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The comfort of having a plan is, I think, important for any investor with or without our help. And so that’s the big part of what we’re trying to do in this portfolio optimization team is make sure that they have the right perspective as they get started and make sure they have a long term perspective so that they can get through a lot of the messiness.
Real estate, even with our help, can be messy at times. 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. All right, well, hello everybody and welcome to Replace Your Income with Kevin and Steve.
How’s it going, Kevin? What’s up man? You’re back from Canada? Oh yeah. A quick trip. How was there? It was great. It was great, but, uh, they got a thing up there called the Chinook, and so that comes through, warms everything up, melts all the snow. So it was, it was almost like spring up. I feel like Chinook is like a bougie version of like, like an IGL for like the, Is that, is that not what it is?
It’s means.
Listen, you just need to go listen to the song Fancy like, um, the country song, and then you’ll know what Bohi is. Okay? Oh, okay. Yeah, Bohi like, like fancy Steve. Yeah, that’s how Not Bohi you’re ladies and gentleman, let’s just take a moment to acknowledge that Steve as a CEO of a real estate company and a very successful real estate investor and owner of multiple business.
Is so far from being bougie that he doesn’t even know what the word means. And that right there is a testament to the man, the myth, the legend. Steve Earl , you’re just, you too kind there, Kevin. It’s great to be back though. It’s always good to come home. It feels good to be back. Yeah, but can we tell, Okay, we’re gonna get to real estate guys, believe me.
But I still wanna know more about a ook cause I feel like it, What is this an Eskimo word? What is a chin? Chinook is a warm wait. I know what I, Is it a delicious baked pastry? ? No. Ok. What is it? Chinook is a warm westerly wind. It is one of the reasons why I will never move back to Soda Alberta. It can be like a perfectly good day outside and you think, Oh, I’m gonna go outside and like, shoot, shoot some hoops or go for a run or something.
You walk outside, you literally, it’s like a mild hurricane. Oh, okay. So it’s not like a warm western wind. It’s like a violent, terrible ruin your day kind of wind. Uh, that’s how I see it anyways. . I imagine that if I was in Canada and I walked outside and experienced a Chinook, I’d probably say something like, Man, this ook got me shook.
Oh boy. I think you better get onto real estate this. Ok. All right. Yeah, we, let’s see. We’ve already had, I’ve already offered up at least five terrible jokes, so I think you’re right. Let’s go ahead and move onto real estate. Well, dude, it’s good that you’re back and, and I’m glad that we’re back doing a, a live episode and we have a special guest on with us.
And, uh, he’s special for a lot of reasons. Okay? Not the least of which is the fact that this man who’s gonna be on today, he’s gonna try to backpedal and say, This award was not given to him. But I’m gonna say it was given to Mike Chamberlain. We’ve got Mike Chamberlain back with us. Many of you know Mike.
He’s an integral part of everything we do here. And Mike just received the President’s Award for the Pleasant Grove Chamber of Commerce. He’s gonna say no. It says DFY on the award. Mike, let’s be honest, Steve and I did nothing for that award. It was all. I love being involved with community. There might have been some involvement there that was recognized, but really it, it actually, No, I’m gonna keep pushing back that it’s the environment that you all create, that Steve encourages that, that we give back and that we are involved and that he wants dfy.
To be a, a corporate citizen in the community. That is actually the catalyst. I, I’ve had another job for a lot of the last decade that didn’t allow me to get involved. Like, like Steve and you allowed, wouldn’t won the award. So it’s a team award. Absolutely. And I love that about being a dfy is that it’s encouraged and I certainly don’t need a lot of encouragement.
I do enjoy the, the, uh, local involvement. It’s, it’s fun for me. Well, it’s, it’s awesome and you deserve to be recognized in so many ways. And, uh, you absolutely deserve to be recognized in the business community for the contributions you make. You know, we did a, we did, I gotta tell everybody. So, uh, we did a golf tournament for the Pleasant Grove Chamber of Commerce, and at this golf term, everywhere we went, somebody would ask us, Oh, what company are you from?
Everybody knew us because of Mike, because everybody knew Mike, because Mike has given of himself of his time, of his efforts, of his just, he’s such a, you’re so full of service, Mike, and you do such a great job, not just in the community, but also for done for you real estate clients. And today what we’re gonna talk a little bit about is some of the service that you render.
And for you guys, listen to the episode. Let me tell you why. Uh, Steven, I thought this would be an important topic. You know, we talk a ton about real estate, right? We talk about real estate, we talk about acquiring real estate. We talk about the urgency of acquiring real estate. We talk about kind of all of the ins and the outs of what’s happening in the economy right now.
