BiggerPockets Real Estate Podcast - Is Real Estate Still THE Best Path to Passive Income? (Invited to Debate)

Starting point is 00:00:00 Is real estate really the best path to passive income? We say it all the time, but today's guest has a different perspective, and today we're going to debate it, so strap in. Hey, everyone, I'm Dave Meyer, Chief Investment Officer at Bigger Pockets. Our guest today is Ryan Sterling. Ryan is the CEO of Nerd Wallet Wealth Partners, and he's been a financial advisor for more than 20 years. So on this episode, we're getting an unbiased outside perspective.

Starting point is 00:00:34 If you think I only talk about real estate because I'm a real estate investor myself, Ryan is a neutral party whose only incentive is to help his clients build as much wealth as possible, including some who want to replace their income and retire early. Ryan's take is that you may not actually need passive income in the way you think. And I'm excited to hear him out and not afraid to debate him on some of these points. So let's get into it. Ryan, welcome to the Bigger Pockets podcast. Thanks for being here. Yeah, thanks for having me. Excited to join. It should be a lot of fun. We're going to dig into a topic we don't always talk that

Starting point is 00:01:11 much about, which is equities in the stock market. And hopefully we can compare and contrast it a little bit to real estate and help our audience understand when and where they should be putting their time and attention based on their own individual goals. Ryan, maybe start, tell us a little bit about your own background in investing in finance? Yeah, so I've been in the wealth management business now for over 20 years. Bulk of my time spent working in some of the larger investment firms, worked at Lions Bernstein, Goldman Sachs, Capital Group, and 2019, I left to start my own wealth management firm. One thing I think we all have in common here is that I always say that financial independence is mandatory. So our job is to solve for what is our client's financial

Starting point is 00:01:57 independence number, even if they don't think they can reach it for the next 20, 25 years, we still want to know what that number is and carve out a path to get there. And I think about, you know, what was my wealth-building journey? My wealth-building journey was saving, investing in the stock market, you know, having the benefit at compounding, but then also starting a business. And ultimately, I sold the business in 2025. And now I'm the CEO of NerdWaWalth partners, where it's very much an extension of what I built at the predecessor firm. We're just doing it now with a bigger team. And we're really excited to continue to grow this business. Well, I love what you said there, Ryan, about financial independence or financial freedom being

Starting point is 00:02:41 mandatory. I don't really see another objective in the professional sense that's worth pursuing more than financial independence. I just think not that many Americans think of it that way. And don't have that critical number that you're talking about, just an idea of like where they need to get to. So maybe if you can do it briefly, like tell us how people can go about figuring out what that big picture long-term goal should look like. The general rule of thumb, and I know the bigger pockets audience is probably very familiar with, is kind of the general rule of thumb is like the 4% rule, right? So if you're a family who's spending $200,000 a year, and that's kind of your baseline, that's what you want to maintain. You know, you're going to need an investment

Starting point is 00:03:30 base that can sustain spending $200,000 a year into perpetuity. You know, as it relates to liquid portfolios, you know, that means you're going to want to have a stock portfolio of roughly speaking $5 million. You know, in terms of the value of a real estate portfolio, it's probably pretty similar to that, but that's more kind of focused on, you know, what's the income. that is coming from the real estate assets. But generally speaking, again, when we are building plans for our clients, and again, let's say it's hypothetically, it's a 200,000 is the number that they need to reach on an annual basis. You know, we're targeting a net worth of outside of their personal residence in the $5 million range. It's funny you say that. I think of it

Starting point is 00:04:17 very similarly for real estate. And I talk to investors every day all the time. And I present this idea to them that you need to back into the total value of your portfolio for us as real estate investors, I think about it as the total equity value. And that's how you should be thinking about growth rather than what is my cash flow this month. Like, don't focus on, hey, I went from 500 to 600 bucks a month in cash flow. The big picture, the hard thing is building up that three, four, five million dollars in equity. As a real estate investor, once you got that, it's kind of easy, right? You could just go out and buy stuff for cash. You don't even need a mortgage. If you got $5 million in equity, go buy a bunch of properties free and clear and you'll have your

