BiggerPockets Real Estate Podcast - 466: Buying “Lottery Ticket” Investment Properties with Alan Corey

Episode Date: May 6, 2021

Alan Corey has had an interesting career to say the least. He’s been an IT worker, a comedian, an author, a real estate investor, and even a reality TV star. Alan has always been fascinated with making passive income in a frugal, but very intelligent way. He’s so frugal in fact, that he made up a crazy story to be on the Jerry Springer show, just to get a free trip to Chicago out of it. Talk about being committed! Alan’s real estate story starts off with buying a 1 bedroom apartment in Brooklyn, New York, hanging up a curtain in the living room, and house hacking. He then repeated this strategy over and over again, becoming a millionaire before 30 years old, with a lot of property and “good debt”. Alan is part of the FIRE (financial independence retire early) community, but instead of investing mainly in stocks, he does so in real estate. His strategy is simple: buy a rental property for every bill you have, then start inventing “fun bills” as excuses to buy more rental property. Whether you’re looking to pay off your phone bill every month, or finance your brand new Tesla, this strategy will work for you. Alan also “hides money from himself” so he can be better off in the future. Right now he’s sitting on around $8,000,000 of real estate solely from his own investments. His new book House FIRE teaches you everything you need to know about retiring early with real estate! In This Episode We Cover: Chasing financial independence and early retirement with real estate Taking on “good debt” so you can grow you real estate portfolio faster Thinking of each property you buy as a “lottery ticket” Alan’s books: A Million Bucks By 30 and House FIRE The danger of high-interest consumer debt (like credit card debt) Seller financing and zero cash-flow triple net leases And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Youtube Channel Alan Corey's Video Sampler Dave Ramsey BiggerPockets Podcast 344: “No Money” Real Estate Investing with Gabriel Hamel BiggerPockets Business Podcast 13: 3 Rules for Crushing It in Business with ‘Shark Tank’ Star Barbara Corcoran Shark Tank Check the full show notes here: https://www.biggerpockets.com/show466 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 466. And it's easier when you're like, hey, what bill do you want to pay? Okay, you found a house that cash owes you $200 that's going to cover your phone and your water bill or whatever it is. Then, yeah, pull the trigger, make the offer. Like, it made the criteria that much easier. And then you just go through your next bill. Like, okay, well, this one pays for your electric bill and the next one's going to pay for your water bill. But, hey, we made progress.

And let's just keep the ball rolling, the momentum going, the flywheel, you know, It just sort of feeds upon itself after a while. 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's going on, everyone? It's Brandon Turner, host of the Bigger Pockets podcast here with my co-host, Mr. David Green. David Green, I got no good nickname for you today. What's up, man? How you doing? There is no better nickname than your best friend and your co-host.

I love this job. My bestie, best friend in the entire world, David Green, here on the podcast again. Man, it has been a crazy few weeks. I know for you on closings. And me, I'm closing like next week on my condo here. So real estate's rocking right now, huh? I closed on two condos in Hawaii. I'm closing tomorrow on a retail center in Minnesota.

soda. I am hiring an office manager for my real estate team. I've got like 10 agents that are already to crush it and we just need someone with a little bit of experience to help train them. The loan business is going well. It's frankly just a good time to work in real estate, right? You got to make hay when the sun shines because it won't always be that way forever. Let me ask you a question though, completely unrelated. Then we'll get into today's show, which was phenomenal, by the way. I can't wait to bring you guys this show. But what do you think of crypto right now? It's crazy. It's all over the news. It's all everyone's talking about is crypto. What's your crypto thoughts in 30 seconds or less? Go.

My thoughts are they have more to do with the way that the government's just creating stimulus. They're not printing dollar bills, but they're buying bonds and that's pushing money in the economy. And it's like pushing water under the surface of the earth. And it has to bubble up somewhere. So people are losing confidence in the dollar. And you're seeing asset based inflation is kind of running rampant. So real estate obviously is going up in value. But you also see NFTs, crypto, baseball cards, kind of weird stuff.

You wouldn't normally expect to see this being influenced. by this water as it bubbles up and it has to find somewhere to go. So I think that as long as there's a scare of the overall strength of the dollar, things like crypto are going to do really well. And if that shifts, you'll see that stop really fast. Are you buying any? No, because I only invest in things I understand. Very smart, very smart. I did buy $5,000 worth of Bitcoin back when it was much lower and now it's worth, I don't know, like $20,000 or how like that. But I literally bought it as a lottery ticket. Like I was like, this is fun money. This is like play money. I might lose the whole thing. Might go to zero. But it might go to a million. So it was an ace. What's the word asymmetric bet?

It was kind of like it could go really significant higher or not. That said, speaking of lottery tickets. Today's show, one of the, our guest is Alan Corey. And Alan brought up a really great term in today's show. I want you guys to listen for it when we get to that point where he talks about like the imaginary lottery ticket, I think is what he called it. Is that right? And that whole concept was so good. We talk a lot about that. We talk a lot about. We talk a lot about risk. I would talk about paying off debt. Should you pay off credit card debt? Dude in loan debt before investing. We talk about that. We talk about should you become a real estate agent to invest in, you know, to get started. We have a lot of good stuff there. I mean, he made a million dollars on one, like, actually, I think he told me three times in his life. We cover two of those stories today where he made over a million dollars on one, like one deal.

So you're going to learn about a couple of those today. And they're not like that crazy. Like, it's stuff that anybody here could probably pull off. So that and more to come. But first, So let's get today's quick tip. Today's quick tip is nice and simple. I put together a, I don't have a title for it yet. We'll have one here shortly. But I put together an interview with a CPA who specializes in taxes for real estate investors and an attorney who specializes an asset protection for real estate investors.

And I put together this a little over an hour long. It's like an hour and 15 minutes, sit down and we cover everything on this video. That is a new Bigger Pockets pro perk. So if you are an existing pro member, make sure you go into your pro membership. I think it's like go to your picture on the corner, drop down, and you'll find all your pro perks in there. That's a per perk in there. And also, if you become a bigger pockets pro member in the future, you'll get that video as well. So that's your quick tip. Check it out.

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completed tens of thousands of studies across all 50 states from remote cabins to apartment complexes. So if own investment property, this is a no-brainer. So visit costsegregationguise.com slash BP for your free proposal and find out how much you could save this tax season. And remember if you're watching this video on YouTube right now, don't forget to like this video, the little thumbs up button, subscribe to the Bigger Pocket's channel and leave a comment below. If you have questions for us or the guest, specifically, Alan Corey, ask them down below in the comment section. We'd love to see the YouTube channel growing. So if you're watching this here, let us know. All right, with that said, I think it's time to get into today's show. Anything you want to add before I introduce

the man, the myth, the legend, Alan Corey? Anything? No, but this was a good one. I had a lot of fun with this recording. I think we got into a lot of life stuff, not just real estate, but the real estate stuff we talked about absolutely applies to the life stuff we talked about. I thought this came out great. Yeah, agreed. Without further ado, let's get into the interview with Alan Corey. All right, so today's show we have Alan Corey. Allen was a huge inspiration in my life for real estate investing. I read one of his books early on, and that really spurred me on toward the financial independence. And in fact, the book was called A Million Bucks by 30. And so I was like, all right, that's a good goal. So I set a goal of a million bucks by 30.

And at 30 years old, they crossed the million dollar mark. So that was cool. Interesting enough, he has been on, I think, six reality TV shows. We'll probably talk about that today, including queer eyes for the straight guy. He was one of the people being looked over there. Longtime investor, real estate agent started in Brooklyn over 100 deals, once had dreadlocks and a lot more. So you're going to hear more about Alan today. But that said, let's bring him in. Alan Corey, it is an honor and a long time coming. Welcome to the show. Hey, thanks. I appreciate. This has been a goal of mine. This is to be on your show. So I feel like I've achieved something. It's like buying a new house. Also, I told way too many people that I was the best guest you've ever had. I really kind of 10xed my appearance today. So I've got to live up to that. Yeah. This is great. I like your prophesying. You just know it's going to be amazing. So we got this. We got this. All right. So I want to start with the most important question of all. really like it's the heart of who you are reality TV what that what that goes that about i did you jerry springer queer eye for this straight guy where did this stuff come from like what were you

where that life come from i i moved to new york right after college this was 20 years ago a different lifetime ago i don't even really recognize that person that i saw on tv but um i wanted to be stand-up uh comic and that's sort of like the when reality tv was sort of a new thing and so they go cast real people is what they call it, but really they just cast comedians to be on the show. If you're a male and then if you're a female, they'll go to the modeling agencies and cast from there. So that's sort of my way on to TV. And I got to tell you, I make way more money real estate investing than I did as a reality TV show guest. Yeah. Yeah, I can definitely see that. So if you guys want to see Alan with dreadlocks and we got him on Jerry Springer and all this

stuff. Go check out. We'll actually put a link in the show notes that BiggerPockse.com says show 466. So check it out there. We'll put a link. I'll see you can just go to YouTube and search Alan Corey. But it's pretty amazing, man. That was fun. And then one of the times they filmed two shows, I was on the restaurant with Rocco de Spirido as a waiter, immediately followed by being made over on Queer Eye for the straight guy as a real estate investor. So I got a lot of hate mail when they had two shows back to back. That's funny. Oh, yeah. Yeah, working for pennies and the other where I was making, you know, some dough flipping home.

