BiggerPockets Money Podcast - 179: “The Guy Who Did Everything Wrong But Still Figured it Out” with David Pere

Episode Date: March 15, 2021

Being in the military opens you up to an array of benefits for a financially abundant life. You have access to VA loans, a tax-free housing allowance, and a pension (if you stick around long enough). That’s why it’s of the utmost importance to start saving and investing while you’re young and in the military. But, that wasn’t exactly what David Pere (From Military to Millionaire) did when he was first enlisted.  David grew up with frugal parents, who never splurged on much. So when he joined the Marine Corps in 2008, he was ready to catch up on the spending he never was able to do. As he describes it, he spent his first salary on “a truck, tattoos, and drinking”. Not the best way to set yourself up for financial freedom! It wasn’t until a few years later when a friend gave him a copy of Rich Dad Poor Dad that David discovered he could be doing A LOT more with his money.  He bought a duplex with an FHA loan for $81,000 and house hacked it so his tenants were paying a majority of the mortgage. When he was shipped off for duty, he ended up leasing out the other side of the duplex and cash flowing an extra $300 per month. He then went on to buy a 10-unit with just 5% down and also got in on a small syndication in South Carolina.  Everything was looking good, until David decided to partner up on a 40 unit, mixed-use building with a sizable amount of leverage. Some things happened and the deal turned sour, now David is in a legal battle to get his money out of the deal. Even with this massive deal not going through, David pushes the importance of scaling, but not too fast. Scaling to an amount where you aren’t overleveraged but at the same time pushing yourself to accomplish more is the sweet spot! In This Episode We Cover The financial benefits that service members have  Why you should max out your non-taxable retirement accounts whenever possible Using FHA loans to buy multifamily properties with very little down payment  The “mentality shift” that comes with buying a large property How to evaluate whether or not a deal is worth the effort  Choosing cash flow over unit numbers to hit financial independence  And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding BiggerPockets Money Podcast 156 with Rich Carey FinCon Check the full show notes here: https://www.biggerpockets.com/moneyshow179 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, show number 179, where we interview David Perrae, an active duty Marine, and hear how he's using real estate to build his version of Semper Fi. But I'm buying properties with much less leverage, much more straight out of my checking account, much more conservatively, because I know that I got my ego involved in that. And that wasn't the safe way to invest in real estate. That was the cool, flashy look at me way to invest in real estate maybe. But I would much rather play the base hit game and just kind of roll into the stuff that I know I can, I know my ARV on. I know what the rent is. I know exactly what's going to happen with it. And it's, I would much rather play the base hit game and just kind of roll into the stuff that I know I can, I know my ARV on. I know what's going to happen with it. And it. And it's, It's consistent. Hello, hello, hello. My name is Mindy Jensen. And with me as always is my non-mustash sporting co-host, Scott Trench. Let's hear very quickly from David about his mustache. Why do you have a mustache?

Because I'm bringing sexy bad. Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. That's right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or learn from giant real estate investing mistakes, will help you reach your financial goals and get money out of the way so that you can launch yourself towards those dreams. So excited to have David Perrae on the show today. He is a friend of both of ours and also has a really great money story. He started out doing everything wrong. And now he is doing everything right. And I love the mistakes because you learn so much from somebody else's mistakes. Or you should. I hope that's why you're listening to the show. So you can hear other people's mistakes and learn from them. So they can go to the school of Hard Knocks and you don't have to. Yep. I think David's got a

great money story, very relatable. Does not have any like, he's an enlisted Marine. So he did not have a tremendous amount of income or substantial assets before beginning his journey and just hustled, built a strong financial foundation, began buying real estate. A piece at a time, maybe a couple pieces that were too big for his position at certain times in that journey, but has learned a tremendous amount. I think everybody's going to get a lot of value from hearing his story today. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch.

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and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. David Perrae, welcome to the Bigger Pockets Money podcast. I'm so excited to talk to you today. Thanks for having me on the show, Mindy. Scott, always a pleasure.

Yeah, good to have you. Wait, wait, it's always a pleasure for Scott and you're just thinking me for being on the show? That was like a comma, Scott, comma, like always a pleasure for both of you. Oh, okay, okay. Probably a bad use of commas. I'm a big fan of the comma. Anyway, David Perrae is a career Marine Corps officer, and he first learned about the term fire from our very own Scott Trench and Brandon Turner, some schmuck who hosts another one of our

podcast for Bigger Pockets. And he learned about it in the most five way possible on a hike in Hawaii. Why were you in Hawaii, David? I was stationed out there. Okay, okay. I was there for business. Yeah, oh yeah, business. Let's do some air quotes around that business.

Although as CEO, I guess it's really convenient to go out to, oh, I've got to talk to Brandon. Better hop on a plane instead of just hopping on Zoom. Anyway, David Perret, where does your journey with money begin? All right. First off, for those listening, I have to correct you. I am enlisted. I am not fancy.

And I actually say that with a badge of honor. because I think that actually makes for anyone listening to this who's military, that actually makes this way more powerful because I'm just an enlisted schmuck. So I show that it's for everyone. Thank you for correcting me. Please jump in and correct me.

I really want to try learning all of this military stuff, but I'm just wrong all the time. So sorry about that. Are you an enlisted officer or just an... Just an enlisted Marine. He's an enlisted Marine. Okay, now tell us your money story. Are you on board with us using

the term semperify to describe your journey as... Oh, you just... Yeah, absolutely. That's an accurate statement. And that's not disrespectful to the phrase semperfy. No, no, it's... It means always faithful, so... Oh, always faithful to your money story. Okay, tell us your money story already, David. Oh, my money story starts off in all the same places that most service members do.

Terrible, right? I joined the Marine Corps in 2008. I had super frugal parents. who did all the right things. They even did envelope budgeting. They taught me all the things you're supposed to do, bought the off-brand stuff to save money. And then I joined the Marine Corps. It was my first real salary. I went to Japan and I was like,

oh my God, I've got money. And I blew it on everything. I mean, I went to a, even went on a deployment, tax exempt pay. I came home with like $17,000 and I bought a truck, a rifle, some tattoos,

a bunch of alcohol, and probably took some people out on dates and have nothing to show for any of it. So I did all the, terrible things, you know, by the time I was, it would have been 2013, 2014, when, I mean, I probably had a negative net worth. And somebody handed me the book Rich Dad Poor Dead, because they were trying to get me into Amway, right, and to help me sell stuff on the side. And I remember telling the guy, like, no joke, I was just like, I don't read. Like, eh.

You know, like, I'm a Marine. We don't read books, which is not entirely true. But, and he pulled a CD, like, out of his pocket and was like, well, I've got a CD. and I know you drive a lot on recruiting duty, so plug this in and listen to it. And I listened to it originally with the intent of like, well, he called my bluff. Fine, I'll listen to this stupid book. And then within three months, I had bought a duplex and things just started rolling. Like, I listened to that book. I like, oh, wow, this is cool.

