this is the Bigger Pockets podcast show 931 what's going on everyone this is David Green your host of the Bigger Pockets real State podcast joined today by my good buddies Dave Meyer and Rob abas solo excited to be here because many of our listeners have been asking us this one question that we're going to dive into today they've been wondering how the three of us would start to invest if we were in their shoes so that is what we're going to do today we're basically the three of us are going to rewind to square one pretend that we do not have successful real estate portfolios and apply our current knowledge to the average situation and condition that Americans find themselves in today yeah we're going to be doing this with some pretty stringent criteria here and we're going to be starting from scratch on this episode much like the board game life so let's get into it all right to start the show we all are going to be on the same page in the same position as aspiring Real Estate Investors so let me set the scene for everyone we will have a salary of $60,000 a year which is the average salary in the United States we will have $10,000 in our savings account no debt but a car payment of $400 a month we will be living with a partner and splitting rent with them the rent is 1,500 so we'll each be paying 750 no kids and we live in a tertiary Market outside of a major Metro with strong Market fundamentals often called an Emerging Market the median home price in this market is $300,000 and our job is Sal saled so there is no overtime opportunities we have a hybrid remote schedule so we work in the office sometimes and from home sometimes Rob I know you hate starting off so I'm going to start with you what's the first thing you're going to do uh I I know what you are going to say so I'm going to change my answer here and uh I'm going to say $10,000 in my opinion doesn't really buy you much um I think there's several ways that you can get started in the world of real estate but I think if that's all the padding you have then getting into real estate out the gate might be a little bit risky because there's a little thing called capex and maintenance that could destroy your life if all you had was $10,000 to sink into an investment so yeah I think if you're coming into this with 10,000 bucks you might need to fortify the foundation if you will so I think the best way to really invest your $10,000 is education and I don't necessarily mean High ticket education I don't think you need to go and enroll in a big course or anything like that what I mean by this is I want you to go out and start networking peer-to-peer and getting education that way and the best way to do that there's a few ways you can sign up for a BP Pro membership really really cheap that gets you access to our website but even the free version of that you get free access to forums where you can literally communicate with thousands of investors every single day the second tier to this if you do want to start investing a little bit of money is you can you know 10,000 bucks get you a couple tickets to some conferences plane tickets hotels I think that's going to be the best way to invest1 ,000 is going around and going to different real estate conferences where we can gather ideas and meet people and then we can work on actually executing once we have a Base education on what it is we actually are interested in doing all right Dave I'm going to move to you shortly Rob before we do I have one question for you are you cutting out the guac at Chipotle in preparation for your investing future well hey every little bit counts and that's $3 so absolutely some people talk about it some people be about it Rob is cutting out the guac this is a serious man he loves real estate hey don't walk about it be about it you know what I mean Dave moving to you I'm not going to ask you about sandwiches because I don't want you to cry here on a podcast but I am going to ask you what's the first step that you would take towards investing so the first thing I would do is try and figure out what type of deal I want to do first is it a house hack is it a shortterm rental and sort of get an idea of what that's going to cost so you would start with strategy essentially I would start with strategy and the reason I would do that is because you need to assess sort of how close or far away you are from being able to purchase property and as Rob said 10,000 bucks is probably not going to get you that far particularly in this type of market so if you were to buy the medium price home in this market of $300,000 that putting 5% down you would need at least $115,000 just for the down payment and then you would probably need another $5,000 for closing cost and then on top of that you probably need at least another 5 grand for capex and repairs like Rob mentioned so I think that little exercise is helpful and just seeing that right now probably not super realistic for me in these conditions to buy a property on my own so then I'm starting to think there's two different things that I could do I can either figure out a way to save up 20 uh another let's say $15,000 um that might be easy for you that might not it's hard to say given your your situation or maybe the better option that I would probably do is try and partner with someone whether that's on a house hack or on a single family rental or even on a flip depending on your strategy I would look to find an experienced investor where I can contribute some Equity maybe not even all 10,000 but maybe I can just put a little bit into this deal let's say put five grand into it and I'm going to sort of Shadow the experienced