The Iced Coffee Hour - Real Estate Expert: I Quit My 9-5 Job After Learning THIS About Buying Rental Properties

Episode Date: September 8, 2024

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I thought the answer was climb the corporate ladder, retire when you're 65. I had no inkling there was another way to exit the rat race other than, you know what, die or get Social Security. So you started out as a W-2 employee, but over the course of 20 years, you've acquired 180 units. I believe real estate investing is a skill. If you practice it enough, you will get better. How can I save so I can buy another asset? That's all I thought about for the first three or four years. How easy was it to buy a property in 2005?

Lending was wild in 2005. My mortgage broker gave me a blank mortgage application. He says, just sign it. Hey, there's a bubble. Wealth is created by ownership over decades. I chose a very, very small footprint to be back in the day to become a lead at better than anybody else. It could be classic cars.

It could be stocks. It could be whatever it is. It could be fish tanks and coral, whatever you choose to become a lead at. And then you have to do that for a decade. All right, Michael Zuber. Thank you so much for coming on the iced coffee hour. I appreciate the opportunity. It should be a lot of fun.

So we've watched a lot of your content recently, and your story is absolutely incredible. So you started out as a W-2 employee, just a normal everyday average W-2 employee. But over the course of, I don't know, the last 20-7 years, you've acquired 180 units. 181. 181, sorry, yes, 181 rental units. We're going to go into that story, how you guys can do it too. Thanks so much. Yeah, thank you. It's a wonderful opportunity to share something that's probably not out there on YouTube a lot. And that is W2 employees, right? What I really see myself as can build wealth. It's not only the entrepreneurs of the world that, you know, have the opportunity to build wealth. But if you're a W2 employee, which I consider myself to be, and that's all I ever was, if you do some of the right things, you can get there. So it's fun to talk about W2 employees. How did you get started? Really, at 30 years old, which is kind of funny because at that point, I was an accountant.

I was a pain accountant. I had an MBA, so I went to an advanced degree. And I was raised to go to school, get a good job, you know, climb the corporate ladder, retire at 65. I'm old enough to have experienced a dot-com crash where I successfully turned seven grand into almost 200, only to lose most of that. I walk into a Borders Bookstore after losing 80% of what was, you know, more money than I had ever seen and found rich dad, poor dad. So I didn't even start my journey until I was 30 years old. Really? What was that like during the 2001.com bubble?

Well, looking back on it, you can sort of see the remnants, but I actually remember thinking I was smarter than Warren Buffett. And I actually think I said that a couple of times. Because again, if you turn seven grand into almost 200 in about a 12-month period, that's a pretty good run. And now because I'm more mature, I can realize I was simply gambling. I went from reading financial statements to kind of reading financial statements to gambling. And then the market just took it all away. What were you investing in? So mainly Cisco Systems was the stock.

Cisco is insane. That was like the Nvidia back, like, or the Tesla, I guess you could say. Yeah, yeah. Of 2000. Yeah, I think there's a lot. If you actually look at the charts between Nvidia today and Cisco of my era, the charts look almost the same. There's some people are talking about that today.

And if you were in Cisco back in the day, you're still not back at the peak. And it's been 20 plus years. So, you know, there could be a long downside to this. So yeah, Cisco Systems is the one that got me, but also Enron and Worldcom, two frauds got me as well. So there was a lot of pain involved. Okay, so you pick up Rich Dad, Poor Dad, What'd you learn from that? And where'd that take you? So if you've ever read Rich Dad, Poor Dad, it's not a how-to book.

It's a book, maybe how to think different. It opened the window to me. Again, you've got to read, this is so frustrating. I paid for an advanced degree. I have an econ degree, an MBA. I was an accountant for a Fortune 500 company. and I didn't know anything about real estate. I thought the answer was climb the corporate ladder,

you know, retire when you're 65. I had no inkling there was another way to exit the rat race other than, you know what, die or get Social Security. And rich dad, poor dad was that, and it's not even particularly well written, but it was such an eye-opening experience. I can't do anything except give it credit to opening it.

I read that book. I think it was eighth grade required reading. Really? Wow. Yeah. Eight grade. required? Yeah, because I took a, I took a class. I think it was like a business class or something like that and it was like Reed, Rich Tad board ads. And we would just go over like that, that, the cash flow quadrant, right? Of like what is an asset? What's a liability? What makes money? What

loses money? It's just the basics that they would never really go into. But like that got the cogs at least turning that there's something more to it. So what I have found, because again, I can only tell my story and it's where my story begins with that eye-opening book. It turns out about 80% of the people that read that book are like me. They want to be Robert and Kim. But there are 20% of the people that go, I don't want to be Robert and Kim. I want to be Rich Dad. Right. And I've reread that book on purpose. And I can never, I can never see myself becoming Rich Dad. The guy kind of making the moves behind the counter. I was always the employee. Just show me a path and, you know, I'll pick up, you know, one rental here or there. It's just eye-opening that some people read the same book and see it differently.

Yeah. So how did you come across that book? Like why that specifically? Honestly, I was depressed. I walked into Borders bookstore. It was a physical location. I buy books when I travel. My career took me all over the world. So I read to pass the time. And honestly, it was purple. I mean, that's the reason I picked it up. In all honesty, it was my favorite color. I'm like, oh, purple book. Never seen one before. That was, you know, that's the legitimate answer is why I picked it up. And why not just keep grinding away at your job as a WET employee? Well, that's what I thought I would do. My whole vision for this after reading Wirtstead Poor Dad was, you know what, if I can get to four, just four, I will have a retirement at 65 that is better than most. Four rentals? Four rentals. That's all I ever wanted, right? Have my own home, which we had at the time and then have four rentals. Again, I'm 30, so by the time those are paid off, I'll be, you know, 60, 62, and my retirement will be better.

I had no grand plan of some other number than four. That's as big as my mind would let me. So my vision was always to work, was to keep climbing the corporate ladder, keep busting my butt, keep investing in myself to try to be better at it, get a raise, get stock options, whatever it is. I just don't think big like that.

I was like, just give me to four. And at 65, I'll have more options than most. That was the vision. Yeah. So what were the next steps after reading that book? And how much were you making at the time with your W-2 job? So at that time, so I was 30 years old,

we were probably combined. So I was married at the time. Our combined household income was right around 200 grand. Which is a lot. It's a decent amount. It's, it sounds good. But I lived in the Silicon Valley, right?

Mountain View, California, specifically, where 200 grand back then was you were still very much paycheck to paycheck. We weren't saving anything, right? It's just that expensive to live there. Now, as you'll see in our story, we eventually really get tight on expenses and we are able to save. But 200 grand, you know, 20 years ago in the Silicon Valley was not a great living. How did your expenses break down at that point versus like, rent, taxes, like all of that, like where does the $200,000 go? So $200,000, again, we were paying taxes. We were in the highest tax bracket, which again, if you had Fed plus California, we were

roughly 50%, right, 48 and change. So 200 becomes 100 real fast. We did have a mortgage at the time, which was about $3,000, so there goes 36. We had a daughter, which we were putting through school, which was 15 or 18. We had daycare because both of us were working. We ate out once a week. We didn't live extravagantly. We didn't take vacations. We lived in the same condoms. We lived in the same condo. We didn't trade up. Our condo had no upgrades. It was those same white subway tiles for 20 years. We had one car and I had a company car. We were not 200 grand for a lot of folks may seem like a lot, but when you're spending, you know, 180 of that before you have any discretionary, and it's not, it's not great. Yeah. So when did you realize that rental properties were the

option versus just doubling down at your day job and trying to turn 200 into 300, let's just say? most people myself included you don't have that optionality a lot in a day job right even though i had a commission-based job you really it's hard to go from 200 to 300 at least in a very accelerated path right eventually you know you get promoted and over my career i became a first line second line third line sales executive so you do have more optionality then but at 30 i was an individual contributor with very little variable common um so it was it was like how can I save so I can buy another asset. That's, that's all I thought about for the first three or four years was how can I save more. So we got really, really tight on expenses. We cut down to 50%

of our expenses. We found ways to save. We didn't go on vacation. How are you cutting out? So vacations were gone. We used to, again, we used to spend every penny. It's embarrassing to admit, but we would go close shopping. We would do fancy restaurants. We would just do the extras because we, quote, unquote, deserved it. But now we were looking at our future going, you know plus w2 jobs very risky right that's all the income you have and one of us got to laid off we were done right if my wife olivia or i were laid off at that time given we were spending 200 and suddenly was cut in half we were in trouble we saw that is a huge risk uh and again something that that sort of highlighted in rich dad poor day we need we needed to find a way to get some

protection or insurance i guess so you cut out all of your expenses and around what year was this so we start the journey in 2002 we didn't really get really focused on cutting expenses is 2003, 2004. Okay, so you start saving and then at what point were you ready to buy your first rental property? We got the, so we remember in the earlier store, we turned, I turned 200 into 40 grand. That $40,000 became three rentals. We bought Norse Drive, which people can look up. 1818, Norse Drive East 937.03. I believe we bought that December of 2002. So that was the first one. Wow. That we bought Ferris, I believe, in July of 2003 and Clinton, like November of 2003. Okay, and when you're saying these things, is that the street name?

Street names, sorry. Street names, yes. The street names. That's what I remember them by. The numbers get kind of confusing, but those are the first three. How did you know how to buy those properties? Because I remember when I bought my first place, I was a nervous wreck. Yeah. Like I was thinking everything I had into it, the real estate agent, Ashley, that I was working with at the time quit on me because of how difficult I was. Because I was a real estate agent, too, but I chose to have another reel to represent me in San Bernardino. Nice. Because I figured she knows the market better than I do. But I got so frustrated when I was emailing her at 11. p.m. And maybe in hindsight, this wasn't warranted. But I would email her at 11 and like she wouldn't respond back to me until like noon the next day. And I'd be like, what's going on between these days? I was like, I'm available. And then I'd want to write an offer immediately. And she says, well, you know, it's kind of late now. So I'm going to send it off. You know, I'll do it when I get in tomorrow. And I'm like, no, it's like, this is going to be going into multiples. Like, let's do this now. We've gotten so many, you know, disagreements on that that she quit on me. And then I represented and myself, it worked out. But I was so scared during that deal because it's like, you could do it for

someone else, but when it's your own money, it's different. I was not nervous buying Norris Drive, but let me set it up. So we decide we're going to go invest in real estate. Like a lot of people, I spent a year looking in my backyard. Because after you read Rich Dad, Poor Dad, you go on to read a lot of other books, because again, it's not how to. So all the books that I read said, invest in your backyard. So I didn't know any better. I tried. Again, as I mentioned earlier, I live in the Silicon Valley, I want cash flow. Nothing cash flow to no one, oh two, just doesn't work there, right? I did not know that at the time. So after 52 weeks, because again, I'm very broken. I get very focused. Every Sunday for 52 weeks in a row, we would drive the Silicon Valley looking for cash flow.