Starting point is 00:05:02 number. Don't focus on getting from $200 to $300 to $400,000. So I really like that. You know, Ryan, I debate this all the time with people about having this number because I think it's hugely important. I wrote a whole book called Start with Strategy. The whole idea is starting with your personal values, what your big picture goal is. Once you set that, goal. Can it change? What's your take on that? Oh, absolutely. We tell people all the time. You know, the analogy I use for a financial plan is, I'm based in New York City. Imagine you're on a road trip from New York City to Los Angeles, right? You know, you can put on ways right now and say, okay, I know the exact route to take, the most efficient route that's going to get to Los Angeles,

Starting point is 00:05:47 and I know exactly how much time it's going to take. There's no way that right now leaving New York city that I'm going to know that when I get to Oklahoma City, there's going to be a traffic jam. Right. That's going to delay me for two hours. And by the way, I might get to Oklahoma City and decide, you know what, I actually don't want to go to L.A. I'd rather go to Denver. And you have to completely recalibrate the route. That happens all the time with the wealth-building journey.

Starting point is 00:06:12 And I always joke that, you know, when we build out financial plans and we go through the Monte Carlo simulation and go through the modeling, I always tell clients that, hey, here's the one thing that we know for sure. The one thing we know for sure is that this is going to change. It's not going to happen this way. But this is the guide that this is the best that we have today. But we're going to update and we're going to recalibrate so many times over. But you still need to have that direction.

Starting point is 00:06:39 You still need to have that intention. Because once you have that, once you have the blueprint, that makes updating it. And again, some of these audibles, it makes it easier than to execute. Absolutely. There's this quote. like it's Zig Ziglar said, if you aim at nothing, you'll hit it every time.

Starting point is 00:06:56 I just think about that all the time, right? It's like, doesn't mean you can't change, but you have to be aiming at something. Otherwise, you're just completely adrift. And whether you're buying stocks or going out and buying real estate,

Starting point is 00:07:11 that is not a strategy. That is just less guessing and hoping that you're going to profit. But there's clearly a better way to do this. And starting with that number or a goal, of lifestyles, what your values are, what you want is such an important thing for an entrepreneur who's pursuing real estate or for someone who's just buying equities. You know, I mean, I love the saying, you know, where focus goes, energy flows.

Starting point is 00:07:33 And it's so true is that like you've got to have to focus and you have to know where you're putting in your energy. And I'll say the mistake that I see people make is that their energy is divided up into way too many areas. And they're doing everything kind of 40 to 50% of the way there. And that really doesn't work very well. But that kind of goes against the idea of diversification, right? Or maybe are you just saying you have to have the big goal? And then once you have that, you can diversify assets and put attention different. Or do you really just recommend people focus on one asset class, one kind of investing? Well, I think it depends. We're a huge proponent of diversification. But is what I caution against is if somebody is, like, let's think of a fact pattern of, you know, you have a married couple with a couple of kids, working professionals.

Starting point is 00:08:21 you know, big jobs, W-2 income, and they're diligently putting money away in the stock markets. And they say, hey, you know what, I heard I can get passive income through real estate. And it sounds really easy. So I'm going to buy a rental property. To me, what I always tell clients is, hey, if you want to get in the game, let's put it through the plan and let's get in the game. But you have to want to be in the game. You have to want to see it as another, as a side business. that's why I always say, like, with the passive piece, and this is like for me, nails on a chalkboard, I always say you got to take a big black marker and cross out passive.

Starting point is 00:08:58 Because I don't believe that it's passive income. I feel like it really is more of a side job. A side job that can be very lucrative, very rewarding. It's not going to take up as much time as your day job, but it's still a job. So I'd like to remind people of, hey, if we're building through the stock markets, and you want to diversify and you want to build a rental portfolio. Let's build a rental portfolio, but you have to know what you're getting into. And if you're going in thinking it's going to be easy, you're going to be disappointed because the first hiccup's going to happen and you're going to bail on it.

