Month: October 2022

The Canada Mortgage and Housing Corporation (CMHC) has stepped up with $2.35 million for a pilot in Simcoe County that could set the stage for an Ontario-wide digital development approvals process.

The Residential Construction Council of Ontario (RESCON), along with AECO Innovation Lab and organizations in the One Ontario coalition are excited about the venture. It’s something that RESCON has been working on for the better part of eight years to help speed up residential development.

The CMHC funds will be used to implement a centralized, one-window digital platform to modernize the residential development approvals process in Simcoe County and move forward with a technology solution to streamline pre-construction processes and help get housing built faster.

AECO collaborated and partnered with regulatory organizations, the county, municipalities, conservation authorities, key agencies, and others to develop a blueprint to implement the platform.

A strategy has been developed that will remove barriers, eliminate data silos, and ensure applications can be processed more quickly to improve housing affordability in the region.

The venture will include a data exchange platform to enable the transfer of information between groups, application tracking to support applicants and inform policy decisions, and a workflow engine to develop a seamless process that will improve efficiency, reduce errors and lead to better communication on files between municipalities, Indigenous communities, and others.

Presently, up to 45 agencies and groups outside a municipality may be involved in reviewing, commenting on, or approving an application.

Processes for residential projects are presently lengthy and complex which results in increased costs that lead to higher housing prices, lower supply, and fewer affordable housing units. For example, a 125-unit high-rise incurs $276,000 in extra costs due to loan-carrying charges, increased municipal charges, and inflation for every month of delay, while a 125-home low-rise development incurs $456,000.

A more efficient system will reduce those costs. Plus, it will result in municipalities receiving property taxes and fees from projects earlier. The additional revenues can be spent on initiatives such as creating inclusive places within communities or supporting more affordable housing projects.

Streamlining communications will make the process easier for all parties and provide certainty for developers. Presently, every municipality has different requirements for development applications.

A regional development application manager will be used for the county’s workflows, document control, drawing reviews, and tracking the applications better.

Simcoe County is perfect for the pilot as the region has a mix of urban, rural, and Indigenous perspectives. It is also becoming a hub for innovation and cutting-edge technology related to housing. Plans are in the works in Innisfil for The Orbit, a next-generation, master-planned, transit-oriented community focused on sustainability. The smart city, to be built near Sixth Line and 20th Sideroad, south of Alcona, is designed to provide 150,000 residents with everything they need.

The pilot project is therefore a good fit for Simcoe County. We are hopeful that the province will see the value of the initiative as Ontario must be at the table if it is to be rolled out across the province.

Other jurisdictions around the world have effectively streamlined their development application and approvals systems, so there is significant international precedent and best practices that can be adopted. 

There is still a lot of work to do and solving the housing crisis requires an all-hands-on-deck approach. However, with the Simcoe County pilot, we are confident that we are heading in the right direction.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at [email protected]  

Ashley:
This is Real Estate Rookie episode 229’er.

Ryan:
I preferred the method of not being an imposter syndrome, but just telling people, “Hey, I’m looking for property. I’ve had property in the past, just primary residents that I ended up selling. I didn’t know about house hacking or really major flips.” And then when I met the guy that I bought the duplex from, I just jumped right in at him. I figured I was nervous. I was waking up at 3:00 AM sweaty and like, “I’m going to screw it up,” because there’s something I had to have missed, right? And I just keep kind of researching and then realizing that once you get in it, you just learn so much.

Ashley:
My name is Ashley Kehr and I am here with my co-host, Tony Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. We oftentimes like to start the show with a quick shout out to folks in the rookie community who have left an honest rating and review for us on Apple or whatever podcast platform you’re listening to.
Today’s review comes from BraveSmith28. Brave Smith says, “This podcast has been constantly pushing me in my real estate investing career. Listening to this podcast has gotten me to think about different strategies. I’ve bought three single family houses since listening to this podcast. I’m about to do my first short term rental. I wouldn’t have thought about it without this and the other BiggerPockets Podcast. The tips and tricks are easy to follow with whatever strategy you use.”
BraveSmith28, congratulations to you on the success. We appreciate you giving us a shout out. And if you haven’t yet, please do leave us a five star rating and review on Apple Podcast, whatever platform it is you’re listening to.

Ashley:
Tony, what’s new? How’s California? I bet the weather’s great because it’s pouring rain here.

Tony:
It’s actually blistering hot today. There’s like a massive heat wave warning this weekend, supposed to get into the triple digits. But outside of that, not too bad. But actually before we hopped on, I was a little late hopping on this morning because we were negotiating with a seller for a motel in Utah. So we’re hopefully getting close to maybe getting a signed LOI on that property. We still have the Big Bear deal that we’re working on so there’s a high possibility we end up having two hotels under contract at the same time, which I guess isn’t a bad situation to be in. We just have to figure out which one makes the most sense. But we’re moving. It’s progress.

Ashley:
That’s exciting. That’s awesome. I knew you went to Utah a couple weeks ago, but I didn’t realize that was to look at a property, so that’s awesome.

Tony:
Yeah, it was super last minute. We’ve been going back and forth with the seller and then we got pretty close on terms to like, “Hey, the seller’s actually going to be at the property if you’re willing.” So I actually ended up driving up there. I was trying to fly but there were no direct flights and I would’ve had to have landed in some other part of Utah and still drive an hour and a half from the airport to the hotel. It was only a six hour drive from my house, I was like, “Ah, whatever. I’ll hop my car and I’ll drive.” So it was a little road trip up to Utah.

Ashley:
Nice.

Tony:
Yeah. What about you Ash? What’s new?

Ashley:
Not much. Finishing up our A-Frame, started to refinance on that to pull our money back out this week. So it’s always good to get money back. It’s exciting to wait for the appraisal to see what the appraisal says. Our attorney says we should be closing on our lake house in 10 days or so, so that’s awesome except for that lake season is coming to an end so we can’t really enjoy it, but-

Tony:
It’ll build the anticipation for next year.

Ashley:
Yeah, the downfalls of trying to close in New York state, it takes forever, so yeah. But we have a couple closings. Campground we have under contract, we have the signed LOI on it. But now that we’re actually putting the contract together with our attorneys, the seller’s trying to change some things.
One thing that he has all of a sudden decided that he wants is he wants 10 years of timber and mineral and oil rights to the property. So there is a lot of timber on this property that’s valuable. New York State also offers kind of a tax incentive. If you sign up for their 10 year forestry program, they will actually come in and slowly harvest the timber over 10 years. So it’s not just you’re going in, you’re killing the forest all at once, you do it throughout time. And that actually helps the forest grow because you’re getting rid of trees that need to be cut down. You’re opening up where it’s not so much coverage. I don’t know the technical terms of it or whatever.
So sunlight gets in and more trees can grow, something like that. So you get a big tax savings on your property taxes if you do this, where if we give him the timber rights, he could just go in the first year and slash all the trees and we don’t have those rights to get the tax credit anymore. So that’s something we went back and said no, we’re not even considering willing to budge on that especially with it being a campground too. We just don’t want him to be able to come in at any time and just start cutting down trees.

Tony:
It’s crazy how every market is so nuanced. If I were negotiating with the seller and they asked me for timber rights, I would have to figure out what that meant. I know minimal rights, but I’ve never heard of timber rights before so that’s interesting.

Ashley:
Yeah. You know what I was thinking about too the other day is you didn’t know what a well was for the water.

Tony:
Yeah.

Ashley:
Yeah. And it’s just because it’s not common in your area and Daryl is actually working on getting a new well or getting one rehabbed on one of the properties, I was thinking like, “We should actually do a video on this for…” And I was like, “Well, what would people care?” And I’m like, “Well, there’s actually probably other people that don’t know what a well is and kind of [inaudible 00:05:42]-

Tony:
I would love to see that.

Ashley:
… what goes into it.

Tony:
And if you can let me know… I’m still nervous. We have a property that’s own a well, we bought one last year in Tennessee. I’m just still so curious what happens when the water runs out. What am I going to do? But they keep saying that it’s not going to happen, so I don’t know. We’ll see.

Ashley:
You know what? That actually has happened on this property, is the well water is so low.

Tony:
No way.

Ashley:
That actually happened at my house, like my primary residence. When we built our house, we ended up just tapping into the well. There’s two other houses on our property and we just tapped into one of those wells. Last winter, the well actually ran off water because there was more people living in the other household and it just like we weren’t getting enough water to keep up with the water usage in both. So as soon as spring came, we actually put our own well in now.
But learning about the wells with this other property we have and Daryl kind of dealing with that is there’s not enough water in there to pump up to the one house that’s up on a hill, so we’re going to try and rehab it. The people think that there’s actually some kind of blockage in there. He said, “Yes, it’s very hard for a well to actually go completely dry, but there could be issues in it that it’s just more cost effective to actually put in a new well than to rehab this one.” So as of right now, we’re going to spend $2,000, we’re going to have them attempt to rehab it and see if that fits the issue. And then if not, then we’re going to go into doing a new well.

Tony:
We got to do a well episode. If for no reason other than my own interest and curiosity, we got to do an episode on well water.

Ashley:
Okay, well we’re going to have to have Daryl do that because he knows way more than me.

Tony:
Well, we’ll have all of five listeners for that episode.

Ashley:
Yeah. Well, maybe we’ll do well and septic together.

Tony:
There you go. There you go.

Ashley:
Well today anyways, we actually have a friend of mine as the guest on the episode and we’re doing it in person. So Ryan joined me at my house to record this podcast. His name is Ryan John. We are actually childhood friends, and just say we actually weren’t super close for probably since high school even, but I started riding a motorcycle and knew he rode a motorcycle. So last summer we rode motorcycles a couple times and we started talking about real estate investing, and here we are today where Ryan is now a real estate investor.

Tony:
Man, I’m super excited for this episode, not only because Ryan shares a tremendous amount of embarrassing memories about Ashley as a child, but he also has a fantastic story as a real estate investor. One of my favorite parts of this episode is where he talks about how he recently went to his first real estate meetup and how the very next day a big massive change occurred in his life as a result of that meetup. So make sure you guys listen towards the end because he shares kind of how that experience changed his life.

Ashley:
I thought you were going to say he talks about his first all-girls sleepover he went to [inaudible 00:08:41].

Tony:
That as well. It also changed his life. It probably just as equally changed his life.

Ashley:
Well Ryan, welcome to the Real Estate Rookie Podcast. Let’s start off with you telling everyone a little bit about yourself and how you got started in real estate.

Ryan:
Yeah, my name’s Ryan John. I’m let’s say a year and a half into the real estate game. I started by nagging Ashley with questions I could have answered off of Google and then she sent me some books and then I continued to dive from there.

Ashley:
So before we go any further, what does your portfolio look like today?

Ryan:
A whopping two units. I house hack a primary residence that I’m currently living in with my girlfriend. And then I have a duplex that originally was an in-law suite that I finished the conversion on that’s rented right now.

Ashley:
Well Ryan, we are very happy to have you on today and dive into your story. I know you said a whopping, sarcastically only, those units, but that is great and that’s part of the reason we wanted to have you on, is because it’s so fresh in your mind as to how you got started in real estate. So why don’t we kind of talk about why you even considered real estate investing. What made you reach out to me? What was the first thing?

Tony:
And Ryan, if we can, before you answer that, just also give us some backstory on how you know Ashley and how she was as a child and any other embarrassing stories you can share that we can use as leverage for future podcasts.

Ryan:
I had my first all girl sleepover in fifth grade with all her and her friends, so that was fun. Basically with the property that I got, it started off just asking people for help, like Ashley. And then I had other friends in the industry too so I was kind of always intrigued by it. And then to be honest, seeing her on the boat having fun, I know it’s not all fun all the time, but I was intrigued. I was like, “Okay, maybe the 9:00 to 5:00 isn’t for me,” so I just wanted to dive in and get dirty and start learning.

Ashley:
So once you started learning about it, how long until you actually did your first deal? You said you’re house hacking your primary residence. Did you start doing that right away or did you get your duplex first? What did that look like?

Ryan:
I moved into the primary first. I wasn’t house hacking it at the time. Probably a month or two ago I actually just started house hacking it with my girlfriend. And then the duplex, it was a year or so of just reading podcast, avoiding the shiny object, I was just like, “Oh maybe I’ll do this. Ooh wait, let’s do this. Oh wow, that sounds fun.” And then I believe it was the lapse thing where you narrow down what you want to pick and I did that. I figured small mal multi-family is going to bring a little bit more income than just a single family. I wanted to take a little bit more of a risk. So that’s when I decided to go that route.

Ashley:
Okay. So once you made that decision, how did you take action? There’s lots of people probably listening now that want to get into real estate. So what are some tips or advice you can give them so that they actually go out and get a deal?

Ryan:
I preferred the method of not being an imposter syndrome, but just telling people, “Hey, I’m looking for property. I’ve had property in the past, just primary residents that I ended up selling. I didn’t know about house hacking or really major flips.” So I just put it out there. And then through meeting a lot of people at my old job, the deal… I got denied on a lot of offers. I only put five or 10 in so not really a lot, and then just kept hammering down and meeting people. And then when I met the guy that I bought the duplex from, I just jumped right in at him. I figured I was nervous, I was waking up at 3:00 AM sweaty and like, “I’m going to screw it up,” because there’s something I had to have missed, right? And I just keep kind of researching and then realizing that once you get in it, you just learn so much.

Tony:
Ryan, I just want to follow up with that because I’m glad you mentioned that fear and waking up in the middle of the night. I think so many rookies that are listening have that same fear around getting started. At what point did you realize that you were ready to actually submit that first offer? Do you remember that moment? What switch went off in your mind to say, “Okay, today’s the day. Here’s the property I’m going to put this offer in”?

Ryan:
Well, it really started fast because basically I was at my old job and the guy walked in the building and talk to the owner of the business and he said, “Hey Russ,” the guy’s name was Russ, he’s like, “Can you sell my house for me?” And I was like, “Boom.”

Ashley:
That’s where the ears perk up.

Ryan:
Yeah, I barged right in the conversation. I’m like-

Tony:
Do you work at a real estate brokerage? Or why [inaudible 00:13:49]?

Ryan:
No, I used to be an insurance appraiser so I would go out basically when you screwed up and tell you how bad you screwed up when you crashed your car. I was able to meet a lot of people through that, which I’m glad about that. But basically, the guy, he said, “Yeah, it’s right in Boston.” I live in Colden, Glenwood and kind of in Ashley’s market too, so it’s right down the road, it was 15 minutes away. And he goes, “I’m going there now.” The driveway’s not plowed. I’m wearing sneakers, two feet of snow, I’m like, “Okay, I don’t care. Let’s plug through there.”
Walk through. I’m not a home inspector, I’m literally a rookie with all this. I just kind of used my sense of judgment. The market was hot and I thought the price was reasonable. He denied a few offers that were a little bit lower than what he was asking. So I just walked around for 30 minutes and shook his hand and then called everyone after and was like, “Can you look at this and make sure I didn’t pay too much or it’s going to fall over?” stuff like that. So I just kind of dove in with it.

Ashley:
Did you give him what he was asking for it? What did you pay for it?

Ryan:
Yes, this was before I read the Chris Voss negotiation book. I was a professional negotiator at my old job, but I was kind of so excited to get going. He turned down a lot of offers. I just gave him his asking price, it was 185,000. I shot at 175,000 and he just shook his head and I just figured, “Why go back and forth? He’s pretty set on his price. The market was fair.” Long story short, with some of that stuff, the appraiser came back higher than my bid.

Tony:
What was it about this property, Ryan, that like… Because you said you had been studying for a year, give or take, leading up to that point. What was different about this property, this opportunity as opposed to all the other properties you had seen before that moment?

Ryan:
I like off market stuff. My first home was off market. The primary one I’m living in now, that house hacking was off market. And so was this. I just like the thing of not having to go through a realtor and being in control of doing all that myself because I was a little bit familiar with it and had a lawyer. And then the main thing was the fact that I walked downstairs and it had everything to be a full apartment besides a stove and a gas line for a stove. It was just an in-law basically right there and it just needed that little extra. I don’t think… Maybe other people didn’t see that when they looked at it, but to me that kind of stood out.

Ashley:
Let’s go through that process of buying an off market property. So you’ve done that what? Three times now?

Ryan:
Yes.

Ashley:
Okay. So what does that look like? Can you kind of walk somebody through who’s maybe never bought a property before or only used an agent what that process looks like?

Ryan:
Yeah, basically the first one is going to be the sweaty syndrome a lot. You’re going to be all nervous and, “Oh, did I not fill out that form?” or something like that. But basically, I just called friends and family and just asked for a lawyer who specializes in doing real estate transactions, I did that. And then basically just be married to the bank for the next three months when they call and say, “Hey, I need this form. Hey, I need this.” Just a little bit more legwork that I think maybe would scare someone off. I mean, it is easier to do a realtor. I sold my house with a realtor. It was a breeze. But just a little bit more legwork when you don’t have a realtor.

Ashley:
What tips do you have for somebody who’s looking for off market deals besides just being in the perfect place in the perfect time when you hear somebody talking about it and eaves dropping? But what are some other ways that people can find off market deals? How did you find your other ones?

Ryan:
The old school drive for dollars sort of thing. At my old job, I did a lot of [inaudible 00:17:49] at the time as my boss used to call it. I just drove all around Western New York, I mean roads that I didn’t even know existed, literally stuff that was dirt road, not even on Google Maps yet probably. I didn’t really know about all this stuff yet, so I would kind of take pictures and then jot down every bad address that I saw.
But I recently just did one too. It was down the road. I sent a letter. I didn’t act fast enough. They emailed me back and they’re like, “Oh it’s already listed.” But just doing the homework that not a lot of people want to do. Maybe go to the town halls, kind of get familiar with the code enforcement, maybe trouble properties because I’m starting off and I just don’t have that big bank yet so that’s the way I choose to look at it.

Tony:
One follow up question and then I want to talk a little bit about the small multifamily piece, but you said driving for dollars. First, can you explain what that is for folks who aren’t familiar with that term? And then second, once you found properties that you liked, what was your process from there? What was the next step?

Ryan:
Yeah, basically I took the advice from your guys’ podcast too actually. But just looking for stuff that’s like overgrown, there’s not a lot of cars in the parking lot, maybe the roof lines bad, like it just looks like it’s just been left to die essentially. Obviously you want a turnkey, like get right in there and get rent, but there’s a lot of meat left on the bone normally if you can get the right price. And then this is, honestly, I want to get better at this because I’m still kind of struggling with this part, but is tracking down the owners. I know there’s a lot of tools online and stuff, but sometimes they’ve passed away or there’s no will and stuff like that.

Tony:
But say you do find that person, what do you do when you find that person?

Ryan:
So the recent letter, full transparency, I’ve done two letters at all because there’s market that a lot of the houses just sell really fast, so the drive for dollars might not work all the time. But my girlfriend has wonderful handwriting, I don’t. So I printed up a sheet with my information on the bottom typed because I didn’t want to blow smoke or anything like, “I’m new to the game but I wanted to be a little professional with everything.” And then just a nice handwritten short message just to show that I’m not kind of one of these computer generated lists that just send out thousands of things every day. So once it works, I’d love to come back on here and explain how well it went. But so far I’m striking out but that’s part of the game.

Ashley:
What’s her cut, her percentage if you end up getting a deal from one of her handwritten letters?

Tony:
That’s a great question.

Ryan:
I can’t get her on the pay. Well, I don’t like the word can’t right away, but right now I’m not set up to put her on the payroll. So basically, I took my tax return, I bought myself some gold and then I gave her my old gold bracelet to get her…

Ashley:
She gets the old gold, you get the new gold.

Ryan:
… and the asset. I wanted her to get the asset trading and buying commodities that are valuable instead of clothes and stuff. I said I wasn’t going to talk about her too much in this, but oops.

Ashley:
Like my Gold Mike, hot commodity.

Tony:
There you go.

Ryan:
Yes. See, I love the Gold Mike. I was like, “We can get along with this.”

Tony:
Ryan, I want to ask a little bit about the small multifamily piece. A lot of new investors when they first think of investing in real estate, they think single family house, long term tenant, buy a property, manage it, do your thing. You went the small multifamily route. What was it about that asset class that intrigued you more than going the traditional single family route?

Ryan:
Honestly, probably listening to the BiggerPockets stuff I heard a lot of people starting off because it’s safer in the single family, but I’ve also heard the returns were a little bit less so I was just kind of under the impression, “Well, if I get a duplex and let’s say one of the tenants is bad or I can’t book it, at least I have some cash coming in to cover the rent or the mortgage costs and everything like that.” So kind of to mitigate a little bit of the risk with it. It’s weird though, with mine, it’s a duplex but I only have one tenant so technically it is a single family. He has a large family, he ended up taking the whole unit himself

Tony:
Really?

Ryan:
Yeah, it’s kind of a weird thing. He was striking out. A local real estate agent reached out because he works at a local plant down here and they ship in a lot of workers from out of state. He was in an Airbnb for two months, he was bleeding out from that. So he was thrilled that there was an option for him to get in. Honestly, I’m pretty happy about that too because he seems like a great tenant and I’m not negotiating between noise complaints or anything like that being that it is a new duplex and everything like that.

Tony:
It’d be really weird if he was complaining about noise, you know?

Ryan:
It’s just like, “The kids out.” Kick the kids.”

Tony:
Like, “Dude, can you…”

Ashley:
“My kid’s in the lower unit,” right? But to touch on like that, how you said if one tenant isn’t paying rent, then you know have the other tenant. And it’s kind of like that security, at least there’s some income coming in from other units. You have more units under one roof, there’s less overhead per unit. And so if you had 10 in a complex, that was 10 units under one roof. Compared to 10 single family homes, there maybe cost differences there because they’re all under one roof. But you do have that side of tenant complaints then, people living wall to wall to each other that there will be disputes over different things that you have to be the one that they think is the mom in the situation and take care of it, which it’s not always the case. You’re adults, you could take care of yourself and figure it out.
But my biggest complaint about that is the tenants that they don’t even talk to their neighbor first. Sometimes that’s all it takes, is for them to say to the neighbor like, “Hey, just so you know, I can hear you screaming at night” or something like that in a way nicer way. But that was the thing I always did. We’ll have you talk to the other tenant first and talk to them about it and they would be like, “Well, no.” And that would always be the first step, is to take that from there.