So are you saying that TV is not 100% accurate, Alan? Don't, don't burst my bubble here. All I got to say is when I was doing this 20 years ago, it was, I was playing a part in some ways. Yeah. I hear you. All right. It might have changed.

Yeah. So how did that lead into? For those who haven't read a million bucks by 30 or the new book, which is, I got it right here, house fire. So you can achieve financial independence and fire early, which is phenomenal. Like, how did you get into real estate? Like, why real estate? what was your first entrance? Yeah, so I was in the clubs performing every single night from about

midnight to 3 a.m. And then during the day, I was working as a tech support guy, nine to five. And I was just wasn't sleeping. I wasn't, you know, because I was just always working either at my day job or in the clubs. And I was like, I've got to focus on comedy full time. I just, I'll never be able to live this dream. And so I bought every single book that I could on financial independence and retiring early and wealth creation and working for yourself. And I just gravitated to the real estate books and just kept reading those and like, oh, this makes sense. If I buy a couple properties, if I'm a landlord, I'll have some cash flow and that I can quit my day job and then I can focus on comedy the full time. And by the end of the hour here, you'll understand

why my comedy career didn't work out as you get to know me. But I fell in love with real estate more than comedy. So I kept my day job and then I started doing real estate at nights and the weekends. and eventually made the switch to doing that full time after acquiring a few properties and haven't looked back. Yeah, so what was the very first deal you did? So the very first one, I bought a property in Brooklyn, New York for $99,000. I was living in Spanish Harlem at the time. I had never been to Brooklyn.

I had $10,000 in my account, and I was like, there's 10% down payment. I need to buy something for $100,000. And there was zero apartments for $100,000, even back in 2001, 2002, when I was. I was looking. But there was one property for $110,000. And I said, you know what, I got to get them down to $100,000 or below, and I'm buying this property. I go over there. I show up for the first time, get off the subway. There's a guy sleeping on the doorstep, asking me for money, telling me some story about he just got out of jail. And, you know, most people would be like, maybe this is not the best primary residence or the best neighborhood. But to me, I'm like, hey, this is all I can

afford. I'm buying it. And it was a one-bedroom apartment. I hung up a very heavy curtain. in the living room, and I called that a second bedroom, got a roommate, and house hacked my first apartment, and then I started house hacking every 12 months after that, and then bought a duplex down the street eventually after that, and then just sort of, you know, I had a goal I was going to buy a property, one property every 12 months. I did that for five straight years, and now I try to buy multiple properties every 12 months, yeah. All right, all right. So let's dig in a million bucks by 30. So how did you get, we'll start with that one. It's your much older book now.

But how did you become a millionaire at 30? Well, so it was a combination. It was really before the fire movement, but it was really the lean fire principles, which is fire stands for financial independence retire early. I lived on 39% of my $50,000 salary, and I invested the rest. I was in 401K matches, the IRA's contributions, but really saving up for down payments. And the big catalyst was my second purchase, that duplex, which was also in Brooklyn, and three bedrooms on each side. And I rented it out to five comedians. I lived there at five comedians,

each paying $600 to $750 a month. We called it the House of Clowns. And I was, once that, that second property, I had all my mortgage covered and I was profiting $2,000 a month in cash flow. And that was more than my day job. So that allowed me to quit my day job, just after my second house hack. And that actually just speaks to the value of house hacking, right? I mean, David, you and I talk a lot about this, but, and Alan, your book talks a lot about, I mean, just the idea of you don't need 500 properties to be able to quit your job and retire early. Like, if you do it right, if you live inexpensively and you buy a house hack, you could

potentially do it right away, right? Yeah, and then that's what my newest book, and as a realtor and my clients, I just, I outlay, just one rental property can really change your life. but if you want to do two or three, you know, a lot of people get scared because they're like, I don't want to be a real estate mogul. I'm not, you know, trying to be Monopoly, man. And I'm like, you don't need to. You just buy a couple, you know, or just start with one and you're going to see how it changes your life and your finances. And, you know, you're going to get the bug like the rest of us, everyone, you know, who listens to this podcast probably knows what that feeling is. And then

you just grow from there and it just becomes a passion. Something I really like, Alan, about what you talk about is it's sort of making the connection between a practical thing in your life like a bill, a mortgage, an internet bill, a car payment, and investing. And you've really created this cool reward system where you tie the hard work that goes into

saving for a property, going through the process of finding it, closing on it, and having cash flow with rewarding yourself that you've now eliminated a bill for the rest of your life because you tied that cash flow to that bill. Can you expand a little bit on how that works and how you found success helping create that link in people's minds. Yeah, sure. So the fire sort of method is you want to save up 25 years of whatever expenses are

in your life. So say you have a $150 internet bill. Multiply that by 12. That's $1,800 a year. The fire method and rules are, and the 4% rule is, hey, take 25 years of that, which is $45,000. And if you just put that in stocks and do a safe withdrawal rate of 4% every single year, you'll have that internet bill covered for the rest of your year. And you do that for every single bill in your life. I take the real estate approach and I say, wait a minute, I don't want to save up $45,000 before I retire. How about I take $25,000 and go buy $100,000 property that cash flows me $150 a month? And then so once I do that, I tie every single cash flow. Oh, this house goes to this bill. And $150 I've got for your internet in life. And then when this, you know, when this house is paid off,

then I can reallocate that $150, which will probably be more like $600 now because I don't have a mortgage to other bills in my life. And so I did that recently for a car. If I wanted to go buy a Tesla, that's $40,000. Rather than saving up $40,000 and buying a Tesla in all cash, I look online and say, okay, wait a minute, this is going to be a $500 mortgage payment. Why don't I take $40,000 and go buy a house in all cash or leverage a house by a $250,000 house with that $40,000 payment, that cash flows me $500 and pretty much, you know, that's house fire, my new book where it's just every bill in your life, let's go buy a property and pay that for the rest of my life. And what's great about it is the older I get and I'm not living on a budget. Every other retirement plan has you living on a budget.

This one, my budget gets bigger every year because properties go down. You know, I'm paying off the principal every year. My rent that I charge goes up every year and they appreciate in value. And instead of giving $40,000 to a car company, I'm giving $40,000 to myself. in terms of equity in a home. And it's just recycling the money. And it's like you said, a mindset where, you know, any toy I want in my life, any expense of my life, I get a house to pay for it. Here's a few points I love about what you're saying. First off, if you're bad at saving, this is even better for you. Because if you're not good at saving and you force yourself to buy real estate, especially if it's cash flowing real estate, you're never going to run out of money.

You literally can't go spend the 40 grand that you put down on that property because it's tucked away and something that's getting you a return. Second thing is that you can't run out of money like this. Because as long as the property's cash flowing, when you buy that car, it's not like you decided, do I want a house or a car? You got both. You got a house that paid for a car. When that car is paid off, you can go buy another car, right?

You will always have a car for the rest of your life. Another thing is that certain things that we like to spend money on, there's this tradeoff between what I want and what I know is best. It's the whole broccoli or ice cream thing. Typically, a really nice car. nice clothes, a vacation feels a little bit like ice cream. Investing in bonds or real estate feels like broccoli. Well, when you're buying depreciating assets like a car or clothes or whatever with real estate, it limits the damage it can do to you because your initial investment continues to

appreciate while the stuff that you bought with it can go down. And then last that I love is that when rates are really low like this, I think a guy on my team just bought himself. He's been a loan officer with me for six months or so, and he's doing really well. He just bought himself a Tesla S. Is that the expensive one, Brandon? Yeah. Yeah. The X is probably more, right? Okay, maybe it was the X. His car payments $850 a month. It's a lot for a young person. However, the price of the car versus the actual payment is really not as bad as what I was expecting when I heard how much the car was. So when rates are low like this and you're borrowing money to buy something that typically we wouldn't advise you to, like an expensive car, you're getting more car for the money is basically

what I'm getting at. And then every year that what you're getting in cash flow theoretically is going up so that even if the car is going down in value, you're still not losing money. So there's a ton of ways that what you're talking about makes so much sense. And I wish every young person would hear this is you start off buying all these assets and that your assets fund the fun stuff you want. Brandon, you have anything to add there? Well, I was going to point out that that's what I did with my Tesla Model X is the payment was going to be like $900 a month. And so for years, I wanted one. I mean, for several years, I was like, oh, I want a Tesla. But I told myself, I refused, even though I, maybe I could have afforded the payment,

but I just refused to buy it until I had an asset buy it for me. So then I went and bought this triplex here in Maui back a year and a half ago. And the thing produced like $2,000 a month in cash flow. I was like, all right, there we go. So then I bought the Tesla. And then I flipped a house. I made $45,000. So I went and bought a Tesla model three, just in cash for my wife.