Starting point is 00:09:33 Totally. Yeah. And that's the way to lose money in real estate. Like if you stay in it, you will make money. If you bail early, that's the big risk, at least in my opinion. I mean, that's how I lost in it. I mean, look, like I said, like I've built my wealth through. investing my excess cash in the stock market and then started a business and had a liquidity event. But I did dabble in real estate. And I had a rental property with some people in Florida. And a hurricane came through and completely disrupted our plans. We did not have that in the model. And tenants had to move out. We had to do the whole cleanup thing. Insurance company wasn't being very helpful. And I bailed on it. And I think that's the lesson that I learned personally is that,

Starting point is 00:10:14 hey, you know what, this isn't the game that I want to be playing. Because like my time, and attention got too divided. And I know for myself that my time and attention, there are higher value uses personally for my time and attention. Now, other people in that group, they went full on into it and they've done very well with it. So that's where it's like, know who you are, know who you're not. I think calling it real estate investing is one of the big misnomer's in the industry. It's entrepreneurship. You are starting a business. This is a small business. Like, you are the bottom line. You are not opening an app and buying a stock. You are not passively investing in anything. For me, it is worth it. Maybe it's just my personality. I don't

Starting point is 00:10:55 think the stuff you're describing is that I don't find it that stressful. Maybe it's because I've done this a while. And what I think we recommend to our audience is like, yeah, it is stressful at first the first time that happens. When you have someone who can't make rent or you have a big repair, it just gets easier over time. Like you just get better. You just get better. better at it. So I don't personally find it that stressful. But I do think you need to have a higher bar for performance in real estate than you do for a stock. That's kind of what I have tried to teach people on this show, or at least my recommendation. It's like long-term average of the S&P 500s, right? It's 8, 9%, 10%, whatever, depending on who you ask, if you reinvest.

Starting point is 00:11:37 I think you got to get 12 to 15% on a real estate investment all in to make it worth that time. 100%. And that number is going to be different for different people. But if I'm only making 7% on a rental property, that is not worth it. Just do nothing. Like, do nothing. But if you can do 12 to 15%, man, that compounding over 20 years is the difference of potentially millions of dollars. So I'm curious how you think of that. And is that like a reasonable way to consider the tradeoffs? You know, kind of the building blocks of investing are the first step is you have to price everything relative to a treasury bond. So you can buy a 10-year treasury bond right now and get four and a half percent or so. So any incremental amount of risk, whether it's risk in the stock

Starting point is 00:12:24 market or any sort of sweat equity, you need to get a return in excess of that. And I completely agree with you that if you go through a building blocks approach and say four and a half percent for 10-year treasury, let's call it 8 percent for the S&P 500, which is completely passive. I mean, you don't have to do anything. That it's going to require risk, time. attention, you have to command a higher return than 8%. Absolutely. I think this is something a lot of newer investors miss, especially coming off these insane years that we've had over the last couple of years in real estate where people are like,

Starting point is 00:12:59 oh, I'm just going to buy and I'll hold on to it and I'm going to make a bigillion dollars. Maybe. We've probably went through a once in a lifetime event with the appreciation that we saw during COVID. And we're just back to the fundamentals. And I personally think that's a good thing. I think that this is what should have. happen, real estate should grow, you know, a little bit above the pace of inflation. That's what

Starting point is 00:13:19 normally happens. You're going to have increases and expenses. But if you, you know, get fixed rate debt, if you could buy good cash flow, like, you can get that 12 to 15 percent. But I don't see a lot of newer investors thinking that way. And I think what Ryan said, I hope everyone in the audience is paying attention to, like, the job of the investor is to think about what is the best use of my time and money today. And if you can, if you're earning, you know, in a low appreciation market and getting a 2% cash on cash return, you are better off in a treasury bond. You are better off in the S&P in 500. Now, I hope from listening to the show, you can buy better deals than what I'm describing there. That's kind of the goal here. But I think that should always be the framework.