Olivia, the better half in our relationship, pulled me down after the 52nd week and said, we got to try something different. So for me, because I don't like airplanes, we didn't want to go around the country. So out of state was not an option. So she pulled out of California map and we started drawing 30 minutes, 60 minutes, 90 minutes, and we found Fresno, California two and a half hours away, Central Valley. And we realized that the numbers work. So the first thing I do is live where you want, but invest where the numbers make sense. So what did that mean? We bought Norris Drive for 107, $107,000, and it rented for $11,000, right, the 1% rule, right? So I felt very comfortable. But how did I find it is your question. A, I never lived in

Fresno. I didn't know anybody when we started. I'd driven. through it once as a teenager on the way to Yosemite, but the numbers made sense. So what did I do? I interviewed 20 or 40 different people and I said, where would you buy? And I just kept a running list. Right. I talked to agents, brokers, you know, mortgage folks, where would you buy? Where did you buy? And the Mayfair District came up the most. Mayfair District in Fresno translates to 9-3703. It's a zip code. So the next thing I did is I said, what do I want to buy? I'd only ever known a house. That's all I ever knew. So I was only going to buy a house. No duplexes, no quads, no apartments, nothing. And then I was like, what kind of house? And then I said three or four bedroom. And then I said two baths because it would

rent for more, two car garage between 1,200 and 2,000 square feet. So that criteria I put into like Realture.com or Redfin locked it in and that is all I looked at for three years. So what does that allow you to do? It allows you to understand what an average deal is of that criteria. And if you look at that every day for six months, you will quickly be able to identify the good or great deals. This one is mispriced, or this one has some value add. You can create a fourth bedroom given square footage or something like that. So the only answer is I created a buy box. I was extremely focused. I knew my numbers, and I was not nervous at all when we wrote Norris Drive because it was the best deal at the time. But before we get into that, AI might just be the most important

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And of course, nobody does it better than Oracle. So now you can train your AI models at twice the speed and less than half the cost of other clouds. If you want to do more and spend less like Uber, 8-by-A and Databricks Mosaic, take a free test drive of O-C-I-I-I-I-I-T-I-I-E-C-I-E-R-A-C-C-L-E-C-E. Once again, it is completely free to try it out. So on top of you getting an amazing service,

it also just helps support us here at the Ice Coffee Hour, so it would mean a ton. Oracle.com slash iced. O-R-C-C-L-E-D-C-C-C-C-E-S-E. Thank you so much Oracle for sponsoring this episode and back to the podcast. That's really interesting. That's exactly what I did in San Bernardino County. There's an investor I was working with who lived in Beverly Hills but bought in Compton, Long Beach, and Sam Bernardino. Sam Renadino is his biggest market. And I took his search criteria and I just applied it to mine in a lower price point. And mine was three bedrooms, two bathrooms, 1,400 square feet or more. I forget what the lots. I think the lots size there was like 15,000 square feet or bigger for a little. lot of size, built in 1979 or newer. So you didn't have any lead-based paint issues. And yeah, I would just put that in and then look at the average rents and then decide from

there what made sense to buy. And back then, my minimum to make an rental property was a 15% cash on cash return, which just doesn't exist anymore. But back then, like, that was the low point. And I remember seeing deals where I'm like, wow, this could pencil out to like a 22% cash on cash return. What you just described, I call yield just to differentiate because I'm just trying to figure out how hard my money is working. Down payment, make ready closing costs versus the expected cash flow over the year.

That's a yield, cash on cash, return on capital. But that's the magic. If you do that in a focused area consistently for 90 days, maybe six months, you'll learn average, and then you only write great deal. So, for example, in my, this is 2002, not 2010, I was looking at anything that was higher than 10%. right so nor strive because i was able to buy it right create a fourth bedroom i was able to get you know a higher return than that so that's exactly what i tell everybody do what most people get wrong is they go oh i'm going to do that criteria and then i'm bored i'm going to look over here and i'm going to look over here and then they just get all confused because you know you can't

compare this market with that market there's different returns different yields different expectations most new investors fall down because they're not focused how did you then navigate going and buying those properties to then expanding. So the journey really has two steps. So again, our capital, $40,000 is gone after the first three. It was $20,000 for Norris Drive, the street name, $10,000 for Ferris, $10,000 for Clinton, we're broke. We got nothing. We got a little bit of reserves for family expenses and things. But thankfully, at the time, the market was going up. So we did a cash out refy of Norris Drive. I hate admitting my mistakes, but they're there. So at the time I'm refining Norris drive,

the mortgage broker asked how much money do you want? I didn't know any difference. I said, how much can I get? So I got the maximum, which is like $42,000. So I got all my down payment money back plus another $18 or $20,000, which allowed me to buy two more properties. Good, bad.

My mortgage payment comes in. And suddenly my mortgage payment is $150 more than rent. Oh, by the way, I have a property manager. They take at the time 10%. Oh, by the way, I have reserved, so I'm losing money every month because I was too stupid, too inexperienced to realize, don't take all the money, right? You got a cash flow still.

You didn't think about doing those numbers? I didn't. I was just moving. Because, again, I would work 60 hours. I would spend a couple hours a night on this. It was a complete error in hindsight. It was absolutely a mistake. Again, I'm sure in the closing documents, it told me that, didn't read it, didn't think

to look at it. Complete error on my part. But yeah, I created my first alligator, which was negative cash flow. Not a good idea. So how do you combat that? Well, in the beginning, you've just got to get through it. You have to, you know, again, you could sell it. What I chose to do at the time was just keep paying it.

I kept it for two more years. And then I sold it and did a 1031. And there was never a better day than getting rid of that property because of the negative cash flow. So I moved that into an apartment that we still own. But yeah, there's not much you can do, right? Because you've already taken rents R. They're locked into a lease.

You can look at expenses, but there wasn't much I could do. I was in trouble. And I did it to myself. How easy was it to buy a property in 2005? So it was extremely easy. I think where you're going with this is lending. Lending got really easy. So our first deal, North Drive, I think was 2002.

We did a couple in three, a couple in four. It really got funny. And I remember this in hindsight. 2005, I think we're buying our six or seven house. My mortgage broker gave me a blank mortgage application. Blank. He says, just sign it. And I say, you know, this is very different than before, blah, blah, blah, blah, blah.

And he's like, no, just sign it. We'll fill it in for you. And I'm like, what? He's like, don't worry, we got your file. And at that point, again, I'm moving and grooving, so I signed it moved on. But yeah, lending was wild in 05. I remember you saying in prior podcast that even tenants that you turned down that didn't fit your criteria would just say, well, okay, if you don't rent to me, I'm just

going to go and buy a house because of how easy it is that, you know, people could just do stated income, say whatever they want. to, lenders will give them the money to buy a house. They'll give them 100, 102%. They'll give them more. They'll walk away with a check. It was crazy. They'd get paid to buy a house?

Yes, they would walk away with a check. Yeah. Yeah. So you're absolutely right. So if you want to ask about the hardest time to be a landlord, again, it was 2005. Because you're right. I routinely turn down tenants for credit quality or income, and they bought a house. That just tells you how bad 05 was.

The 05 vintage was really bad. Did you see any of the issues leading up to the 2008 crash or did it seem to come out of left field? There were telltale signs. So one of the things I pride myself on is always trying to seek out other experts. There was an expert in Southern California. He's now in Florida named Bruce Norris. He wrote a report called California Crash. I believe this was in 2006.

Somebody's talking about California crash. And 100% of my net worth is in California real estate. I'm reading that report, right? the essence of that report was affordability is at record lows and the the quality of our mortgages is terrible. That was the essence of the report. And he was like sell and get out. So again, at the time, I didn't know who Bruce Norris was, but he had all the charts, all the data. So I went back and did my research. I realized that Fresno, California had I think it was a 13 affordability, which the lower you get the least affordable, the less affordable it is. And it was at a record

blow. So alarm bowls go off in Olivia and I's head. So we spend the next roughly 11 months selling every single house because I believe a crash was coming. So we took action. And we didn't sell and pay taxes. We sold all eight via 1031 exchanges like like kind, move a house to five units. And we jumped from eight units to 80 units in about 11 months. And shortly after our last 1031 completed, all hell broke loose. I had no idea. Fresno would fall 70. percent. I thought 30 would be reasonable given where we were. But once once the momentum broke, it just, it just kept going. It was, it was a bloodbath in Fresno. That would have been terrible had you gone through the 2001 crash, lost 70 percent to put it all in real estate to then lose 75 percent.

Yeah, thank you for PTSD. Wow. Yeah, that would have been bad. Yeah. So how did it, how did it start? Because I began in real estate in 2008. So when things were already had peaked, we're going down is when I started. Yeah. So I never saw the run-up and then that like immediate-rack. So I think the best example, people can look this up on Zillow. Again, my first property, Norris Drive, buy for 107. I think we sold it for 262 or 263.

It actually runs to 300. So I sold a little bit early, but again, I had seven others to sell. It runs to 300. And then it retrades at 75 the next time. Wow. So again, the market was going crazy until basically the two-year ninja or the state-income loans blew up. They wouldn't issue any more of those. And after that, it was off of the races.

It was pretty big. Yeah. So your multifamily property that you bought, how did that do in terms of what you paid for it versus what it was worth? So the first one we bought, so we trade Norris for a five unit on Vassar. The first thing I would tell you is if you're a single family home investor and you're doing an exchange or buying five units and above, just know that the management is very different. Single family home tenants, you know, they don't turn over very much, one family to deal with. If you're buying five units that are 600 square foot each, they're all side by side, part of your job is going to be coming a counselor.

It's just a lot more. They're parking in my spot. They're dogs barking. The kids are, whatever's going on. So that was a headache I wasn't prepared for. I wasn't prepared for the turnover being much, much higher. Also, I bought the apartment knowing I would value add, which I think at the time that the rent was like 300 or 325, it should have been 525. Even back then it was underpriced. And that was because of the condition and the landlord just not carrying

total slumlord. What I learned in that experience is in order to go from substantially below market just to market, you're going to have two kind of iterations to go through. You can't just jump from, you know, five below to at market.

You've got it. There's a whole process. So a lot of learning experience, a lot of heavy lifting. That first property was supposed to cash flow a thousand bucks a month. It didn't for like 16 months. Ultimately, when we got there, rents went from 525 to roughly 600. So it started to work. But I again, incorrectly assume that

managing five units would be just like owning a single family home. And it's not. From there, how did you navigate the downturn in the real estate? Oh, the downturn was amazing. So the first thing I did is once we saw foreclosures happening, notice the default. So that's the first step of a foreclosure. The first thing we did is pause. It was the first pause that we had in our investing career because we didn't know what was happening. We knew a crash was coming. We didn't know how bad it was. But the first thing I remember telling Olivia is, let's just stack cash.

Let's not deploy any more capital. Let's just let's see where this thing goes because this is my first downturn. So we're on the sidelines for six, nine months. And then properties that we're selling for roughly 300 start trading at 150 and we start buying again. That's when we started buying again. Single family home. So you're saying in nine months there was a 50% cut? Yeah, it came quick.

Yeah, nine to 12 months, Fresno was going on. Now, again, not all properties were that, but again, you started seeing motivated sellers. You started seeing some people, REOs would come on the market every Monday. I mean, it became a process. They had a tape, right? The tape came out, and they loaded them on Monday. And I would just go through the list, and I would find the properties, you know, from the lenders. And I learned that you could offer, I think it was 88% of list price, and they would say yes.

In 87, they would say no. It became a formula once you did all of this. So yeah, it came down fast. But it came down even. Again, remember, North Drive peak value is 300. We start getting interested at 150. It goes all the way to 75. So we were early.

But we wanted to, you know, we didn't know where it would go. So how much capital did you have at that time when you're like saving up? We had about $50,000 at our disposal. And what we did is we just, we started buying one. And what I would do at the time is I would write for a website I had called wealthbuildingpro.com. It was just, hey, here's our ladies. purchase. I always nicknamed them because I didn't want to say the street names. Here's the gumball house and all these numbers. And, you know, we were doing one every 90 days or so because we would just

burr it. We would go buy it cash. We'd fix it up. And then we'd go. And it would always cash flow. It would all. I mean, yeah, we were buying them for, you know, $75,000. They'd rent for $1,500, you know, after we put $18,000 in. So we would get most, if not all our money back while we were burying it. But the magic happened. Just by being open with what you're doing, my network, right? My friends were throwing money at us. So there's the first time we borrowed millions of dollars from friends and family. We were paying 10 to 12% interest.

And they just were the first. So what we ultimately end up doing just kept recycling capital is we would buy it, fix it up, then we would get all our money back and stick a first note and a trust deed, and we'd pay 10%. And we just kept recycling that same 50 grand. So we were doing, you know,

I don't know, one transaction every three to five weeks for a year and a half or two. And how did that evolve then from 2010 through today? 2010 was probably the most active year for us when we go back and look at our tax statements, 2010. But it was pretty good living through 12. In my market, they came elsewhere first, but in my market, hedge funds or Wall Street money showed up in 12. And I remember the day like it was yesterday, because again, I told you it became a process. Every Monday, the new tape would load.

