Ashley:
This is Real Estate Rookie, episode 295.

Paul:
I’m a cashflow buy and hold investor here in Colorado Springs. My wife and I own a few properties. And my day job, I still have a W2 job as a underwriter in corporate banking. And this has definitely helped me in my real estate underwriting and my exotic plant selling side hustle business.

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

Tony:
And welcome to the Real Estate Rookie Podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And just like always, we’ve got an amazing story for y’all today. Today we’ve got Paul Lee on the podcast. And Paul’s an investor based out of Denver. He’s up to eight multi-family units right now, or eight units across two multi-family properties. But just really interesting conversation with Paul. We talk about this $100,000 side hustle with exotic plants, we talk about getting rid of PMI. We talk about his job as an underwriter and how it helped him as a real estate investor, just so many, I think, good topics from the conversation with Paul today.

Ashley:
Paul also breaks down the benefits of using leverage. If you are a Dave Ramsey fanatic and you are afraid of getting into more debt, Paul gives some really good talking points as to reasons why leverage can actually be beneficial to you, especially as an investor in trying to grow your wealth.

Tony:
And this was probably one of my favorite parts of the episode, he also talks about how he got a 10% down commercial loan for one of his four units, which is something you don’t typically see. Make sure you listen for that part. And then he also talks about something called the self-sufficiency test, which I had never heard of before. Ash, had you heard of that before?

Ashley:
No, I hadn’t.

Tony:
Yeah, it was brand new information for me and Ashley, so I love when we as the host get to learn something new. Just overall the really amazing conversation with Paul. But as always, I also want to give a shout-out to someone who gave us a five star review on Apple Podcasts. This person goes by the name Dr. Goldstein 79. And Dr. Goldstein says, “Informative and motivational. The show is so great. They cover a wide range of real estate investing topics in an accessible way. Episode 273 specifically inspired me to try something new. Two months later, I’ve closed on a deal, and I’m excited to get going. Thank you, Ashley and Tony.” Dr. Goldstein, kudos to you for listening and then two months later actually taking action. That’s the whole purpose of our podcast is to motivate and inspire. If you are part of the rookie community or you’ve gained any value from our podcast, please take a few minutes and leave us an honest rating review on Apple Podcasts or Spotify or wherever you listen. The more reviews we get, the more folks we can reach, and reaching folks helps us help people, which is what we love doing.

Ashley:
Before we do bring Paul onto the show, I do have a little boring banter for you, Tony. I think we should start to incorporate a segment where it’s called Guess the Size of Tony’s Baby. What Object is similar in size? I was scrolling social media this morning and I saw the cutest posts ever of Tony making little tiny diapers to put on a fruit for their display and their kitchen. Everybody think to yourself real quick, what size of a fruit do you think is Tony’s baby right now? And then Tony, you’re going to give the answer.

Tony:
It’s the size of a banana right there.

Ashley:
Yay.

Tony:
We got a little banana baby sitting on our island right now. But all those little apps, we’ve got the apps to say how your baby’s the size of a blank this week. And for whatever reason, our app always talks in terms of fruits, so every week we’ve been buying different fruits. And the bananas the biggest one, so yeah, me and Sarah get a little creative with the island display every week.

Ashley:
And I know you put it on your Instagram, but I don’t think you have told our listeners as to what you are having.

Tony:
Oh, yeah. Me and Sarah are having a baby girl, so the first girl in the family, so we’re super excited. We have our 15-year-old son. And I was not hoping, but I was mentally preparing for another boy just because I’ve already done that; I know what it’s like to raise a boy. And then when I found out that we were having a girl, I was like, “Oh my God, I got to learn a whole new style of parenting to do this the right way.” We’re excited.

Ashley:
Well, congratulations, Tony, to you and Sarah. I’m also super excited too, to have a little cute little girl co-host come on and grab the mic and take over from you every once in a while.

Tony:
Yeah, it’ll be a good time. We’re excited for it.

Ashley:
Well, Paul, welcome to the show. Can you start off telling everyone a little bit about yourself and how you got started in real estate?

Paul:
Yeah, absolutely. Well, first and foremost, Ashley and Tony, thanks for having me on here. I’m a huge fan. I always listen to you guys when I’m working on the property. But a little bit about me, I’m a cashflow buy and hold investor here in Colorado Springs. My wife and I own a few properties. And my day job, I still have a W2 job as a underwriter in corporate banking. And this has definitely helped me in my real estate underwriting and my exotic plant selling side hustle business, which we can get into later.

Ashley:
I am very anxious to hear about that.

Tony:
Paul, let me ask, man, just before we get too far into the weeds here, what does your portfolio look like today? You and your wife have a few properties. What does that look like?

Paul:
Yeah, so we have eight units and comprising of two properties, two quadplexes. And our main strategy is house hacking. And we can get more in the weeds later, but the first property we house hacked, and the second property we ended up using a investment property portfolio loan from a credit union, and we were able to put 10% down.

Ashley:
Let’s go back to when all of this started as to what were you doing in your life where you decided that you wanted to make additional income?

Paul:
Yeah. I guess going back, I was always surrounded by real estate growing up. My dad and my uncles all invested in real estate. And I had a core memory at a young age of going to one of his commercial properties, seeing something huge and tangible, and saying, “I want to do this when I grow up.”
But that being said, I did have a rejection phase in college in high school. And I think this was after or during the great housing recession where I would say, “Real estate’s too risky. I don’t want to be a landlord,” things of that nature. And I really had the middle class mindset of going to college, focus on getting a good job, retiring in 30 years.
What really got me interested in real estate and these side hustles was during COVID I had three realizations where we only had one income stream at that time, which is my W2 job. And as much as you’re loyal to a company or your workplace, you’re just another line in their profit and loss statement, and they can just fire you and you’re out of income. And then as you get farther up in a company, you’re more entrenched and you’re more involved so there’s more time investment that’s required. I wanted freedom from a time perspective as well as more income streams. And at that time we were still renting, only had one income. And during COVID, the interest rates were so low that it just made sense to go into in real estate. And, yeah, the plant side selling hustle is just some random arbitrage opportunity I came across.

Tony:
Yeah, we got to get into the plant hustle there, but before we do, you mentioned something about the risk associated with having a single source of income. And I think that’s something that a lot of new investors and just people in general, they don’t comprehend very well that just because you have a W2 job doesn’t necessarily mean that you are secure.
I just Googled tech layoffs 2023, and it shows me by month all the big tech companies, how many people were laid off every single month. And in April, there were 17,900 people laid off from big tech in April. March, 37,000 people were laid off across big tech in March. February, 36,000 people laid off from tech in February. January, 85,000 people laid off in the month of January this year. Just because we go to school, just because we get a degree, just because we get a job at this big, well-known company, that doesn’t necessarily mean that you are secure. And I think for most people, one of the responsible things you can do for yourself is build that secondary source of income. Paul, I’m just happy to hear you say that. I just wanted to reiterate that point for all of our Rookie listeners as well.

Paul:
Yeah, absolutely. And yeah, I was looking at multiple sources of income. Real estate, it’s funny that when I was growing up, I saw it as a risky investment, but as I got older, I saw it as more of a safety net, a cash flowing real estate property. Yeah, definitely.

Tony:
Just really quick, Ash, obviously economy’s all over the place right now and some industries, some asset class are getting hit harder than others. How are your long-term rentals doing? Are you pretty steady year over year? Are you seeing things go up, go down? What has it been like for you?

Ashley:
For at least the price of rents have increased so much. We’ve seen that. But lately, I feel like they’ve been stagnant. There isn’t a lot of room for growth. But we just had three vacancies. And as soon as they were listed, they were rented. And two of them moved in within a week, and then the other one is moving in tomorrow, which would be two weeks from when it was listed. But also, I’m more affordable housing, I don’t really have any luxury high-end units either, and I think that makes a big difference too.

Tony:
Interesting. Yeah, only reason I ask, some of our properties are up year over year, but some of our markets are down year over year, so we’re curious to see how 2023 is going to finish out. But Paul, sorry, I didn’t mean to get you off track there, brother. Let’s get back to you in your story, man. You go on this journey, you said, during COVID. And what happens from there?