And so both of those were assets or business, whatever. So I didn't get sucked into that lifestyle. early on. I mean, this goes back to the whole fire thing. And I want to dig in this a little bit more, Alan, is like, if I, like, early on in my career, I said, similar to you, I said, I needed $3,000 a month to be able to quit my job. Like, that was my number. It wasn't a lot. And I lived in a small town and I was super conservative and cheap. And so I needed three grants. I was like, okay, what do I need then? Well, if my average house is making me $100 a month in profit or average a unit, I need to see 30 units. And I just went on a quest to go buy 30 units. And I just bought 30 units. And I quit my job after that. Like, it's, it's not a super complicated. thing. It helps with analysis paralysis because I've got a lot of clients and friends who sort of just freeze. And it's easier when you're like, hey, what bill do you want to pay? Okay, you found a house that cash flows you $200 that's going to cover your phone and your water bill or whatever it is. Then, yeah, hold the trigger, make the offer. Like, it made the criteria that much easier. And then you just go through your next bill. Like, okay, well, this one pays for your electric bill

and the next one's going to pay for your water bill. But hey, we made progress. And let's just keep the ball rolling, the momentum going, the flywheel, you know, it just sort of feeds upon itself after a while. And it becomes fun. And then once you run out of bills, you have to invent bills like like Tesla payments. Yeah. Exactly. Then you's going to buy more, yeah, dude, more and more. Which again, goes back to your point is that's great. If you can start from this position of like living low, like low expenses, you start there, then you bring the asset up to that level, then you can rise the two together for indefinitely. I mean, then you can move to Hawaii and have a two million and two Teslas and all this cool stuff.

And I didn't, like, when people see that of my life today and they, like, I look like just the typical rich guy, like the reason I'm here is because I lived in an alleyway in a duplex that I house hacked and I lived for free. And then as I made more and more money after over the last 10, 15 years, I've been able to rise to that. And so I think people see the outcome. They see the social media and they see the fancy cars and houses. But then they try to go and get that lifestyle before they have the asset to pay for it.

And that traps them to a job they don't like for the rest of their life. And for those in that position right now, you know, you might have student loan debt. You might have a card note. I'm anti-paying those off. I'm like, you can save up the $25,000, $50,000 to pay off your student loans. Go save it up and buy a house that covers that student loan payment. Because what's going to happen in 10 years, you're going to have that loan paid off and have a house that's one-third paid off.

Or you can just pay it off. and then you're starting from zero, saving money again. And it's going to be another 10 years before you save enough to go buy a house. So just sort of get off the sidelines, go buy a house to pay off whatever debts you have right now, rather than paying off the debts, then go buy a house. And I'll say this is something every single wealthy person, at least that I've come across in my life, they all have it in common. I mean, it's literally just they spent their money on assets.

Now, sometimes it's a business. Here, it's often real estate. There's other people that understand different asset classes than us. Some of them even do it well with stocks. But that's what they did. And it creates this incentive structure in your brain. Like, that's what I do. I basically look at all the money I make goes into real estate.

What comes out of real estate typically goes back into another form of real estate, right? So I make money and I put it into flipping houses or buying short-term rentals and I take the cash flow from those things and put it into long-term safer stuff. What comes out of the end of that funnel is all that David actually makes to live off of. That's how I look at it. That's my real income that's coming in. And I don't even think about the active income that I'm earning. So I think just like you do, Alan, if I want that thing, I've got to get at the end of my funnel enough coming out. And it forces you to be disciplined.

It forces you to be creative. It forces you to have a vision for how you're going to make all these pieces work together. But that's all healthy stuff. Isn't that what every great mind that we look at has found a way like, how do I get from where I am to where I want? You want to become a great stand-up comedian. You want to be great at fitness. You want to get a great degree from a great school. It's a similar mindset people have.

And so I love that you're sharing this message of be disciplined early by asking. let assets appreciate and let them fund the lifestyle you want. It's really the best way to get on the property ladder. And then another step I'll take that to, if you're thinking about the wealthy mindset, it's really using leverage and mortgages. A lot of people are scared to buy homes and they want to pay them off as soon as possible, pay them in all cash. And the way I look at it is, you know,

you're buying a house that you think is going to go up in value possibly or you think it's a good buy for whatever, you know, criteria you evaluated it. Let's assume you buy it $100,000 house and all cash. Well, if you think that's good, why don't you buy four of them, right? Why don't you go buy four homes with $25,000 each? It's the same $100,000 and you spread it out across four homes. You're actually spreading out risk. You're not creating risk for yourself because you're getting the home appraised when you buy it with a mortgage. You have a real estate agent typically involved holding your hand. You've got all the, the bank is the most conservative partner you can have.

And if they're going to prove it, one, they think that house is worth the value that you're buying Two, they think you can afford that house because they're not going to give you a mortgage if you can't afford that house. And then what happens is 10 years, if the property goes up $10,000 or 10% instead of making $10,000 on your $100,000 house, you made $40,000 because you have four $100,000 houses. If the rent goes up $100, you know, instead of making $1,100 a month, you're making $1,400 a month or whatever, you know, you're scaling your whatever interest is, whatever your properties, you're scaling your wealth, you're scaling your wealth, you're scaling. and I look at is you're reducing risk while you're scaling your wealth, which why wouldn't you do it? Yeah, and it works in reverse, too. When the property loses value, if you put 20,000 into it and it drops 20,000 of value, you've lost 100% technically of your investment. What makes real estate different is typically your cash flow doesn't change when the property loses value. And this, I have a like a B in my bonnet over this issue because I hear a lot of equity traders bring up the same fact.

And they're like, oh, real estate appreciates 3% a year, but I can get to 8% in the stock market. And it's very misleading because you can't take out a mortgage to buy stocks and stocks don't give you cash flow. They're only looking at an aspect of how real estate builds you wealth, isolating just the appreciation that you see, ignoring the stuff you're saying like the supercharged leverage that you're getting a better return and the safety that comes from it. You also mentioned another hot button topic I'd like to get into. It's this debate right now that should you pay off all of your debt because there's a crash coming or should you take on more debt because rates are really low and inflation is coming. And I kind of wanted to throw that question to both you, and Brandon, where you stand on this controversial topic? It's not controversial to be. I'm leveraging. I'm trying to get as much debt as long-term debt as possible.

I tell everyone, stop making the extra $25, $30 payments on your mortgage payments. You know, don't round them up. Don't do the bi-weekly payment program. That just is insane to me. And the way I explain it is, you know, when I walk into an antique store and I see a sign that says like ice cream for a nickel, right? when was ice cream a nickel? Apparently that day existed. And due to inflation, you know, ice cream's three dollars now, right? So what that three dollar ice cream come in 30 years is going to be nine dollars.

So your money is worth the most, has the most purchasing power right now. So you want to go have as much of it as you can in your pocket, not making extra payments on this debt so that you can accumulate as much money to go buy more debt, you know, buy more assets that have debt. And this, And what happens is if you have a $1,000 mortgage payment over 30 years, it actually gets cheaper over time. You can, you know, instead of buying, you know, paying $3 from ice cream go down, pay $9 a mortgage with the same dollar 30 years from now. And you're actually saving money in some regards by spending it in tomorrow's dollars. Money's always going to worth more today than it is in the future. So then that ice cream never becomes more expensive for you because you're always paying it with rent that appreciated over time.

I like that. I generally agree. My own personal philosophy, I agree with exactly that. I like leverage. I like debt. I think when you can get debt locked in at two or three percent, four percent, five percent. Like, if you can make more than that, you know, it's a math thing. But like I've talked about on the show before.

