BiggerPockets Real Estate Podcast - 424: Make More Money, Build Your Portfolio, and Get Greater Tax Deductions in 2021 with J Scott, Amanda Han, & Matt MacFarland

Episode Date: December 10, 2020

We have a real estate and investing mastermind session in this episode of the BiggerPockets Real Estate podcast! J Scott, Amanda Han, & Matt MacFarland join David and Brandon to discuss what investors should do to maximize their wealth (and opportunities) in 2021. Co-host David Greene goes over his new book SOLD: Every Real Estate Agent’s Guide to Building a Profitable Business, talking through who should (and shouldn’t) be an agent, what makes a great agent, how agents can maximize their income, and more! J Scott talks heavily about how the election, stimulus packages, and new (proposed) tax codes could hurt (or help) real estate agents, and what you can do to ward off higher tax plans, loss of rent, or even inflation. Amanda and Matt are our tax professionals on the show! They dive into which upcoming 2021 tax codes could affect you, whether you’re an agent, a real estate investor, or just a W2 worker! This is a fantastic episode for any listener who wants to know more about how 2021 may shape our economic future. Thankfully, we have some of the best guests in the world to tell you about it! In This Episode We Cover: Who should and shouldn’t become a real estate agent How to offset earned income tax with real estate investments Why you should buy David’s new book SOLD: Every Real Estate Agent’s Guide to Building a Profitable Business The new opportunity of buying businesses in 2021 How to hire your best workers (and why you may need to let some go) How 2020 taught us to keep our businesses lean What to do if 1031 exchanges go away How inflation may affect your wealth over the next 1-5 years Why debt is a great inflation hedge And SO much more! Links from the Show BiggerPockets Forums David's Instagram Brandon's Instagram BiggerPockets Podcast BiggerPockets Bookstore 20% off code: podcast BiggerPockets Business Podcast 20: The Questions You MUST Ask Every Potential Hire with David Greene BiggerPockets Business Podcast 18: How to “Have It All” by Living with Intention with Brandon Turner BiggerPockets Business Podcast BiggerPockets Podcast 212: Buying a 115-Unit Apartment Complex for No Cash Out of Pocket with Brian Murray BiggerPockets New Books! BiggerPockets Podcast 319: Avoid These Common Newbie Mistakes! Hard-Earned Lessons from Nathan Brooks Paying Off Student Loan Debt with a Median Income and Two Kids in Northern California with Kyle Renke Bring Brandon a Deal BiggerPockets Webinars BiggerPockets Facebook Page Check the full show notes here: http://biggerpockets.com/show424 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 424. Every single person you hire should be smarter than you are. And if everybody in the organization does that, every year that organization gets better and better. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. What is going on, everyone?

It's Brandon Turner, host of the Bigger Pockets podcast here. Once again with my co-host, Mr. David, soon to be another author, a three-peater author, Green. What's up, man? Congrats on the new book lunch. That's funny. It's like when you have another kid and they say, you're going to be a dad again. You're going to be an author again. Yeah, anyway, congrats.

I think your book comes out this week, right? I think so. It does, yeah. And this is probably of all the books I've written, the one that was the most difficult to write, but probably also the most rewarding, because it's on such a difficult topic to get into. Yeah, man. So was that difficult, like being, you know, writing a book about being a butt double to Hollywood stars? Like, is that a tough thing? I don't know. Well, it was, but really, I did it for the listeners of the podcast. Really, they were the ones that motivated. Yes, that's exactly right, because I know

how many other people would like to be able to say the same. And I just wanted to pave the path for how to get there. It's not an easy journey. You're a good man. You're good man. All right, well, let's talk about the book here in our quick tip. Today's show, Quick Tip, is all about, well, the quick tip is really you can get 20% off any book in the Bigger Pockets Bookstore. That would include David Green's new book. So new book is called Sold. It is a book to help real estate agents be better to learn how to become a good agent and to grow and succeed and be awesome. And it's not just for agents.

I think any investor can read it and pick up a lot of stuff. But more importantly, or maybe equally importantly, it's a great book to buy for the agent or want to be agent in your life. So as you're thinking, holiday season, it's a great book. Buy right now. Send it to somebody you love. Anything I should add on that? Oh, podcast is the code. So use the code for 20% off.

Any book on Bigger Pockets. Podcast. That is a code podcast. So yeah. Good job. Anything you want to add in the book? Thank you. It's a book.

Just that this is the first of a three-part series. So there's going to be two more books coming out. The first book is geared towards someone who's getting started in the business as a real estate agent. The next will be how to become a top producer, really, one of the top agents in your area. And the third will be how to put a team around you so that you can scale from job to business and really just become a rock star. Very cool. Very cool. And we do talk a little bit about that in today's show. Today's show is a very cool show. We brought in some of my favorite people in the world, Amanda Hahn, Matt McFarland, my CPAs and Jay Scott, and honestly, David Green. I mean, you were almost like you were a guest today. And we did kind of a panel where we talked about the future.

What did you at the, like here at the end of the year, going into the next year. What does 2021 look like? We covered a lot of stuff. Everything from should you get your real estate license. We started talking about the real estate licensing because, you know, obviously the book's coming out with David. Like who should get their license? Why should you, why should you?

We talk about hiring employees in your company if you're going to try to grow next year. Or if you are somebody who wants to get hired by a company like one of mine or Jays or or David's, what should you be doing? What should be looking for? How can you dramatically increase your income this year? We talk about the tax changes that are coming up in 2021, including some of the current things that you have right now, some of the things that are going away, like that possibly the 1031 exchange.

We're talking about what that means and how that could affect the real estate market. We talk about the economy in general. In fact, we spent, like, there was a moment where Jay spent about 10 minutes just like giving some of the most in-depth economic outlook like you'll ever hear. It's amazing. So make sure you guys listen through to that stuff. Interest rates, inflation, how it all plays into each other. You're going to learn a ton.

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This is a paid advertisement. And now we got to get into this show. It is a beast of a show. but I think y'all are going to love it. So without further ado, let's bring in the panel. All right, Amanda Hahn, Matt McFarland. Am I saying your name correctly? It's not like McFerland.

No, no. MacFarland's good. I thought I've always said it for years. And Jay Scott, welcome, y'all. And David Green, of course, because David, you're kind of a guest today. Welcome all to the Bigger Pockets podcast. How are you doing? All at the same time.

Go. Yeah. Thanks for having us. David, you missed out there. I don't know. Today we are talking about the next year of our lives because the world has been in kind of a crazy turmoil the last year of 2020. So here as we are preparing to go to 2021, we're talking about things that people need to know, whether that's economy related, whether it's earning money related, whether it's tax related, whether it's just mentality, mindset related. We're talking about the vital things that people need to know going into 2021.

And so I want to actually begin talking about making money. And the reason why is because David Green here is the king of making money. Like literally if there's like one person on the planet, I was like, somebody came to me and like, hey, who's the guy that I need to double my income this year? Who's the guy to talk to? I'd be like, talk to David Green because David Green's like that guy. So David, why, why are you the guy? Like, can you give a quick?

Because you just told him he was. Why are you the guy? It's like here's what I'm getting at. David has been on the podcast now as a host for the last couple years. But before that, he's had a slew of different jobs. And every one of them is like this perfect picture of doing a really good job, making money at your job. So David, maybe just a quick one minute summary of like what you've done and why I say that about you. Oh, man.

That's a tough call for one minute. I would say to sum it up, I value efficiency more than most people do. so I'm always asking how can I do the same thing faster. I have embraced leverage so where I have the confidence to say, hey, it's better to let someone else do something and I focus on the thing that I'm doing. And I typically have a strong sense of urgency with whatever I'm doing. So I like to look at a lot of situations in life like it's a competition. You know, like when I go to work, how many things could I get done that day that actually

made a difference in the business? So when I'm investing, that would be analyzing deals and writing. writing offers. And I wouldn't say, hey, I did a good job. Let me pat myself on the back. I wrote an offer today. I would think, you know what? I probably could have got six of them out if I would have done things a different way. And then I go back the next day trying to write six. And I'd say that's kind of three habits I've developed that have led it to where making money isn't nearly as difficult for me now as what it was when I was starting off. Okay, that makes sense. So specifically, I want to ask you about making money as a real estate agent. Now, this show is

about real estate investing, and we're going to talk about a lot of investing stuff today. But the reason, two reasons of one is because you have a book coming out in a few days called sold. It's all about how to become a, what, super rich and famous Instagram star. And, okay, real estate agent. And secondly, because we all believe, I think most of us here, I may not, I'll actually ask you guys, I'm using the collective we, maybe I shouldn't. I believe being a real estate agent is a great avenue for people to earn more money because there's no cap on your income necessarily. It's not like a job where, it's more like you work harder, you can make more money.

You work smarter, you can make more money. So first of all, do you guys agree with that? Or anybody want to disagree with that point? I think as real estate investors, anything we can do, any businesses we can do that are real estate adjacent, those businesses that aren't directly involve investing, but are related to investing. So whether that's being a real estate agent, whether that's being a owning a real estate service business, whatever that is, there's a great amount of complementary benefits

to doing that. And I think being a real estate agent is one of those areas that just, it makes a lot of sense for a lot of us in this industry. That's so true. And that's Jay Scott, by the way. Those just listen to this and can't hear the different voices today when you hear that voice. That was Jay Scott. Thanks, Jay, by the way, for joining us. Thank you. Yeah. And then being a real estate agent, so let's talk real quick. David, who do you think should become an agent and who should not become an agent? Let's start there. That's a really good question. And I'll answer that right after. I comment on Jay's comment, which was also super important because what Jay was describing was Synergy when he says a real estate adjacent thing. Most of the really, really big investors I know

also did something else related to real estate before they took off. So my flipping partner, Mario, we flip a lot of houses together. He was a real estate appraiser. He got really good at knowing what houses were worth. He had a reputation where everybody in town was coming to him and saying, hey, grandma died. Can you appraise the house? Well, that turns into a conversation that we then have with the seller about, you know, can we buy the house instead? So there's a great nugget of wisdom in there that if you're trying to get traction in your investing business, if you're known as the tax professional and everybody comes to you to say, well, what are the tax implications of this? That will turn into deals it many times. So, and I did exactly what I was afraid I was going to do,

Brandon. I forgot what your question was when I started talking about Jay's. Who should be an agent? Who should not be an agent? And specifically, again, the show is about 2021, which people should be doing one in the next year is who should be thinking about becoming an agent in the next like now so that they're preparing for 2021 and who should not okay so the person that should not be an agent is the person who is only doing it because they want they think it's going to help their investing business in my opinion that's a fallacy I don't think it helps you just take on a lot of liability a lot of potential lawsuits and a lot of fees and training that you have to take to become an agent it doesn't necessarily force deals to come to you you can use agents for the same purpose

more or less exactly the same as if you had your license if you find the right agent. The person who should not be an agent is also the one who's thinking, I want a little part-time job that gives me a ton of freedom and I can work when I want to. I'll pick up a deal here and there. I'll make a really nice commission and when I don't want to work, I don't have to. That is not how the industry works. You may have flexibility with your physical location at times. You don't have the clock in a time card, but your boss is now your client

who's oftentimes more demanding than whatever boss people have in a regular W-2 job. So it's very easy to disappoint people. It's why the industry in general has a pretty negative reputation, in my opinion. Not too many people say real estate agents are great. It's more complaints than compliments that are given. And it's because of that mindset. They don't understand when they get into it. You are becoming an entrepreneur.