But one of the things that Steve and I kind of realized we have not talked at length about is what happens after you purchase a property. So obviously you buy a property, we’re gonna go and get it leased out, so on and so forth. So whether you’re done for you real estate client or you are one of our mini listeners who has not worked with done for you real estate, but you just, you’re a real estate enthusiast, this is a really important set of principles that we’re gonna be talking about today, which is how should you be viewing your real.
After you purchase it, and what are some of the action steps and things that you should be considering, both in the immediate, but especially in the long term? Steven, anything you wanna add to kind of the setup of the episode? Yeah. In fact, this, this is such a, an important thing to me. You know, as hard as the process of finding and buying and financing and closing on and, and giving a property, you know, rented out, as hard as that can be, the real challenge comes once all that’s done.
There, there’s a beginning and an end to that part of the process, but then what goes on after that, which is the owning and management and optimizing of that property. Well, that’s when the hard part comes in from the standpoint of just simply making the decisions. Analyzing what’s going on. Um, it’s not that there’s a ton of work that is, is necessarily going on and, and a ton of time and energy and resources required for that, but it’s this ongoing effort post purchase and kept.
When I first got into real estate, um, after I had sold, uh, my, uh, penny contacting company became a full-time real estate investor, and then I started getting into to helping other individual. Do what I was doing is I felt like this massive burden on my shoulders, like post purchase, if my clients had like any issues or.
Things that came up, I always kind of felt like, Oh man, like I need to help my clients, you know, deal with this. And in the regular real estate world, that’s not how it works. It’s like, Hey, as a real estate agent, you help somebody make that purchase. And then it’s like, Hey, when you’re ready to buy again, gimme a call.
But it’s, it’s not the job of a real estate agent to take upon themselves that kind of, that, that continuous follow up and the continuous development of the client to do well with the properties that they bought. But that just always weighed so heavily on. And I think that this is one of the big reasons why this has become a big part of them for you real estate is this whole concept.
We’ve created a whole, it’s our pot team, our our portfolio optimization team, and they work with our clients post purchase to help ensure that they have a good and successful investing experience over the coming five to 10 years that they’re gonna own that. And as such, that kind of leads us into, you know, this idea of, we, we do a transition call and we do property and market reviews, and we do, uh, all of this post purchase, you know, efforts with our clients to make sure that things can go as well and as smoothly as they possibly can.
And Mike heads that team up and has become expert in this area, and you can tell that he has a passion for this part of the whole process. Yeah. You know, it’s, it’s so funny that we don’t talk more about this because, you know, I think about, you know, me, I use sports analogies. I think about sports a lot. I mean, imagine spending your entire career, you spent all through.
Middle school and high school and college, and you work your butt off to get to the nba, and then once you get to the NBA and you finally get there as a professional basketball player, there’s like no professional development. You’re just there. You know, nobody would do that. Right. There’s, there has to be ongoing care and concern, you know, that that was one of the hardest things when I joined the mba when I was, you know, when I got at my, my contract.
Is that, that whole thing? Yeah. It just didn’t. Did well that’s, and that’s why you’re in real estate. You know, You didn’t have that about Yeah, you didn’t. That’s that’s exactly right. But it’s, you know, when you look at that concept of it from a real estate standpoint, we want real estate to be set it and forget it.
We want real estate to be passive, and it will be if it’s done the right way. But it doesn’t just because when we say set it in, forget it. The idea is not literally to forget about it. It’s that we still wanna have a consci. Sort of attention to what’s happening with our real estate portfolio and kind of understand what’s going on on an annual basis.
We don’t wanna just completely forget about it. So Mike, let’s kind of dive in and let’s talk a little bit about this. So once somebody. And we can talk about it from the done for you real estate perspective, because I think that even if somebody is not a client of ours, just kind of hearing what the process is that we’ve developed and put into place and implemented over all these years now, I think it’s a good sort of exercise for people.
So once somebody completes a purchase, what should be happening? What things should be considered? What are the things that, that a lot of people. Through that process. Okay, good. You bet. So I think the first thing that’s important is that somebody looks at themselves as the business owner that people have heard for years.
That real works out well as the wealthy people invest in real people invest real to save money, more of hard earned money. And yet sometimes people don’t actually go off and set up the separate independent business account at the bank or set up an LLC that they can. For cash flow, whether the property itself has the extra protection or not.
Something we can talk about in a bit, but, but I think it’s so important that they look at themselves as a business owner and that they position themselves for the long term potential of that business. So after they purchased that property, you know that that’s a big deal. And I love to acknowledge the fact that they’ve gotten off the bench, they got up the bat, they’re on.
Of course we still need a round the bases and, and come home. And so having conversations or thinking to yourself if you’re doing it on your own about how is this gonna be managed now? And so part of what we do is review the relationship, the property manager, and they have that direct relationship with them.