investor and learn as much as I can from that investor hopefully make a little bit of money on it but really to Rob's Point work on my education while I have a probably a small piece but at least I'm in a deal a little bit I love that let me just add to that because oftentimes the answer is like hey go Shadow someone and make them work by training you in your scenario you're saying hey I'll put a little bit of my money into this deal which is pretty much everything everything for you in this scenario that skin in the game the stakes are high and so I think it it's really it shows a lot of good faith to be willing to do that if you're going to go and partner with someone all right my first step would be to get my financial house in order so I have a different take on real estate than some people uh like the brain and Turners of the world tend to say you can't buy real estate be creative figure out a way to buy it and for some people that works when I talk to the wealthy investors that I've met the successful ones they all have one thing in common and it's capital it takes money to invest in real estate and real estate specifically requires more money than other Investments do like your Apple stock doesn't have a roof that needs to be replaced and if it does it doesn't come from you as the investor it comes from the funds of the company and your dividends would just be less but when you own the asset completely yourself like you mentioned earlier you're going to be having to replace those pipes when there's a leak or that roof if there's a problem or that air conditioner when it goes out so you really need to be in a financially solid position before you get super deep into real estate investing and I know that everyone doesn't love hearing it but it's the truth and that's what we bring to you here so the first thing that I'm going to do is get my financial house in order I'm going to start with a budget we're going to come up with a budget of what we're going to spend on food Gas Energy entertainment everything we're going to have a plan and then I'm going to download apps like rocket money I believe mint was one that was available before I don't know if that one's still around but it's actually going to tell us how much money we are spending as a couple because in this case we're with a partner on our credit cards and we're going to make sure that we're hitting that budget so you earn the right to get into real estate investing which we all like by starting by controlling your own expenses and then I'm going to start looking for a job that pays more or opportunities at this job where I can make more so if my boss says hey this is all we got for you there's nothing more great I got another 16 hours in a day I'm going to go pick up a shift waiting tables I'm going to go get my real estate license I'm going to go look for an investor that's hiring someone to help with work I'm going to do something to be financially productive during those downtimes CU we don't have kids right now to make more money and save more money that will get that $10,000 that I have in the bank doubled and tripled much faster in which case I'll feel more comfortable investing yeah I I think that I I like that advice David and generally agree that trying to improve your financial situation won't just help with your first deal but is going to pay dividends over the course of your investing career uh we were on a show the three of us recently we were joking about how because I have a full-time job I am the most lendable out of the group and I think that is something that people should consider is that if you're able to increase your salary or bring in just some more money that A lender can look at that it's going to help you throughout your entire investing career and it will set you up even if that means taking a little bit longer before you get that next deal so with that said I guess David I mean what would your I mean you're going to build build up your financial Fortress if you will what would be your first investment sort of once you did that are you going straight into real estate are you investing in I don't know equipment that might help you start a side hustle is that is that where is that where you're getting at you might you know start something on the side here where you can make more money what what's your next move well my first investment is going to be a race to a house hack if we're talking about a $300,000 median home and I could find some even less than that I'm looking for the ugliest biggest house that I could possibly find I want to get something that already has four or five bedrooms that has space that I can add another bedroom to this is my first deal I want something that's been sitting on the market a while terrible pictures maybe has a tenant in it so other people aren't buying it and I'm going to get that Realtor and say what do we got to do to get this house do I have to wait for the seller to get the tenants kicked out can I is there uh an open unit that I can use a primary residence loan to buy it and then replace the tenant or is there something I can buy and rent by the room when you're trying to get a foothold in real estate rent by the room is usually the first step and the easiest step to do it's not sexy which is why nobody likes to do it cuz no one likes roommates that's my objection I hear all the time well I don't like roommates I get it I also don't like being broke so which of the don't likes is worse I'm going to deal with roommates for a period of time so I'm going to find a big house add some bedrooms to it and if the average price home is $300,000 I can get