And I would go in Monday and have my offers Tuesday, and I'd counter on Wednesday, and we'd close something on Friday. And nothing showed up. I'm like, huh, that's weird, right? where'd they go? The next week comes. So then I start reaching out to my network of people I knew because again, you're right. Agents, agents worked with these people and agents work with those. And they're like, Michael, New York's here. I'm like, what do you mean New York's here? It's like these people with these, these, you know, big buckets of money are buying everything in the tape at list price. Right? I figured out you could pay 88% of list price. So why pay list price? They're like, they just bought everything.

And in 2012, the world changed. The hedge funds Wall Street showed up in Fresno and 12. So prices, that was the bottom, and we started building from there. And how many units did you have at that time? I don't know exactly, but I would suspect we were 135 to maybe 140. A lot of that was residential, because you remember us going into the crash. We had no residential. That's about all we bought from 2000 and late 2009, let's call it 10 through late 2012, was all residential, all single family homes.

And back to your earlier point, Jack, what we started buying after that was multifamily. Because when hedge funds came in, they only came to residential. What also happened after that is we started seeing multifamily crack. And we started buying multifamily direct from banks, like credit unions and whatnot. So we bought a property on Millbrook, another couple on Diana, directly from banks. So they do crack at different times. And I think that's what you know, when we talk about the market today, I think there's very much a difference between commercial and residential. But the same thing happened before, right?

Residential cracked first, commercial cracked. How much were you making at the time? So guys, this time of year can be very busy. The weather's nice, everyone's going back to school, and finding time to cook a meal at home can be very tough. I know for me it's just way too easy to end up at a drive-thru, which definitely is not the healthiest or the most budget-friendly option. And that's where our sponsor Factor comes in with their no prep, no mess meals. Factor meals are ready to eat in just two minutes with no mess or cooking involved. All you have to do is take one of these meals from the refrigerator, put it in the microwave, and two minutes later, it's ready to eat.

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checkout. Once again, 50% off your first box, 20% off the next month while your subscription's active at factormails.com slash iced coffee 50, ice coffee 50 at checkout. Thank you so much Factor for sponsoring this episode and back to the podcast. How much were you making at the time? So this time, Olivia and I, we had some raises. We were probably combined making 400, maybe 3, 80, 400 at the time. Is that net? No, those are gross numbers. And what does the net look like on something like that?

Well, again, we're paying 51% right, state, federal state, because we're in California. Maybe it's 49, something like that. So half that's gone immediately. Daughter still in school, all of those things. But we probably had $75,000 in disposable income, again, because we chose to ratchet our expenses. We're still not taking vacations at this point. You got to remember, we're 140 units in.

We're cash flowing now. in our units and we're still not flexing. We're still just just building. And the number that you provided, the 400 number was not including or is including? No, that's just our W2. Okay, so what was the real estate doing at that time? So the real estate actually turned for us probably in 2010 or 11 because I remember this like it was yesterday. I was in Europe for work and I remember calling Olivia saying, hey, how much money do we have to transfer to the to the real estate account? And she goes, nothing. And I went, what? Because we kept having to transfer stuff over. and she goes, our rentals are paying for it.

And I'm like, didn't we buy two houses last month? It cost 18 grand to remodel in like 21 or something? She's like, no, the rentals covered that. So we had positive cash flow. That's the first time I really saw it because Olivia and I divided the work. My job was to find deals in secure capital and her job was to run the business. So I didn't really know what was going on in the business. That was the first time it really opened to me that this was working.

So rentals at that time were probably net net 15 to 20,000 positive on top of all. And what was it gross? Oh, 140 units at the time. Gross was probably just under 100 grand a month. Right? Today it's 180, 190 a month. Yeah. I'd have to do the math, but pretty close, I would think, to 90 grand a month.

And how were you managing the tenants? We have had property managers since day one. Okay. Our job was to manage the managers. And then, again, I've admitted many mistakes. I was horrible at it. We fired the first five, right? We fired the first five property managers for lying or not even.

expectations. So what we did is we ultimately got to a point where we were large enough to call the shot. So we have one point of contact at the property manager we've been with for 10 years. We have a standing, used to be Friday, now Thursday phone call. We go over the same numbers. I get a daily report of what's going on where I can ask questions daily. So at this point, we're spending probably less than two hours a month kind of managing that, but it's because we've gone through the fire of working with the manager, setting expectations, and we're not adding units like we used to. Any tenant horror stories? Oh, I have several. I can tell you the first tenant on Norris Drive almost killed us. First property we bought. We're so excited. We took half

our stack, 20 grand, we buy it. Tenant moves in. We do everything right. Credit check, reference check, income check, all of that. What we don't know is the family is going through marital strife. They break up divorce the first month and weeks after moving in. She takes off. he is not happy with this. He decides to stop going to work. He decides to become near as I can tell a professional alcoholic and spends the next three months destroying our property. I'm in California, so it takes two to three months to get them out,

costs $1,000 to get them out. I went from here being excited to have my first rental to here. Again, to your point, after losing 80% of my stack, I'm ready to quit. I remember walking in, and I still can't get this out of my head. the sheetrock, he's got wine bottles, empty wine bottles, stuck in my sheetrock.

And I am ready to quit. I'm ready to sell it at a loss, move on, and feeling like a loser. Olivia looks at me and goes, did we do anything wrong? No. Let's try one more time. And from there, Norris Dryd never disappointed.

Next tenant never missed payment. You know, on to that. But that almost killed us. The other horror story is... Oh, I thought you meant kill like it actually... No, sorry. Almost... That's what I thought.

I was like, did he come charging at it? Yeah, what was happening? No, no, no. My bad. So it used a different word. Well, it almost killed us financially. That's for sure. The other one, I call it the Hammer story.

So this is probably 10 years in. A tenant comes in to pay rent. Cash. My property manager does their job. This person who's paying cash for the rent, not on the lease. We think it's a roommate situation, right? Okay, we allow that. Just allow an app.

we'll add you to it. We'll let you pay rent next time. Thankfully, they didn't take the payment. So he fills out the app, brings it back, wants to pay rent again. My team does the right thing, says, no, we can't accept that until you're approved. You're accepted, blah, blah, blah, blah.

Turns out the only thing accurate on the lease was his name. Everything else was wrong. Turns out the guy was a drug dealer of some kind. He had scared the existing tenant out by threats. Yeah, this gets crazy. We tell him he has to get out, evict. he sends his buddies a text or an email or something says let's have a hammer party we actually got copies of this after a fact so all his boys come over through a raging party in my

apartment complex and decide to take hammers to every surface in my unit break the toilet break the tub break this break that end up we call the cops we end up taking like eight people of jail including him but you know i have a twenty thousand dollar you know destroyed unit because of that so yeah you know people can be pretty mean a hammer party. We should have one of those here, man. That sounds pretty fun. We could do the cyber hammer. Cyberhammer, true. Wow. Does insurance cover any of that or no? So I'm sure I could have filed insurance, but at the time we were under the impression that if we did, all of our insurance would go up. We had not had a claim yet, so maybe this again is inexperience. So we paid for it all. We did,

you know, we used it in the trial. He ended up going for jail for longer. So, but yeah, no, we paid for that $20,000. Oh, my gosh. I feel like everyone's scared about making an insurance claim because then their premiums are going to go up? What's been your experience with that? So I've actually had three disasters. So I had two fires and a flood. Two total losses and one partial loss. And surprisingly, first off, the insurance policy

is a lot easier than I thought. So the first one on college, I get a phone call from my property manager. His name is Brad. It says, hey, your duplex is on fire on college. It's likely a total loss. So what happened there? A homeless person was camping under the carport,

lit a fire to stay warm. caught the carport, caught the tree, caught the house. Thankfully, no loss of life just destroyed. Called my insurance company, you know, file a claim. I had a check in three weeks. I was shocked. I didn't know how fast it would be. So I had a check.

We ended up scraping the lot and selling the lot, and we came out ahead. We had two more, one on Diana, one on terrace. But my insurance actually did not go up as, you know, as much as I feared. It went up a little bit. But now every time I fill out a new form, I have to say I've had claims. so that may impact stuff. It would be interesting to know like the lifetime return

of something like that. It would. I've actually toyed with the idea of calculating all my insurance premiums versus what I've received in those three claims. It's probably pretty close to even at this point.

But you're getting your money back then rather than over time, which is more valuable. Right, correct. Yeah. And it's so fascinating. It kind of is frustrating to know that insurance.

It's like, what am I even paying for at the end of the day? You know what I mean? I heard a story. It was on Twitter. The term is raw.

dogging it right now in real estate that people are going without insurance self-insured yes i i would never do that so really what they're talking about is they still have likely still have liability insurance but they're not taking the structure or total loss on it so they're basically saying if it gets sued for liability they're likely covered i would not raw dog without that but if you want to be self-insured and you have you have a big enough checkbook you can write the check to rebuild go nuts i'll never do that i like i like being able to call my insurance company and say hey, my unit burned down, either build it back or cut me a check. Yeah, for me, it's the peace of mind because I looked at the cost of earthquake insurance

versus the cost of retrofitting the foundation. And I look at that and I think, well, the financially smart move would be to probably retrofit the foundation, the chance of an 8.0 earthquake in Los Angeles. Like, you do all the math and you're thinking, if I'm sitting $2,000 a year and extrapolate that over the next 30 years, I don't know. For me, it's the peace of mind knowing just if something happens, I would rather have it than not. Like just in case. No, I think that's wise in areas that have earthquake prone like LA or San Francisco. I think it makes sense. Thankfully, Fresno, where again, where I'm at,

where I've only ever been, is some of the most stable earth in California, right? It's the farmland. So I don't have earthquake insurance, knock on wood in Fresno. Now, this might be another, like, nob question, but I've always wondered if you end up getting earthquake insurance and there's an 8.0 in Los Angeles. Let's say a lot of people have, you know, the same insurance companies. How is one of those companies going to be able to pay for the flattening of like thousands of homes. I think it's something called reinsurance. I think a lot of insurance companies have reinsurance. They buy insurance? Okay, it's from like what? Funds or something like that. Well, Buffett's big business is reinsurance. Interesting. Yeah. Yeah, that's what I think.

Does you think he has enough money? Just in case something happens? I mean, I would hope so. I don't know for sure, though. I would hope so. Okay, so what's the best and the worst deal you've ever done? Well, I'll give two answers on the best deal. I think you always got to start with their first one. I think you've got to prove it works. You got to prove that you know what you're doing. You got to see that cash flow. Again, my cash flow in the first deal wasn't great. It was about $150 after we got rid of that first tenant before we did a refi. But it was proof of concept that would work, right? That Rich Dan Portette was right, that, yeah, we can find value. So I think the first deal is always interesting. I think the best deal outside of that was an apartment building. There was an apartment building.

It's on Millbrook. It was listed for a long time at $1.4 million, 1.44 million, to be exact. and it was listed for two years. Why was it listed at 1.44? Because that's what the previous owner bought it for. He wanted his money out. Unfortunately, this was 2012 when the whole market was rolling over. And his lender allowed him to extend and pretend. Unfortunately, because he knew he was underwater, he did not update the property.

He was being a total slum lord. And ultimately, the owner or the bank was forced to foreclose. We buy it directly from the bank for $700,000, so half off. It was destroyed. How many units? 18. 18 units. We ultimately put about 120 grand into that building.

Today it's worth, you know, 2, 8, 3 million, something like that. Wow. So, and rents have more than doubled on that since we bought it. So, again, that's what's coming. There's a lot of busted multifamily deals coming. And there's a lot of stuff being listed at previous purchase price that'll never sell. So extend and pretend we'll only last so long. But that was my best deal, that apartment building.