Paul:
Yeah, so before real estate, I was selling plants. And, yeah, so I guess I can get into the plants selling how I ended up that there and why I decided from plants it was a profitable business… From plants, why I decided to get into real estate. We were all mandated to sand doors during COVID, and if you looked on your social media feeds, there were plants. People wanted to make their interior home look better because they were all working from home, so I was part of that wave. The first plant that I was interested in was a philodendron gloriosum.

Ashley:
Oh yeah, I know what that is.

Tony:
That sounds like a spell from Harry Potter or something. But I’m glad you said the name, Paul, because we should probably just clarify for listeners that when you say, “Hey, I’m selling plants and I live in Colorado,” people might think of a certain kind of plant. But Paul’s not a drug dealer, guys, so we should just say that these are just household plants.

Paul:
Right, right. Disclaimer. Yeah, not plants you find in Walmart or Home Depot, really exotic, rare plants. But yeah, I was looking for this plant online, and the lowest price was from a wholesaler from South America. Ordered that plant, and I must have fat fingered the order. I ordered two. As much as I love to keep two of these rare plants, I wanted to sell it. And I listed it online, and it sold for two to three times what I purchased it for. I was like, “There’s a great arbitrage opportunity here.”
And I linked an article from Wall Street Journal saying, “Forget the stock market, the rare plant market is going bonkers.” I saw this opportunity, I reached out to this wholesaler multiple times, had a large stock. And this flipping of plant, you’re not just purchasing these plants and selling them the next day, because they’re being shipped and exported, you have to rehab it. You have to take care of it, make it sustainable for the next person. And so that’s the value that I added to the process.
And I saw that rare plants, they’re not going to stay this… The prices aren’t going to stay this high forever. No one’s going to pay $2,000 for three leaves. Objectively, I was standing back and looking at this. No matter how beautiful. I was like, “Okay, this is a bit trendy. What can I go into that’s stood the test of time?” And that was real estate. And at that time, interest rates were… I got an FHA loan for my first property; it was 2.75%. I was like, “This is a no-brainer. I’m paying rent. There’s this opportunity; I’m going to go for it.”

Ashley:
Paul, I have to ask, was this plant business lucrative? And how much did you end up making off of it? And did you use that to fuel your real estate investing?

Paul:
Yeah, so I looked at my profits the other night. I made about $100,000 net profit to date.

Ashley:
Wow. How long of a period was this? A couple years?

Paul:
This was two years.

Ashley:
Wow, that’s awesome.

Paul:
Yeah. I sold 381 plants. On average each plant was about $400, and the profit on each plant was about $262. Quite lucrative.

Tony:
Isn’t it wild all the different side hustles? Paul, we just did a side hustle show that aired not too long ago, and we had previous guests from the podcast. One of our guests, he drove DoorDash and Uber Eats but had a really sophisticated system for maximizing his revenue. But then one of the other guests, she was couch flipping. And same thing, she was finding couches at a really low price and then just re-flipping them to other buyers. And you’re basically doing the same thing but with exotic plants. And it just goes to show that there are so many ways to make money that the ability to generate additional revenue, it’s all based on how creative can you get? And if you’re not able to generate that additional revenue, it’s not because it’s not possible, it’s just because your eyes aren’t opened wide enough to the opportunities.

Paul:
Oh yeah, 100%. There’s so many opportunities out there. And instead of saying that you can’t make this or you don’t have enough money, go pick up a side hustle, whether that’s DoorDash, sell exotic plants, you know?

Tony:
Yeah. And just to call for our Rookie audience, it was show 294 where we had our guests talking about their different side hustles. If you want to find some additional ways to make some money to fuel your real estate business, obviously exotic plants is one avenue, but if you want to go back and listen to our other guests, you can check out 294.

Ashley:
Which was just the episode we did this past Saturday it was released, so I think not too far to go back. Okay, Paul, I’m interested in now that you’ve decided you want to get into real estate because that is more of a long term side hustle for you, was your wife always on board with this? Tell me how you guys built this real estate portfolio together. Where did you start with it?

Paul:
Yeah. I will say that my wife is super supportive in everything I do. When I first brought up selling exotic plants, she was puzzled. But as far as real estate, she was on board, which is extremely important for your significant to be on board. But, yeah, she was always on board. And nowadays, she does the property management side of things, so we do self-manage our properties, and she handles the day-to-day communications. Yeah.

Ashley:
With the property management, is that something you knew from the beginning that you wanted to do, to self-manage it? I definitely want to dive into some of your deals and everything, but with the property management, how did you decide that you guys wanted to self-manage? And maybe you can give us a glimpse into how that business actually works for you.

Paul:
Yeah. I did not always know that we were going to self-manage our properties. When I was modeling for these real estate investments, I included a property management fee into my modeling, but it naturally came because I wanted to do the repairs myself. I enjoy doing the repairs. Coming from a corporate life, I didn’t know how to change a garbage disposal, a water heater, so I would find myself YouTubing these things. When the opportunity presented itself, I was like, “Okay, I’m going to do this. I want to find my tenants. I want to screen.” And especially since I’m owner occupying the property, I want to make sure I have good tenants. And I’m not saying that property managers don’t care about the tenants they put into the property, but you’re invested into this property; you will always care more than the property manager. We found ourselves self-managing naturally. I think eventually, as our portfolio scales, we’re going to eventually hire a property manager. But we’re at that point where we have enough units that it’s manageable by us.

Tony:
You said your wife is leading the property management piece for you guys. Did she have experience related to property management at all in her W2 career? Or were there any skills in what she was doing before that translated to the property management?

Paul:
No. She did not have property management experience prior. Her most recent jobs were customers service facing positions. But that in itself is extremely transferable to property management because I firmly believe that being a property manager and landlording is a customer service focused business. You want to be responsive to your tenants, you want to make sure you schedule the repairs on time. That really separates the landlords from the slumlords, if you will.

Tony:
And then what about for you, Paul? You talked a little bit about you being an underwriter. I would think that there’s probably some overlap there between that W2 job and what you do as a real estate investor. But I guess just walk us through how do you feel your day job has set you up to be a better investor?

Paul:
Yeah, so being an underwriter has definitely helped.

Tony:
Before you even answer that, can you just define what is an underwriter? For Rookies that don’t know what that word is, what is someone who underwrites?

Paul:
Yeah, so an underwriter is someone that looks at all the information. For example, I’m a corporate business underwriter, so the lender will bring in financials, the opportunity in front of me, and then I underwrite the property, I do the modeling and I make sure the company can cashflow with the loan that we’re proposing to give to them.
I analyze the company from a top down perspective, so my W2 job has definitely prepared me for real estate as well as my side ventures. An underwriter is essentially someone that looks at all the financials and all the numbers and the nitty-gritty down to the weeds. And my job is to essentially determine if we should move forward with this opportunity based on my financial modeling and my research or if we should reject a company for a loan.
In this mortgage process, you’ll have the mortgage lender that makes the relationships, reaches out to the borrowers. They make the connections, go to net networking events, and then they hand off the package with the financials to the underwriter. And that’s when they determine does this guy pass the sniff test? Should we give a loan to them?

Tony:
Paul, just for my own understanding, as an underwriter, are there certain either state or federal guidelines around what underwriting looks like? Or is it more so subjective based on the individual underwriter?

Paul:
Yeah, so for the residential mortgage side of things, if you go and Google Fannie and Freddie Mae lending matrix, there are firm guidelines as to how much a borrower has to put down for a specific type of property. But on the corporate level, I think it’s more flexible there. I’m not too sure. I’m sure there’s some banking regulations that we have to adhere by, but off the top of my head, yeah, can’t think of any.

Ashley:
Paul, do you want to take us through your first deal as to what that looked like?

Paul:
Absolutely. The first deal I got through a commercial broker. It was off market. And we used an FHA loan; put 5% down. And like I said, the interest rate was 2.75%. Their purchase price was $650,000.

Ashley:
Paul, before you go any further, I just want to find out, you said it very nonchalant as to use a commercial broker, it was off-market deal. Explain that a little more. How do you get that, especially for your first deal?