You will serve your clients. You'll submit to your clients. They become your boss. And they're going to be very irrational and emotional and emotional. and stressed out and sometimes need a lot more handholding than what we would have thought. So I can keep going on to who should be an agent or I can let you comment there. I don't know. Jay, what do you think on that one? Then I'll go to you, Amanda and Matt, and see what you guys think. I mean, I agree with most of that. I think there are benefits to getting

your real estate license as an investor. I definitely agree with David that people get their real estate license for the wrong reasons. They get it because they say, I'm going to get more deal flow, or they say, I want to make more money or whatever. For me, it has nothing to do with the extra money you make. People are always like, oh, I can make an extra 3% or save 3%. Yeah, it's great, but that's not a reason to get your real estate license. I agree. Likewise with deal flow, for me, the best reason to have your own real estate license is control. Being able to control your deals, when you have your real estate license, when you're the agent on your deals, you can talk directly to your buyer's agent. You can talk directly to

your buyer's lender. You can talk directly to the appraiser. You can talk directly to the inspector. And nobody questions it. If you try and do that as the seller, sometimes you get questions about it. But if you do that as the agent, it's perfectly natural. You just have a lot more control over your deals. So in general, I definitely agree with David. Don't start a real estate agent business for those reasons. But I do see some advantages to having your license for your specific deals, specifically around control.

Thanks a lot of sense. Yeah, it kind of reminds me of being a general contractor. Like, if you're going to, let's see you're going to build a big addition on your house. And so you're like, okay, first I'm going to go get my general contractor's licensed and then I'm going to hire some people. You can just hire a general contractor. Yes, it's going to cost you a little bit more. But you don't have to learn all of that crap that comes with becoming a general contractor.

You don't have to go through all the permitting processes and licensing stuff. It's just like you just hire that person. If you want to build houses for people and that's how you want to make a living, I think it's really a pretty darn good idea to have your general's contractor's license. So Amanda and Matt, from a tax standpoint, is there any changes? First of all, how do real estate agents get taxed? What's that? Can you explain what that's like because it's self-employment usually, right?

And then are there any changes coming in the next year for those people who are looking to do that? Yeah, I'll take that one. So, yeah, real estate income, commissions income is taxed with ordinary income. So whereas, you know, in the real estate realm, we always hear people talk about there's so many tax benefits of being an investor. This is a completely different bucket in the eyes of the IRS. So it's tax similar to W2 income in a way because you have to pay federal and state income taxes as well as self-employment tax. So that's sort of the downside. But from a benefits perspective, if you're a real estate agent and also you're an investor,

and if you're a real estate professional, oftentimes you can use rental losses from your real estate to offset the income taxes from your realtor commission's income. So it's a really great way to generate active income, but also potentially reduce it through your rental property. So that's really good. I mean, currently under the Tax Cuts and Jobs Act, Real estate commission's income is one that is usually eligible for the $1.99A tax deduction. And I want to bore you guys with the code sections, but effectively that just means the first 20% of that commission's income could be zero tax. So we've seen that to be a huge benefit in terms of our clients who are realtors or brokers in reducing taxes from commission, right? Zero percent tax

on part of that income. That makes sense. So let's talk about what you were just mentioned there, but offsetting your income. I'm going to shift a little bit towards the tax stuff real quick with you guys, because this is so important. I want to talk about offsetting that earned income, whether it's a real estate agent, whether you just have a really good paying job or whatever, you made money somehow. What did you mean by that? For those who don't understand what that means, you're offsetting your income or your deduct, like how does that work? And why is real estate beneficial in that regard? Well, yeah, it's the way it kind of works is for a lot of our clients, they are full-time investors.

And now we have some there, you know, kind of part-time, but it does run the gamut from work at the W-2 job investing on the side to just being a full-time investor. But really from a tax perspective, the one huge benefit is if somebody is involved in the quote-unquote, we call it like the day-to-day stuff of doing investing every day, they can have a good likelihood of qualifying as a real, what's called a real estate professional for tax purposes. And when you do that, if you can generate losses from your rentals through,

like depreciation and other tax strategies, you can use those losses to deduct against your W2 or your earned income or whatever other business income you might have. That's a huge advantage for the day-to-day investor where the passive investor may not get that opportunity. That's just because of the way the tax law is written, they want to incentivize a day-to-day investor to get, I guess, more benefits, right, than the passive investor, if you will. Yeah, so how does that apply to, I guess the best way to state is, like, people who

invest in a syndication. Like they still get the depreciation benefits, don't they if they're a passive investor in that? Like how does that, I guess I've never really understood that is they aren't real estate professionals because they're just passively investing in somebody's fund. They put money, you know,

with somebody. Right. How are they getting a deduction still? And, oh, I guess is that still, like, well,

how's that a thing? Yeah. And that's a common misconception. We get that question all the time. People will say, oh, I'm not a real estate professional. Therefore,

I cannot get depreciation. therefore I cannot take home office. And that's not true at all. So investors, all investors can take depreciation if you have a valid home office, if you use your car for business, you know, as long as it's related to, you know, you pursuing your real estate activities, these are all tax deductible. So all expenses, including depreciation, can always offset rental income. In your scenario, you're talking about a syndication investment, right? It works exactly the same way if it was someone owning a property on Main Street. You can always use those to offset rental income. The next question then is if we've already wiped out the taxes from our rental income, and we also want to

try to use it to offset taxes from other income, like a W-2 or some sort of commissions or whatnot from real estate. And David's example, then there might be some limitations for higher income earners. And that just means that, you know, if you're a higher income earner, then if you're a real estate professional in the eyes of the IRS, then you can use the excess loss to offset these other time. So that's really the only difference. But there's nothing special about depreciation. everybody can utilize it to offset taxes on the rentals. Okay, that makes sense. All right.

So I'm going to jump around a little bit today, but I want to run back to David again real quick because we asked who should not become an agent, who shouldn't do that. So keeping all this in mind now that there are a lot of tax implications, you're going to pay a lot of taxes as an agent. I mean, would it be fair to say, Amanda, if you're in a state like Hawaii or California,

you may end up losing up to half your commissions? Is that fair? Maybe not quite that much? Yeah, no, that's very possible. Yeah, crazy. All right. So how like who then David should become a real estate agent? Who's that worth? If you're going to potentially lose half of it, unless you get some creative strategies like Amanda and Matt are talking about, who should become an agent, David? Well, Amanda mentioned something about when you're making good income as an agent, real estate investment stuff can help offset some of the taxes on that income, the depreciation.

So that only applies if you're making good money as an agent. And then Jay mentioned as an investor, this is where being an agent can help you. you can have some control. So those are two great points to consider. But what I want to take away from it is that you're also spending money in time to become an agent. It isn't as carefree as I think a lot of people look at it when they watch H.E. TV. So if you're not making good money as an agent, all that depreciation from your portfolio isn't actually saving you any money because you're not making it. So the person that I believe should become an agent is someone who first off loves real estate, which is why we talk about this to bigger pockets people. because they're here because they love real estate.

They want to be free from the confines of their current situation, but they don't necessarily want to completely be retired on the beach, kicking back, doing nothing. So it allows you to become a business owner. And in my opinion, the duties of a real estate agent are more easily leverage than many other jobs you could have. I can't think of any examples off the top of my head, but if you're a truck driver, you can't exactly pay someone to go drive the truck for you.

As a real estate agent, there's a lot of things. that you can do, that you can leverage others and build a business out of what is normally looked at like a job. So people that are interested in a form of entrepreneurialism, this is a great way to get started. And then the person who is known as a real estate person, be that a buy and hold investor, a flipper, anything to their sphere, to the people that know them. That's one of the reasons that my business did very well is when I got my license, everyone that knew me already saw me as a real estate person. It wasn't uncommon for people to call me or text me and say, what do I do with this house or I want to buy a house? Where should I go?

Hey, what's up with this loan? Do you think this interest rate is good? They already kind of saw me that way. And I have a feeling a lot of our listeners are in a similar boat where everyone knows they're a real estate net. We get this bug and we're into it. If you're looking for a change and you already have that, that's a huge, huge asset in driving business towards yourself to get that business started. Yeah, I had a deal that came across my desk earlier this week and it was in the Bay Area of California. And it took me about three seconds before I thought, David Green. I need to get in touch with David because, A, he's an agent, so he knows the market better than 99.9% of investors out there. But he also understands from an investor's standpoint what I'm looking

to do. And that's just tremendous value add to any investors. And I mean, I pointed out earlier that we have our license. My wife is licensed in three states. I'm licensed in one state. But we still have real estate agents, third-party real estate agents on our team, because yeah, we like that control, but there are so many things that a great real estate agent is going to be better than my wife or I are going to be good at, because that's what they do every day. We're investors. So even though we like that control, there's still tremendous opportunity to leverage the value and the benefit of a real estate agent, even if we're licensed and in some cases we're doing our own deals. I also need to point out, and just a little bit of a plug for my show,

episode 20 of the Bigger Pockets Business Podcast, we had David Green on. And as good as you might think David is as a host, he is a hundred times better as a guest. He was my literally, no offense to you, Brandon, because you were on the show. And all her other guests, David was absolutely my favorite guest ever. And for anybody that really wants to dig into the mind of somebody who is an investor, an agent, and just an awesome business person, you have to listen to episode 20 of the Bigger Pockets Business Podcast. I mean, it was just phenomenal. And so, David, I'm excited to read the book because, I mean, just based on that

episode of the podcast, it's David's great. All right. So honest question here. Let's get serious for a minute. How much did David pay you, Jay, to say that? I I I it was literally the easiest episode we ever did that's actually true and and and one of the best this is why today I told David he gave him information about that deal in Norco you know exactly Jay you want to know about that deal here's what I'm going to need from you buddy all right

so let me ask all three of you all four of you a question and just uh the same question what do you think makes I know like obviously David you're an agent jay you're an agent your wife's an agent Amanda and Matt, you are not agents, correct? Yeah, I think we will be after this. Okay, there you go. I'm not an agent. You're licensed, but you're not an agent. I have my real estate license.