Ryan:
I like that.

Ashley:
Yeah. But Daryl and I went to a property today too, which reminded me of the point that you made. The more units under one roof was, there was an eviction there, the tenant hasn’t paid since June and so the eviction’s been done and it’s time to get rid of her content. So we went in. I mean, there’s just stuff everywhere and just the garbage removal’s going to be $1,100. We have to repaint, we have to put new flooring in the two bedrooms, just all these costs and we’re just thinking like, “Wow, this was a single family home. This would’ve taken away your whole cash flow for the year. Maybe even more and you would’ve broke even.” But since there’s other units on this, then it’s not going to hurt the property as much, this one unit out of 40 not making any income this year. I mean, it’s still obviously sucks, but that idea of having more units under one roof.

Tony:
That’s it. That’s such a good point, Ashley. I think the only thing I would add to that is that for those of you that are listening, what’s most important is that you just get started. If you buy a single family, you buy a small multifamily, you buy a mobile home park, you buy an Airbnb, whatever it is, I think you just get started.
This is what I like about your story, Ryan, is that you educated yourself, but as soon as you saw that opportunity, you’re like, “I’m not letting this pass me by. Maybe I’m ready, maybe I’m not, but I’m going to figure it out.” And it was that one decision that’s led you to the success you’ve had so far. So for all of you that are listening, try not to get too caught up on which path, which model, which asset, which this, which that. Just make the decision and get started because eventually you’ll learn the lessons you need to learn to make it a successful thing for you.

Ashley:
There’s so many pros and cons either way you go. I mean, it’s like not one way, it’s multifamily, lots of units is the perfect way. It’s not. There’s tons of advantages to having single family too.

Tony:
Even me, right? I’ve made a name for myself in the Airbnb space. And even so I’m like, “Man, should I be buying self storage right now?” I have those questions with myself all the time. So it’s like whatever asset class you’re in, the grass always I think feels greener or seems greener on the other side.

Ashley:
Well Ryan, do you want to talk us through the numbers on one of your deals? You want to go through the duplex?

Ryan:
Yeah, I’ll go through the duplex.

Ashley:
Okay, I’m just going to rapid fire questions at you and then you can tell us more of the story of once you closed on it, what has kind of happened. So what was the purchase price?

Ryan:
Purchase price, like I said earlier, 185,000.

Ashley:
Okay. And how did you finance this?

Ryan:
Just a traditional finance through a local Nickel City Funding in Buffalo.

Ashley:
So like a 30-year fixed rate?

Ryan:
30-year fixed. Yep.

Ashley:
What was your interest rate on that?

Ryan:
My interest rate was very nice. It’s 3… That’s another reason why-

Ashley:
Okay, you already said three, and yeah we’re all like, “Yep, that’s good.”

Ryan:
We’ll go quick to my primary residence, that was 2.62 which wow, I love that.

Tony:
Wow.

Ashley:
Wow.

Ryan:
The iron was hot, I wanted to strike again. I got 3.36 something like that. So yeah-

Ashley:
Yeah, that’s awesome.

Ryan:
… just that alone was huge for me to get the loan.

Ashley:
Okay. And then would you do just 20% down on the property?

Ryan:
I was able to do a 15% just because I got referred through another client that they work with.

Ashley:
Oh cool.

Ryan:
They gave me a little bit of a break, which was nice.

Ashley:
Yeah, that’s awesome. I didn’t even realize that places would do that. That’s cool. So definitely something to ask if a bank will do that and then you go and find one of their clients and get referred and get a discount on your down payment. Okay, so you purchased it from 185,000. How much did you put into the rehab of the property?

Ryan:
This is a true rookie statement because literally I have rough accounting done. I need to sit down and just QuickBooks it out. I’m very good with the receipts because I had to do that with my old job with expenses and everything. So I’m going to ballpark, it was probably 10,000 but I want to say closer to 15 grand. It was just adding appliances, flooring. I just wanted to make it nice to bring in a better tenant.

Ashley:
Did you do a lot of the work yourself or did you hire it out?

Ryan:
Yeah, and I recommend… Halfway through I learned to get off my wallet and just pay professionals because I would say I paid my flooring guy like 700 bucks and next thing you know I’m demoing the basement, drywall and doing all that. I come up and upstairs is done, where before I was banging my head against the wall trying to do everything, work till midnight. I think it’s good to DIY because you learn it, but you got to start treating it like a business even though it’s new, you got to learn to outsource, which is hard for me.

Ashley:
I think too, just the time, at least for me, I know how to install vinyl plank flooring, it’s just going to take me two days longer than paying the professional. So what is my time valued at? Am I actually saving money by doing it myself or is it costing me more because now for three days I’m installing flooring instead of paying a contractor who could get it done in one day and then I’m actually working my regular business in what I do in those two other days and making even more money because I didn’t have to be stuck installing flooring. So looking at that opportunity cost as to what your time value is too I think makes a big difference if you should pay a contractor or not to.

Tony:
Yeah. Can I add just one thing to that? I love what you said. You said get, “Off of my wallet.” I’ve never heard a phrase that way, but it’s such a smart way to do it. Obviously what you said actually is so true. It’s like people want to hold on to the $5 not realizing that they’re costing themselves $10 by doing it themselves. But one caveat I will say is that a lot of times when you’re starting, you maybe can’t afford to hire it out. So when you a rookie, maybe sometimes you do have to realize that, “Okay cool, I am going to invest a lot of time into this, but it’s because I don’t have the funds or the resources to hire it out to somebody else.” So for those of you that are listening, just know if you have the money, definitely spend the money. If you don’t have the money, don’t feel bad about it. You’ll figure it out.

Ryan:
I would say get creative too because I mean every state’s a little bit different with contractor rates and stuff, but I would get ahold of a friend that used to work doing trenches or drainage or general contracting and you say, “Hey, can you come over here? I’ll give you, I don’t know, 25, 30 bucks cash” and they’re like, “Okay cool. Yeah.” I mean it’s going to cost you 75 to 100 to get a licensed contractor, but if you know someone in the game and experience and not that you’re being a boss, but be a good leader/boss, don’t be brutal and beating up your people with work they’re helping you out. So just kind of incentivize them because then I’ve noticed the ones I pay the most, they’ll just come back and help me. They’ll come over for a couple hours and they don’t expect anything. That’s kind of nice. It goes a long way.

Ashley:
I think too when you’re starting out too, it’s great to barter. So if you have a friend that is really good at something, maybe exchange services with them for them to help you too with something. Daryl, he’s had bartered for stuff before and it’s been really great for me. Huge advantage for me. I don’t have to do anything or pay anyone.

Tony:
Wait, can I tell you guys about a time I failed at negotiating? It was the funniest thing. For my 30th birthday, we had a 2000s throwback party and I wanted to dress like I would dress in the early 2000s, so I wanted to get a really big old school basketball jersey. They only sell those at the swap meet by my house, right? So I went to the swap meet. Swap meet’s all these different vendors kind of doing their thing. You can usually like, “$5?””No.””$10?” And you guys go back and forth. So I find this jersey, it’s like a replica of this Michael Jordan jersey and I see it hanging up, I’m like, “Okay cool, this is the one I want.” So I go up to the guy, I’m asking him, I was like, “Hey, this is a nice jersey.” He’s like, “Yeah, it’s a great jersey.” And I was like, “All right, cool man.” I was like, “Look, I really want to buy it but I’ve only got so much money.” I was like, “I’ll give you 40 bucks for it.” He was like, he turned the jersey around. And on the backside of the jersey there was a price tag and it said 40 bucks. So I’ve completely failed at negotiating. Because what can I do at that point? Can I go back and say, “I meant to say 30.” So anyway. Double check the price tags before you start negotiating was the point of that story.

Ashley:
I think another way too to save money with contractors is also if you continue using them. So today, even when we got the estimate from the junk removal company, this is only our second time using them and right off the bat, we didn’t even have to ask, he said, “Usually this job I would say 1,300, but since you guys are a repeat customer and you’ve talked about using us for other work, we’re going to do it for 1,100.” And yeah it can be blown smoke or whatever, but we do appreciate that for sure. And it still was. Our other quote we got was $3,000 so no matter what, we were receiving tons of money going with them and we’ve used them before and they were great. So I think too using those same contractors and sticking with them I think can be super beneficial. If they do do a good job and they do give you good rates, keep using them.

Tony:
That’s a great point, Ashley. Honestly, you can even leverage that before you’ve done work with them. If you can say, “Hey, I’m a real estate investor. I plan to buy X number of houses this year. Every time I buy a house I’m going to hire you to do my trash haul,” that by itself can kind of help give you some leverage to get a discount. So that’s a fantastic point.

Ashley:
And giving the contractor out for referrals. I think a lot of people like to hoard their contractors because they don’t want them to get too busy. But even Ryan has sent me your electrician that you use and other people’s referred me to them and I’m sure they appreciate it as much as I appreciate it. So next time Ryan needs a referral, I’m going to go through and see who I can connect him with. And I think having that and the contractors knowing, “Oh, Ryan has been referring me, I’ve been getting tons of work to him. I want to give him a deal too because of that.”

Tony:
Can I ask one follow up question, Ashley? Are there certain people who you work with that you won’t refer out?

Ashley:
I would say yeah, there’s one person right now that I won’t because I want to really use him for one project and I know that he’s super busy already, but I think everybody else I would. Yeah.

Tony:
Yeah, same. I have our main guy who runs all of our rehabs in JT and I will never give his name out to anybody. But our subs, our electrician, I’ll refer him out. Our countertop guy, I’ll refer him out. Our garage door guy. But our main dude, I’m taking that name to the grave. No one’s going to know who he is.

Ryan:
I got a friend like that too. He was like, “You can call him, but wait six months.”

Tony:
Yeah, that’s how it goes.

Ashley:
Okay. So now that the rehab is done, what is the property renting out for?

Ryan:
I’m going to be a little long winded with this because it is a single family home with an in-law suite, so it would’ve cost a lot of money to get separate meters. So essentially it’s two units. I had 200 per month for utilities. So 400 since he’s taken the whole thing. But 2,400 and then the 400 is included in that. Honestly with our market it’s a little bit high, but the more I talk to people, people are running sides of a duplex so they don’t even have a whole backyard, a whole house themselves, shed, deck, there’s a lot of amenities at this property. They’re 1,900 to 2,200. So I’m right in line with it. I think a good lesson is I bit the bullet and ate the first month’s mortgage because I was looking for a good tenant. I think an extra 100 to $200 isn’t nothing if you have a good tenant and you don’t have issues. I think that’s goes a super long way.

Ashley:
So 2,400 is what you’re getting in total?

Ryan:
Yeah.

Ashley:
Okay. So you say you account 400 to that in utilities, which especially when winter comes, is it gas for heat?

Ryan:
Yeah.

Ashley:
Yeah, so you’ll definitely need [inaudible 00:36:40].

Ryan:
And there is two central layers, you know?

Ashley:
Yeah, so running AC. Okay, yeah, great point. Okay, so what does your cash flow end up being after you pay the utilities and you pay your mortgage payment?

Ryan:
It spreadsheet it out at 700. I’m not taking this money or running to the bank and smiling and laughing, but last month the guy… Actually, when he moved in the, he was helping me seal up all the windows. He go, “Oh this window’s not sealed. If I’m running the AC…” And I’m over here like, “Yeah, it’s like this guy gets it. He’s not going to be just burning stuff up on me.” So I appreciated that and I was hoping it was going to go smooth. And then last month it was 1,017. I mean, well above what I projected, but like I said, I’m not too high on that knowing that the winner is coming and he’s from Texas.

Ashley:
Okay. Ryan, nobody cares. That is amazing, okay? Your first investment property outside of your primary, a thousand dollars cash flow, even $700 cash flow. How much money did you end up putting into it? The 10,000 rehab. And how much was your down payment on it?

Ryan:
There was some I gifted or took a loan out from a family member, but I think all in right now I’m at 32,000 we’ll say.

Tony:
Yeah, I just did the math. That’s a 27% cash-on-cash return.

Ashley:
Tony, I was going to ask you to calculate it and I was so happy you read my mind.

Tony:
Yeah, that’s a 27% cash-on-cash return.

Ashley:
Good. That’s awesome.

Tony:
But dude, that’s amazing.

Ashley:
Yeah.

Ryan:
This is why I want to do my accounting so I can be like, “Oh okay, it’s going okay. Good.” I’m having the numbers in front of me, but…

Ashley:
Didn’t you know we do deal analysis live to let you know the results of [inaudible 00:38:25]? Well that is super cool, Ryan. That’s awesome. Congratulations on that first find. So what’s next for you now? What are you looking for next?

Ryan:
As much as I would love thousand dollars returns each month, I’m looking at just doing more duplexes and conservative even if it is a couple hundred dollars. I know all the deals aren’t going to be a home run deal. But even last night, I looked at, there’s a ski resort by us and there’s a little mobile home. It’s built in ’76. I started learning you can’t do a traditional mortgage on anything older than ’87. But I figured, “Hey, let’s look at it and all that.” But as I’m looking at it, I’m like, “Is this really going to be in line for what I want to do?” Just because there’s a deal out there, I don’t want to jump on it, because if it doesn’t line up with what I’m trying to do, then I’m jumping around doing too much and I’d rather master, let’s say, one asset class and then move away from there.
I mean, I wouldn’t mind getting a campsite with her. We used to camp all the time. I got it all the time in the world to manage something like that now.

Tony:
Can I ask, Ryan? You say you have all the time in the world, what does that mean?

Ryan:
I went to my first ever real estate meetup a month ago. Ashley sent me the link for the local stuff.I just had a really good time, hit it off with everyone. There’s people with no units and then there’s 5,000 units there, so you get a taste of everything. I was talking to a local agent and I’m like, “Yeah, I’m kind of an investor.” And he’s like, “No. No, you are an investor. You tell yourself you’re an investor.” I’m like, “Okay. Yeah. Yeah.” And it helped my self esteem all that. And then the next day I go into work and we had a disagreement and we parted ways.
I’ve been listening to the Quitter Podcast of the BiggerPockets. I was planning on doing that three to five years, but hey, my hand was pushed a little bit sooner. So I’m just trying to take advantage of the time and not feel forced to jump back into the traditional job market.

Ashley:
Well, I think Ryan too is we even talked about this a couple months ago, I think it was, where you’re like, “I really don’t have that much living expenses.” You’ve always lived way below your means. You never made a huge income at this job anyways and you’ve bought a house. You’ve never had a car payment, right? You always had your cars paid off. I think that you had that foundation that you set, your personal finances up like that has put you in a great situation so that when you did leave your job it was okay. You weren’t panicked to go, and you have your duplex money now.
I think that is such a big thing that even if you’re not ready to invest now, start getting your personal finances in order so that when you’re ready to leave your job, you do have that option and you have some time to breathe and figure it out, “Okay, here’s what I’m going to do now.” I think you’ve gotten a lot of people having you do different stuff anyways during this time. I think just the time you’ve been able to put into your investing and the research and everything has been kind of awesome.

Ryan:
That’s an awesome point because that’s why I like hanging out with Ashley and other people in the business because they have just such a cool mindset where if I talk to friends after I left the job, they’re like, “Aren’t you freaking out?” I’m like, “I’m never been this relieved In eight years.” I realized I wasn’t doing stuff that “aligned with me” and what I enjoy. I’m glad you made the point about low expenses because it was always hard on myself, like, “Man, I wish I had 50 grand cash reserve to just do whatever.” But when I went to finance the duplex actually, they’re like, “What did you drive here?””My vehicle. Why?” They’re like, “You’ve never had a loan on a vehicle.” I’m like, “Yeah, I don’t know. I’m like a country boy. I don’t know. I just buy beater trucks and they last me five years and cost me two grand.” So you start doing the math and then you realize how there is a lot of people with a lot more money, but kind of like Ashley saying, if you’re just rolling a bigger ball and you’re buying flashy stuff and you’re buying liabilities, you’re not going to get to the goal you want to be at. You can just, I don’t want to say struggle and don’t have pleasure in your life, but just realize that you might not need all the things you think you need. It might be more of a want or trying to impress somebody. Just own what you can own to survive and save for the cash assets I think is smart.

Tony:
Ryan, can I ask next, so now that you have no day job, what’s your plan here? Are you thinking about entering back into the workforce? Is this more of like a sabbatical or are you planning to go full force into real estate and never go back to the 9:00 to 5:00?

Ryan:
Well, since I… I want to be clear with all the rookies, because I’m a rookie too, this is not passive, doing the duplex stuff obviously, unless you were to let’s say have a property manager handle all that stuff. So in the theme of being passive, I’ll say this now because I know Ashley’s too busy, so she’s not going to snipe this idea, but my friend, I actually looked at these a couple years ago, but when you go to a wedding event and they have those luxury toilet rentals, I just went to my friend’s wedding and he actually told me a year ago, he goes, “If you get in this business, I would rent it from you.”
So I go to his wedding and get slapped in the face with, “Oh there it is, there’s a trailer. It could have been mine.” So I’m actually working right now to get a little bit of private money. It’s in the theme of real estate because it is a rental entity and I look at it as the cash flow is equivalent in a weekend to what a month of rent is. I like the pressure of I could go work for someone. We all know friends who we could probably do side work or cash or sell off some toys or something, but I like the pressure that kind of motivates me to try a new business and make myself a little uncomfortable again.

Ashley:
Ryan’s known me a long time, but obviously not long enough because he made the mistake of posting on Instagram in a story of where he was getting a quote on these toilet trailers from and I already went in, got my quote, and it should be delivered any minute in my driveway.

Ryan:
Yeah, she’s going to rub it in and deliver this bad boy and I’m going to sink into my chair.

Ashley:
But I think I shared with you too Codie Sanchez on Instagram and she has YouTube too.

Tony:
Oh, yeah. She’s cool.

Ashley:
Talking about boring businesses and you can be a real estate investor, but also investing in businesses too just to diversify and create some income and how to make them as passive as possible too. So she’s really awesome to follow if you guys are interested in doing something like the toilet travel trailers and things like that.

Tony:
Yeah, I mean just one thing to add on to that, not having that steady paycheck from a job is definitely a scary thing because as a society we are so heavily programmed to think that that’s the one and only way to make a living for yourself. And even if you’ve been setting real estate investing and even if you’ve been deep in this world of entrepreneurship as a real estate investor, it’s still scary when that moment actually happens because you’re like, “Oh it’s here. Oh my god, it’s happening,” right? And it’s scary. But I can tell you, my business had a tremendous amount of growth the day that I stepped away from my day job because it’s like you said, there’s this pressure to make sure that you’re able to provide for yourself and provide for your family.
When you have a day job, you know that check is coming every two weeks. But when you don’t have that, the check is only coming if you do the work and it does kind of motivate you in a way that this never happened before. I think that’s why when people take that leap, they see this hockey stick kind of growth because everything’s on your shoulders now. So I’m glad you recognize that and I’m glad that it’s motivating you to take that action as well.

Ryan:
Yes, and I’m being hesitant too because I’ve had opportunities like you kind of just said of getting back into the workforce and people trying to transfer businesses. And it’s so funny, it’s like people want to do that but then they almost just want the worker be, because the minute you ask, “Hey, what would the buyout be or what is your monthly payment that you would like?” because I’m trying to look at it like she looks at stuff, business stuff, I don’t want to have to be in the field doing everything. I would love to be able to hire it out. You can employ people, give some the freedom and all that. They just keep a lot of older mentality or something like business folks think you just got to do it all yourself and they think, “Oh, if something’s ‘easier,’ it’s not going to last and it’s not real.” I’m all good with hard work. I think you should work hard and smart, but not just hard.

Ashley:
It’s kind of like Robert Kiyosaki how he has the four quadrants. The first one is you’re the employee, you work the 9:00 to 5:00 job, you have a boss. And then it’s also the business owner, and it’s where basically you own the job. Like, yes, so I think of, I always think of a chiropractor for example. You own your chiropractor business, but you’re not making money unless you’re there cracking backs. So you have to work every single day to make money. You take off work, you are not there.
And even my dad, he is a mechanic and he owned a mechanic shop forever. It’s always been really hard for him to take off work because he’s the one that does everything, runs everything. He has a few employees, but he never had that person that could really take care of things for a long time because he’s always put himself as… He’s the reason people come to his shop because they want him to work on their vehicle, not other people. So I think kind of having the difference between that. And then there’s becoming the investor where you are just investing in the businesses and it becomes a lot more passive. Tony, what’s a fourth one? Which one am I missing?

Tony:
I think it’s employee, self-employed, business owner, investor.

Ashley:
Yeah, so the self-employed one would be the one where you are the chiropractor example. Yeah.

Tony:
Right. Right. Awesome. Well thank you for sharing that, Ryan. I appreciate the trans transparency, man. It’s always a scary moment, but being able to take that leap, it’s like the matrix, right? It’s taking that red pill and you see this whole new life that you didn’t even realize existed before.

Ryan:
[inaudible 00:49:29].

Tony:
There you go.

Ashley:
I feel like it would be impossible for me to go back to a job. I would have to find a sugar daddy or something. I don’t think I could dust in my mind.

Tony:
I would also look for a sugar daddy if I had to go back to, so I’d be right there with you.

Ashley:
Yeah. Ryan, we’re going to take it to our Rookie Request Line now. This is where anyone can call in and leave us a voicemail at 1-8885-ROOKIE and we may choose your question to be played for our guests to answer. So Ryan, here’s today’s question.

Dom:
Hi, my name’s Dom. I’m new to this podcast. I’m a student college. Right now I have just about $20,000 saved up in my account. What would your advice be to me to get started in real estate and what books to read and what other things I could do to prepare if I want to get into it?