One of the concepts that changed my thinking a little bit on this is this, there's a book called Life Fanair. It's one of my favorite books, like Millionaire with the word life. And they make this concept in there, this idea where if the goal, the goal of the game should determine how you play the game. And so if the goal is to quit your job, have financial, independence as quick as possible to become wealthy, which is a lot of people's goals. Then if that's the goal, then there are certain rules you play by, like leverage will get

you there faster. I think we all believe that if you leverage real estate, you're going to get wealthy faster. If your goal is to reduce all risk in your life and to live the safest life possible and to have minimal chance of ever having a heartache or any risk, then maybe, you know, the Dave Ramsey model is better for you. Well, to me, that's risky. The Dave Ramsey method is risky. because if I have four homes for that same $100,000, if there's a vacancy, then I'm still getting

some cash flow. If I have one house, then there's a vacancy, I'm getting zero. How is that not riskier? And also, every property I buy, I say it comes with an imaginary lottery ticket, right? And that is appreciation that I don't have control of. And I've hit the lottery three times on these properties and made a million dollars off three different properties because I leveraged my money and I just started buying everywhere and spreading out and getting more of these imaginary lottery tickets. I never bought a property because I thought it was going to appreciate. I bought it because it paid a bill. And then apparently, you know, and then if the neighborhood changes, there's a new park going in, something, you know, some new development that I had no insight on. Then my wealth tremendously explodes.

And that was no, I can't do that if I'm buying one house and two and having it paid off. Why don't not turn that into 10 or 20 and have those imaginable? lottery tickets. Yeah, there's another component to this that never gets brought up. And it's the assumption that when you pay off your mortgage, you own it free and clear. But the mortgage is one chunk of the whole pie of what you pay when you own a property. And it's often not even the biggest piece. And it's not the biggest. And that's what's annoying is they're like, oh, once you pay your property off, you have no expenses. No, not true. You have tax. You have insurance. You have property management. And your freaking expenses and capax and maintenance are so much bigger

than your mortgage anyway. Go ahead, Brandon. I don't want to just rip on Dave Ramsey. I actually like Dave Ramsey for a lot of reasons. But Dave Ramsey's like Instagram, they had this quote. It said, 100% of all foreclosures were with people with mortgages. And I was like, that's not entire, like, I get what he's saying? But I go to the comments and everyone else calls him up for two. What about tax foreclosures? What about like all the other reasons you could lose your property? Like primarily taxes or the thing, you know, you don't have insurance on the property. Like, there's a lot of things that go into that. 100% of bank foreclosures, you could say. Well, 100% of foreclosures were from homeowners. You can't have a

foreclosure unless you have a mortgage that have a bank foreclosure. If you're buying, buying old rentals and the market goes down $10,000, I bought $100,000 house. It's worth $75,000. Now, I don't care. My rent doesn't go down 75%. There's a 12-month lease. So there's always a 12-month lag on my lease is based on property values. But never, you know, maybe my lease stays the same. but it's not like, you know, if there's a market crash, you actually have more renters because people are losing their homes or people aren't moving or they can't afford a home. And so it creates more renters and more demand. And so to me, I like to spread out my risk and you do that by buying more properties. It's like a belay. When you're climbing the mountain and you slip,

you'll fall a little bit, but it will catch you. You won't fall all the way to the bottom. That's what cash flowing real estate does. In the stock market, in securities and equities, there is no belay. If you're at $80 a share and it drops to $20 a share in a day or two, there was nothing you could do to stop that as opposed to real estate. I don't care what it drops to. Even if we have the scenario that hasn't happened in my lifetime where rent was $1,200 and it drops 30% all the way down to $900. Maybe I went from cash flowing $200 a month to negative $100 a month. I can probably swing $100 a month. This doesn't get brought up enough when people are comparing these investment vehicles. And so I really appreciate you doing that here.

And that tenant, if you're losing $100 a month, the tenant's probably paying $150 in your principal paydown. So in some ways, so some ways you're not losing money. It's just not cash flow. It's future money. You're paying yourself in the future. Well, let me dive into this topic a little bit deeper that we've been talking about, but debt versus investing, you know, like clearly I think all three of us, we utilize leverage in debt. And when it comes to 5% student loan debt, 3% student loan debt, mortgages at 3 or 4%, this all makes cents. What about credit cards? What would be, I don't want to ask you to guys this. You got $25,000 in credit card debt right now. You're paying 25% interest on this money. Do you pay that off first or do you

go invest in real estate with it? What do you guys think? Alan? I think credit card is the one thing, the consumer debt that you got to pay off first, only because that's going to allow you to get better terms on a mortgage. And that's just, that can spiral out of control. And Dave Ramsey calls that playing with snakes. That is the one, the one debt, I would say, focus on your credit. cards and then everything else buy an asset to pay for it. Especially, I would second that because credit card debt is typically ridiculously high. You can't have this one-size-fits-all solution that most people find comfort in in life. Well, should I just pay off all my debt?

Well, all your debt could be a 1.5% interest rate on student loan versus an 18% interest rate on your credit card. So I think there's some common sense that should go into it now. And you made a great point. There's a passive investment to paying off credit card debt because it will help you get a mortgage, it will improve your DTI and your credit score, which allows you to go by real estate. And the last little cherry I'll throw on the top of this is when you house hack, which all of us here are huge, you know, disciples of house hacking, you're also getting rid of something,

you're getting rid of your mortgage payment or your rent that you're going to have if you're not owning real estate. And saving $1,000 on what you would have made towards a house payment, you're not getting taxed on money you save. It's almost the equivalent of getting $1,400 or $1,400 in cash flow after you lick a lot of the taxes. You know, if I get at one more piece of the credit card thing, I'll say I actually, so if it was just about the money, I would actually be different than both what you guys said. And I would say I'd rather have somebody go and invest in real estate than pay off $25,000. But I'm going to, before people, before people take that and run with it,

the reason I say that is because the knowledge gained from actually taking action to invest in real estate is going to benefit you way more than $25 grand in your life. The reason though, then I would, but I would still side with you guys on this point. and I think we all would agree to this, is like when you have $25,000 in credit card debt or $50,000, that is a symptom of a greater problem most of the time. And everyone here that has that is yelling at the car stereo right now. And that's not true. I had this unique experience or, you know, I had this medical bill.

I had something. But there's usually still something in your life that made that happen that I think you need, most people need to fix. Again, there is the rare, like you had a crazy medical thing that just had to go on credit card. but I know for me there was a point where I was like 50 or 60,000 dollars in credit card debt and that was maybe even more at one point. And some of that was house flip stuff, but some of that was because like I was making, I was spending $1,000 more every single month than I was making.

So by paying off credit card debt, you change your identity from one who is living in the moment and living for your wants and your desires to somebody who lives with intention and with purpose and with goals in mind. And so that, it makes you a different type of person, which will then benefit you on real estate. anyway, just some thoughts there. Anything you want to add on that? Yeah, I think that's like the training course to handling money and understanding leverage. Like if you have the willpower to pay off your credit card bills, regardless of the amount,

you're going to have the willpower. It's that exact same willpower to be successful in real estate investing. Like it's the same, you know, mindset, really. So maybe put it a different way. Like, I've often heard the phrase, and I love this is if you can't donate, if you can't like tie their charity, whatever, 10% of your income when you're making two grand a month, you won't do it when you're making $20,000 a month or $200,000 a month. I would say that same principle applies.

If you can't live within your means at $3,000 a month, you're not living with your means at $30,000 a month either because it is a mental thing, not a math thing. And I think the thing with credit cards is like most other debt, student loans, car notes, you're paying some of the principal. But credit cards make it really easy to just pay the interest, so you're never getting ahead. So that's, if you wanted to take my house fire approach,

buy a house, but make sure that cash flow pays more than the minimum, more than the interest payment that you're actually paying down the principal. Otherwise, you're never going to get out of that credit card debt. You're just on a treadmill. There's a lot of variables to this. There's also the side of, well, if you pay off your credit card, are you just going to go run up the debt again once it's been paid off because you can't be trusted with credit cards? So you don't know how many times that, like I worked, you know, I worked at a bank for a year, year and a half back in the day with like a banker that gave people credit cards and open checking accounts and all that. And numerous times I would find a way to use like home equity. Like I'd get a home

like we line of credit and we'd pay off their credit cards. And I was a good banker. So I'd work with them. And I was like, I had all these ideas on how I could help them. And then three months later, they'd come in and they're like, well, what else can you do for me now? I'm back to my 35,000 in credit card debt again. And I'm like, we just did a refi in your house to pay it off. Like, what are you doing? I don't, yeah. And it's, it sucks. And just go back to like that debt is often a mental thing than it, like, especially consumer debt. It's a mental game. It's a mental sickness and illness for, for many people. So, you got any advice, Alan, on. You got any advice, Alan, And I want to go back to your story here in a second, but any advice on people, like getting

into that mentality where they can sacrifice more now, where they can live more within their means. The people who are struggling with that right now, what do you got to say to them? I always trick my brain. I'm like, hey, Alan, when I'm going to give myself a gift in 10 years, what would that gift be? And, you know, it's like, oh, well, maybe it's no credit card debt. You know, okay, let's let's pay future Allen. with my, you know, gift, President Allen's got to work to gift future Alan that credit card debt. Okay, well, let's make up a plan, $200 a month, go here and go there.