They’ll interact with them, but if there’s issues that come up that we’re here to help make sense of that or can help even represent them to make sure things make sense in the long run for them. And if there’s concerns about protection on the property, if, if they’re wondering. What they need to do to put themselves in a good position, whether it’s using LLCs or insurance.
We can look at that and see what they’ve done so far with that and talk a little bit more about that, but then ultimately focusing on why they’re doing this real estate and how they can best profit for it, and really just what would be helpful. Make sure that they stay invested for the long. I guess that’s a big part of how I try to help a client is kind of circle back around and say, Why are we even talking in the first place?
Why are you doing investments in real estate? What do you want or need this property to do for you in your financial future? And so helping to create a little bit more of a, a long term plan in the comfort of having a plan is, uh, I think important for any investor with or without our. So that’s the big part of what we’re trying to do in this portfolio optimization team, is make sure that they have the right perspective as they get started, and make sure they have a long term perspective so that they can get through a lot of the messiness.
Real estate, even with our help, can be messy at times, but if we can help circle back around and remind ’em what the long term goals were and give ’em some perspective on where things are at along the way, that often helps them feel a little bit more comforted and stay invested for the long term.
That’s awesome. Okay, so somebody transacts a piece of property, you transition. We have conversations, And by the way, I think this is really important that I don’t know how many, I know there’s been plenty of investments that I’ve made in my life where I just make it because I’m like, Well, I want to make money in the future, so I’m just gonna throw money at this thing.
And I’ve just sort of, You had this financial planning background, would you talk just a little bit more of the importance of somebody having kind of an intentional purpose of why they invested the money and where it’s taking them? Sure. So playing off of that traditional financial planning background, you know, the traditional model out there is you have an accumulation phase of your life in which most people out there are simply scrolling away their pennies.
They’re having money withheld from paychecks, that’s going into 401ks. Hopefully the company’s matching that they’re growing money. For this future transition from earning money and having money set aside to distribution phase of life as they retire, having that income check replaced with their earnings and, and with some social security and, and anything else they may have.
And so that during that accumulation phase of life, it’s so important that that money is focused on trying to grow in the traditional model out there is, is your decades away from retirement is your away from making that transition. You’re gonna have most, if not all of your money in stocks. You know, stocks are what has outpaced inflation.
If you’re, if you’re simply comparing. What most people are doing with their money, stocks, bonds, or cash. You know, stocks is the only thing that’s really out inflation over the long run, and so you have to have something growing. If you’re not gonna retire for decades, you have to have something growing for the future.
However, as you get closer to retirement, the financial planning 1 0 1 is gonna be when you’re about 10 years out from retirement, you’re selling off some stocks. You buy in more bonds so that even as you get to a time at retirement where you’re gonna retire, The assumption is, is that you’re not gonna have all the money pulled out and go on a trip around the world, but rather you’re gonna have about half of your money that’s still gonna grow for the future because you need something working hard to outpace inflation for later in your life.
Most people will live two or three decades in retirement and in two or three decades, typically it’s gonna cost twice as much to buy the same amount of goods later on in your life. So you need something growing for them, but you have this other crop that you planted, you have this other part of your portfolio that you can go and harvest from.
You can pull the food off of that side of your, uh, portfolio when you need to put food on the table. And so that’s what most people are doing with financial planning is, is they have this plan that they will have different kinds of assets as they’re further away. They’ll make rebalancing and diversification a big part of that so that they can have something that is there to help them make the transition and last for decades in retirement.
I, I love to try to tie into that with what we do with real estate. Just with those two kinds of investments, you can either buy something, which is what stock is, you’re owning a piece of a company, or you can lend your money out. You can buy a cd, get a bond, get a fixed rate return. Not not a great investment, not a great return for you, but it’s conservative and it’s part of a endorse by portfolio.
And so with the real estate, you know, we’re often coming back and trying to find out what somebody’s trying to do with it, because depending on where they’re at in their stage of life, it will help depend what the best approach is for real. Whether to use leverage or not, whether to be focused on paying down more properties or taking equity outta properties to buy more properties.
You know, this all depends on where somebody’s at. So, tying into that question, reminding them of, of what they’re trying to do and what stage of life they’re in to, to try to accomplish that. Will help us best implement some principles that are really kind of the same, whether they use traditional investments or real estate.
That there, there’s a different phase of life, there’s a different time when your monies need to be doing different things for you, and we can help make sure that they’re taking advantage of that with their real estate portfolio using some of those well established financial principles. That’s awesome.
