BiggerPockets Real Estate Podcast - 870: The Real Estate “Strategy” ANYONE Can Use to Build Wealth in 2024

Starting point is 00:00:00 This is the Bigger Pockets Podcast Show 870. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate Podcast. Join today by my good friend, partner, and co-host Rob Obis Solo. That's right. And with me today is my friend, colleague, partner, confidant, muse, real estate crush, David Meyer, who wrote a book. Welcome, Dave. I did write a book.

Starting point is 00:00:26 Thank you guys so much for having me on it. Another one. It seems like you're coming out with a book every four minutes. You, David, you were one to talk. You've released two books this year. I've done half as many as you. So I'm just trying to keep up. Oh my God.

Starting point is 00:00:41 I've done half as many of you, which is still literally a book. It's something that everyone dreams of their entire life. You're like, I've only done one book this year, guys. Well, this one nearly killed me, so it might be my last. That's the thing is why we do that. It's like you, it's probably one of those things. Like, I don't have any kids, but I've heard from people that do. that they're like, why did we do this terrible idea?

Starting point is 00:01:03 This is the worst thing ever. It's killing you. And then you're like, let's do it again. Let's do another one. Birthing a book can feel very, very similar to that. Now, Dave, you actually wrote a real book. No pictures as far as I'm understanding. No comics.

Starting point is 00:01:16 You are a numbers guy and you share number and strategy. And we're going to be talking about your book today. Start with strategy. So if you hear the show and you like it and you like to purchase a book, go to biggerpockets.com slash strategy book, you can get a copy there. And if you want to grab the book, make sure to use the special coupon for podcast listeners. It is at Start 870, Start 870, and that will get you 10% off the book and all the bonuses. All right.

Starting point is 00:01:43 Let's get into this thing. So Dave, why did you choose to write this book right now? What is it about strategy that's so important in today's market? I wrote this book because there are just so many good and exciting ways to make money in real estate. But for people who are just getting into it, or even if you're starting to scale, I find that it's really difficult to figure out of all those amazing options, which ones are actually right for you and your personal circumstances. I'm sure David and Rob, when you talk to other investors, you hear this all the time. People ask you, should they short-term rentals?

Starting point is 00:02:16 Should they flip? Should they invest in California or should they invest in Texas? And I think the truth is that there are limitless ways that you can make money, but there's a challenge in trying to match the right strategy to you. And I wrote this book to help people figure that out for themselves and to create their own personalized real estate strategy. That makes sense. I mean, I think getting into real estate, you need a strategy. But I'm curious if you feel that it is of utmost importance more than ever to have a specific strategy today or if it's just the same fundamentals of setting a strategy no matter what the landscape is. I think right now it is even more important than ever to to figure out what your strategy is going to be.

Starting point is 00:02:56 Because I see a lot of people who are interested in investing, but look at the macroeconomic climate and get a little bit scared. And to me, the best way to sort of work through some of that fear or uncertainty about the market is to figure out the exact right things that work for you and your risk tolerance. A big part of the book talks about like taking on the appropriate level of risk. And so I think for people who are just jumping in right now, they look at perhaps flipping a house and say, that's too risky. I don't want to get into that.

Starting point is 00:03:21 And that might be fair. But there are other low risk options like house hacking, for example, that are a great way to get started in real estate investing, really in any type of macroeconomic climate. And so by setting your strategy, you can identify the types of real estate that are actually well aligned with your personal preferences about risk and how you want to invest your money. Yeah, Rob and I were just talking about this not too long ago, that when real estate was in its heyday, at least investing in it. And I say heyday. I mean like, our little microcosm of what we've seen from real estate heyday. It was shortly after 2010, there was a huge crash.

Starting point is 00:03:58 Real estate was this intriguing thing that was for the first time ever becoming accessible to the masses. You didn't have to be a person who had sort of been mentored by someone in town or born into a real estate family to be able to get into it. And this was coinciding with an explosion in media. So YouTube was taking off, podcasts were taking off. For the first time ever, you could learn about the stuff for free. And it was a huge wave and bigger pockets caught that wave.

Starting point is 00:04:24 And it was this explosion that took this to the masses. And it was kind of as simple as here's what you look for. Here's what you look to avoid. Do the first thing and not the second thing. And just keep doing it. And eventually you're going to make money. And we're in a different scenario now. There are a lot of people that are after this asset class.