And then what's the worst? I remember buying a property on Princeton that had a house in what we would call today an ADU. It was essentially a garage conversion. Unfortunately, at the time, I didn't know that the garage conversion wasn't done right. They created a housing unit, but it was still on the same garage foundation, which was one inch thick or two inch thick first 12 inches. So it wasn't to code. We needed having to scrape that unit. So I bought something that I thought would produce two different parts of income and it only had one, which really,

made that deal skinny. So yeah, I definitely, you know, there's there's some people that do ADUs wrong. And that was a big mistake on my part. Do you think anybody could be a real estate investor? The thing that I think is different about me is I believe real estate investing is a skill. I don't think anybody is born being a real estate investor. I think it's a skill. I think it's like singing. It's like sports. If you practice it enough, you will get better. Now, will you ever be Sam Zell, rest in peace? Will you ever be Jonathan Gray from Blackstone? No, but can you be better? Yes, you're not going to be Beyonce, but you can be a better singer with practice.

And I think real estate investing is a skill, so it can be practiced and learned. You just have to be, everybody is, everybody's too distracted. They're too unfocused. If you just slowed down, got a narrow focus like you did when you started, things would start to, you would start to understand the market. Right. You would start to understand what an average deal is versus a great deal. That's what I would tell most people. So I believe because it's a skill, anybody could do it.

And what if they can't afford to take the risk? Because you hear a lot of people saying, well, it's easy for you to say because you had this job and you were able to scrape together some money. But what about me? Because I don't have anything left over. I have nothing to fall back on. If I take a risk and fail, I'm on the streets. So what I would tell somebody in that situation is you should look into what today is called house hacking. It wasn't called that when I was coming up.

But basically, you can get into an FHA or if you happen to serve in the military. VA loan for anywhere between zero and three and a half down, three and a half percent down, up to five percent if you wanted. And if you could get into something where you take your living expense down to zero or near zero, you're ahead of the game. There's a lot of people that talk about Starbucks and all of this and saving six bucks a cup of coffee. But if you can actually go after your largest expense X taxes, that's where it comes.

So what I've told most young people is my biggest financial miss wasn't that loss in the stock market. It was not buying a fourplex at 20. when I could have. I could have lived in one unit. It was a single guy. Could have lived in one unit. And that would have set me off

on entirely new trajectory. So I think more, most people, you know, if they're in that state, need to look in the house hacking three and a half percent down. And who shouldn't buy real estate? Well, I think there's a couple of things. If you're going to be an investor,

if your time horizon is less than five years, don't even bother. Right. The beauty of getting wealthy in real estate is holding for a long term. You need inflation to be your friend. ideally it's 10 years but anybody who has less than five year timeline don't even bother go do stocks or crypto or something else not not real estate for sure yeah and what are you finding in

today's market oh man today's market is really tough um so answer that question two ways uh i think we're actually rolling into the slowest real estate market of my career 20 plus years what do i mean by that i believe last year the low for existing home sales annualized with 3.88 million sold. I believe we're going lower than that sometime in the next three to four months. But then we're going to be through this. I think this is the bottom in transactions for real estate agents, mortgage brokers, inspectors. But because the market is getting so slow, it actually gets me excited.

Why is that? Because of all the deals I've ever done, I buy from people who don't want it called don't wanters. And the best way to do that is a slow market. What was the hardest thing to do the last four years? buy a piece of real estate because everybody could do it. Everything cash flowed, right? Mortgage rates are low. So I think inventory is building.

I think it's up 40% year on year. I think it gets worse from here. I think buyers pull back. I think this election that we have in front of us is going to cause people to pull back. They're scared, pissed off, nervous, whatever it is, but when they do that, they pull back. And I think that's going to allow people to write disrespectful offers and get some.

So I think the real estate market's slowing now, but it's also opportunity if you're doing the work. So I think there are great deals to be had. And then more importantly, I think people need to learn about seller financing. I think the last couple of years have been very much cash heavy, right, DSCR loans, in non-QM, cash, cash, cash, cash. But I think as inventory builds, you're going to have some people that want out that can't take a lower price or don't want to, but maybe they'll offer you terms.

So I have done seller financing deals five or six times over the last 20 years. I think the opportunity for seller financing goes up from here because some people have to sell. Although before we go into that, for those that don't know, I have a coffee company. It's called Bankroll Coffee, and our entire goal is to bring people the best quality coffee at the most affordable price. Of course, there's a lot that goes on behind the scenes that I don't often talk about, but part of the process of doing all of this was to find the best e-commerce platform to be able to sell from, and that, of course, is where I found our sponsor, Shopify.

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trial period at Shopify.com slash ICH, all lowercase. Again, that's Shopify.com slash ICH all lowercase to upgrade your business today. Shopify.com slash ICH with the link down below in the description. Thank you so much Shopify for sponsoring this episode, and now let's get back to the podcast. So for those people out there that are nervous to buy their first rental property, they want to get into it, I think this comment, I mean, I would say represents their sentiment pretty well. Okay.

One of the top comments on the Ryan Panetta podcast that you did, was this. Adjusted for inflation, the first house at $100,000 in 2001 is $172,000 in $2,023, which now is even more. Sure. Good luck finding a good rental property now in California, let alone Silicon Valley for under $200,000, even under $400,000. It is not possible, I would say. And also, I know Graham can attest to this, but like wage growth has not been the same as the increase in cost for getting into real estate. Absolutely correct. So first off, we've never been able to cash flow in Silicon Valley in 25 years. Point to that question. Second, cash flow is hard. It has been very difficult. That's why I talk about live where you want and invest where the numbers make sense. They don't make sense in the Bay Area. They don't make sense in high expense areas. There are areas even in L.A., right? If you're in L.A. and you draw a map and you go towards the inland empire or maybe out to the high desert, there are opportunities where you can create cash flow. Maybe it's not as much as it was in 2001. or two, but there is opportunities to do that. It's always, it's always hard. It's always hard. And let's talk to that 172 number. Today, I think if you looked up Norris Drive, I think it's at 313 or something. The other thing I would tell people, because I have this saying, inflation's a feature, not a bug. What does that mean? I've gone back to 1970. And if you go back

to 1970 and look at real versus nominal home prices, nominal home prices are up ungodly. But if you just for inflation, it's about 1% a year, right, if you take it over a long enough horizon. So real estate goes up slower than most people expect. And what does that mean for going forward? I think we've seen, for the 2020s, I think we've seen all the appreciation. I think we're flat, rough and tough, you know, at median home price for nearly the rest of the decade. I just know when I think about my own circumstance in this situation, I closed on my first and only property that I have at the place I'm living right now that I'm house hacking, which is nice. was back in late 2021. I got just under a 3% interest rate and I purchased right around 600,000 bucks.

My mortgage is like just shy of, or my PITI is just shy of like 2300. But now if I were to buy that exact same property at the same price, but with today's interest rates, it'd be like 80% more. Could be 100% with the decrease in taxes and whatnot. Yeah. And talking about with that considered, prices have gone up as well. So like maybe that property is like 700,000 or something like that. So it's well over 2x. And that's just in a matter of three years. Not even. Yeah.

Which I think like a lot of people, they see that and they're experiencing that or they have analysis paralysis over the past couple of years. And now they're just like, oh my God, like as time continues going on, it's just getting so like unmanageable. It's not possible. And Graham talks about how renting right now is a lot more affordable than buying for a vast majority of people. Yeah.

I mean, if you do the rent versus own calculation, I believe I saw this correctly. it's the worst skew that it's been certainly in the last couple of decades, the rent-first ownership. Forty years. Forty years. Several decades, yeah. Where do you think prices are going to be headed over the next let's call it five and ten years? So the next five and ten years. So just we're on the same

page, we're going to talk median home price national. We're not going to talk Texas or, so median price national, S&P K Schiller, if you'd like. I believe through the rest of the decade home appreciation will be sub-inflation. So in Real terms, home appreciation will be negative.

It likely will still be nominal, but we're talking single digits, right? I think inflation will run most of the decade to two and a half percent. So nominally speaking, it will be positive. Real terms, it will be lower. Why is that? Because you can go back to the 1970s and see that home prices has generally been 1% above inflation. And in the first four years, we are way up. So I think there's some give back.

So I think nationally speaking, home prices are going to be basically flat. And I think that'll drive a lot of people crazy. And what about rents? You think rents are going to keep up with inflation plus some? I think, again, I think single families will likely be slightly above inflation because there's not a lot of them. And I think multifamily will be slightly less. So it'll be negative in real terms. And what about the difficulties of today's market, just competition is through the roof.

Properties are the most unaffordable they've been in 40 years. How do people combat that? Well, I think the answer that you didn't say was supply. A lot of all of that rolls around supply. And unfortunately, I still think we have a bifurcated housing market. I'll give you some stats that one of my fans sent me about Lynchburg. In Lynchburg, the median home price is roughly $275. In today's market, as of Tuesday, one third of the active listings are below $275, which means two thirds of them are above $275. Also, we're seeing increased price reductions, but those price reductions are on properties above the median. So what I think is going to transpire over the next year or so is transactions are going to disappoint. We're going to have more price reductions, but it's going to drive people crazy because the median home price will be yanked higher. This is how median is calculated, right? We're going to have more transactions above the median, which is going to pull the price higher. So I think the median home price is going to be positive. I think transactions is the thing most people missed.

And I don't think we get back to five million transactions until 2026, 2027, maybe 2028. It's going to be that. The housing market is fundamentally broken. The Fed broke it. They took rates too low for too long. They started buying mortgage-backed securities for too long. The move-up buyer is dead. And, yeah, that entry-level home is just not coming on the market enough.

But it's still worth it for people to buy today. But if they buy the multifamily, the four-plex-in-house, packet. Yeah, so I think the easy thing to do is to house a fourplex, you can make those numbers work. Because again, if you're going to house a fourplex, you technically don't even need it to be profitable. You just need it to be less than your rent would be because what you're trying to do is lower your monthly expenses. I would argue a fourplex, you really should aim for zero, so you're living for free,

which means you can stack another $2,000 a month to buy assets going forward. I would argue, I'm seeing people all the time buy cash flow rentals, but it's usually in central or the southeast. It's tough California. It's tough in Texas. But it's not impossible. I think I think a lot of people just believe you can't because that's the kind of era we live in. I just think it's hard. I've been doing 20 years. It's never been easy. Today's uniquely hard, true, but it's not impossible. I do think it gets easier from here. But we'll see. And what do you think about the difference between like a big apartment complex versus just single family homes residential? I'm so glad we got here. And let me,

let me take you guys back to 06. Let's talk 06 residential. So 06, if you don't know, that was pre-crash, because most people talk about 08. So this is what happened in 2006. 51% of loans originated were arms, adjustable rate mortgages, 51%. I believe 17, it might have been 19% of those were what's called pick a payment. Do you guys remember pick a payment? Picket payment was essentially negative amortization.

You had four payments. You could pay the 30-year full PITI. 15-year P-I-T-I, interest only, or negative AM, which meant 500 bucks below the payment, we'll add it to the back of the debt. Pick a payment. Guess which much people picked? Pick a payment, right? It's the lowest payment.

By far, because you're just adding the debt. Those are now illegal, but they were very common in 06. So in 06, we had a lot of speculation. Everybody thought residential would go to the moon. People were saying residential never crashes. We had adjustable rate mortgages on steroids. and we know how that ended in residential. It blew up.

I want you to now go to 2003, multifamily. Grant Cardone, all these syndicators, are going out doing value add apartment buildings. We saw more transactions in 2023 in multifamily than we'd seen in decades. We saw assets trade two and three times in 18-month periods because people were just speculating.

And the cap rates kept going lower and lower and people were financing this with shorter and shorter bridges. debt, having bad assumptions about rent growth and expenses, and all of that is blowing up right now. So my prediction for multifamily is there's going to be a lot of losses and opportunities in 2025. I believe the greatest opportunity for wealth building is going to be in commercial properties. I think residential has already seen the appreciation, unfortunately.

I don't see a lot of pain building there. So again, prices don't go up or down very much. But I personally am excited about once again 10-30-1ing a house like I did Norris Drive into more multifamily building. So there's a chance Olivia and I double or triple our portfolio because we sell houses and buy multifamily in 25 and 26. What areas do you think are going to be going to be going to be the ones with the most new development coming? So again, looking at the map, it's the sunbelt, which we're already seeing. I do think there are some markets that have the combination of tax hits and insurance hits that make it doubly expensive. Like Austin resets every year, we have a lot of the southeast in Florida and the Gulf Coast, Louisiana, in trouble because of insurance.