Maybe it's, I would go to my, when I had a day job, I had the HR take some of my, like, 25% of my savings or my income and automatically deposit to one bank. And then 50% it would go to another bank across town that I didn't have access to. and the other 25% would go to like retirement accounts. And then what I would do is it wasn't in my account. It wasn't in my daily account. 50% of my paycheck was just going to this bank on the other side of Manhattan. And it was a pain in the butt for me to go to.

And I didn't have, didn't want to create an online login, didn't want to have the debit cards. I actually had to go there in person. And then all I did was I give my gift to myself every January 1st. Well, the bank, whenever the bank would open January 2nd or 3rd, I would walk over there, say how much do I have in my account because I need to go buy a house with it. And that's, that's what I did for my first one was here's $10,000. Okay, my budget is $10,000. That's 10% and $100,000. The next year, it was $25,000. Okay, let me go buy a house with that. And, you know, it was that I would just play these games and be like, oh, hey, good looking out for you, Alan, you know, thanks for doing that.

And so I knew if it was in my account, I'd go spend it. I'd do some dumb. I'd go drink, you know, with my buddies. But if I'm like, hey, guys, sorry, I only got 20 bucks tonight, but I'll go out, you know, it was fun. You know, I didn't feel like it missed out anything. I didn't feel like I was living in poverty. And then those beers and those happy hours, like, how are you doing this, Alan? How are you buying these houses? And it's like, oh, well, I hide the money from myself, you know, and pull it out once a year. Dude, I play that exact same game in so many areas of my life. Like money, like the same, like the same thing. If I set it aside, let me, the government does it too, right? Government takes the tax money from your paycheck first because they know that then,

like, you're not going to spend it. So I do the same. Same thing. I have so many random accounts. In fact, true story, there's going to be like a weird flex. But the other day of my finance guy, Micah says, who helps with all my finance stuff. He gets a letter from the bank, Bank of Hawaii. And they say, your account is going to start charging you $10 a month if you don't use it. You haven't used it in a year. They're going to charge your $10 a month or whatever. And I'm like, and he's like, hey, Brandon, what do you want to do with this account? I don't even know what account it is. It must be your personal one there. And I said, I don't have a personal account of Bank of Hawaii. He's like, well, you got this letter. So I was like, well, you look into it.

So he calls up his banker, the banker friend that we have at the branch. Finds out there's $25,000 sitting in this thing. It's been there for at least like three years. Like, because I said I opened it over on Oahu. I have no memory of this at all. Like, I mean, I know I lived in the town where that was at. But I just, I must have gotten money from something. I sold something and I put it into that.

I opened a bank account and was like, hey, this would be for my future. And then totally forgot about it. It's like fighting 20 bucks in your jeans pocket. That's like I was just going to say. It's like putting money in your, in your jacket pocket and leaving it there all winter. and then you get back out. I'm so glad I'm not the only one that does this. This happens to me all the time.

I feel so good. You probably took out a loan at Bank of Hawaii and funded it with some money and then sold the property that the loan is attached. Yeah. But the point being, I hide money sometimes like that, maybe a little too well, so that I won't spend it. There's a, I've used this analogy before, but I'll say it real quick. There's a movie called Fantastic Beast and Where to Find Them.

It's a Harry Potter spinoff, right? In there, there's this creature called like the Akami, or I don't know if I'm saying it, but that expands to whatever size you get it. And so if you put it, it can put it into, so you put it into a big room, it expands to the size of the room. But you can put it in a teacup, and it shrinks to the side of a teacup.

And I always say like our budgets are like that, like our finances. If you have $2,000 in your checking account, you're going to spend $2,000 in your checking account. We all just do it. So the government's like, well, I'm going to take that out first. So by limiting the size of your container,

then that little acchemy of your spending will just fit inside that. And you won't even notice it. So taking that $2, $300 a month and sending it aside. you won't notice it. I mean, maybe the first month you'd be like, oh, that's a little weird,

but you just don't notice it when you set it aside. So anyway, I love that. Oh, by the way, that also works with time. Think about it. It's like Parkinson's Law. If you had a whole day to finish some project, you're going to take a day to do it. Oh, true.

But if you give yourself, no, I've got one hour to finish this thing. Or if you say, I'm going to buy a real estate deal this year in 2021. Yeah, you might do it by the end of the year. But if you said, I'm going to buy a property in the next 30 days. Like, oh, I'd love to see the action you take in 30 days because you gave yourself a smaller container. You play tricks with yourself. It works. Oh, yeah, totally. I always like give myself constraints and deadlines.

I find myself getting way more creative and way more productive because I can him and haul for 90 days on a property. But that's what's great about 1031 exchanges. You have a time limit, right? And so then you make a decision. But, you know, so if you just do that, you pretend like everything's a 1031 exchange and I got 30 days to invest this or, hey, whatever I have in this account on January 1st, I got to buy a house in January. Because the faster I the house, the faster I can start saving for the second house, you know, those sort of timeframes. So I love this. You just realized your business needed to hire someone yesterday.

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caught it early. That's expensive. A good property manager isn't overhead. Their protection against small mistakes turning into big losses, and that matters more than ever in this economy. That's why I like Mind. Unlike other property managers, Mind manages your property like an investment. They obsessively measure the things that matter for your bottom line. Things like occupancy, delinquency, and net promoter score, and they have the results to prove it. Go to mine.co slash show me to see how mine performs and get your first month free, which is much cheaper than learning the hard way. Tell us a little bit more about the subsequent houses that you buy using these little mental hacks that you're playing with yourself? Well, personally, I've grown my portfolio. I've been doing this for 20 years,

and I wrote this down. I had to do research before I came on here because it changes every week because I'm buying and selling things. But currently, I have about 69 units personally for about a total of $8 million, 48 single family homes, 21 units are duplexes, triplexes, and quads. And then with some partners, I've got another $20 million with a property, 94 units, mostly commercial ranging from 12 to 28 units and some storefronts. And so it's, and David, you might know this as a realtor. You know, opportunity starts presenting itself. I'm always been an opportunity buyer.

I've had clients find a deal. When I'm first starting out, I didn't have money, but I could find a deal and then I'd go find people with money. Now I'm on the other side of the coins. Some of my clients and friends, they find the deal and they come to me with money. And I'm like the other side of, oh, okay, let's buy these deals together. and, you know, sometimes I date clients and I'm like, hey, guys, this is the house you want to buy. I know it's not the perfect kitchen.

It's not the perfect bathroom, but you're on a double lot, and this lot, it comes with this lot that's landlocked, and because of that, you can do X, Y, Z, you can build a pool and it doesn't go against your far. You can build a second story here where all the other homes can't. There's just the, maybe it's, this is like not imaginary lottery ticket. This is real life lottery ticket right here that no one else is seeing the value. you need to buy it. And a lot of times they can't pull the trigger. And so I say, sleep on it. If you still don't want it tomorrow, I'm going to buy it. And that's sort of what happens is I wasn't looking for that property. I wasn't looking for that sort of gold mine. But because I'm out in the

road, you know, out on hitting the road, taking clients out looking for myself, I find these things. And I'm like, you should buy it. Okay. I'm going to buy it. You know, and that's what I love about real estate investing is really kind of finding those opportunities to maximize value. And it's not always just to fix up the kitchen kind of thing. Explain where are you buying today? You're not in New York City anymore, right? You moved down to Atlanta. Is that right?

Yeah. So I'm in Atlanta. I was born and raised in Atlanta. And after spending 13 years in Brooklyn came back to Atlanta. And so I just sort of 1031 to most of my portfolio or all my portfolio eventually to Atlanta and sort of continuing to invest in and around Atlanta. The winters don't freeze my pipes here. That's what I've learned.

We've got termites here, which New York didn't have a problem with. but our winters do not freeze pipes. So that's been a sort of a relief. And I did recently venture out about an hour outside of Atlanta. And this goes hand in hand with one of my clients. He found these properties that were individually listed on our MLS. It's really hard to sell like a single family portfolio, at least in our MLS. It's either a single family or you can sell a commercial property.

But if you've got a package of 30, 40 homes, you know, you either sell one house and you have to give it really crazy value. and everyone ignores it or you have to sell them all you know list them all individually so i had a client come to me i've been showing them investment properties we lost some bids it didn't work out and he came to me and he said out there's this town of our south from here and they're selling the homes for 30,000 each and so he would look at it and no i'm not looking at 30,000 dollars homes but in the realtor notes it said must buy 40 of these you know here are the other mLS numbers and so so these are just been sitting on the market for like a year because everyone with a $30,000 budget, it shows up, but no one has a million dollar budget, right, who's looking at these properties.