I can legally do what agents do, but I would not call myself an agent. David and his team are agents. I just have my license. I can own a business and not be an entrepreneur or a business guy. Which is a topic I would love that you actually get to. We're definitely going to cover that today because that's so valuable. So here's the question. what and so Amanda Matt more from your perspective as a as an advisor to agents out there what but

I'll start with David what makes a great agent like if people right now are listening to going I need to make more money in 2021 I've got to I want to make an extra 50 an extra 100,000 $200,000 so maybe I can go invest in real estate what traits what skills allow people so I'll start with David and I'll go Jay don't why don't I go last I kind of want to hear what they have to say all right let's start with Amanda and Matt then like what have you found the agents that you guys know that just like, I mean, you know their taxes. You know who's making money. Like, what do they have? What's special about them? Gosh, I think just kind of going back to what Davis said earlier, just really treating it as a business for our client. We do have clients who kind of earn some commission

on the side, maybe just for their own deals. But yeah, the ones that are truly successful, they run it like a business. They, you know, they try to systematize and streamline as much as possible. And I love what David said earlier about, you know, growing that business where you have other people working for you, delegating and making commission. So that's typically when we see successful agents or brokers, they have those business systems in place. Yeah, I think the thing that comes to my mind when you guys were talking about earlier too was I had a friend asked me this few years back. And, you know, he's, I'm thinking about becoming an agent. And it's just like, the thing that stands out is you've got to be flexible, you know, you, as to David's point is like, this is not a,

you know, Monday to Friday job. Like, you know, if you've got, you know, kids and you're doing soccer, baseball, whatever on the weekends, you know, hopefully post-COVID. You know, you got to be flexible. That's when people obviously want to go look at houses, right? So it's not as, it's not as you've got to be willing to go roll with it, you know. So that's what I've seen the people are the most successful. They can make that work in their situation. There you go.

Jay, what do you think? So I can answer the question from two sides. So what makes a great agent in terms of an agent being successful? And then what makes a great agent from the perspective of me being a customer of that agent and why I think they're great. From the first, certainly Amanda and Matt hit the nail on the head, that it's all about treating it like a business. And I talk about that in real estate as well. Every business is the same. I mean, not the same. Every business is different, but every business has the same components. I mean, you have to be great at marketing. You have to be great at sales. You have to be

great at operations. You have to be great at customer service. You have to be great at all of these things. And being an agent's no different. And a lot of times as real estate investors, we get into this mindset of it's a solitary business. We can be investors ourselves. Yeah, I can find my deals. I can rehab them. I can sell them. And I think a lot of people feel the same way being a real estate agent.

They feel like I can do this all myself. I can find clients. I can market houses. I can sell houses and get them to the closing table. And technically you can do that. But just like in any other business, you're probably not an expert in every aspect of business. You're not both a marketing expert and in operations

and a supply chain expert. You're not an expert in all these things. And so just like in any other business, if you want to be successful as a real estate agent, you have to surround yourself with people who are experts in each of these areas. And you have to bring in the right people and you have to trust them and rely on them

and build a cohesive team that can do that. So exactly the same thing Amanda and Matt said. Now, from the perspective of me as a client of a real estate agent, some of the things I look for, every agent does some of the same things. They're going to put the house in the MLS. Hopefully they're going to hire a good photographer. Hopefully they're going to write good copy. I want an agent that does more than that. I want an agent that's proactive, an agent that goes out and says, especially as an investor, I want an agent that can tell me this is the level to which you should rehab this house to get maximum value out of it. And this is your demographic of buyer. Here's who's likely to buy this house. You're likely to have a family with one young child. you're likely to have an older couple with no kids or you're likely to have a middle-aged couple with an elderly parent. And knowing who my likely buyer is based on the demographics, and you'll never be perfect there, but knowing who the likely buyer is, that tells me what amenities I should put

in the house and what finishes I should put in the house and what special touches I should put in the house. And so a great agent to me as an investor is going to help me make money by helping me make great decisions before I list the house. Too many agents are just like, okay, call me when you're ready to list the house. The great agents are like, call me before you buy the house. That's really good, man. Really good. Before David, I'm going to go to you last David, because you're in, you're like,

you wrote the book here. I'm going to say this. I had a buddy who a year and a half ago decided he was going to get his real estate license, said he needed to make more money, super low on income, struggling to put food on the table kind of situation. He said, I'm going to be a real estate agent. And I said, I think it's a great idea. I think it's a great way to make money.

But my advice to him was if you're not willing to, to make no money for the next six months, but work every single day anyway, then don't do it. If you're not willing to do that, and I'm not saying it takes six months or a year to make money in real estate, maybe you could do it in the first week or two, maybe.

But what I see is that so many people, they see the outcome that they want, make an extra $100,000, $300,000 a year as an agent, yet they don't realize it takes a long time, maybe six months, maybe a year of not making anything while you're learning and struggling and trying to build up clients and all that. And if you're not willing to work,

work for a solid year. And I actually give us advice to all business owners, no matter what business you're going to do. If you're not willing or capable to do heavy amounts of work for a long period of time before you start reaping the rewards and don't do it. So that would be my advice for future real estate agents. What do you think, David? That's a great, I mean, I literally say the same thing in the book. You have to understand. Just like everything else in life, you want to start buying deals. It takes a while to get your name out there to find the right contractors, to find the right rhythm for you. You want to get in shape. You don't have great results the first time you go to the gym.

You don't have any results the first month or so. You're just sore all the time and you're trying to learn what to do. But nobody doesn't have results six to nine months after consistently going. So I think that's a big hurdle for new agents is not many times in our lives. Have we been in a situation where you went to work and didn't get paid? It's a hard mental shift from I deserve X amount of money an hour because I'm at work to, I deserve whatever I can get. And Jay just described the value that agents should bring.

You don't know how to do that when you're new. You don't know what to tell the person before they buy that house. You have to learn. And that's a big, big problem for new agents is that they go in there just not understanding the W2 mindset does not work in the 1099 space in the entrepreneurial space. So this book is the first of a three-part series written for agents. And it's written, the first book here is written specifically for new or inexperienced agents. Maybe you've been an agent for four years, but you haven't sold many

houses because you never got good mentorship or training. And it comes from the lessons that I taught the new agents that were on my team that worked in my business that helped my clients. So they come in, they're green, they're hard workers, they're honest people, they're smart, they have no idea what to do. That is the, that's the most crucial part in your career and it's the most difficult because you got to convince that person to go to the gym every single day when they're not seeing results. And I took all the lessons that we've taught the agents on my team, and I put them into this book for all the people that I can't personally mentor, because I think that's probably the biggest whole in the real estate agent space. I got my license. I'm ready to go. I'm going to take on the world.

What do I do? And there's not a whole lot of answers that are given to you until you go get a bunch of leads and a bunch of clients. And then your broker is going to say, okay, now I'm going to teach you. So there's a lot of things that go into making a good agent. There's not a lot of places to get them. There's actually a huge shortage. When I was, when I, people would ask me, what's a good book to read? I just got my license and I said, well, the millionaire real estate agent's really good. And that's it. I can't think of any other books have written.

So that's why we wrote this book because I know there's a lot of listeners on bigger pockets that are also real estate agents. We talk to them all the time. And they're all asking me questions that I can't answer to the thousands of people that are saying, what do I do? So that's why this book was written. And I'm happy to talk about more specifics or if you want to open it up to go another direction. That's cool too. Yeah, I would say, let's move on from the agent thing. I will say this.

I mean, everything you write, David, is phenomenal. This book is no difference. It's really, really good. And it's really good even for those who are not trying to get into real estate to understand as an agent, to understand the mindset of an agent, but more importantly, what it takes to be successful in anything. You could literally, like, apply every, pretty much every principle you wrote in that book to other areas of life, including real estate investing.

And it really translates well. So definitely I would recommend people pick up the book. You can get it by going to, what is it, biggerpockets.com slash new books. All right. New books? Yeah, that's one of the links they have where I did not even know that was a link. You know all the new books that are getting ready to come out. All right, all right.

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which is much cheaper than learning the hard way. I want to shift a little bit here and go back to 2021. here we are going into it. We talked about making more money. Actually, before we go to the taxes, I want to go to business, like generating money from business. So Jay Scott, you know, host of the Bigger Pockets Business Podcasts. What opportunities do you see coming into 2021 for people to make more income, to make more money so they can then invest maybe in real estate with it? I don't necessarily see any different opportunities than I've seen in previous years. that said, again, being a real estate investor, I think there's always opportunity in real estate

adjacent spaces, areas that are related to real estate but aren't necessarily specific to real estate investing. So we talked about real estate agent, potentially owning a real estate service business, so an electrical business or a plumbing business, I own a mold remediation company. The synergies, as the great word that David chose there, are tremendous. One, you have a company that can do work for your own projects. Two, you already have a built-in customer base. You network with other investors in your market, hopefully. So potentially you have an avenue for marketing for your services or your business. And additionally, it may give you discounts on materials. It may give you access to labor at cheaper prices. There's so many synergies by owning a real estate adjacent business. One of the potential values of, in 2021 that we don't normally see, and I said there are none, but that may not be true, is simply the fact that with COVID and with the economy where it is, what we're seeing or starting to see is there are a whole lot of businesses that are going out of business these

days. There are a whole lot of business owners, unfortunately, that weren't able to weather the COVID storm. And over the next several months, maybe the next several year, as stimulus starts to run out, I think we're going to start seeing a lot of businesses that go under. And that does provide an opportunity for anybody that's looking to buy a business. There are going to be a lot of business owners out there who are, they'd be happy to take a small amount for their business as opposed to having to shut it down and take nothing. Or I've talked to plenty of business owners out there who are telling me that I would be happy to give my business away to somebody that would come in and promise to keep my employees. Basically, they just don't want to have to lay people off.

So what we may see, and I said this, and I was wrong, I said this eight months ago, I said, there's going to be a tremendous opportunity this summer to be buying these types of businesses. And what we're seeing is that that hasn't happened, but mostly because the stimulus has just kept going and going and going. But once we see the stimulus run out, I think we are going to see a number of businesses that start to go away. And there'll be a lot of opportunity for entrepreneurs or real estate investors who want to buy real estate adjacent businesses at low prices or, again, maybe even free if they're willing to put some money in and keep the employees. And then additionally, longer term, I think what we're going to see is because all of these businesses going out of business, we're going to see a lot less competition in a lot of these spaces.