I downloaded the audible, listen to a couple other purple library books. And then I was Googling every time I didn't understand something. I just go to Google. And then I stumbled upon bigger pockets and then the book on rental property. investing in the book on No and Low Money Down. And then right in the same time frame, someone got really drunk and parked on top of my Harley. And so they totaled my Harley, but they didn't want to, he owned a car dealership. So he didn't want it on his insurance.

So he just paid me cash. And then I took it to the dealership and they paid me for it. And so I basically got the original price I'd put into this bike. At the same time, I'm looking for a duplex. And I used an FHA loan, bought a duplex, lived in one half, rented the other half. and then things are just kind of scaled from there. So at this point, you're sitting there and you're just becoming aware of wealth-building concepts in general, and it's 2013 or 2014.

You have basically no wealth. Are you in debt at all at that point? Yeah, so I guess by the time I read this book, it was actually probably October of 2015, I had a little bit of debt. I mean, maybe a few thousand in credit card debt and an auto loan. But I probably didn't have a thousand dollars in a checking account. So I only had, you know, I probably only had like a negative like three or four thousand, $5,000 net worth.

So it wasn't like terrible, but it was definitely nothing to show for it at all. But you were contributing to your TSP, right? A little bit. I had done like the minimum like eight to 10 percent. But what I had done and this is the, there's a, there's different funds, right? When I first joined, money went into the G fund, which is government-backed securities, which put this in perspective. I've been putting 8 to 10% of my TSP because someone told me to, but between 2008 and 2015,

I left it in a fund that essentially earned two, maybe three percent interest. It's never lost money, but it earned like 2% interest. While the rest of the stock market was earning 20, 30% returns coming out of the 2008 recession, and I just ate it. So I could have way more money in there if I just known where to put it or put more money in. So it wasn't until 2015 that I really cranked up and started putting 20, 30. Last year, I hit 60% at one point into my, into my thrift savings plan. Nice. Okay. So this was not a meaningful part of your position at the time when this all got started, right? No, I probably had five grand in TSP. Maybe. I don't know. How much cash did you have at the time as well? If I hadn't totaled or had my Harley totaled,

basically none. I was pretty much living paycheck to paycheck. How does a Harley jumpstart one's cash position? I don't really, I don't have a perspective on this. Is a motorcycle worth eight grand? Is it worth 15, 20, 25? I have no, no, no, not that that much. I probably got probably like 8,500 out of totaling it. It wasn't a super expensive Harley and it was a few years old. So I probably got about 8,500. But I was living in Missouri, which is super affordable. And then I was able to use the FHA loan. So I got into this house for like four grand. I think it was like $3,800. So you're stationed in Missouri and you buy a duplex. And can you walk us through kind of how the housing allowance and all that kind of stuff works for those who are not familiar with military

benefits just so we can get a total picture of your position at this starting point in 2015? Yeah. I think in Springfield, my housing allowance was like $850 a month. And the housing allowance is tax exempt. So it's, you know, you don't pay any taxes on it. So it actually counts as a little bit more as far as debt to income goes towards your lender. I think it's like 1.25 times, whatever your housing allowance costs when you go to buy. But at the time, I was living in an apartment. And there's like $5.50 a month for a two-bed, one-bath apartment. And my lease was coming up on being due. So I was able to get into this place. I bought the duplex for $81,000. My mortgage was $6.15. And there was a tenant in one side for $4.75. Market rent was like $5.50.

So I was like, okay, well, this could work. Like, if nothing else, I'm going to be paying, you know, $100, whatever that math is, $140 a month out of pocket for the mortgage as opposed to the $5.50 I was paying on rent. And I probably should have used the VA loan on that. But nobody knows anything about the VA loan. And my lender actually told me not to because he told me, quote, unquote, you can only use it once, which is wrong. There's so much confusion around the VA loan. I hope that somebody someday will sit down with a really great lender and talk all about the VA loan. And if they have already, it would be awesome to link to that in the show notes because the VA loan is only applicable to who?

Service members, veterans, some federal employees, but generally just service members and veterans. Okay. So that's not necessarily all of our audience, but I think it's really important to note that you can use it more than once. You can use it a lot more than once. You can use it as many times as you want, right? There's some stipulations there because you have to renew the eligibility. And after two or three times, it gets kind of convoluted. But the first time you can use it, there's no limit on it anymore.

So you can go and buy, there's a guy. I don't want to knock on wood right now. There's a guy under contract on a triplex for $1.6 million in the Bay Area right now that we're helping. And he's going to basically move into this thing, zero down. And he's high income earner out of the military, veteran. in the medical field. So he's got a good debt to income, but he's going to pay his zero down, get like two and a quarter, two and a half percent interest on this thing, and his tenants are essentially going to pay the mortgage and then he's going to be on the hook for like maintenance

and repairs. I will say that I have very little experience with the VA loan. However, when you have a lender who really knows what they're doing with the VA loan, that is, you don't have to know anything about it. Your VA lender will do everything for you, which was really helpful. That's how I got. I had a client, Sean, hi, Sean. He listens to the show. I had a client, Sean, who was going to use his VA loan. I reached out to David. I'm like, hey, do you have a good VA lender? He's like, I do. And he was awesome. He walked me through the whole process. I don't have a huge military presence in my city. So there's not a lot of opportunity to use the VA loan. But yeah, that VA lender is enormously helpful. So we have this duplex now. we're paying $600 in the mortgage, we're getting $400 some on in rent. I have an $850 housing

allowance. So I'm cash flowing or cash flowing tremendously in this current circumstance. Although you're on enlisted pay, and that's that's going to, you know, that has income limitations in terms of how much you're able to bring in. What happens next in your story from there? So right after I closed, I got married right around that time frame. And then about six months later, I was done with recruiting, and I got orders to Oahu. And so it was actually kind of funny because the FHA, you're supposed to live in the house for a year, but I was maybe there seven months before I got the orders and I was gone, right? And I guess that's the stipulation, right?

You buy a house and then it's like, oh, shoot, I'm leaving for the Marine Corps. Sorry. And so I rented out the other side. And at that point, I was cash flow. And I think I've pretty much consistently been right around 300 cash flow every month on that thing since I've owned it. So almost 100% cash on cash every year? I want to point out that you used FHA loan.

You moved before you had your one year of occupancy, which is a requirement of the FHA loan. But you moved for the military, which is an exemption. You moved more than 100 miles away, which is an exemption. And you purchased it with the intent to live there for the year. The military just told you, ha, ha, ha, we're going to change your plans. So that comes up a lot on the Bigger Pockets forums and in the Facebook groups in general, just, hey, I want to buy a house. Do I really need to live there?