And so this turned out into a really good deal in that it's really difficult to finance a property that's below $50,000. There's a federal law that closing costs and attorney fees can't be a certain percentage of a property value. Usually $50,000 is that threshold for a mortgage company to give you loans. And so we tried to get a loan. And so we tried to get a loan. loans and I said, okay, I'll partner with you. And no one's lending on it. So we went to the seller and said, the only way you're going to sell these is seller financing. And so he understood that. He's been in the business. It was a guy who's retiring, accumulated 40 homes. And he gave us 15-year seller note with 10% down payment at 7% interest. And it was still cash flowing after that.

And it was just a no-brainer. And so the total package was $1.3 million at the end. So we had to come up with $130,000, which is great to buy. $1.3 million portfolio that was seller finance, and it was cash flowing on day one. And now two years later, that it's worth $2.5 million. So, but what happened was because my name as a realtor showed up on 30 listings in this small town, every single wholesaler in that town, every single real estate agent in that town, whenever they had a listing, they're like, Alan, you've had a buyer for the last 40 properties in this town. Would your buyer be interested in this? Would your buyer be interested in that. And I bought another 10, 15 properties off market that way just because they're

like, whoever Ellen is representing, they're buying these properties. Yeah, this guy's a shark. This is great. Can you explain for those who maybe have never heard the term before, who are brand new to this? What a seller financing? And how does that, how does that work? What are the benefits of it? Like, explain that concept. Yeah, sure. So it's basically a bank and the seller is going to be your bank. So instead of a bank going through your finances, making sure you're putting 20% down or 25% down that you have the debts to income ratio, all the formulas and criteria they use to purchase your home, the seller is going to say, hey, I want to lend you the home. Basically, give me 10% and I'm going to be the mortgager.

I'm going to give you the 90% in a mortgage, and you just pay that over time. There are some benefits to the seller for doing that. One, he couldn't sell his property otherwise, but two, he can do installment sales or other sort of rolling in this income. So instead of one big payment can kind of, I'm not exactly sure in and outs, but there is some sort of benefit. For him, the taxes are a bit less. Yeah. Over time. And three, it doesn't go, honestly, it doesn't go on my credit score. It, you know, I bought it in an LLC. It's separated. So when I go get a mortgage somewhere else, but it's not even on the radar for anyone. And so what we talked at the beginning of the episode,

leveraging your money as much as possible, spreading out risks across 50 homes. If 10 are vacant, I'm still cash flowing, you know, it kind of thing. If you're trying to get in real estate, you have no money, that's your best opportunity. It's really, really the best. And it's usually cheaper than a hard money loan as well. I don't think people think enough about seller financing. I know I don't. But it's, and because it doesn't work all the time.

And so people just never bother to ask for it. A seller has to have their house paid off in cash to do seller financing. So you're going to find these opportunities, find retiring, investors, typically guys who have acquired a significant portfolio over time. Their kids have no interest in real estate, and then they're willing to offload it to you. Yeah. And I, you know, when I wrote that book a long time ago, the book on Invest in in Real Estate with no and low money down. And when I was writing that, I was doing some research on the seller financing because it's a whole chapter on that. And when I found at the time, I don't know if it still holds true, but I

bet it does. It was like a third of all homes didn't have a mortgage. And so like that was a way bigger number than I imagined. So it's possible that. a third, and I know a lot of people buy houses for cash today, it's a big thing to buy for cash. So it's very possible to still get dollar financing. In fact, I was just talking to a buddy yesterday, yeah, last night on my house here, and he just got a huge deal locked up here in Maui. And it's like a $1.3 million property, but the seller offered to carry, it was like, he could do, he could do seller financing, but only up to $800,000 because he had a little

bit of a mortgage to pay off. And so my buddy's like, okay, so he's going to do that, he's going to get that, and then he brought in a partner to fund the rest. So the partner's bringing in like, I don't know what it is, $400,000. The seller's carrying the $800,000 or whatever that number is. And then together, they're going to flip the house. And so this guy is going to do it for no money down, this huge million-dollar-plus deal. So it's definitely a tool to have in your arsenal and to learn about.

I mean, some guys like Gabriel Hamill who we've had on the show here, that's his entire strategy. That's all he does is seller financing. He just kills it. Yeah, it's powerful. And there's ways to look these up in tax records. Typically, I know there's strategies to see who's own their own for over 30 years. they're probably paid it off. You can search for out-of-state landlords,

or if their mailing address doesn't match the property address, there's all these tools out there if you really want to go knocking some doors or do some direct, but that's a fast way to get into real estate with no money. 100%. That's so good. All right, so you bought this portfolio of 40-some houses,

and you like made, I mean, it sounds like you made over a million dollars. You're selling it now, right? Like, it's over a million bucks. I'm off one. Yeah, so I've got it under contract. And so I'm looking to,

to 1031 it now, which is a tax deferment. If I sold it, I would get a lot of, I would have to pay, you know, capital gains taxes. 1031 allows me to avoid that or defer that and roll it into the next property. And so what I've been really interested in, and I've always tried to push myself, I always try to buy something bigger, a product type I've never bought before whenever I do a 1031. So I'm looking into commercial and specifically something called a net cash flow, triple net lease. So triple net is commercial properties that the tenant pays for everything, the improvements, the structure, the roof, any repairs, the rent, the mortgage, or if there is a mortgage, or sorry, the rent covers the mortgage and insurance, property taxes, it's just hands off. I know my expenses are just going to be my mortgage payment. So a zero cash flow triple net basically is exactly what it sounds. I'm not going to make any profit. The tenant pays the mortgage er directly. And also, these exist in AAA bonded tenants, the best of the best. You have your CVS, your Walgreens, Dunkin' Donuts, Chase Bank.

They're a corporate entity is signing on the lease, and they sign on these for 20, 25 years. So even if the property goes dark, which means they close it down, they're still going to pay the 20-year guarantee lease. And so on these triple nets that are zero cash flow, you can get into them with 10% down, 15%, down, which is about half of what you typically need, usually need 30 to 40% down to buy a triple net property. And the way it works is you can, the tenant pays off the mortgage. And I'm not going to make any money for 20 years. There's 20 year mortgage, 20 year emmerization, 20 year lease, but in 20 years, I'm going to have this huge paid off property. I leveraged it. My 1031 proceeds with a 10% down payment. Also, during that time period, I can write off losses on that property.

So as a real estate professional, I'm getting other rental income and cash flow. And this property is going to earn me losses, even though it's not a loss. It's a loss on paper that saves me on taxes and my property. And also allows me to do, all these properties have recapture when you purchase, which means if I put more than 10 or 15% down, they instantly give me back that 1031 proceeds back to me cash free, almost like it's a cash out refi. so I can access my 1031 proceeds without paying taxes on it. Fascinating. Yeah, this is something I don't think we've actually talked about on the show before,

but I'm more and more intrigued by this idea of owning the triple net lease stuff because of the lack of management. It's a lot easier. I'm going from my 40, 50 houses that you were handling into one of these things. It's going to be night and day difference for your management, I'm assuming. And I'm giving my gift to myself for 20 years. I mean, that's the way I look at it. I don't need money now. I don't need the cash flow now. I've got. all my other bills still covering the bills in my life. But in 20 years, I'm going to have this paid off whatever Triple Net corporate entity who will probably sign another 20 year lease and that'll be pure cash flow. Yeah, why wouldn't I do that? There's some genius here that I want to

highlight because you're looking at this. David. Yes, absolutely. Well, Alan, the minute we brought you on the podcast, it was like a halo that just shines out from your entire audio there. You're not just looking at cash flow. And that's what I wanted to get at. It is cash flow is what brings a lot of real estate investors into the door because cash flow can replace your job. Cash flow can get you out of a buying. Cash flow can pay off bills. Everything that we talked about, it's great.

It doesn't mean that's where you should stay forever. And cash flow, in my opinion, is oftentimes like training wheels. It keeps you from falling off the bike. It teaches you how to write it. But it limits how fast you're ever going to go if all you're looking at is cash flow. Alan, you're describing a deal that will net you no cash flow and, could save you theoretically seven figures in taxes if you're making it in other areas as a real estate professional. That's a huge, huge win on a deal that other people might just ignore

because they're not looking at it from your perspective. So I appreciate you sharing this side. I'm going to highlight we're not advocating people by non-cashilling properties if they're not in a strong financial position. But as you do well with real estate and your financial position becomes stronger, real estate has all these really cool techniques and tricks that you can use to grow the wealth you've already created relatively safely. All right, two more quick questions before we move on to the deal deep dive. First of all, what's your management life look like? Did you manage all those 40, 50 houses yourself, all that stuff?