in with $9,000 down I actually have enough right now with 10 grand I just don't have enough to do it and feel comfortable that I still have savings for life so if I can get to 15 $20,000 by working extra shifts and saving more money just going to go in there and I'm GNA buy a house hack I'm gonna live in a room with my partner and I'm going to rent out the other four rooms or five rooms to somebody else and I'm going to start living for free and now we're also going to be saving that $1,500 a month that we used to be spending on rent cool yeah that makes sense house hack I knew it I knew it that's a good one I think that is a very very strong answer solution to anyone getting into it I mean I tell everybody house hack is should be everyone's first investment but I also understand it's not everyone's cup of tea what say you Dave yeah it's so boring I know but house hacking is just the right answer and I rarely give that sort of definitive advice most questions in real estate are like it depends it depends on your strategy and blah blah blah but I think honestly house hacking is kind of a no-brainer if you're getting started especially in the scenario that we've created here where it's just you and a partner you don't have kids year would greatly benefit financially just from reducing your rent expenses rather than having to cash flow and so there's a lot of benefits to it so I I just I know that's boring but we can end the podcast now let's make it a little less boring because there's different flavors of house hacking we typically just say house hacking house hacking is a principle it is not an actual strategy okay you can do like I said rent by the room that's a not a popular flavor that's the broccoli flavor of house hacking then you've got some they're a little more sexy you buy a fourplex you live in a unit you have your own you rent out the other three sure that's a more enticing flavor but it's just harder to find that kind of deal about the guacamole yeah there you go add a little bit of guac to it right you've got the have a basement that you live in and you rent out the rooms upstairs or rent out the house upstairs you've got a house hacking with a short-term rental component to it where you live in Adu and rent out the house like there's different ways to do this and some are more sexy than others I'm starting off with the least sexy one because that's the easiest way to get my foot in the door but we should point that out that house hacking itself is a very generalized term and there's lots of different ways to make it happen I'd like to point out a a preh housee hacking because in this scenario you're probably living in some kind of apartment I actually don't really think you need to buy a house to house hack I think you could go and rent an apartment and then rent a room in that apartment great all I really want yeah all I really want from anyone that's doing the house hacking thing is try to get your monthly living expense as close to zero as possible so if you're like well dang I got $10,000 that's you know 9,000 of that is going to go towards a $300,000 you know house for the down payment is three and a half% what about capex you know maintenance that's still going to kill you if your AC goes out that first year right you're going to be in a really really bad spot so I'd even push people to think before that and say hey can I rent a two-bedroom apartment where my roommate is covering a majority of that rent and if you can get your rent down as close as zero I think that jump starts your real estate career because pretty much at that point you're saving your rent every single month and that starts compounding pretty quickly too there you go great point there see how house hacking is like one of the only real estate investing strategies that pairs with financial Independence like principles of Building Wealth as opposed to just ease like I bought a property it makes a whole bunch of money and it's passive income and I don't have to do anything and it just makes me Rich while I go do what I want in today's market it's definitely not like that as we're starting over with only 10,000 bucks and a $60,000 salary we don't have the luxury of ease we're going to have to get our hands dirty here so Rob how are you going to get your hands dirty well there's there's a couple of things I think getting into this world of real estate investing especially with $10,000 because you know I don't want to make it seem like it's nothing but it really is a risky place to be to put all of it on the line so when I'm looking in the world of like real estate investing this is technically not real estate what I'm about to say it's a little bit more Hospitality but I do think it's a good it's a good way to get your feet wet as they say they do say that right that yeah yeah your toes dip your toes in the water I mean your toes are on your foot David come on um so I would probably push someone towards co-hosting and co-hosting is basically Property Management there is a small difference here typically property managers collect money on behalf of the the landlord and then they remit it there's like licenses and yeah that gets a little bit more cumbersome with the paperwork but a co-host on the short-term rental side is someone who actually has the log info they actually have access to a landlord's property and they can list that property on different OTAs online travel agencies like Airbnb vero.com booking.com and you can manage someone else's short-term rental property and basically give up your time and exchange you can charge a percentage on that monthly gross revenue that they're bringing