Starting point is 00:04:42 The economic environment we're operating in changes very quickly. It's tough to nail down what type of market you're actually investing in because they can swing so fast, you really need a multidimensional approach to real estate investing. It doesn't mean it doesn't work. You can't be as naive as just, does it cash flow or does it not cash flow? And you just buy cash flow and then wait. So I love that you're putting out a book about this because like you said, Dave, you need a strategy that works for your specific goals. You need to give yourself a longer timeline and you kind of have to think maybe one step ahead, at times two steps ahead, but at least one step ahead. When you're buying real estate, Rob, you've got a pretty

Starting point is 00:05:19 impressive portfolio of short-term rentals. When it comes to how you've seen the market change since you've been investing, have you seen that it was at one point more simple than it is today? That's a good question. I wouldn't say, I guess it was more simple in that you could sort of throw a dart in the last five years and land anywhere on the board and be okay. And I think now going into it, you've got to be pretty precise. I think you've got to hit more bull's eyes these days to really hit it because I just don't think properties are cash flowing the way that they were, which I know that that's just one component of it. We don't really know the state of appreciation. And so overall, I think the more precise you want to be with your calculation, the more skill

Starting point is 00:05:59 that it takes, meaning it's a little less simple. Does that make sense? Yeah, I think so. I mean, Dave, you're also sort of sitting in the crow's nest working at BP, looking at numbers all the time, a literal data scientist, which, by the way, you seem way too handsome to be a scientist. like I've never seen you in the white coat. Hey, well, thank you. But people of all appearances can be data scientists. Yeah, you're over here breaking down walls. That's exactly right, showing that science can be cool.

Starting point is 00:06:26 Are you seeing a bit of overwhelm right now that investors just can't figure out either what area they should invest in or what asset class that they should be investing in? Yeah, definitely. And that was one of the main impetus for writing the book. And you sort of hit the nail on the head, David, is that a lot of this comes down to media and we're part of the media. So this isn't disparaging people for posting about what they do. But I imagine if you're new to real estate investing, you go on Instagram or YouTube or get into bigger pockets and you hear you should be a rental property investor. You should be a

Starting point is 00:06:59 short-term rental property investor. You should go into creative finance. You should buy land. Like there's so many different exciting things that sort of get pushed in your face right now. It can be really hard to filter down to the things that actually matter to you. and that are well aligned to your personal circumstances. And I think to your point about the economy, like that also makes this a little bit worse because people look at some tactics that traditionally worked and aren't working as well right now.

Starting point is 00:07:30 And so they're trying to go through all these alternative or newer strategies and it can be really difficult to figure out which one of them is right. Awesome. And we're going to break down how you, our listeners can build the perfect real estate strategy right after the break. Most investors spend more time chasing deals than reviewing their insurance.

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Starting point is 00:10:04 Start with Strategy and How to Pick the Strategy that's right for you. actually kind of want to ask a follow-up, because I just want to make sure that we're all on the same page as to what even strategy is. Do you think maybe you can sort of define that? Because obviously there's flipping, they're short-term rentals, there's long-term rentals. Are those strategies or are those tactics within a strategy? I know everyone in real estate calls strategy something different. I think some people call quote-unquote strategy, like whether you're flipping or whether you're buying a rental property. For me, when I talk about strategy, I talk about a portfolio level approach. So in the book, I call it portfolio strategy, which is basically

Starting point is 00:10:42 looking at what you have to invest. That comes from money. It comes from time and skill. You don't just invest money into your portfolio. You have to invest these other things into your portfolio as well. And then you need to make high level decisions about how to allocate those resources. Like, do you want to take all your money and put it into one deal? Do you want to spread it out between a bunch of deals? Do you want to do something that's high risk? Do you want to do something that's low risk. Investing strategy is sort of like a business plan, right? You need to look at what you have, like anyone who has a business does this. They look at the resources that they have and decide how they can deploy those resources to get towards their goal. And so within the book,

Starting point is 00:11:22 I present sort of three parts to real estate investing strategy. The first one is vision, which is basically you have to start by deciding what you actually want to accomplish. Like, what are your goals as a real estate investor? Do you want to be? become a tycoon and a billionaire, or are you just trying to move retirement date up by a couple of years? You need to start there because there are so many different ways to invest in real estate that unless you have a good idea of where you want to head, you can't really figure out how to get there. So you start with the vision and say, here's where I want to go. Then you go to the second part, which is called deal design, which is basically where you look at all the different types of deals