If you do not live there for a year, unless you have these reasons, it is considered mortgage fraud. It is a felony punishable by up to five years in prison. So go in knowing that you could be a felon. It's not worth it to me. But you're not a felon. I know. I was the best looking felon out there. Okay, back to your story. Yeah, so cash flowed consistently. to Oahu and we tried to buy a house there. At the time, the VA loan still had a limit. So I was only going to be able to borrow $725,000, which didn't really get you into a house on my side of the island in Kailua. So we made several different offers knowing that if you go over that cap, you have to pay 25% of the difference. And so I made several offers and I had saved enough money in that time

house hacking and through some other stuff. I finally started saving my paycheck. So I was able to go, I would have been able to go over maybe 50,000 over and pay 25% of that, not anything huge. But Kailu is just so crazy, I got outbid on everything. There was the other side of the island I might have been able to work on, but my wife was pregnant and was like, you're not commuting 45 minutes to work. So I was like, okay, fine. So I didn't buy on Oahu. We lived in base housing.

And when you live in base housing, you basically hand them all of your housing allowance. And that's that. So really the only way we were able to save up a lot of money in Hawaii was because my wife was working. and we basically just saved her paycheck. And then I just kind of started buying more properties. About a year after I got there, I bought a 10 unit. I was marketing for duplexes.

Where did you buy the 10 unit? Yeah, so I started buying in, I stayed in Missouri for the most part. I had a property manager. I had an agent. And while the market is not necessarily anything glamorous, it's consistent. It's not a super appreciation play. It's just a simple cash flow market. And it's affordable.

So I got this 10 unit for $212,000. And I paid 5% down with 10% seller financing and 80% bank financing. So I paid 109 on this 10 unit. And it cash flows, you know, about 18 months later, I actually refinanced it, pulled all my money out, paid off the seller financing, and it still cash flows like... Pulled all of your 109 out. Yeah, yeah, all 10, 900 out. Paid off the seller financing. And I refinanced it.

I'm on a 16-year note on that, and I'm still making between 800 and 1,200 a month in cash flow. Pretty sweet deal. I actually got an offer yesterday. It's not on the market, but someone offered me 320 on it. So I'm, I don't know. I'm going to see if I can push that up, and I might take it. So, well, let's walk back for a second here. So you're in Hawaii. You're living rent and housing allowance free, which seems like the best option after exploring the house option as seriously as you could, given the circumstances. And you're saving, what would you say your rate of saving is during this period? Like a thousand a month, a two thousand a month?

Well, I had upped my TSP to probably 20% of my paycheck, which is probably about 700 a month at the time in just the TSP. And then I was probably saving another thousand on top of that. So I'm probably bouncing around 1,500 to 1,700 a month that I'm saving at that point in Hawaii. Did you put it in something other than the G-Bill, the G-Fund? Yes, yes, yes. So I always hesitate to talk to my specific allocation. So I'm going to just go ahead and say that this is not me saying to put it in this fund. But after reading the Simple Path to Wealth, I put 75% in the C fund and 25% in the S fund, which kind of mirrors the VTSAX. Okay, so you are basically index fund investing your TSP, which is the military version of the 401K. Okay, great. Correct. And that's, I mean, I don't think that's really directing people on where to go. index fund is a really great way to build solid wealth in addition to these real estate deals.

So you have a duplex in Missouri. You have a 10-unit building in Missouri. What else do you got? My wife actually owned a house before we got married. So we're renting that out while we're in Hawaii. And then as we've kind of grown over the last few years, at this point, I have 19 doors in Missouri. and then also a small, I would say small percent owner, a general partner on one syndication in South Carolina. So what point did you buy the 10 unit? What year are we in?

That would have been 2017 February. Okay, so two years of grinding it out past between you buying the first duplex for 80 grand in Missouri, moving to Oahu and then buying the 10 unit in Missouri while you're stationed out there. Is that right? About a year and a half, yeah. Okay, and I just want to point that out that this is, again, typical of the grind that is real estate investing for many, that it's not loading up on units all at once. It's a gradual snowball mechanism with this. So what happens?

What's like the next milestone? Is there a mentality shift or another event that propels you forward? Or what kind of happens after this 10 unit? Well, for one, after the 10 unit, I realized that it wasn't as scary as I thought I could actually. So once I bought the 10 units, I actually considered myself. an investor. Up until then, I kind of figured I was like, yeah, I've bought a house. I'm really interested in this real estate thing. I'm learning, but I wouldn't call myself an investor because I was like, all I've done so far is buy a house that I lived in. When I bought the 10 unit,

then it was like mentally, I was like, oh, cool, I'm an investor. Now I've bought something like out of state, long distance, you know, I've been around people who have helped me kind of come out my shell because that was nerve wrecking. Buying that thing, I was like, I don't know what I'm doing. I remember, it sounds like I'm named dropping here, but I was sitting on a surfboard actually with Brandon and Doug out in Oahu at one point. And this was probably the first time I ever actually talked. This was the second time I ever met them. I met them at a meetup in Oahu. I met Doug. I just talked to Doug the whole time. I didn't even know Brandon was on the, like, I knew Brandon was on the island, but I didn't know he was there because of Doug. So I asked Doug, like, can I go surfing with you?

And then I show up and Brandon's there. And I was like, oh, well, this is, this is cool. And I'm sitting on the water, like, basically saying, should I pull the trigger? Oh my gosh, I've got this opportunity and I'm so scared and anyway, they kind of talked me into it. So buy this 10 unit. And then it was like this just like mentality change of like, oh man, this stuff. It works. I know it works. Now I have proof of concept. Now I'm fairly confident in it. And I know I can take a few bigger steps. And so at that point, I went and just started throwing every penny I could into funds to buy real estate and trying to network with people in the market that I was trying to buy and trying to figure out, like, how do I find more deals and, yeah.

So what does that look like? You're sitting there. You've used up most of your cash, or you're saving $1,000 a month or so is what you're telling me, in liquidity outside of your TSP. And so you just put in 10, 10, 9 into this property. You know, what is throwing every penny look like for you? What is, like, this is a grind. I just want to know how it accelerates or changes after the 10 unit and this mentality shift. Yeah. So one thing I did was I pulled out a home equity line of credit on the property my wife had, which probably is still mad about on some level because I spend it a lot. She was all on board with it, I think, until she realized how much I was going to use that thing.

So I pulled out a home equity line of credit on that and about $50,000. Can you walk through this property because it sounds like another asset? Oh, yeah. Sorry. So my wife bought this thing in 2012, maybe. she bought it off. Essentially, someone had overdosed in the living room, and it was across the street from her dad's.