Paul:
Yeah, it’s actually a funny story and a learning lesson for me. When I first started, I didn’t know who to reach out to or what to do so I just went to a plain vanilla realtor, a single family home realtor, and I was like, “I’m looking to house hack a small multifamily property. Can you help me?” And she was like, “Of course I can.” And then later, I looked at her track record and she only sold single family homes. Getting back to the story, she said, “Of course I can.”
And throughout the process, I found that she had some skills that were lacking and I was finding all these properties. I was going through LoopNet, I was running the numbers. I was bringing them to her, and she was basically writing the offer. Now, I’m not saying she was a bad realtor, but for my purpose, she was not a good fit. We offered on a property. Eventually, we offered on a property, a commercial property in Colorado Springs. We lost out, but I reached out to the broker that listed the property, and that’s how I got connected to him.

Ashley:
Paul, that scenario you gave I think can resonate with a lot of people, including Tony and I where we have asked the wrong question. And one thing that I thought of right away when you asked her if she could help you with that is we’ve had guests on that say it perfectly as to they learned that you’re asking questions the wrong way. You should be asking how many investors have you worked with? How many multifamily deals have you closed? Because a lot of times people just want your business, they’re going to say, “Yes, of course I can help you.” I just wanted our listeners to know that is one way that you guys can avoid mistakes that we’ve had is by making sure you are asking the right questions.

Tony:
Yeah. It’s almost like going into a car lot and asking the car salesman, “Is today a good day to buy a car?” The answer’s always going to be yes; it doesn’t matter what’s going on. But Paul, continue, though. You got connected with this broker, this deal that you were working on. What happens from there? Well, first, I think a lot of new investors do exactly what you did is that they don’t even realize that there is a difference between someone who focuses on residential and commercial. Once you got introduced to this commercial broker, what was that dialogue like? How did you get to a point where, I don’t know, they were taking you seriously as this person that had never done any real estate transaction before?

Paul:
Yeah. I think they took me seriously just because they saw that I did submit an offer on the property, so that in itself shows that I was making offers, so off the bat, he knew I was serious. But just seeing what his company does, they underwrite. Well, they don’t underwrite, but they make models of these commercial properties. They try to reach out and get off market contacts. And they’re living and breathing small multifamily and commercial properties day in and day out. When I was speaking to them on what I was doing, he was asking the questions that I really knew that he knew what he was talking about. He was asking me, “What are you looking for? What’s your strategy? What’s your buy box?” I knew that he knew his stuff. And, yeah, it was just as easy as that.
And the first property I bought with him, he was representing myself as well as a seller so he was limited on how much he could help me because he is representing both of us. That’s where my underwriting skills definitely had to kick into high gear because I had to be sure of my numbers, I had to be sure of the property, the location. And, yeah, thankfully everything worked out.

Tony:
Yeah. When you say be sure of the numbers, be sure of the location, is that where your W2 skills as an underwriter helped facilitate that? I guess walk us through what you took from your day job that you applied to your analysis of that first commercial property.

Paul:
Yeah. When a commercial broker presents in property to you or a rookie, they’ll show what the trailing 12 financials are, how the company has performed, as well as proforma figures, proforma rents. You can take those proforma rents into consideration, but what I like to do is take it a step further and see what the people around, what they’re renting at.
And a really great app that I use as Rentometer to see what rents these units are getting. And I even take it a step further. I go to each of the data inputs on Rentometer, I see what the unit looks like, what kind of property it is. Do I think that I can achieve that? In short, my skills as an underwriter, I take a more conservative approach as far as vacancy, allowance, repairs. And if it works at that point, I’m not hesitating to pull the trigger on the property.

Tony:
On that first multifamily, you said it was four units, correct?

Paul:
Yes.

Tony:
And your goal was to house hack of this. Now, you said you went with an FHA loan. For folks that maybe aren’t familiar, how does an FHA loan differ from other types of financing?

Paul:
Yeah, so an FHA loan, to summarize, is a more lenient loan offered by the government. It essentially tries to get more people into owning houses. They have a lower down payment requirement, their credit score threshold is lower, their debt to income thresholds are higher. The goal of an FHA program is to get first time home buyers into the home and to be able to purchase a home, to be able to purchase a home.

Ashley:
What are some of the things that you need to do to prepare to get an FHA loan or that maybe you need to be mindful of during the process where maybe if you’re getting a conventional loan, you don’t need to know?

Paul:
Yeah. For an FHA loan, it’s pretty much the same as getting a conventional loan as far as you have to provide your tax returns, your source of income. From that standpoint, it’s completely the same. But there are specific things that rookies and real estate investors that are looking to owner occupy have to be mindful of. This nugget is extremely important for rookies that are starting out. But if you’re using an FHA loan to house hack a triplex or a fourplex, you have to be mindful of the FHA self-sufficiency test.

Ashley:
I don’t think we’ve ever talked about that on here, Paul.

Tony:
Yeah, I’ve never heard about that.

Paul:
Yeah, so if you do a quick scan of this, you’ll see me harping on all the Reddit and social media is about the FHA self-sufficiency test. But basically what it says is that, again, this only applies if you’re using an FHA loan to own or occupy a triplex and a fourplex, but essentially does 100… Does 75% of the gross rents… And these gross rents are determined by an appraiser. Does that pass the pity payments or does that exceed the pity payments? Principle interest, taxes, and insurance. This test doesn’t look at the borrower, how much income they make, what their debt is, they’re really just looking at the property itself and seeing if it’s self-sufficient because the FHA knows that when people are owner occupying a triplex or fourplex that eventually you’re going to move on, so will the property be self-sufficient on itself?

Ashley:
You said you posted this on Reddit?

Paul:
Yeah.

Ashley:
How is that information received?

Paul:
Yeah, so I posted this on Reddit. And the reason why I’m saying this on all the forms is because you’ll see real estate gurus say that all you have to do is use an FHA loan, house hack a fourplex and you’re golden. But that’s not really the case. There’s little nuances that someone that has been through the process understands. I posted this on Reddit, and a lot of people were thanking me as well as saying, “I’ve encountered this in my closing process.”
Now, there’s two ways to remedy this, two possible ways. One, the borrower can counter the appraiser’s determine market rents with their own analysis, and they can say, “These rents are what I believe, based on my analysis, what I believe market rents are.” And then two, they can also pay down the loan or put more equity into the property to lower the debt payments. But at a certain point, you have to really juggle between putting 20% down FHA loan versus conventional, especially with PMI payments that an FHA loan typically has.

Ashley:
Do you think that part of the reason you figured this out is because of your underwriting background? Or is this something that no matter who’s doing it, they’re going to eventually figure out?

Paul:
Yeah. I think it’s both. I think someone that encounters this, they can just be saying, “Huh, that’s weird. Okay, next. I’m just going to use a conventional loaner.” Brush this off. But for me, there’s nowhere that… Or not a lot of social media outlets and podcasts talk about this, like I said, so I think it’s one where I caught this. And because house hacking is a strategy that I plan to use in the future, I’m also mindful of this and I want to tell all the rookies that, hey, you need to screen for this before you even get on your contract on a property, on a triplex or fourplex.

Tony:
Yeah, Paul, I guess what I’m curious about is how can we give our listeners maybe a tip on, hey, here’s how to find the potential pitfalls in your own deal? How’d find out about this self-sufficiency test? Was it your lender who came across it? Were you doing your own research about the FHA? How did you uncover this potential landmine?

Paul:
Yeah. Funny enough, the lender that I was working with, I told him the strategy that I was going to use, house hacking, using an FHA loan. We found a fourplex and he said, “Oh yeah, we can definitely do this.” He sent the package to the underwriter and she pointed out that this does not pass the self-sufficiency test. It was really the underwriter that pointed out.
To your question how can rookies figure out the pitfalls? I would say speak to people that are breathing this day in and day out. That could be an FHA lender versus a lender that does FHA conventional everything under the sun. And speak to professionals. I will say that during my journey of searching for a lender and realtor, I’ve noticed that a lot of people will say things that they don’t fully understand, but they want your business, like we discussed, so they’ll say, “Of course you can do this, of course we can do that.” But in actuality, that’s not always the case.

Tony:
So you go through the hoops, you’re able to close on this fourplex. Can we get some numbers on this deal, Paul? Because I’m curious to see how it actually worked out for you, man. What was the purchase price from that first fourplex?

Paul:
Yeah, so the initial purchase price was $650,000. I put 5%.