So I think there's a lot of you can just look at the map and see the pain in that kind of where the Gulf comes into the U.S. I think that's where a lot of the pain is. But again, if you step back from today, how do you get wealthy? How do you get wealthy? I believe getting wealthy is three steps. Step one is you have to create disposable or discretionary income, right? You have to have something left over at the end of the month that you can save. Then you have to become elite at something.

I chose a very, very small footprint way back in the day to become elite at better than anybody else. It could be classic cars. It could be stocks. It could be whatever it is. It could be fish tanks and coral, right? Whatever you choose to become elite at. And then you have to, you know, you have to do that for a decade, right? wealth is created by ownership over decades.

The other thing you should really be looking at is what is the net worth of renters versus owners? It's very clear if you own assets. But now, part of me would say that the difference between that is because people are forced to save and the type of person to buy a house is probably the type of person to also be probably more prone to budget, have a higher income, make a little more money, just overall. and that for savings. I don't know. Let's play with that.

Let's play with that a little bit. So when you, at least when I step back and I read stats about the average American. Yeah. What is it like 80% of us live paycheck to paycheck? Something like that. Something like that, right? And if we look at home ownership rates, it's like 67% roughly, 67, 68%. So I'm not sure I buy that.

I'm not sure I buy the fact that homeowners have some natural ability to save more than renters. Just looking at the stats. But I think also that home ownership rate includes inheritances. Oh, I'm sure it does. So I'm sure a lot of people would just get a home. Okay. You know, maybe move in or, you know, have access to it. Yeah. I guess where I will agree with this is it is a force savings, right? Because one of the things again, you read in Rich Dad, Poor Dad book is your home a liability. Right. That's a whole thing people get wrapped around. I just step back and look at, you know, the time is going to go by. I'm over 50. Both of you are certainly under 40, if not under 30. And when I step back and realize where was wealth created, it was in owning assets. I think about my mom, who bought a home

in 1977 in the Silicon Valley. The only reason she was able to have any semblance of retirement is she sold that house. We never moved. The same house I grew up in. She sold in, I don't know what it was, 2015, 2016. So again, it's a forced savings account for a lot of folks. The other thing we need to realize, to your point of buying the 600

K House 2. Whatever it is, your shelter is fixed. You know, ex insurance and taxes, you know, tidbits. Renters can't say that,

right? One of the things in this whole renter is cheaper is zoom out. Look what's happening to rent over the next decade or so. You think rent's going to go down,

right, in the next decade, especially with less development of homes. So it's absolutely cheaper today. But it will it be forever? And the other thing I would ask you guys to look at

is we've kind of seen this movie before. We've seen an environment where rates went up 500 basis points, 600 basis points. Think 1981, 1982, 1983. 1981 is still the least affordable housing ever, even worse than today. We still did two million transactions, you know, a lot of cash purchases like today. You know, it has been this bad before. But again, it's just a transactions will go down. That's what's happening today. So how are you navigating today's markets? Because I'm looking as well, and I check every single day in the Las Vegas market.

I've yet to see any property that makes sense to buy that is either not a huge fixer. So you have to put a ton of money just to make it work and time or just you're going to lose money every month. And so from my perspective, I'm like, why would anyone buy for cash flow in Vegas? It just doesn't make a lot of sense. I'm looking at Vegas. I actually just have a show called Buying Vegas. Olivia and I just moved here. So I'm trying to create a new buy box for Vegas.

So it is tough. It's really hard to cash flow. I don't think, again, I'm still learning it, so I don't know as well as you yet. I think I'm going to have to change what I do. So I've been a long-term, you know, year-lease, month-a-month guy for 25 years. I may have to go to finish midterm. I may have to buy a house that is non-H-O-A so I can add a Casita or an ADU in the back to Goose.

So I think you just have to get more creative and look for opportunities. I'm still very much early, but I will be buying a rental in probably Henderson. I think the only thing it might make sense is building an apartment. like that could be the only thing, but even then land is so expensive. Is that going to take you three years to build 200 units or something like that? How much is that going to cost? What's the downtime worth? And then by the time you're finished with it, would you have been better off just buying a treasury?

Yeah, so I follow a lot of people in the commercial space because I think that's where the big opportunity is. If you have the capital, I think the commercial market, again, defined as five units and above, is where a lot of pain is coming in 2025. I think there's a lot of commercial banks who are extending to pretending on bridge debt. There's a lot of shadow banking going on with non-QM loans that they just have to clean up. And I think there's a lot of value-ad deals that aren't going to be added. So we're going to be able to pick up stuff 60, 70 cents on the dollar. So I wouldn't be building right now.

I think you can buy stuff at a discount shortly. I guess what I worry about is in a lot of those cases, because I've also paid a really close attention to the commercial market. And you hear all these stories of, you know, the debt's coming. due pretty soon and they're locked in at, you know, 3%, and now it's going to read, you know, adjust at 5 or 6%, they're going to be losing money on that. I'm afraid that all it takes to keep it going to keep it going is the Fed coming in and saying, all right, well, we're going to backstop some of these banks and we're going to subsidize some of these rates so that the market doesn't crash, you know, there's so many variables that they could throw in there to just keep it going.

No, there's no question. The bank could create a short-term bank funding program for commercial loans, it'd be fixed tomorrow. Yeah. They could. Don't miss the Devil Wears Prada 2 in theaters. Merrill Street, Anne Hathaway, Emily Blunt, and Stanley Tucci are back. In light of the recent scandal, I'm here to restore your credibility. I did not hire you, and all

I need to do is find my time until you fail. On May 1st, icons. I'm going to make something of this job. Rain. Be the bridges I burn. Night my way. Forever. I just love my job. Get tickets now. The Devil Wears Prada 2 in theaters, May 1st. David Frankel. I don't know that the Fed really cares about the shadow banking system. I would argue

that the Fed specifically Powell wants to see more regulation and wants to see pain there. Now, it's not going to happen to JPMorgan or city or any of the big banks. But the non-banks, the mutual funds, the Wall Street funds, the debt funds, it wouldn't shock me of Powell's sort of smiles that those guys are having to take some losses. So what's your prediction for the rental market? Just across the United States, just overall. So I think there's two rental markets. I think there's multifamily and I think there's single family homes. I think multifamily apartment rentals are going to go negative.

I think they're going to go down. I think we have supply coming online specifically in the Sunbelt. It would not shock me if it goes down three, four percent. Single family homes, you know, flat to plus one percent. Again, I think a lot of what we've seen in the last four years was too much too fast, kind of to your points, right? We've had this big run up in rent, this big run up in prices. And the only way to fix affordability, there's three things you could do.

Lower prices, lower rates, increase income. As I sit hitter today, I think we need five years of wages going up. We finally have wages higher than inflation. I think that continues going forward. I think it's just going to be years for wages to come up. And to that end, transactions are going to stay way, way down. We did six million transactions. I think in 2023, you know, we're going to be.

going to be low fours. We have a broken housing market. This is the first broken housing market since 1981. The move-up buyer is not playing. They're staying in their homes longer. Turnover used to be eight years. It's probably going to go to 12 years. It's just the market's not, you're not going to sell your 600K house. It's now 700 because you got this low rate. I think that a lot of people are making that choices. So we're going to need time for wages to catch up. What's your solution to this? If you had a magic wand and can fix the housing market, how would you do it? If I could wave a magic wand, I would encourage every public builder, smaller mom builder,

to build smaller homes. For too long, we've been building what was called McMansions. We've seen the average square foot for the last 20 years increased by something like 30%. If I had a magic wand,

I would go back and build what they were doing in the 50s, the 997 square foot, three, one and a half. I would build some two-toes. I would just build smaller homes. And I'm not talking condos with shared walls.

I'm talking smaller homes, yes, on smaller lots, but I want single-family homes. I think Lenar is the first public builder to try this. They built some 661 square feet in San Antonio. They got some sub-thousin in Sacramento. But if I could do anything, I would encourage smaller. We need entry-level homes.

That's the big piece that's missing today's entry-level. So it's funny. That was actually in my video yesterday, where I covered shrinkflation in the housing market. So building has gone back to the same square footage that we were in 2010. Correct. And building since the 1980s has increased by, double. So what used to be 1,400 square feet is now the average home for a new consortage is like

2,800 square feet. Now it's down like 26. More builders are building instead of walk-in closets, they're building a smaller closet that's not walk-in in exchange for building another bedroom. There you go. So you're finding a lot more of those. I just, I tend to think that for builders, it's more profitable to pack in the square footage. And if you're charging, you know, 150 a square foot or it's costing that much, then it makes sense to maximize it because you have the materials anyway. Like building a little more is not going to be that much more money, but you could charge way more for a bigger house. So I think that my suggestion a while ago is to be able to take the interest rate with you. That was the one thing. I never understood why the rate had to stay with the house.

And if you leave your house, you can't take the interest rate to another house. Like you're already approved for the loan. It's already bad. As long as it appraises for more, you. You know, you you would think that would be a great thing. I understand why banks don't want to be holding on to these, you know, 3% mortgages and they factor in that the average one is going to, you know, be charged off in 10 years. They get their money back. And it'll encourage people to keep that loan for 30 years. So it kind of screw them.

Right. But it would open up the housing market. I think you were the first person I heard bring that up. I think that is a very creative and genius. Because, again, think about it. 600K house. You want to trade up. You take whatever that mortgage is 500 grand.

You have a second for the delta, which is maybe a. at a higher rate. I think that's a genius and pretty creative fix. I would hope somebody looks at that, but that could help. That would get transaction. Oh, absolutely. Because we're missing, we're missing the entry level home, right? You got into your first home. You thought it was going to be your first home. You got a 2.9% mortgage. Now the price is up 100 grand. You probably can't even qualify for it at 2.9. Certainly not at 7. You're stuck. If you can move it, I think that's a genius Yeah. The other thing was taking the property tax basis with you, at least on that portion, on that portion that you sell, if you double up, let's just say, then, you know, it's a

prorated basis. So half the house could be the old property tax. I don't know how on earth. That would get messy. Yeah, if you move to a different city or something like that, but there should be bounds where maybe if you're over the age of 65, within a certain county, you're able to exchange one house for another to open up. There are some of those, at least trade down. I know they're in California. I don't know if they're in Nevada, but if you're 65 and older, there's some county tax assessment, you know, tradeoffs like that. But that would be, I think if you just did the mortgage, that would be enough of an unlock. I think that's a creative answer. Yeah. What are some of the biggest challenges that you've had to overcome? In real estate investing? Learning a new

market, you know, that was certainly harder than I thought it would be. That first tenant was a wake-up call understanding market cycles because I just thought I just thought everything was the same. Access to capital right when the market was rolling over, right, getting bigger. Understanding seller financing, you know, the tax code. Because again, you got to remember, I'm a W-2 employee. I make more than, you know, at this time, 250 grand, so I can't take losses. So I have this carry-forward loss. So, you know, how you can structure those with LLCs and other things maybe to give you some benefit.

becoming a real estate professional with some help from an accountant. It's just always learning. I think my biggest error was the first five years I tried to be a cowboy. I tried to do it all by myself. And part of that was just laziness and excuses because I was all over the earth. I was in Europe, in Asia and South America. But in today's world, you've got to get in the right rooms. One of the things that I pay really close attention to today is who are the five people I spend the most time with? because if you want to get a six-pack abs, get around people that are fit. You want to be a millionaire,

get around millionaires. So that's something I didn't audit before. I think that's a big unlock. I do think it's really hard today. I haven't done a deal. I mean, to your point, I haven't done a deal in probably a year, 14 months.