Starting point is 00:14:04 And instead of thinking about, you know, how do I just keep buying all the time in real estate? and I recommend that you do. It's like, how do you keep buying at a level that's better than the stock market? Right. Like, that's, to me, the framework I use. All right. A lot of good stuff here from Ryan Sterling. We've got to take a quick break, but we'll be right back.

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Starting point is 00:17:32 deals, you can keep more capital available as you grow. If you're buying, rentals, refinancing, or scaling your portfolio, go to hostfinancial.com. That's hostefinancial.com and see what you qualify for. Welcome back to the Bigger Pockets podcast. Let's get back into my conversation with Ryan Sterling. Now, Ryan, though, I'm sort of unusual here in the Bigger Pockets universe with a lot of our other hosts who have just gone full in on real estate. They just only, all, every dollar they own is in real estate. I am not that way. I'm, closer to 50-50, probably 60-40 in terms of real estate. How do you advise people who want to take a diversified approach, but they are sort of in, they're in on real estate, right? Like, they've

Starting point is 00:18:20 embraced it, they like it, they want to do it. How do someone like that diversify? Because I get this question all the time, and I'm not a financial advisor. So I'd love your take on this. It's a good question. I would say that we usually get it through the lens of I feel really comfortable with real estate, the stock market I don't feel comfortable with. So I think for a lot of those clients, it's actually educating them on the benefit of diversification in the stock markets. And it goes back to risk. I think, you know, examples where someone is buying, you know, 10 rental properties in, you know, one specific location, there's a lot that can happen in that specific location. The neighborhood could change. It could be in a really good commercial center that for some

Starting point is 00:19:06 reason falls out of favor. Natural disasters happen. So, I mean, when you think about diversification, owning 10 rental properties isn't actually diversified if they're all clustered in the same area. So again, it's, I never want, if someone is comfortable with it, they understand the risk, they're willing to put in the hard work and the sweat equity all day long. I want people to own rental properties. However, when we think about being risk managers, it is important to know. that you are taking on a lot of concentration risk. And when we're talking about the markets, we are broadly diversified. Does it mean we're immune to a 20, 30 percent pullback? Absolutely not. But the thing that makes me laugh is, you know, when people come to me and say, you know,

Starting point is 00:19:54 the real estate, I can see it, I can touch it. Where the stock market, it just, I just, I don't, I don't see it. And I just, I don't want it to go to zero. And I always laugh and I'm like, I hope the stock market goes to zero because I'll take a dollar and I'll own all of Apple. I'll own all of Microsoft. I'll own all of Google. And the reality of it is like that's just that's not going to happen. So I think as investors in the stock market, I think we need to do a better job connecting people to you're not buying dots on a screen. You have ownership in companies and companies that are producing goods and services that are adding tremendous amount of value around the world.

Starting point is 00:20:33 So get away from looking at the dot on the screen and what it's doing today. Like, that's largely irrelevant. You know, when we construct our investment portfolios, I really don't care what's happening today. We're looking at how it's going to help build and compound wealth over decades. And I think about, you know, when it comes to building wealth, you can't do it through earnings alone. You just, you're one person.

Starting point is 00:20:56 It's impossible to do it. You need to get the benefit of leverage. Now, in real estate, the benefit of leverage that you get is that, look, look, you can put down a down payment, you can borrow, you can buy an asset bigger than you can afford. And by the way, you can use that leverage to acquire 10 rental properties faster than if you're doing with cash. That's a beautiful thing. When I think about the stock market, you're using leverage in terms of I'm an owner of Google. I'm an owner of Microsoft.

Starting point is 00:21:21 I'm an owner of Apple. I have the smartest people in the world who are building products that we're all using. I'm an owner of that. They're working for me. And when I think about, you know, my path to building wealth, I can't do it alone. I need help. And for me, like, I want to leverage the help of the people at those companies. Yeah, I'm with you. I think it's just there's like a dose of humility that's helpful in diversification and just admitting you don't really know. Like, I think that that's just super important where I study the housing market all day. I think I have a pretty good grip on it.

