Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
It has been a really awesome 2021, and I think that what we’ve been able to see in 2021 may not even hold a candle to what we’re gonna see in 2022, and we don’t know what’s gonna happen. We know equity’s gonna continue to increase, but we just know that there is so much potential at your fingertips.
What would your life look like if you could replace all of your working? With simple and conservative investments that could do it for you. Over the last 13 years, we’ve helped thousands of clients transact over half a billion dollars in simple and conservative real estate transactions, allowing them to begin replacing their work income with real estate investment income.
Each week we’ll be pulling back the curtain on the ins and outs of real time retirement based real estate transactions that will transform your financial future even if you have no real estate experience. This is Replace Your Income with me, Kevin Clayson and Steve Earl. Well, hello everybody and welcome to Replace Your Income with Kevin and Steve.
What’s up dude? How’s it going, man? Hey, we are at the conclusion as we’re recording this, we are at the conclusion of 2021, which means we just lived through the worst year in real estate in history. Right? Is that kind of what’s going on? Is that, Is that why we’re recording this? Am I wrong? I’m a little bit confused, Kevin, cuz uh, you might have got it wrong.
Oh really? I mean, the, like, the media might want you to think that it was, it’s been the worst year ever. As far as I know. Everything is absolutely terrible. Yeah. So um, Just kidding. We really are at the end of 2021. And guys, today’s episode we are gonna be talking about. Honestly how amazing 2021 has been.
So we’re calling this episode 2021 year in review. And what’s next? Because listen up, we are gonna talk about it today, but man, Steve, we are sitting here at the end of 2021 and I think. Personally, it’s the best year that I think we’ve seen as a company, and it’s the best year that our clients have seen as far as owning real estate.
Is that a fair assessment? Yeah. One of the things that we want to talk about today is the fact that, you know, when we talk to our clients, we let ’em know. It’s like, Hey, if you’re not planning to hold this property for five to 10 years, then you shouldn’t be buying it because it takes about five ish years to get to the point where it’s like, Hey, now I’ve got some real options.
I could refinance, pull that cash out by another property, or I could sell the property, do 10 31 exchange and buy another property. Or if you bought multiple properties, you could do that with all of them. And it’s usually that right around that five year mark where it begins to make sense to really get serious about those conversations.
And that’s been our experience over the last, you know, 14 plus years now. And what’s interesting is that 2020 and 2021 obviously have been like this crazy anomal. It started out with in 2020 when the pandemic hit, Hey, the bottom’s gonna fall out. It’s gonna be horrible. We were all worried. Everybody was worried.
Nobody knew what was gonna happen, which we kind of refuted. Yeah, we didn’t believe that. And things actually really heated up as everybody knows. And through 2021, we’ve seen high double digit growth in real estate and it’s really expedited the opportunities. Of anybody in real estate, but in particular speaking to our clients, the opportunity to move forward at a significantly accelerated past.
So what you thought might take five years, like if you bought a property two or three years ago, there’s a good, good chance. That your plan, like did in those three years because of what happened in 2021, what? It would’ve taken five or six years. Right. Our average properties, Kevin, increased by about $50,000.
Okay, so let’s do the math real quick, right, Because this is like, look, this is right after the holidays if you’re listening to this. So this is like a belated, uh, holiday gift for you all. Okay? If you own real estate and, and just in general, Like if you don’t know what happened in 2021, if you’re some of our listeners out there who’ve been sitting on the sidelines and you’re like, I’m not ready to go.
I’m not ready to go, listen, And if you owned real estate, you kind of probably know. Maybe some people don’t look up their property values. I look up mine all the time. But here’s what, Here’s what we could tell you is we’ve got our clients done for you real estate clients. There’s about a collective 3,500 or.
Properties. That’s conservative. That’s conservative. We’ve been saying 3,500 the entire year and we’ve done a, you know, another couple hundred properties this year. I think so, so, but let’s call it 3,500. So if we’ve got 3,500 properties that our clients have under management right now, and we went and we looked, if we look at each of the markets where our clients own real estate, based on the percentage increase in those markets, that means that on average, done for you real estate clients have seen around a $50,000.