But that doesn't mean I'm not trying. I've probably written 25 offers in the last 14 months. You just got to take your shots. It's a numbers game. It is hard. 2021 was my worst. I wrote 100 offers

and didn't get anything, right? Because everything was flying off the shelf. Because I would only write for cash flow. And I didn't change markets. A lot of people have changed markets to, you know, the central or whatnot. But it's definitely hard to cash flow today. I do, you know, most of our deals, when we look at it, occur between October 1st and January 31st, the winter months, when a lot of people take their time off. So I'm hoping that unlock some opportunities or some seller financing.

So you just got to keep learning. And I've been 25 years. I'm still learning. Yeah. What's your advice for people today, buyers, looking for a good deal? Don't rush. I guess the first thing I would tell people is it's possible. I think a lot of people come into this going, it's not possible. It's hard. It's not easy. It's always hard. I would tell them that buying today or I'm not only to say buying, but learning what a good deal is is the goal. And I think that's what frustrates a lot of people. Because again, to our earlier point, real estate investing is a skill. And if you don't spend the time learning the skill, you're gambling. You're just flat out gambling. And I don't believe in that. I believe it takes focus, repetition.

I think you should learn a very, very small buy box. Everybody that I've seen do that, they understand, oh, that one's priced differently than everything else. So I think a lot of people get unfocused. A lot of people I talk to today that have a stance that it's not possible today when I talk to them, we're like, hey, I've looked at Dallas and I've looked at Memphis. I've looked at Columbus. I've looked at Fort Lauderdale. And I'm like, you're not learning. You're just frustrating yourself.

You're going backwards. Just slow down. Get one area. Figure out what, you know, you should be able to tell somebody your best friend, hey, an average deal, three or four bedrooms, two baths, between this and that is a negative 8%, which is bad. But until you can do that, you don't know. And I just think a lot of people rush it or they just have opinions that it's too hard. What do you think about the people buying for appreciation? That's a big pet peeve of mine.

I'm not a fan of that. I had a friend of mine back in the day he was an executive when I was just a low-level guy he pulled me in his office and said, hey, Michael, I'm buying in Louisiana. This was right after Katrina when they had some depreciation extras come in.

He's like, hey, look, I can buy four homes and, you know, I can afford to write off $250 a month negative and given all these, you know, tax benefits and this is going to go to the moon. You know, lo and behold, it didn't and he lost all four of them, because again,

betting on appreciation is gambling. I think one of the ways to bust out is to, I think there's two ways to bust out of real estate. Betting on appreciation or having short-term debt. This is Dave Ramsey's story.

Dave Ramsey became a millionaire flipping properties. Unfortunately, as I understand the story, Dave Ramsey was using 90-day debt. Using 90-day debt, probably not a good idea. The market slowed down. People called the loans,

and he went bust. I think people going bust in multifamilies because of, you know, two-year bridge debt. I think people that blew up in 06 to 10 was arms, teaser loans. 30-year fixed-rate debt, cash flow day one, or keep your money in a money market account and just keep grinding. What are your thoughts on flipping versus the buy-and-hold method? Again, I only can share my experience.

So while I was working, well, I had a W-2, I had no time, so we just bought and hold. I did retire in 2018. It was a great time to flip. We flipped 56 properties. Basically what I did is I paid people to go find slumlords and we would pay cash for their property because I had to scratch the capital and I would fix them up, stick a tenant and I would sell them to landlords. I did that, but I stopped doing that in 2021 when prices went crazy. So you can make money in flipping. You need a team.

It's a lot harder. I personally think you have to have full time focus on it. You can't do it part time. There's so many ways to go wrong. But I couldn't have done flipping without having a 15 years experience in multiple teams. I could call on. Are there any emerging markets right now that you feel there's a lot of potential in? So again, I don't generally talk about that stuff because I think everybody has to do their markets. But if I had a gun in my head, I would go southeast probably like Huntsville, something like

that. I've done some casual. I've some people point at that that I've looked at for them. But it would be somewhere in the southeast. Price points below 200 grand. Population seems to be increasing. There's more PhDs in and around Huntsville because of NASA. I know this. This They seem to have a lot of good stuff going for them. And what are your thoughts in the anti-landlord movement? I think it's coming. You had the president at the latest debate talk about rent control. I mean, that's something I believe I heard him say I was watching.

I think there's a lot of folks that are anti-landlord. And I think there are some horrible landlords. I just talked earlier about buying 56 properties from slumlords. I think slumlords should go to jail. I think it's the most disgusting human trait that you could ask somebody to live in an unsafe, disgusting property. I think they should go to jail. That said, most landlords, specifically mom and pop landlords, do a great job. And they care about their properties.

And they care about their tenants. And I just think negativity sells. I just think that's just where we aren't. Us versus them, there's a lot of that. And what do you think of rent control? I think if there's any way you want to blow up a city, established rent control. I mean, Minneapolis is the latest example. they adopted rent control, I think, three or four years ago,

and you had developers pull out instantaneously. They canceled projects that were in the play. I forget who it was. I think it was some economists that says, the only thing that can destroy a city more than rent control is a bombing. I mean, rent control is a horrible idea. I mean, I understand why it feels good. It feels good to the tenants that get it.

But trust me, if you fast forward three, four, five years, you will not have any new development. You will have more and more people bleeding properties. and it will not end well. Yeah. Yet Jack saw it when I was in the duplex. My block in Los Angeles was rent-controlled because there was a mixture of single-family homes

and duplexes that were kind of like, you know, intermingled across the street. And you see the difference, when you go one block south of that, they're all single-family and no rent-control. The difference between the rent-controlled block and the non-rent-controlled block was massive. Just in terms of landlord upkeep, how nice the places were, pride of ownership, my block, unfortunately, people would not sink any money into their places at all. And a lot of the reason was because they had tenants that had been there for 30 years paying significantly under market value. Putting any money in the property would just be lighting it on fire. So from landlord's perspectives, why would I spend money on this thing when it's not going to increase any value? It's not going to do anything for me. By the time they move out, I

going to have to update it again, there's no point. Right. But you see a substantial difference between the two. No, and again, people can go back and look at history. I mean, you go back to the 70s and look at New York. I mean, there's lots of examples where cities or areas have brought on rent control, the outcome is predictable. The only thing you can ask is how long it takes to get there.

Yeah. What I also didn't like about rent control in Los Angeles was that it wasn't based on income and that sometimes you just see people who are making a fortune and just happen to be lucked into getting a rental back in the early 1990s where prices were love. even though they don't need it, if that makes sense. No, I mean, I think there's a TV show called Friends where you had Monica and I forget Rachel living in an apartment in New York

because it was her moms or grandmas or something. You have a lot of that, and it's not based on income, it's just based on, it's based on luck. It is. And that's not okay. So why did you quit your job? I didn't want to. So I quit my job at 45, February 2nd, 2018,

whatever that Monday was. I think it was February 2nd. It might have been the third. I was a sales guy. I was a senior leader. And the reason I remember it is because in sales, you get a new patch, you get a new territory, you get a new quota every fiscal year. And the last company I was at Splunk.

You can look at LinkedIn. It was my last company. The fiscal year was January 31st. So first couple of days of the new year, you get those new team, new patch, new quota. And I was brought into this back room, which I'd never been in. and they ended up giving me the three things that I didn't want. They also gave me a boss

that frankly didn't like me as much as I didn't like him. Why didn't he like you? Because I was arrogant. I was cocky. I was very good at what I did and I wasn't shy. I wasn't PC.

I voiced my opinion. Had you known this guy prior to... Oh, we knew of it. Yeah, we were at the same place. And then it just so happened to be that you guys got randomly assigned each other. It was a random. He was above me in the org chart.

I'm sure he asked for it because he wanted to get me out. I'm sure it was purposeful. Oh, really? What's the point of getting you out if you were making good sales and hitting your numbers? I mean, W2 employees, especially sales, high income, high pressure, there's a lot of ego. There's a lot of ego. He didn't like the shine that I had, right? I was right out the CRO chief revenue officers.

I took her places and stuff. So I was getting more shine than him, and that really annoyed him. What was it exactly that you were selling? So I was selling software for Splunk security software, IT management software. So it's called Enterprise Software as a space. They were million-dollar contracts. Yeah, my quota at the time, I think, was $100 million, $101 million. How do you get into that?

How do you decide that's what I want to do? Were you good at sales to begin with? No, do I was an accountant. I was an accountant out of school. I was a bean counter. So I was a bean counter at 22, 23. My company, Quantum at the time, you can go back at Look at LinkedIn. These are all there.

I don't remember the years, but they'll be close. So I was at Quantum as accountant. We adopted an enterprise software called Oracle. I was on that. Shout out Oracle. This podcast. Love them. I heard that.

Yeah, there you go. Shout out Oracle. Love you, Oracle. Thank you for everything you've done. So Oracle gave me a chance to work on a project as an accountant. So I was domain expert, but I learned the technology. That project went well. I was then recruited to Sun Microsystems to lead their financial aspect.

that went well and then I was recruited to a software company that had Oracle Tools as a technician which is really weird because I'm not an engineer not a computer scientist

but I knew the business I knew finance and then from there I was the best at it that gave me a sales role sales rolled out to management management led to senior level it's just you know

20 years of grinding and being good at what you do So how much were you making from that job or what were you going to make that year versus what were going to make I just penciled I think it was 450 was the year

that just ended was 450 is what you were going to make from the corporate job. And what were you going to make from the rentals in that year? And gross and net? Oh, gross was 1.5, 1.6, something like that. Nets probably four-ish, 380. So about the same? About the same.

And again, the beauty about Olivia and I is we live on about 12 grand a month. That's still, I mean, that's a pretty luxurious life. Oh, it don't suck. But, you know, 12 times 12 is 144. And if, you know, the rentals are making three, Easy math. Does that feel pretty good walking out of there? I had a couple of days where I smiled so much my face hurt.

Have you ever smiled so much your face hurt? Yeah. I didn't even know that could happen. It was pretty awesome, yeah. That's awesome. And then I'm guessing you had all of this free time to just sink then into real estate. Oh, no. You would think that.

Maybe I should have. But that... What'd you do? Just like take it easy? Maybe this is just me. But so the first two days, high as a kite. Don't even think I touched the ground. I was so excited.

but by Wednesday or Thursday I start getting depressed for the first time in my life like depressed and by like week three I am having not necessarily suicidal thoughts but that's how dark it got like you're a failure Zuber you're an idiot you're not contributing society you're a more I mean I was having myself talk was horrible three weeks after leaving

I'm 45 I don't have to work more I can do whatever I want and I'm having these thoughts And I remember saying, I got to get out of this. So the first thing we did is we just picked up and did a family trip to Taiwan. That's where my wife's from. We spend three or four weeks there. It's actually where I stumble upon Graham the first time in the back of this car where everybody's screaming Chinese.

And I don't speak Chinese, so I have headphones in. So that was a little bit of escape, but that was just an escape. So I come back from that. It's probably five or six weeks. I'm still depressed. And mind you, I'm getting phone calls probably three times a week saying, hey, come work for me, come work for me, come work for me, we'll give you 300, we'll give you 400, we'll give you 400,

we had one offer at 500 grand a year to come work for me. And I remember sitting down going, if I don't get out of this headspace, I'm going to take a job on Monday because I don't like the way I feel. Not because they need the money, because I didn't like the way I feel. My ego or whatever that was was built up in my job, and I just couldn't let it go. And so I had that epiphany Saturday morning, and then what I decided on Sunday was I'm going to go back and fix a mistake.

So one of the things that I never did was I never revisited my journey from Norris Drive to nearly 200 units. So what I did is I sketched out something that ultimately became the book one rental at a time. So it was that commitment to that book that made me feel better. I would write for 90 minutes, two hours a day. And that would be enough that I would feel. feel better. I could go to the gym after. I could go to lunch with Olivia. But, dude, I don't know what it was, but I got depressed after quitting. And it wasn't until I stumbled on this idea of, hey, take a breath. You can always get a job. Let's document your story, which has always been a

weakness. So I'm still shocked that it happened, but it did happen. Why didn't you take one of the jobs? Like, why didn't dad go through your mind? Like, I could just take the 500 grand and still do the book and still do everything else I'm doing. So at that point, you're six or seven months out. You really do realize you don't need the money. I stumbled, this is what I told myself very early on in why I wrote a book, which is horrible. I'm a horrible speller. I'm not good at it was.