Starting point is 00:12:00 you can do in real estate and pick just the ones that are aligned with your vision. So you say, this is where I want to go. Here's how real estate can help me get there. And then you get to portfolio strategy, which is the most tactical where you're sort of making the day in, day out decisions, like specifically which properties you should buy, which markets to invest in, should you sell or refinance, how you should scale. And when you have all these things together, your vision, your deal design, and your portfolio management plan, to me, that is the best possible way that you can move towards your goals of financial freedom, whatever those might mean to you. You know, something I love about what you're describing, Dave, is it's sort of

Starting point is 00:12:35 of highlights the evolution of real estate investing. There was a time where the way that you got people into this was you just said, find cash flow and let the details figure themselves out. Cash flow at any expense. If you get cash flow, you can do whatever you want. You can retire early. You can retire better. You can quit your job and take your dream job. You can start a business. Really, cash flow was sort of presented as this magic pill. And as cash flow has become increasingly harder to find. And by the way, cash flow was never the magic pill was presented at because every real estate investor knows it's very unreliable. Rob, I love how you often advise not to live off your cash flow.

Starting point is 00:13:10 Just put it right back into the account. Keep saving that money. Don't pull it out because you don't know if it's going to be there. It takes one bad tenant. It takes one eviction. It takes one nasty turn and that cash flow can be gone. Over time, yes, you want that. But it's not going to solve all of life's problems right now.

Starting point is 00:13:26 There's many ways that we make money with real estate, Dave. And you're highlighting of that fact that this is a journey that you take, that you need to start the journey by deciding what destination you want to get into, what asset class is going to get you there, and how you're going to build a portfolio that's going to get you there, is almost impossible to fail at. If you give yourself enough time and you make wise investments, you're guaranteed to get there.

Starting point is 00:13:50 I love that. And totally agree. And this is really well aligned with what's in the book. The book, basically, it works sort of like a business plan. If you've ever read a book like Traction, it'll be familiar to you where you make some of these decisions and decide how you're going to grow your portfolio. And David, you hit the nail on the head with a couple of these. Like one part is your income plan.

Starting point is 00:14:11 This is outside of real estate. But like, as part of your real estate investing strategy, you need to decide, like, are you going to be making money from real estate or from somewhere else? Like for me, I work full time at bigger pockets. And so I can make decisions about my portfolio knowing that. I have an income that is steady and reliable. And so I can take risks with my real estate. As Rob said, I can reinvest all of my cash flow into back into my portfolio because I have a job.

Starting point is 00:14:39 And so in the vision part of the book, you make these decisions like, am I going to have a job? If so, what is it? Am I going to reinvest my cash flow? As you said, Rob, that's exactly a decision that you have to make. And what kind of financial goals are you trying to hit? Are they modest? Are they big? Are they somewhere in between?

Starting point is 00:14:58 And so by setting all these things, then you, you're really putting yourself in a position to succeed because you know exactly what assets you have to help grow your portfolio. It feels like a pretty common thing to kind of start with like a number of mine. Like a lot of people are like, I just want to make $3,000 a month in passive cash flow. And I'd often argue that that's not particularly a vision. I guess it is a vision, but it's not like really what we're going for here. One of the biggest mistakes I see investors making is not starting with the end in mind. They're just trying to get to like that first goal. And so they center everything around the first goal that they set versus the longevity of like their

Starting point is 00:15:39 career. So how do you how do you kind of break down this vision from like a short term in a long term standpoint? Yeah. So in the book, the law, the vision is really long term. It's it's trying to get the end in mind. Like you said, it's like what financial goals specifically are you looking for? And I know you ask people, you're like, what is your financial goal? And most people are like, I want a a billion dollars. That's not like really all that practical. Like if you were to work for any sort of business or corporation, you have to work and set achievable realistic targets. You don't just go into a corporation and say, we're going to make a billion dollars this year. You have to come up with something that you can actually work towards. And I know it can be hard for people, but the book