Tony:
Pretty good.

Paul:
Oh, yeah. Well, now it seems great, but at the time and the state of the property, I thought I was overpaying. This was back in April 2021. $650,000, 5% down as down payment, 2.75% interest rate. From the get go, using the broker’s figures as well as my own analysis, cashflow was going to be extremely slim. But because I was putting such a small amount as a down payment, the IRR, internal rate of return, my returns were off the charts.
Because I was renting at the time, I didn’t mind the smaller down payment, I just wanted something that I could own. And because of the crazy inflation during COVID, rents jumped up, the whole market around 30% to the point where I was cash flowing I want to say $1,300 at the time with an FHA loan. I was living in it for free, but if I moved out, I would cash flow $1,300 a month.

Tony:
That’s amazing, man. And then, you bought in 2021. We all know what the market has done since then. You bought it at $650,000. What do you think that fourplex is worth today?

Paul:
Yeah. Actually, in August of 2022, I took out a HELOC and the property was appraised for $950,000. And yeah, I found the property right next to me that looked identical sold for $900,000 to some estate investor. But, yeah, I was stunned. And I’m still shocked to this day. It just doesn’t feel real.

Ashley:
That’s awesome. That’s super cool.

Paul:
And I also refinanced that property into a conventional loan to get rid of that FHA PMI, so now it cash flows $2,000 a month. Yeah. And we’re able to use the FHA loan again.

Ashley:
That’s something I don’t think we talk about enough too is getting rid of that PMI and making sure that you’re staying on top of that. And if you’re have that much appreciation in that short of time, you can definitely get that PMI taken off because it’s, what, 75% of what the loan to value is, as long as it’s under that threshold. Do you know off the hand, Paul, what that percentage is? Or is it even 80%?

Tony:
I think it’s 80. At least I’m pretty sure it is in California. Because I did it for my primary residence here, and it was 80%.

Paul:
FHA puts out this list on if it’s below this down payment amount, it’s this percent. I want to say it was 0.8% of the total loan, and then that’s per month. Yeah.

Ashley:
You went ahead and just refinanced into a different loan, but what if you were going to keep the same loan? What are the steps someone would do to find out if it is time that they can get the PMI removed?

Paul:
Yeah. I guess this is a little difficult. Going back, I guess you can reach out to an appraiser to see if they can do just a computer appraisal and figure out what they think the value is of the property. And, yeah, you can pull comps yourself and figure out based on the quality of your property and all the renovations you’ve done what you think the property’s worth. And if it crosses the threshold you’re looking for, whether it’s a refinance or cash out refi, if that’s feasible.
But yeah, to your point, I know a couple people that have homes that they purchase with less than 20% down and they’re still paying PMI because they didn’t know that they can refinance and get rid of that. I tell them all the time, “Because of inflation, your property has skyrocketed and your equity has increased, so you should probably look into that.” But now with where rates are, I don’t know if that’s the best idea.

Tony:
But the other option too, Paul, and this is what I was saying we did for our primary residence, is you don’t even necessarily have to refinance, but if you go to your current lender and you say, “Hey, I believe that either, A, my loan balance has decreased or my property value, B, has increased enough so that I have at least 20% equity in the property,” they’ll remove PMI for you. For me, when I did it on my primary residence, I called my lender, I said, “Hey, my home has appreciated a ton in value. I’ve paid down the loan balance a bit as well. Can you please reassess what you think my property is worth and tell me what percent my loan balance is in comparison to the new appraised value?” And they don’t send out… Actually, I think they did send out an actual appraiser when they did this. And then when they got the new appraised value back, they said, “Yep, Tony, your loan balance is less than 80% of your appraised value. We’re going to take off your PMI.” And just like that, I dropped, I don’t know, I think it was $300-something dollars off my payment every month for my primary residence.
For all of you guys that are listening, if you feel that you have that margin there now if you feel like you have that spread there, just call your lender and ask them, “Hey, I want to get rid of my PMI.” And then they’ll go through the steps to get rid of it. And think about it from the lender’s perspective; they’d rather take off that PMI than lose your loan altogether with you refinancing with someone else, so most lenders, I think, are going to be open to doing that for you.

Ashley:
Paul, before we move into our segments here, I wanted to ask you, coming from an underwriter and just an experienced investor using different types of loans, what are the benefits of using leverage? What would you say to our Rookie listeners as to why they should consider leverage?

Paul:
Yeah, so I think the benefits of leverage… In simple terms, you’re using someone else’s money. The banks are giving you money at favorable interest rates, and you don’t have to come out and buy a fourplex for $650,000 cash, you can use leverage. And that in itself juices up returns because you’re using someone else’s money.
This is what private equity firms do when they do leveraged buyout, they try to put as little equity into the company as possible and they try to use as much bank debt as possible with the intentions of making the company more efficient, more profitable so they can cash out refi in the future or sell it to another company. And I think of myself as a less intelligent but still a private equity fund or firm where I’m buying these properties with as little money as possible down using lots of leverage and then getting better tenants, renovating so I can get higher rents with the intention that in the future I can get higher cash flow, I can cash out refi. The benefits of leverage is, again, you’re using someone else’s money instead of your own, so you can, yeah, put your own equity into multiple properties.

Tony:
Paul, let’s talk about how you financed that second fourplex. We know the first one was The House Act FHA. Did you reuse your FHA for the second one since you refinanced the first one, or was it a different funding source?

Paul:
Yeah, so the second property is where I really learned about the FHA self-sufficiency test. My goal was to use the FHA loan again to buy this property, but at that point I spoke with multiple lenders with all their loan products, just in case, I actually don’t know why, but I just wanted to see what else was out there. But I wanted to use the FHA loan for this property. It didn’t pass the self-sufficiency test. I had this other lender, it’s a credit union in Utah, they had a 10% down portfolio loan that they were going to give me. And thankfully, I ran the property with multiple different financing scenarios where I was able to quickly say, “Yeah, let’s do it.” And yeah, I was able to run the numbers, it worked, so yeah, I was able to close on that using that property or that loan.

Tony:
A couple follow up questions. You’re in Colorado, right? That’s where you live?

Paul:
Yeah.

Tony:
And you said that you found a credit union in Utah. Help us understand how you found this credit union in a totally different state.

Paul:
Yeah. It’s strange. There’s this company, it’s called Academy Mortgage. They connect buyers in the region with the financing products of this credit union. I don’t really know the intricacies of why they do it that way, but yeah, it’s been huge for me to get this 10% down portfolio loan for a fourplex. That’s unheard of just because a conventional loan, you have to put 20%, 25% down even if you’re owner occupying.

Ashley:
Are you giving the information on the deal before they match you with that loan product? Is that bank looking and saying, “You know what? We’ll only do 10% down because it’s such a great deal, and we believe that they’re getting it… The purchase prices below market value.” Because I have seen that before where someone will walk into their local bank and say, “I have this property, I can get it for $300,000, but if you look at these comps, it’s actually as is worth $400,000. Will you only let me put 10% down?” Was it a situation like that? Or this was just a loan product that was offered no matter what the deal looked like?

Paul:
I didn’t send them my models or anything. They were looking at me as a borrower, so they were looking at my income, my debts. And yeah, I think your credit score had to be pretty strong, so above a, I want to say 750 to get this product. But yeah, they were only looking at me as a borrower.

Ashley:
Well, your social media is about to be flooded with people asking for this contact.

Paul:
Yeah. I try to keep it hidden. I use a broker, and I told him that I was using this product, I’m like, “Please keep it under the blankets and not tell anyone.” And he told to everyone, and I think they’re swamped with business right now.

Tony:
That’s amazing, man. Cool. Well, kudos to you, man. And Ashley and I talk about this a lot on the podcast too is where sometimes you get the best loan product not by necessarily asking for a specific type of loan but just explaining what your situation and what your goals are and then putting it on your mortgage broker or your lender to find the loan product that best suits your unique situation. And, Paul, it sounds like you got a killer loan product with that, man. 10% down on a fourplex is pretty damn good, man, so kudos to you, brother.
All right, so let’s jump into our Rookie request line. And for all of our Rookies that are listening, if you’d like to get your question featured on the show, head over to biggerpockets.com/reply. That’s biggerpockets.com/reply. And if you got a good question, we might just feature it on the show. Paul, are you ready for today’s question?