So we're going to see some opportunity to come in and be able to snag some market share a little bit more easily than we were in the past just because they're going to be fewer of these businesses out there. So with that in mind, all of us here today are business owners of some sort. Absolutely. What are some shifts that you can recommend other people take to be successful in the new economy? Yeah. So one of the big things, one of the big opportunities is because we have a lot of businesses going out of business, because we have a high unemployment rate right now, there are a lot of very qualified candidates that are looking for work. And I think it might have been on your episode of the podcast, the business podcast that we talked, David, about the fact that one of the big mistakes we see a lot of business owners make is, is they want to bring in employees that are really inexpensive. And those inexpensive employees are the ones that you have to train

and you have to spend a lot of time bringing up to speed and you have to teach them. And that's great. I mean, you can basically mold them how you wish and save some money. But if you really want to be impactful on your business, bring in employees that you're not training, bringing employees that have expertise in an area that you don't and that can hit the ground running from day one. I don't want to train a marketing person because I'm not a marketing person

because I'm not a marketing expert. And I can save a lot of money by bringing in somebody that's not a marketing expert in my real estate business. But given that I'm not an expert myself, I'm not going to do a great job of training them. It's better for me to spend twice as much money and bring in somebody that on day one is going to start generating income from my business than it is for me to spend half as much money and have to wait six months for that person to generate any income if they ever do. Why do you think that's so hard for people? Because that's hard for me, right? Because I get that fearful, that cheap.

I want to go hire the cheaper person rather than the good one, even though the good one's worth 10 times what the cheaper one is. Here's what I found. And I think a lot of us, our initial thought is we want to save money. But if you really dig in and talk, I've talked to a lot of people about this when you really dig in. It's often not the money that's the concerned. For a lot of people, the concern is that they're terrified of hiring somebody that's smarter

than they are. They're terrified of hiring somebody that they feel, I don't know what to tell them to do because they know more about this than I do. I don't know how to define their job role because they know more about this than I do. And they feel like by hiring somebody that is less experienced than they are, they don't never have to worry about saying, I don't know something or I'm not an expert here. And hiring somebody that is an expert, you have to admit you don't know what you're doing, at least in their role. And so the first thing I would say is we have to remember as business owners, the best business owners surround themselves with people who are smarter than they. they are. In my most successful businesses, I worked at Microsoft for a long time. And we used to have a saying at Microsoft, if you work with people who, if you're a hiring manager and you have people who aren't as smart as you are, you're not a good hiring manager. Every single person you hire should be smarter than you are. And if everybody in the organization does that, every year that organization gets better and better. How do you guys balance that? I'm curious to all of you,

Maybe you can jump in real quick. How do you, how would you rate or rank, I should say, experience, culture fit, and skill set. If you had those three things for an employee, they have people who can, they have the skill set needed. Like let's say you need an underwriter for your real estate business. So somebody who is really good with spreadsheets and can run the numbers, but hasn't really done a lot of real estate. And then there's somebody who's got a ton of real estate. They got a lot of experience in the industry. And then there's just, I'm a really good cultural fit.

I like hanging out with them. I like being with them. How do you balance those? how do you rank them? How do you view those three things? Maybe I'll start with Amanda and Matt, and then we'll, because then you guys hire a lot of people as well. And then we'll jump through David and then Jay. That's a great question because I think, you know, we've had our own business for 12 years now and we've probably run across the gamut of that situation where someone's got, you know, all three of those, someone's got one, you know. I mean, on the front, I think experience

does is important, but then again, do they have the right experience, right? I mean, they can have a resume that says they've been doing, you know, taxes for six years. So, you know, we think they're going to have a certain level of experience because they should have known how to do A, B, and C, but then when you go and talk and interview them, you'll find out that they're really, in our eyes, they have two years of experience, you know, so the experiences and everything, cultural fit, I think, just, in my eyes, probably depends on how big your organization is. You know, if you've got 100 people and somebody doesn't, quote, quote, fit in the best, maybe it's not such a big deal.

When you've got, you know, if you only have, like, five people or something, that's probably going to be a bigger deal, you know. But again, it depends on how the economy shapes up with people working from home, working from the office, you know. Yeah, I think like Matt said, and that may be specific to accounting. I know Jay earlier you said, you know, you can hire a lot of good quality people in today's market. We really haven't seen that on the tax side just because there's been such a shortage. And oftentimes we and every people who have just bad experience from working with other CPAs. So it is for us really just being able to find someone that, you know, is quick.

learner, smart, detail-oriented, who can learn quickly the right things and implement them the right way. David, what do you think on that? Experience or skill set or culture fit, which is most important? What do you look for? Well, skill set, meaning if you're hiring an accountant, they have to be analytical. That's non-negotiable. You don't even try. If you need to center for your basketball team, you don't go looking at five foot three players. That just, it doesn't make sense. So I just assume if I'm interviewing you, you have the skill set for the role. And then it comes down to experience versus was the attitude? A culture. Yeah. Attitude. Culture fit versus that. Yeah, versus experience. So now that I've limited to just those two options, what I say is I need

somebody who has experience if I'm looking for a leadership role. Here's my vision. I need you to drive us to where we're going. Like for you, that would probably be Brian who helps get the properties you guys are looking for. He's done it before. You turn it over to him. It doesn't take you three years of Brian maybe developing into what you need him to be. When it comes to a maybe smaller role or less of your company success is dependent on that person, that's where I can go more with culture fit. This person isn't maybe going to get paid quite as much. They have more time to learn. They're an assistant to your Brian. To the leader who's going to drive it forward. You can get away with it there and that's where you kind of, you know, find that Tom Brady that was drafted at the end

of the draft that turns into the great player. Which is exactly how it operated. I brought Brian Murray in who wrote, you know, the book crushing and commercial real estate and apartments. And then we're writing the new multifamily book that comes out next year. Brian Murray was like my, yeah, experienced guy, but he doesn't want to work 40 hours a week at this thing. So we brought in Walker. Walker is now my basically integrator. He's my underwriter. He runs most of the day to day. We call him my integrator in training because he is, he doesn't have the experience, but he had the skill set and the culture fit perfectly. We then took Brian's experience and now he's gaining experience being part of that. So that's a perfect example of that. Jay, what do you think on those three things? What do you look for?

What do you care most about? I'm going to be a little bit contrarian here and say that of those three, there's only one that's a disqualifier and that's culture fit, especially in a small organization, but even in a larger organization, somebody that doesn't fit in the culture is going to hurt morale. ultimately at the end of the day, they're going to hurt the organization in a way that's going to outweigh how much value they can add. No matter how strong their skill set is, no matter how much experience they have, if they're not a good culture fit, I will contend that they will hurt the organization more than they will help it. I'm not saying there aren't any exceptions there, but general rule of thumb. And this is something I've learned the hard way over the years, because it's real easy to say, yeah, we can we can overlook the culture fit for this one person, but one person who has, that doesn't have the culture fit, can really drag down an organization. So that's number one for me. In terms of skill set and experience, they're kind of, they're interchangeable. Typically, somebody that has a lot of experience, but not the skill set, is going to be a little bit more valuable because they can

acquire. We learn how to learn. And over years of doing anything, we get better at learning. So somebody that has 20 or 30 years of experience, successful experience at anything, they've gotten good at learning and they can probably acquire a new skill faster than somebody that has one particular skill, but no experience. So if I had to rank it, I'd say culture fit is a non-negotiable number one. And then typically I'm going to want to see experience over skill set simply because a lot of experience can drive picking up a skill set faster. That's awesome. Well, I got two follow-up points real quick to make on that. And I think you guys would probably all agree with these things. Number one is for years, I thought I had to choose between these three things.

And so I'd hire people without the skill set, but had great cultural fit and it didn't work. So at some level, or vice versa, right? At some level, like now today, it's all three, and I know we all agree with this, they're all non-negotiable, right? Like into a level of like, I'm not going to hire a jerk to come work in my company. I'm not going to hire someone who's fresh out of high school to run my entire real estate fund. So one is don't settle. My advice would be this don't settle if you're like, well, I really like this person for this thing, but they're terrible at this, don't hire them.

There's enough people out there right now in 2021 are going into that that are looking for work right now. You probably just need to broaden your search and before you settle with the one or two people you had to apply. The second point I'd make is the biggest lesson I learned over the last year, year and a half, and building open door capital is that you do not know how somebody is going to be until you work with them.

Like that's like, and this is really, really difficult. And I understand I have a, I have a leg up on this because I have a lot of people that want to work for me. But like we found all of our people pretty much through either internships or previous relationships. So like I mentioned Walker earlier, he came because of an internship. Mike came from who's my investor relations head. He came from one of our internships. Today I have Matt and Drew as two of my interns and they're both like awesome and I'm learning what they're good at and what they're not good at. So relying on applications and interviews is pretty much the best that most people ever do. But if you can find a way

to either JV first, partner first, just get to know them first in some way, it's going to save you a lot of the risk of hiring the wrong hire. That's just a couple things I learned. I was having a discussion with Nathan Brooks, and he's somebody who's been on this show. He's a turnkey real estate operator. He's been on the show four or five times, and we were talking about hiring a couple weeks ago on my show, and he gave one of the best tips that I've heard on hiring, and that's bring them in for a trial run. Bring somebody in. four hours, eight hours, even a whole week. Just say, look, this is what I want.

I'm going to pay you for the week. I might even pay you double for the week. I want you to come in for a week. I want you to do the role we're hiring you for, work with the team, and no commitment. You can walk away on day two and say this isn't working. We can kick you out on day four and say this isn't working. But by the end of that week, before you've committed to a long-term relationship, you know if they're a good culture fit.

You know if they have the skill set. You know if they have the personality. You know if they're going to work out in that role. And so it's a lot less risk on both sides. We like to think of it as the employer. We're the ones taking the risk. But as an employee, a lot of times employees are taking the risk too because they may be quitting another job. And so now they're risking coming to you.

And if it doesn't work out, they're jobless. Or maybe they're not quitting another job, but they're losing opportunity cost. If they come work for you, they've now stopped their employment search. They've stopped interviewing or maybe they've cut off interviews at other companies. So they're taking as much risk as you. So if you can do a trial run, it reduces risk on both sides. That's really, really good advice. Yeah, Nathan Brooks, he's awesome.

All right. So let's go back real quick to this idea of hiring somebody. The last point I want to make on this, when you're hiring somebody, like, what do you guys individually right now? Like maybe even, maybe an actual example, but what are you looking for right now? Like, what is going to make somebody stand out and be like, yeah, I want to hire that person? Because of the people listening to this right now. now that they should probably go find a job working for somebody like one of you three

because that's the best way to gain experience and knowledge right now. So what are you looking for? We'll start with Amanda and Matt. Like what kind of person do you guys look to hire? I think for us, David, Andy, this is I was thinking as you guys were talking earlier too, is one of the things that's huge for us is somebody this detail oriented. And, you know, kind of the point you got to make earlier, like, it's so true is that don't be afraid to.

There's certain things you can teach people for sure, obviously, right? but based on experience of doing this for years, somebody's not detail-oriented, they're not going to become detail-oriented, you know? So it's like, don't bang your head on the wall, like don't, you know, don't try and teach that dog their new tricks. So I think it's definitely detail-oriented.