Ryan:
I would read… For the book thing that’s easy for me to answer, is I got The Richest Man in Babylon in my duffle bag over here, and Relentless from Tim Grover. Those are just really good, like going back to what Tony said, is like we’re so ingrained that the only way you make money is trading your labor for time. The more research you do on success, the most successful wealthiest people trade their money for money, like let the money work for them.
And then in regards to the 20 grand, I mean I guess I don’t want to dodge the answer, but I guess it would depend on what market you’re in. I mean, they always say you can go partner with someone too, which I think is a great thing. Me personally, in my first one I love doing it single, by myself, just because you got to take on all that responsibility. You learn a lot more. I feel like on a partnership you could maybe push some of the pressure on someone else and there could be issues. But honestly with the 20 grand, I’m assuming you’re working and you’re not a bum like moi, you could get financed really easy on that luxury restroom rental too. And that might be a way to learn how to do the passive sort of income. It’s going to take a couple hours of your weekend to get going on that.
I mean, obviously you want to buy a house right away, but I have a friend who’s in a similar position where he renovates vans and does that and he’s like, “Maybe I should keep doing that until I get some cash going and then buy one.” And I’m like, “Dude, you’re renovating these vans, they look awesome. You’re doing interior design. The house is the same thing, it’s just on a bigger scale. So you’re building up experience right there.”

Ashley:
Yeah, that’s so true. I think a lot of people have a skill set they don’t realize is a huge advantage that other people don’t have. That if they got started, they might have it a little easier because they have the skill that they can use and apply to buying their first investment property. I think asking the $20,000, people get too hung up on finding the perfect, the best way, the biggest return on that first investment. Don’t get hung up on that. Look at all the different scenarios you can do with that money. First of all, congratulations, you have $20,000 saved up. You’re way ahead of the average American I would say with that money ready to invest.

Tony:
Especially in college, right?

Ashley:
Yeah.

Ryan:
Yeah.

Tony:
I was negative in college.

Ashley:
I think that just look at the different ways you can get started and pick one, okay? Run the numbers. Look at the property the way you invest it. If you put a $20,000 down payment and maybe you buy two houses and do a $10,000 down payment on each and they’re just smaller houses, if you partner with someone in five years, what are you going to end up with? You don’t have to make the perfect investment, you don’t have to have the best return on your money because once you get started, you’re going to figure out so many other ways to keep buying properties and keep going because you become addicted.

Ryan:
Momentum is a real thing.

Ashley:
Mm-hmm. Yeah. There you go.

Tony:
Fantastic advice. All right. So Ryan, I want to take us to our next section, which is our Rookie Exam. So these are the three most important questions that you’ll ever be asked in your life. So are you ready for the exam?

Ryan:
Yes, my deodorant stopped working an hour ago.

Tony:
All right. So question number one, what’s one actionable thing rookie should do after listening to your episode?

Ryan:
Well, I’m assuming you’re already reading, but it’s hilarious that you brought that up because me and her just chatted the other day and just reading even if’s 10 pages a day, just enamor yourself in the mindset of doing real estate business. It doesn’t even have to be a real estate book, right? Just something that you’re learning constantly every day. And then let’s say you were like me and you were reading and going down the rabbit hole of everything and talking yourself out of it and talking yourself into it and all that, and on the fence of just going in on it, even if you know an Ashley in your neighborhood or someone like me just starting and they need help, I don’t know, framing up a duck something, just trying to get used to the terminology and just dealing with people and the tenants and stuff like that because that’s just inevitable when you’re on the job site and picking people’s brains for information.

Ashley:
I would just want to add in too because I know people are going to ask Ryan this question, is like, “How do you find somebody like Ashley to talk with you?” or whatever? First of all, it’s taking me out to eat. So free food always works. But he will bring a piece of paper like a notepad and he will have all of his questions ready to go and he will take notes. I feel like sometimes I talk to people and they just ask very generic questions. And Ryan even said to me the other day, he came to my son’s football practice and sat with me for two hours-

Ryan:
Whatever it takes.

Ashley:
… and kept me occupied a while and just we talked real estate the whole time. It was great, but he was willing to come and just sit there with me. And it’s the same thing, he had his questions ready and he is like, “I remember you saying before not to ask generic questions. It’s super specific so that you can actually help me through my situation.” And I thought that was awesome that he is actually listened to things that I’ve said and that he comes prepared. He has his questions ready and then he takes notes too. I always think that people that do take notes, it shows that you are generally interested and you really want to take action on what that person is saying instead of someone just like, “Oh yeah, cool. Okay” and then listening. How can you actually remember all of that? When I go to a restaurant and they don’t write down my order, I have severe anxiety that they’re going to mess it up.

Tony:
Hey, Doug. Hey, Doug. Like, “Doug, if you don’t just write this down like every other server in this restaurant…”

Ashley:
I know. So yeah, I think having great questions prepared, asking detailed questions and then taking notes I think is… And that Ryan’s obviously taking action too

Ryan:
I don’t want to toot your guys’ horn too much, but the more I immerse myself in this stuff is I realize my time is very valuable. And I can only imagine, I don’t have kids, you guys have kids and stuff. Your time is valuable and I can understand the frustration with being in a position of having the knowledge and then being asked like Ashley said of generic stuff, like you can go on Google. Because that’s what I started with her. I was bugging her and then I’m like, “Wait, I got to just take some action.” And then once I do it and trip over myself and then be like, “Hey, how do I fix this or what about this?” And it kind of helps add value to each other because I don’t want to leech on her, that’s why I’m offering her and Daryl some help on their property. Anything I can do.

Ashley:
Yeah. He came out to one of our properties and worked for a day with Daryl. That was awesome that he did that.

Ryan:
Not a lot of hardwork. I was handing tools and stuff. Daryl’s smirking over here but…

Ashley:
Okay, so our next question is, what apps, tool or software do you use in your business right now?

Ryan:
Boom, I was waiting for this. I got a good old Rent Ready from her and then I’m sure there’s probably promo codes still active for all that. So if you guys want my referral because I don’t need her to send you the referral, I could use that hundred too. No. But no, it’s very convenient. And being me that I’m scatterbrained and stuff, that’s why I do jot down notes when I do ask questions with everyone because I think it’s just a society thing. Our brains are so overwhelmed with information, it’s hard to keep all that together.
So I think it’s good to be organized. It’s on a spreadsheet. Everything’s right at the app portal and it just helps organize a tenant and yourself, because you’re running a business so you tell the tenant, “Hey, this is how the business operates.” A lot of people are like, “Oh I used to just give cash or run a check over.” Well what if you’re on vacation going back to the job thing? What if you’re out somewhere and it is the end of the month and you can’t get your rent checked because you’re on vacation? Something trivial like that. And then it helps with accounting, which I’m not good at. So that’ll be all organized and just make it a little easier at the end of the year I would say.

Tony:
Awesome. So last question. Where do you plan on being in five years?

Ryan:
Five years I originally thought, okay, when I first bought my duplex, I’m like, “Oh man, I get five of these?” And I do the math, I’m like, “That’s more than I made working.” But the more I thought about it, my friend said, “Hey, are you going to buy one next year?” I’m like, “I want to buy one this year. I don’t want to wait that long.” But as the more I thought I want bigger multi-units because there’s less grass, I mean our environment out here is we have all four seasons and it can be horrible. So there’s just a lot of expenses involved with like say you had five properties, that’s a lot of grass, a lot of driveways. So my goal would be to buy in the 10 to 15 unit range because I just don’t want to bite off too much right off the bat, but I just like the versatility of having that much income and value add opportunities and stuff like that.

Tony:
I love that, man. So moving into our last segment here, this is the Rookie Rockstar, and super excited for this one because it’s a great story. Today’s Rookie Rockstar, it’s Patrick Eldridge. Patrick says, “My wife and I are no longer employees as of today. Our real estate journey started just under two years ago. After working so incredibly hard we were able to acquire a whopping 32 doors following the BRRRR method.” So Patrick, but congratulations to both you and your wife and welcome to the Matrix.

Ryan:
Yes, call me.

Ashley:
Did you just watch The Matrix recently so [inaudible 01:00:44] couple times to reference it?

Tony:
I didn’t. I just feel like putting your job and doing the thing. I don’t know.

Ryan:
I respect it.

Ashley:
You know what, Tony? You’ve been on with this podcast for what, two years? I think this is the first time you’ve ever quoted movies. You’re trying to make up for never watching [inaudible 01:01:01].

Tony:
For never watching it.

Ashley:
Well Ryan, can you tell everyone where they can reach out to you and find out some more information about you?

Ryan:
Yeah, I’m not going to give you my other personal page because I’m kind of a crazy man on that. But my real estate page is BND Rentals. Boy, Nancy, David Rentals. I’m on there a lot because I am a professional bum. So if you have questions or a deal or help, I mean even if it’s something I can’t personally do, like Ashley said, maybe we’ll know somebody. I just love reaching out and following just the like-minded people so we can just get to the path we want to go on.

Ashley:
Awesome. Well thank you so much for joining us.

Ryan:
Thank you guys.

Ashley:
Ryan’s computer conveniently wasn’t working during his audio check yesterday, so he had to come over and do it in person.

Ryan:
I wanted to check out this massive empire, this Real Estate Empire in person.

Ashley:
Well thanks so much for coming over and dealing with all our tech set up and everything. So thanks again. I’m Ashley, @wealthfromrentals, and he is Tony, @TonyJRobinson on Instagram. We’ll be back on Saturday with a Rookie Reply.

 

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The Atlantic Canada housing market has been sizzling since the early days of the coronavirus pandemic. But what differentiates the real estate markets in New Brunswick, Prince Edward Island, Nova Scotia, and Newfoundland and Labrador is how they have held steady, even as the broader Canadian real estate market experiences a correction.

Although there have been forecasts suggesting that the eastern provinces could join the downturn, the numbers so far show that real estate activity in this part of Canada is not imploding.

So, what do the data show? Let’s look at the latest trends in Atlantic Canada.

What’s Happening in the Atlantic Canada Housing Market?

Here is a look at the four major Atlantic Canada real estate markets:

New Brunswick

According to the New Brunswick Real Estate Association (NBREA), residential property sales plunged 19 per cent year-over-year, totalling 956 units in August. Home sales were relatively unchanged on a month-over-month basis. Year-to-date, home sales declined more than 15 per cent from the first eight months of 2021.

New Brunswick real estate prices remained elevated in August, association data show. The MLS® Home Price Index (HPI), which is considered more accurate than average or median price measurements, surged 20.9 per cent year-over-year to $287,600. Here is how specific housing types performed in August:

• Single-family: +20.6% to $288,100
• Townhome: +33% to $264,900
• Apartments: +25.6% to $272,100

The average sales price of a home in New Brunswick advanced nearly 12 per cent to $270,698. Moreover, the year-to-date average price climbed nearly 22 per cent to $297,489.

Housing stocks weakened in August. New residential listings tumbled 3.2 per cent year-over-year, totalling 1,348 units. Active residential listings dropped 1.8 per cent, clocking in at 3,236 units. Months of inventory, which measures the number of months it would take to exhaust present supplies at the current rate of sales activity, rose to 3.4, up from 2.8 months.

According to Canada Mortgage and Housing Corporation (CMHC), housing starts have exceeded 2,700 year-to-date, up from 2,139 in the same period last year. There were 536 housing starts in August alone, up from 312 a year ago.

Newfoundland and Labrador

The Newfoundland and Labrador housing market recorded a 4.7 per cent drop in home sales, totalling 667 units in August. Year-to-date, home sales have been roughly flat from last year’s span, totalling nearly 4,230 units.

According to the Newfoundland and Labrador Association of REALTORS® (NLAR), the benchmark price increased 8.9 per cent year-over-year to $286,000 in August. The average price of homes sold in August jumped more than eight per cent to $300,490, while the year-to-date average price surged 7.2 per cent to $292,714.

Here are how the specific properties performed:

• Single-family: +9% to $288,000
• Townhomes: +5.9% to $276,200
• Apartments: +10.4% to $222,000

Inventories also fell sharply, creating tight market conditions for Newfoundland and Labrador. New listings plummeted 16.8 per cent to a five-year low of 889 units, while active listings cratered 33.9 per cent to a decade low of 3,069 units. Months of inventory tumbled from 6.6 in August 2021 to 4.6 in August 2022.

New housing construction activity has been vigorous in Newfoundland and Labrador, with 535 housing starts in the first eight months of 2022, up from 384 in the same span of 2021.

Nova Scotia

The number of residential properties sold declined at an annualized pace of 17.6 per cent, totalling 1,181 units, according to the Nova Scotia Association of REALTORS (NSAR). Year-to-date, home sales tumbled 18.2 per cent to 9,260 units compared to the first eight months of 2021.

Price growth was exceptional in the Nova Scotia real estate market, as the HPI composite benchmark price increased 17.8 per cent year-over-year to $395,300 in August. Prices climbed for all main residential property categories:

• Single-family: +17.4% to $388,400
• Townhome: +17.1% to $471,000
• Apartments: +25.1% to $466,200

The average sales price for a home in Nova Scotia jumped 9.7 per cent to $385,935. The year-to-date average price surged more than 19 per cent to $424,336.

Once again, supply pressures supported prices in the eastern province. The number of new residential listings slipped two per cent to 1,589 units, while active listings climbed more than 13 per cent to 3,531 units. It should also be noted that new listings were 4.8 per cent below the five-year average, and active listings were 31 per cent below the five-year average. Months of inventory came in at three, up from 2.2 months

Nova Scotia housing starts have been robust in 2022, soaring to nearly 3,300 from January to August, up from 2,784 last year.

Prince Edward Island

Prince Edward Island Real Estate Association data show that residential property sales slid 13.7 per cent on an annualized basis, totalling 196 units in August. This was the worst performance since August 2015. Year-to-date, home sales dropped close to 13 per cent compared to the first eight months of 2021.

The overall HPI composite benchmark price soared 17 per cent to $372,700. The average price of homes sold in August advanced by 15.5 per cent to $391,772, while the year-to-date average price soared more than 17 per cent to $394,837.

Housing stocks were mixed in PEI, as new listings fell 7.7 per cent to 323 units and active listings spiked 30.5 per cent to 955 units. Both were below the ten-year average for the month of August, clocking in at 4 per cent and 35.9 per cent, respectively. Months of inventory increased to 4.9 by the end of August, up from 3.2 months at the end of August a year ago.

New housing construction has been subdued in the Prince Edward Island real estate market, with just 65 housing starts in August.

Must All Good Things Come to an End?

Can the Atlantic Canada real estate market sustain its momentum amid rising interest rates and national market uncertainty? So far, despite the wide range of bearish projections, this region is keeping it together amid tight supplies and affordability. Perhaps these provinces will be attractive places as long as the major urban centres are selling homes greater than the national average of around $520,000.

With the threat looming of another possible rate hike, Canadian investors are at a crossroads. They’re faced with a difficult question: What is the best way to maximize the return on investment?  Real estate investors may be asking themselves: If I cash in my investments by selling my property, will it be at a loss? Is that even an option given where the investment project is at?  If I don’t take it out now, am I risking an even greater loss down the road? Is this the normal ebb and flow of the market and thus should stay the course? Is there a better option out there?

Rogers or Twain

To that last question, the answer may very well be ‘yes’. Before you cash in all your proverbial real estate chips, we’d like to remind you of the wise sentiment of not just one great man from history but two; “Buy land. They’re not making it anymore.” We’re also dedicating this article to the purchase of vacation property as an investment. Some may say it’s like killing two birds with one stone.

If the mere mention of investing in vacation properties makes you think of a cringy salesperson trying to sell you swamp water in Florida, or the like, you’re not alone and we hear you.   But stick with us as we head to the Caribbean. We’re going to focus on Turks and Caicos Island, sometimes referred to as TCI. You’d be well within your right to ask why Turks and Caicos? We’ve decided to pick a single point of reference and what better place is there to put a pin on the map than the world-renowned luxury resorts, turquoise water, and white sandy beaches of this sunny archipelago in the Atlantic Ocean?

Before we jump into that, we need to briefly examine a few key terms:

A Lifestyle Investment is a property whereby the purchaser’s goal is not merely a monetary return on investment. The value-add is in its ability to offer a solution to a lifestyle-related concern such as (a) wanting to escape the cold snowy winters of Edmonton or St. John’s, as examples, or (b) a consistent standard of living on vacation. In this example, a family or person may come back to the same place repeatedly because they’ve come to expect a high level of care of luxury at the property and thus return year after year. In inflationary times such as now, it can give a great deal of peace of mind to have an investment with a history weathering the storms of inflationary times well by holding its value. This, when paired with removing the financial burden of paying for family vacations when it’s time to get away is a clever way to enjoy the sun without adding debt or sacrificing luxury.

The other type of investment examines the dollars and cents of it all. It is measured purely on how it returns on the initial investment. If lifestyle investment is the measure of an intangible value of resort unit ownership, this is the antithesis of that. Of course, there is the hybrid model as well, in which the lifestyle box and the rate of return box are checked simultaneously (although not always in equal measure). There, I’m glad that we got those sorted!

TCI: Did You Know?

As you likely know, the anchor industry in Turks and Caicos- world-renowned for its luxury resorts, turquoise water and white sandy beaches- is tourism. While all of that makes sense, here are some factoids about TCI that may be news to you: (a) it’s a British-dependent territory (b) there’s very low unemployment (c) It has a consistently positive net migration (d) there are approximately 350 days of sunshine each year.

You may be asking, okay, but why should I care?

TCI is regarded as a Commonwealth Country

The reason why this is important from an investor’s perspective is its judicial infrastructure. Being a British-dependent territory means that its legal system draws upon British Common Law, as does Canada. Having such deep-seated colonial roots may be problematic from a socio-anthropological perspective.  In this case, it means that the legal system, although we hope that you don’t have to use it, should be as easy to navigate as the one used by Canadians when on their home turf.

The Math Turks and Caicos Island

An investor may be interested in the low unemployment rate of an island such as Turks and Caicos through an economic stability lens. However, when we dig into that a little bit further, we learn that in order to fulfill the demands of the over 1.3 million visitors annually fueling its robust tourism industry, TCI often brings in people from neighbouring island communities.

According to macrotrends.net, in 2015 this paradise island oasis attributed 34.4% of its population to migrant workers. Here’s the gem: all the folks need to be housed. Most of these workers need longer-term, but temporary lodging.  It’s for this reason that they’re likely not looking to purchase but rent a dwelling.

We turned to Kokomo Botanical Resort (https://www.kokomobotanicalresort.com/ ) owner and fellow Canuck, J. Kelly Sullivan for the benefit of his wisdom.  Mr. Sullivan has been in Turks and Caicos since 1993 and brings a good deal of experience in purchasing both rental units for workers and vacation spots for future fam jams. He shared his ‘boots-on-the-ground’ perspective, “There’s a chronic shortage of inventory for affordable rental housing. People are living and working here. It may be the biggest demand on beautiful TCI and there’s not a lot of people catering to it.” This is often achieved through an apartment-style unit on or near a resort.

In addition to being the proprietor of Kokomo Botanical Resort (https://www.kokomobotanicalresort.com/ ),  Mr. Sullivan has been a residential landlord for as long as he’s been a resident of TCI. He has experience with the hybrid model by tapping into both revenue streams. When asked about the differences between being a resort owner or a residential rental owner in Turks and Caicos, “[an investor] doesn’t collect as much revenue as they do on the resort side, but don’t have anywhere near the overhead and there’s no rent control!”, exclaims Mr. Sullivan.

350 Days of Sunshine

turksandcaicostourism.com proudly boasts that of the 365 days in a calendar year, the island has a whopping 350 days of sunshine.  While you may be celebrating all the vitamin D, that much sunshine also means a wonderfully-long tourism season. This not only boosts the gross domestic product (otherwise known as GDP) but also likely allows enough time for the property to gain some serious rental revenue. For those folks who are purchasing for lifestyle reasons, there’s plenty of time to enjoy the property with friends and family (and get some of that vitamin D for yourself). These savvy folks enjoy stress-free, turnkey, hassle-free vacations in their residential resort island unit.  This home away from home generates revenue whenever you are not on vacation; often as a minimum, offsets the cost of ownership, but also has tremendously more earning potential. For the dual-motivated investor with the hybrid model, the return on investment and the extra rays may as well be check marks for each box.

ROI and Vitamin D

If you and your family are debating whether to move your hard-earned money out of the Great White North, there are many reasons why the south may be the right direction for you. Consider a place where you don’t have to choose between the return on investment and vitamin D. Fun in the sun and income-earning property resonates for you, Mr. Sullivan strongly encourages our readers to follow in his footsteps by investing in both types of real estate and enjoying the best of both worlds.

David:
This is the BiggerPockets Podcast Show 679.

Zeona:
For people that are trying out this strategy coming from the long-term rental side, one thing that we say is like, “Yeah, maybe you don’t want to spend the money to invest in furniture and ones you already own, but if you’re going out and buying new places now, it’s really hard to find long term rentals that’ll cash flow.” And so this is a great strategy for that because now even with the high prices, even with the high interest rates, you can still get cash flow and medium term.

David:
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast here today with my co-host, Rob Abasolo, where we are bringing you another fantastic show today focused on medium term rentals. You may be aware of short term rentals. You’re definitely aware of traditional or long term rentals, but in today’s show, we talk about the new emerging market, a medium term rentals. Typically, these are properties that are rented to traveling professionals, often travel nurses, but not only travel nurses, and we get into some really good stuff. We talk about how to find the right type of property that will work for this, what location to look for, how to furnish them, how to manage them, and how to maximize their efficiency, as well as how to mitigate your risk when you are a short term rental investor. Rob, what were some of your favorite parts to today’s show?

Rob:
Honestly, it was just really nice to talk to a couple pros. Sarah and Zeona just have this mastered so well. I am obviously more of a short term rental guy, but I have a couple of medium term rentals and yeah, I just walked into my medium term rental after someone checked out and it was like that scene from Daddy Day Care where Eddie Murphy walks into the bathroom and he’s like, “Oh, Oh.” And it just kept revealing that it was just worse and worse. That’s how I felt. It was nice to talk to them and talk about their strategies, their processes, and the systems they’ve put in place to run a very successful medium term rental. This is going to be a fun one to get into.

David:
Wonderful. Before we get into the show, today’s quick tip is check out Sarah and Zeona’s book 30-Day Stay. If you pre-order it now, you can get some special perks, bonuses, if you will, a coaching call with them, a free webinar, as well as other bonuses. You can find it by going to Biggerpockets.com/pod30 and use any of the names from today’s podcast to get 10% off that book. It’s very well written. It is a very relevant asset class, and I believe that these two are the front runners for sort of sharing information of how you can make money in this space. I have bought these properties myself. Rob has transitioned a couple of his short term rentals into medium term rentals, and you can do the same. So go grab the book. Rob, any last words before we get to the guest?