Paul:
Let’s do it.

Jeff:
Ashley and Tony, thanks so much for everything you do. Huge fan of the show. My name is Jeff Palmer. I live in Truckee, California. My question for you is around the HELOC. I have substantial equity in my primary residence, and I’m pulling a HELOC right now and debating whether or not I should be using that money just for something on the shorter term like a bur deal or if it might be all right to put that money toward a longer term deal like a long term rental or even a short term rental. Thanks so much.

Paul:
I want to say that typically when you’re taking money from a HELOC, it’s better to use it for short term purposes just because there’s that floating rate component. And we don’t know where rates are going to go so I would say I would be most comfortable with a flip or a bur. But it can also work for a long-term rental. Just so you know that you know can get that deal under wraps and you can quickly refinance a year or two down the line into another loan product. It can be used for a long term investment, but you have to be really sure that you can refinance that into another product.

Tony:
Yeah. No, I feel like I’m got a pretty high risk tolerance, but I don’t think I’d want to use a HELOC for something where it’s tied up for too long. Cool, Paul. Well, let’s jump to our next segment here, which is the rookie exam. These are the three most important questions anyone will ever ask you in your life. Are you ready for question number one?

Paul:
Yeah, absolutely.

Tony:
All right, first question, what’s one actionable thing Rookies should do after listening to your episode?

Paul:
Yeah, so I would say take an evaluation of your portfolio as well as your personal finances and understand where the risks are and where your advantages are. To clarify, would a major repair wipe your cash reserves out? If that’s the case, you know, have to build up more cash reserves. You have access to HELOC for this repair. Are you like me and you rely on one income? What are some other sources of income that you can bring in?
And another one could be… I was talking about my wife and how she handles the property manager side. I like to DIY, all my renovations, and my father-in-law’s a general contractor, a commercial general contractor, and he’s helped me out on a lot of my renovations because watching YouTube videos only takes you so far, so having your team to fill in where you’re weak on or you’re not as good with, that’s a risk. And also, your advantages. Are you in the position to be able to house hack? People with bigger families, it might be harder. But if you’re young and you don’t have a family and you’re able to house hack, that’s a huge advantage. And once you find that advantage, you should hit it hard. We try to house hack, that’s our strategy going forward because we’re in that position, but eventually our family’s going to grow and we’re not going to be able to move around, so for the time being, we’re hitting that hard.
And if you can’t house hack, do you have access to capital? Do you have more money to the point where you can just cash flow with just using an investment property loan? Really knowing the risks and advantages as it pertains to your real estate and your personal finances is important.

Ashley:
Great advice, Paul. Our next question is what is one tool, software, app, or system in your business that you use?

Paul:
Yeah, so like I mentioned, I like to use apartments… or sorry, Rentometer to determine market rents of an area when I’m looking at a potential real estate investment as well as if I’m in a position where I can raise rents, what are other people getting? And it’s a great tool because it shows you the data inputs of what they’re using so you can see how far back this data is. If it’s two years old, then you probably don’t want to consider it. If it’s something that was listed a few months ago, maybe that’s comparable.
Another one I use is apartments.com, which is grade for investors that are self-managing. You can set up auto… Or tenants can set up auto pay, you can post the executed lease agreement so if they have any questions, they can pull that up and really look at where I’m quoting. If I say like Section eight says something about pets, they can see it. Yeah, Rentometer and apartments.com for sure.

Tony:
All right, and last question for you, Paul, where do you plan on being five years from now?

Paul:
I want to say that I see myself in the near term purchasing more small multifamily. I do eventually want to get into different flavors of real estate, so commercial properties, five units and above, short term rentals, industrial real estate. I also want to look at other businesses, so self storage, car washes; I’ve been looking at that. But yeah, in five years I want to be able to fully support or fully replace my W2 income with these kind of streams of income. And I have no intentions of quitting in the future or living off this income because I like my job, I like what I’m doing. I really just want to have that safety net where if I do lose my job, I can still support my family.

Tony:
Love it, man. All right, before we wrap things up, I want to give a shout-out to this week’s Rookie Rockstar. And this week’s rockstar is Tiara Savvy. And Tiara says, “I’m excited to share that we closed on our second investment property. We’ve fallen in love with real estate investing and are excited to continue growing our portfolio. Huge thanks to the BiggerPockets community. We’ve learned so much through reading about other people’s experiences and getting insightful feedback from other investors.” Tiara, congratulations to you on property number two.

Ashley:
Yeah, awesome job. And thank you so much for sharing. If you guys would like to be our Rookie Rockstar, you can slide into mine or Tony’s DMs on Instagram or you can hop over to the Real Estate Rookie Facebook group. And you can leave us a question at biggerpockets.com/reply.
Paul, thank you so much for joining us today. We really appreciate you taking the time to come on here and share your story and share your knowledge. Can you please let everyone know where they can reach out to you and find out some more information about you?

Paul:
Yeah, you can find me on the BiggerPockets forums, or I also have a Instagram account called Leaf Investments, L-E-A-F. But yeah, thanks for having me on. It’s been super fun. And thanks, Tony, for clarifying I’m not a drug dealer.

Tony:
My pleasure.

Ashley:
Well, Paul, thank you so much. We really appreciate it. And one last thing, before we end today’s show, I want to give a shout-out to an Instagram account. We’ve been doing this every once in a while, and I want to continue to do it so you guys have more real estate investors. And maybe not even investors, just people who can help you with life in general or even business skills, things along those lines. This week’s shout-out is going to go to Coach Chad Carson. He’s actually written a book too for BiggerPockets, but a post that stood out to me, he wrote, “I currently work two hours per week on my rental properties. They reproduce most of my income. Earlier, it was a lot more of my time. Rentals begin like a startup, big effort and end up like a blue chip stock. Very passive. I still love to work but only on passion projects and on my time.” Coach Chad Carson, he posts a lot of information about rental properties and how you can purchase your own and what he does to manage his, so make sure you give him a follow. I’m Ashley at Wealth Farm Rentals and he’s Tony at Tony J. Robinson. And we will be back on Saturday with a Rookie Reply.

 

David:
This is the BiggerPockets podcast show, lucky number 777. You don’t have to buy more real estate. You have to continually be active in adding value to the real estate you have, and when you’ve got to the point that you’ve increased the value as much as you can by doing the rehabs after you’ve already bought it at a great price, sell it or keep it as a rental. Move on to the next one and continue adding value to every single piece of property that you buy. That will turn into the retirement you want.
What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast here today with a Seeing Greene episode. In today’s show, I take questions from you, our listener base, and I answer them for everybody to hear. And you have struck the jackpot with episode 777 because this is a very fun and informative show. Today we get into several questions, including how to know if your property will work better as a long-term rental or a short-term rental, the spectrum of cashflow and equity and what that means, if the 4% rule of financial independence still works today and what may be changing about it, as well as what you can do if you get started investing later in life and you feel like you’re behind. All that and more on another awesome episode just for you.
Before we get to our first question, today’s quick tip is very simple. Check out real estate meetups in your area. Many of you are in certain markets in the country that we don’t talk about all the time on the show. In fact, I bet you the 80/20 rule applies. We talk about 20% of the markets 80% of the time, but what does that mean for the other 80% of the people that live somewhere else? Well, you still need to get information about your market and opportunities you have available, and there’s no better place to do that than a good, old-fashioned real estate meetup where you can meet other investors and hear what they’re doing that’s working, what challenges they’re having, and how they are overcoming them. If there isn’t one in your area, good news, you get to be the one that starts it, and you get to build the throne upon which you will sit as the real estate king or queen of choice. All right, let’s get to our first question.

Sam:
Hi, David. Thanks for answering my question. My name’s Sam Greer from Provo, Utah, a recent college graduate. My wife and I bring in about 180K a year. We have no debt, wanting to get into real estate, want a three bedroom as we both work from home and have a one-year-old. Rent here is about 2,200 for a three bed. A mortgage with a 5% down payment would be about 2,800. We’re wondering if we should continue renting, buying real estate outside of Utah as it’s much cheaper, buy here, try to house hack, although if you do a duplex, it’s about 2,800 accounting for the rent on the other side. Things are expensive around here. We’re wondering what we should do if it’s best to try to find a deal here or go out outside of Utah in a cheaper market. Any advice would be greatly appreciated. Thanks.