in and if they make $0 that month you make $0 that month but if they make $5,000 that month let's say you're charging 20% management which is is pretty standard you'd make $1,000 and that's super super super low risk versus other forms of the short-term rental side like Arbitrage where if you make 0o one month but you're you're still going to be on the hook for your monthly rent so for me I kind of like that idea because if you can build up a co-hosting business which again is not on the- nose real estate it's more Hospitality you can build up a bank account from there and eventually use that to Parlay into actually purchasing a short-term rental property very very nice you're also going to get some experience real estate that's going to gain some confidence Dave you see any you want to poke any holes in that no I I think it's a great great idea people should be looking for ways to both invest in their actual physical assets and in their income potential so I I'll just add one something I actually did myself was in to achieve the same outcome that Rob was just talking about which is building up more assets with which you can invest I personally uh I think like three or four years into my invest invting career decided to go back to graduate school I chose a lowcost state school with instate tuition I invested probably about 10 grand took on some loans but it was probably the best Roi I've ever gotten on an investment in my life it doesn't work for everyone it depends what field you're in if you like what you're doing um but if you do like what you're doing you should consider investing in education that could also increase your income potential now you still need to learn a lot about real estate at the same time but there are real big benefits to getting a salary or a larger salary and using that as sort of a financial Foundation from which to invest so that you can order the guacamole at Chipotle and also buy duplexes at the same time it's actually refreshing to hear you say that because I do feel like the popular thing in the real estate Community is like don't go to college it's a scam they charge you 60,000 and you're still paying it off but it's it's true like the ROI on that is great it's to you having a higher salary which allows you to invest in more real estate totally and like we've talked about college on a bunch of the Bigger Pockets money show and it's not always worth it it it really depends on the degree you're going after the school you pick so but I I agree like if you're in the right field and you choose the right school it can be great if you're in the wrong field and you choose the wrong school it could be terrible for your finances so you just have to be thoughtful about it totally totally all right Dave so you've bought your first property we've all agreed it's going to be a house house hack tell me what kind of house hack do you think you got and what's your next step from there if I could pick uh I would look for not the rent by the room I I think it can really work but if you can find a duplex or Triplex it's going to be less operational intensity like it's just a little bit easier I think to rent out multiple units I know that sounds different CU you have multiple tenants but you have people living in separate spaces I think it's just a little bit easier um so I would choose a duplex a Triplex or a quadplex and I would look for something that has some sort of value ad upside and that is similar to what David said where you might be looking for something that is undervalued or needs ideally if you could find something that just needs a cosmetic upgrade that to me is the perfect situation because those are skills and those are upgrades that most people can do themselves or learn to do themselves anyone can learn to paint most people can learn to put down V luxury vinyl plank or you know laminant floors uh and that's how you can really start to build some equity in the property and the key and the reason you want to build equity is because if you want to get to that next deal and you're earning 60 Grand and not and your savings rate is hopefully positive but not great you're going to need to find a way to build up more cash to get into your next deal and a good way to do that is through value ad or forced appreciation people call it different things but if you could do that in your first house hack then refinance in a few years I think that's sort of the one two punch you get more equity in your first deal in a great house hack and then it gives you sort of a springboard to your second deal and hopefully subsequent ones after that I have a small variation on that and I mean maybe it's I guess it could be the same thing but yeah I might consider just going right into the live and flip um which is kind of what you're alluding to a little bit right Dave yes yeah very similar idea yeah and that's basically like this again not everyone is going to be willing to house hack like I I think typically if you have a spouse the spouse may not be down and I totally get that right um and so for me I would probably just as much as I I always have a lot of respect for investors that rent and buy an investment property versus buying their own home but I do think that doing a livein flip where you can force equity and force appreciation is a really really powerful move because you know you can get into that house super super cheaply and then as soon as you're able to save up money you're able to put 3 and half% down on the next house and turn that house into a rental it's just a tried andrue method and that's what I did for myself and using those skills the DIY skills using