Okay, so let’s dive in to the, what we call the property and market review. So, okay, we’ve gotta have a plan. When we do real estate, we kind of wanna know what phase of life we’re in and sort of where the money’s coming from and how we’re looking towards the future. But one of the things that’s critical, and I know that this was an area that, that we as a company, decided we wanted to do for our clients because we realized that for years we’d been helping clients invest in real estate, which was.
But then they kind of, you know, float off into this abyss, right? They kind of go to this black hole of weight till the next transaction, and we thought, Boy, there’s so many things that we need to be considering on top of the fact that every year. The market changes, uh, interest rates go up or they go down.
Refinances become more of an option or less of an option. At some point there’s gonna be time to sell. When should we be selling? And one of the things, you know, Steve and I talk a lot about and that I talk a lot about when I’m talking to clients, considering working with us. Is we don’t have to be attached to a timeframe of you’re gonna have to own this property for three years, for five years, for 10 years.
What we get attached to is the numbers. The numbers guide the decisions. And so when you talk a little bit about what it is we’re doing in the property and market reviews, and regardless if you guys are listening, regardless of whether you’re done for you client or not, if you’re a done for you client, lemme just say if you have not had a property market, You need to call us and get one scheduled.
We’re generally pretty proactive about reaching out to folks around the anniversary of their purchases in order to get those set up. But, but if you’ve not had one of those, please reach out so we could get that done. And if you are not a done free real estate client, just be considering, are these the sorts of things as Mike dives into this?
Are these the sorts of things that you are considering with your portfolio on a regular basis? So kind of dive into the property market review, Mike. What are the things that we care about and that we’re considering and that should be important to investors regardless of, of how they may be investing in residential real estate.
Okay, great. So anybody who’s invested in real estate for any length of time knows that real estate can be messy in the short run. As much as they’re independent inspectors, As much as you have third party licensure and checks and balances in place before you purchase it, there can be surprises. So we do annual reviews with our clients because it gives us a chance to check in with them and see how it’s been going to get their feedback, and we hear the good, bad, and the ugly along the way.
But it also helps us give them a chance to look at what real estate’s doing for them overall. So if there is an occasional cash flow issue because they’ve had to use more of their cash flow to repair a toilet or whatever the case might be, the messiness of real estate, then looking at other ways of their benefit can help them stay invested.
Cuz that’s always my goal here, is to help somebody get the long-term benefit of what they’ve already paid the money for. They’ve already paid the bank. They’ve already paid the tile. They’ve already paid us. If they got our help a little bit, they’ve made this huge investment in their financial future.
The last thing I want them to do is to get out when they have a rough patch, because real estate in the long run works. Real estate in the short run doesn’t always work. So, So real quick, just to go back to that analogy, comparing stock ownership and, and real estate does another kinda ownership the stock market.
Two years ago this month lost 34% in one month’s time as Covid was coming on the. 34% in one month causes somebody to worry whether it is gonna keep going down or not. But in oh 8, 0 9, the stock market lost 57% in a year. And a half’s time owed oh two, it lost 49%. So three times in the last two decades, people who’ve owned stock, if they owned it for the short run, whether it was a month, a year and a half, or just over two months, and those different windows.
It was a horrible investment for them, but if they held onto a diversified portfolio, it worked out much better for them. So it’s kinda the same thing with real estate. Do not do this kind of real estate for a year or two time because anything could happen. Give it a decade or two time, and it just works magically well.
And so that’s what we’re doing when we’re checking in with them on these annual reviews, is we’re given a perspective. All right, here’s the property that you bought, let’s say three years ago. Here’s what you bought it for. Here’s if you paid cash, your total out of pocket, or if you used leverage, you know what your total outta pocket was, which is a fraction of that.
And then we’re giving them a perspective, a conservative perspective of what we would estimate the home is likely worked now. And that growth will then apply a formula to it to show them what their actual return on investment has been in that three years time. And it’s dramatic to me is, is somebody owns a property.
And, and they give it a chance to work out’s certainly four or five years into it. When they have that leveraged appreciation or even if they have cash and they’ve been able to, to pocket more cash flow along the way, just how much that equity behind the scenes building up can make all the yields be worth it, you know, make all of the troubles small compared to the total return or the total way that real estate is benefiting them.
So the property review, the annual reviewer, we’re reaching out, asking our clients to give us an. And of course they get to call us as often as they like along the way, but we, we wanna take at least an hour a year with our clients, check in with them and give this perspective, remind them long goals in this real, So we’re some of those behind scenes benefits of real appreciation that’s behind.
We’re also reviewing what’s changed in the market. SOS have come down if the lending costs have come down. We’re talking about refinancing and capturing, you know, paying less money to a bank and keeping more of it for. So we’re focusing on ways that they can improve their cash flow by doing that, or if their home is grown enough where they can turn one home into two by doing a cash out refinance.