David:
Hey there. Thank you, Sam. So let’s start off with this. Real estate being cheaper somewhere else does not necessarily mean better somewhere else. There’s a reason that real estate is expensive in Provo, and that’s because you’re getting growth. So I want you to look at the way that real estate makes money. It really makes money in 10 different ways that I’ve identified, but there’s two main sources, which is cashflow and equity. Usually, a market that is stronger in cashflow will be weaker in equity and vice versa. So that doesn’t mean it’s a cashflow market or an equity market, although most of the time it would lean in one direction or the other. That means there is a spectrum, and on one end of the spectrum you’ll have equity. The other end, you’ll have cashflow. And you got to figure out where you’re comfortable fitting in there.
The Provo market is growing because population is growing. People are moving there, and people are moving there from California and other states that have money, which means rents are going to continue to increase. Values of real estate are going to continue to increase. That is a healthy robust market that you’re likely to do well in, but as you’re seeing, that means it’s not affordable. Now, here’s where I want you to change your perspective, and I want you to start Seeing Greene. It is not affordable right now, but it’s going to become even more expensive in the future. Now, I’m saying this because if you don’t buy in these high-growth markets, your rent continues to go up and up and up. So you mentioned that you can rent for 2,200 but own for 2,800. Right off the bat, that makes it seem like renting is cheaper.
It’s always like that in the beginning. Remember the story of the tortoise and the hare, where the hare came out the gates and was really fast, and the tortoise was really slow? The hare always looks like they’re winning the race in the beginning. That’s what it’s like when you think about renting and instead of owning. But over time, rents continue to go up. Your mortgage will be locked in place at 2,800. You actually even have some potential upside that rates could go back down and that 2,800 could become even less on a refi. So you might get some help on both sides, both from rents going up and from the mortgage coming down if you buy. So if you’re taking the long-term approach, buying is going to be better, and this is before we even get into the equity. We’re not even talking about the house gaining value and the loan being paid off. We’re only talking about the cost of living, which means buying is better.
Something else to consider is that you’re probably going to get tax benefits if you own that home. So if you get a benefit of say, $300, $400 a month in taxes that you’re saving from being able to write off the mortgage interest deduction, that 2,800 now becomes 2,400 or 2,500, which is much closer to the 2,200 that you’d be spending in rent. So as you can see, it’s starting to make more sense to buy. Now, that’s before we even get into house hacking. Can you buy a four-bedroom house or a five-bedroom house and rent out two of the bedrooms to family, friends? Maybe your wife isn’t into that. She doesn’t want to share the living space. Can you buy a property that has the main house that you guys stay in and has an ADU, has a basement, has an attic, has a garage conversion, has something in the property where you can rent that out to somebody else?
So your $2,800 housing payment is offset by collecting 1,200 or 1,400 from a tenant, which is house hacking, making your effective rent much more like 1,600. Now, that is significantly cheaper than the 2,200 that you’d be spending on rent plus you get all the benefits of owning a home. Now, I’ll give you a little bonus thing here. For every house hacker out there that feels like you’re not a real investor, that’s garbage. Let me tell you why house hacking is awesome. Not only do you avoid rents going up on you every year, so that 2,200 that you’re talking about here, Sam, that’s going to become 2,300, then 2,450, then 2,600, and it’s going to go up over time, but you also get to charge your tenants more. So you’re winning on both sides. Rather than your rent going up by a $100 with every lease renewal at the end of the year, your tenant’s rent is going to go up by a $100 with the lease renewal at the end of the year, which means a savings of $200 a month to you every single year.
Over five years, that’s the equivalent of a $1,000 a month that you will have added to your net worth to your budget. Now, how much money do you have to invest to get a $1,000 return every single month at a 6% return, that is $200,000. So house hacking and waiting five years in this example is the equivalent of adding $200,000 of capital to go invest and get a return, right? It makes a lot of sense, so take the long-term approach. Talk to your wife, find out what she needs to be comfortable with this. Go over some different scenarios, whether it’s buying a duplex, or a triplex, or renting out a part of the home, or changing a part of the home so it could be rented out. Maybe you guys live in the ADU, and you rent out the main house for $2,000. And now with your payment of 2,800, you’re only coming out of pocket $800 a month.
You save that money, and you do it again next year. When you first start investing in real estate, it is a slow process that is okay. You’re building momentum just like that snowball that starts rolling down the hill, it doesn’t start big. But after five, 10, 15 years of this momentum of you consistently buying real estate in high-growth markets and keeping your expenses low, that snowball is huge, and you can take out big chunks of the snow that have accumulated that’s equity and invest it into new properties. Thank you very much for the question, Sam. I’m excited for you and your wife’s financial future. Get after it. All right. Our next question comes from Laura from Wisconsin.
“My husband and I began investing in real estate in 2018. I’m 57. He’s 58. We got a late start and are now trying to navigate our way through to get us to retirement in the most efficient way possible. We weren’t always financially savvy, nor did we think about retirement as we should have, which has led to us now trying to play catch-up. I began listening to podcasts and reading books to get educated and use that to take action. We invest in B-class neighborhoods in Southeastern Wisconsin. Our business plan has been to rehab these properties so that we don’t have to deal with capex or maintenance. My husband is a contractor. We purchased our first single-family fixer in 2018 and fully rehabbed it to about 90% brand new. We did a ‘burb but then sold it in 2021 to capitalize on the market being in our favor. We 1031-ed that into a four family, then sold our primary residence that my husband built last fall and used that money to buy a single-family residence from a wholesaler and are now doing a live-in flip.”
“This has allowed us to personally live mortgage free. We do have a mortgage on the duplex and the four family. I don’t have a specific question. Just what advice do you have for those of us investors who got a late start? There haven’t been a lot of podcasts related to this topic. Cashflow is important to us, but appreciation is nice too. We aren’t comfortable investing in markets that provide the most cashflow. We also want ease of management. We love a good property that we can take advantage of Jeff’s strengths and add value to. We don’t want a huge portfolio, but are hoping to have enough properties to make a difference in our ability to retire comfortably. I realize this is a broad question, but maybe it’s a topic you can tackle in the near future. Thanks for all you do for the real estate investing community.”
Well, thank you Laura and I got some good news for you. You and Jeff were actually in a pretty good state. What I can do here is I can provide you some perspective that you may not be getting now. Most people look at real estate investing from the training wheel perspective they get when they first get introduced to this. So when we at BiggerPockets were first teaching people how to invest in real estate, it was a very simple approach. “Here is how you determine the cash-on-cash return. Here is how you make sure that you’re going to make more money every month than it costs to own it because that’s how you avoid losing real estate.” Now, this was important because BiggerPockets came out of the foreclosure crisis where everybody was losing real estate. So Josh Dorkin started this company because he had lost some real estate and he wanted to help other people avoid that same mistake.
At that time, it was just if you knew how to run numbers and you bought a property that made money not lose it, it was that simple. You were going to do well. And if you bought anything in 2011, ’12, ’13, 10 years later, you’ve done very well. So you understand what I’m talking about. Fast-forward to 2023, it is a fast-moving, complicated, highly-stressful, pressure cooker of a market, and we need a more nuanced approach to real estate investing that’s simple. Just calculating for cash-on-cash return and that’s all-you-got-to-do approach, it’s not cutting it anymore. So let’s break out of the training wheel approach of just buy a single-family house, get some cashflow, do that again, hit control C and then control V 20 times, you’ll have 20 houses, you can retire.
Real estate actually makes you money in more than one way. I’ve broken this into 10 different ways, and a couple of them are buying equity which means getting a deal below market value, paying less for a property than what it’s worth, forcing equity which is just adding value to the property, natural equity which would be the fact that prices of real estate tend to increase over time because of inflation, and then market appreciation equity which is investing in markets that are more likely to appreciate at a greater rate than the areas that are around them. Again, it’s not guaranteed, but it’s reasonable to expect. If you buy in a high-growth market with limited supply, it’s going to appreciate more than if you buy in a low-growth market with plenty of land and tons of homes everywhere, so they can’t go up in value. Now you’re already doing the first thing I would’ve told you, which is take advantage of your competitive advantage.
In Long-Distance Real Estate Investing, the first book I wrote for BP, I talk about this. Buy in markets where you have a competitive advantage. Where do you know a wholesaler that can get you deals? Where do you know a bank that will fund them? Where do you know a contractor who’s really good and reasonably priced? That’s the market you want to take advantage of. Now, you happen to sleep in the same bed as an awesome contractor, which is great. He’s always going to take your jobs first, and he’s going to communicate with you quickly. That’s the problem all the rest of us are having, but your husband does this for a living. You’re taking advantage of that. You’re also buying equity. You mentioned that you sold the house that you lived in, and you made the sacrifice, which was sacrificing your comfortability of loving that home that your husband built from the ground up with his own hands to get a good deal from a wholesaler and start over.
Now, when you bought that single-family residence from the wholesaler, you bought equity because you paid less than it was worth, and now you’re forcing equity by having Jeff work on it. That’s exactly what you should be doing. I understand you’re playing catch-up. That doesn’t mean you need to take more risk. That doesn’t mean you need to hope deals work out and just like buy a whole bunch of property. It means that you need to be more diligent about getting more out of every deal that you buy, which you’re already doing. You’re not paying fair market value for properties, and you’re not buying turnkey things. That’s a mistake a lot of investors make is they want convenience. They go buy a turnkey property, or they go to a market, like you said, where it appears that you’re going to get a lot of cashflow but you get no growth. And they end up either losing money or breaking even over a 10 to 15-year period.
You have already sacrificed comfortability in the name of progress, and I love that you’re making the right financial decisions. Hopefully you guys are also living underneath a budget, so keep doing that. I like the idea of you guys doing the live and flip. Buy a house that’s ugly, torn up, but in a great market. I call that market appreciation equity, it’s B-class areas, A-class areas. Just like you said, those are going to appreciate at a higher rate than C and D-class areas. Fix up the house. After two years, you’ll avoid capital gains taxes. You can sell it, and you can buy another one and repeat that process, or you can keep it as a rental, and you can put 5% down on the next house. You aren’t going to need a ton of capital. Because your husband does this work, you have an advantage over other people. Because your husband does this work, he has contacts in the industry.
Maybe he’s too old or his body can’t keep up with the demands of it, he can oversee the work that someone else is doing. Maybe he even mentors some younger kid that wants to come in and learn construction, and your husband can use his brain instead of his body to bring value into forcing equity. That’s another thing you should think about. As you do this, the equity that you’re growing with every deal should continue to increase. At certain points, rip off a chunk of that. Go buy yourself another four family. Go buy yourself another triplex. You’re already doing the right things. So to sum this up, you don’t have to buy more real estate. You have to continually be active in adding value to the real estate you have.
And when you’ve got to the point that you’ve increased the value as much as you can by doing the rehabs after you’ve already bought it at a great price, sell it or keep it as a rental. Move on to the next one and continue adding value to every single piece of property that you buy that will turn into the retirement you want. Thank you very much, Laura. Love hearing this story and glad that we have BiggerPockets are able to help you out with that retirement.