Equity increase price, increase of value, increase in the real estate that they own. So let’s do the math. 3,500 times 50,000 is. Hundred 75,000,175 million of wealth netted or accumulated or growth experienced by done for you real estate clients, which is insane. That says nothing about the tax benefits.
That says nothing about the cash flow that was collected. It says nothing about any of those things. Right? By the way, if we wanted to do that math too, you probably figured that what if we were conserv. If on average, most done for your real estate clients are averaging about $300 a month of net income, right?
That’s a little over a million dollars of net income cash flow to our clients. You multiply that by 12. So let’s say that our clients were able to take home around 12.5 million conservatively in cash flow and see a conservative 175 million of equity. In 2021. So when we say 2021 year in review, if you look at those numbers, that feels pretty good.
That is pretty freaking awesome. And I just gotta tell you, I get so excited because Steve and I sit behind these microphones. We sit behind these desks on a regular basis. We had an amazing Christmas party with our team. We had our team flying in. From all over the country where they are. We’re here collectively as a crew, as a group working for you, working for our done for you real estate clients, for our podcast listeners.
And I don’t know how many people have an opportunity to, to feel what we had a chance to feel, which is we look back at 2021 and we realize that what our clients have accomplished and the small role that we’ve played in helping them accomplish that is truly magnificent. I mean, that is, Game changing.
Incredible. How many people get a chance to be a part of that? And if you are listening right now and you own a piece of real estate, you were a part of that for 2021. You’ve done something truly magnificent by owning this real estate and riding this roller coaster that’s been happening over. It hasn’t really been a roller coaster.
It’s really just been like a throw ride, but over the last couple years. So anyway, I just get so excited when I think about that man. I just think it’s awesome. It is. It is awesome. So, I spent the Christmas, uh, whole holidays up in Canada. By the way, can we tell everybody how cold it was in Canada, Steve?
Because Steve sent me a screenshot of the thermometer in his car telling what the outside temperature was. Go ahead and tell everybody how nice and toasty it was in Canada. Well, let’s just say it’s 67 degrees warmer here than it was in Canada, and it’s only 30 degrees out here . So. So that gives you kind of an idea of, of, uh, the negative temperatures.
I’ll understand how humans can survive in temperatures like that. Well, amazing. You don’t, you, you’re in a warm house or you’re in a car with a heater blowing. Really? That’s right. Really hard. Gosh. So in fact, you know, I did some of these calculations while I was up in Canada just looking at things, you know, and just kinda reviewing the year and taking a look at some different numbers and different things.
And I thought maybe I was actually having a brain freeze when I just multiplied really quickly. The, you know, the average equity increase by the number of properties under management, 175 million like, like that really is like, it’s really satisfying to be a part of that, to know that we were a part of blessing the lives of so many people.
Who have seen such incredible growth that we help them get into real estate. And in some cases, these are individuals who otherwise would not have gotten into real estate. Right? Yeah. Because the time and the know how and the whole, that whole thing just wasn’t quite there. And so it really is a privilege.
It’s an opportunity to be a part of that. Now the question here, Kevin, the thing that I got really excited about was this. Is the type of real estate that we do when we talk about it in our book is it requires some patience, right? Yeah. It’s like, hurry up and get it done right? Hurry up and get preapproved.
Hurry up and find a property right. Hurry up and close on the deal. And then it’s, Take your time. Yep. I had a, I had a mentor once tell me that you have to be anxiously patient. Yes. I love that. That’s really what it’s, That’s a great way to put it. Yeah. And so, you know, what was exciting to me is that, you know, individuals who are two years into this, three years into it, four years into it, you know, they still had some time to wait for equity to increase, for the cash, to continue to increase.
And just kind of, you know, waiting and inviting their time for that, waiting for that opportunity when things start getting exciting in. Four, five, and six. And when you start to have some really interesting and exciting options like refinances are selling and 10 31 exchanges and so on, right? But what 2020 and 2021 have done for the real estate?
Investing community, those who have gotten into real estate and in, in just the last couple of years, is it’s expedited their ability to move to the step two by three or four years. Yeah. Potentially just because of the increases that they’ve seen in their individual properties, like rents have gone up significantly, which has been incredible.