Rob:
Yeah, Just quick clarification on the promo code. You can use promo code, Rob, you can use promo code, David, Sarah, or Zeona for 10% off. You said any of the names from today’s podcast, right?

David:
Yes. And you just gave the names, so thank you technical Tina for correcting my general error.

Rob:
Listen, while we’re here, the one that’s going to give you the best 10% discount will be Rob. Don’t ask me why. Just use Rob.

David:
That’s really good. I have no counter to that. All right, let’s get to the show. Sarah and Zeona, welcome to the BiggerPockets podcast. How are you two today?

Zeona:
So good. Thanks for having us.

Sarah:
We’re excited to be here.

David:
Yeah, so I believe we just got to see each other at BPCON in San Diego. Zeona, you were there as well, right?

Zeona:
Yep. You were on my floor. We shared a couple elevators.

David:
Oh, and you didn’t say anything the whole time. Nicely played.

Zeona:
Not true. It’s cool though. It’s cool.

Rob:
She told you about her childhood, David, come on.

David:
She’s honest. I was trying to give you the cool factor. Oh, it’s an elevator with David Greene. I didn’t even care. I made him talk to you.

Zeona:
Oh my God. Well, the first time there was a crowd and I was like, I’m not doing that. Everybody’s like, oh my God, it’s David. No, I don’t care that much.

David:
That’s so funny that you get that a lot when you’re in our position. These people will say, you know what? I know I’m not impressed by people that are a big deal. We hear that all the time. And I’m like, well then, why did I work so hard to become a big deal? That’d be like if some guy was to say, I’m not really impressed by beautiful women, so don’t think it matters. And you guys would be like, well then, what was the point? It’s always a funny thing that I noticed that pops up, but no, you did not fan girl at all, Zeona. I would’ve remembered, and it’s probably a good thing that you avoided that big crowd because I’m sure one of those people is the one that gave me this cold that I’m now suffering from post BPCON. That was a large exposure to a lot of people with very little sleep, which is a recipe for getting sick. I trust all of you are in good health.

Zeona:
So far so good.

Rob:
And let me just say you are a big deal to me. I look at your photo and then I go to sleep every night and so when I got to see you again in person, I was like my man.

David:
That’s the joke at BiggerPockets is I have a huge fan base of males. I’m very popular with the male crowd. I’m like, every guy wants my life, which is very funny. So I appreciate that. Thank you guys for the support. I had a blast at BPCON, and I believe you two are now in the exclusive club of BiggerPockets authors. So we were on the same floor also when we were doing our book signing events. How does that feel to be a BiggerPockets published author?

Sarah:
Feels really good.

Zeona:
It’s kind of surreal. I feel like you work on this, I don’t know, idea for a while, and then when you actually hold it in your hands, it was the first time we were at BPCON, it was like, whoa, this is not just our secret, it’s out and people have it now. It’s pretty awesome.

David:
There’s certain moments that are like that. The first time you hear your voice on the podcast that you love, you’re like, whoa, that’s me On the BiggerPockets podcast. Or for me, when I walk by a Barnes & Noble and I see the book at the Barnes & Noble, I get that surreal moment you’re talking about like, that’s my book that’s right there. It definitely is very cool. And I believe Sarah, you and I were also on a panel together teaching real estate agents how to sell more houses. We should definitely get into that today as well. You’re a bit of a multi-talented personality. Before we get into all the stuff you guys have to offer, if you don’t mind, Zeona, we’ll start with you. What’s your story? How did you get interested in real estate investing and get into your first property?

Zeona:
Yeah, so I was on the BiggerPockets podcast 229 and 300, so way back before you were here, David. If people want to go back and get the deep dive, I used to be big in short term rentals, so just trying to be like Rob. But yeah, I did that since 2012 and I built a big co-hosting business around it where I was managing rentals in five countries. But after COVID, I realized that I had to make a switch. And so I got really excited about the medium term strategy and that’s why we wanted to bring it to everybody. It was really during that period of time that I had to do something different.

David:
Awesome. Sarah, what about you? How did you get introduced into this world?

Sarah:
Yeah, so I started out as an agent, and that’s why you and I shared a panel at BPCON. I coach real estate agents now on how to invest in real estate themselves or build an investor-friendly business. And so started out as an agent and similar to Zeona, just have an absolute love of travel. And so realized really quickly that I wanted to be location independent and build wealth through investing. And so now, I own 19 units in four states and I manage all of them remotely. Half of them are medium term rentals, which is why Zeona and I write the book.

David:
Well, this is amazing because full transparency, I have three medium term rentals that are all under rehab right now and I have zero idea how to manage them.

Sarah:
Great.

David:
I’m going to ask you a lot of questions to try to prepare for this because I don’t know what I’ve gotten myself into, but I’m pretty heavily invested. Those three properties are probably worth around five to $6 million, so I got to figure this thing out and what better way than to do it live in front of everybody on the podcast. Now, Rob, have you got into the medium term space or are you pure short term?

Rob:
Yeah, I actually have a couple of medium term rentals, David. I have a couple of short term rentals that I converted into medium term rentals back about a year, year and a half ago. Really, at the beginning of COVID, I’d say. I was really thriving in the short term rental model, but there was a couple regulations in LA that made it a little bit more prohibitive. And so medium term rentals typically, especially in the LA side of things, is 30 days or more. Anything under 30 days is considered a short term rental in Los Angeles specifically. I converted that and I still rent my tiny home and what used to be my primary residence on Airbnb for anywhere from 30 to 90 days and there’s definitely some learnings that I’ve taken away over the past couple of years that I’m excited to dive into.

David:
Learnings, you’re literally making up words on this podcast.

Rob:
No, that is a word. Look it up.

David:
Learnings.

Rob:
Google it.

David:
No, this is what Brandon Turner did too. He just became rich because he could do it so well. He’s like, “Yeah, let’s just call it BRRR. Let’s just call it house hacking.” Then everybody started saying it. Now, we’re all going to hear everyone with a corn cob pipe and a monocle that are all going to start saying things like learnings.

Rob:
It’s a word forward.

David:
Yes. All right. I am fascinated by the why behind what causes people to switch their investing strategy. Zeona, if you could, what was it about short term rentals that you didn’t like? Or was there an opportunity you saw in medium term rentals that you did? What motivated you to switch out of what was probably very lucrative space into something different?

Zeona:
Yeah, so right when COVID was happening, I think it was even March 8th, it was from one day to the next, we had all the bookings looking like it was going to be a really strong summer kind of building up to that and then the next day all of the bookings got canceled. They just literally evaporated off the calendar. And so I knew I’m not just going to have these places vacant, I’ve got to be an investor, I’ve got to put my thinking cap on and be creative and figure out something else. And right at that time I started seeing longer requests coming in.
People needed to quarantine coming home. There were emergency workers coming into town, people needed more space because they’re working from home or they had their kids at home now educating. And so all of those things made me go, I wonder if I could do this medium term thing for longer stays and make that still work. And the thing I was worried most about was trying to get people in for tours. But I realized later that a lot of these people book site unseen just like a short-term rental, and so it ended up being fine.

David:
Cool. It was the vacancy problem that you’re like, “Ugh, I got to figure out some way to keep these things occupied?”

Zeona:
Yeah, definitely. Then like what Rob said, there’s a lot of transitioning in markets where I might have owned in that market for five years and before you could short term rental with no problem. Then now they’re getting stricter and stricter and so it’s just a little bit easier if you can transition to the medium term space.

David:
How about you, Sarah, what was it that was the switch that you sort of zigged when everybody else was zagging?

Sarah:
I actually went straight from long term to medium term. I bought a fourplex and furnished two of the units and discovered that I could actually net more if I rented to traveling nurses. There’s a big hospital complex in that area. This is in Omaha, Nebraska. The Airbnb hotspot location doesn’t quite apply to this property. And so while I could get fully booked on weekends, I had all this vacancy in the middle of the week. I almost immediately switched to the medium term rental strategy to increase my cash flow.

David:
Okay. First selfish question coming up, Sarah, is it as simple as just buying a property near a hospital or are certain hospitals more likely to be bringing in traveling nurses and other ones are not? Like how much nuance do you have to put in to figuring out where to buy?

Sarah:
I like buying near hospital complexes so that there’s multiple hospitals in the area. For example, my four of my seven units in Omaha are a 100% occupied because the nurses just keep extending their contract. That’s one of the many benefits of having the traveling nurse versus any other MTR tenant is that they likely are going to extend their contract, and then you have six months of occupancy with no turnover.

David:
But would some hospitals not be bringing in traveling nurses or is it pretty much every hospital right now is having nurses travel to work there?

Sarah:
What’s really nice is, well, it’s not nice for society, but it’s nice for people that own MTRs is there’s 300,000 vacancies across the country for nurses right now. If you ask any healthcare professionals, 75% of them will say, I don’t see myself in the healthcare profession in the next two years. And so the need for traveling nurses is higher than ever and I see that as a continued trend. While I can’t say that every hospital across the United States is going to have a traveling nurse, I’m really confident that if you buy a rental near a hospital complex, you’re going to have someone who’s willing to stay there.

David:
I’ve noticed several people in the BP community, some of them are in my mastermind and other ones have come on the lives and they’re all making incredibly good money as traveling nurses. This is literally the strategy some people are using to save up money for their down payment is they’re making twice what they would make at a different location and they’re getting their housing paid for by the hospital. That’s one of the things that got me really interested is that they’re getting their rent paid by the hospital so you can charge more for rent and they don’t necessarily fight about it, the person who’s making their own rent payment and they’re going to fight you over $20. Zeona, same question to you, what’s your strategy when you’re picking the location for where you want to put your medium term rental?

Zeona:
Yes, so we look for hospital complexes, we try to be within five miles of two hospitals if you can. That’s the number one thing and the reason for that is that nurses are probably not going to travel more than 20 minutes. Beyond that, a university can bring in a lot of people, it can be students, it can be teachers coming into town. I like being near universities. Then there’s also tech centers. Where I live in Boulder, we’ve got a Google campus and a couple other kind of tech hubs and those actually end up bringing in a lot of people when they’re trying out for a job and they don’t want to buy something yet. They might stay in a medium term rental for a bit. Then you’ve got kind of business professionals that will come in for a month or two, go to the main office, but they normally work from a different office. Yeah, there’s just a lot of different people using MTRs now.

David:
Take someone who owns traditional, what we call long term rentals right now, who in that asset class should be considering switching over to a medium term rental? Sarah, I’ll ask. I’ll start with you.

Sarah:
Everyone buy our book. No, I really think that the MTR strategy works for so many different property types. We’re seeing, I have clients who have, even in our book case studies where they own in urban areas and rural areas. There’s MTRs for four bedrooms, single family houses, there’s one bedroom, one bath MTRs, and so I truly believe that almost any location can support an MTR. Would I go and buy 30 houses in a small town and turn them all into MTR?

David:
If you were David, you would and you would definitely regret it. We just talked about that.

Sarah:
Yeah, I don’t think that’s the best strategy, but I think it’s so interesting. I get this question a lot of what if, what if, what if, and the reality is you only need four tenants a year, so you don’t need to stress as much about like, is this a good strategy? If you’re just going to turn one of your long term rentals into a medium term rental, you obviously have to furnish it and that’s going to take time, money, and energy. But aside from that, it really isn’t that stressful of a transition to go from a long-term to a medium term.

David:
Nice. Zeona, what advice do you have for people that already own some assets that could easily be converted rather than just having to go buy a new one?

Zeona:
Yeah, so I would want to make sure that the location was good for it. I would say you want to probably be more in an urban market. As opposed to short-term rentals where they’re more on vacation areas that might not be as urban or rural stays that might be outside of town, urban’s going to work best for this, you just have more options for tenants. Then the second thing is size. With short term rentals, you’re seeing a lot of people going bigger is better, four, five bedrooms trying to get in to families heads and beds. That’s kind of the name of the game. With the medium term rentals, I really like to do one or two bedrooms. It can work with bigger ones that I’ve heard about people doing rent by the room strategy with medium term rental. But it seems like such a headache that I’ve generally found that people travel either by themselves with another nurse or with a family member, and so they’re really not needing that much space.

David:
You’re saying there’s not a huge demand for traveling ranch hands that are going into these rural areas?

Zeona:
Maybe not, I mean, maybe in Ocala, Florida or something like that where it’s like horse capital of the world, but other than that, maybe not.

David:
All right. That’s funny. Also, Zeona, perhaps I’m saying the word rural correctly. If you guys would like a master class on how to struggle with that word, go back to the time when Zeona was interviewed on the BiggerPockets podcast before me with Brandon and Josh and watch Brandon struggle to say rural for 200 episodes. It is hilarious.

Rob:
I can’t say it either rural.

David:
That wasn’t bad. You could tell you’ve been practicing. That was part of the auditions when Rob was trying to get this co-host position is we were like say rural and we all sat there with a scorecard and gave him a score of zero to 10 on how well they did.

Rob:
Very traumatizing.

David:
All right, Rob, you’ve got a decently healthy portfolio yourself, what would you do? What would it take for you to transition some of these into medium term rentals?

Rob:
Totally, man. I mean, there’s kind of a few schools of thoughts and I think if you’re a long term rental investor, a lot of the times, you’re going to be handing off that property to a property management company. I mean, you might do the self-management thing, but I know a lot of long term rentals do that. Then with short-term rentals, it’s so heavy into the self-management for me and then for a lot of the people that I work with and a lot of my peers in this space. It is definitely a lot more work than obviously handing it off to a property management company. Midterm rentals are kind of a really unique spot in between for both, and so I think it’s pretty low stakes to test out this approach for the medium term rental side of things, when you’re already a short-term rental host. I mean, it’s a little bit tougher going from LTR to MTR because you got to spend money on the furnishings and that’s a big investment and it’s time to set it up and everything like that.
But if you’re a short-term rental host, you’ve already got it furnished no matter what, you’re going to be running it as a short-term rental. It’s pretty low stakes for you to give it a shot and the way that I’ve done this is I’ll pick the price that I want for my short term rentals and then I’ll just apply a really big discount for anyone that books my place for 30 days at a time or more. If a typical property is going to bring in, we’ll call it $7,000 a month on the short term rental side, and I’m fine with having it as a midterm rental, I might offer anywhere from a 30 to 50% discount. Now, for me, typically medium term rentals have brought in less money than short term rentals, but they’re a lot more hands off. I find that whenever people are staying at my place for 30 to 90 days, they don’t really bother me as much for little things.
I feel like they sort of feel the empowerment of, “Hey, I can go buy my own toilet paper, or hey, they don’t have a garlic press, I’ll just go do that. I don’t want to bother them for that.” Whenever people feel like they live there, they don’t really bother me as much unless it’s an actual maintenance problem that I have. I think if you want to try it as a short term rental host, it’s a lot easier of a decision because all it takes is for you to just apply a discount and let people book you. But I’m curious, Sarah and Zeona, when you guys are doing medium term rental as opposed to short term rentals, how much of maintenance like property management maintenance with guests do you feel? Not actual physical fixing thing, but I just mean how high maintenance are your medium term rental guests? Sarah, we can start with you.

Sarah:
I find the same thing. They take ownership of the unit and sometimes they’re even leaving really wonderful things. I had one even improve the closet and say she added shelving because she was there for three months. And so not only are they less maintenance, but they’re actually improving the property along the way and they may need your help getting into the unit or have a question in the first three to five days, but then they fall silent. If they’re saying 90 days to 180 days, that’s like 80 days of peace where you’re not having to, this is how you use a cure egg, this is how you get into the unit and that’s what I like about MTR versus STR.
I just want to touch on, I think it’s really important of what you said, that you are making less money as an MTR because you bought in places that are really stellar STR markets. But some of Zeona and I’s units are in places where short term rental doesn’t really work. And so therefore, MTR is not only more because your occupancy’s higher, but it’s significantly more than it would if I was a long term rental.

Rob:
Yeah, that makes sense.

Zeona:
Yeah. And I just wanted to say because you were talking a little bit earlier about should I change my short term to medium term? It doesn’t have to be as dramatic as that because you can just utilize the strategy for your slow times. That’s what we do at a few of our places that are sometimes short-term rentals is that you’re just going, “Okay, it’s going to be winter season, that’s our slow period, let’s get someone in for three or six months just to abate some of that.” That would otherwise be only weekends, right? I like it for that. Then for people that are trying out this strategy coming from the long term rental side, one thing that we say is like, “Yeah, maybe you don’t want to spend the money to invest in furniture and ones you already own, but if you’re going out and buying new places now, it’s really hard to find long term rentals that’ll cash flow.” And so this is a great strategy for that because now even with the high prices, even with the high interest rates, you can still get cash flow in medium term.

David:
I like that it’s a hybrid. You don’t have to choose long term or short term. That’s actually brilliant during the slow seasons. You can put it on Furnished Finder or we’ll ask you guys later some of the better places where you advertise these. And when you don’t need to, just get more income, putting it on the short-term rental vacation sites, that actually makes a ton of sense. You don’t have to change anything about the property. It’s already set up to be doing both. What are some of the key considerations that people should take into consideration when they’re going to go the medium term rental route as far as being an asset manager?

Sarah:
Yeah, I love talking about asset management because I don’t think it gets some of the shiny headlines that other topics do. And I think as an investor, you have to be an investor. And so one of the things you need to keep in mind if you’re going to switch to medium term rental is that you need to have systems in place. And so if you’ve never run a short-term rental before or any furnish rental, you’re going to need a great cleaner, you’re going to need multiple handymen because these guests do expect things to be fixed. It’s probably a little quicker than you would on your long term rental. I call it my vendor list. And my vendor list doesn’t have one plumber, it has five plumbers. And so if you’re thinking about having a medium term rental, you want to build your on the ground team.

David:
That is very wise. I have the same thing because I have rental properties all across the country. Every time we get a new one or anytime we have a problem with one that exists, we add that vendor to our vendor list. Every state, I have a property, every city I have a property, I’ve got every plumber that we’ve used in the past, every handyman, the person that can hang a door because you don’t want to be going online and looking for a new person every time you need something because you didn’t take five seconds to throw them on your spreadsheet when you had them. That is a very, very good little quick tip there to mention. Zeona, what about you? What do you think when it comes to being an asset manager? What’s some advice that you can give our listeners?

Zeona:
Yeah, so when we were at BPCON, this was great. A person in the audience came and talked to us later and she was saying that they own an 8-plex and that most of the units were two bedrooms, but they had a couple that were one bedrooms and the two bedroom units would rent really fast long term. They had no problem with that, but then these one bedrooms would be hard to rent. They couldn’t really get tenants for it and they were struggling and they looked at each other and they were like, oh my god, this MTR deal now there’s going to be so much demand for these one bedroom units because they’re perfect for this strategy. There’s so many nurses that want to just live alone or a digital nomad or somebody that’s doing a renovation in their house or whatever. It can be great for a couple or just a single person.

Rob:
Yeah, I’ve had every single one of those at my medium term rentals. I’ve had families that were wanting to move to that specific neighborhood. A lot of people, especially in LA, I mean it’s expensive to buy a house out there, right? A starter home out there could easily cost six, $700,000 up to a million dollars just to get into something. It’s a lot of money. And so a lot of people want to go and stay in the neighborhood and feel like, okay, hey, do I like it here? Do I actually want to spend the money in a neighborhood like this? I’ve also had people that were traveling nurses, I’ve had groups of traveling nurses stay at my place. I’ve had people that were remodeling their kitchen for an HGTV show that they were like couldn’t really tell me too much about, but they’re like, “It’s a famous show, I’m not allowed to say anything.” And I was like, well, I gotcha. I got blackmail on you because you just told me but…

Sarah:
Was it in Denver? Because there’s a series about build my sex room and I feel like that’s what they were actually talking about.

Rob:
You know what? Let ask some of the…

Zeona:
Wow, David’s face was priceless. He was not expecting that.

Rob:
Cut back to that.

David:
That sounds like…

Zeona:
Build my dungeon. [inaudible 00:26:10].

Rob:
I’ve had a lot of different people stay at my place. Formerly, I thought that families were my favorite people to host in medium term rentals. I would say that perception has been crushed by my last set of guests that were families that stayed there for a long time. I will say in my experience, medium term rentals have brought a little bit more wear and tear than a typical short term rental. Can you guys talk about that, Sarah? Have you ever had anyone in your guest that was… Sorry, have you ever had anyone in your house that was a little bit harder on your home in a 30 day stay than you would’ve with five sets of guests in the short term rental side?

Sarah:
I think that when you allow pets for your medium term tenants, you’re opening yourself up to more damage. I definitely have replaced a couch and a rug because of pets and so that’s a consideration you have to make. I know that Zeona has made the decision to have no pets, which is brilliant. Then I just have found a way to have a great pet fee, a pet deposit as well as a security deposit, and so that’s the money that covered the cost of replacing those items.

Rob:
Yeah. What about you, Zeona?

Zeona:
I actually think short-term rentals are harder on the home just because people are kind of turning in and out so much and they’re more like vacation vibes and they don’t care as much and there’s a little bit of that hotel, oh, it’s not my place. I think when people are there a while, they have a little bit more pride of rentership. They like having their home a certain way, they might actually take care of it a little bit better and we don’t have as much damage because they’re not moving furniture in and out like they do in long term rentals. One thing I wanted to mention as an agent myself, I figured David would like this, is that I’ve had so many people moving to the area and then being able to either refer them to an agent in that area or take them on as a client myself when it’s local. I actually think it’s like a secret sauce for agents.