We’ll talk about that and, and what the ramifications are for the cash flow now, but really for the overall portfolio and cash flow later. And so we’re looking at ways for them to grow their portfolio, ways for them to increase their flow. We’ll, we’ll bring in some of the tax consequences of that and benefits of those cost of transactions.
And it’s always tied back whatever they’re trying to accomplish. And if they have a home that is older, if they’ve had it for several years and there’s issues with big expensive repairs that may come up on the horizon and in the next several years. Then sometimes it makes more sense to sell it. We’ll go over that.
You know, is there a home where there’s concerns about a roof or hvac, you know, these bigger, expensive repair bills, it makes more sense to get out it now. And by the way, if we were to buy that same home now and you bought it at today’s prices instead of eight or nine or 10 years ago, prices, not only can you get a newer home now where we’re not as concerned about the repair.
You also get a step up in your depreciation. You get to write off more of the taxes by transferring the gains from this home into another one. And so we’re looping all of those different considerations in to try to help them, again, always come back to why are we doing real estate? What are we trying to accomplish, and what’s the best way to get there?
Awesome. Steve, any thoughts on the pmr, like as far as, so the property market review, Talk a little bit about. Why you feel like that was such a critical piece of something that we implemented? Well, you know, on an annual basis, like Mike, uh, mentioned, kind of on the, on the property anniversary, the purchase date, we try and do this property market review, and I think why this became such an important and critical component to who we are and what we do.
And and why it became such a critical thing for our clients to experience is it just kept first and foremost in our client’s minds on at least an annual basis, what they needed to be considering with their property. Because so often, uh, you, after you, you purchase, you know, some real estate, you’re not thinking about how much life and depreciation do I have left?
Do I need to sell this property, move it forward? What’s the condition of the property? Are there significant repairs coming up that I might wanna consider? Instead of just doing a refinance, pulling money out to go do a second property might make more sense. Like, uh, Mike mentioned to maybe sell that property and avoid some of the, the major expenses and.
Do a 10 31 exchange into another property or two properties. And then the other thing, we’re also doing this market review so our clients can take a look and see, you know, what’s going on in the market where I’m investing? Does it make sense to keep investing in the same area? Or would it make sense to sell in this area and maybe buy in another city or another state?
And so it’s one of these things that there’s all these questions that we kinda, you know, that Mike’s team goes through to just help kinda spur the thought. And ideas of that client based on what the property is doing and how it’s performing. And that’s such a massive value add. Like we don’t charge anything extra for this, right?
Our whole goal is to help our clients succeed and, and move forward. You know, last year in, in 20 21, 60 3% of our business was just repeat. Customers coming back and, and buying more properties with us. And I believe that this property market review and the, our, our portfolio optimization team is a big part of that because of the value that they’re bringing to the table and helping the clients see the opportunities that might make sense in further developing their portfolio in their ultimate end game of replacing their income.
And so having that attention like it, it’s just been, it’s been pretty phenomenal. We’ve been working on this for going on I think about four. And it’s just taken time to, to really get in, in place and develop and it continues to, to develop and get refined. And I dunno if you have anything to add to that.
Yeah, yeah. Maybe one additional insight, you’re talking about the market side of that property and market report and that we do with our clients. We’ve got lots of great examples of clients that we helped purchase properties, say 10 years ago in Phoenix, and 10 years ago, maybe this person that bought it was 55 years old, 10 years away from retirement and buying a property, an asset appreciating market, where the appreciation has been off the charts, has worked out wonderfully for them.
But the cash flow in that market has not scaled like the home prices have. And now this person is 10 years older, they have a property that’s 10 years older. We’re starting to look at some of the bigger expensive repair bills. But, but really more than that, it’s their space in life has changed. They’re now looking to make that transition, and so they can sell a property that has done exactly what their job was.
Stocks are supposed to help your money grow for the future, buying properties in appreciating markets, using leverage, which by the way, that’s kind of an analogy or analogous statement I, I’ve been trying to loop in to, to help clients make sense of it. As I mentioned before, as you’re 10 years away from retirement, you’re gonna have mostly stocks in a traditional portfolio, is your 10 years away from retirement or needing to replace cash?
Boy, if you’re wanting to grow your portfolio, you need to use leverage If you have a temperament for a risk tolerance, and if you have some savings in place, leverage isn’t for everyone, but leverage is the tool that it makes real estate so powerful for total returns, and it is the way to grow the portfolio.
It is the way to turn one property to two, and two to four is by using leverage. And so we can factor all those in the stage of. How the markets are performing. You know, I always look at what’s the condition of the home, What’s the condition of the market and what’s the condition of their finances and what are they trying to do and what’s changed there?