I wanted to spend the rest of my time creating something that outlived me by 50 years. Something. And that's tough to do. So that's where my focus. went. Because again, I could have got a job, but being an enterprise sales leader, it's hard. It's very stressful. Most of those guys are addicted to drugs or alcohol. They cheat on their wives, you know, all this nasty stuff. It's a very unhealthy environment. And frankly, I was done. A lot of people in my space never stop. They just keep wanting to climb the financial mountain,

right? If you're monthly, if you're yearly nuts 100 and you're taking in 300, does 400 really move the needle. This 450 really move the needle? So what I wanted to get comfortable with was just sitting down. I reserve the right to change my opinion and go higher if I want to. But I'm spending all my time now trying to create something that outlives me by 50 years because I think you die twice. I think you die once physically. And then you die a second time when somebody's, the last person is say your name. And I don't know many people that have done that. So that's, that excites me today. And I've been doing it for five years, I get almost daily notes now that it's working. So what I stumbled on very early is, hey, let's go try to create a legacy. So that's why. I didn't need more money. How do people find

purpose like that in their lives? Because I think a career could go one of two ways. One, it could give people a lot of purpose, but too, it could also be a distraction from that. That's a great question. I actually think all of us go through four seasons in life. So here are very quick. The first season is when your parents take care of you. For a lot of us, that ends at 18, some of us, 22, two, some of us 30. Then there's season two. That's where you're taking care of yourself financially. Usually sometime in season two, you have this epiphany of this moment. Like, hey, I can either keep working until I'm 65 and hope retirement works or I have to do something different. For me, that meant buying rentals. For some people, that stocks, whatever it is. But if you're lucky

enough, you can exit season two and get to what I call season three, which I'm in today. and that is you no longer have to worry about your bills. Now you choose where you want to spend your time. That's everything I do now is time-based, not dollars-based. Where do I want to commit the three or four hours a day that I have that I want, there are my choice. So that's the big thing. A lot of people talk about, hey, find your purpose.

You never work a day in your life? Crap. When you're in phase two, go find the thing that makes the most money. Go get really good at that. Live below your mean stack paper buy assets. If you want to go find a purpose, whether that's painting, or, you know, like my wife does, or teaching, you know, kids to play baseball. Do that in phase three when you have options.

So I think some people get that wired. And I've only stumbled on this by accident. I thought I'd worked until I was 50. I loved what I did. I would have done it for free. But yeah, I can tell you I'm so much happier today. No stress. I get to choose everything I do.

And it's a great feeling. Season 4 is much like season one where somebody else is taking care of you. you know, you're 80 years old and you've got to go to convalescent home or something. And the beauty of these seasons is there's no age limits. You can get in and out of them at any time. There's also no guarantee you go past them. But I think a lot of people should focus on making season three as long as possible. When have you been happiest in your life? Oh, today. Every day I'm happy. Every day I get more happy. What's contributing towards the happiness? I've seen the impact of five years of daily discipline. You know, I've done 14,000 videos. I've done this, that, the other. I get notes every day. Now I get

text messages from people saying thank you. You know, I got a note this morning from a guy who just closed four duplexes, seller financing 30 year fixed, 4% 30 year money, right? So things are possible if you do the work, write offers. But yeah, I get notes every day. I send out cards to people that do them. And there's no better feeling than putting something out there consistently, your tribe finding you, and then them executing.

It's pretty wild. What are your thoughts on the fire movement? that's a very interesting thing. So my opinion about the fire movement is definitely biased. So I retired 45, as we've talked about. I would argue that's early, right? Financial Independence retire early. I try to reach out to a lot of people in the fire movement.

And frankly, they, you know, they blank all over me. They don't like real estate, at least the ones that I bumped into. They are anti-real estate. And it kind of works. So, yeah, I'm not a big fire guy because of that. Because you're just so anti-real estate. They can be. I think they tend to sway in the direction of being like a fang, tech worker, stashing money away and index funds and not wanting any of the liability or the work that comes along with real estate.

And I think for a lot of them, real estate is like a second part-time job or, you know, like a side hustle that you still have to work towards. And they want something truly just like I could go anywhere in the world and not answer a single email or phone call. And I never need to do anything. Two hours a month, 180 units, multiple six figures a year, I'll take that trade. Yeah. Now, what about for the people like me, because I get very antsy if I'm not doing something. Like, I feel if I'm not productive throughout the day, I get a lot of anxiety. I, too, feel depressed if I go through it an entire day and don't do anything.

And then sometimes I worry if I'm not doing the highest level thing I could possibly do, then I'm wasting time. And so even for me, like, going and painting the garage was something where, like, I really enjoyed doing that, but it was really tough for me to spend the time, even on a, this is a weekend, by the way, painting the garage, but looking at that and thinking, well, I should be doing all these other things, and this is not the best use of my time, but I really enjoyed it. Yeah, so I only can answer, you know, I'm 52 years old. When I was in my 30s, I was triple type A. It's just always going that direction. So I likely had the very same thoughts, if not worse.

But now that with a little bit of age, you know, my daughter's 31, you get a little bit more perspective. What helped me kind of go from AAA to maybe B is giving myself permission to sit down. Like literally telling myself, it's okay. You have 181 units. You don't need 191. I said that out loud. Olivia and I have had that conversation. where a lot of people, my opinion only, they have success, they have more success.

They just like, what's the next thing, right? We got a million sub. Let's go to 1.2. Let's go. And that just keeps you on this wheel. And the wheel gets bigger and bigger and you've got to push more and do all those things. What I did right or wrong is I said out loud. We have 181.

That's enough. Now, we buy, we sell. It's okay. But I'm not pretending to sit here telling you I'm grinding as hard as I did 10 years. ago. No question. I still look at my market every day. I still wrote 25 offers or whatever it was in the last six months, but I am not nearly working as hard as I was before because today my goal is to contribute to others. So I've really pivoted. I gave myself permission to slow down. How do people realize when there's enough? Again, for me, it's math. Right. I think most people should look at what I call their monthly nut, right, what their bills are. If you're a nut stand for. I don't know. It's a, it's a, sorry. It's a term. It's a term. Like, what's your monthly expenditures?

Rent, food, entertainment, gas, insurance, all of your bills. That's what I call monthly net. Sorry for the slang. Oh, I thought you said nut. He did. Monthly nut. Nut or net?

Nut, N-U-T. Oh, it's just a phrase. I've never heard of that for. Have you heard of that? Yes. Okay, my bad. No, no, no, no. On me, apparently.

So, yeah, so what's my monthly expenditure? So let's just pick a number. Let's say it's five grand. in my world, if you get to a point where your assets are spinning off two X that or more, you're good. Maybe two and a half, you're 12, 5, you're good. As long as you don't get stupid and expand your monthly expenses, you have the optionality to retire. So for Olivia and I, we got to like 3x our expenses.

And I'm like, so that was what it was for us. Yeah, in my mind, though, I agree with that. But then I like to plan for the worst case scenario. So I've said this before, but I'll imagine the market drops by like 50%. There's an earthquake in California. Have a child with disabilities that needs constant care. Sure. And if we plan for all of that happening at the same time, how much do you need for all of that without skipping a beat?

And so that for me is kind of how I base things. It's like worst case scenario first and then base it off of that. The way I see it, not to chime in. is that you're more likely, knock on wood, to just walk out one day and get into a fatal car crash or something like that. I'm just saying, I'm just saying, right. But like, what do you do to hedge against that? Right. And if that were to happen, drive a safe, safe car. Sure, but if that were to have a Tesla, cyberdunk, if that were to happen, right, then you would have wasted all of the time that you spent just like, you know, preparing for the earthquake and this and that and this and that

when there is an element of fate just to, you know, everyday existence, you know? So, and then that time you could have spent doing other things you enjoy, like painting more garages. Who was it? Watching Jack's car. Michael Saylor really put it in perspective when we had him on the podcast. He was talking about, I think this was on the podcast, too, of how much trust you put in other people just throughout the day that could, you know, off you in seconds. And he even gave the example of like your Uber driver.

You get in the car, you have no idea how much sleep they got the last night, if they're erratic, if they've been drinking, if they're on. Anger issues. Yeah, anger issues, substance issues. When you're driving down the freeway or a highway, you're putting your trust in the other people, not to just swerve the wheel five degrees. And that's it. So it's like there's so many little things throughout the day that you place your trust in everyone else to keep you safe. and that things can't happen. So one of the things that I would ask you to look at

is the expected outcome. So again, you could wrap yourself around the axle of all these horrible things occurring at the same time. Child with disabilities, earthquake in L.A., drop in the market 50%. Those all are possible. But now I would argue put on an expected value.

What's the odds of those things happening? Do the math. Because I think you're... Because you said this earlier, and I've asked you this privately, like, are you really concerned about like running? out of money and you're like yeah I really am I'm like really right so you know I think there's

something in there um you know I don't think you should be concerned I do agree bad things happen but you know what you made it work before you could you could do it I've always been like this no true ever you know since I started making money it was always I'm going to save it and you don't know what can happen yeah maybe this is just age right I've got a couple of decades on you um the other thing I would tell you that's really interesting is I've had the luxury of taking some pretty ridiculous travel the last three or four years like six star stuff and when you get on these like we did a river cruise for three weeks in Europe and when you get on these cruises like 98 people the average ticket's like 25 grand a person so 50k a cabin and when you're on these cruises for

three weeks you get to know everybody it's a really small boat and what you really find out is the average age of people on the boat are 80 plus they're all multi-millionaires. A lot of them via real estate, coincidentally enough. But they all have the same regret. They didn't enjoy life. They just kept going and going. And now they're 82. They can get off in Germany for like 45 minutes before they're tired or somebody has to wheel them around in a wheelchair. That's not living, right? Olivia and I, you know, I'm 52. She's just slightly older. And we got off and we had a good old time. Right. So again, once you get to that number,

like I'm not trying to build legacy wealth. I'm not talking to generate generational wealth. Olivia and I, good. Our daughter, good. I'm done. Now, I reserve the right to change my opinion, but yeah, those are eye-opening. Having a conversation with an 80-year-old that's worth $25 million and hear them say they regret it, they regret it. They regret the last 10 years of working.

That's like, wow. Yeah. It's pretty eye-opening. Yeah, in my case, sometimes they don't know if I just really, really, like working, like for me oftentimes, I'd rather work than go on a vacation. Sure. To me, seems more fun. But then in my mind, I'm thinking, do I really enjoy the work itself, or is it feeling

productive? Or is it making more money that I enjoy? I don't know. Or is it just the fact I really enjoy the work that I do, and I would be doing it regardless, and that is just more fun, or is it, that's what I'm used to doing, and I just get in a routine or a habit. Well, let's have Jack knows you better than most. So I think in a vacuum, you do not prefer to work more than you enjoy to do other things.

However, with all of the context, all the surrounding context, for example, when you're not working, you have this just constant like reminder in the back of your brain, I should be doing something. And that makes it so you can't enjoy. Exactly. It makes it so you can't enjoy relaxing and do all that stuff. And when you are working, although sure, you're maybe not like hanging out with a couple of close friends, just talking shop and having a good time or like when we had the Fourth of July pool party and stuff like that.