David:
Yeah, I like the point you made. If I was to ask Rob what his biggest complaint was with short term rentals or the biggest detriment to the business, my guess is it would be the freaking partying. The people that come in, they book it for six people and they bring 20 and they throw a huge party on the last day there, they trash the house because they don’t live in their own filth and then you got to go clean it up. But that’s not going to happen in a medium term rental because they got to live in their own filth if they try to do that. No one throws a party at their house, they throw it at somebody else’s house. By making it a medium term rental and making someone live there by nature, they’re going to take more care of the property. And that’s one of the reasons I’m getting into that space because I think you’re eliminating one of the biggest complaints that you’re going to get from short-term rental operators is the parties.
The other is going to be the fact they get held hostage by the guest. Oh, the coffee machine didn’t work, the thing didn’t happen, I need a big discount. You’re not as likely to do that if you’re staying there for three months of your life, it’s awkward. You don’t want to get a bad relationship with your landlord. You’re willing to get a bad relationship with your hotel host that you’re only staying somewhere for three days. I love that you’re not really losing a ton of revenue, but you are eliminating a huge part of the headache of the short term rental space. I wanted to switch gears up. Actually, do either of you have a comment you want to make on that point before I ask the next question? I saw you nodding your heads.

Sarah:
I think of one of the things that I like about this strategy is its less barrier to entry for a lot of investors. So investors out there that have been nervous about short-term rental regulations or just the constant turnover and cleaning and coordination of guests. This strategy is really great for that type of investor. If you’re looking to make more cash flow from your units that you already own or units that you’re about to acquire, this is a really great strategy that isn’t as much work as a short term rental.

Zeona:
I’d like to say that they just do stuff that other guests won’t, like short term rental guests, they won’t change a light bulb, they won’t go get batteries for the remote. There’s things where they’re like, yeah, …

David:
There it is, the batteries.

Zeona:
… we’re a team. We’re living in this home. They’re happy to contribute a little bit more and we save a lot on supplies because they leave a lot of stuff. They might leave really nice shampoos and conditioners or they buy extra of things, and so we’re not having to replace as much in the supplies department.

David:
Thank you. All right. I’ve been dying to ask this question the whole time. I’m sure somebody else is thinking the same thing. When I’m converting something into a medium term rental, how many bedrooms ideally do I want to go for and how do I know if more is better? If I have the opportunity to take a property and turn it into three one bedrooms or two units and one of them has one bedroom, one of them has two bedrooms, what are some factors you would take into consideration when determining if you want a three bedroom medium term rental or a one bedroom medium term rental?

Sarah:
My units are all two bedroom and one bedrooms. I like the smaller units. I find that they’re actually, at the beginning I found that they were less attractive to other buyers. Most people are wanting a bigger unit. If you’re buying a duplex, they’d love a three, two on each side or a two one on each side. I was able to pick up these multi-family properties that are all one bedroom, one bath, and then the cash flow from them are amazing. Does that mean that a three bedroom doesn’t work as a medium term rental? Not necessarily. I just am targeting two bedrooms and one bedroom units.

David:
And so before we move on to Zeona, what is it about the two bedroom that like who’s going to be renting that out? What’s the avatar of tenant?

Sarah:
Yeah, so it’s really interesting. While most of my tenants are traveling nurses, you’re going to see a lot of different tenants. I have a friend Sylvia, who’s investing in Waco and she only has rented to construction workers. Then I have a friend near an Amazon facility and they’re all housing seasonal Amazon workers. And so there’s a lot of other tenants out there that aren’t traveling nurses. In addition, I’ve also housed people going through a divorce or doing a kitchen remodel. And so while most of my tenants are traveling nurses and that gives people a feel for, you should buy an MTR near a hospital, know that their MTR tenants of all shapes and sizes.

Rob:
Yeah, I wanted to say that I actually put my parents home on Airbnb a couple years ago and they were like, basically, my mom got relocated to San Antonio and so my parents’ house, she would basically go back and forth every two weeks or every three weeks because of how the job worked out. And so my dad would go there with her because he’s a romantic, and so their house would be very empty. And so I was like, “Hey, let’s put it on Airbnb.” And it’s in a town called Pasadena in Texas, which is not necessarily a touristy place. It’s actually where a lot of refineries and oil rigs are. Like if you drive to Pasadena, Texas, it’s miles and miles and miles of giant tubes coming out of the ground with smoke, and so it’s not really a tourist destination per se. And so when I told my parents, I was like, “Let’s just do it. I think it’s going to work.”
And they’re like, “Why would anyone stay here?” And I’m like, “Well, let’s just see.” We actually ended up getting so many month long bookings from refinery workers, from refinery workers that were coming in from all over Texas and the company was paying a housing allowance, so they would just split the place, and my parents were making two, three, $4,000 depending on the month on these medium term rentals. It was a lot of money. That’s a lot of money for that specific house because they paid it off, and I think they bought it for a hundred grand or something like that.

Sarah:
If I can, I just want to add that if you’re listening to this and you’re thinking, could my property be a medium term rental? You can list it on Furnished Finder for $99. It’s not a booking site, so no one has the ability to book it and you can just put feelers out there. You can put in the listing description that these are unfurnished photos, but the property will be furnished or you can even use stock images. Just make sure that you’re honest in the description that furnish photos are to come and you can start to get feelers out there and what a cheap way to get a feel for your market and do some research.

Rob:
That’s a great tip. That’s a really great tip. A lot of people stumble on that one too because they’re making this multi hundred thousand dollars investment, 2, 3, 4, $500,000 for a house and like, “Oh, I don’t know. Am I going to make money? Am I not?” Then it’s like, hey, spend 99 bucks on Furnished Finder and they’re like, oh, yeah, I don’t know, 99 bucks. Don’t know if I can swing that, and it’s like, come on. Just it’s like it’s fine because I had the same struggle I find with people that don’t want to buy rental house on AirDNA or whatever. Sorry Zeona, I didn’t mean to cut you off.

Zeona:
[inaudible 00:34:47].

David:
Well, now that Zeona has had Sarah answer very thoroughly and Rob answer very thoroughly, now you have to try to find the crumbs that might’ve been missed and you’re like, okay, where can I contribute here? So don’t feel bad if they’ve already taken your answer, but what’s your feedback on how many bedrooms someone should be looking for in one of these units?

Zeona:
I also really like one bedrooms and it’s for a similar reason as Sarah, Sarah’s bought in a multi-unit, so she’s got a quad and duplex. But for me, I’ve bought a lot of condos and so the one bedroom condo is just a less popular product. People if they’re going to go out and finally buy a property, they want two bedrooms or more. I found that you can get a lot of discounts, it’s great opportunity to get in there. I actually really love that. A lot of investors hate condos, so it’s kind of nice to just have a different avenue if you’re looking at it differently, you’ve got a different lens. Then I was going to say that digital nomads are people that I see a lot in the two bedrooms. My partner and I are digital nomads and it’s always like, okay, where are you going to work? Where am I going to work? Because we’ve got to have some separation when we’re on calls or podcasts or anything like that. And so it is nice to have two bedrooms when you’ve got that kind of situation.

David:
I think that’s a brilliant strategy, especially in a hot seller’s market when you’re just like, I can’t get anything. You guys are both agents, so you’ve seen what that’s like when we’re in a bit of a nice little pause right now, thank God, where you can actually, buyers have an opportunity to get something for the last eight years. You’re like, oh, I have 70 buyer clients and I put one in contract every month. It’s terrible. But in this strategy, like you said, Zeona, it’s a condo, people don’t want them as much. It’s a one bedroom condo. People don’t want those as much. You actually can make that work and you can go after a motivated seller when everybody else is having a hard time getting a property at all. So I love that, especially in that situation.

Rob:
Yeah, this is very enlightening to me because as a short-term rental investor, one bedrooms are very rarely on the docket for me. I mean, it’s just a non starter for me, all I really want these days are 3, 4, 5 bedroom pluses. I mean, I own one bedrooms if it’s a tiny home and that’s the specific gimmick or the marketing niche that I’m going for, no problem. But a one bedroom condo is something that I wouldn’t even look at no matter how cool it is because the way I think about it is partially beds and heads, but also how much can I actually gross on a one bedroom place?
I am curious, I think you guys mentioned that you book for, you said you only need four every year and you’re doing three month bookings at a time. Is there a specific strategy that you employ whenever you’re trying to get a three month booking? Because for me, a lot of my midterm stays usually start as 30 days stays. Shout out to your book, but they will typically transform to 60 or 90, sometimes 120 days. Is there anything that you do to get longer bookings? Sarah, we can start with you.

Sarah:
Not necessarily. I have it listed on Furnished Finder and like I mentioned, I’m near a large hospital complex, so a majority of my tenant base are traveling nurses and their contracts are 13 weeks. That’s my clientele. I don’t think there’s anything that I’m doing on Furnished Finder in particular to attract them. But I know that Zeona, you have a different strategy when you’re listing on Airbnb as far as the timeframe that you have open.

Zeona:
Yeah, so when I have medium term only places, so there’s some places that I have that can be short term, but then there’s some cities like Denver and Boulder where you can’t do anything less than 30 days. If I’m doing something like that, then I only open my calendar five weeks out. And the reason for that is that I am fine attracting just one month stays, but I don’t want a lot of vacancy in there. I don’t want somebody to be able to book with a three week gap that I won’t be able to fill.
You have to be a little bit strategic about it. And I don’t let people instant book, I have them make a request because what I’ve found is a lot of these people are driving, they might be going to Austin next or whatever and they have their car with them. And so they might come out two days early or two days later. And so you can massage those dates so that you don’t have as much vacancy. I thought it might be interesting to go into the numbers of a one bedroom condo I have. Would that be helpful?

Rob:
Yeah, definitely, because I wanted to ask about analyzing these things.

Zeona:
Yeah, so last year, so it was March 2021, which was super high time. It was really hard to get anything not over asking and everything. It was just very competitive. I had a friend who just was breaking up with her partner and she was like, I’m thinking I might go look for a one bedroom apartment, I’m not sure. And so I thought, okay, let me just take a look at what’s here in Boulder, and I found this great little one bedroom that just totally renovated and she wasn’t interested in it. And so I was like, okay, maybe I’ll just buy this and maybe I can have her rent it from me or something like that.
And so I bought it for 255 and my PITI, it’s 1250. And so with that, I could probably rent it long term for about 1,250 to 1,400, something like that. But with a medium term, I can get 2,400 and that’s kind of the normal price. But because it’s also seasonal, a short term rental in June, I can get 3,000, in July, I can actually get 4,000. And so I’m actually okay with these one month stays that they can actually make us a lot more money.

Rob:
Yeah, that’s awesome. Generally speaking, I believe it, I mean, for the most part in my mind, they’ve always outperformed long term rentals. And like I said, they really aren’t even in some of the areas that I’ve seen them or done them not terribly far from the short-term rental income either, but I have a very specific formula for how I analyze short-term rentals. Zeona, when you’re actually in the throws of analyzing your medium term rental, is there any kind of formula or process that you take to do so?

Zeona:
We both talk about analyzing them like you would a long-term rental actually. You only have to add in a couple more lines because there’s just not as many expenses as the short term rental. You’re including utilities, you’re going to have to budget for furnishing, but it’s really not that different.

Rob:
What about you, Sarah?

Sarah:
Yeah, that’s the exact same. There’s three things that increase your upfront renovation costs, includes furniture, your utilities increase, and then the best thing is your rent increases.

Rob:
Yeah, I had a student who has a place out in Anaheim and like you were saying, Zeona, it’s like they have the regulations out there too, so she does it 30 days at a time. And she says that when she’s buying her property, she’s typically doubling what a long-term rental is and she’s starting there. Obviously, that projection is like a long-term rental, medium-term rental, short-term rental. I think she said on a long-term rental, she was making, or I wanted to say it was like 2,500 to 3,000. She was budgeting for a medium term to be anywhere from five to 6,000. Then if the regulations allowed it, a short term rental would probably be like eight to $10,000.
And so she says anytime she doubles what the long term rental is, and that’s just a quick rule of thumb, obviously, it’s not going to apply across the board, but she’s been getting that pretty consistently and she starts with doubling it and then she’ll go and basically just run comps on the market and stuff like that. But curious if there are, when you’re doing any kind of tools or anything like that, is it AirDNA or All The Rooms or Mashvisor? Are any of these big platforms for short term rentals usable when you go into the strategy? Or are you just going straight long term analyzation strategy?

Sarah:
There is a resource for medium term rentals, it’s called Furnished Finder. It’s the same place that we list our units and it’s where a lot of traveling nurses look, but they actually have a really robust statistics page. It’s Furnishedfinder.com/stats, S-T-A-T-S, and you’re going to get a lot of that information there. What happens then is then I have clients that come to me and they’re like, “Okay. Yeah, but what do I do with this information?” And so that’s when you really have to put your thinking cap on and you have to think, okay, what’s my population in my market? Like 30 inquiries this year for a two bedroom, one bath in my zip code, is that enough for my unit to stay vacant or so I stay occupied or is that not enough? And so I can’t give a number that works for every market across the country. That’s where investors really need to put their thinking cap on. But I really like that resource because that’s where you’re going to get your tenants.

David:
That is an incredible resource. I just typed it in when you said that, and I typed in the city of one of the houses where I’m looking to put one and it shows in the last 12 months that they have had 127,000 searches for housing requests in that area and map and property listing page views of 730,000. I would imagine those are pretty solid numbers. That’s a lot of people looking for a house. Probably all I need to know is say yes, let’s move forward with putting an offer on that property.

Sarah:
Then look at your competition in that area, and you’ll see that, I mean, I don’t want to PAFO on anyone, however, there’re really ugly units on Furnished Finder. And so you don’t have to be as beautiful a STR as what Rob does. You just have to beat out your competition. I like to use the analogy, if a bear is chasing, you don’t need to be faster than the bear. You just need to be faster than your friend. And so when you’re looking at Furnished Finder, you don’t have to be the most beautiful unit on Airbnb. It’s a lot easier to be the most beautifully decorated unit on Furnished Finder.

David:
It shows you how many total rooms are available for rent. It shows you how many houses are available for rent. It tells me that this city ranks 148 in the entire state of California. This is very, very good information.

Rob:
David just became the ambassador for Furnishedfinder.com.

David:
Well, you don’t only have to pay for it just showed up right there, but that’s that. When you’re an agent and you’re working with a client who’s trying to figure out, should I buy this property? They have all this what if going through their head, that’s a very solid security blanket that you’re getting that this is how many people are looking to rent a space where you’re at. I mean, it’s pretty cool that it’s easy to find that information that it’s not behind a bunch of paywalls or that it’s not accurate.

Zeona:
The other thing about Furnished Finder is like if you search it as a client, so you just put in whatever city you’re in and then the number of bedrooms that you’re looking for, it just pulls it up on the map and you can search right around there what people are actually charging per month because they have static rents listed there. It’s not like Airbnb where you’re seeing a nightly rate, but every night could be a different price and it’s hard to understand that data. I find it really useful that sometimes I just get curious and I’m like, “Okay, what does San Antonio look like versus Omaha or something like that?” And you’ll find that certain states just don’t have really high medium term rental rents yet and their pricing is still too high. You’ve got to find ones that have the right margin, but you can do a search around the US really quickly.

Rob:
Yeah. We’re going to hit the deal deep dive here in a second, but I have a couple of selfish questions before we move on because I know a lot of people probably are wondering this at home. And so when you go to the medium term avenue, I’m curious, you’re going over 30 days a lot of the time. So that sort of takes you out of the short term rental laws and regulations that might protect you in that aspect. When you’re renting to people 30 days at a time, does that require a lease? Is a lease a standard operating procedure for both of your businesses? Sarah, we can start with you.

Sarah:
If they are booking outside of Airbnb, then I am setting them up with a lease.

Rob:
Within Airbnb, you’re not simply because Airbnb has a trust and safety team that can have your back?

Sarah:
And they don’t really like it when we move guests off the platform.

Rob:
Oh no. I mean, if you have a guest that books on Airbnb, let’s say for 90 days, is it fair to ask them to sign a lease in addition to that reservation on Airbnb?

Sarah:
Oh yeah, great question. I have not done that. I find that the protections within Airbnb keep me protected. But if they’re finding me on Furnished Finder, then I’m setting them up with a lease.

Rob:
What about you, Zeona?

Zeona:
Yeah, so I also don’t do it, but I’ve heard people in California specifically being worried about squatters and evictions, so you could. If you’re worried about it, just add that extra layer of safety. I know that Airbnb is trending more towards these longer stays, so they’ll probably be putting in more automations. I’m hoping to see that coming forward where they’ll have, this is the guest name, let’s just put it in this pre-made lease, and then it’s just electronically signed. I think that it’s like the old days of short-term rentals that there just wasn’t any software before and you had to do it all yourself, and then now there’s so many companies that you can pay for all these automations. I think we’re just a little bit behind still for the MTRs.

Rob:
That makes sense. I don’t do it when I do it on, I really primarily do the medium term rentals on Airbnb and I’ve always felt the same way, Sarah, like the trust and safety team there, for the most part would probably have my back on those types of issues. But I am starting to lean more towards just adding that extra step of having a lease sign that sort of has basic protections like, “Hey, if you damage this or this or this, this is what we would charge.”
But I guess the other thing for me, like I said, the wear and tear has been a little tougher, and Zeona, I know you said that, you think the short term rental wear and tear is a little bit tougher. Honestly wondering, do you have any other cleaning procedures that you do on a property? Because one of the things that I’ve been working towards as of this last stay is that I actually want to have a cleaner come in every single month that a guest is there, do either of you have any beefed up cleaning procedure for your medium term rentals?

Zeona:
I try to have a day in between. As much as I hate vacancy, you can, there’s enough demand to have people check out at 10:00 AM check back in at 3:00 PM and just have a whole new guest. But I’ve just found that when it’s been six months, you don’t know what you’re walking into. And this is part of the reason why I stopped using or allowing pets is that we just say, “Hey, let’s just do a day in between.” And that gives them enough time to assess anything, maybe get the handyman over if we need any of that, and then just do a deeper clean.
One thing that we do, I have Hospitable, I don’t know if you use that for auto messaging, but we can use it in our medium terms as well. And one of the messages that goes out like day three has the cleaners information in it. I’m not currently requiring it because I just don’t want to have to pay that. Even though you’re passing it on, it’s money that you couldn’t charge for rent. If it’s an extra 200 bucks a month, I want to get that as rent. And so what I do offer is the cleaners name, what their rate is and their phone number and they can reach out to them if that’s something they want.

Rob:
Yeah, that’s a great system. I actually think, I’ve had people ask for my cleaner and they’ve used them in the past.

Zeona:
Totally.

Rob:
But I think just after this last guest, I’m telling you, man, they were really, it was a family and look, I’m a family… I got kids, I know what kids do in the house and I’m like, right, I get it.

Zeona:
It’s hard.

Rob:
Yeah, I show some grace to families, but they really stained all of my carpet and I had to get something to come and steam clean all my accent chairs and it was like a whole thing. One of the systems I’m putting in place is just asking for it like, “Hey, happy to book you for more than 30 days. Just note that every 30 days, there will be a new cleaning fee.” And from the people that I know that are in the medium term space that have been doing it, they said that they haven’t had any pushback on that.
I’m going to start doing that simply because honestly, I stayed at my place immediately after that family. Thank goodness I did, I mean, my cleaner did not relay what they were supposed to. I actually had to let them go because of the condition that the house was in. But had I not stayed there, I would not have caught all of the different things that I had to fix. It was supposed to be a 14 day vacation, actually ended up being more like a 12 day vacation, because the last two days were just us touching up magic, erasing the walls, hanging things up again, putting a new baseball. It was like a whole thing. But Sarah, do you have any cleaning procedures or anything like that on the medium term side?

Sarah:
One tip I got from another investor that I now implement is I have my listing photos printed out and laminated and those are given to the cleaner or put in a utility closet. That’s why they’re laminated. If there is a utility closet, it goes in there. Otherwise, they’re just emailed to the cleaner. Because one of the things that’s kind of my pet peeve is that I worked so hard to decorate the units really beautifully. I own a company that does this for a living, and yet during the cleaning turnovers, they’d put the throw pillows in the wrong room or the chair is a weird way. And so to make things easier, I give my listing photos as well as pretty explicit instructions to the cleaner on what to do.

Rob:
That’s good. Yeah, the laminated photos is probably really helpful because theoretically, you would think, oh, they can just look at the listings or the photos on the listing on the phone, and I’m like, they probably don’t do that. I actually also, I didn’t do that, but I just created a whole new checklist specific for medium term rentals when it comes to cleaning, because I found that not only with the medium term rental, you’re not just up keeping the inside of the house, but it’s also the outside of the house. I was walking around my home and everything is dusty, there’s dead leaves everywhere and it’s just a little bit tougher to maintain that.
Usually, in short term rental guests, we come in, we can clean that stuff up, we spot it a lot faster. But when a cleaner is there for a medium term guests, they’re really focused on the inside. Now, I think we’re just going to turn it into a deep clean for every single guest and basically make it a two day thing just because when I have families in there for 60 to 90 days, obviously, it’s pretty tough on everything. That’s it for my selfish questions. David, do you have any other selfish questions before we move on?

David:
No, I think that they’ve done a very good job being gracious guests, answering all of the selfish questions that I have. I guess maybe my last one would be outside of Furnished Finder, which was very helpful, are there other resources that you would recommend that a medium term rental investor should be familiar with?

Rob:
That’s a softball right there.

Zeona:
Our book.

Sarah:
Well, thanks for asking David. We recently wrote a book called 30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium Term Rental. And I know that you would like an online resource, which we’re really excited because our book really walks through every single piece of buying an MTR. So someone could pick up, hear about real estate investing, know nothing about cash on cash return, and then pick up our book. All thanks, Rob.

Zeona:
You got it.

Rob:
Yeah, I just got this in the mail yesterday. I was legitimately stoked. Mark my words, everyone at home listening, this is the next book I’m going to read.

Zeona:
I love that. Well, we’ll check back in because that has a lot of our personal stories in it. We just wanted to make it a little more fun and so we’re going to quiz you later. We’re going to be like, “What do you know about Philippines?”

Rob:
Please do. Please. I want you to. I want you to check in on me in two weeks. I don’t know if I’ll be through it in two weeks, but I’m going to work my way starting tomorrow. I’m going to [inaudible 00:54:25]. I am.

David:
Yeah. Rob’s list of books he’s going to read is like Leonardo DiCaprio’s list of ex-girlfriends. There’s always a new one that he’s like, ah, this is the next one I’m going to read. They just get cycled through, don’t they Rob?

Rob:
That’s true. But I never say which book I’m going to read. I just say I have a list of books. But this one I got it and then I also got Real Estate by the Numbers, so I’m trying to…

David:
This girlfriend is special.