my co-hosting skills that I built up when I first got started that's how I was able to really pitch investors and people to actually invest in me whenever I scaled up to the next property so Dave you're looking at hey I got to get some equity in in addition to keeping my housing expenses low yeah otherwise you're going to be waiting a long time to buy your second deal I think if you you could just buy the house hack and hold on to it for a while that's actually what I did but it's something I regret because I sort of just bought it took the cash flow because I was young and needed the money and I was like this is great I'm making a couple hundred bucks a month and then a couple years later I was like man if I had done some more thinking and built some Equity I could have built my portfolio a lot faster so I think you have to sort of strike the right balance there it's a really good point I I love that while you are helping yourself right now by saving money you're also thinking at the same time I'm going to be thinking about the next one and if I can get Equity coming from this property that could be the down payment and more for the next property and you also made a really good point that's another real estate principle worth repeating Equity is easier to build than cash flow cash flow is very slow it's very difficult and it's outside of your control Market rents are going to be what Market rents are and often times expenses are outside of your control like can any of us prevent our insurance from doubling on our Properties or property taxes from going up you can't but Equity does tend to have be something you have more control over you can add additions to a property you can improve its condition or you could buy it at a good rate so I love that you that's how that snowball starts to get built the reason I like the livein flip and why it worked so well for me is because the equity that we built up you know what you're talking about here allowed me to get a HELOC a home equity line of credit that I was then able to use to build new construction properties whether it was my Adu or a tiny house you know right outside the city and that really unlocked a lot of things for me too so kind of gives you this HELOC funding option for future projects that I think then you can use to really attack the real estate portfolio so what are you going to do for your uh next option you've got your first property Rob what kind of property did you get and what's your next step well my next step here is I'm just trying to build a little bit of experience and a little bit of like knowhow in this space but 100% I mean regardless we started with $10,000 so it's not like no matter how hard I work it's not like I'm getting to like $100,000 overnight right so what I'm trying to do is just build my skills build my experience and my confidence to then go out and find a partner that will then fund the the pro the next rental property that I buy in my case it's a short-term rental but I mean it could be a long-term rental I think it gets a little tough right because when you're bringing in private money Partners typically they're in it for the cash flow so I would go and I would raise money from a private money partner and use that to acquire my next short-term rental that way I can get out of the uh you know the co-hosting space and actually get into ownership where I have all four benefits of real estate ranging from cash flow tax benefits depreciation and appreciation or Debt Pay down and and appreciation sorry so flesh that out for me a little bit more like what kind of a split do you think you're going to offer your partner who are you going to look for how you're going to pitch it to him okay so you don't really have too much of a leg to stand on because you don't have a lot of experience erience in this scenario so here's the exact thing that I pitched that I think is super fair in this point in my career I regretted a little bit but I don't think I could have done it any other way so what I told Partners going into this was I will find it I will run it I will manage it as long as you fund it so you fund it I find it I run it that's kind of the arrangement and what I would say is I'm going to do a 50-50 partnership on equity and on cash flow on the entire property however because you're the one that's putting up all the risk I will take zero cash flow from this deal until your investment is paid back once your investment is paid back I will then take start taking distributions 50/50 with you I think that's a really fair deal uh it kind of keeps you broke for a little while it doesn't solve the cash flow problem but it does build a little bit of confidence and it puts the onus on you to perform Super well for that investor because the better you perform the faster you'll get paid that's a great point I love it I especially love that you're willing to take zero cash flow they basically get a preferred return of 100% until they get paid back it's that's a tough deal to beat yeah well you know like I said these days I'm like well should I have done that but it gave me my start and it helped me format like the types of structure that I would go on to De well that's the scenario we're talking about getting started I think it's the perfect mentality Robin I I think it's a smart structure and honestly if in your first deal if you just break even you're probably going to be happy and learn something and I know it's tempting and desirable to have 100% ownership or something or get all of the upside in your first deal but if you're in the scenario where you only have $10,000 and you aren't able to get a a a