Starting point is 00:16:17 gives you some frameworks for doing that. But I think regardless of the book, you really need to have an idea of what sort of financial situation you're trying to create for yourself and maybe even more importantly, what kind of lifestyle you're trying to create for yourself. All right, the second part of your framework is deal design. Now, some investors believe that deals are hard to come by right now. How should one go about selecting the right deal for them? Yeah, so I really think this is the most fun part about real estate investing is that there's just so many different ways that deals can work for you. And that's why I call it in the book deal design because although they're, you know, in real estate, we often call this quote unquote finding a deal. And there is certainly part of deal design and

Starting point is 00:16:57 strategy that is going out and identifying a property to buy. But there's so much more than just like picking the physical structure to a deal, right? You have to pick the financing. You have to pick the partnership structure. You have to figure out what kind of asset class you want to buy and what class neighborhood. And so to me, that is what deal design is all about is looking at all these different components of a deal and sort of putting together the puzzle in a way that we're works for you because David, Rob and I, each of us has a different vision. And even if we all were able to buy the same exact property, we may actually operate that property entirely differently. Like Rob might turn into a short term rental. David might burn it. I might just

Starting point is 00:17:36 long term rental because I'm lazy a lot of the time. And so it's really just up to each investor to like design the deal around their long term vision. And to me this is really just, it's a filtering mechanism. You basically start at the top with all the different ways that you can run a business, all the different financing mechanisms, all the different partnership structures, and just filtering down to the ones that work well for you, given your current circumstances and your long-term goals. Sure. So, I mean, okay, one of the big criteria that we start building early on in our real estate portfolio, in our real estate career, sorry, is our buy box, which is, hey, what is the parameters for which we'll buy a property? But it almost feel like deal design is a much bigger

Starting point is 00:18:17 umbrella with a lot more moving parts than just your physical buybox, right? Well, I guess your figurative buybox. I don't know. Whichever one of those makes sense. No, that's exactly right. So I use both. So for me, deal design is like the whole universe of things that I'll consider. So like for me, I just mentioned that I'm going to hold off on commercial for a little while. But in my deal design, I keep commercial in there because it's something I'll consider. And, you know, I participate in syndications and funds. And even though I'm not going to do that right now, I would still keep that in my deal design because I want to know what deals are aligned with my vision and what should be sort of in my universe of real estate investing toolkit, right? That's sort of one way to look at it. These are all the tools that I can employ in the future throughout my investing career to move me towards my goal.

Starting point is 00:19:05 And then at the end, during the last part of the framework, that is when I do get to a buy box because I do think that's important. but I think there's further narrowing down of your options that need to happen. Like from deal design, what I personally do is I do a lot of macroeconomic research. And then I also do some benchmarking. So I go out and say like run deals in commercial. I run a short-term rental. I run a long-term rental. And I like to say, of all those options today, you know, in January of 2023,

Starting point is 00:19:35 which one's going to be the best one for me? And that's what I turn into my buy box. But I don't like get rid of the other options. Those are still things I consider, but the buy box is sort of the final step before I actually buy a specific deal. That makes sense. Yeah, I kind of have a similar approach, right? Obviously, I have what I'm good at, which is going to be the short-term rental side of things. But I do have other things that I consider recently. I mean, really for the first time ever this year, I've been opening up a little bit the deal design side of things and what I'm willing to take on.

Starting point is 00:20:03 I've done a flip. I've done a wholesale, which is basically like a wholesale into a retail, right? kind of like a micro flip, if you will. And I don't actively search those out, but I will consider them if the deal is within my city. If it's something close to me, if it's in my buy box, in my zip code, it's something I'll always take a look at. So it makes sense that you sort of have your bread and butter, but then you sort of have sort of these auxiliary types of deals that you may consider. Yeah, that's a perfect example. Like for me, I would also consider doing a short-term rental. I have some experience with that. I would do a burr. I have experience with that.

Starting point is 00:20:39 But I, like, in my deal design, I don't do flips. Like, to me, that's just too much work. I don't want to do it. And so even if a good flip came to me, I still wouldn't do it because it's not aligned with my vision. Like, when I look at my vision, I personally, one of my goals is to spend 20 hours or less of time per month on my portfolio. And a flip would throw that out the window in in a week, you know, like I just wouldn't be able to do that. And so the deal design sort of puts blinders on you, like in a good way, right, where you can just sort of focus on the deals that are going to work well for you and you can ignore it. Because frankly, like, we all get this great job where we get to talk to real estate investors. I'm constantly facing FOMO. I'm like, man,