And then the equity increase and so, Bottom line is there are some options. There are options to take a look at refinances. So for example, I just purchased a property in Oklahoma. In fact, Kevin, I just close on it this morning and you know, rates have gone up a little bit, but. I bought a property a year ago.
I bought two properties in Memphis at about this time last year, and my interest rate was, I think it was like 2.9 or maybe it was exactly 3.0, and now it’s gone up to 3.375, which is still historically low. Incredibly, yeah, still amazing. At this time, two years ago, we were in the five, five and a half. And so there is still an amazing opportunity to do a refinance on a property where now you’ve got 40, 50, 60, 70, $80,000 equity for many of our clients.
And or do a 10 31 exchange to like actually sell the property, take the profit, do a 10 31 exchange and turn that into two properties. Yeah. So there’s some really good options. And the thing that I want to talk about real quick is sometimes because things are still going up, like things haven’t magically stopped or even slowed down for that matter.
Yeah, not at all. Yeah. If you listen to the media, you know, you might think that things are coming to a grinding. They are not coming to a grinding halt. There is still massive building going on and will be for the foreseeable future for years that like at the rate that the builders are building, like things are moving along nicely, but we’re still four or five years out before we even get to equilibrium.
Yeah. On the, the needed number of single family homes that are affordable. And I was just talking to one of our builders in one of our markets and he actually sent me this article sharing all of the struggles that builders are having still with Supplie. Which is increasing the cost of properties and the, the labor shortages and so on.
And so the demand is still there. The need is still there. And so the homes are still being built and like I say, like values are gonna continue to go up. We subscribe to. Some pretty good sources of data and information, and they actually have properties in the areas where we help our clients buy. And interestingly enough, those sources are not just what people say on Facebook.
Oh, really? Yeah. Yeah. Oh, so this is real information? Yeah, it’s like real information. Yeah. Sweet. Yeah. . So, So the bottom line is prices are still going up. Things are gonna be double digit for the foreseeable future. And so there’s still a massive opportunity. There’s just never been a better time to buy, and there’s also been, never been a better time to refinance and there’ve never, even today, and there’s never been a better time to like sell, actually sell a property that you have and buy now.
Here’s kind of the things that you need to consider if. Own a property. Let’s say that you’ve owned it for four or five years, and let’s say that it’s approaching that 20 year old mark where roofs need to be replaced, Furnaces need to be replaced, AC needs to be replaced. Air conditioning units. One of the things that we take into consideration, Kevin, are these types of things, and this is.
One of the reasons, like we don’t only suggest to our clients that you should sell just because you got enough equity, you should also be taking a look at how old your property is so that you can avoid some of the major repairs like a roof and so on that are inevitable that your insurance will require if you hold onto the property.
In many cases it makes sense to just hang onto that property, make the repairs, the replacements, and so on and move forward. But it can also make a lot of sense. Even in a market like today to sell a property and move, um, laterally and purchase another property that’s newer. We’re doing more new construction today than we’ve ever done, ever.
And so, you know, you could pick up a new home or a newer home, one that’s only a couple years older, brand new for that matter, that’s not gonna have the major types of repairs for 10, 15, 20 plus years. Right? So you could make that lateral move and you could probably, you potentially, depending on your circum, You could turn that one property that’s getting ready for some pretty significant repairs and some expenses and sell it and purchase two brand new properties.
And so those are some things to consider, right, that, that we gotta take into account. So interest rates are still at historically low levels. And values are still going up. It’s a great time to buy. And so what we’re interested in doing with our clients and anybody who’s interested in talking to us is taking a look and doing a property and market review so that you make the best decisions for you and your family based on these historic increases.
Your expedited game plan, like the opportunity, like it’s so exciting, Kevin, like makes my head kind of almost explode that this opportunity exists. It’s this idea that we need to be really smart about what we’re doing in today’s market. And even if you don’t end up doing anything, Kevin, you need to just analyze and you have to make decisions based on good information, good data.
Yes. And that’s what we’re here for. Well, and data is the key word to me because there’s always speculation and you could always make decisions based on speculation, but why make decisions on speculation when you can make ’em on data? And so everything we do is very data driven. And that’s why Steve’s saying, Look, if you own real estate, you should be doing a property and market review.