Or do you have a management team? Do you hire it out? What's that look like? So I started a property management company and I realized really quickly all my time was to managing the properties and not focusing on, you know, finding new deals or figuring out how to do a deal analysis or figuring out how to finance it. And so then I grew a property management company and then I slowed it down and offloaded all the properties so I could directly focus more on acquiring new properties. So I've outsourced across three different property managers depending on where my properties are.

Okay. And so then do you say the majority of your time these days spent as an agent because the property management is looking after all your stuff? Yeah. I would say that, yeah, that's probably 75 to 85% of my day is real estate agent related, which I enjoy. it gets me talking to people, buyers, home sellers, and search into those

treasure chests out there that are just waiting to be discovered. Do you think people should get the real estate license when they're getting into investing? I do not. I think I side with David on this.

There's no really cost savings. Well, let me rephrase that. If you are going to be a real estate agent that helps other real estate investors, 100%. And there's benefits to that because what happens

is other real estate agents call me and say, hey, I've got this quadruplex coming to the market. I know you have a lot of quadruplex buyers. You know, do you want it? And I'll pass it on my clients.

And if they say, no, I might buy it. So those opportunities are great because I'm a real estate agent. But I have never, and I do the same to other real estate agents who I know have buyers and sellers in those markets. But I'll never call that one-off person who's a vester if he's not my client, right? You know, that's just not the best use of my time. And I find that as a real estate agent, if I'm dealing with another real estate investor who's investing with themselves, it's a more difficult process.

it's not as easy as they think it is. I have to explain the contract to them over and over again or how things work. And they know a lot about real estate, but they don't know a whole lot about a real estate transaction. And if you're not doing, maybe you're doing it once or twice a year, you're not going to get the reps in like a realtor would doing 100 deals a year. Yeah. Alan, you just helped me realize why I don't like this question. It hit me like a lightning bolt right now. Why don't we say the same thing to every other component of investing? Are you going to get your contractor's license when you become a real estate investor? Are you going to become a CPA when you become a real estate investor? Are you going to get, are you going to become a full-time property

manager? It's only with being an agent that this question ever comes up and you're highlighting the exact point is getting the license doesn't make you good at it. You know, getting a license that says you know how to be a construction worker. You have a contractor's license doesn't mean you're skilled at doing the work. It takes reps. And most people don't want to put those in. Yeah, like you said, like I tried to, when I first got into this, I met every plumber. every electrician, every handyman, just looked over the shoulder, like, I'm going to learn how to do this. It always costs me twice as much when I try to do it myself twice as long. And I've learned what we're doing is leveraging skill sets, right? Instead of leveraging money to buy house, I'm going to leverage other

people's skill sets who do this full time and that they're going to do a better job than someone who's doing it part-time or learning as we go. There we go. Awesome, man. Well, love it. Love to hear your story and where you've been and what you're doing. But we're not done with yet today's show because first we have to to the deal deep dive. Time to dig into one particular deal that you've done to find some details on the deal. It's a question and a half, one and a half.

What type of property was it and where was it located? This was in Brooklyn, New York. This was actually five doors down from that duplex that I bought. The house hack, my second one, the house of clowns with comedians. Okay, and how did you find it where you just walking down the street

and saw this house five doors down? Yeah, I am the noziest first. person ever, and I purposely, every time I walk to the subway, I would walk a different direction to the subway, just because I wanted to go down different blocks, different streets, and every house that's under renovation, I stick my head in, hey, what's going on here, guys? Is this going to be rentals? Is this going to be for sale? You know, I didn't really have money back, you know, I was 25 years old. I was just curious. Like, what's happening? What are you guys doing? And so this was actually the opposite direction of the subway that I would normally walk in,

but I walked in there and I saw a contractor fixing it up. And so I poked my head in, hey, what's plans with this. And, you know, real estate investor talking to real estate investor. I ended up talking to them more and more over time. And it gave me a price. And I said, you know what, I'd be interested. Let me see if I can find a way to buy this because I didn't have any money, didn't have any cash to buy it and build up rapport. And this was going to be a finished, renovated duplex nicer than the duplex I lived in five doors down. Question number three. Did you ever consider forming a band called five doors down to compete with three doors down? How much was the property?

How much was the property? That was not a real question. How much was the property? The property was he wanted a million dollars for it. And I believe I negotiated him down to the $990 on it because it was off market. So I got $10,000 discount. You, sir, that's what I was going to say, that's why they call you Mr. Chris Voss, like the, you know, the FBI negotiator right there. Yeah, right, right, right.

Yeah. We're supposed to ask how you negotiate that price. Is it because it was off market? So you said, hey, you're saving money on the realtor fee. So give it to me. No. This is how it went down. I went back to my wife. And I said, hey, we're buying this property. This, we're no way we can lose money. We're buying it for a million dollars. And she's like, I can't, we're not paying a million dollars for that. And I said, well, you go talk to him. And so she came back and said, I got him down to 990. There we go. Here's another quick tip for everybody. Something about that million mark is such a big deal in everyone's head. I cannot tell you how many deals we've been trying to get under contract with buyers and the seller. Nobody could get it under contract until I came back

and said, let's give them a million dollars, but ask for $40,000 credit. Done. Yeah, yeah. Right off the bat. Something about that, just million dollar number, one million dollars. Yeah, and yeah, people love the million number. All right. How did you fund it? How do you get a million bucks for this thing? I had no cash. And so what I did is I went and did a got a he lock on my duplex, the House of Clown's duplex. And it came in at a crazy number. Honestly, way more than I thought it was worth. But, you know, I'm not going to complain. I'm going to take their appraisal. And based on that, I got a $300,000 he lock credit line. So with that, I took $300,000. And for me to be able to buy this, I had to put 30% down. So there goes my entire heloc, 30% down and mortgage the rest.

So it was 100% financed duplex. And why I loved it so much was that even with that 100% financing, I was going to cash flow $2,000 a month. And it wasn't the prettiest duplex. It was right underneath the BQE, which is this raised interstate. I live five doors down, so I was used to the noise. It didn't bother me. It sounded like an ocean after a while, just a steady white noise, probably like living in Hawaii. I would imagine.

And under an interstate. Yeah, yeah, under the interstate. And I can't believe I paid $1 million for the duplex, but it just made sense on paper. I was like, there's no risk. We're going to, you know, $2,000 a month, that entire $2,000, I'm not paying myself. I'm going to pay down this HELOC, which is an interest-only loan that had no principal associated with it. But my HELC payment, I want to say was like $600, $700, $700.

So the other $1,200 was going to work that down. I had a plan that we're just going to pay this off over time. So it was a free million dollars. This is the way I look at it. Okay. Next question. What did you do with this duplex? So I rented it out for four years.

I made, like I said, a really good cash flow on it. And then when I moved to Atlanta, I saw what a million dollars could buy in Atlanta. I could actually get more cash flow and I could buy more property. So I decided to sell it so I could do a 1031 exchange. And I sold it. And this is what happens in New York. This happened to me a few times in New York when I sell a property over a million dollars. who eventually have celebrities that come buy it.

Barbara Corcoran from Shark Tank bought my first million dollar property in Red Hook. So she bought that for her investment. And that gave me confidence to know what I'm doing. If like, wait a minute, Barbara's buying my stuff, should I not be selling? Or am I doing the right thing by renovating and selling to her? And I sold to some of like Spike Lee's right-hand men and guys like that. But this property was sold to Christina Ritchie. She's an actress.

Played Wednesday in Adam's family and usually has sort of a goth character role, kind of thing. And I feel like I can say that. I signed a nine disclosure at the time, but then that was so she could immediately the day of the closing sit out in a press release about it that she bought it. And who knows if she still owns it now. This was probably 10 years ago. But it was kind of cool to meet her at the closing table. And again, I was like, wait, wait, she's buying it. Am I making the wrong decision? You know, am I doing the right thing? But I was able to buy three quadruplexes in Atlanta with that 1031 exchange. So it seemed to make sense. I love how it just demonstrates that you like how one deal can lead into it lead into another

bigger deal better deal which can lead into another bigger better deals you know plural and that's how you build. I call it the stack in real estate, right? It's like you start with one and you stack two and you stack four and eight and you know you grow exponentially and your cashful increases with that and your equity increases. You can take it from one to the next and then you bump it up again because you fix up that property and just the whole world of real estate. It's just so cool because it does that and that was a great story. So what lessons did you learn from this deal? And, well, I should say, what was the outcome? What did you actually totally make on it then? And what lessons did you learn? Yeah, that was the first time I made a million dollars on one property. So that was a pure million dollar, 1031 exchange money that I was able to put on as down payments for the other properties in Atlanta.