Starting point is 00:21:53 But, like, you don't know what's going to happen on an individual property. You don't know what's going to happen regulation. If you went all in on short-term rentals, I think a lot of people have seen that concentration in short-term rentals was a risky strategy or in recent years, concentration in commercial real estate and multifamily in the Sunbelt. Booming for a while, now it's really hurting. You know, you just, we don't, even the smartest people in the world don't really know why I personally preach diversification. I diversify both in real estate and the stock market, but even within my own real estate,

Starting point is 00:22:26 I do a lot of different stuff. I'm invested in different markets and different asset classes across the country. But I have the luxury of that, Ryan. And I think that's sort of where I think a lot of people have questions is like, I've gotten to a point where I have enough capital that I can spread it around. And that's a fortunate place to be. But when you're starting in real estate, it's so capital intensive. Like, you kind of have to go all in on it, right?

Starting point is 00:22:51 Like if you're, if you have to save up to put 25% down on a rental property, that could be 100 grand. you know, it takes people years to get to that. So like, can you diversify in that scenario? Or do you just kind of have to take a leap of faith if you're in in real estate and trying to grow a portfolio? I would say, you know, who is the best candidate for going all in on building a rental property portfolio from scratch? It's someone who's young. And it's someone who's just starting. So it's like, look, if you can scrap together $40,000 and use leverage and buy the first property, and if you can have that vision to then a year later buy another one, and then two turn into four,

Starting point is 00:23:32 the turn into eight, et cetera, that is the fastest way to build wealth. But it takes a lot of direction, it takes a lot of intention, it takes a lot of sacrifice, and I'm all for it. So I would say that if there's someone starting out today and they're like, I want to get to financial independence as fast as possible, I would probably be the first to concede that real estate is probably the best option, building a real estate portfolio. I think the one caveat to that is for people who are in high earning areas, you know, I think about sales, for example, if you're a good salesperson, is your time and energy better spent potentially being distracted on real estate deals or making 20 more calls a day? Yep.

Starting point is 00:24:14 And 20 more calls a day could turn into making this up an extra $200,000 of income. It's going to be really hard to replicate that in real estate for the short term. I think about our clients who are corporate attorneys or investment bankers. They are working so hard in such long hours and they're making so much money. Their time is at a premium and it's kind of what you were saying before is that it does require extra time and effort. If they don't have it, you're better off going for the biggest bonus you can get and then diversifying into stock markets and having that be a way to build and compound your wealth.

Starting point is 00:24:47 But I would say that if there's someone who's starting out and they're like, hey, I've got a decent an up job, but, you know, there's, you know, there's, there's some upward mobility, but not crazy. And I've got time on my hands and I'm young and I'm willing to take risk, like, all day long. Like, that's a perfect profile to start building a diversified rental portfolio. Yeah. I think that makes a lot of sense. That's sort of what I, when I was started, I was 22, 23, I was like, I had nothing to lose. There was nothing in my bank account. So I just figured I could try and hustle and got, you know, was so into it that I could pay such close attention to every deal that I did that I thought I had a higher probability of success. And I think that's true. By the way, though, too, a really important point is like we've been talking a lot about risk. And I think, look, everything needs to be through the lens of risk first. But risk is a very fascinating concept. And I would actually argue that someone who doesn't have anything to lose at 22, 23,

Starting point is 00:25:46 who's taking a swing at real estate, guess what? If you don't take that swing at 22-23 and you decide to stay in a safe, stable job, that might not be around in 10 years from now. I totally agree, yeah. So you're taking concentration risk on your job. So that's where, like, I would actually argue that if you're 22-23, taking a swing at some investments, like, that's actually potentially the least risky thing you could be doing.