And I think, you know, probably somebody's a go-getter, obviously, like somebody that's, especially in today's economy and, you know, having to be flexible and adaptable in the working conditions. I think that's really huge. You know, just give an example of detail-oriented, because that's like a word that we all use, but sometimes I'm like,

I don't even know how to explain what that is. I want to give a perfect example. And I'm going to pick on my intern Drew for a second. I love Drew. He's awesome. But this is an example of yesterday I had him deliver rock to my house because we're redoing a garden. And I didn't think I'm not detailed oriented either. That's why I can pick on him a little here.

Like they dropped the rock off. But what would have been super detailed oriented is if he or I would have thought, let's get a big tarp first. Because now once the rocks moved, I'm going to have a bunch of rock all over my yard. Like instead. And now it's just going to create a bigger problem later. That's an example of detour. They don't just think of the issue.

They think of the surrounding issues. And then the things that affect those and then around those. So there's just a tangible example. So again, Drew, I love you. I didn't think of it either. I can give you a good example of, then somebody told me this years ago about,

we do this when we're interviewing people is, you can ask them to pretend their role play, right? Asking to pretend they're a waiter or a server and that they're taking your order for breakfast. So they come and they ask you, what do you want for breakfast? And you say, you know, toast.

You know, if that's all, if they just write it down, that's the end of the thing. I love that. That's a bad sign, right? But if, you know, they say coffee and then, you know, do they follow it? Do you want, you know, cream or sugar or whatever? You know, things of that nature. They can think on the fly and think of those follow-up items, you know. I'm totally writing that tip down.

I love that. That's fantastic. That's literally a training point we have on my team. We say, you're not an order taker. You don't go to the client and say, which house do you like? Oh, you like that one? Okay, let's go look at it. What do you want to do?

I don't know. What do you think I should do? well, tell me, do you want to write an offer? Okay. What price do you want to write it at? You're taking this person who is overcome with nervousness and anxiety and looking to you for guidance and you're reducing yourself to just tell me what to go do, which is so easy. And, you know, the reason we're covering this is because going into 2021 when we don't know what the economy is going to look like, the best thing that anyone can do is increase their own skill set, increase their own ability to be valuable to a company. And you find the people who did that well in 2020 made a lot

of money and the people who didn't are the ones that their businesses literally went away and they had nowhere to work. So that's a great piece of advice is quit thinking that you're an order taker that just runs off after what everybody want. The good waiters say that's a great choice with your filet mignon. How would you like it cooked? Oh, medium rare. Can I recommend a wine to go with that? What other types of wines do you like? That's the people that are going to do really well regardless of what the economy does. That's really good. So Jay, what are you looking for right now? Like, what would you hire right now for? So these days, sadly, over the last couple of months, we've had to lay a few people off

in two of our businesses. And that's always a hard thing to do. And it's reminded me that in good times, we tend to grow a little bit too fast. We tend to hire people faster than we should. We may not be as efficient as we need to be. We may hire two people for a role where one good person could do a better job. And so laying people off over the last couple months is really reminded me. me how important it is to run an organization lean and to ensure that every role is filled efficiently,

not just fill. And again, don't hire two people to do one role because you're too lazy to go out and find the perfect person to do that role. And so I would recommend to anybody right now, again, going to 2021, we don't know where the economy is going to go. Hopefully it's going to go up. My gut tells me, and I'm sure we'll talk about this at some point, my gut tells me that things are going to stay soft and may even soften and get worse before things get better. And so if you're running a business and all of us as real estate investors, as David pointed out, we're all business owners, run your business lean and efficiently. Don't necessarily try and do it all yourself, but make sure that every single person in your organization has a well-defined role and is

performing their role well. And if they're not, go find somebody better now because at some point, you're going to wish that you had the right person in every role. That's really good advice. David, what do you think? Like, what are you looking for right now in your team or whether it's a specific role or what type of character type or personality are you looking for? So I'm looking for people that want to come in here and they want to build an empire. Somebody who says, I have a skill set.

I am good. I want an area where I can grow with no limits. And I'm willing to be a mini David. So like I was saying, when you're the agent, if the client's unhappy, that's a thousand percent on you. There is no shifting the blame. So I like people that have that same mindset who walk in here and say, I have to be accountable to David, like David is accountable to the clients. We all have that extreme ownership. And the thing that I'm passionate about after working for the last three years trying to build a team and build a business that Jay just mentioned is helping people that are

looking to break into the industry understand the mindset they need to do to get in there. So like Jay just said, if you have one stellar person instead of two semi people, when things turn around, that person keeps their job as opposed to two people having to get laid off. Everybody loses. The business owner losers, the employees lose, the government loses because that's another person that goes on unemployment. It doesn't benefit anybody. So we're talking to business owners about, hey, who's who you need to hire.

But I want the listeners who are looking to break into becoming a real estate agent, break into becoming an investor, whatever it is they're looking to do to understand what makes them good at that job. And that's something that there's just another, like, there's a big gap in the education for here's how to be a good employee. And so when it comes to us, I'll tell you, the two people that I have been in 2020 that I was, that did the best job in my companies was my buddy Kyle Rankie, he was interviewed on the BP Money podcast. And he came in in the middle of COVID. His first day was when our economy literally shut down. And last month, I don't know if he's going to want me saying this, but he just made a little interference.

$50,000 in real estate commissions. He's only been doing this for about 18 months total and about like six or seven full time. And he was someone who said, David, I don't just tell me what to do and I'll go do it. He didn't give me pushback. It wasn't a whole lot of, but why do I have to do that when they don't have to do it? He had such a great attitude that he learned so quick. And every single customer that I assigned to him said he is amazing. So I start seeing in my email inbox compliment after compliment after compliment about Kyle. What do you think that makes me want to do? I am way more likely to give him more opportunity as opposed to the person who I'm getting complaints about. And then I go ask him what happened. Well, the customer was kind of salty so I didn't really

like their attitude. So I kind of just ignored them. And then they're expecting me to sympathize with them. Oh, the customer was salty with you. But I'm like, you're trashing my business here. I can't give that person anything. And when you come into a situation, your attitude determines how successful you're going to be, how quickly you're going to learn it, how fast your skill set's going to develop than how much experience you have. Your attitude is so important. And the other one was my lending partner, Christian, who said, hey, I will advise you because I had skill set and I had culture fit and I didn't have experience with all the loan officers. And he was an experienced loan officer and said, I'll do everything for free. I don't care. I just want to partner with you.

And for about four months, he advised everybody pretty much for free. It didn't ask for a thing. And what do you think happened at the point where I'm like, well, I can't do it. without this guy. Now he's a partner in the company because he came in with the right attitude. And when you find the right fit, it's okay to think that way. You don't have to be so worried about, like, well, I need to make sure I get mine before you've proven yourself. And that's the way that I think all of us are, like Brandon, with the people you're raising money from, you don't go in there and tell them all your fears about them. You answer all the fears they have about giving you money. When Jay's running his companies and someone's bringing him a deal, he's approaching this like,

How do I make that person who brought me the deal want to bring all their deals to me? He's not just thinking about his own side. And I would say that's, if you want to be successful in 2021, have the faith to say, I'm going to serve this other person and put them before myself and learn everything that I can and watch and see if that develops into a good opportunity. If it doesn't, well, then you go find a new company to work for. But that's how you ingrain yourself into someone who's already being successful. And I think if we all sat here and said who are best employees were that helped us build the most,

that are now being compensated the best. I bet you that's a trait they all have in common. Yeah, man, that's really good. I want to pivot this show now a little bit and move over to, I mean, we have like my actual tax CPAs here on the call. So we should talk taxes a little bit. Specifically, we're going to 2021. What are some of the changes?

We're going to start with taxes. Then I want to move to economy as well after this. So I'm going to be asking Jay and, I mean, all of you really, where you see the economy headed. But let's start with tax changes that are happening that people need to be aware of those who are real estate investors or are going to become it. So Amanda, Matt, the floor is yours. What do we see coming in the coming year?

Oh, man. So, well, firstly, I think before we talk about next year, what's coming up in 2021, just want to do a quick reminder that the CARES Act brought us a lot of great tax benefits and tax saving opportunities. Those are things that we know are in existence. So, you know, as we head into the end of the year, one of the main things to do is to make sure that you're working with your tax advisor and figure out. out how some of these benefits might be able to help you. I think for a lot of people,

especially for investors, you know, 2020 may not have been the best year. And so it's really about turning lemons into lemonade. If you have losses, there are opportunities to carry it back and get refunds for prior years, for immediate cash in your pocket. There are ways to access retirement funds with no penalties before the end of the year. So there's still a lot of these benefits that we know that are in existence that we can take advantage of. In, in terms of, you know, getting some cash flow that might be needed. But looking ahead at 2021, unfortunately, there's, you know, all signs point to potential tax increases.

We really haven't seen anything that's indicating the opposite. And maybe Jay will tell us more about, you know, macro economically why that is and how it's impacted. But really, you know, from an investor's perspective, you know, one of the things we talked earlier about with David on that realtor commission right now, you can get up to 20% of that tax free. So within the proposal as it exists, there are talks that may be further limited starting in 2021 or later years. We don't know. But certainly the changes that are coming up are all counting towards or pointing towards additional taxes. Of course, you guys all know that there are talks that there might

limitations or phase outs of 1031 exchanges, which are huge for most of us who own rental real estate. So really not much in terms of tax benefits. But at the end of the day, I think the keyword is tax planning. Because as tax changes come out, CPAs like us and others in the community, we are already taking lots of classes and reading and research to see how do we get around some of these tax increases? What are going to be the new strategy? Should a couple questions on that. One, 1031 exchange, if that goes away, that was a talk during the, during the campaign, I think that Biden, I don't know if he personally said it or just part of his documents somewhere,

said that they might do away the 1031. Do you, A, do you guys foresee that coming? This is kind of an open question to everyone. Do you think that actually could happen? If so, how does that affect real estate? How does that affect us as investors? Well, I think he didn't mention it at some point or the administration mentioned it in one of their people. It wasn't as clear cut as some of the other things that he's talked about.