What I love about this is that you didn't trade a duplex for a million dollars. You traded a duplex for three more properties with the million dollars in equity. So you never felt like you were rich, right? Like we were talking about earlier. Yeah, yeah. Like I always like playing this game. Like ask someone, what are you going to, what would you do with a million dollars? And, you know, most people, I'd buy a Ferrari and Lamborghini. I'd go in this trip. You ask a real estate investor and be like, oh, I'd buy four million dollars with a property with that. That's 25% down payment, right?

Like I don't get enjoyment buying myself those things. I'd rather go buy a property and then. Well, then let your property buy those things like we said earlier in the podcast. And it's worth noting that I had no insight that that four years was going to create a million dollar equity. I bought the property based on the mechanics of a deal looking at it on paper. This is going to cash flow me. More money than I anticipated.

But it was just going to be a profitable venture. I was happy with $2,000 a month. And then the Brooklyn Net Stadium came. That was your lottery ticket. Yeah, I had no insight on this. I'm not some genius. You know, there's so many dumb idiots running around the real estate world because there's such a low bar of entry.

But I want to be one of those idiots. So let's just get, you know, lucky. That's exactly right. You assisted enough tackles. You're going to come up with a fumble if you're in the right place enough. I was going to say you can't win the lottery if you don't play the lottery. And the great thing about real estate is that you are playing a lottery that pays you money every time you buy a lottery ticket no matter what.

And then sometimes that lottery ticket goes to 10x. But most of the time it just pays you a nice monthly income. And you're like, this is great. Like what a great business. I love this game. This is so good. All right. Moving on.

Any last final lessons you can pull out of that deal? Well, I think a lot of real estate investors would say a million dollars is too big. Like, that's scary. I think a lot of real estate investors would say, I don't have the money. And then the deal dies there, right? And so I was like, I got to find the money. You know, I tried to add, find partners. And no one was interested in buying a property underneath the duplex or underneath the interstate. And I tried to reach out. You know, I didn't have a huge network of rich people. I was like 25, 26 years old. I was calling like my ex-girlfriend's father and said, hey, you want to buy this thing. And. And, you want to buy this thing. And I couldn't get any bites. And so I just looked inwards and be like, where could I pull equity out of the properties I do own? And I thought I'd get $100,000 off that HELOC line, but I got $300,000 and that's all I needed to get the deal done. And so it's perseverance, really, and just not giving up and trying and throwing everything at the wall and see what sticks. Awesome, man. I love it.

Well, let's move on to the last segment of the show. It's time for our Famous Four. The famous four is a part of the show. We ask the same four questions every week to every guest. And we're going to throw them at you right now. So first one, favorite real estate investing book, other than your own, of course, which is one of my favorite real estate investing books. Every book you've ever mentioned on here I bought and read multiple times.

So there's one book that maybe I missed, but it's called Evicted by Matthew Desmond. And what it is is, you know, we're in a privileged class. If you're able to afford more than one property, you've unlocked an achievement level you should be proud of. And we have tenants and landlord's like telling about, you know, I don't want to hear your story from the tenants because every tenant has a story. And a lot of times you're trying to cut through the BS. And like, was that a real story or not? So evicted is by a New York Times reporter, Matthew Desmond. And he lives with three tenants in Milwaukee, low income. One's in a mobile home park. One's in the inner city. And I forget where the third one is, but follows them around and really gets the truth of their story. And so what happens to, behind the scenes is really, really interesting to understand what your tenants are going through sometimes, even though the story they tell you might be different. It's mostly because they're embarrassed by the true story. And I just found it very rewarding to understand, you know, we're all in the ecosystem and our view from landlord to tenant is can be, you know, muddled,

but it was really interesting to see the tenant to landlord view and really understand where they're coming from. So I'd recommend that read for anyone. I couldn't put it down. Awesome, man. Yeah, I think I won a Pulitzer Prize. Yeah. So that was a big book. So I've been ready, though. I'm going to pick it up. Thanks, dude. All right, number two, David.

Number two. What's your favorite business book? So same sort of thing, a business book. I've read them all, probably E-Miss my best, but I want to throw out there. It's sort of a business book. It's called The Color of Law. And really, it's about segregation. Housing practices created segregation for different income groups and ethnicities.

And we all know housing is a great way to generate one. wealth, but if the government strips that from you through blocking out from lending certain neighborhoods, rewarding builders to build white neighborhoods, obviously it's really difficult to get your family on the wealth chain of real estate investing. And really, it put marginalized groups 30, 50 years behind a lot of other privilege classes. And I recommend the color of law by Richard Rothstein as well as a book to read to understand that. Very cool. Awesome. Thanks for the recommendation. Number three.

Number three, what are some of your hobbies? So I was a basketball guy like you, David, growing up. And so I'm coaching my kids basketball. And I got to say, I really enjoy it, but I'm a terrible coach. I always appreciated those coaches that just had command to practice. And, you know, my practices are run with like, all the kids are pantsing each other and slapping each other. And I'm like, time to get in the defensive stance. And you know what?

No one learns a damn thing. but I think we're all having fun. I love it, man. All right, last question from me. What do you think separates successful real estate investors from all those who give up, fail, or never get started? So personally, for me, it's my pain of regret outweighs my pain of failing. So I never wanted to be that could or should have would a guy.

I didn't want to be like, oh, man, I wanted to get in real estate. I should have bought that duplex 10 years ago. I didn't like those war stories. I didn't want to be that guy. I wanted to be the guy that said, oh, I'd, I'd, bought that, you know, a million dollars duplex and I failed. That, you know, I didn't want that. I'd rather be that than someone who didn't try, didn't put in the effort, who was scared of it. I'd rather try and fail. I believe in myself. And the second reason I think most people don't get

into real estate is Georgia football. And what I mean by that is people are always like, hey, let's talk real estate. Okay. Hey, let's, um, Saturday at noon, you want to grab lunch? Sorry, man. I got Georgia football game to go to. Okay. All right. Well, that, that's when I'm free, you know, if you want to get into real estate. And it could be Dallas Cowboys football. It could be whatever, the Brooklyn Nets basketball. You know, it's, it's prioritizing. And it's really kind of, if you really want to be real estate investor, you'll put that

above whatever, the bachelor or whatever it is on TV, right? If you really, really want these dreams. And so it's, look on yourself. What are you putting in front of your dreams right now? What TV show? And it's always, you know, something on Netflix or whatever it is. So that's, those are two things that I sort of approach. Do you still feel the same about Jerry Springer?

Jerry Springer, I don't even know if that's on it anymore. I definitely didn't make my parents proud by being on that show. But that was the goal of mine when I was in college. And I lived that dream making up a story to be on Jerry Springer because, one, it paid for my spring break. They flew me and my friends out to Chicago, pay for our hotels, our food. And, you know, everything to me is how can I get this? paid for it. Well, back then it wasn't in a house. It was a reality show. Did they know you made up the story or did they think you were completely legit? They tried to trip us up a lot of times and

they threatened us and they said, we're going to sue you for $80,000 if you bust out laughing on the show because it costs us $80,000 produced a show, which really honestly scared us. So I went to my best friend and I said, listen, Jeff, I'm going to punch you in the face because if I don't put you in the face, we're going to get sued for $80,000. He's like, yeah, and I know. And so we got in this huge fight. I got to point, well, he dodged my punch. I guess I shouldn't have told him it was coming. But Steve tackled,

tackled me, brought me to the ground. But right then and there, the producers made us fly home on separate flights. So I think they took it seriously. Yeah. Awesome, man. Love it. Love it.

I've been wanting to ask you that question for about 15 years now. Because I read a million bucks for 30. All right. With that said, we got a close-up shop. David, wants you ask the final question and then get us out here. Alan, last question in the day. Where can people find out more about you? Yeah, sure.

So I have a website and all my social media presence is The House of AC. My initials are AC. My friends call me AC. And if you Google the House of AC, you'll learn a lot about air conditioning. So apparently that was very bad branding choice of my end. But yeah, the House ofac.ac.com. And I'm creating two podcasts, one about Housefire and one about called Agent Upgrade, about how to upgrade your real estate agent business.

Cool. And the book is called House Fire? book is called House Fire, Fire being financially independence and retire early, how to be a red hot real estate millionaire with a wealth of time and money to burn that is out right now. Learn how to pay your bills, kill your bills with Housefire. Awesome, man. Appreciate you. Appreciate you coming on the show. This has been a dream come true. So thank you. Well, it's been my dream as well. And thanks for having me. It's been great. And I hope I lived up to my 10x. Maybe that was a 5x effort of guest. But, uh, maybe, awesome. Got to hear it.

I got to hear it. All right. This is David Green for Brandon, the wisdom of Dave Ramsey and the entertainment value of Jerry Springer Turner. Signing off. 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 height, 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.

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