventative maintenance that you do on properties, the criteria that you set

for the tenants that you choose, all of those are under your direct control. And that's one of the things that's nice about rental properties is that you, in a very real way influenced the way that this business is run. And yet, it's also a passive investment. You don't need to live in the same city or the same state or, as rich has proven, even in the same country as your investments. As long as you have a good team in place, the rest works itself out. And if you think about this, in the context of any other business, we all know that this is true. In the context of any other business, you can be the owner of a company or a majority stakeholder in a company without necessarily needing to live in the same space where that company is

headquartered. This is true for rental businesses as well. Now, there's one other thing that Rich said that's kind of part of this point. He mentioned that if he had not lived for 10 months in Montgomery, Alabama, then what he would have done was gone there for a couple of weeks. That's very similar to what Emma and I did. We went to Alabama for three days, and the goal of that trip was not to buy any houses, the goal of that trip was purely to answer two questions. Number one, do we want to invest in Alabama? And number two, if so, do we want to invest in either Birmingham or Montgomery? And honestly, if I could turn back time and do it again, I would have considered three cities. I would have considered Huntsville as well. But point being, Emma and I, Emma lives in Portland,

I live in Las Vegas. We both flew to Alabama for a couple of days, checked it out, and we were able to answer those two questions. And in that time, we were also able to find a real estate agent that we liked working with. Now, both of us at this moment are tending to a few other priorities before we go ahead and buy our Alabama properties. For example, I'm giving a main stage talk at the World Domination Summit coming up soon, so that's stressing me out. I've got to focus on that.

I've got to get this course launched because it's been under construction for two years now. The only reason that we haven't bought anything yet is because we're balancing priorities. You can do anything but not everything. But both of us, Emma and I still talk about it fairly frequently. And both of us are kind of looking ahead in our calendars to when we want to go back to Birmingham and pick up a couple rental properties there. So I suppose if there's a takeaway from that, it's if you're employed full time, be willing to spend your vacation days or your weekends or your three-day or four-day weekends, taking trips to places that other people might find boring. No offense to Birmingham, but it's not like the number one vacation destination that you might think. of. But if you've got a three-day weekend, if you've got a Memorial Day or a Labor Day in front of you,

are you going to spend that time on the lakefront or are you going to spend that time flying to a city where you might be interested in buying your first rental property? That decision right there is what delineates people who are serious about this from people who aren't. So those are four takeaways that I got from this conversation. I would love to know what you thought. Head on over to Instagram. You can follow me at Paula. P-A-P-A-P-A-N-T. And leave me a note about what you thought of this interview. If you enjoyed today's episode, please do three things. Number one, most importantly, tell a friend. Number two, subscribe to this show in your favorite podcast player. So whatever

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So make sure you subscribe so that you don't miss that episode. Thank you so much for tuning in. My name is Paula Pant. I'll catch you next week.