If you’re one of our done free real estate clients, cuz we know there’s a ton of you who listen and we love you, but if you have not had. A recent annual property and market review done. Maybe you don’t know that we offer those for free for all of our clients, for all of the properties that you own. If you get with us.
In fact, I’m just gonna put this out there. If you have not done an annual property and market review, or if it’s been close to a year since you had your last one, you need to do one of two things right now. We don’t often have major calls to action on the podcast, but stupid. I were talking before, we’re like, we need to let people know, like move now because this is.
Killer time to be able to take advantage of some stuff, and so you either need to call 8 0 1 2 0 4 9 0 6 1. That’s our main office number. You’ll probably be greeted by the fabulous Wendy, and she’ll get you all set up, 8 0 1 2 0 4 9 0 6 1 or just email me kevin dfy real estate.com and let me know and then I’ll get you routed to the right person.
Cuz what we do with the annual property market reviews is we have this, this amazing team and they will do the research, they will look up the numbers, they will run refinance scenarios, they will run sales scenarios, they will run all of the numbers and all of the scenarios because I always like to say as I’m talking to people, That are thinking about working with our company.
They always ask the question like, What’s the plan gonna be for the long term? And I give them the options. I’m like, You may have enough equity that you can refinance it out. You may decide that you wanna sell and turn one property into two properties. We let the numbers dictate, and that’s the key. Let the numbers do the deciding for you.
You don’t have to be the one. That’s sitting there going, What should I do? I don’t know what feels nice? Just let the numbers tell you cuz the numbers will guide the decision making process and to just speak of numbers in case you guys think that we are just up in the night. Totally crazy. We’re completely making this stuff up.
There’s no way there’s been increases like this. Listen, I was like, you know what Steve? I was like, I better go find some data. Online. So from that really good, uh, source called Facebook. I’m just kidding. No, I went to Business Insider, which is a pretty credible deal, and Business Insider, here’s what they said.
Okay. They said between October, 2020 and October, 2021. So we’ve seen even increases since October, 2021. I’m telling you right now, there have been monthly increases even since October. But between October, 2020 and October, 2021, the average price of an American. Went up 18%. Now, Kevin, keep in mind that that’s across the entire nation, right?
That’s a whole nation. So we’re in just specific markets and in the markets that we’re in, they’re in some of the higher growth areas. And so those numbers. Are actually even a little bit higher. The other thing that I wanna point out is like, I don’t often do this, Kevin, but I do want to create a bit of a sense of urgency.
Yeah. Only from this standpoint is rates are still good. Yes. For now, and we know they’re gonna go up next year. We absolutely know 100% that rates will are gonna start ticking up. We don’t know how fast and they could kinda go up and go down and then go up. But over the next year, two years. The Fed has explicitly stated that they’re going to begin raising their rate, and that impacts mortgages.
And so we just need to keep in mind that, you know, if you’re thinking it’s like, ah, I’m just gonna wait for, for one more year. It’s like, that’s totally fine, but get in the know, like, get these reviews done so that you can make a decision again based on data, based on correct information and know. Because rates will begin ticking up and we don’t know how quickly they go up.
I hope that it’s gonna be a very slow progression. I hope that they’re smart enough to try and control that and not, you know, make some massive adjustments. Yeah. Right. But one point can make a bit of a difference in your, you know, your monthly cash flow. Sure. Um, half a point makes a difference. And so just keep that in mind that there is a bit of a sense of urgency to kind.
Take some action and at least get the information so you can make some really good educated decisions. Here, what we are encouraging everybody to do is we are encouraging you to be like number five. Do you know who number five is? Steve, do you remember the movie Short Circuit? Do you remember the, Okay. I, I think it’s on Disney Plus.
If you have not seen sh, This was like one of my, I think it’s Steve Gutenberg. This was one of my favorite movies as a kid. Partially because it’s about this robot that becomes alive and as the robot at the end trying to figure out what his name is. He, Kevin is one of the suggestions. I don’t think he goes with Kevin, but it made me feel really cool as a kid.