So it's a little more vague, but, you know, is it going to go away? Is it only going to go away for people who make more than a certain amount of money? It's totally unknown. But I personally, I, you know, this is my personal thing. I'd be surprised if it went away. I think there's just too much of a strong lobby to keep it around, and whether it's to some extent of the full thing. But I think, I don't know. I mean, obviously, I'm not an economist, but I feel like it's going to, it could slow down the, you know, selling process or the number of homes are sold and what have you. But yeah, I think the 1031 exchange, a lot of people don't know, but a lot of the 1031 benefit

actually went away as part of the Tax Cuts and Jobs Act, starting in 2018. So you used to be able to 1031 exchange and defer taxes on other assets too. So business assets, when somebody sold business assets, you could have deferred the taxes before, although we always talk about real estate because we're real estate investors here. But that actually went away under the previous tax. reform. So, you know, like I said, is it possible, I mean, anything is possible, but hopefully that's not the case. I think, you know, looking ahead, if 1031 exchanges removed completely and the capital gains tax rate, another part of the proposal, right, for might be increased to over 39%. So you combine

those two with someone whose own real estate for years and years. And now, not only do they have to pay taxes, but it's also going to be at a much higher tax rate. I think, people will think twice or more about whether they're going to sell a specific property. Yeah, I would envision a whole lot fewer big apartment complexes that have been traded up over the last 20 years. A lot fewer of those sellers wanting to sell. But what do you think, Jay? So obviously I don't know. We're all guessing here.

But I'll throw out a couple things. One, it's important for us to remember that first and foremost, and over the past four, eight, 12 years, depending on who you ask, there's been this push towards the president having a lot more involvement in legislation. We've seen a lot of executive orders over the last two administrations. And so historically speaking, that hasn't been the case. I'm hopeful that we'll get back to the point where presidents are not making legislation and it goes back to Congress to make legislation. So I'm hopeful that even if the president decides to do certain things with respect to taxes,

that he will push it to Congress to make those. decisions. And so then the important point to realize is that there are a lot of people in Congress who rely on real estate as their primary source of income outside of their congressional salary. And historically speaking, Congress has not done a whole lot to vote against their own interests. So the fact that, and we've seen this with things like conservation easements, which actually have been tested a lot the last couple years and certain real estate loopholes, and now I think see it with 1031's. I have a feeling that Congress is going to be very hard pressed to pass laws that would hurt them in their own pocketbooks or their own wallets. So I'm not too concerned about

1031's going away. That said, I think it's pretty clear to me that we are going to see an increase in taxes overall. I think we would see that with either administration, but certainly it looks like the Biden administration is going to be taken over, and they're certainly pushing for greater tax increases than we would see if the Trump administration we're going to stay. So I think it's something we need to prepare for. And I think as real estate agents, part of our real estate investors and business owners, part of our job is to zig and zag as things like this are thrown at us. So am I happy about it? No, absolutely not. But I will do what I do with any administration and any changes that come my way. I'll figure out how to zig and zag

best I can. I think that's a really good point is that a lot of there's a lot of fear around change. This is not just with real estate or taxes or politics, but, but especially in those three areas. People get fearful because the world is changing. But I think it's just a good reminder that like that's that's the nature of life. We zig and zag and zag. We move with it. And generally speaking, if you're listening to this show right now, you are probably smarter than the average bear, right? Like you're, we're going to figure this stuff out. So like, let's just like, yeah, when, If you all start feeling anxiety, people listen to this, feel anxiety about the coming year, the new administration or what's going to happen.

Like, we always figure this out. And investors typically come out ahead at the end because, like you said, Congress is largely made up of many real estate investors. And so it's usually not too terrible for us. Let's talk about COVID, though. Like, where do you guys see the economy headed in 2021? And again, we don't have crystal balls. We're just guessing here.

But for the sake of conversation, let's start David Green. What do you think? What's COVID? and what's all the unknowns and uncertainty is going to do to the economy and real estate specifically? I think you're going to see a bifurcation of opportunity. That's a big word. I don't even know what that word means. You're going to see a polarization.

That's still kind of big. You're going to see everything was in the middle, going to go to the two extremes. If you were for a certain industry, a splitting, a splitting. There we go. I'll just say like a twoferization. A twoferization. I think this should be a new word. Anyway.

That's such a good brand. It's a bifurcation. Okay, go ahead. So if you work for a company like an Amazon, and I don't want to give a huge list of what they all would be, you're going to do really good. You're going to be getting raises. You're going to be in a solid position. If you work for a company where you worked in a manufacturing plant that's going to come under a ton of regulation and restrictions, it might be harder to keep your job or at least be able to do well. So what I'm noticing specifically in MySpace as an agent is that condos and townhomes are becoming much less desirable.

single family homes with yards that have more square footage are becoming much more desirable, which was the opposite of the trend that we saw for the last eight years or so, where all millennials were wanting to buy in the big city and they'd get a tiny little condo, but the location was what they wanted. They didn't have to have a car. That's all changing. And that's to Jay's point, you got to be okay, zgging and zagging. You cannot just get comfortable thinking, this is the way it goes. I don't have to educate myself anymore. I don't have to pay attention. So one of the things that I'm noticing is helping people who are considering buying look at, well, shelter in place might now become standard operating procedure with our country. It might be the next, there's going to be

another virus after this one. It could be other concerns where they say, nope, everybody batten the hatches, stay home. How do you position yourself so that you can do better there? When you're buying properties, do condos become something that you can expect appreciation with quite as much? I bet you in your market, Brandon, in Hawaii, I think you guys had a condo. You probably We just got it sold and you might not buy another one if it was in today's environment. So that's one thing I'm telling people to prepare for. And the other is that I think I made this point a little bit earlier. Most people look at it from this binary perspective of, am I working at W2 or I'm retired doing

nothing? And real estate's the way you jump from one to the other. Owning real estate is. I like to consider, well, there's a spectrum. How do you move from I punch a time clock? I work nine to five. I'm a straight W2 into I have some freedom. I have some flexibility.

I'm a business owner. And then eventually I become an investor. Maybe more like the Robert Kiyosaki cash flow quadrant. You don't skip from employee to investor. There's actually a transition. It's okay to take so that if we get a big change or when we get the big change and you don't know exactly where it's going to come from, you are prepared to handle it no matter what. That's really the advice that I give people because I don't have a crystal ball.

I can't tell you what's going to happen. But I can tell you that's going to change. Whatever we're used to isn't going to be the same. So position yourself where you can be very flexible and you'll be okay. Amanda, Matt, what do you guys think? Where is the economy headed and real estate specifically? Oh, my gosh. And we're going to hold you through this and we're going to broadcast it.

I know. I feel so pressured. Gosh, you know, I have to agree with David said. I think I don't know about the economy as a whole, but, you know, back down to at the individual level, I completely agree because we have clients who, you know, maybe work in the tech space and our real estate investors where COVID, 2020, even 2020, are projecting huge windfalls. And so from a planning perspective, it's okay, how do we take those windfalls maybe in stocks

and put it into real estate so we can scale very quickly? And then we also have clients who are, you know, just our landlords who are struggling a little bit this year because tenants and ability to pay and things like that. So for us, you know, we kind of see the two different spectrums that was mentioned earlier. I think from a, you know, from an action perspective is really just being able to pivot, like you guys were saying earlier. You know, we have clients that earlier in the lockdown, people who are doing Airbnbs where they weren't able to get any bookings, everything was refunded. And for a lot of those people that were talking to, they've now made up whatever was lost in those earlier months and even more because now, you know, people prefer to do Airbnbs rather than staying in large hotels with a lot of other unknowns.

So I think regardless of what the economy does as a whole, there are always things that we can do in looking at what our resources are, what our expertise is. and how do we deploy that so that we can continue to build our wealth, irrespective of what the economy at large is doing? Ah, that's good stuff. Jay, what do you think? Let me kind of start with, you always want to ask, first and foremost, where are we right now? And normally there's an easy, clear response to where are we now?

That's normally the easiest question to answer when we're talking about the economy. Where are things today? The problem is we don't know. where we are today. There are so many inconsistencies in the economic indicators that we're seeing. On the one hand, we look at things like the stock market. Let's just take the stock market. We hit an all-time high in the Dow last week, this week. I mean, at the same time, we're seeing real unemployment at about 15%. We're seeing U3 unemployment, which is the common unemployment measure at about 8%. We're seeing unemployment filers at 800,000 people this week. We're seeing

the largest number of people who haven't been able to pay their rent or who haven't paid their rent in history. We're seeing the largest number of people now we are giving them the option of not paying their mortgage through forbearances, but we're seeing the largest number of people in history not paying their mortgages right now. And at the same time, as David pointed out, there are a lot of people who are doing tremendously well. Billionaires are making billions and trillions dollars more and people that work for big tech companies are doing tremendously well. And so right now, we're not seeing any consistent. People always ask me, where are we in the economic cycle? I wrote a book all about economic cycles and people read the book and they say, so where are we right now? And I'm

embarrassed to say that when I wrote that book, nobody had ever thought about something like this happening, not just me, but economists. And right now we're kind of nowhere in that economic cycle. We're outside the economic cycle. So that leads me to the next big question that we need to be answering. What's going to get us back into the cycle? And once we get back into the cycle, where are we going to be. So let's start with that first question. What's going to get us back into the cycle? In my opinion, the thing that's going to kind of get us back into reality, economic reality, is when the stimulus runs out. Right now we're living in a faux or a fake economy that's being propped up by all this stimulus. And it's personal stimulus. We literally sent out checks

a couple months ago to every American. It's small business stimulus, PPP, EIDL loans. It's big business stimulus. I mean, the too big to fail and basically carving out trillions of dollars that we're just handing to businesses without any accountability. Then we have what we're doing for renters and homeowners, rent moratorium, so people aren't being kicked out if they're not paying rent. And forbearances where people who own their houses aren't being foreclosed upon if they don't pay their mortgage. So tons and tons of stimulus.

And it's likely now that the election's over, we're going to see a whole lot more stimulus. At some point, that's going to need to stop. And right now it may not seem like that time's ever going to come, but it is going to come. And when that stops, we're kind of all going to be jolted back into reality. And we're going to find ourselves somewhere in that economic cycle. We're going to find ourselves at the top of the market or the bottom of the market or somewhere in between. We don't know where that is. But I have a feeling that once the stimulus runs out and we allow things to go back to, I use the term steady state,

we kind of let everything fall into place, we're going to see that the market, the economy in general drops. I think we're going to say, and again, I'm just guessing, but I think we're going to see what we refer to as a double dip, where unemployment actually drops lower, and we're going to see a lot of foreclosures or a decent number of foreclosures, maybe not 2008-type foreclosures, but we're going to see a decent number of foreclosures. We're going to see a whole lot of people

that are getting kicked out because landlords, unlike with our mortgages, we can do mortgage forbearance, and we can say, hey, don't pay your rent for six months. We'll add that on to the back-end, so you just pay your mortgage longer. We can't do that in the rental world. If somebody hasn't paid their rent in six months,

your two options are, or three options are, you forgive them and say, okay, just start paying your rent from here. Two, you ask them to pay it all back before you allow them to move forward. Everybody knows that's not going to happen. Or you somehow figure out some hybrid where you attack it on the end, but you can't really do that. And so for people that are renting and not paying their mortgage, there's going to come a day of reckoning. And we're going to have a whole lot of people that are getting kicked out on the street. I think when that happens, we're going to see the economy kind of dip. So how does that, then that leads to the next question. How does that impact us as real estate investors?