And so basically she... Where is it located generally, like in the United States? Yeah, southwest Missouri. So, not married, yeah, yeah. And so we actually met on recruiting duty. I met her there. And then, so whenever we got married, she had this house. I just didn't realize when we first got into this,

that she had equity in this house, right? I had no, I didn't know. That wasn't like one of the questions. I asked when we started dating because I didn't know anything about money. So I did all that wrong. But she had basically bought this thing that someone had OD'd in. And so it went for way under market value. And then her dad used to build houses.

So he came over and swung a hammer with her. And so they got into this house for, I think, like 105 and then put 20,000 into it to renovate it. And it's worth 160, 170 at the time. And so, you know, it was worth 160, 170. and she had 90, I think, on the mortgage, and we were able to pull like 52, I think, was what they gave us on the line of credit. Okay, awesome. So what do you do with the, what do you do with the 52?

I use 30 of it to touch up the 10 units. So I paint the outside, do upkeep maintenance, repair the roof, all that kind of stuff to make it somewhat stable. And then I, well, at one point in the game, I pay that back down and I put. Sorry, I'm interrupting a lot here. Because you're going through a couple of key points. So you take out $52,000 into HELOC and you use it to improve a long-term investment. But you've already told us that you refinance out of the financing for that long-term, the financing on the 10 unit. And a point I want to make is that it's very dangerous to use a HELOC to invest in a long-term property.

Where it's not dangerous or where it makes a lot of sense is when you're going to do when you're using it with short-term intent. I'm going to touch up the property and then pay it down. and touch up the property and pay it down. And so I want to get at this and understand how you use the HELOC and you used it to modify that property, that property. How did that relate to your refinancing event and paying back off the money used to touch up the property from the HELOC? Yeah. So I used the HELOC. I guess this would have been pretty much in sync with purchasing. So I basically purchased and then use the HELOC within the next two or three months. And then a year and a half later when I refinanced, I pulled all that all that money out.

So I guess when I said paid off my 10,900, I should also have mentioned, yeah, there was a helot there and I paid that off as well. So you had a real winner here. You put down 10-9. You seller-financed a piece of it and used a hel-lock. You improved the property dramatically, refinanced all of that crazy, complicated debt structure used to acquire the property with a single 16-year note. And in the process, we're all to pay off your seller financing, your helock, and return your cash

that you invested in the property originally. Yeah. That is a good use of a HELOC. Yeah, it was a good deal. And it's still cash flows. Yes. Yeah, I mean, not every month. I've definitely, I had a guy die in there once, and that was, that month did not cash flow

at all. But year over year, it has absolutely cash flowed. So it's been a good investment. It's probably my favorite because it's the weirdest one and it worked. Okay, so we had the $52,000 in HELOC and we used $30 of it. What happened to the other 20? Yeah. So when I paid, I paid it back down.

And then so I was basically just paying the HELOC down as my way of saving in the process of waiting on that refinance because I was like, well, if I'm going to save money, I can use the money in the HELOC. So that should just be where I'm storing cash. So I put all my money in there instead of into a savings account, kind of pay it down. And then when I paid it all off, I actually went and did this thing where I rolled the entire 50 into an investment that failed terribly. And two years later, I'm still in a lawsuit trying to get that money back. So that's probably why my wife is. angry about the HELOC. She's going to listen to this and get mad that you called her your mom, too. I know, right. Yeah, yeah, yeah. Okay, so. In so much trouble here. So let's talk about your miserable failure as a real estate investor.

Yeah. I think it's really important to highlight these. I'm not, David and I are friends so I can tease him like this. But you can lose a lot of money investing in real estate if you make a mistake or if somebody else is not being amazing. So David, what kind of deal did you put this money into next? I partnered and I jumped into a mixed-use commercial building for 2.795, 40 units, 25 residential and 15 commercial. What's the deal with this property? You bought, how much was it? 2.795. And you had 50,000.

dollars to throw at this? I did. And my partner brought another hundred. And so we put 150,000 down on a, it was purchased as a lease option. And I can't get super into detail on it because the lawsuit's still not closed out. We probably got another two months till we have two and a half months to court date. But essentially what happened is we bought this thing with the, we bought the option to purchase on a large building that had a lot of upside potential. And there were just a lot of things in the contract that then they were in the contract that didn't get upheld on the seller's end and they were detrimental to the property. So there were, I think my biggest learning lesson from this is that if there's things in the contract like seller will do X by this date or O buyer, you know, whatever amount of

money to put all that in escrow right up front. Because essentially what happened is there were items like there were four Airbnb units that were under construction that were supposed to be finished and there was a roof that was supposed to replace and some big ticket items and they didn't get done. And so four months into the deal, I'm like, okay, this isn't making the income it's supposed to because of these units. This roof is causing people to move out. And there were some big ticket issues like that. And I was like, look, we're not going to execute this option because this clearly isn't going to work out. But also, none of these things in the contract happens.

So we want the money back because, you know, whatever. And so that's where we're at right now with that big thing. So I've, yeah, so not the best use of the here. key lock. And I think the biggest lessons that I would say for people there is, while the deal itself would have worked out really well, had it been what was advertised and everything had gone great, I think I got swept up in the idea of 10xing your goals and units. And so I bought this thing because I had kind of put myself into a box where I told myself I was going to buy 50 units in a year. And so in my head, it was like, oh, I need to, I have to find X number of units as opposed to

focusing on cash flow and numbers per deal. It was a deal that could have or should have panned out well, but it was a very risky deal being that I'd never done anything mixed use or gone out of the residential space. I have so many comments about this, because you are not unique, my beautiful little flower. You are like a lot of people that I hear stories from in the Bigger Pockets forums, in the Facebook groups where they say, oh, I have to grow so big. Why? Why do you have to grow so big within a set amount of time? And there's a lot of people that are encouraging you, which is great. But there's also, those people aren't on the mortgage. Those people aren't left holding the bag when something happens such as this. So if you have a goal of, hey,

I want to have X amount of cash flow. And I would actually like to hear Scott's opinion on this. I think the X amount of cash flow is a better goal than X amount of units because you can have 500 units that cost you money every single month. And that doesn't make you a successful investor. And that is just buying yourself a job and a whole lot of stress. But, you know, it's so easy to get caught up. And you said 10x.