But number five, this robot who’s like alive, there’s this whole scene where he keeps saying, Need more. Need more input. And so you need to be like number five from short circuit. You need more input. And if you haven’t got it, let us do that for you. Let us do the proper annual property and market review because what we know is that the numbers Core Logics Home Index says that October, 2020 to October 21, it’s the highest collective increase we’ve seen in America in, Are you ready for it?
45 years. Now here’s the crazy thing. I remember having conversations with people right in the midst of the early stages of Covid. Right. And it was, I don’t know what to do. I wanna hold off. I’m not sure. And you and I, we were doing the podcast before covid. I think we’ve been doing it since Covid, and we’ve said the entire time, When is the best time to buy real estate?
We’ve said it forever. It’s now, it actually, the best time is 20 years ago. But the second best time is today. It’s the same as planning a shade. So we have never waved from that stance. We do not waiver from it today because here’s what we never. We never know what’s ahead, right? But what we know is that over time real estate sees increases, like historically without exception.
If you look at it and you look at it for more than just a single couple months, within any given year, when the economy is really bad, there’s always increases that you see and listen, because inflation is a really real thing right now. Inflation’s really high home prices are going up, like home prices and home values.
And building prices and construction and everything that goes with it will float with inflation. It will go up over time. And so here’s the deal. We know that the home prices have come up. We’ve seen a collective equity increase. We’ve seen rents come up. We’ve seen that come up. We’ve been telling you for, I don’t know, almost two years now.
Least a year and a half that you should be buying real estate and you should be buying it right now. So here’s the deal. We’re not gonna waiver from that. You should be buying it. You should be buying more right now because we still know, if we look at our data sources and like you mentioned Steve, you know, we’ve got these really high level data sources and we let the data lead.
If you look at all of our markets, every single one of ’em is seen some pretty significant increases in equity, or at least being projected based on all these data. Over the next three years, like it does not look like it’s slowing down. And so if you’ve been sitting on this gold mine of real estate, you should be looking at, can I refinance?
Can I sell in? Can I get a few more? If you’ve been sitting on the sidelines, it should really be okay. It’s time to maybe finally jump in and make this thing happen. Because the longer you wait, the more you will miss out on. And so from an urgency stand, That is something really worth considering. The longer you wait, the more you will miss out on.
I mean, seriously, think about it. If you’ve been waiting for a. Not only did you maybe miss out on thousands of dollars of of cash flow and potential tax increase or tax benefits, but you have also missed out on an average of $50,000 of equity growth potentially depending on where you bought that home.
Like think about that. That is real. Those are real dollars. When we talk about equity, we know that equity is kind of this nebulous concept. I sometimes talk about equity. Money locked up. It’s like paper money locked up in a safe in your basement, and you don’t know the code, right? You don’t know the code of the safe.
If you are looking at equity and you go, Okay, I can’t really fully wrap my mind around it. I just know that it’s there and I can’t access that money. It’s not spendable. Here’s the deal. Sometimes that money is growing whether you wanted to or not. In that equity, sometimes it’s time to pull equity outta the property because if you can pull it outta the safe and put it into a couple other properties, it’s gonna grow at an even more exponential rate.
Point is you’ve got resources and ability that’s there right now, whether you know it or not. And so you should be, whether you’re calling our phone number, (801) 204-9061, or you’re emailing me, kevin dfy real estate.com, if you’re a client, if you own real estate, if you want a property review and you haven’t had it, let’s take a look and see what’s there because all of the indicators are, you’ve done something magnificent in 2021, and let’s double down and make it even better as we look towards 2022.
Agree with you a hundred percent, Kevin, on everything that you said and just diving into the numbers a. More something to consider is equity is, it’s awesome. There’s a little bit of a double edged sword to it, and it’s this, the more equity growth you have in a proper. The lower your current cash on cash return is.
Yeah. So the more, the more resources you have tied up in your property. So, you know, if you bought the home, and let’s say you got into it total out of pocket $50,000, and let’s say your cash on cash is, let’s just call it 7%. Okay. Well, if you add $25,000 in equity, now you have $75,000 tied up in that property.