Rob:
Yeah, well, I’m telling you these 30 day guests that I just had or these 90 day guests, they really put some bruises on old Rob here. I’m like, all right, I need to really step up my systems game on the medium term rentals I think. I’m working through that right now simply just for the sake of educating people and how to do it correctly.

David:
Well, I’m glad to hear that, and I also want to publicly tell you thank you for all of the bruises you take for us on that Scottsdale property. You’re my offensive line and you absorb all of that so it doesn’t get to me letting me sit back here in the pocket like Tom Brady and make my throw, so thank you for that, Robbie.

Rob:
Amen, I’m here to make you shine my friend.

David:
Ladies, I know we’re going to talk about it later, but where can people go if they want to get a copy of that book? Does BiggerPockets have a landing page set up specifically for it?

Zeona:
They do. It is Biggerpockets.com/pod30. And if you use Sarah or my name, you can get 10% off and Sarah’s with an H and my name is Z-E-O-N-A. You’ll see it in the show notes.

David:
While you’re there, you might see another book that you like because BiggerPockets dominates the publishing world in the space of real estate, which means that Sarah and Zeona have basically entered into the hall of fame before they’ve even sold a copy. If you use the name David or Rob, you can also get 10% off any other book in that entire bookstore. Here’s my recommendation, buy all of them, put them on a bookshelf and then tell everyone you know, this is the next book that I am going to read and never read it, and you can be as cool as Rob Abasolo.

Rob:
Here’s my recommendation, use promo code Rob, not promo code David.

David:
Yes, I will give you that home field advantage. All right, we’re going to move on to the next segment of our show. This is the world famous Deal Deep Dive. In this segment of the show, we dive deep into a particular deal that our guests have done. Sarah, we’re going to start with you. Do you have a deal in mind that we can ask you questions about?

Sarah:
Yes. I have never talked about this deal on a podcast, so you’re hearing it here first.

David:
Ooh, behind the scenes look. We’ll ask you the question so you won’t have to go through the whole thing here.

Sarah:
Okay, cool.

David:
First question, what kind of property is it?

Sarah:
Duplex, a side by side duplex.

Rob:
Nice. Question number two, how’d you find it?

Sarah:
My investor-friendly real estate agent.

David:
There you are. Question three, how much was it?

Sarah:
210,000.

Rob:
Question four, how did you negotiate it?

Sarah:
Not well, no, I’m just kidding.

David:
That’s funny.

Sarah:
They asked for 210 and I wrote a check. No, I did get, what did I get? I got brand new roof, I got a brand new roof, brand new windows and some closing cost.

David:
I said they were an investor friendly agent, not a negotiation friendly agent, David.

Sarah:
Yeah. No, just kidding. But yeah, no, new roof, new windows throughout. I was very excited about that.

David:
That’s pretty good, especially with the way that insurance is working these days. Sometimes having those amenities can keep your insurance low because if you’re investing, this is not related to your thing, but just as a public announcement here. If you’re buying anywhere that bad weather is, insurance is insane right now. I recently bought a house to South Florida. The insurance quote was $26,000 a year for insurance on a short term rental. Making sure it has a new roof and new windows can significantly decrease your expenses. Thank you for sharing that.

Rob:
Wow. Wow.

David:
All right. How did you fund this deal?

Sarah:
I had an equity partner and they got a conventional loan.

Rob:
Awesome. And what did you do with it? Was it a flip, BRRR medium term rental?

Sarah:
The inherited tenant on one side, he is still there and kicking and he’s a long term tenant. Then the vacant unit, I did some renovation and furnished it and it is a medium term rental.

David:
All right. What was the outcome of this deal?

Sarah:
The inherited tenant is under market paying 625. Market value is about 900. If I didn’t do anything to his unit, but if I improve his unit, I could probably get 1,200, 1,250. And then for my medium term side, without doing much update to the kitchen, I am getting 1,900 a month.

Rob:
Yeah, I saw that coming. I was like, I know it’s going to be more than that. That’s awesome. Congratulations. I assume once the inherited tenant leaves, will you want to do some work and then turn that into a medium term?

Sarah:
I will. Normally, I’m really liking this kind of hybrid model. A few of my duplexes are medium term on one side and long term on the other. It provides some stability. For those more risk adverse investors out there, that’s a really good way to sleep well at night knowing that you have a long term tenant on one side and also get me through the winter. Frankly, I just didn’t have bandwidth this summer to do a big renovation, and now that it’s winter in Iowa, I’m not going to mess with vacancies and renovations, so I’m going to wait until the spring.

Rob:
Yeah, that’s cool. My house in LA was the trifecta. I had a studio underneath with the long-term tenant. My tiny house was short-term rentals and my main home was a medium term rental.

David:
Wow. You hit for the cycle.

Rob:
I’ve done it all. What lessons did you learn from this deal?

Sarah:
Yeah, lessons I learned are, spend money while it’s vacant. There were some repairs that I was like, oh no, I’ll wait until that thing breaks. Then of course, four weeks later, it broke in the middle of a medium term tenant being there. And so if you have the time, money, and energy, just go ahead and improve some of the systems when it’s vacant.

David:
All right. On this deal, who was your hero?

Sarah:
The investor friendly real estate agent. He sends me great deals. I send him a text message exactly what I’m looking for, letting him know I’m a 100% committed to buying, and then within days, he sends me a deal.

David:
All right. I’m going to send him a copy of my book Skill, which he can find at Biggerpockets.com/skill so he can learn how to negotiate better for you and get a better review the next time you do a Deal Deep Dive and more clients, but good job [inaudible 01:00:56].

Rob:
And if he uses promo code Rob, he can get 10% off as well.

David:
Yes. Please make sure he knows that. We need to figure out some way to get Rob some value to be given in this situation. That’s 10% Rob, right there. All right, Zeona, same question. Do you have a deal that you’d like to go over with us?

Zeona:
Sure. I already went through one, but I’m happy to do another. Let’s go for it.

David:
We’ll go through the questions quick and you can just repeat the stuff that you already said and if there’s new stuff then we’ll expand on that. Question number one, what kind of property is it?

Zeona:
It’s condo.

Rob:
How did you find it?

Zeona:
Well, I found it myself on the MLS after that girl got out of her relationship. It’s perfect.

David:
You are an investor-friendly agent yourself.

Zeona:
I am.

David:
I suppose you used a stellar investor-friendly agent to find your own deal, right?

Zeona:
Yes, myself.

David:
There’s a line in Braveheart where the guy says something like in order to converse with his equal and Irishman is forced to talk to the God Almighty or something like that. That’s what it reminds me of. In order to get an agent worthy of my level, I had to use myself to find my own deal. All right. How much was this deal?

Zeona:
It was 255, but it was listed for 265 and I still got it under asking. Then when you’re a real estate agent, you actually get their commission back, so it was even less than that. Yeah, I would think I got 7,000 back at closing.

Rob:
Very cool. And how’d you fund it?

Zeona:
I just got a regular loan. This one actually was sitting on the market for two weeks because it was a non warrantable condo, which just means that there’s not enough owner occupants in the building, which really common in Boulder. And so nobody could get a loan on it, and so it would have to be a cash only deal. I just jumped on the phone and called everybody I knew until I found one that would say yes. Sometimes you just have to be persistent.

David:
That’s right. And what did you do with it?

Zeona:
Furnished it right away. I was lucky enough that I was selling another condo that was a three bedroom Airbnb and she needed to get rid of all of her furniture really fast. I sent my friend over and she picked through the furniture and then got everything we needed for the one bedroom.

Rob:
Very cool. And what was the outcome?

Zeona:
Yeah, it’s a great rental. I had somebody move in that was renting. I owned the unit two doors down, so she was renting it from Airbnb and was like, “Hey, I’m going to extend.” I moved her over to this unit and she stayed in it almost a year and it was at a 16% cash on cash return. I was feeling really happy about that, and then she bought a property from me. So win, win, win all around.

David:
That’s exactly right.

Zeona:
Chicken dinner.

David:
When you make your living within real estate, you get those multiple wins out of the same deal. I live with that.

Zeona:
It’s good. Yeah.

David:
All right. And who was your hero on this deal?

Zeona:
Okay, so the whole time I was doing this deal, I was in Maui, and so this deal was in Boulder, Colorado. And I had to have an agent on my team go, check out all the furniture, moved it all in, staged the whole place, get it ready for my tenant. All of that happened from Amy, so she’s amazing.

David:
All right. Thank you very much for sharing your information on your Deal Deep Dives. Those are incredibly helpful. And remember everyone listening, you two can do more deals with the help of BiggerPockets. Simply click on resources and you can find agents that can help you find properties and other vendors that can be the hero on your deal.

Speaker 5:
Famous Four.

David:
All right, moving on to the last segment of the show. This is the world famous, Famous Four. In order to avoid the confusion that I have frequently brought on YouTube, we will start by having Sarah answer and then Zeona answer each of these questions because I can see how this could get out of hand. Question number one, what is your favorite real estate book?

Sarah:
My favorite real estate book is Raising Private Capital by Matt Faircloth.

David:
Lovely book. Matt is also a lovely man. We just got to see him as San Diego. Zeona?

Zeona:
My favorite real estate book lately is Profit Like the Pros. Ken Corsini wrote that one for BiggerPockets and I think it’s really fun for people that are new and want to learn about a bunch of different strategies to figure out which one is theirs. It’s such a fun read where you’re just like, “Oh my God, I want to do that. Oh my god, I’m so inspired by this.” It’s a lot of cool case studies.

Rob:
Awesome. I mean, if you use promo code, Rob, then you get 10% off, which is awesome. Great. Favorite business book, we’ll start with Zeona this time.

Zeona:
Gosh, I always get the same one, so I’m not going to do that this time. I think Traction is a really good business book. Yeah, let’s go with that one, Traction.

Rob:
Sarah?

Sarah:
I like Made To Stick, which is under by Dan and Chip Heath. It’s why some ideas survive and others die.

Rob:
Oh, all right.

Sarah:
It’s really good.

Rob:
Okay, question number three. Sarah, whenever you’re not out there dominating the medium term game, what are some of your hobbies?

Sarah:
I travel full time. I’m actually calling in from Bangkok, so I think it’s four in the morning in the future. And I own an events’ company, so now I actually get paid to travel, which is dream job.

Rob:
Very cool. What about you, Zeona?

Zeona:
I love water sports, so I grew up in Maui and I’m actually in Maui right now. And so I love surfing, paddle boarding, anything in the water, snorkeling, all of it.

David:
Are you anywhere near Kihei?

Zeona:
I am in Kihei as we speak.

David:
Really?

Zeona:
The other day I actually paddled out and Brandon and Josh were there. So guys, if you want to stalk the BP guys, just come out here and start surfing.

David:
Yeah, that’s where I have a couple condos out there. Not too far away from where Brandon lives.

Zeona:
There you go.

Rob:
Batman themed condos.

David:
Are the whales out there right now?

Zeona:
Not yet. They come in a few weeks. By the time this airs, it will be whale time.

David:
It’s super cool when they come, you could just look out there and they’re just everywhere jumping out of the water. Very awesome. All right, my last question. What sets apart successful investors from those who give up, fail or never get started, Sarah?

Sarah:
Being coachable. I think when you are stuck in your own ways and unwilling to change, especially with the changing market or Rob in your case, like changing tenants and tenant demands, you are not going to succeed. So you have to be coachable, trainable, and flexible.

Zeona:
I think it’s important to be uncomfortable and be okay with that because it means that you’re growing. And so it’s like being in new groups, putting yourself out there, just like trying new things. Being scared a lot. I like to say that I’m scared of everything and I’m just constantly trying and doing it anyway. And so I think that’s important to be uncomfortable, get used to it.

David:
It’s uncomfortable or comfortable paddle boarding around whales, but that is something that is also very cool.

Zeona:
It’s scary actually, but beautiful. They’re huge.

David:
They are. Yes. I mean, everyone knows whales are big, but when you actually see one when you’re in the water, it’s bigger than you can picture.

Zeona:
Like under your board.

David:
Yeah.

Zeona:
You’re just like, holy man.

Rob:
Awesome. Well, lastly, can you tell us where people can find out more about you on the internet? And just a friendly reminder to everyone at home to go back and listen to episodes 553 and 563 for more interviews with our awesome, awesome guests today.

Zeona:
I can be found at Zeona McIntyre, Instagram’s probably the best place and you can DM me there and I respond to all my DMs.

David:
Can you spell that for us, Zeona?

Zeona:
Z-E-O-N-A, McIntyre’s M-C-I-N-T-Y-R-E.

David:
And if you think that ZMac would be a cool name for Zeona, please DM her.

Zeona:
Everybody wants to give me a nickname.

David:
ZMac. I just feel like it’s such an opportunity that like God blessed you with. And if that was me, I would insist that everybody had to call me ZMac. [inaudible 01:08:38].

Sarah:
David, what’s your nickname?

David:
I don’t have one. I have such a basic boring name. How do you make something cool out of David Greene? Right?

Sarah:
Hi, I’m Sarah Weaver. There’s not a lot of nicknames there.

David:
Zeona doesn’t realize what she’s got, right? We’ve craved our whole life to have a cool name like that, and I’m just like a white bread.

Rob:
My parents had the foresight to name me Robuilt, so this is not an issue for me.

David:
Very, very nice. If my name was a spice, it would be flower. That’s how boring it is. All right, Sarah, where can people find out more about you?

Sarah:
My website Sarahdweaver and my Instagram is the same thing, Sarahdweaver.

David:
And can you spell it for us?

Sarah:
S-A-R-A-H, D as in David, Weaver, W-E-A-V-E-R.

David:
Thank you very much for that. And Robuilt, if people want to find out more about you, where can they?

Rob:
Oh, they can find me on YouTube at Robuilt, on an Instagram at Robuilt and on my birth certificate at Robuilt.

David:
Not Robuilt underscore, not Rob.built, not underscore Robuilt. Please be very careful, everybody is getting hacked these days and stealing money, so do not send any of us that’s on this show money. The jerks that are out there that are doing this are probably watching this episode. They’re probably making fake profiles for Sarah and Zeona as we speak and they’re going to be hitting you up asking if you want to donate money to their cause. Please don’t do that. You can find me at Davidgreene24 and message me there. You can also miss me on the BiggerPockets platform or YouTube at David Green Real Estate.
All right, this has been an amazing episode and I appreciate you guys for sharing such useful information. A lot of the time people want to just kind of say, ah, here’s the gist of it, buy the book to get the rest. You didn’t do that. You gave us very good stuff. If you’ve shared this much on the podcast, I can only imagine how much good stuff is actually in that book. So head over to Biggerpockets.com/pod30, use the name David to get 10% off and forget that Rob’s name even exists. Zeona, any last words before we let you get out of here?

Zeona:
I just really appreciate being here. Thank you guys. We’re excited to get this info into people’s hands because we do really think it’ll help them.

David:
Sweet. Sarah?

Sarah:
Reach out if you need anything. We love hearing from people. It really means a lot. As Zeona said, we read all of our DMs and we love it when you guys reach out. So reach out to us on Instagram.

David:
And Rob?

Rob:
Oh, go buy the book. Go buy the book. I’m excited. Beat me to reading it. I don’t know if you can. I’m starting tomorrow. Tomorrow’s the day, my book diet.

David:
Beat Rob to reading a book’s the lowest bar ever set…

Rob:
That’s very true.

David:
… in history of bad kind. All right, thank you very much ladies. We appreciate you. We’ll let you get out of here. This is David Greene. For Rob, definitely not a library Abasolo signing off.

 

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Since the beginning of the coronavirus pandemic, the Newfoundland and Labrador real estate market has seen the best of times and the most modest of times. In other words, the Atlantic Canada housing market has enjoyed a pandemic boom, but prices have not mirrored what was taking place in British Columbia or Ontario.

Despite climbing interest rates that have ostensibly impacted many major urban centres, small towns and rural communities across the country, Newfoundland and Labrador have held steady. The province and its municipalities have not fallen off a cliff. Instead, despite waning demand, prices have remained intact and affordable.

So, what occurred in the eastern province’s real estate market? Let’s explore the latest data!

A Spotlight on Newfoundland Real Estate

New real estate association data confirmed that demand is showing signs of cooling off in one of Canada’s most affordable housing markets.

According to the Newfoundland and Labrador Association of REALTORS® (NLAR), residential property sales tumbled 4.7 per cent year-over-year in August, totalling 667 units. Year-to-date, home sales were relatively flat from the same time a year ago, with 4,229 units exchanging hands in the first eight months of 2022.

On a historical basis, home sales were 16.5 per cent above the five-year average in the Newfoundland and Labrador real estate market. They were also nearly 30 per cent above the decade average for this time of the year.

Newfoundland and Labrador real estate prices remained strong in August, as MLS® Home Price Index (HPI) surged at an annualized pace of 8.9 per cent in August to $286,000. The overall composite HPI benchmark price index is considered more accurate than relying on average or median price measurements.

Meanwhile, prices for various residential property categories continued their upward trajectory from a year ago. Here is how these housing types performed in August:

• Single-Family Homes: +9% to $288,000
• Townhomes: +5.9% to $276,200
• Apartments: +10.4% to $222,000

The average sales price for homes sold in August jumped 8.1 per cent year-over-year to $300,490. Year-to-date, they were also up more than seven per cent to $292,714.

The Newfoundland and Labrador housing market conditions were robust because of inadequate inventory levels in August.

The number of new residential listings tumbled 16.8 per cent to 889 new units, the lowest reading in the month of August in more than five years. Active listings were down nearly 34 per cent to 3,069 units, a decade low. New listings were 11.4 per cent below the five-year average, while active listings were close to 38 per cent below the five-year average.

Months of inventory, which gauges the number of months it would take to exhaust current supplies at the present level of sales activity, dropped from 6.6 a year ago to 4.6. This is also below the long-run average of ten months for this time of the year.

New housing construction activity has been decent, according to fresh statistics from Canada Mortgage and Housing Corporation (CMHC). Housing starts totalled 90 units in August, up 50 per cent from the same month last year. Year-to-date, there have been 535 housing starts, up more than 39 per cent from the first eight months of 2021.

How is the St. John’s Housing Market?

Residential sales activity slowed down considerably in the St. John’s real estate market. But local housing experts contend that this may have more to do with demand outpacing supply, as competition is still sizzling amid the broader Canadian real estate market downturn.

NLAR data show that home sales were down 11 per cent year-over-year in St. John’s, with single detached home transactions plummeting more than 22 per cent.

The overall MLS® HPI composite benchmark price for homes in St. John’s advanced by $322,500 in August, up 8.4 per cent year-over-year. In addition, the benchmark price for single-family homes in St. John’s surged 8.8 per cent year-over-year to $334,100. The benchmark price for townhomes jumped 5.9 per cent, while apartment prices spiked 11.8 per cent to $221,500.

“The story is different elsewhere in the country. In the rest of the Prairies and the Atlantic Region, prices are holding up better,” TD Bank wrote in a research note. “The former has been supported by some of the best affordability conditions in the country, while the latter region is drawing support from robust population growth and relatively tight conditions.”

What About 2023?

While higher interest rates were expected in 2022, many market analysts did not anticipate the Bank of Canada (BoC) would be as aggressive as it has been. This is mainly because experts did not think inflation would run this high for this long. Therefore, the prolonged slump in the Canadian real estate market may be slightly more surprising than initially expected.

So, does this mean 2023 could be preparing for a significant crash? Industry analysts have been apprehensive about using the term “crash.” Still, they have warned about notable corrections and sharp downturns throughout the country’s housing sector, except for perhaps Atlantic Canada.

Although TD Bank is projecting a 20 to 25 per cent decline in average home prices in Canada in the first quarter of 2023, the NLAR thinks conditions will be a more tepid decline of two per cent in prices in 2023.

Mindy:
Welcome to The BiggerPockets Money podcast show number 347, where we interview Nick Maggiulli and talk about money and investing.

Nick:
I have actually never looked at the market to try and decide when to put money in. I just buy regardless. I don’t care about that because I’m doing this for the long term. If I’m going to be investing for the next 40 years, in my early 30s now, I’m doing this for the next 40 years. Why do I care about the price right now?
Look at the price 40 years ago. Do you think people are… People are probably equally obsessing over that day and now it doesn’t matter. It’s like the annualized returns are like whatever, 7.7 versus 7.8 or whatever it is. I don’t know what the exact 40 year return was, but it’s like that’s how small the difference is over getting right in at the perfect time or not.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and with me as always is my equities super fan, co-host Scott Trench.

Scott:
The only thing I like more than equities is the bonds that we have with you, listeners.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or just buy investments for the entirety of your life. We’ll help you reach your financial goals and get money out of the way so you can launch yourself toward your dreams.

Mindy:
Scott, I am super excited to talk to Nick Maggiulli today. He is the author of a new book called Just Keep Buying, which is kind of my philosophy for investing. Buy up, buy down, buy. Buy, buy, buy.

Scott:
Yeah. Nick is a money nerd, expert authority, in my opinion, in the same vein of Michael Kitces, Bill Bengen and some of these other guests that we’ve had like Jim Collins on the show. I think he’s a fantastic knowledge center for the world of investing.
I learned a lot from him both from his book, Just Keep Buying and from the conversation we had today. I can’t wait for you guys to hear it and think he’s just a rockstar in this space.

Mindy:
Nick Maggiulli is the chief operating officer and data scientist at Ritholtz Wealth Management, where he oversees operations across the firm and provides insights on business intelligence. He is a huge numbers nerd, so he will fit right in with the rest of us here.
He is also the author of Just Keep Buying: Proven Ways to Save Money and Build Your Wealth. Nick, welcome to The BiggerPockets Money podcast.

Nick:
Thanks for on, Mindy. Thanks Scott.

Mindy:
I’m super excited to talk to you. I just finished your book and I have a lot of questions. First of all, I have a lot of praise. I love it. Yay. I have a problem with you putting Chapter 14 all the way at the end instead of at the beginning, “Even God can’t beat dollar cost averaging.”
This is my absolute favorite chapter because not only do you make this very bold prediction, you’re like, “I want to read more about this.” You back it up with numbers and data, kind of your thing, to prove that dollar cost averaging is not the way to go when you’re investing, to save for buying the dip. Actually, let me let you explain that a little bit better.