After all that talk, you would think I'd have a good answer for how all of this impacts the real estate market. But the truth is, we don't know. If you look at various recessions over the last 150 years, there have been several of them. 2008 was a good example of one that real estate market got crushed. Go back to the early 90s, late 80s, early 90s, real estate market got crushed. Go back to the Great Depression. Real estate market got crushed. But then there are plenty of other recessions. You look at 2001, real estate was barely touched. In fact, in a lot of areas, real estate kept doing well. Go back to the 70s and some recessions in the early 50s, the first recessions after World War II, real estate just kept going up.

So we don't know exactly how real estate is going to be affected. That said, my guess is that affordability is the largest driving force. And there's debate over whether this is true. But in my opinion, affordability is the largest driving force of whether an economic recession is going to lead to a real estate downturn. And these days, what I think most people will agree is that we're seeing affordability issues in a whole lot of markets. You look at the K-Shiller data and that bears out the fact that there's a lot of affordability issues across much of the country. That leads me to believe that we are going to see a softening in the real estate market. Again, I'm not saying it's going to be a

2008 sort of thing. I'm not saying it's going to be a Great Depression sort of thing, but I definitely think that we're going to see a downturn in the real estate market. So there's that answer. Then that leads to a couple other questions, inflation and interest rates. So, because that affects us as real estate investors as well. Let's start with interest rates. One, I don't think interest rates are going up anytime soon. First, and we'll talk about inflation in a few minutes, but there's a lot of pushes for inflation. The Fed is pushing for inflation over the next couple of years. The best way to generate inflation is for the economy to keep going strongly. And the best way to spur on the economy is to keep interest rates low. So I think we'll see interest rates low for that reason.

Number two, the Fed is printed four or five trillion dollars over the last couple months. We have to pay debt on all that money that we're printing. And the amount of interest we pay on that debt is directly proportionate or directly related to our interest rates. So increasing interest rates is going to cause us to have to pay a whole lot more money on the debt and the money that we've printed. So I think for that reason, we're going to see interest rates stay low. So all in all, I think interest rates are low for the next three, four, five years. Could be 10 or 15 years. Could be forever. Who knows? But I think anybody that's sitting there thinking, do I need to get a mortgage now because interest rates are going up? I think interest rates are

going to stay low. Now, let me talk about that. Mortgage interest rates aren't necessarily the same as the federal funds rate, the real interest rate that the government sets or the Federal Reserve sets. So what are mortgage interest rates going to do? Typically speaking, when there's uncertainty in the market, that has an effect on bond prices. Bond prices have an effect on mortgage interest rates. And we see when there's uncertainty in the market, we see mortgage interest rates go down. When there's certainty in the market, everybody is kind of a little bit more comfortable. We see mortgage interest rates go up. We've actually seen a pop up in interest rates over the last week or two since the election, just because I think regardless of who would have won the election, people like the fact that there's some level. and you can argue whether there is any level of certainty, but I think to a lot of people, there's more certainty than there was a few weeks ago. And so the market's like that, but that's

kind of pushed up interest rates a little. Long story short, though, I think mortgage interest rates are going to stay low, at least for the next couple years as well. Which leads us to the next question, inflation. And I'm sorry, this is probably more information than you were asking. But let's talk a little bit about inflation. So definition of inflation, I'm not going to give the technical definition, but the definition that we tend to care about is the price of the stuff that we buy the consumer goods and the commodities that we buy going up. When the price of your milk and your cars and your rent and all the stuff that you buy goes up, that's inflation. When it goes down, that's deflation.

So the question is, are we going to see inflation? Are we going to see deflation? Are we going to see things hold steady? For a whole lot of reasons, I think we're going to continue to see inflation. And probably we're going to see over the next few years, maybe not the next few months, but over the next few years, we're going to see an increase in inflation. Biggest reasons there. One, the Fed came out about a month ago and said, we want more inflation.

We have not seen enough inflation. We can talk about why that is if you want. But basically when the Fed says we want to see more inflation, good rule of thumb, the Fed gets what they want. They create what they want. So when the Fed says we want more inflation, typically that means we're going to see more inflation. Number two, as long as interest rates are low,

interest rates kind of low interest rates spur the economy economy being spurred drives inflation typically inflation is driven by the market doing well third we're printing lots of money when you print lots of money that deflates the value of our currency and we see inflation so long story short i think we're going to see over the next three five 10 years we're going to see a decent amount of inflation but a lot of people say, well, how about in the next month or two or six or ten, are we going to see a lot of inflation? Do I need to worry about all my money, like the value of my dollars going to zero? And I think over the short term, we're not going to see a lot of inflation because there are two other things that factor into inflation that are important. Number one is demand. When the economy is kind of soft and there's not a lot of demand for goods. Inflation's caused by basically everybody wants to buy lots of stuff. So businesses need to start making. making more stuff and they have to hire more people and they have to buy equipment and buy inventory and buy warehouse space. And when they spend all that money, they have to like raise their prices so they can get the money back. When people aren't spending money and the economy is not doing

well, businesses aren't raising prices and we don't see a lot of inflation. So short term, I think until the economy gets back on track, a year, two years, three years, whatever it is, I don't think we're going to see a ton of inflation. The inflation starts in three, four, five years. And then number two is just like gravity in the physical world, there's this gravity in the inflationary world. Gravity, there's this general push towards deflation. Prices tend to drop because we get more efficient at doing things. We automate. And so to get inflation, you actually have to work at it. Inflation doesn't happen automatically. Deflation happens automatically. And so I think over the next couple years, we're not going to see a ton of inflation.

but over the next three, five or ten years, we're probably going to start to see more of it. Wow. Okay. So is that all the answers to all your questions? Yes, that is a great answer to where the economy headed. So, okay, so let me ask you this question. Based on all of that thought, and I can start with Jay,

but maybe this is kind of a follow-up, kind of a wrapping question for today's podcast. Based on everything we talked about, including and especially where the economy is headed, possible inflation, with Jay on that, for those things I could understand. Based on that, where do you guys think investors should be doing? What should they be doing right now? What are a couple tangible tips, maybe one each or two each, that investors should be focusing on right now? Why don't

I start with David Green because I know you're good off the fly? Tangible tips that investors should be doing. First thing to point out, whether we have a lot of inflation or a lot of deflation, real estate works good for both. That's why I love buying it. If the values go down on everything, great. I have cash flow in place that keeps my asset protected. The stock market can't say that. If everything goes up in value, that's even better for real estate. So you're good either way when you're trying to figure out where do you put your money,

putting it into real estate. That's one of the reasons that I love the asset class. Second piece is, where are you going to invest? Jay made a good point about inflation coming. And as he was talking, I was thinking, man, I already see it at my market. Inflation is rampant here. Everything is going up. wages are going up. So remember that real estate is like locally based. Have you seen the

cathode toilet paper? Yeah, there you go. Or like restaurants, they're charging a lot more money now because they have to because they can't sell as much stuff. So if you live out here in the California Bay Area, prices are already going up a lot. Maybe in the middle of the country, that's not so much. So depending on where you think the market goes, that might depend on where you want to invest. So I would recommend checking out long distance real estate investing, talking to some other people about what they're seeing and then trying to predict where migration patterns are going to change. For instance, California, because of COVID, has put themselves underwater as far as the money that they're bringing in on taxes.

We can't afford to continue going like we're going, but we probably don't have any politicians they're going to say cut back. So they're going to raise taxes. There's no way around it. That means people are going to leave the state because they don't want to get tax tire. They're talking about bumping up our tax to almost 17% for state income tax. So what I would say is, well, what climates are similar to California, that have no state income tax because that's where Californians are going. Jay's really smart.

He went to Florida first and he's already buying property out there because when Californians move places, as anyone knows who has had Californians move in, it pushes prices up. Nobody loves that. So consider areas like Tennessee, Texas, Florida because they have warm climates and they have no state income tax. I think a lot of people are going to move there. That's the advice that I would give that really works regardless of what the economy does because we can't know what's going to happen, but we can be pretty sure that it's not going to be the same that it is now. All right. Matt and Amanda,

what's your advice for people going into 2021? Gosh, I mean, I just agree with everything David said. It's what we're seeing on our end in working with clients and in looking at where we're going to be investing. But it's so true about the, you know,

migration out of certain states like California due to taxes or New York due to just being, you know, too crowded or too urban into places. like Florida. And so many of our clients have made the shift from an investment perspective, from a tax planning perspective, to really try to grow and protect their wealth. I think that, you know, one of the things is to just really stay on top of, you know, what, what we think is going to happen in terms of the economy in making those types of decisions. Yeah, I think the thing

we're telling clients now is, you know, we've got a few weeks left in the year, obviously, is you got to think about, we can't make decisions for people, obviously, but you as the individual have to think about what do you think is going to have more taxes, right? Do you think the taxes are going to go up? Do you think they're going to stay the same and go down? Because that's going to dictate what moves you make, obviously. And then, you know, if you is an extreme example, obviously, is if you think capital gains rate is going to go from 20% to 39.6 and you were planning to sell something next year, I mean, doesn't make sense to pull the trigger sooner like by the end of the year. I mean, that's an extreme example, obviously, but that's a real life example that

people have to think about. And that's answer is going to be totally different for everybody, obviously. So that's what I tell people, investors, is to kind of look at 2020, look at 2021, and, you know, you've got to make the decision based on the facts of what's happening in the economy and the political ramifications. And, you know, if there's going to be tax changes, how soon or never, are they phased in? Are they right away? Are they retro? You know, there's so many things. But that's where I would start from a tax perspective. do you. All right. Jay, what do you think? One of the biggest concerns longer term, and we talked about inflation, and as I point out, personally, one of my bigger concerns longer term is inflation,

and that's one of the reasons that I love real estate, if you're concerned that we're going to have inflation, and it's no guarantee, some people think we're going to go the opposite way, but if you're concerned, we're going to have inflation, and I am, the second best hedge, or the second best investment you can make when you're concerned about inflation is real estate. And the reason for that is if, let's say I have $100,000 and next year I still have $100,000 in cash and the price of everything doubles, my $100,000 is basically worth half as much. Inflation has cut my spending power in half. And so cash is a bad thing. Real estate's a good thing because if I took that $100,000 and I put it in real estate, if everything doubled in the next year, well, most likely the value of my real estate doubled in the next year.

And the amount of rent I'm getting doubled in the next year because typically with inflation, the value of real estate and the value of market rents keeps pace. So real estate is probably one of the best ways to preserve the value of your capital over any inflationary period. You said second best, though. Yeah, what's the first? Yeah, so let's talk about the best. The absolute best hedge against inflation is debt.