Starting point is 00:26:11 Yeah, diversification. Yeah, exactly. Because especially that early in your career, at least speaking for myself, I don't know where I was going to wind up. You know, I didn't know what I wanted my career to be. And you sort of putting a couple irons in the fire, so to speak, to see what works out for you. So I think, yeah, I totally agree with you. You're young. Go out house hack, hustle, do those things that we talk about all the time on the show. It really just works. Like, there's still risk. You got to mitigate that risk, but it really can work. It's all risk. It's all risk. The other, I think, big group of Bigger Pockets listeners and people who I talk to all the time

Starting point is 00:26:45 are people with jobs that they like that they're not intending to go full time into real estate and they want to diversify or they want access to capital and income in a way that they at least, I'll ask you about this, don't feel that the stock market provides. So, you know, of course there are dividend stocks, but they feel, you know, the cash return on real estate is better and worth the time, right? So again, this is the idea of worth the time. How should someone like that think about diversification? Because a lot of these folks, maybe they have a 401k if they're fortunate through work. They've been investing in the stock market for a while. But now they say, okay, I want some of that real estate action. How should

Starting point is 00:27:34 they think about balancing and what capital to put where? That is kind of what we see more. often is that, you know, you have people who are, you know, in their late 30s, early 40s, they're still very much in the wealth building stage. They're established in their job. They have a family. They have responsibilities, et cetera. And that's where it comes back to what we were talking about at the very beginning of the episode is, you know, having that plan in place, having that direction and intention and

Starting point is 00:28:01 putting real estate into that. So it goes back to if someone's like, I want to buy one rental property and that's it, run the numbers. and I think you'd probably agree with it, it's probably not worth the headache. Just a single one? Yeah. Yeah. I mean, it's just, it's not going to be worth it.

Starting point is 00:28:17 You really have to have the mindset that we're going to start to acquire a rental portfolio over the next five to 10 years. And let's put that in the plan and let's see what it looks like. Now, of course, it all starts with one. So action produces information. So, you know, of course, you know, buy that first rental property and let's see how it goes. but go in with the mindset that this is going to be part of our portfolio of building wealth. Just know that's what you're doing. All right, everyone, we need to take one more quick break, but we'll be back shortly.

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Starting point is 00:32:13 and get 50 free leads at www. propstream.com slash BP. That's www. P-R-O-P-S-T-R-E-A-M dot com slash BP. Welcome back to the Bigger Pockets podcast. I'm here speaking with the CEO of NerdWallet Wealth, Ryan Sterling. Let's get back to our conversation.

Starting point is 00:32:38 And there's risk everywhere, including the stock market. So I'm curious. your read on the situation right now. We're hovering around all-time highs. Obviously, I'm asking you to pull out a crystal ball that you don't have, but like just give us your sense of how the stock market is performing and where it might go from here. You just hit the nail right on the head in terms of, look, we're at all-time highs. The stock market valuations are stretched and are stretched to not the highest we've ever seen, but certainly very much on the high, uncomfortable

Starting point is 00:33:08 side. So valuations are not gravity. So high valuations do not mean that we should expect a correction or bear market in the next 12 months. Markets that are richly valued can be even more richly valued a year from now, two years from now, et cetera. Same thing with markets that are attractably valued. So the high starting valuations do not do a very good job of informing you of what to expect over the next 12 months. However, they do a good job of telling you what to expect over the next decade. And what valuations are telling us right now is we should expect lower returns over the next decade than the previous decade.

Starting point is 00:33:46 Yep. How is that going to materialize? We'll find out. Is it going to be instead of 10% returns? Are we going to see 7% returns? Maybe. Is that going to be at a straight 7% clip? Probably not.

Starting point is 00:33:58 We're probably going to see markets get up to, you know, bubble territories and then have a crash in correction. Like that's typically what happens. You know, I would say that 1996 during the dot-com boom, Alan Greenspan, who is the head of the Federal Reserve at the time, gave a speech that he called it irrational exuberance. And he basically was saying there's the prices of these dot-com stocks are in unsustainable territory. He was right. However, it took four years. It was four years off for that bubble to pop.

Starting point is 00:34:30 Yeah. So, you know, if you're sitting there right now and saying, God, the stock market, it looks too richly valued. I'm going to be on the sidelines, you might have to have a good amount of patience before the dam ultimately breaks. The other thing, though, I think that's important to note is the mega cap companies right now that make up the U.S. market. So I'm talking about the NVIDIAs, the apples, the Googles, the Microsofts, the Amazon, metas, et cetera.