Starting point is 00:21:22 that guy's doing something so good. Or this woman had so much success doing this one strategy. And I'm like, I should do that. But then I sort of come back to my deal designs and like, actually, no, I shouldn't. aren't right for me. It might be right for these other people, but I need to stick to sort of what's appropriate for me and what's aligned with my personal strategy. I'm really, really glad you said that because there is more context to what I just said, which is, yes, I'll consider more things. And then sometimes, like this year, I got into a flip and several times in this process, I was like, what have I done? Why have I gotten myself into this? There's a reason I haven't done this for the last seven years. And so now that I've kind of at least gone through it, I would consider

Starting point is 00:22:04 it, but there's definitely something to be said, like, you want those blinders on because just because we can do something does not necessarily mean that we should. And yeah, we should just like practice the things that we're good at. Now, I would also add in the last 10 years, we've had such a strong market that the fear of missing out, the FOMO, the man, look what somebody else is doing, has been at an all-time high. It's never been as high as what I've seen right now. And you throw in the fact that there's a lot of people that see themselves as real estate gurus, I want to teach other people how to do it. And so you just get hit with this marketing all the time of all these great deals that people put together. And no one shares their losses. It's been easier than ever to think I have to

Starting point is 00:22:41 jump in and do something I'm uncomfortable with. But this is sage advice. One of the rules in Richest Man in Babylon, one of my favorite books, I drew on it heavily in my book, Pillars of Wealth is don't invest in something you don't understand. And if you're not a house-flipper, that doesn't mean you can't flip houses, but it does mean that you are much more likely to get yourself into trouble or burn energy that would have been productive, but somewhere else, if you stood on something that you do understand. So I love this idea that is okay to say no to the wrong deal in the pursuit of the right deal and the right deal is subjective. It depends on what your goals are. Now, Dave, what advice do you have for investors trying to get into real estate investing right now today in this market?

Starting point is 00:23:18 Yeah, David, I think that that's an excellent point about this FOMO and not taking a deal that you're not going to be good at. And I think it's easy to think about this in terms of like what type of deal you're doing, like flip versus, uh, you know, a rental property or short term rental. But I think this is also true for the other parts of what I would call deal design. Like if you are not good at self-managing a property, don't do that. Like just go out and hire a property manager. Like I learned that one a painful way. I'm just not very handy and I lost a lot of money trying to be. And I think there's, That's why deal design is more than just what type of deal you're doing. You have to think about every element of it and just identify the things that you're good at

Starting point is 00:24:01 and that you like doing and that you're going to be willing to work on. And it's okay if you don't like do every single part of your business. And I think most experienced investors would tell you that it's actually better to identify early on like what you're good at, what you're not good at and just focus on those few things. And you don't have to like bootstrap and do every little thing yourself. I can't wait to get into the last segment of your book, which you have called the most overlooked part of real estate investing. It is on portfolio management, one of my favorite topics. But first, let's take a quick break.

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Starting point is 00:28:21 Now, the last part of your framework is to go through portfolio management, a topic I love talking about. Why is this so important? I think this is like one of the most overlooked part of real estate investing and maybe the most important. I don't know. Maybe not. But everyone loves to talk about buying deals.

Starting point is 00:28:37 But so much of your performance of your portfolio comes down to how well you manage the deals that you actually have. That comes in reallocating resources, so selling bad deals or investing in good deals or reallocating your time to things that will make more money. And so in my mind, a really important part of strategy is constantly looking at your existing portfolio, your existing efforts, measuring them. And I know I'm the numbers guy, but I really do think it's important to like measure all

Starting point is 00:29:08 of your deals and look at how they compare to one another, how one deal performs against another, perform against another, and then constantly reassess, like, is there any way that you can optimize your portfolio right now? And I think this is particularly important these days because it is harder to buy a property right now. We've talked a little bit about cash flow, but the fact is also that there's just less properties on the market. So that just makes it more difficult in general, even if you can find good cash flow. And for a lot of people, you might be better off actually reinvesting some of the money you have. Rebacking. Backing. into your portfolio rather than buying a new deal.

Starting point is 00:29:45 Like, for example, if you had some cash, like maybe you should build an ADU, or you should renovate something to increase your cash flow rather than going out and buying a blackluster deal right now. And if you have the tools and you sort of have this thought process, it really is a mindset of portfolio management. You can constantly be tweaking and optimizing your performance to really get the most out of the deals that you have already done. And by doing this, it also helps you figure out what deals you should do in the future, right?