Isn't that a grant cardone phrase? Oh, I got swept up in all of that. It was a very ego thing. Yes. It's a very ego thing. You can do it. You can do it. And why would you settle for such a small thing when you could be so big? And you can get to a point where you have so much money. You can't spend it anymore. I mean, you could try real hard, but you don't need that to be happy. What do you want? I'm not speaking to you, David. I'm not lecturing you. I'm lecturing all the listeners instead. What is it that you want? Do you want $1,000 in passive income every month? Great. Aim for that. Do you want $10,000? in passive income. I don't need 10,000, but that's, you know, there are other people who have more expensive taste or live in a higher place than I do, and that's okay too. But aim for a realistic number that is based on numbers. It's not based on this like pie in this guy. I need to

have 500 units. You really don't, unless that's generating you 10,000 in income and then you've bought way bad properties. Yeah, from my seat, it just seems like, hey, you know, I'm, I'm, I'm guessing, but I'm paying your net worth outside of the TSP at the time you make this deal at somewhere in the ballpark of 250 to 300. Is that right somewhere in the ballpark? Yeah, it's probably right around 250, 250. Great. So you're buying an asset that is 10 times the amount of your net worth, and you're doing it with 100% leverage by using the HELOC on that. And I think that's another component of the issue here. There's a sweet spot. If you go too small, you're buying yourself

a pain in the rear, right? You buy a $20,000 unit, one of those 10 units in the 10 unit property, and you're buying yourself a pain in the rear rather than something that's going to make a meaningful difference in your life. You buy something that's 10 times your amount of net worth at this point relative to your situation, and that is a potential catastrophe. That's a tremendous amount of leverage on that. And I also think that, you know, I'm quoting Warren Buffett here probably poorly, but he says, using the wrong types of leverage or leverage in general can't make a bad deal good, but it can make a good deal bad. And so I think there's the financing component and then the size of the opportunity relative

to the position that are too conflicting things there. And on the money show, you know, we're trying to make the rich carry story, the cool story, you know, where, hey, it's pretty cool to have a paid off. As many said, what's the best possible case? It's not to have 100 units is to have one. stream of cash flow, that's 100% guaranteed that flows in perpetuity and you can do whatever you want with, right? That's a much better outcome than a million tiny streams of income. So anyways, all that aside, that's kind of how I feel about the situation. But I'm interested

to hear your thoughts and how you're feeling about it now that you've, you're the one going through it. And I want to point out before David goes into his explanation is that there were seller issues that didn't get taken care of. And did you have a real estate agent representing you on this deal? I did. Okay. I do think that agents need to be more active in letting people know what the consequences are. Here is a deadline and we are coming up on it. So let's check in and see if this item has been met. It hasn't. Do you need more time or are you going to give us money? Where do you find an agent with experience on a lease option on a 2.75,040 unit mixed use building, where you're using this kind of financing structure? Like, what broker has that? Give me a call. Why are you writing lease option offers on mixed use commercial space if you don't have experience in that?

I'm not a commercial agent. I do residential real estate. I don't even do like multifamily, like small multifamily. I do single family homes and condos because that's, That is my wheelhouse. And I would probably mess this up. But I know that if it's in the contract, you got to go by the dates and deadlines. And I think those are really important.

And I think a lot of people are getting caught up in this. I want to be a real estate investor or I want to buy a house. And therefore, I'm just going to jump in with both feet. And I read an article in the Wall Street Journal over the weekend that said these people rushed to buy a house in a pandemic and now they regret it. And a lot of them just didn't read their contract. they didn't know what they were doing. They didn't ask their agent for advice or their agent just didn't help them.

Like people were buying houses and waiving inspection. I never, ever lose the house before you waive inspection. But so I don't think that this is necessarily like a huge mistake that David made so much as just the seller didn't uphold his end of the bargain. And David's agent should have been a little bit more proactive and, hey, we've got a deadline coming up. Let's look at this a little bit closer. So I guess I will preface this by saying about a year ago, I don't know if you remember this, Mindy, we were at FinCon. You mentioned being on the money podcast and I told you my finances weren't ready to be on the money podcast. And this was a big part of that was that I knew this was not what the money podcast wanted to talk about. This is exactly what the money podcast wants to talk about. But this was not how to represent myself as a finance guy because this was clearly a debacle. And so I agree on both fronts here, right? Like there were things that should have gone. right. And had they gone right, this probably would have paid off. I mean, the deal had a lot more

upside than downside had certain conditions been met. I also had no business buying into that deal at that point. And I think going forward will probably prove that, because if you were to look at what I've done over the last year and a half, last year I bought two duplexes, three single families. And so far this year, I've bought, well, I've purchased three single families and I've got two under contract. And of those three that I've purchased, two were cash. So I'm, I'm, I'm, you know, much more conservative on the smaller things that I can buy, you know, cheap and then either, right now I'm kind of doing some, some whole tailing because I got a property under contract for $12,000. And then we listed it, like I literally sent someone in to sweep it out and we listed

it and went under contract within 24 hours for 35. And so it's like, okay, you know, so those are kind of a smaller, more conservative plays that I've been making right now, but I'm buying properties with much less leverage, much more straight out of my checking account, much more conservatively because I know that I got my ego involved in that. And that wasn't the safe way to invest in real estate. That was the cool, flashy look at me way to invest in real estate maybe. But I would much rather play the base hit game and just kind of roll into the stuff that I know. I know my ARV on. I know what the rent is. I know exactly what's going to happen with it. and it's consistent.

Yeah. And I want to chime in that we've talked about thinking in bets. I don't know if we talked about it. We talked about that, at least in the pre-interview, that we're both fans of that book. And the danger with that type of thinking is that in a deal like this, it can be a good bet. It can be, hey, there's a 70% chance you three extra money and a 30% chance you lose it all. That's a risk-adjusted net gain on the deal. But if it's all your liquidity and you can't afford to lose it,

that's going to set you back considerably, or the consequences are devastating there if you do, you can't take that bet. And so the idea is to put yourself in position where you can play as many of those risk-adjusted positive bets as you want and you're going to make money over time. And it sounds like that's what you've been doing since this deal. Is that right? Yeah. I think if you're going to take those risks, right, I was in the right position to do it. And I think the military actually affords you a pretty solid opportunity there because if I had lost, if I lost literally everything I owned at that point, I was what, 27, 28, if I lost every single penny I owned, still got housing, still got a job, still got a housing allowance, still got a food allowance, still got, you know, VA loan options. Like, I would have been okay. It would have been really devastating, but it wouldn't have been the end of my, like, livelihood. So I think that if you are going to take a crazy risk like that, I was probably in the position to be able to afford it. Definitely not the right decision. And I definitely, I think it was really good that it happened to me because had that, one had that gone off really, really, really well, I'm a pretty throw the parachute out the airplane,

hope I find it on the way down type of guy, as opposed to the planning. So it would have probably been the wrong thing to happen for me. So right now, I'm much more conservative, much more, I still think big, I still have the big vision, but I'm putting those systems in and being much more risk-averse than I used to be. Had that thing gone well, I don't know what I'd be buying right now, but it probably would be dangerous. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing.