Starting point is 00:34:55 These are the greatest companies we've ever seen in the history of the world. in terms of their scale, in terms of their cash flow, in terms of their capital allocation, in terms of their future growth prospects. So that also has to go into your consideration as a long-term investor in that you are having exposure to, again, the companies that we've never seen in the course of human civilization. These are the best companies we've ever seen. So how does that populate itself in terms of what we're advocating for our clients?

Starting point is 00:35:28 It goes back to diversification. and that we feel very comfortable being invested over the long term. I always think about, you know, do I think Google is going to be around 10 years from now, or do I think Apple's going to be around 10 years from now? The answer is yes. Do I think it's going to be bigger than it is today? The answer is yes. Do I think it's going to be a straight upper trajectory from now to 10 years from now?

Starting point is 00:35:47 Absolutely not. So you have to be able to stand the volatility, and the diversification serves to mute the volatility when it presents itself. That's very well said, Ryan. Thank you. I think that's a very sober way of looking at it. I just want to provide a little bit of context here, too, because I agree, you know, I read a lot about the stock market and, you know, you hear this like decade of lower returns often. And I think the same thing is true in real estate. I say it on the show all the time, you know, but I want to provide some context that the last decade for equities and for real estate were abnormally good.

Starting point is 00:36:21 So some reversion back to lower returns is to be expected and is not necessarily a catastrophe. right? The second thing is, I just think the job of the investors, what do you do with your money today? And I think we, I see a lot of people get hung up on this on real estate where it's like, oh, I don't want to get into real estate because they won't, the returns won't be as good as they were in 2022. Or I don't want to be in the stock market because in the next 10 years, they won't be as good as the last 10 years. What else are you doing with your money? What's the other option? You know, I still think you need to be, I'm not just saying throw your money into anything, But saying, I'm going to wait until there's going to be the best decade just makes no sense.

Starting point is 00:37:02 Like, you have no idea when it's going to come. Thinking that you're going to be able to identify it is the height of arrogance. Like, you're not going to know. And if you're going to wait, you'll probably miss the whole thing. So taking a more pragmatic approach and adjusting your expectations, I feel like is just really important. Don't do this to get rich overnight. Do it to get rich 20 years from now. And if you take that mindset, your senses of success,

Starting point is 00:37:26 are pretty high. At least I think so. So anyway, I really appreciate that. So Ryan, like, what is your approach to that? Like, for people, like, is just dollar cost averaging kind of the right way into market? I know it's boring, but it's just works. I mean, I mean, by the way, the boring is really effective. Like, we always say, like, what we do is simple, but not easy. Having people stick with the plan over the long term, it's actually a lot harder than it sounds. You know, there's a saying that we overestimate what we can do in a year and underestimate what we can do in a decade. And that is so true as it relates to building wealth and that if you think starting from zero that you're going to reach financial independence in a year, that's just arrogant. Like that is like likely not going to happen.

Starting point is 00:38:13 But the progress you can make over a decade, it's substantial if you stick with the course. Now, you know, to your point, like what do you do if valuations across the board and asset classes are high? Good luck being in cash and picking the best opportunity to deploy your cash. It's likely not going to happen. I can tell you in the stock markets, tell me when a 10% decline turns into 20% decline, when a 20% decline turns into 30, when a 30 turns into a 40. Look, we've had some air pockets of volatility in the last couple of years, and I know people who have been in cash, and they still have the bat on their shoulder,

Starting point is 00:38:50 even though there have been multiple opportunities to deploy cash down 20%, because they thought it was going to be down 40%. So you have to get timing right, which is impossible. So the dollar cost averaging piece, I think as it relates to real estate, it's the same principle that, you know, if you have a plan and a direction and intention to own 20 rental properties, and in this year in the plan, you're going to acquire two rental properties, acquire two rental properties. Obviously, you know, don't force yourself to do it. You have to do the research. You have to do the diligence. You have to make sure that you're underwriting the deal in a way that makes sense for you. But don't get too cute and say, let's wait for things to correct and I'm just going to be out of the game and I'll get back into it in four years from now. Like, that's going to derail you over time. I completely agree. Just sticking with the plan. It's harder. It's easier said than done, but it's absolutely the right approach.