And here's the reason for that. Let's say I buy, again, let's say $100,000 property. Let's say I make $100,000 a year. And let's say that $100,000 property, I have a mortgage payment every month of $1,000. Quick math. How much of my annual salary am I putting towards mortgage every month? Anybody? Come on.

You can do a percentage. One percent. One percent of my... One percent of my annual salary is going away towards mortgage every month. Now, again, let's say next year, prices of everything double. Value of that property is now $200,000. I'm getting twice as much rent. And let's say, because everything's doubling, my wages are going up too.

So now my wages, instead of making $100,000, I'm now making $200,000. Did my debt go up by twice? How much am I paying on one mortgage every month? I'm still paying $1,000. And that $1,000 is no longer 1% of my salary. It's a half a percent of my salary. That's a half a percent. There you go.

See? See? I got it. See? I saw you pull out the calculator. Yeah. And so basically I'm paying down that debt with quote unquote cheaper dollars. Basically, I'm taking the debt when the dollars are worth a lot.

And then I'm paying them down when I have a whole lot more money, when I'm making a whole lot more money. And so with real estate, typically I can keep pace with inflation. With debt, not only can I keep pace with inflation, I'm actually benefiting from inflation because I'm paying down that debt with cheaper dollars. Are you saying by having debt or by being a debtor? Like you're lending money? No, by having debt. Okay.

By taking debt against my property. Now, I'm not telling anybody out there over leverage. I'm not saying get as much debt as you possibly can. Use debt wisely. Always use debt wisely. But intelligent use of debt during inflationary periods is literally the best way to make money. Yeah, that's cool. And if you're a lender, you're going to get screwed during inflationary periods.

That's exactly what I was thinking when you said that debt is the best. I was like, well, not being the guy holding the debt because you can't raise your rate. You can't raise your interest rate. Exactly. So basically, for anybody out there that I'm lending money to, be forewarned. Yeah. So, but seriously, lending tends to be a lot less effective and profitable during the inflationary period. Keep your, keep your loans short and make sure you're resetting your rates appropriately.

Let's wrap this thing up. So those who want to learn more about the stuff we talk about, all three of you have books that you have written. Jay, what books have you written and what did each of them cover? And then we'll go to Amanda and Matt and we'll go to David Green. Yep. Book on flipping houses covers one guess, one yes. Rental. There you go.

Flipping houses basically lays out a chapter by chapter, 20 chapters, 20 steps towards getting your first flip or your next flip. Next book is the book on estimating rehab costs. So one chapter of the book on flipping houses was all about estimations. Rehab costs. And by the time I was done that chapter, it was 300 pages. So I turned that into its own book. So if you want to learn how to a good methodology for estimating rehab costs, the book on estimating rehab costs, the book on negotiating real estate. As far as I'm concerned, the best negotiating book specifically geared towards real estate investors. And as David Green would attest if he actually read it because he hasn't, it's probably good for real estate

agents as well. And then finally, recession-proof real estate investing, which is a book all about economic cycles, how the economy works, and how we should be modifying our strategies and our tactics during each part of the economic cycle, which is a very timely book for today. So check it out. There we go. All right. Amanda and Matt, you guys have written some books. Yeah, only two, though, compared to Jay.

That's not a lot. So we had the-in-overachiever. Yeah. So our first book was the book on tax strategies for the savvy real estate investor. and we just had the book on advanced tax strategies that came out recently. So both are essentially, you know, ways to use real estate to save on taxes. So if you're someone who is investing in real estate or planning on investing in real estate, these are really great books.

The feedback we've gotten is it's not your typical, you know, cite, the tax code, boring calculations. In fact, we talk very little about the tax code in itself, but mainly going over examples of what can be done to use real estate to reduce. use tactics. Also, we talk about what cannot be done in some of the horror stories that you might want to avoid, too. But we do, we do change people's names to protect the innocent, though. So, if you see Brandon in there, that's not Brandon Turner. It's another brand. I may or may not be one of those examples in that book. It's okay. It's okay. We want to talk about which one it is.

Oh, there you go. Jay's holding up the books. Yeah, pick them up. They're awesome. In fact, I'm going to answer a question before I get to you, David. The earlier Jay said the best investment. The second best is real estate. The best is having debt. I'm going to even go one above that. The best investment you can make in a potential recession is in your own education. Like I'm such a, and I know we're all big believers in that. The best thing you can do is be knowledgeable. Don't just be passive. Don't sit there watching TV all day long, waiting for the government to take care of you. And I know if you're listening to an hour and a half into this show, you are not one of those people who just lets life go by. So continue to educate yourself. Pick up a copy of these books and start

reading. Listen to more podcasts. Tell your friends about this. Become an expert in your area. Keep building that knowledge and that expertise, that skill set, that social network, that brand around you. And you're going to be fine no matter what you see. With that said, David Green, what you got? What you've written? What book? Long distance real estate investing. That's the book that describes how you buy in other areas.

But, oh, thank you, Jay. Very, like a Van of White over here, but even hotter. I appreciate that. But really, that book dictates real. I'm not going to touch that one. Too hot to touch. I don't blame you. It details systems for when you're buying real estate.

This is the systems you should have in place to be able to do it. And that's why it can work anywhere. The Burr Book by Rehab Rent and Refinance Repeat describes, there we go. Thank you. Can I buy an R, please? It shows how to buy properties, fix them up, and then pull your money out to increase the velocity of your money, increase your ROI, and scale your portfolios safely and rapidly. And now the new book, which will be the first of a three-part series, which is the labor

of love spent towards helping real estate agents not suck at their job. And hopefully this helps the industry as a whole as new agents learn how to be better at agents and then us investors have a better experience with those agents and bigger pockets can be responsible for improving the entire real estate ecosystem. And that book is called sold. Yeah, Jay doesn't have that one. Yeah. This is what you get for not sending me an advanced copy. Yep. We need to talk to Bigger Publishing about that. Very good point, Jay. It's sold. Every real estate agent's guide to building a profitable business. I kind of like what you said the first time is that this sold us about how to not suck

as an agent. That would have been a better subtitle. A good title. Stop sucking. That's actually a great title. I'm buying that one for sure. I would, yeah, because that's the book you buy for your real estate agent friends. Like, here, stop sucking. No, but that said, speaking about it is gift, if you are not interested in becoming a real estate agent, that's fine. I mean, I'm not going to become an agent anytime soon. However, I'm still going to give copies of that to my agent friends and like my buddy who wants to become an agent still hasn't taken action yet too much on becoming that agent over the last 18 months but i'm going to send him a copy of david's book so

here we are in the christmas season probably if you're listening to this when this comes out pick up a copy of sold to send to your agent or any of these books to send to your real estate investor friends family or just to read for yourself and i think if i remember right there's actually a sale going on yeah when this comes out discount code podcast will give you 20% off everything in the bigger pockets of bookstore so anything you want the bigger pockets of bookstore 20% off And that is active. That code is December 10th, 2020 through December 15th, 2020. Again, code is podcast.

You can get the books at biggerpockets.com slash store. All right, y'all, we got to get out of here. You didn't tell us about your books. I've got a bunch of them, and that's it. So here's a little surprise for anybody. Walk into your nearest Barnes & Noble and checkout or whatever your local bookstore is. And make sure you check out Brandon's books because here's a little, here's a little secret.

Whenever I go into a bookstore and I find a Brandon book, I sign it from Brandon, and I put his phone number in there. Oh, great. That's what I thought. That's why I keep getting phone calls. This is great. That's hilarious. If you want Brandon's personal cell number.

It's like the Willy Wonka Golden Ticket. It's exactly what it is. I've been waiting for that day that Brandon comes to me and says, somebody found my phone number in a book. Who gave it to him? So that's actually a funny idea. I think we should, with the next book, okay, I'm going to do that.

On the multifamily millionaire book that I'm writing right now, it's Brian Murray and I writing a two-part series on multifamily, comes out next summer. We're going to include, somebody got to remind me of this later. We're going to include a golden ticket and one copy somewhere in the world. And that person gets to do something cool,

like come out to Hawaii and spend some time learning real estate or something. That'd be fun. That'd be a cool contest. Love it. I like this idea. Yeah, I got to figure out how to get a golden ticket. All right. With that said, yeah, I've written some books there in the bigger pockets,

bookstore. And where can people find out more about each of you? Jay, where did they contact you at or at least learn more about you? What's your phone number? My phone number, 770. Seri what is Jay Scott's phone number? Don't do it because it's in there. You can contact me. My website is jscott.com by email. You can send me an email, Jay at jiscott.com. Or if you like ever want to invest with me, go try. check out, invest with Jay, just letterj, j.com. Mm, fancy. It's kind of like bring brand and a deal.com.

You got that? Yeah, I know. I love that. Yeah, whatever. Awesome. All right, Jay. And you, of course, are the host of the Bigger Pockets Business Podcast, the best business podcast on the planet.

Thank you. Contractually, I'm obligated to actually say that. So, yes, my wife and I are co-hosts of the Bigger Pockets Business podcast. Check it out. Well, you were contractually obligated to get a tattoo of my face on your upper arm, but you haven't done that yet either. So you know what? Where did you get that tattoo, Jay?

Because I don't see it on your upper arm. And I know you on her contracts. The bandage hasn't come off yet. All right. Amanda and Matt, where can people connect with you guys out? So our website is keystonecpa.com. That's k-E-Y-S-T-O-N-E-C-A.com.

We have some great free downloadable resources to check out if you want to learn more about tax savings. All right. And finally, David Green. host of the Bigger Pockets podcast, Best Looking Agent in California. Where can people find out more about you? Well, I think they should just ask Brandon. I'd rather you tell people about me or Jay.

Jay said some really nice stuff. Just go to them and they'll tell everything you need to know. To contact me directly, you can get me on anywhere on social media, David Green 24, who's the E at the end of green. Instagram's probably your best bet or the Bigger Pocket's website. I do check my emails. I try to check them more often than I really get around to doing it. but I'd say every week or two, I go through there and reply to everybody.

And if you have an agent friend, if you want to give your agent a gift for helping you with your house, I think this is a really good way to do so. So you can get the book at biggerpockets.com slash new books. It's the top one on there. All right. All right, guys. Thank you so much for being a part of this webinar, I mean, podcast today, not webinar. Those are happening out Wednesdays.

And you can sign up at biggerpockets.com slash webinar. David Green has been hosting some webinars lately. And I know, Jay, you've been doing some webinars with Tarrell lately. We do a weekly webinar. Very cool. Facebook Live. Check it out. What's the URL for you know?

Facebook.com. slash bigger pockets. Is that it? I think slash bigger pockets, probably. I think so. All right. Let's get out of here. David Green in typical fashion, would you like to close today's show?

Yes, sir. This is David Green for Brandon, the webinar Wonder Kid Turner. Signing off. You're listening to Bigger Podcast. Rockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com.

Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by E&K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter,

please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.