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Enjoy in-store prices without leaving your home. You'll find the same regular prices online as in-store. promotions are available both in store and online, though some may vary. So after this deal, you put the 50 grand in the HELOC in. How are you able to continue buying properties? And what year is this deal? Does this begin? So I bought this in 2018 August. Okay. So in the last two years, how are you able to continue purchasing property? What's your savings rate? How does all that combine to allow you to make all these smaller bets. Yeah, so we were saving my wife's salary, a good chunk of it in Hawaii. So we were probably, once she got a job and started saving that, we were probably putting,

I'd say, between $3,500 and $4,000 a month into savings and or investment funds. Granted, that wasn't super consistent. It was more of a like, okay, 20% or 30% goes into my TSP and then pay off all the credit cards and then every month. month, we'd roll a little bit into the credit card and then whatever's left. It wasn't necessarily pay myself first. It was like a guaranteed $2,000 would go into the fund and then whatever was left at the end of the month would also go in. So it averaged between $3,500 and $4,000 would go into, and I was just putting that either back into the he lock. I probably bump that down to like $30. And then I would be like, okay, that's low enough that I can exist and I would just put it into a

savings account. So then the next duplex we bought was I put 15% down and it was 93. So I think I came out at closing like 17,000 out of pocket. And then- And you used the HELOC for that or was this out of savings? That was actually out of savings. And that's a four or five month accumulation period for you to get to work up the capital to save for that. Yes. Yes, yes. That's a really fun bet to make. in that position, right? Because you're not, you're not betting the farm. You're betting something that's actually not that meaningful that you can then continue to do. I mean, when you think about meaning, you use the word meaningful in the terms of these bets, I like to think of it as like a year of cash flow, right? That's where, you know, your brain starts getting very worried about all these

different consequences and that kind of stuff. You could do three or four of those a year at this point. Yep. That's awesome. Yeah. So, and then at this point, that purchase was early, like probably April 2020. So I got this thing. It was kind of like when everyone freaked out, this thing popped up on the market. And I was like, that's worth more than it's listed for.

I'm going to buy that. And then over the next nine months, I slowly started getting into finding my own off market deals. And so I started getting... So you bought this in 2020? Yeah. So you spent from August 2018 to April 2020, fairly inactive,

accumulating cash. Yeah. Essentially accumulating cash, paying down the helock a little bit, regrouping my thoughts, also paying legal bills, which has been a blast. I think I paid 17,000 in legal bills last year alone. Oh, congrats. Yeah, so this has been a very fun process to not be finished yet. So two years in, yeah, so I've probably put, no, I mean, you know, it's, it's tuition.

And assuming that everything pans out, we'll get it all back. So, you know, whatever. But, yeah, so I was paying off legal bills, regrouping, learning. And then I started just kind of talking about that's kind of in this process of like, okay, I'm regrouping, I'm learning, I just kind of started. That's where like the whole blog started, where I started just kind of writing about what I was doing and learning about the VA loan. And then over time, that is kind of grown as well.

And so we're at this position now where I'm like, all right, my TSP has, when the pandemic hit, right, my finances at this point have shifted to where probably, so whenever March happened and everyone went, oh my gosh, what do we do? At this point, I'm sitting at, let's see, March, probably 370, 380 net worth. My TSP had enough money in it that I knew if every one of my properties at the time it was 15 doors went vacant for completely vacant. I could hold them for 18 months off just my TSP. So I knew that I was good there. It was my like super emergency fund. I had, $20,000 in cash. I had no credit card debt. Heelock was paid down to 25 or 30. And at this point, I'm like, okay, I'm saving pretty decent amount, just slowly paying off debt. And I was in a position where I'm like, okay, I've got a decent amount of cash. I know I'm saving a lot of money. And then things on the side hustle front started to kind of grow. And I was like, all right, I'm making progress. I need to start buying some more properties. And then at that point,

I was ready to move. So I bought that duplex in April. And then started marketing for off-market deals in, like, the end of August, beginning of September. And then me and my roommate bought five doors. We bought five-door portfolios. So it was one duplex, three single families for $200. And it appraised for $2.80. And we only came out of pocket 15 apiece. So it was 15% down.

So we each put $15,000 in. We cash flow. But last month, is this still in Missouri? Yep. Yep. Okay. Simple cash flow market. All your properties are concentrated in a relatively condensed geographic area. Okay.

I have a good property manager, and I feel like the competition there is pretty light, so I just kind of roll with it. And yeah, so then we bought this little five-unit portfolio. We paid $30,000 down for it. We actually sold one of the five doors and paid ourselves back out of that. And so at this point, we're like basically zero into $240,000 worth of real estate that cash flows. Last month, we actually cash flowed 900, but you know, when you figure in budgeting probably 45, 500 and help the net worth or whatever. And then we just kind of started scaling

the off market. And with that money, we're like, okay, we'll buy this one cash. We'll buy that one cash. I think we'll buy this one and then we'll sell it. I think we'll buy this one and then we'll sell it. And so it's kind of, it's been this like, okay, now we have some momentum. Now we can kind of keep going. But now I'm in a spot where my finances are like, okay, I could exit the military right now. And that's my plan actually in six months. but I could exit the military now. And essentially, I think I could just keep this rolling. Do you have a pension or anything like that that you've been racking up?

How long have been in the military? And, man, is that, you know, that's often an elephant in the room when we talk to military or, you know, members of the armed forces? Yeah, I'm at 12 and a half years. And you have to do 20 to get the pension. So what I'm going to do is I'm going to go into the reserves so that I will still earn that pension, but in the reserves, you won't get to actually start pulling from the pension until you turn 59 and a half, minus any time deployed. And so I'll get the medical benefits. I'll get

the base access and most of those veteran benefits, but I won't get to touch my pension until I'm almost 60, which is actually really scary for a lot of people. Like there's a lot of service members who've been basically telling me, like, you're making the wrong decision. But now that I've got my finances in check and I know where I'm at. I just know that I'm making more money and I will be able to continue making more money myself in the next seven years than that pension is going to be worth to me seven years from now, if that makes sense. So I think I'm just at a position now where the military is not as fulfilling for me as it once was and I'm in a position where I know that I can exit and not have to take another W-2. And so I'm going to take that opportunity and run with it.

So why do people say that you're making the wrong decision? They think you should be in the Marine Corps for another seven years and then leave? The military pension is one of the few pensions left, right? And it's a very safe thing. I mean, by this point in my career, all I have to do is not get in trouble. And I'm essentially, as long as I don't get in trouble and don't get really injured, I'm essentially guaranteed to make it to 20 and get the pension. And our pension is pretty solid, right?

I took the new retirement system. So mine would actually be at 20 years, I'd get 40% on my base pay for the rest of my life. And then you figure in, you probably earn a little bit of disability pay if you have any injuries. And then a couple different things from that end. But I think it's just the mentality of like you've made it this far. Why not gut it out a little bit more? Okay. But you still get the same amount of pension when you're in the reserves?

It's calculated differently, but it's. It will be a little bit less, but not very, like, it's really not that much of a difference. I actually thought it was going to be, I had always kind of come up thinking the reserves was this terrible thing, but my paycheck and the reserves pension will be relatively similar to what it would be active duty. It's just that I won't get it starting at 38 years old like I would on the active duty side. I'll get it at 59 and a half when I hit retirement age. So that's the major difference is it's that extra 20, 30 years of pension that you would be receiving. if you did active duty.