Starting point is 00:30:12 because if you buy a bunch of deals and see that they're all really high risk, maybe you realize that your next deal should maybe be something that's a little bit more low risk. Or you already have plenty of cash. So maybe you want to take a swing on some equity for your next deal. By constantly seeing what you have and visualizing it in an easy way, it will make decision-making about your portfolio a whole lot easier. I love that, man. I really, really do. This is something I've been talking about very heavily the past few months because most people are in search of that door account.

Starting point is 00:30:42 This is something we talk about a lot. People just want more doors, right? That's the magical number, the magical bragging rights number at a real estate meetup. I've got this many doors. And so many people focus on getting more doors and they're chasing this like, I don't know, this metric of making more money. And I've been telling people recently that with interest rates the way they are, with the fact that it's harder to squeak out a good return these days, I think that the best way to get an ROI on your money right now is through maximizing the revenue of your portfolio as it is. This is something I've been doing over the past year. I've been reinvesting back into my short-term rentals. And, you know, you could go out and buy another property and chase like a 15% cash on cash return. And it's

Starting point is 00:31:26 really hard to do that. And you can go and you can scout the MLS and you can make an offer and you can do the due diligence and you can close on it, which is super, super hard. Or you can figure out how to reinvest that back into your portfolio and make that ROI a little bit quicker. I built like a deck. I've added some amenities and the ROI that I've been getting on this, you know, they've been so much higher than going out and buying a property and so much easier to execute. So I think this kind of goes into that a little bit, which is like, how can you maximize the revenue of your portfolio now versus focusing on acquiring more properties? Yeah, I've put a lot of this into play. Not necessarily with the way that I'm improving properties, but more so the areas that I'm buying them in and taking a

Starting point is 00:32:10 longer-term approach. So I noticed this pattern that when you buy in better locations with constricted supply and improving demographics, the properties appreciate at a higher level and the rent goes up at a higher level than when you get into something that's easier to get into, lower price point, stronger price and rent ratios, 10 years down the road, it's largely the same investment than when you get into something that's harder to get into. So I realize, hey, I'm still working. I'm still running companies. I'm still making money.

Starting point is 00:32:36 I don't need cash flow as much right now as what I want is a lot of tax-free wealth waiting for me when I decide I don't want to work anymore. So I just designed a strategy where I bought properties in the best locations that were very rare, hard to find that I thought would improve and appreciate more than others. And I just kind of planted the seed and I'm going to let the tree grow. And then when I hit retirement, it should be waiting for me with a bunch of fruit. That was very fortuitous when you consider the fact. that cash flow became much harder to find. So you had to sort of turn this into a game of chess instead

Starting point is 00:33:04 of just checkers. I think that's a perfect example, David. You have your own situation that's probably very different than someone who's approaching retirement, right? Like if you're 55 and you're just trying to build out some cash flow so that you can retire comfortably, the decisions that you're going to make about your portfolio, your portfolio management strategy is going to be entirely different. And so it's really hard, you know, we come on here and talk about real estate so we can help help educate people. But it is really hard for anyone to sort of adopt someone else's strategy. I think that's like almost impossible. Like even the people listening to this might say, oh, David's got a great plan, but maybe that's not going to work for you. So hopefully you

Starting point is 00:33:42 learn something from the examples David's giving. But I hope you take what David and Rob are sharing with you week in and week out and try and apply it to your own life and realize that you sort of have to come up with your own situation and run your own race. Yeah, one final note that I want to say on that, Dave, that I think is just super smart is. You were saying if you have a lot of high-risk properties and maybe not a bad idea to consider a low-risk property. And when I started, obviously, I went really heavy into short-term rentals. I've got to, my whole portfolio is basically short-term rentals.

Starting point is 00:34:11 And, you know, there's seasonality that comes with that. There's highs, there's lows, there's months where I absolutely crush it. There's months where I know I won't make money because no one really makes money on a beach house in December. Not a big secret there, right? And so I'm coming around to the idea of, okay, hey, as much as it's great, to have these high cash flowing properties, maybe I should have a couple of base hits long-term rentals that consistently perform consistently cash flow so that I just have a more dynamic

Starting point is 00:34:39 portfolio that's not just relying on seasonality. So I think that's a lesson that everyone can take home. It's as long as good as it is to like go all in on one thing. There's never really an issue, I think, with diversifying so long as it's within your deal design. Would you agree with that? A hundred percent. I think risk and managing risk, managing cash flow versus equity. is something that often takes people a while in their investing career to come around to. And hopefully by listening to the show, people will start doing it a little bit earlier. I think it's extremely important. Like personally, I have a pretty high risk tolerance.