Scott:
Yeah. Could you explain why you shouldn’t wait to buy the dip and why even God can’t time the markets perfectly?

Nick:
Yeah, so in the thought experiment, I give you two choices. You can either buy stocks every month and this is just 100% stock, S&P 500 US stock portfolio, or I’m going to tell you the lowest point between two all-time highs and you can buy all those. Basically, you buy the lowest point between two all-time highs. You buy the dip basically. So for example, the most recent, the biggest recent dip was obviously March, 2020. You would’ve known about that ahead of time. You could’ve saved cash, waited for that bot then instead of buying every single month.
Most of the time if you do that, like 80% of the time, you actually outperform if you’re just buying every month, versus someone who even knows the future and knows where the dip is, knows where the bottom is. Of course, there’s some other things in the simulation that don’t make it-

Scott:
Why is that?

Nick:
Why does that happen? It basically happens because the market tends to go up over time and those dips, when they do occur are usually at a higher point than where you could have bought originally. Now, I’ll give you an example to explain this. I actually wrote a blog post called Just Keep Buying literally four years to the day before the book came out.
Actually, no. I’m sorry, five years to the day before the book came out. At the time all of these people were saying, “This doesn’t work because valuations are too high and the market’s overvalued.” This was in 2017. Early 2017 I was hearing this criticism, if you had just held cash, people said they were going to buy the dip. “I’m going to wait until the next big crash.”
Let’s say you held cash and you held and held and held from 2017, 2018, 2019, et cetera. And then you bought on the exact day of the bottom, March 23rd, 2020 during the COVID crash, which is the biggest most recent crash that we’ve had.
If you had bought exactly on that day, you still would’ve bought at prices 7% higher than the prices you could have gotten early 2017. That’s why buying the dip doesn’t work because those big dips are rare and because they’re rare and they don’t happen that often, most of the time when you buy a dip, that dip is happening at a higher price point. So you can imagine this line, you’re going up into the ride overtime and every time it dips, it doesn’t dip back to where it was originally.
Because of that, you end up buying it a higher average price over time. The better thing to do most of the time throughout most of history is to just buy every single month. The evidence then is overwhelming.

Scott:
And we’re assuming that that God can time the bottom of the market, but he can’t perfectly time the top and the bottom. Because obviously if he sold right before the dip and then bought again and then did it every time on a daily basis, you could do that but that’s preposterous. I like your framing much better.

Nick:
Yeah. You’d have a trillion dollars by the middle of the year or something. I remember someone did an analysis like that. If you found the top performing stock every day and just day traded it, and you could do that, you would have a trillion dollars within half a year or something. But obviously no one knows that.

Scott:
Yeah. We’ll all listen to their podcast whenever someone can figure that out. That sounds great.

Mindy:
Yeah. They better not tell anybody. They’re just going to sit on that.

Scott:
So using that as a framework, can you explain the concept of Just Keep Buying at its root level, the thesis for your work here?

Nick:
Yeah. The phrase I use in the book is the continual purchase of a diverse set of income producing assets. That is the mantra of the book. If I had to say what does Just Keep Buying about, it’s about that. It doesn’t tell you exactly what to buy. It tells you a little about when to buy, Just Keep Buying over time. But the core component is just income producing assets.
I can’t tell you, “You need to buy real estate.” Or, “You need to buy stocks.” Or, “You need to buy bonds.” Because I’ve seen people get rich in all these asset classes. I don’t think there’s any correct way to build wealth. I think there’s a general path or general framework you can use, but I don’t think it’s like you have to own real estate. There’s real estate people that say stocks are a scam. They really believe US Stocks are a scam. There’s stocks people who think real estate is stupid.
I think both of them are wrong. I think they’re both ways are valid ways to build wealth because they’re income producing assets. I believe in a diversified approach. I try to own a little bit of everything and that’s generally worked very well for me so far.

Scott:
Awesome. Would that advice change at all for someone who wanted to be more aggressive with their portfolio and get wealthy faster? Would you recommend going into one asset class over the others or how do you think about that?

Nick:
Well, I guess it depends on the risk. I mean, what risk you want to take. Actually, if I do write a second book, it’s going to be about that question which is like, okay, if you just want to be a millionaire, have a couple of million dollars or something and have a decent retirement whatever, you can follow Just Keep Buying.
If you’re trying to become a hundred millionaire, this is not going to get you there unless you have a super, super high income. And that’s the truth. You can’t go buy the S&P 500 ETF day in day out with a day job and get to a $100 million. It’s just not there. If you’re trying to get to a higher wealth level, the tactics have to change completely. And it’s almost always going to be something involving some sort of business ownership.
So you’re going to have to start a business, you’re going to have to take a lot of risk or you’re going to have to build some sort of brand that can actually end up paying you that much money. Those things are very, very difficult to do, which is why they’re so rare. But I think the tactics would change. I don’t know if your portfolio allocation actually is the real differentiator there.
I think it’s more about your labor choices and your income choices, how you build income is going to be more important than like, “Oh, maybe I should go all in on a penny stock or something.” Yes, there are people that got very rich doing that, but that’s very rare. I don’t think the portfolio is really the differentiator if you’re trying to get to very high levels of wealth like that.

Scott:
Awesome. That’ll be the next title, just build a business in 2024 from Nick. Okay. Walk us through the next kind of phase here. I’ve decided I want to do that. How do I begin tweaking that, accelerating that or deciding on my asset allocation?

Nick:
Yeah, I think it all comes back to risk. And so you have to figure out, okay, which assets… You have to do a little bit of research, which assets have a riskier profile and which ones are less risky. And so generally that’s stocks versus bonds or real estate and stocks and all these versus bonds, things like that.
But there’s different ways you can diversify and there’s no right answer. We can start with… I think everyone should just start with a very standard portfolio, whether that means a 60/40 or an 80/20 or whatever works from you. Just start with some portfolio based on your age, based on risk metrics and then build from there, expand from there. Because I don’t want to get… I can tell you what I have, but I don’t know if that’s going to necessarily work for you. I’m mostly equities.
I have I think 10% in bonds, maybe 5% in bonds, I can’t even remember right now. But I’m mostly equities and I’m split between developed and US equities, my equity share and then I have another 10% of my portfolio in REITs. I’m like yeah, 70% equities, 10% in REITs, 5-10% in bonds. And then the other 10% is non-income producing assets. So that’s things like crypto.
I own some art and I also own a little bit very, very small share of a couple of private businesses, which I don’t consider income producing even though they’re technically like stocks because they haven’t produced income yet. That’s how I look at. If I had to break it out, 85% or 85-90% of my assets are income producing and the other 10% are not. That’s why I say if you want to play around with non income producing assets, you can, I just don’t recommend them for the bulkier portfolio.

Mindy:
You have a fairly diverse portfolio. What are some examples of income producing assets other than the equities and the REITs?

Nick:
You could get into farmland. That’s not something I have done yet, but I plan on doing at some point. You can technically do that through REITs. There are farmland REITs out there, which is the easiest way to get in. But if you want to find an individual property, there are services online where you can crowd fund that basically. It’s like a GoFundMe except for a farm and all the investors go in, you become partners and you own the farm and everything and I don’t want to name any names, I don’t have any affiliate relationships, but you can look them up and there are plenty out there.
That’s an example. You can buy royalties. That’s another thing. Let’s say there’s a song you really like, you can own that royalty stream for five years, 10 years, however long and it will pay you over time based on how many people listen to something.
That’s all. I think that’s more of ego investing with royalties like, “Oh, that’s cool.” If you’re just really into music, that would be a cool way to earn money. That’s another thing I like to think about. So there’s a lot of different ways you can do that.
But yeah, those are just a handful I can think of. I think real estate is a bigger asset class than just like there’s investment properties that you can do Airbnbs. And then in addition to that, there’s like as I said, private investments, investments in businesses, whether you’re an owner operator or you’re actually operating the business or you’re just someone who’s giving capital and trying to provide some guidance in some way.
Or you can just be a completely silent partner where you give capital and provide no guidance. There’s a lot of different ways that this can be done. But yeah, those opportunities are usually reserved for people with more wealth and as you get older and stuff. I still am barely kind of dabbled into those. I think as I get older, I’ll start doing a little bit more of that.

Mindy:
How diverse do you recommend? I hear that comment a lot. “Oh, you need to diversify your investments.” But nobody ever gives a specific amount. Nick, give me specific numbers. How do you diversify an investment?

Nick:
That’s a great question. What is diversified? Some have argued and I think this is fair, that you can be relatively diversified with the portfolio of 25 stocks. If they’re in different sectors and stuff. You could be diversified on your equity sleeve with that. Now, of course that’s not going to get everything right. Farmlands vary different. It’s not really correlated with traditional markets.
The other thing to remember in diversification, it’s really like okay, how many… I break all assets at the end of the day down into risk assets and non-risk assets. Most assets, like the things we were talking about, income producing assets are risk assets. Because of that, when markets crash, they tend to all move together. Not all of them completely, but usually when things crash, it’s not good for real estate, it’s not good for stocks, it’s not good for farmland, et cetera.
They usually all fall together. Because of that, I think realizing that in the bad times, diversification only exists between your non-risky and your risky assets. And then in the good times, the diversification shows up because every asset class is getting a different return stream.
So some may do very well. Like right now, energy stocks are doing incredibly well because of all the energy crisis stuff going on. But they didn’t do that well at the beginning of COVID because no one was buying oil. So it’s a very interesting thing that you can see high volatility in a certain sector. And so by being diversified, you’ll pick up on those and you’ll pick up some of the upside and you’ll also get some of the downside over time.

Scott:
We’ve talked about the word risk with a couple of these assets and you just used the word volatility. What’s the difference and how should I think through that?

Nick:
I guess volatility I would say is a measure of how much a price moves over time and risk, I think… There’s so many different ways to define risk. My way of defining risk is when you need to spend money and you can’t. That’s true risk to me, because at the end of the day, why are we investing or doing all this? So we could live the lifestyle we want in the future?
And so if in the future we need to spend money on something to survive or do something, maybe you need to pay for something and you don’t have money, that’s risk. The question is at what point, what assets do you need to own so that you don’t have a risk of not having funds to live the life you want? That’s kind of how I think about risk versus volatility is just literally, it’s a numerical measure of how much a price moves for a given asset.

Mindy:
Speaking of risk and volatility, I don’t know if you saw the stock market last Friday, but it was a little squidgy. How do you get over yourself and continue to invest anyway when you’re waiting for the bottom, you’re holding off on investing, maybe Friday was supposed to be your day to put money into the stock market and then you see it going rather whampy. I can see people saying, “I’m waiting just for it to go down a little bit more, a little bit more.”

Nick:
Most of the time, I’ve actually never looked at the market to try and decide when to put money in. I just buy regardless. I don’t care about that because I’m doing this for the long term. If I’m going to be investing for the next 40 years, I’m in my early 30s now, I’m doing this for the next 40 years, why do I care about the price right now?
Look at the price 40 years ago. Do you think people are… People are probably equally obsessing over that day and now it doesn’t matter. It’s like the annualized returns are like eight point whatever, 7.7 versus 7.8 or whatever it is. I don’t know what the exact 40 year return was, but it’s like that’s how small the difference is over getting right in at the perfect time or not. I don’t obsess over that at all.
I don’t think that really is going to affect my financial life in any way, me, whether I bought on Friday or not. Looking at this and caring. The second thing you brought up Mindy, about waiting for the bottom, this is kind of gets back to even God can’t be dollar cost averaging.
The whole premise of that is not to do that because it’s very likely that you’re not going to be able to time it and the market’s going to take off. The example I have and I use is March 2020, it was the perfect example. I knew so many people who were like, “I’m going to wait this one out.” Within six months, we were at all-time highs. It’s like, “Are you still waiting it out now?”
I remember all these people telling me I was stupid to say just keep buying in March and April and yet we hit all-time highs once again. I’m not saying that’s going to happen here. Right now, we’re down what? 20-something percent maybe or maybe 18%. I don’t know the exact number right now, but we could be down that much a year from now, two years, five, 10 years. It has happened before. It is not impossible for us to still be down 20% a decade from now.
I do want to tell people, this is not perfect. But over the long haul, if you’re diversified across many asset classes, to think that every asset class on the planet is still going to be down 10 years from now, I think is very unlikely. If so, we probably have bigger issues in the world than what’s going on with our investment portfolio. It’s a call option on the future really. It’s like, “Well, what if the stock market goes to zero?” Then it’s not going to matter. It’s not going to matter what you did. You’re going to have to have guns and canned goods and all sorts of other things to survive. Your investment portfolio won’t matter.

Scott:
I think that’s a fantastic answer and I think that most folks who are listening to BiggerPockets Money would completely agree with that framework. I think what a lot of folks… Here at BiggerPockets Money, we’re talking a lot about early financial freedom and the ability to retire early and begin withdrawing from your portfolio. For example, early in life or I’m about to hit traditional retirement age, how do I catch up really quickly and get there at that point?
I think your premise works perfectly. I completely agree with everything you just said. While I’m trying to accumulate wealth, I’m going to invest in asset classes that are likely going to be way more valuable, particularly relative to inflation 40 years from now and I don’t really care about the puts and takes along the way.
But if I’m about to withdraw from my portfolio or am withdrawing from my portfolio, I think you have a scary situation here in 2022. Let’s zoom back like three months or maybe six months to January, February, March and say okay, it’s January, February, March. Bond yields are at all-time historical lows. They’re clearly about to come back up.
Inflation is super high. The stock market is at all-time highs from an evaluation standpoint. Real estate prices skyrocketed 40% in many of the most popular markets around the country over a two-year period. What do I do at that point in time? We’re still, even later in the year, the stock market’s only down 17% year-to-date. Bond yields are clearly still likely to continue rising if we believe Jerome Powell last week.
Inflation’s still high so I can’t even put it in cash. I don’t like Bitcoin because that lost 60% of its value. How do I think about that portfolio when I am setting it up for a withdrawal?

Nick:
When you’re setting up for withdrawal… So I think you guys had Michael Kitces on the podcast and he’s done some great research on withdrawals and how retirees go through retirement. What he found, and I can probably send you guys the article after, is it’s not usually a bad year that really messes with the retirees. It’s a bad decade. You have to go into a really… One or two years doesn’t really, if you have a 30 year plan, you’ve saved up enough for that using a 4% rule, et cetera, you’re generally fine.
Remember, this was run even through periods of high inflation. So the ’70s and all that, you’ll generally be okay. If we go through a bad decade, that’s where it can really hurt you. I say right now I don’t think we have enough to worry about yet. Now, I’m not saying not to worry at all, but at the same time, if you’re withdrawing, you have other things.
I think my real advice is think outside of your portfolio. I know this is a money podcast, but there’s a lot of other things we can do. Let’s say you’re like, “I’m going to pick up a part. If inflation’s gone up, maybe my costs have gone up significantly. Maybe I’ll pick up a part-time job to do something. Or maybe I will find a way to cut back on spending.” That’s usually what retirees do. If you actually look at the data, they just generally try to match their spending with their income.If they have an income of $1,500 a month, let’s say they only have social security, they’re going to match their spending to that $1,500. Even if they had a portfolio… Let’s say they had actually more than social security. Let’s say they had a portfolio that could pay them, let’s say another couple of $100 a month, let’s say $300 a month.
So they have $1,800 in total income. They would spend 1,800. Even though they could be drawing down that portfolio every month, they generally don’t do that and the data shows they don’t do that. They’re income matching. I think the main thing is think outside of the portfolio. What other things can you do to offset these trying times and whatever that means. If that means getting cheaper hobbies or that means cutting back somewhere or I don’t know. I’m trying to come up with ideas here, but I think there’s more to your life than just, “Oh my portfolio.” And exactly how much money I have every single month.
I know that’s one thing, it’s important. I’m not saying it’s not, but there’s a lot of other… You have a lot of more flexibility than you think and if you start to really analyze your situation, I think you’ll discover that.

Scott:
You said something really interesting there where you talked about how people are income matching and are not actually withdrawing their portfolio. I’ve informally pulled members of the community and found that while the 4% rule is touted as this, when you get to 4% rule, you’re done.
The fact of the matter is that in order to achieve the 4% rule in a 60/40 stock-bond portfolio, I’ve got to start selling off my equity position at a regular basis. I think less than 5% of the respondents are actually doing that. The people who are actually FIRE are selling off equity positions to fund their…
People who just aren’t comfortable with that mentally it seems and are instead spending income that their portfolio is generating with that. Could you elaborate on that point you just mentioned around income matching and what the data shows there and where you found that?

Nick:
Yeah, so I think it’s chapter two of the book I talk about why I don’t think people need to save as much. People don’t want to save as much as you think and everyone’s always like, I’m not saving enough, not saving enough. Besides social security, we can put that aside for now. Yeah, most retirees, only one in seven retirees with an actual portfolio, so this is beyond social security, are actually withdrawing principle.
The other six out of seven are doing exactly what you’re saying, Scott, which is like they’re living off the dividends and the interest or the investment earnings and they’re just living off of that or they’re living off of… Most of them are living off of less than that and then reinvesting more.One of the most common things we hear is, for example, people that have to do RMDs, once you’re over 70 or I think 72 or something like that, 70-and-a-half, whatever it is, you have to start withdrawing. Required minimum distributions by the way, RMDs for the audience. The government forces you to start withdrawing money out of your portfolio.
Well, so many people, they take money out and they just end up reinvesting. It’s not like they, “I need to spend this now.” They end up just reinvesting it again. So it’s very ironic that the government’s forcing you to do this and then you end up reinvesting the money anyway.
I do think that retirees, because they’re worried about long-term care, they’re worried about all these sorts of risks, so they end up basically matching their spending to whatever income they have in retirement. And that’s the data shows that pretty clear and I don’t think that’s going to change any time soon. Instead of thinking about, “I need a million dollars in retirement.” You can just be like, “Okay, well how much income am I going to have in retirement? And that’s basically what I’m going to spend to.”
So it really kind of takes the stress out of retirement saving if you really think about it because even people with no retirement savings and just social security somehow manage to get by. I’m not saying they’re living a great life, but they make it by somehow on $1,500 a month, which is what the average benefit is paying.

Scott:
Six out of seven people, perhaps more in the early retirement community if I were to guess, are not withdrawing principle from their portfolios. The 4% rule, we can talk about how great it is all day, but in practice nobody’s following it is the reality of what’s happening there.

Nick:
Yep.

Scott:
And then, I have required minimum distributions from my 401(k). Typically, not my Roth IRA at that point in time. This is what we’re talking about, pretax retire retirement accounts here. Doesn’t that put me at a major risk?
Isn’t that a vote in favor potentially? If you’re starting really young and you have a really high savings rate, doesn’t that put a vote in favor of the Roth IRA instead of the 401(k) because I’m going to most likely be forced to take a huge distribution or massive distributions that are going to put my income in a high bracket retirement. How would you think about that if I’m an aggressive saver in the FIRE community for example?

Nick:
Yeah, I think that’s a really complex question. I’m not just trying to cop out of that because there’s so many factors going into this. Really, what you’re trying to do, if you’re really trying to optimize perfectly your tax situation over time, you want to pay the lowest taxes as you can throughout your life. If that means early in life you have lower income, you expect to have higher income later, you should probably do the Roth because you’re paying the lower tax now and as you grow your income, you move into a traditional.
But then there’s this other factor which you just brought up with RMDs, which is an issue. But then there’s also another… I can throw another layer on top of this, which is your state income tax. So if you have to pay state. For example, I’ve lived in basically California and New York for the most part most of my life. Because of that, I’m paying state income tax.
But if I know I’m going to retire in Florida, I should do pre-tax now so I could be paying less later. I’m not going to have to pay state income tax when I’m pulling that money out because there’s no state income tax there. These are all hypotheticals and I can keep adding other layers on top of this. This is why talking about taxes is so difficult. I generally think most people Roth early and then into pretax is probably better.
I think it’s better to actually have both accounts because there’s more flexibility. You have options. When you have both of them, you have options. I generally recommend doing both or at least if you’re only going to do one, just do pre-tax because you can always play the tax games later. You can find tax games later. Once you’ve already paid the tax, you can’t pay the tax. That’s the only downside to that. But I think most people, if they’re entering trajectory look like the average person, you’re going to want to have pay Roth early and then pre-tax later.

Mindy:
I like to recommend that people do the Roth for as often as they can because hopefully, their income will increase to the point that they’re no longer eligible to participate or contribute to the Roth IRA. That is an interesting dilemma and we’ve had that debate on the show multiple times.

Scott:
It was just a fantastic answer, Nick. That was really good. I’m learning a ton from you today. It’s just fantastic.

Nick:
I think it’s just really tough. It’s a tough thing. That’s why I hate writing about taxes because it’s so individualized. Like, “Well, what about this case where I’m doing…” I’m like, “Well yeah, that was genius that you did that, but I can’t generalize, I don’t know your situation to apply to everybody.”
So there’s always going to be exceptions. This is why taxes so tough to write about in my opinion. That’s why. It was the hardest chapter for me to write on in the book because I do talk about these trade-offs that are in there, but it really depends on a lot of stuff. For example, I’ll give you another quick story.
I have some friends who during our working years, they all went pretax and I said, “Well, why are you guys doing pretax?” They said, “Because, we’re all going to get our MBAs and when we’re in our MBA, we have no income really so we’re going to then convert them to Roth then when our taxes are…”
When we have no income so it will convert at the lowest rate possible, because we’re not working. I was like, “That’s kind of genius.” That’s even another layer if you’re like, “I know I’m going to get an MBA or I know I’m going to have a couple years where I’m not working.” You can use those non-working years to then convert all your traditionals to Roths and the much lower tax bracket than you would ever pay during your normal working years. That’s another layer I can add to this in terms of complexity.

Scott:
That’s awesome. Nick, going back to our discussion earlier when we were talking about how very few people are actually selling off their equity position at a 4% rule portfolio with 60/40 stocks-bonds. How would you go about constructing a portfolio that could fund retirement today?
Let’s say you had $2 million. What would be something that you’d do if you were 35-40, had that wealth and wanted to max maximize the length of your retirement and the amount of income you could live off of during that. How would you think through that and how would that be different than the Just Keep Buying portfolio?