It's just different. Like I think when you are working, you're thinking, okay, I'm doing good stuff. Like I'm building towards a future. And you also have this entire added context of like scarcity of like,

okay, well, everything can go wrong. Everything that can go wrong will go wrong. And then this is all extremely productive because it will hedge against it. It's just so much stuff. But in a vacuum,

I think you really do enjoy relaxing and hanging out with friends more than working. Could be. Like if you had, we've thought about this more. If you had endless resources, what would you do? And you're like, well, I'd probably keep doing the podcast. Okay, good. On top of that, you say like, oh, like, I want to go, you know, snorkeling and scuba going and doing

all these cool traveling things. So obviously, if you just take it to the nth degree, you do want to take it easy. It's just that you still want to build towards something, you know, and then you got a question, why are you building and how much is enough? Yeah, that's true. Yeah. So I'll ask the question this way. This is, this is, I asked myself after retirement, having that depression, what I wanted to do. Like, when you, when you, when you, when you, when you, fast forward five years, what would have happened both personally and professionally for you to deem those five years successful? So right now it's 2029. Yeah. And we five years have gone by. What do you think happened both personally and professional? I'll ask you both this. It'd be

great to hear both personally and professionally. We'll do personal first. Personal. I probably five, five years you and I probably want to have a child. Okay. Five years from now. So that's probably a person. And then travel is a big thing, where I really wanted to travel. So we're talking once a year? What are we talking? I think it's just the quality of the trip.

Because we travel a lot for the podcast, but it's mostly throughout the United States. I would say just visiting the rest of the world. Which is a lot of that I have not seen, so I'd love to experience that. So that, like, personally, I think seeing the world would be really interesting. Professionally, though, I don't, that's, I don't know.

I would like to feel like I'm doing something different. working towards something I haven't already done where it's YouTube it kind of feels like I've done it I've said everything I need to say there's not much more to contribute so I feel kind of like

you know you're up against the ceiling at that point that's interesting the poca perhaps or something else that you know I could get good at okay how about you I would say personally I would love to be with a woman

that I will be with for the rest of my life that is not married in five years because you know maybe a couple years in a relationship I would have liked to have traveled a pretty good amount, and I would say feeling comfortable with the financial cushion. I feel comfortable right now, but definitely not like, you know, comfortable. Gotcha. So I'm happy where I'm at, but I don't feel like I can, like, I definitely know 100,000 percent. I need to keep working.

Like a lot. But I want to, in five years, I would like to think that pressure was all. Yeah, at least like if I continue doing the podcast in five years, that I would be able to increase the expenses to not have such a large profit margin so then I can reduce kind of my active, you know, efforts into the podcast and start focusing on other things. And I would say I would be very happy with myself if I did that. There you go. Because I think when you ask yourself that question, it's sometimes when you really, and I had to do this quietly, right?

Because that's just how I am. I got to go, go away, get quiet and ask me that. But it really helps orient what should be priorities today, right? When you really step back, both of you have said, if that's what you want in five years, well, are you doing said things to work to those today? and only you could answer those. But that's why that question is always fun to ask folks.

How do you start spending more money? When did that start? Oh, is that nerve-wracking? It wasn't nerve-wracking. We didn't actually start enjoying any of the money until after I retired. Well, I guess I'll step back. So I retire in 18. Olivia retired in 15.

The first thing we did is we redid the house. So we'd been in this house since 1999. It had zero upgrades. Still had the white subway tiles, all of that. So the first thing we did because Olivia was going to be home is we upgraded every surface of the house. Paints, flooring, kitchen cabinets. We put in, you know, thermidor or this, that. You know, we dropped, I don't know, 120 grand or whatever.

So that was the first year. Then I got my dream car, which is, you know, I had a company car. So we only had one family car and then I had a company car for when I did work. I got my dream car, which is an everyday driver. I now have 104,000 miles on my dream car. It's a Mercedes-Benz, SL 550, two-door, twin turbo, hard. top, you know, convertible. White, it was my dream car, so I got that.

I got it used. I didn't buy it now. Then we started taking trips. We've done one trip a year, sometimes two. Last year we did a month in Asia and three weeks in Europe. Because that's our thing. And then the last thing we do is our vice and part of the, like, I think it's $3,000.

It might be $3,500 of our 12-month budget or $12 grand budget is food. We eat out almost every day, sometimes twice a day. Fancy places. Oh, 100 bucks. Very, yeah, easy. Yeah, easy stuff. So we enjoy food. That's our thing.

That's Olivia's a foodie. We love Vegas because we can go to lots of new places. We don't drink alcohol, so it's just the food and water. But yeah, we're not, we don't look at the prices. So that's our vice. That's where probably a bigger chunk of money goes than most people expect. What purchase gives you the most enjoyment? Trips.

I really, when I go on trips, I like to what I guess I call it people watching. So I traveled a lot for work. I've been to over 100 countries, done a million miles, almost a million miles in the air, but I didn't really get to see them, right? Airport, freeway, hotel, client, you know, in reverse.

But I love just sitting at a table and just watching for three hours. Because one of the things you get to realize is we're all basically the same. Our skin colors are different. We speak different languages, but we all want better for our kids. We all generally want to be, you know,

we all generally want good things. And I just like watching people. That's really fun for me. So you've been to over 100 countries. Which country is your favorite? So the funnest one, the vacation is Greece. It's every little island is different. Mekanos Road, Santorini, you know, all of those.

That was our funnest vacation because every day was different. This is on a cruise ship. I like Japan. Japan is a lot of fun. My wife's from Taiwan, so she'll slap me if I don't say Taiwan. Europe. What do I like in Europe? I thought Barcelona was a lot of fun in Europe. South America, Chile. Chile was a winner. Santiago, Chile was awesome. Australia was great. But if I were to pick my, I think Chile was, Santiago Chile was, I was shocked at how much fun I had there. That was a great place. You've traveled to over a hundred countries. What's the worst country you've been to? Russia. Really? We went to St. Petersburg, Russia. Everybody there was. was miserable. Again, I like to people watch. They were miserable. We went to the Nutcracker ball and they fed us and I got deathly sick. How could you tell people were upset? They didn't

smile. But it could just be like, you know, part of their culture, you know what I mean? If you're in the metro in Japan, you're not supposed to like make eye contact, you know, so there's kind of little nuances. No, but if you're, like if you're in a foreign country, now they may not smile at you because you're a dirty American. But they'll also be smiling to their friends and all of this. Russia is communist. And when we were there,

we were there 48 hours, so maybe it's a small sample size. But by far, the people were just unhappy. When was this? So when did we do that? And what time of year? Was this like the winter time?

No, this was, so it would have been summer. It would have been summer. It's the Baltic Sea cruise. It would have been the summer, probably September, August or September. Okay, because Tucker Carlson

recently went to Russia and he came back with, I saw that. Raving reviews. Like, he was like, it's so clean. The architecture is amazing. The food prices, grocery prices. Like, everything is reasonable.

Yeah, I saw that. I didn't go. I've been there. And he talked about grocery stores and all of that. What do you think about the grocery stores? I mean, you probably didn't see it. We didn't see one. I can't comment.

But, and again, this is, in fairness, this is nine years apart. So maybe something is transpired over the last nine years. That makes it different. Again, it's almost a decade, right? But, yeah, it was, Russia by far was the most. I remember leaving that going, I'm glad I'm leaving. What are things about being financially free that you did not predict you would experience? Financially free that I did not expect.

Like, I'll speak in terms of myself, although not even close to being financially free. Like, I always imagine that when I started earning more money and I had more money that I would start buying luxurious things. And that wasn't really the case. I did buy like a nice car like I bought a Tesla, but that didn't provide me with like crazy a crazy amount of happiness. I was really happy for a short period of time. And obviously, I love the car and I enjoy the car

and I'm glad I did it. But I wouldn't say that euphoria lasted forever, obviously. The thing that really provides me with a lot of joy is not worrying about smaller expenses and being able to pay for comfort. So, for example, if I'm going to Chipotle, comfortably adding the guacamole, comfortably asking for double protein.

Oh, I still don't do any of that. Stuff like that. Like, not worrying about if I'm at the airport and I don't want to bother one of my housemates for a ride. I'll just call an Uber. It's fine. It's like 20-some bucks. that's the type of stuff where I feel like really, really good about. And I didn't predict that. I thought it would be buying fancy things. Yeah. I guess thank you for that. It gives me a lot of clarity. So lucky enough for me, I've been in that space for a long time where we don't look at prices on this or that. I guess today it's helping somebody else out. There's a lot of people that need help these days. And to hide the financial wherewithal where you could write hundreds or you can hand hundreds or thousands or sometimes tens of thousands to someone on your discretion.

is and do it and do it, um, voluntarily and, and most of the time without our name attached to it is, um, that's a very good feeling. Because I grew up dirt poor. We were going to lose our house. We were going to move across the country. So I know sometimes people get in bad spaces. So we have helped multiple families. We've helped multiple people. Um, some of them we don't even know. We just got their story and, and, you know, we stepped up and, you know, I remember there's a story of a, a guy in Fresno, whose brother passed away, and it was going to cost something like $5,300 for the funeral. And they were trying to do a go-fund me.

And we just gave the $5,300 and said, you know, go take care of him and stop worrying about money. You know, things like that we've done. And that's a pretty cool feeling. What's something you think more people should be doing, but they're not? Living below their means. The key to getting wealthy is you have to create, discretionary income. You have to create these little stacks, what I call seeds, and over time,

those seeds get planted, and then those plants start to grow. And if you could do that for a decade, the chances of getting wealthy is it's mathematically almost certain. But if you don't do this, I can't help you. And what about purchases that most people should make that would improve the quality of their life or business? Purchases that would increase. Smart switches. Smart switches. It's such good value. Yeah, I don't even know if that is, smart switches. YouTube premium.

Oh, YouTube Premium. There you go. Subscribing to this channel is free. Yeah, there you go. Subscribe to... Getting Oracle. Yeah, go work on Oracle. I think most people need to invest in themselves.

You know, Warren Buffett, I think has a saying that says that's the best return you can have. I think we rely on stuff too often. It's always the next gadget, the next widget, the next iPhone, the next this, the next that. Most of you all just need to do less of that. The other thing I would tell you to do is you can go on vacation for free. You can go in your backyard. You can take trips. You can do all these things. I think we just naturally want to spend money on stuff. And certainly if you're in grind mode that season two, stop it. Do that when you're in season three, when you're a little bit older. If you were to go back in time, let's just say you are 20 years old, except it's the year of 2024.

What would you do? First thing I would do is house hack a fourplex. That's my biggest financial report. And how would you get the financial cushion to be able to do something like that? So when I was doing it 20 years old is I had three jobs. I had a full-time job. So you would go and start working three jobs right now, probably what, presumably 16 hours a day? So I would either get three jobs or one of those would be a side hustle because, again, when I was 20 the first time we didn't have this stuff. So I had a job at Sears.

I had a job here. I had a job there. I would do everything I can to make as much money as I can so I could save and buy a fourplex. And I would, like Alex Ramosey, go to Goodwill, don't eat out, don't go to parties. just grind, you know, sleep, work, sleep, work, save, buy a fourplex. Buy a fourplex. And what if you live in a more expensive city? Buy a fourplex. In the expensive city. I don't. Buy a, move if you can't. Right. You're 20 years old. If you have to move, get away from

family or friends. But again, I think buying a fourplex three and a half down, even in LA, a million bucks, what's three and a half percent? Thirty-five grand? You know, hopefully you're making more income. But the answer if I was 20, unequivocally, one of my biggest financial regrets, I didn't house hack a fourplex. It's going to be the, it's going to be thing I always say. How do you like Vegas? I love Vegas. We came to Vegas for the food and the food is not disappointed. Although I will tell you, the fifth day over 115 kind of sucks. It's been really hot the last five days. Funny, I don't even notice it. He doesn't go outside. I don't go outside. It's a fifth day over 115. I had no clue. I had no idea. Good for you. I only go out at night

and when I open the door at night, it just feels like, you know, 95. I just, all right, that's fine. I don't, I don't even notice. Well, good for you. Yeah, I got so many texts recently. I'm like, are you doing okay with the heat? I'm like, I guess so. The house is 72. Yeah, it's 72 as far as I'm aware.

I have no idea. Yeah. Cool. Thank you. Thank you so much for coming on, Michael. Thank you guys for listening. Hopefully, after this podcast, we have inspired you to get a nice deal in real estate. Only great deals.

Only great deals. And we'll list to your info down below in the description, including the book, if anyone's interested. Thank you, sir. With that said, you guys, thank you so much for watching. Until next time.