Vince:
Hey, David, thanks for taking my question. This is Vince Herrera from Las Cruces, New Mexico. I’m in the middle of closing on this property that I’m in right now. It’s my parents’, I made a deal with them to pay off the remainder of what they owe. And they sign it over to me, and I’m the owner free and clear. So right now, it’s really good. It’s only 30,000. So I looked up just really quick numbers on Rentometer and the areas around it, and it looks like I could probably rent, this mobile home for around a $1,000 a month. It’s a four bedroom, two bath. It’s in really good shape. It was recently remodeled. So I’m wondering, after I do this, should I try to use it as a short-term rental or long-term?
Obviously, I know I would probably make more as short term, but I don’t know how successful mobile homes are for short term, and I just don’t know what factors I should be looking at to make that determination. If you could help me out with that, that’d be great. My overall goal is to house hack small multifamily properties to build up my portfolio. So when I have something done with this property, whether it be short-term or long-term rental, I’d like to get into a small multifamily duplex, triplex, fourplex and house hack that, and then just keep going hopefully. So appreciate you taking my question and hope you have a good day. Thanks.

David:
All right, Vincent, thank you very much for that. This is a good question. To go short term to go long term, that is the question. All right. Now, like I mentioned before, what I usually need to give a good answer on this is an apples-to-apples comparison. So a lot of what I’m doing in real estate when I’m looking at two options is trying to convert the information into something that’s apples to apples. So what I wanted was to know what would you make per month as a long term? What could you make per month as a short term? Then I would look to see, because it’s going to be significantly more work to manage the short-term rental, is the juice worth the squeeze? If it’s an extra two grand or three grand a month, you can make as a short term rental, I’d compare that to what you’re making at work.
And I’d try to figure out would that make sense for you to put the effort into it versus if it’s another $300 a month, and it’s going to be a lot of work? Maybe it doesn’t make sense. So I use the BiggerPockets Rental Estimator, which anybody can use if they go to biggerpockets.com and they go to Tools and then Rent Estimator. And I looked up four-bedroom, two-bathroom, mobile homes in Las Cruces, New Mexico, and I used the zip code 88001. I don’t know exactly what the address was, but that’s the one that I picked. And rents seemed like they were anywhere in between $1,100 and $1,700, right? So we’re going to use an average above that, $1,300 for this property as a long-term rental. The next thing I would need you to do is to ask around at property managers that do short-term rentals out there and find out how much demand you have for short-term rentals?
You’re going to want to talk to either another investor that does it or a property manager that manages short-term rentals to figure it out. My guess is the people that would be renting out a mobile home as a short-term rental would probably be either a traveling professional that needs a place to stay for a month or two or a person that wants a budget deal because otherwise they would just stay at a hotel. So at a $100 a night, you would basically need to rent that thing out for around an average of 13 times a month in order to get similar revenue to the long-term rental. Now, of course there’s cleaning fees and other fees associated with short-term rentals, but it’s about half the month it’s going to have to be rented for at a $100 a night. Compare that to hotels. Can people stay at a hotel for less than that or more?
If a hotel out there is $200 a night, maybe you could get 150 or 125. That’s the approach that you want to take. I can’t answer your question on which way you should go until I know how much demand there is and how many people are traveling to Las Cruces, but I have given you enough information that you could figure this out for yourself without a ton of work. Also, congratulations on using the resources you have available to you, which was your parents to get this property, pay off the note, and take it over free and clear. I would love to see what you would do with this. This could be a great building block, a foundational piece to get some of the fundamentals of real estate investing down that would then help you buying the next house, which is hopefully a regular, construction, single-family home that you can buy with 5% down.
Reach out to me if you’d like to go over some lending options and come up with a plan for how to do that, and hopefully we can get you on another episode of Seeing Greene to give progress on the next property that you buy. Now, Vincent, at some point you may want to finance that mobile home, and you’re going to find that financing is not the same for mobile homes as it is for regular construction. You’re not going to get the same Fannie Mae, Freddie Mac 30-year, fixed-rate products, and that throws a lot of people off. There are still financing options available to you though. You just got to know where to look. Check out BiggerPockets episode 771 where I interview Kristina Smallhorn, who is an expert on this, and we go over some financing options as well as other things you should know if you’re going to be buying mobile homes or pre-fabricated properties.
All right, this point of the show, I like to go over comments from previous episodes that people left on YouTube. I find it as funny, I find it is insightful, and I find it as challenging, and sometimes people say mean stuff, but that’s okay. I’m a big boy, I can take it, but I like to share it with all of you because it’s fun to hear what other people are saying about the BiggerPockets podcast. Make sure that you like, comment, and subscribe to this YouTube channel, but most importantly, leave me a comment on today’s show to let me know what you think. Today’s comments come from episode 759. Let’s see what we got. From PierreEpage, “You should make turning on the green light part of the show, and then it will be harder to forget, almost like a quick tip being said in a certain way so consistently.”
Pierre, that is a great idea. This is why I like you guys leaving comments. I could not do this show without you. It could be that, like (singing). [inaudible 00:21:58] is that, isn’t that Sting or something that sings that? Is it Roxanne? (singing) Yeah. We could even make that the theme show for the Seeing Greenes, but we just have green instead of red. Maybe I should do that. When I start the show, I’ve got the regular blue podcast light behind me, and then we know it’s time to get serious because I flick it to green like Sylvester Stallone in that movie, Over the Top, where he turns his hat backwards. And it’s like flipping a light switch, and I go into Seeing Greene mode. Might have to consider that, Pierre. Thank you very much for that comment. In fact, if I can remember your name, I might even give you a shout-out when I do that for the first time.
Next comment comes from Patrick James 1159. Before I read this, I just want to ask everyone because I do Instagram Lives on my Instagram page, @DavidGreene24, and you try to read the person’s name that has the comment. And it’s always Matt_Jones_thereal.76325, and I wonder is there that many Matt Joneses that they need this many? Patrick James, are there 1,159 of you, and that’s how far you had to go? But as I read this, I realize the hypocrisy of what I’m saying because I’m DavidGreene24, and there probably were 23 before me, but I picked a number. However, my number was my basketball number in high school. I don’t know what number 1159 could be. It’s not a birthday. I’m curious, Patrick, if you hear this, leave us a YouTube comment on today’s show, so we know why you chose to throw such a big number at the end of your name.