Well, now you’re, you’re gonna run that number based on, you know, a top number of 75,000 or a bottom number, $75,000 with your net income. On top of that, you take your net income per year divided by your total out of pocket, or whatever equity you have built up in that home. Well, you just went from a 7% return to probably less than 5% because you have so much more in resources tied up.
So as you take a look at the numbers, this is what you take home is that the more equity you build in a property, the lower your total cash on cash. Goes. And so it’s a concept of highest and best use of the resource, which is that property that you can possibly create. And so when you have enough equity in that property that you now can take it and turn it into two properties.
Now you’ve got two properties that are earning whatever the appreciation rate is, and you’ve got double the cash flow, and you haven’t put any of your own dollars into that property you created. Out of the growth of inequity, additional monies that you now turn into two proper. Like that’s the power of real estate.
Yeah. And so you don’t wanna, like, it’s a good feeling be like, Ah, I got a hundred thousand dollars. I got $150,000 in equity. I put 50 down. I’ve now increased over the past five years. I got a hundred thousand dollars in equity. I got $150,000. In resources sitting there, that’s a pretty darn good feeling.
But it’s a matter of taking that, rearranging it and taking that, that same equity and dividing it and putting into two properties. I think they call that myosis. Yeah, it sounds right. It sounds scientific. I’m not smart enough to know in the cellular world, gotta take of that property and watch it. Like divide.
Yeah, divide, which we, we always talk about things at a cellular level on this podcast very frequently, so, Yeah, that makes sense. So, so anyways. You know, the whole idea of this podcast is to just create that sense of urgency, to invite you to, to come and have a conversation and to see how we can help you make the most out of the resources that you’ve put into your real estate and take advantage of this anomaly, which we call 2021 and move forward in a bigger, better, faster way.
That’s exactly right. You guys, 2021 has been really, We’ve been extremely thankful for what we’ve been able to see our clients accomplish. Our team has grown here at Dun for you real estate. We’ve just got incredible people that we get a chance to work with. Our number of clients that we get to serve has grown significantly in 2021.
Our existing clients have grown their real estate portfolios in 2021. You all collectively have seen this massive equity increase, this cashflow increase. It has been a really awesome 2021 and I think Steve, That what we’ve been able to see in 2021 may not even hold a candle to what we’re gonna see in 2022.
And we don’t know what’s gonna happen. We know equity’s gonna continue to increase, but we just know that there is so much potential at your fingertips. And to reiterate what Steve said earlier on, if you’ve owned this real estate, if you have these properties, 2021 may have just given you the best gift ever, which is, it may have just expedited exponentially your ability to multiply your portfolio because of the equity growth that you’ve seen.
So let’s find out. So feel free to email me, kevin@dfy-realrealestate.com, and let’s get you routed to the right person and let’s do a property market review. If you haven’t done one, and if you’re not our client, if you’re somebody who. I’m sort of interested to know what I could do. Look, we are happy to take a look at what your portfolio looks like and how much equity you have and where your equity has grown and what markets you’re in.
And let’s take a look at for you, if you’re not working with us, is there a way that we could put the assets available to you into a better usage? With some done for your real estate properties. Who knows? Maybe we can, maybe we can’t. Point is, if you’re out there, if you’re an investor, if you’re a DFY client, 2021 has been something that hopefully you’ll look back on and be extremely thankful you were a real estate investor and real estate owner during this last year.
Take advantage of what the market’s given you. Let the data drive the decisions, and let’s make 2022 an exceptional, incredible. Amen. . Right. Okay, everybody, thank you so much. That’s all for today and we will talk to you real soon. Have a good one. Thanks so much for listening to Replace Your Income with Kevin and Steve.
Do you have a question you want us to answer on the show? Head over to Apple Podcast and do three simple things. Leave us a rating and review and tell us what you think of the podcast. Then in that review, ask us anything you want related to real estate or income replacement. Then sit back and get ready to have your mind blown.
And if you wanna shout out, leave your Instagram handle, Lord your name, and that’s all. Then listen in to hear your question answered, live unfiltered and uncut. Thanks for joining us on Replace Your Income and just remember income replacement for you and your family may only be one property away. See you next week.