We could have an excuse to, to tie in with everybody each year to see what’s changed in their life, what’s changed in their portfolio, and what do we need to do now to help them accomplish whatever that is. And of course, what that is is usually having financial freedom. It’s having a legacy that you’re creating for future generations.
It’s having what I think I heard the best definition for retirement oftenness for people is having dignity and independence in a rising cost environment that you can’t outlive. So having dignity and independence and using real estate to get there quicker and more securely with more peace of mind is just powerful.
What it can do for somebody. And then to be in a position where there’s assets left over for a legacy later on, it’s dramatic how that changes people’s lives and, and so that property and market report, And again, whether it’s us helping you do it or you do it on your own, just checking in on an annual basis to get a sense of where you’re at and why you’re doing this and, and what it’s doing for you can often help you stick with that plan.
It can often help you. You’d never regret paying to fix that toilet, you know, 10 or 20 years later. You never regret owning real estate, getting into it and keeping it even during the rough patches 10 or 20 years later. And so helping people keep that long term perspective, I think is so important for them being successful overall.
Yeah. You know, we did an episode a couple episodes ago on perspective, and I think holding that perspective is so critical through the investment process. And the two words that I wrote down as I was just kind of considering this and as I was listening to you talk, is evaluate and accelerate. Right? I mean, that’s really what we’re talking about.
It’s really hard to accelerate a portfolio if you’re not doing a frequent evaluation. Like for example, as we’ve been evaluated over the last. We’ve seen a lot of people see a lot more equity increase in their properties than we anticipated them getting when they originally bought the property. Right?
If they bought the property three, four years ago, maybe even two or three years ago, we maybe were thinking, Oh, okay, five, six years, maybe it’s time to do something. But during Covid and with the appreciation doing what it’s done and the demand being as high as it’s been, I know that we’ve been looking, and maybe you could talk to this Mike, people have probably seen more of an.
In their portfolio, then they realize, and doing that evaluation all of a sudden makes it possible for us to now accelerate that portfolio, whether that’s through a refinance or a sale, and then a 10 31 exchange. But maybe talk a little bit about what have you seen with clients as we’ve been doing these reviews, especially over the last year, given the equity growth environment that we’ve.
So a little background. I came to this company three years ago after spending most of the last two decades as a traditional financial planner. I, I got to the real estate game a bit late and before my eyes were opened up to it, and I saw what happened during the oh 8 0 9 market crash, and, and I was shocked and I thought that that would never happen again as far as what happened with home prices and appreciation.
And so, before I talk about what’s happened this last year too, I, I wanna quickly circle back around. I’m a conservator guide by nature when it comes to somebody else’s money, and I often quote Warren Buffet, Consider the greatest stock investor. He said that if you’re not going own a stock for 10 years, you shouldn’t own it for 10 minutes.
I tweaked that when it comes to our clients in real estate, I encourage them to look at it. If you’re not gonna own it for five to 10 years, don’t think about it for five to 10 minutes. But it’s been incredible what’s happened this last couple years. And in, in accelerating the client’s opportunity, the, the chance to go from a phase one to a phase two, the chance to acceler.
Their portfolio cuz it really is so important that you just get started. I heard a podcast where Ben and Turner over at Bigger pockets was talking to somebody at, at his karate class and he was going to, and somebody asked him, What, what belt are you? And he said, I’m just a white belt. And he said, the person that was a black belt that was talking to him, he said, That’s the hardest belt to get.
Because that white belt, it means you, you got off the couch and you came in and you got started towards, you know, this progression. It’s so important getting started. But, but then the name of the game after you get started is to then multiply. That, is to leverage that and build upon it so you can, you have this bigger snowball that’s rolling for your financial future.
And so when somebody has that goal of growing their portfolio to replace more income down the road, before they might have had a five to 10 year window. Most of the time it’s been between five and six years for our clients, If not. But it’s literally accelerated so that if they’ve owned a property for two or three years, They’re often in a position because of equity growth cuz of a little bit of mortgage pay down cause of the incredible timeframe that we’ve had to actually look at cash out refinances in purchasing a second property now instead of waiting for another two or three years.
And with that context, I do like to add a little bit. No guarantees. You should never look at real estate, is my opinion is you shouldn’t buy real estate. It it, the idea of it going down a little bit in value. Would cause you to wanna sell it because anything can happen anytime. But that’s why we say don’t look at it for a year.
Two, look at it for a decade or two and it works out. And so what Quick comparison, back after oh 8, 0 9, there was 18 million excess single family homes in the nation, 18 million more homes than there were buyers wanted to or were able to buy them. And so when we have appreciation, like’s happened in the last couple years that understandably it causes some concern triggers.