Nick:
I think they can definitely be very similar. I think if you’re doing something that’s a much longer… You need to think about longevity. I think that’s the most important thing is figuring out longevity. Especially if you’re retiring early and you’re like, “Oh, I’m going to retire for 50 years or something.” It’s much tougher. This is even without the 4% rule.
As you said, we’re not withdrawing money, I’m just living off my income. The thing is inflation slowly is going to in theory, raise your asset prices, which will help. But if inflation goes up, if your particular inflation rate for whatever you consume goes up more than the assets do, like this year’s a particular example where assets are actually down and inflation’s up, you’re going to be in a tough spot there, especially if you do this for 50 years.
I think the thing with that is to always just be vigilant about what’s happening in the economy and how this can change and you’re like, “Where can you fail?”
And so figuring out ways to mitigate that, whether that means you always know that you can go back to work if you had to. That’s an example. I’m not saying you need to go back to work, you need to stress over that at all. But when you’re trying to plan for 50 years, it is very different than planning for 20 or 30 years. I know that seems like… It’s only an extra 20 years, but the amount of stuff, you can just imagine the error bars on our prediction of the future just gets more and more massive as we go further in time.
Going out to 50 years to be like, “I’m going to be able to live this forever. 50 years.” You have no idea how much it’s going to change. Imagine someone in 2019 with that idea like, “I have all these Airbnbs in this perfect location. What could go wrong?”
And then COVID happens and you get wiped out and so you had this long plan to do all this stuff and then now none of that happened as a result. So it’s really tough to perfectly plan for it.
In terms of portfolio, I would say I have to get more assets that I think are longer duration things that I know will be… Of course you’re going to want to own stocks, of course you’re going to own that. You’re probably going to have a little bit less bonds, especially with yields where they are now. Maybe you can reincorporate them later, but you have to watch that.
I’m not sure if yields will ever come back to what they were like in the ’80s or anything like that. That’s another thing to keep in mind. I would probably have some farmland in there. I just think there’s something about farmland. Land is a scarce resource and so that’s going to be something that I think is always going to have some sort of value.
And then outside of that, I don’t think the portfolios are any different. I think it’s the tactics you use with that portfolio and how you think about your financial situation going to the future are different. I think it’s more of a personal decision than it is about your portfolio.
Once again, we kind of talked about that theme earlier. I think early retirement is far more a personal choice and about what you do with your day to day and your enjoyment in your life. It’s going to matter far more about those things than like oh, what’s exactly in your portfolio,

Scott:
Nick, when you think about debt repayment, what is a level of debt that… When I think about it, I think, okay, 4% or lower interest rate, probably not going to pay that off. I’m probably going to invest instead.
Five, six, 7% kind of this gray zone and north of 7%, I’m going to go ahead and pay that off. There’s something there to me that then brings investing in bonds back into the fold. If I can get an 8% or 9% yield on a debt fund, that’s pretty good compared to the stock market return, which is going to be in that 8-10% range and I’ve got a much lower risk profile on that debt. Secondarily on that point, if I’ve got a seven or 8% mortgage, for example, I’m a real estate investor and I buy a rental property, rates are in the 7% right now. Maybe a little higher and likely to go north.
How does that change the math or how I should think about my portfolio allocation and investments? I do have to react at some point to those interest rates changes, even though, like you said, they’re not quite where they were in the 1980s.

Nick:
Yeah, of course you have to react. That’s why I’m saying we can’t always have a fixed portfolio like, “Oh, I’m perfectly set for the next 50 years.” I don’t believe in that. I think too much information’s going to change. Too many factors are going to change where you’re going to have to react and move things around.
Yes, of course if you can get 8% in a bond or something, which I don’t think there’s any bond paying that right now. So if you can and if it’s truly a really safe asset, yeah, that’s a great idea to do that and to maybe not have as much equity risk. But yeah, if you’re really going for the long term, you have to have I think a much more diversified portfolio than someone who’s even going a little bit shorter term because you don’t know what’s going to happen.
If you think about… There’s a great book called Wealth, War and Wisdom. Barton Biggs talks about all of this and he is talking about… He really talks about investing during World War II and how he shows how equity markets do go to zero or temporarily the German equity market, Japanese, things like that, things didn’t really work out really well.
But for the most part equities do well and they’re really interesting to think about investing for a very long timeframe and how is that different than investing for, as I said, a shorter timeframe. That’s my take there.

Mindy:
Okay. Nick, way back on episode 120, we asked Michael Kitces what he would do with a lump sum of money. Let’s say that you just inherited a $100,000. Would you invest it all at once or would you try to dollar cost average your way into the market over a period of time? What would you do?

Nick:
I would put it all in right away. I know that sounds very risky and it can be at times, don’t get me wrong. But the data overwhelmingly shows, and this is true across basically every asset class, I show this in the book, I go through bonds, I go through stocks, I go through international stocks, I go through gold, I go through Bitcoin even and I show generally for someone that is putting all their money in now, they are going to outperform someone who’s putting it averaging in over time.
I know you call it dollar cost averaging. I don’t like using that term here because that definition is not the definition I like of dollar cost averaging. Just to remind the audience, there are two definitions for dollar cost averaging. The original from Ben Graham is just buying every time you have money.
So for example, buying in your 401(k) every two weeks, that’s called dollar cost averaging. However, what Mindy just described is also called dollar cost averaging, but it’s very different because you have a large sum of money and you’re slowly buying into the market. And so I don’t agree with that because it takes you longer to get invested. The main principle you have to remember is you should invest as soon as possible.
Behaviorally, there’s another layer to this. The only time when lump sum under-performs the averaging method are slowly kind of waning into the market is when the market’s dropping. That’s the time when you’re least enthusiastic to want to buy anyways. It’s like oh, the market’s going down.
Imagine you have a $100,000 and it’s January, 2020. I put all my money in right away. You say, “I’m going to slowly start putting it in.” February happens, “Oh my gosh. What the heck’s this COVID thing.”
March happens now you’re like, “Oh my gosh, this is really scary. I’m going to wait it out.” And so a lot of people would’ve done that. The one time when you buying slowly would’ve outperformed me and you didn’t even take advantage of it. I’m not saying that you’re going to do that, but there are people that will do that. I don’t recommend it because even the times when it’s supposed to outperform a lump sum, people don’t follow it. It’s like damned if you do, damned if you don’t type of thing.

Scott:
That’s what Kitces said too.

Nick:
Great. Glad, we’re in agreement.

Scott:
Nick, how do you feel about Bitcoin and NFTs? You mentioned them very much in passing there as part of the Just Keep Buying philosophy. But you didn’t mention them as part of the portfolio that you’ve articulated there. Do you think there’s a place for those or are they something you’re personally interested in?

Nick:
I mentioned them slightly. I’ve talked about crypto generally and I think having a little bit in non-income producing assets such as art or crypto or Bitcoin or NFTs, whatever you want, those can all work. I don’t think you should have a large amount in those because we still don’t know what they are yet.
We don’t have the… They don’t have the history that a lot of these other asset classes have. So because of that, we don’t know. It’s so funny because when I first started talking on podcasts about my book and stuff, there was a lot of people that said, “Well, income producing assets. Crypto.”
There’s all these things like yield farming. You’ll get paid yield if you just lend your crypto. And I was like hey, there’s a lot of risks we don’t know. I don’t think we should be doing that because it just doesn’t make sense to me that someone’s paying you 20% a year when treasuries aren’t paying that. They’re paying a 10th of that or something or even less.
So I’m like, “Where does this come from?” And they’re like, “Oh it comes from…” And so people had all these explanations and this and that. I’m like, “I wouldn’t touch it.” Because I just think there’s unknown risks we don’t know what’s going on. And then we’ve now seen a lot of these schemes blow up because they were not obviously as safe as we thought and there was hidden risk there.
My take on a lot of this is we still don’t know. I’m not saying not to own any. I personally own some Bitcoin and some Ethereum, but that’s it. I’m not saying you can’t own NFTs. I actually own one or two NFTs, but they’re very, very small. There wasn’t a high end NFT or anything. I’m not saying you can’t do it, I’m just saying be cautious when you’re going into it because this is still uncharted territory as far as I’m concerned. So I would say to hold some of it, but not a lot. I have 2% in crypto as of right now.

Mindy:
2%. 2%. I would like to reiterate that.

Scott:
Used to be 4%. Just kidding.

Nick:
No [inaudible 00:35:58]. It’s funny. So actually, I’ll tell you this story. One of my most viral tweets ever, I bought Bitcoin at like 8,000. It went up to 52 at one point and I sold half of it and I said, “Selling half my Bitcoin. Ask me anything.” It was just a firestorm of responses. Half the people said, “Great trade.” The other half said, “You’re an idiot, how are you going to explain this to your grandchildren?” All these funny jokes. And they were actually pretty funny. I actually enjoyed it.
I think they all meant good fun. But there was clearly the most polar responses. And the only reason I did it was just a rebalancing. I went from 2% to 8% of my portfolio or something outrageous. And I was like, “I can’t do this. I have to sell this down.” So I sold some of it down.
That said, I have not since had to re-buy it because how everything is, it’s basically back at 2%. But I think the main takeaway there is just like yeah, we don’t know what it is yet. I still own some of it. I’m actually semi-bullish on it. I think some of the value in it is it’s like a private bank and it’s wealth that can’t be taken.
My bank account, in theory, the US government could freeze. They could take all my securities, everything, but as long as I know my seed phrase, my Bitcoin’s my Bitcoin. I think there is a value that is outside of just traditional ways of thinking about finance and I think there is value there. And that’s kind of how I look at it. And it’s not the way that most people look at it just trying to make money. I think there’s value in just having a literal unseasonable store of wealth. That’s my take there.

Mindy:
Okay, individual stocks, Bitcoin, I think a lot of people are doing Bitcoin because it is so hyped up. We had individual stocks like Game Stop and what was the movie theater one?

Scott:
AMC.

Mindy:
AMC. The people like hyped up like crazy and rose or generated really crazy, not returns. They bid up the price and then they all got out and then it collapsed again. You say don’t buy individual stocks. I agree with an asterisk next to it, but I want to know why you feel this way about individual stocks.

Nick:
There’s two different arguments we can make about this. The traditional argument I’m guessing most of your audience has heard, or a lot of the audience has heard at some point was you’re probably going to underperform. Most professional money managers who are active funds, active managers trying to pick stocks, underperform after fees after a three to five year period. If you want to look these up, they’re called SPIVA Reports, S-P-I-V-A, you can look them up for basically any equity market on the planet and you’ll see, most of the time, most managers underperform.
So if professionals with resources and it’s their full-time job to do this underperform, what chance do you have? That’s the traditional argument. It’s fine. There’s nothing wrong with the argument. I like it, but my argument’s a little different and it’s the second argument, which is I call the existential argument, which is how do you know if you’re any good at this?
In most things in life, the feedback loops are pretty small. The example I give, if I went onto a basketball court with LeBron James and let’s say LeBron James wasn’t famous and we started playing basketball, you would know within minutes that I don’t have talent and he does. You could tell quickly.
If you asked a computer programmer to write a program and do something, you could tell within minutes, is it working, is it not working? The feedback loops are so quick, either there’s an error, it does what you want it to do or it doesn’t. You can kind of get the feedback quickly. With investing that feedback loop is massive. I would say it’s at least a decade if not longer. I’m saying you can get feedback more quickly if you’re doing day trading, but it’s very difficult to do that for a long time and show that you’re good.
Because the feedback loops are so long, especially I’m guessing most of your audience is not day traders, but more long term investors, you’re not going to know if you’re actually good or lucky for a long time. I hear tons of people who tell me, “Oh well, but I own this one stock and look. I’ve done so well.”
It’s like, “Yeah, well if you take that one stock out, how well have you done with all the other picks?” And if you have done well with the other picks, then maybe you have talent. Remember, there are about 10% of people have talent at this right after fees or even after all taking into account all that.
However, the other 90% probably don’t. That’s my question to you is how do you know if you’re good? Because you can’t know, why waste your time doing all this when you can do something you can clearly add value? I clearly add value as a data scientist compared to a stock picker. I know I can add value because I can create charts, I can do stuff that people value versus I can pick stocks I have no idea if I’m good or not.
That’s kind of my argument against stock picking. It’s more of the existential thing. How do you know if you’re good? Why are you wasting your time doing this? I’d rather you do something that really capitalizes on your true strengths.

Mindy:
I love that explanation. Thank you.

Scott:
Nick, at the end of your book, you kind of conclude with a very powerful concept about why you’ll never feel rich. Could you explain that concept and help folks maybe overcome that? What are some tools to overcome that feeling?

Nick:
Yeah, so the story I use in the book is on Lloyd Blankfein, who’s the ex-CEO Goldman Sachs and who is billionaire, actually a billionaire, and he was being interviewed and he said, “I’m not wealthy. I’m just like, well-to-do.”
This is a billionaire and asked someone who has a billion dollars said this. As a normal person, you’re like, “What? This seems crazy to me. How can you say that?” However, when you realize, who does this guy hang out with? Who does his friends include? David Geffen, Jeff Bezos, et cetera, all these people who are much, much richer than him. So when your best friends have a 10 or a 100X net worth difference than you can feel like you’re not really that wealthy. So you can really get into these bubbles.
I started to say okay, well I know that seems ridiculous, but I bet you probably feel the same way about your wealth. I bet me, you and most of the listeners here are probably very similar. Now, let me give you an example.
On a global scale, if your net worth is $100,000, you’re in the top 10% of the world. I would say the top 10% is generally rich. I would say 90% of people, you’re better than that. I would say that’s generally rich on a global scale. And now you’re going to say, “But Nick, that’s not fair. You can’t compare me to these random people on the world. Maybe a farmer in I don’t know, Asia or Africa or whatever. That’s not fair to compare me to them.”
But I’m going to argue that Lloyd Blankfein is using the same logic about why we can’t compare him to us. He’s like, “Oh, you can’t compare me to those average people. I hang out with these people.”
So the issue is we’re always comparing ourselves to our relative social circle. And so Lloyd Blankfein is comparing himself to all these multi multi-billionaires, comparing ourselves to other, mostly, I’m guessing, this podcast is mostly for Americans. So that’s who we’re comparing ourselves to.So if you think about that, we’re always comparing ourselves into our social circle. And over time, especially if you gain more wealth and you start hanging out with different types of people, you join a country club, you do this, you do that, your social circle’s going to change and you’re always going to be able to point to someone richer than you. That will never stop happening.
I think the only way to overcome that is think about where you would be relative to yourself. If you could rerun your life 1,000 times or 10,000 or however many times, in how many of those worlds are you better off than now, how many worse off?
I think you have to compare it to yourself because if you start comparing it to peers and other people, you’re never going to feel rich. You’ll always find someone richer. As successful as I am, I can always point to someone that’s more successful until you’re the most successful person, the richest person in the world.
You see the problem with that, it’s one of these things where you have to really spend some time and just kind of really ground yourself and what actually matters. You have to define, “Okay, this is…” Even though I’m not a millionaire, I would consider myself rich relative to the world.
I would consider myself a rich person or a rich citizen of the earth. I don’t say that to brag or anything. I say that because if I don’t consider myself rich, I’ll always feel like I’m not rich and then I’ll have to keep chasing money and that leads to all sorts of problems. So I think we need to just redefine how we view ourselves and realize how much privilege and how much advantages we had relative to other people on the planet. I think that’s my way of looking at it. Of course, not everyone’s going to agree with that, but I think it’s a better way of looking at it than constantly one-upping yourself.

Scott:
I think that that’s a fantastic framework and really thought-provoking concept that you just shared with us. I also wonder aloud if that problem certainly exists in the financial independence community, but maybe is a little bit more mitigated because the goal for most folks, I think who are trying to achieve financial independence is not to be the richest person in the group.
It’s just enough to cover their middle or maybe upper middle class lifestyle, that they’re sustaining and there’s a little bit better of a job of maintain the goal post. That’s what feeling rich is about. I wonder if there’s an opportunity there for the FIRE movement, the financial dependence community to maybe have less risk of falling victim to this really messed up worldview around, am I rich or not when I’m a billionaire or 10 millionaire or a 100 millionaire or whatever. The circle never ends and I think you’re right.

Nick:
Yeah, I agree. I actually have a comment on that because I remember reading a post, remember, this is N=1. This is one person’s experience. I don’t want to say the whole FIRE community is like that. That’s definitely not true for the record.
But there was someone who did FIRE, retired early, him and his wife retired early. They were doing everything fine, but a lot of their friends weren’t on FIRE. So they kept getting more income, they started going in more fancy vacations, this and that. There was sort this filling of missing out, FOMO type of stuff started happening. That created tension in the relationship. And then on top of that, by chance, the person who was writing about this, he’s a male, he started having medical issues that he did not think he was going to have and that was very expensive.
So then he had to jump out of FIRE and start working again. I’m not trying to scare anyone with horror stories. If you’re around a bunch of people that are also doing financial independence, that’s very easy, because you guys are all agree not to spend as much money. There’s a lot of social norms there that will be pro-social for all of you guys, but if your friends are not FIRE and you are, it can get really scary, especially as things start to progress.
Keep that in mind as you’re kind of on that journey. I think that’s really important. I think just hearing his story was super important for me because even though I don’t plan to do any sort of financial independence stuff, it does make me realize the types of risks that you have to think about.
He had no idea. He thought him and his partner were on the same page, but after they started seeing all their friends posting all these crazy vacations all over the place, then it was like, “Oh, why can’t we do that? I know we can afford it.” And so it sort of becoming attention in the relationship and that wasn’t obviously good for them.

Scott:
Yeah, that’s really, really interesting concept. We should probably talk to more people who have been FIRE for a long time and see if that or have maybe gone back to work and see if this is a common thread.

Mindy:
I wonder if social media has anything to do with this. You see people on Facebook posting and how long has Facebook been around? Like 15, 20 years now. You see them posting only the good side of their life. Look at all these fancy things that happened to me, and they don’t show you the crappy parts of their life. And you think, “I need that too. I need that too. I’m never going to be as rich as they are.”
Well, maybe they just went on some big trip with points and they did all of these… There’s lots of ways to save money and still have a really great life. But this is good to hear because I do live in this weird little Phi bubble where I live in Longmont, Colorado. Mr. Money Mustache is my neighbor. There’s a lot of financial independence people in this town that move here specifically because he lives here too.
I have a huge network of financial weirdo friends who never spend any money. You kind of described it perfectly. We do cheap things and we have all kind of agreed that we’re not going to spend any money on anything. That’s not really the way it goes. We all spend money on things that matter to us. But really, we’re in Colorado. We get to go hiking for free all the time and we get to do all these amazing things for free because we live in this amazing state.
It’s just… Like nobody’s keeping up with the Joneses in this community. You know what? They kind of are. “Oh, I retired at 35, I retired at 33, I retired at 32.” It’s a different kind of keeping up. It’s not the spending so much. But that was an interesting way to look at it.

Scott:
Thank you. Nick, this has been absolutely fascinating. Thank you for a lot of thought-provoking frameworks for us. I know there’s lots of ponder here and really, really enjoyed your book, Just keep buying. We’ll be recommending that to everybody and really appreciate your time today.

Nick:
Thank you both. Thank you, Scott. Thank you, Mindy. I appreciate it.

Mindy:
Thank you, Nick. It was great to talk to you. We’ll talk to you soon. Okay, Scott, that was Nick Maggiulli. That was an amazing show. I loved what he had to say about the different philosophies and the different ways to look at growing your wealth. I had a really good time talking to him.

Scott:
Yeah, I think he’s really mastered his frameworks for investing in and wealth building. I think they’re really strong. I agree almost completely with him. I, instead of having 2% in Bitcoin, have 0% in Bitcoin of course. But those are really minor deviations, and he’s probably more right than I am on those.
I really respected the way he fought through all of that. By the way, he did mention to us after the episode that the reason he arrived at a 2% Bitcoin allocation is because he ran a very sophisticated portfolio analyzer tool looking for risk adjusted returns across various asset classes over the past decade and arrived that a 2% Bitcoin allocation was an appropriate allocation on a risk adjusted basis.
Really fascinating concept there. You can view that blog article that he’s posted at ofdollarsanddata.com. We will link to that in the show notes here.

Mindy:
I love how he divided assets into risk assets and non-risk assets. I haven’t heard anybody explain it in quite that way. That was really, really powerful to explain that instead of having such a diversified portfolio just for the sake of diversification, you have it diversified by risk.

Scott:
I think that that’s a really important concept. I do wonder if he’ll change his tune when he comes out with his Just Build a Business book for a hundred million dollars in wealth. Because he’s right, you cannot diversify your way to $100 million in wealth unless you earn an extraordinary income or own a business, in which case you’re not diversified because most of your wealth is in the business. I think it’s a really interesting concept there and really would look forward to exploring that concept as well at some point.

Mindy:
Okay. Scott, this episode had a ton of information and we threw a ton of stuff at our listeners. Let’s give some action items that our listeners can take away. Number one for me would be to check out ofdollarsanddata.com and the book, Just Keep Buying by Nick Maggiulli.

Scott:
The second tip would be to write out a one page document, keep it to one page, that supports your investment philosophy, and then review your portfolio and confirm that your portfolio actually matches your investment philosophy.

Mindy:
Number three is to write yourself an email. Write your future self an email. What does feeling rich look like to you in 2025? Remember to adjust for inflation. And then in 2025, read that email.

Scott:
And then laugh at yourself or congratulate yourself. If you haven’t pulled a Lloyd Blankfein.

Mindy:
I think you’ll laugh at yourself, but it’s a good exercise. It gets you thinking. It isn’t just a one-off, just, “Oh, I’m going to be super rich.” Really, really think about what it feels like in three years, four years, three and a half years. Wow. It’s getting really late.

Scott:
Yeah. Maybe write yourself an email for 2027.

Mindy:
2027. So in five years, what does feeling rich look like to you? Go from your position now and where do you want to be in five years? What will it feel like to be rich then? Okay. Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
From episode 347 of The BiggerPockets Money podcast, he is Scott Trench and I am Mindy Jensen saying take care, Polar Bear.