Oh, have you run spreadsheet analysis and all the same things that all these five people do to see what the difference would be? Oh, it'd be, I mean, I think it's, I can't tell you the number off the top of my head because ultimately my decision was less based on how much money I'm losing on the pension and more based on quality of life. You know what? That's really important. I think a lot of people are focused on money and not focused on happiness.

You can have both. I think what's going on in your situation fundamentally to me is a increasing comfort based on your tuition that you, as you called it, with real estate investing and a really good framework that you've developed through some pain and lots of trial and error. But then all softened by what I imagine is a very low fixed cost lifestyle and a huge amount of savings per month. I mean, I can't imagine that if you leave the military that you're going to be cash flow negative based on what I'm hearing. about your savings rate and those types of things. So the fundamentals of your position are the, we didn't touch that deep on them during the interview, but when you're saving 3,500,000 a month,

that's because you're really disciplined with your budget and your day-to-day month-to-month expenses in general, I think. Yeah, yeah, we've definitely increased the savings rate, and that's the main reason I'm going back to Missouri is because the cost of living there is so afforded. that I know like, okay, well, if I'm going to exit the military and take myself somewhere, if I want to make this work, right, I could stay in San Diego, but my, you know, $50,000 a year that I'm able to make or whatever that is, is going to go a lot less in San Diego than it will in Missouri.

So I'm going to move back to Missouri. And yeah, I don't think there's any reason that I will ever have to work at W2 again there and I'll continue to be able to scale. Number one, that's the number two reason. The number one reason is because your wife is there. Yes. Yes, yes, yes. David, this has been really, really interesting. I love the stories of I made a mistake

because you learn a lot more from somebody else's mistakes than you do from their successes. I bought a house and it was great. Wow, thanks. I bought a house and it was a total disaster. Great. What did you do so I can learn from those? So I really appreciate you sharing that with us,

but we're not done yet. We still have to go. go to the famous four. David Paray, are you ready? I am. Okay, David, these are the same four questions we ask of all of our guests. What is your favorite finance book? Is it cheating if I say set for life?

Yes. So I actually have recommended that to so many people. And the reason being, so simple path to wealth is a great one, right? If you want to learn the index funds. But Scott actually does such a good job of breaking down basic finance and introducing the real estate in the house hacking and the live short commutes and just in a way that no other finance book does. And I'm a huge fan. Okay, so that is very interesting that you named those two books. I was speaking with a friend

of my 14-year-old daughter and he said, oh yeah, I'm really into the stock market. I'm like, do you just know that I have a podcast and you're messing with me? Or are you really into it? He's no, no. And then he starts talking about day trading. And I'm like, oh, so you're 13 year old into it. Okay. But the fact that he's into it is all is really exciting. And I sent a note to his mom, hey, can I send him a book? And she's like, anything you can do to get him out of that day trading is, I would love that. So I just sent him a copy of the simple path to wealth and set for life so that he can read these. And can you imagine being 13 or 14 and reading that and being like, oh, I'll do that. Can you imagine how set for life he will be if he takes that and like, oh, yeah.

So hopefully in a couple of years, we will have him on the show and he could be like, yeah, Mindy gave me this book and now I'm a millionaire and I'm 15. Well, I appreciate the plug and I'm thrilled to be in good company with Simple Path to Wealth. That's one of the best books that are written in my opinion on the subpoenaed. of finance. And if you're thinking about reading it, but oh, maybe it's my kids involved and, but not really, like, he, J.L. Collins wrote that book for his daughter. He aimed it at his daughter because she knew she needed to do something with money, but she didn't want to think about it right now. So it's not like super intense and high level. It's, it's really relatable and

understandable for almost any age. I'm a Marine and I understood it. Oh, come on. What was your biggest money mistake? Just not starting soon enough. I put money into the Thrift Savings Plan and I left it in the government securities. If I had, and I tell service members this all the time, if you just put 20% of your paycheck in, the moment you start, I mean, the more the better, but at least 20%. And you put it, even if you just put it into the life cycle fund so you never have to touch it again, those dollars you put, you put in when you're 18, 19, 20, 22 are worth more than anything I do right now. I'm putting 30% in right now, and I can't touch what I would have been able to touch

at 10% a decade and a half ago. So I think that's my biggest money mistake is just that I knew enough to put something into the TSP, but I didn't know enough to just read a little bit and learn why. Love it. I like that as a mistake. I wish there was more guidance. In general, I wish there was more guidance. I'm very excited my 14-year-old when she starts high school next year has to take a finance class.

And I reached out to the teacher. I'm like, please, please let me help you. What do you need? I will get it for you. I know some people. Okay, what is your best piece of advice for people who are just starting out? Well, there's the age-old advice of track your expenses, although I'm the wrong personality for that. so I'm not as good about meticulously tracking my expenses so much as I kind of like the envelope

system. So I would say figure out what you need for certain categories, you know, clothing, haircut, food, whatever. And I love the age old, pull $500 in cash out every paycheck, put it in those envelopes, use that money, and put everything else into an account that you can save or invest. That's the reason I don't have the mentality to go super deep on spreadsheets for every expense I make and track all of that. But if I can stick to what's in those envelopes, then I'm going to save a ton more money than I would if I was just kind of winging it. So I just tell people like, get your expenses under control. Because if you never get your expenses under control, it doesn't matter. I'm making way more money right now than I was three years ago, but I wouldn't be saving anymore

if I didn't have my expenses under control. That is a really great way. Stop spending like a sailor. That's it. No 20% interest, Mustangs. Don't do it. Oh, that hurts. So, and I think, think that you are talking a little bit of smack about yourself. I think that being conscious enough to know that $500 will suffice and you put $150 in groceries because that's about what I spent last month. You're still conscious of it. You're just not spreadsheet number Scott level. Well, Scott doesn't track his spending either. I'm the same as David here. I don't have that kind of level of detail in any of these buckets. I just make sure that the amount coming in is way larger than the out and coming out and that I've got reasonable controls in place to prevent silly spending.

And then I go to town looking at the biggest levers. So the biggest lever at first is a really detail-oriented approach to tracking your spending. And then it is now not that lever for David. It is more about his investment approach and maximizing the return of his portfolio and finding more deal flow and those types of things. And so he cannot exert the same amount of mental energy to tracking his expenses that he might have done at the beginning or earlier on in the journey because that would be a poor use of his time at this point relative to the other opportunity sizes. All right, what is your favorite joke to tell at parties? Oh, man, I've been waiting for this.

Why did the chicken cross the road? To get to the other side? To get to the ugly person's house. Scott, knock knock. Who's there? The chicken. Aw. That's the worst joke ever because nobody has any idea what you're doing.