property on your own and have full ownership you need to just be realistic with yourself and realize that anything that's going to improve your financial situation is going to help you in the long run even if it's not a home run or grand slam right off the bat yeah I mean the more you do this the more you partner with people the more of a rockar you can be and actually have results the easier it will be to continue doing that with other people and you start building up references and Rapport and if you can treat one investor really really right you know it kind of leads to more opportunities down the line too I think a lot of people get hung up on well that's not fair that's not fair to me it should be 50/50 everyone has their own definition of fairness the best advice I offer there is that Market determines what's fair what's a fair price for your house it's what the Market's willing to pay the reality of life is that nothing is actually ever going to be fair and when you're a new person you're going to give up a lot more than an experienced person can and as you become an experienced person you may come back to that same person you partnered with before with the deal that's better for you and not as good for them but that's market value because if they say no you could find somebody else that would be willing to do that with you once you've got three or four properties that you're working on so don't assume that when we're starting from scratch here what the way we put a deal together is the way we're always going to put that deal together it's going to evolve just like the price of homes evolve just like the rent that you collect on a home evolves just like your expenses are going to evolve it's always going to change and so you're always asking yourself the same question what's market value right now oh let me add one thing it doesn't have to be because if some people might hear this and say well I really need the money I think there's other ways you can work that out you can say Hey you get 75% you investor get 75% of the cash flow I get 25 and then once your investment is paid back we waterfall it meaning we change the splits to 50/50 so I think that part's always flexible you just have to feel it out one of the biggest mistakes I ever made was I didn't have that much experience I pitched my father-in-law's brother so I guess my uncle-in-law and I gave him horrible terms cuz I was like all right I know what I'm doing you get 20% of the profits I get 80% and then he was like whoa Bud you're a nobody you don't have any experience this is a horrible deal for me and it really I was like oh okay yeah maybe I need to learn how to feel out investors a little bit more so I think you'll know once you kind of get into those conversations with Partners Rob I that's awesome I was just going to say something similar to that it's like like David said people want Fair well think about what your partner wants is it fair for them to get an equal deal with someone who is inexperienced in real estate you kind of have to think about like as the the partner they can invest that money in a lot of different ways they can invest it with you they can invest it with with a more experienced operator they can invest it in the stock market and to be perfectly candid if it is your first deal you are by far the riskiest option out there and so the only way to attract an investor is to give them sort of an unfair deal in their favor to compensate for that risk and to David's point that is market value your market value when you are a brand new investor is low and that's fine that's just how it goes but you just kind of have to be realistic about that totally yeah yeah yeah hey I was a risky I was a risky boy it would have worked out but uh I told that's 100% correct what about you David what what would you do what would your plan be mine is what I call the sneaky rental the sneaky rental is a strategy that I like because it's covert and tactical no I'm just kidding basically it takes advantage of the financing of real estate which is one of the most important part so the difference between putting 20% down on a property or 25% down and three % down are astronomically different I mean oh yeah you can literally buy seven times as much real estate putting 3% down instead of 2025 it's a good way to put it yeah right so I'm going to take advantage of that which means I have to buy a primary residence which means I'm going to be buying a new house every single year which means I'm always going to be house hacking and I have no problem with a boring repeatable predictable systematic approach to how I'm going to build wealth I'm going to buy that house I'm going to rent out the rooms next year I'm going to do like Dave said I'm going to try try to buy a Triplex or a fourplex if I can get one I'm going to get one if I can't I'm going to buy another big house and I'm going to rent the rooms out again now I've got two houses that I'm renting rooms out on I'm going to get some software that makes that easier for me to do I'm going to learn how to be a landlord the oldfashioned way and handle this stuff myself and then next year I'm going to do the same thing again you can get conventional loans with 3% down which are usually better than FHA options at 3 and a half% down because on an FHA loan you're going to pay the MIP which is like PMI and FHA loan forever doesn't matter matter what your Equity is in the property but on a convention loan it's going to drop off when you hit that 80% loan to value ratio so I just have to make sure every year I can save up another 3% now if I'm not having a housing payment like you