Starting point is 00:39:41 One more question for you here, Ryan, before we get out of here. And that's about finding and working with a financial advisor. Most real estate investors I know do not do that. I personally have one. I, when my wife and I, we've been together for 13 years, but we finally got married three years ago. And I was like, man, I got to get a financial advisor because I don't want to be wrong. And I just want someone else to gut check because I had been doing it by myself for 10 years. It was super hard to find a financial advisor that knew anything about real estate.

Starting point is 00:40:17 I think I probably, I'm not exaggerating, probably interviewed eight or nine before I found one. And I was specifically talking to people who said they understood real estate. Why is that? And do you have any tips for people on working if they want to be in real estate, presuming that they are all in, either all in or doing this a diversification? But they want to build a portfolio. How do you best work with a financial advisor? You know, unfortunately in this industry that, you know, financial advisors oftentimes, the vast majority of their job is to be a salesperson. And there's sales people first, practitioners second.

Starting point is 00:40:52 So I think it's important to find an advisor and find a firm that considers themselves practitioners first before anything else. You know, there's, of course, certain clues like people who have their CFPs, et cetera. But unfortunately, I do think it does take some work and it does take some interviewing. And I think it's important to articulate what your values are. And, you know, for people listening to this podcast, real estate is probably a deep value in terms of it's going to be a part of your plan, I would only work with an advisor who understands you and understands what you're trying to build. It doesn't mean that they're going to underwrite everything. It doesn't

Starting point is 00:41:33 mean that they're going to sign off on everything. It doesn't mean that they're going to agree with everything you say. However, they understand with the spirit of what you're trying to accomplish and really take financial planning in a holistic sense, not just try to gather your assets and invest it in a stock portfolio. Again, there's a plan. place for that. You know, investing is one of our core tenants, but it comes with financial planning and coaching. And, you know, one thing I loved what you said, because I say this all the time. You know, building wealth is like building a reputation. Warren Buffett has that famous quote of a reputation takes you decades to build and only seconds to destroy. Wealth is the same thing. You know,

Starting point is 00:42:12 wealth can take, you know, three decades, two to three decades to build and one to two bad decisions can completely erode the process. So a big part of our job as financial advisors is also making clients aren't making the big mistake. But, you know, unfortunately in this industry, there are a lot of people that are going to try to sell you product that are going to try to sell you on, you know, just their investment portfolio. And again, while there's a place for that, you really have to interview people and to feel like they understand you understand your values and ultimately what you're trying to accomplish. Awesome. Well, thank you so much, Ryan, for being here for all of your insight. We really appreciate it. Yeah, absolutely. And we'll say just kind of quick plug. Yeah. We are starting a podcast.

Starting point is 00:42:52 it is called Your Next Dollar. Andrew Giancola is our host. And I know he's been on this show before. Andrew's awesome. Yeah, Andrew's great. We're super excited for Andrew to launch this. And I will be a recurring guest. So if you enjoyed this, make sure to tune in.

Starting point is 00:43:08 Awesome. Well, good for you. That's awesome. We'll definitely check it out. Andrew's great. It was on the show just a couple of weeks ago. And obviously, hopefully we've got some good practice for you being a guest. Good.

Starting point is 00:43:19 Yeah. Thank you. This is a good warm up. Well, thanks again. Ryan, and thank you all so much for watching this episode of the Bigger Pockets podcast. We'll see you all next time. 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

Starting point is 00:43:36 podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus media. If you'd like to learn more about real estate investing or to say, Sign up for our free newsletter. Please visit www.

Starting point is 00:43:55 www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.

BiggerPockets Real Estate Podcast - Is Real Estate Still THE Best Path to Passive Income? (Invited to Debate)

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