And they're like, this is every joke ever. Are you kidding? Fine. I couldn't do that to Mindy. She'd hate on me. I'm sorry. But I just couldn't do that to Mindy for many reasons. I have that.

I have all of those terrible senses. That's as good as I get. That was unique. I like it. David Perre, tell me where people can find out more about you. From military to millionaire.com. Don't email him. Oh yeah, Mindy's apparently been trying to send me emails and they don't come through.

There's some glitch between my email and your email. And when I send you an email, it bounces back. This email address doesn't exist. I'm like, I've sent him things once in a while. If I wanted people to think I cared about them, I would text them and say, I'm trying to email you, but it's not. And you've got a podcast, a website, blog, all that kind of good stuff. And I had a lot of fun on your podcast.

I think it was last year or so. We asked me some good questions. That was fun. Yeah. What was the one that you got me, you got me. Oh, was that the, we actually, there were a few different good questions in there. I've had a lot of fun on that podcast. Yeah, so we have the military millionaire podcast.

as a blog, basically just trying to help service members and vets, learn how to build wealth. And actually, I have my first book coming out in hopefully April 1st. I hope that's not a, hopefully that's not a really bad April Fool's joke. But I'm working the audiobook right now. And the hope is that as soon as that's done, it'll go to formatting and be out. Well, that's awesome. What's the book called?

The No BS Guide to Military Life, How to Build Wealth, Get Promoted, and Achieve Greatness. Wow. Well, hey, that subtitle gives Scott a run for your money. What's a subtitle for your book? I think it is Dominate, Life, Money, and the American Dream. Similarly, high aspirations. I don't know if my book will compete with Scots, but it's got my ugly mug in it, so that's something.

I'll afford to reading it. You could listen. You could listen to your voice reading the audio, right? I am about 70% of the way through recording it right now. Awesome. David, this was super fun. I'm really glad you finally fixed up your finances enough so you could come on the show. Me too.

That was a fun year. If you are in the military, David has a, he's being very modest. He has a website, a blog, a podcast. He has a Facebook group where you can go in and ask questions. And he's very, very helpful if you're in the military lifestyle, he can help you. in the military, not lifestyle, in the military, period. He can help you fix your finances. Okay, David, thank you so much, and we will talk to you soon.

Thank you guys so much for having me on. Okay, Scott, that was David Perret. What did you think? I thought it was a great story. I think it was wonderful. He shared a tremendous amount of detail with us, which we're always grateful for. And again, I just think it comes back down to his financial foundation that he built, stabilized and continue to accelerate and grow throughout all of that journey. That's how you go from

buying the first deal. And the only way you're getting the liquidity for that is because you get a freak accident with your Harley to being able to buy tons and tons and tons of deals and begin accelerating your position. And I think he's had a really good experiment. He's a really good experimental approach where he's going to try it, see if it works, learn, figure it out later. And so I love that. I think I learned a lot from it. And I think I really respect his mentality and approach to building wealth. You know, Scott, something we didn't really circle back on while we were talking to him is the fact that all of his properties are in one basic location. He has a team that he uses for that location. He knows the market. Learning a new market isn't impossible. But if you've

got one that's cranking out the cash flow, which is the reason you're investing in the first place, then why go try to find something else? Why mess with something if it is. broken. And I just love that he's able to realize that's a good deal. He said it near the end. He said, oh, I saw a house that was listed. I knew it was worth more than it was listed for. You don't know that unless you know the market. So I think one of the top things that you need to do if you're starting to invest is learn your market. Get on the email list from the agents and have them start sending you the property so you can see what is it being listed for, what is it selling for, and keep up. You don't just jump in with both feet unless you really want to have lessen your ability

to make a good investment. Yeah, everything comes back down to the foundation and operating infrastructure he's placed. He's in a market that he knows really well. He's got a great property manager, which he spoke about at length. He's got a solid financial foundation. And that enables him to gradually accelerate his investment approach in that market and continue to build and fortify and strengthen that operating foundation and financial position. And that is the formula for success that underlies all these other things. That masks any other types of problems that are going on in that portfolio because he's got those two strengths there.

And if you're listening and you hear about all this acceleration and unit flow and all that kind of stuff, remember that he bought his first deal for 80 grand and then his second deal for 240 or something like that, right? The 10 unit, 220 was it? And these are, you know, I'm sitting here in Denver and I'm paralleling my story to his. And it's like when I buy a $240, $240,000 duplex, that's three times the asset value of that first duplex. When I buy the next one for $300 or $350, that's even more than the next one there. And so you don't have to compete mentally with folks that are investing in different parts of the

country or with different structures in these types of things. You know, lots of approaches work in different ways. But I want to point out what I'm saying this, what I'm trying to say, my point here is, is that David has to buy a lot of units and build an incredible operating infrastructure because of the market that he's chosen and the style that he's approached with this. And that didn't really come up in this. But all of those things benefit his position, his strategy there for a large number of units and tremendous acceleration in the the growth of his portfolio in Missouri, which is different from a coastal city.

So I don't know exactly where I'm going with that. But I guess I'm just trying to point out that he's got a great situation and a great flow there. And it's just not comparable to investment approaches in a higher cost living area in some ways. Yeah. And we did touch on that a little bit. Don't compare yourself to somebody else.

And I still can't remember who said this. But don't compare the beginning of your journey to somebody else's middle or end. David is doing great. He has 19 units, but he has 19 low-cost units. If you live in San Francisco and you're buying million-dollar properties, unless you're a Deca millionaire, you're not going to be able to do that. And that's okay. That doesn't make your investment strategy a different, a bad strategy. It's just different. So don't compare yourself to David, learn from David and apply his methods to however you're planning to invest. Here's what I was going with that is if you're thinking about, if you like the numbers and those types of things of like a 20 or 40,000

unit, remember that in order for that portfolio to benefit you and actually get you towards the goal of passive income and wealth over time, you're going to have to buy a lot of units. 19 is the starting point for a portfolio in that type of location. And again, the point I'm trying to make with that is that David has built a foundation and an operating infrastructure and a comfort level with that market that will allow him to achieve that scale or give him a really good shot at doing that. It would be a completely different story. And we've actually recommended to other Marines on this podcast that they sell properties like

those that David owns in those types of markets unless there is an intent to build a significant portfolio in a cluster with the operating advantages like what David brings to his portfolio. Yeah, you know, I haven't said it in a while, but personal finance is personal. So what works for you might not work for him, might not work for her, might not work for them. But it doesn't have to work for anybody but you. And for David, it's a great choice. Absolutely. He's doing, he's crushing it. Okay, Scott, should we get out of here today?

Let's do it. From episode 179 of the Bigger Pockets podcast, he is Scott Trench. I am Mindy Jensen. Today's sign off comes from Felix. he says this episode is over and we are out.