Questions about whether we’re in a bubble. Again, I do think it’s important to point out that the basic supply and demand law, that if there’s too much supply and not enough demand, prices will go down, is not at all the case now, you know, that was triggered by the real estate market as a whole, specifically by the lending market and subprime loans.
When they started to hit the, the fan home prices started to go down and there weren’t enough established qualified buyers to swo it up as s, That’s not where we’re all at with lending, right. And the fact that we have 5 million fewer homes on the market across the nation as a whole, instead of 18 million excess, we have 5 million fewer, puts us in a very different situation.
And then you couple that with all the changes that have happened with covid and remote work and people able to work where they want, is just made this single family home with extra space for an at home office or extra air to breathe. The great hot area in real estate right now. By far, this last year was the best place to be in real.
And so I guess that’s a, a circular way of saying absolutely. If you’ve owned real estate over the last couple three years, you’re in a position to accelerate your portfolio and grow it. Cause that’s so important. One home alone can make a huge impact in your financial future. Two is better and hopefully you experience that over the next couple, three years too.
But if not, Give it five to 10 years. It just works out magically. But yeah, we’re, we’re helping a lot of people accelerate that and, and grow their portfolios now a lot quicker than they, they were planning to originally. Well, that’s awesome. Well, cool. Well, as we kind of wrap the episode, I wanted to just do a quick recap some of the things that we want, that we think you ought to be considering if you’re listening, that you ought to be considering.
As you’re evaluating your property, number one, you should be evaluating your property purchases on a regular basis at a minimum annually. And some of the things that Mike mentioned that we look at and that we’re considering with these property market reviews are, what stage of life are you in? What role is that real estate plane based on the stage of life that you’re in?
What are the necessary repairs that are either going to be coming up soon or that are needed right now? What is the age of the property? Can that make an impact? You know, we get questions all the time. When should I sell a property or when should I move from one to another? Well, that’s why we do these reviews because if you’re in an aging property, but there’s an opportunity to sell one and maybe go get two newer properties that are gonna cash flow, maybe even twice as good as the one property is, cuz you’ve got cash flow working in two or whatever the case may be.
You wanna be considering that sort of a thing. So what’s the age of the property? How much have you depreciated the property? Where are you in your depreciation schedule? Is another one. What are the prevailing interest rates? Are interest rates going up? Are they trending upward? Are they trending down?
You could also add to that leverage. Can I go by with a, There’s folks that, you know, we were doing real estate with, they could only do it for 25% down. Well, now we have a ton of people still investing in real estate with 25% down loans, but 20% kind of back on the table for people, right? So maybe that’s one of the things you evaluate, just in terms of how much you can leverage if you wanna use leverage as you look towards the future.
Another one. Things, equity, growth, how much equity has grown? How much will be projected to grow over the next couple years? Can that play a role in when you should sell and should you continue to keep that property, geography, what’s happening in the market? Are you in the best possible market? Could you maybe look at another market?
So there’s all of these factors. That you ought be considering on a regular, at least annual basis, and those factors combined should paint a picture and it should be a picture that necessitates some form of action. Even doing nothing is a type of action, right? Sometimes we think with the set it and forget it approach.
It’s just a passive real estate investment. Well, just cuz you want your real estate to be passive does not mean that the real estate’s going to be passive without you. Okay? Meaning there’s always things happening in the market. The real estate is always going to be doing something. There’s going to be tenants, there’s going to be age of property.
There’s going to be depreciation, there’s gonna be tax benefits. And so as passive as you want your real estate to be, take an active role in considering it on a regular basis. And you just may find the ability to, once you evaluate, to accelerate your portfolio growth and accelerate, accelerate, accelerate.
You know, it’s always fun when my speech impediment like pops up, right? Like I had speech therapy for like years and I had a problem with the letter R. And every now and then when I’m just talking, it just comes back like you all just witness. So once you evaluate and you can accelerate your portfolio, it can make all the difference in the world on your road to income replacement.
That was a lot of ours. That was just, Any last words, Mike or, Yeah, absolutely. So. We’ve talked a little bit about some of two of my favorite things about real estate. When, when you look at physical, tangible things about real estate, uh, you know, the, the power of leverage is, is amazing what it does for somebody.
You can use that power greater than any other investment vehicle out there with real estate that the tax savings is not what you make. It’s, it’s what you keep and, and the ability that real estate has to help our clients keep more of their money. Those are two things that are physical that, that you can count and measure that I really love about real estate compared to what else somebody might be doing with their.
Really, my favorite thing about real estate overall though, is what it does for somebody’s psychology, for the non-tangible, for their peace of mind. I, I’ve seen it time and time again. You know, I was on the other side of desk from clients when the market lost 57%, oh 8, 0 9, and there was a handful of them that didn’t.