Starting point is 00:35:14 And I also have what I would call high risk capacity, which is I'm in a fortunate situation where I can't afford to lose money. If a deal goes bad for me, like I can weather that. But I've also found that like I don't have to make every deal risky. to meet my risk appetite. Like, I can make some of them really risky and some of them a little bit safer so that I balance out to the right risk reward appetite. It's kind of like stocks, right? Like some people want to buy 100% stocks. That's pretty risky. Some people want to buy 100% bonds. That's pretty safe, but you're going to sacrifice. But most people who invest in bonds and equities

Starting point is 00:35:49 find their balance. And I think that's true in real estate too. Like you have to find your balance between cash flow and appreciation. You have to find your balance between risk and reward. And there's no right answer here. It's really just, it's about tradeoffs. You need to figure out what tradeoffs you're willing to make and, and ultimately build that portfolio that you are comfortable with and you're going to be able to sleep at night with. Yeah, that makes sense. Let me ask you, do you feel like you've changed? Obviously, strategy is something that is always evolving, but do you feel like going into 2024 that your strategy is constantly changing with the market? Or do you feel like you're holding strong on what you initially set out to do? Yeah, that's a great question,

Starting point is 00:36:28 Rob, I think my long-term strategy, like my vision hasn't really changed. What I've always wanted to be able to do is like buy a lot of free time so that I can travel, spend time with my friends and family, and I think I've largely accomplished that. But when I get into what deals and my buy box are, though that actually changes all the time. And so going into 2024, mine is changing. For those of you who don't know me, I live in Europe. I moved here four years ago. And when I did, I really just went hard into passive investing. So I've invested in a lot of syndications and funds over the last couple of years. And that's worked out great, but I've decided that I need to diversify to your point, Rob. Like, I can't just invest in other people's. And I still do own rental properties in Denver,

Starting point is 00:37:13 but I haven't bought a lot of new rental properties. And so I'm going to start doing that again. And I am going to reread David's book on out-of-state real estate investing. It's been a while, but I'm going to pick some new markets and start buying rental properties again. Word has it that David's actually working on out-of-country real estate investing right now. He's on its final draft. Dave, thanks so much for being here, man. And thank you for writing another book for Realston investors that brings the truth, that it is more about strategy than it is about just finding, like, whatever the new buzzword

Starting point is 00:37:43 happens to be that people think that they can beat the system if they just have some little edge or they know some approach to real estate that other people aren't taking. That's not the case. It is about winning in the long run and understanding what your strategy is going to be to do that. So if people want to get the book, where would you say they go? Go to BiggerPockets.com slash strategy book. And if you get to there before the book actually launches, the pre-order, you'll actually get some really good bonuses, including a strategy planner. So this is kind of like a business plan workbook. So you can read it alongside the book

Starting point is 00:38:17 and sort of fill out your own strategy and business plan alongside the book. Normally, I'd forget exactly what that cost, but it's basically the cost of a second book. But you get for free if you actually go now and buy it as part of the pre-order. So if you're interested in buying the book, just go to biggerpockets.com slash strategy book. You can find all sorts of information there and make sure to use the coupon start 870. That's start 870. And if you use that, you'll get 10% off the book and all the bonuses. Thank you, Dave. For all the brilliance that you bring to the show. We always appreciate your insight, man. Thank you both. This was a lot of fun. So head over to biggerpockets.com slash strategy book and get your copy today. And also, if you love the podcast, please consider

Starting point is 00:39:02 leaving us a five-star review. Wherever you listen to podcast, those help us out a ton. And we really appreciate it. You can also check out biggerpockets.com for even more resources than you got here today, almost all of them free because we love you that much. This is David Green for Rob, my favorite Martian Abbas Solo, signing up. 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. On the host, an executive producer of the show, Dave Meyer, the show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus

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BiggerPockets Real Estate Podcast - 870: The Real Estate “Strategy” ANYONE Can Use to Build Wealth in 2024

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