mentioned Rob uh and I'm keeping my budget in control I can probably save up more than 3% every single year which means I can always buy another house if I'm willing to be uncomfortable I'm always moving in a new property no one likes moving and no one likes roommates get over it that's what it takes when I got nothing and I got 10 grand in the bank and I need to move forward now in 10 years I'm going to have 10 properties my goal is to buy in the best locations I can and add as much Equity as I can to every single deal just like you said Dave I'm kind of adding all of this together here with my strategy that's the benefit of going last you get to take everybody else's great ideas working in no it's good though because you know in your strategy how many houses do you have at the end of five years yeah I've got five houses and I've got equity in each one if I have 100 Grand in every house even 50 Grand in every house I've got A4 million dollar of Equity I started with ,000 to my name and I'm just going to keep going for 10 years I'm going to do this and then I'm going to reevaluate and you know what that 10 year rule of you can't keep getting more properties that only applies to investment properties you can get a loan on a conventional loan with more than 10 finance properties if it's a primary so what I keep telling people you got to buy a primary every single year before you do a short-term rental before you do a burr before you do longdistance investing before you do any of the sexy stuff we talk about on this podcast get a primary residence get it in the best neighborhood you can get the best deal you can add as much Equity as you possibly can do the boring thing eat that broccoli first and I'm going to start off behind all the other investors and I'm going to pass all of them up just like the tortoise in the race because I'm going to keep taking action every single year it's a great strategy I want to just like I know it may may not sound a lot for a lot of people I just want to make sure like five houses is a lot if you're doing this this method because in 10 years you have 10 in 20 you have 20 and 30 you have 30 that's crazy like you will a multi- millionaire by the time you retire if you actually execute this strategy so I really don't want people to think oh one a year that's just like your foundation you're just doing that as like the base but you can do so much auxiliary real estate on top of that and it starts to just snowball so quickly well I'm probably going to hit a point if I'm doing rent by the room where I've got seven houses and then I've got four tenant in every house that's 28 tenants that's crazy I don't want to keep doing that so I'm going to take the four that have the most Equity with the least cash flow calculate the return on equity and I'm going to sell in 1031 those into that big bad short-term rental that I really wanted to get now I've got one property instead of four to manage that eliminated you know 20 of my tenants or whatever the case was and then I'm going to make sure that like Dave said I keep buying and building equity on every single future deal so that when I do feel overwhelmed I just take all those little houses and I tend 31 them into a hotel and then I keep buying more houses in the future yeah totally I'd love to toss out idea for scaling here and again I I don't really love selling real estate but I do think it could work in this scenario there is that rule where if you lived in the property for two out of the Last 5 Years you can sell it I believe without capital gains taxes you could do that for what whatever properties you want to within the that 5year period and use that money to then actually start and acquiring more aggressive types of properties maybe it's bigger triplexes quad plexes maybe you use those those funds to actually execute a bur or rehab but I think that's where you can start getting a little bit experimental with your Equity wonderful but the key is you always got to have more Equity because Equity creates options yep and a lot of fears people have what am I going to do when I have all these houses what am I going to do when I'm stuck what am if you have Equity you have options and you can move it around I think that's so true that Equity is extremely flexible and gives you the best liquidity options to take advantage of future opportunities cuz none of us really know what they're going to be but if you have liquid equity you're always sort of in a ready state to take advantage of whatever comes up there you have it folks Rob Dave and I figuring out how we would start from scratch $60,000 salary $400 car payment 10 grand in the bank just a little baby bird trying to figure out how to fly this is how we would soar like eagles let us know in the comments what you would do if you think that there's a strategy that we missed and if you're listening to this where you listen to podcast please subscribe to this show if you're enjoying it and we would appreciate it a ton anything you guys want to add before we get out of here I'm just going to say there are definitely other more aggressive strategies out there you could go right into flips and do like hard money lenders that will loan 100% I think there's a lot of ways to do that you can do wholesaling I just think that everything we talked about is the most practical and a conservative but really amazing way to get started in real estate so I'll leave it with that this is practical I think anybody could do this Al righty I'll let you guys get out of here this is David Green from Dave start with sandwiches Meyer and Rob Drop It Like It's guac Oba solo signing [Music] off