Stick with the plan. Understandably so. You see half of your money disappear. You wonder if the other half is gonna go and so they pull out and they’re there for the rebound. You see it go down two years, a twice in the two, and you just don’t. It’s gonna be there for your financial future. And so what that does, so often if somebody doesn’t have real estate in their portfolio, is they’re often holding on to what they have and, and saving it for the rainy day.
You know, they know that there’s gonna be long term care out there in the future that that half of us are gonna need some kind of assisted living or at home healthcare. They know that there can be unknowns and uncertainties that come up with their life and that uncertainty causes them to not really.
Enjoy life as much as I hope and wish they would. I got into the financial planning business when my parents retired and I wanted them to ride after the sunset and enjoy it and not worry about. And the advice they were getting, you know, wasn’t helping them do that. And, and so I made the transition there.
My favorite thing about helping somebody with their overall financial planning is helping them spend their money when they can. Helping them go on that cruise, remodel that home, buy that new car or whatever the case might be, enjoy the fruits of the labor. And so often I’ve seen it where they haven’t done that cuz they’re so worried about the future.
What I love about real estate is because it’s a physical, tangible, You know, something you can kick, so to speak, something that people have experienced in their own homes, even if they haven’t done it with investment properties yet, it’s something they have more confidence and belief in that will be there for their financial future and, and so we can get into that and actually help them, You know, maybe we buy a new property now and use leverage that you maybe pay 70 or $80,000 out of pocket now in 20 years from now, if you just take the positive cash flow, that home would be paid off and now you have this home that can help with your assisted living.
We can get into the details of their financial planning of, of what they’re trying to accomplish, what their concerns are, they’re keeping them from accomplishing that, what they need to get over those concerns. And then we can help them craft a plan that that addresses that. I love doing that. I love helping somebody feel more confident.
Just this last week, I was talking with one of our clients that has several properties, has actually more of a money outside of real estate than in real estate, and she told me that she got her car back from the garage just last. And the repair bill was gonna be more than what the car was worth, and so she was trying to figure out whether to repair that car by a new one.
We talked about taking that 70 or $80,000, putting it towards a property, and the car she really wanted was a Tesla when I started talking to her about it. And so we, we talked about how she could take the 70 or 80,000, she would’ve put in a Tesla and instead of buying a brand new one off a lot, you could put that in a property and have the positive cash flow from that property.
Pay for that 30 or $35,000 Tesla and now you have an asset that’s growing for your financial future and, and she can go have that dream card that she wanted and she has the resources to be able to do it. I love that she was hoping for an extra $2,000. When we looked at, looked at her whole portfolio, she has an extra $4,000 a month in place right now, and we can help her do more and better with that so that she can enjoy life, She can have that car, she can travel around like she wants to and explore the southwest.
I love getting into those details and, and charting a path to help somebody feel more comfortable with what, what they’re doing, so they worry less and live more. That’s what real estate does, I think, for people, is help them worry less and live more, or have more confidence, more certainty in their life for their financial future.
So I, I enjoy those conversations. Love to have more of them with anybody that, uh, could benefit from that and appreciate a chance to talk about that a little. Awesome. Thank you so much, Mike. Hey guys, if you wanna, if you are a client and you’re thinking, man, I really wanna get with Mike, I’d love to have a conversation with him.
Feel free to just, you guys could, could either call the main number you could Google done for your real estate. You’ll get connected to us that way. Feel free to also shoot me an email if you want to, kevin dfy dash real estate.com and I’ll get you routed over. And so anyway, we can serve you happy to do that.
Feel like it could be a benefit to you. Let us know. Steve, I’m gonna give you the last word as we wrap this episode. The last word. That was good. That was a good, that was more than one. We’re good. We’re to go. This conversation listening to Mike and it’s really powerful and I question last I to him and did analysis to pulling the trigger and, and, uh, you know, just, uh, walked away, uh, extra confident that.
You know, my plan on the last two properties that I, that I bought in Oklahoma City near the end of last year, uh, was was right. Moved from my portfolio. And, uh, anyways, he’s, he’s just a great resource, so I’d highly recommend if you can give us a call, send like an email, set up a time to, to meet them.
Awesome. All right everybody, thank you so much. That’s all for today and we will talk to you real soon. See ya. Thanks so much for listening to Replace Your Income with Kevin and Steve. Do you want to connect with us and other income replacement rangers out to obliterate the status quo and experience real retirement with income replacement through real estate type done for you Real Estate USA in your Facebook search bar?
And make sure to like our company’s page, send us a message while you’re. And I’ll send you a personal hello and make sure you are on our weekly property scouting emails where you can view weekly deals right in your inbox. Until then, thanks so much 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.