All right, Patrick says, “I wish the best for everyone, but I’m leery of inflation and higher and higher rates. Two things that I can’t control, a grizzly burr.” Ooh, I see what you’re saying there like grizzly bear, but using burr, and you’re saying bear because it’s a bear market which has you nervous, which is why you said you’re leery of inflation at higher rates. Okay, you probably meant this as a joke, but I’m going to run with this in a serious way. It’s a problem, my brother. This is literally why I think the market is so hard, and I won’t take the whole episode to explain it, but if you’re struggling finding deals that make sense compared to what you’re used to seeing, you are not alone. We have created so much inflation that you cannot beat it by investing your money in traditional and investment vehicles, bonds, CDs, checking accounts, ETFs, even most mutual funds. Unless you’re an incredibly talented stock picker, you’re not beating inflation right now, and depending how inflation’s measured, that’s different, right?
The CPI think came in at 4.9, but if you look at how much currency has been created, there’s people that think inflation is closer to 30% to 50% a year. You’re not getting a 30% to 50% return on any of these options I mentioned. Where can you get it? With real estate, and that doesn’t mean a cash-on-cash return, I’m saying more like an internal rate of return. If you look at buying equity, forcing equity, market appreciation equity, natural equity, natural cashflow, forcing cashflow, buying cashflow, all the ways that I look at how real estate can make money when I’m Seeing Greene, you can start to hit those numbers over a 10-year period of time. And that’s why everyone is trying to buy real estate right now, even with rates that are high, even with cashflow that’s compressed. It’s hard, but it’s still the cleanest shirt in the dirty laundry, and everyone’s fighting for it.
So I hear you, Patrick. It’s rough. Patrick then says, “There be a grizzly burr in them woods.” This is a very corny Seeing Greene fan, and I love it. Thank you. Guys, who can out corn Patrick? I want to know in the comments. From Justin Vesting, “Hi, David. I just want to touch on something that I’ve noticed. You guys never interview or speak on the Northeast market, New England specifically, the toughest market in the US and where I’m located. I live in Rhode Island. Please do a show regarding the Northeast market, and if you could, Rhode Island would be fantastic. Hope you can make it as I would love to hear some insight in my market. Thank you.” All right, Justin, as I read this, I realize I forget that Rhode Island is a state in our country. I’m probably not the only one. There’s other states like Vermont and Maine that I can very easily forget exist. New England you hear about, but with Tom Brady gone, you hear about it much less.
So you’re right. We don’t do a whole lot of Northeast talk. We don’t have guests on that have done really well in those markets. Maybe we need to get someone to reach out to BiggerPockets.com/David and let me know if you’re a Northeast investor, so we can get you on the podcast because it’s tough. And I can see how you live there, and you’re trying to figure out what can be done to make money in those markets, and you’re not getting any information. So first off, thank you for listening even though you’re in a forgotten part of the country that I don’t know exists. This is like when you go through your closet, you find that shirt that you forget you had. You’re like, “Oh yeah, I haven’t worn this thing in three years. I remember I used to like this sweatshirt.’ But it’s like it’s brand new. You just reminded me we have 50 states and not just 47.
But on a serious note, yeah, we do need to get some people in to talk about that. I believe that we had someone from Bangor, Maine, it was like the first BiggerPockets episode I ever co-hosted with Brandon. We interviewed somebody from that market, and it was very rare. So if you’re a Northeast investor, let us know in the comments. And if you’ve got a decent portfolio, include your email, and our production team will reach out to you and interview you to be on the show. All right, a call to action before we move on to the next question. Get involved with your local real estate investor association or meetups. This is your best way to connect with investors in your market and get real-time info about what is working. If you’re investing in New England, please apply to be on the show at BiggerPockets.com/guest.
We also have an episode with Pamela Bardy coming up, so keep an eye out for 785, and she is from Boston, and you’ll love it. So if you’re in a market like the Northeast and you’re not getting as much information as you’d like, it’s more important that you make it to meetups and learn from other investors what they have going on. All right, we love and we appreciate your engagement, so please keep it up. Also, if you’re listening on a podcast app, please take a second to leave us an honest review. We love these and they’re super, super important if we want to remain the biggest, the baddest and the best real estate podcast in the world.
A recent five-star review from Apple Podcast from Legendary. “Finally took a second to write a review. Listened to you since the beginning, kept me going when I wanted to throw in the towel in my own real estate biz. Keep up the great work.” And that is from Jake RE in Minnesota. Thank you very much, Jake, for taking a second to leave us that review and especially for being so kind. So glad you’ve been here from the beginning. Love that we’re still bringing you value, and thank you for supporting us. All right, our next question comes from Tomi Odukoya.

Tomi:
Hey, David. My name is Tomi Odukoya. I’m an investor in San Antonio, Texas. Behind me is my vision. I have a question. I’m also a Navy veteran. I love your idea and thank you so much for pushing house hacking. I’m currently in my primary residence. I used my VA loan. I’m getting ready to close on a new bill duplex using my VA loan again. Current house, my primary has interest rate at 3.25%. I’m wondering when I close on the duplex and move into it, my current primary, should I transfer the deed to my LLC, or how should I take care of that, so I can rent out the current primary and also not have to worry about the liability, but hold onto the mortgage at 3.25%?

David:
Thanks. All right, Tomi, first off, thanks for your service, man. Really appreciate that you’re in the military, and love that you’re listening to the show. If we have other military members that are BiggerPockets fans, send me a DM on Instagram, @DavidGreene24 and let me know you’re either a first responder or military. Would love to get to know you guys better, and gals by the way. Okay, let’s break down your question. The good news is I think you’re probably overthinking it because you have the right idea, and I can see that you’re trying to keep your low interest rate. But you’re wanting to move out and get another house, which frankly, if I could just tell anybody what they should do with real estate, I’d be telling them to do what you are doing. Don’t overthink it. House hack one house every single year in the best neighborhood you can possibly get in with the most opportunities to generate revenue, whether that’s the most bedrooms possible or the most units possible, whatever it is. Just keep it simple. Put 5% down every single year. So you’re already on the right path.
Now, regarding your concern, if you’re saying that you may want to move the title into a new vehicle through a deed, so like starting an LLC to take a house that was once your primary residence and take it out of your name for liability reasons, I’m not a lawyer. I can’t give you legal advice. I can tell you if I was in your situation, I wouldn’t be worried about that. And I’m saying this from the perspective that LLCs are not airtight guarantees, much like your bulletproof vest which you’re going to wear if you’re in a position where you need to. It’s better than not having it, but it is far from a guarantee, right? The bulletproof vest doesn’t stop everything that comes your way, and you know that.
LLCs are like that. People tend to look at them like these airtight guaranteed vehicles that you’re protected in case you get sued and they’re not. They can actually have what’s called the corporate veil pierced. If a judge looks at your LLC and says, “That’s not a business. That was just his house. It’s still him that owns it. He doesn’t have a legit real estate business. He just took his house and stuck it in this LLC.” If you’re found negligent or at fault, they will still let that defendant come after you and take what they’re owed in the judgment. One thing people don’t realize is that your regular homeowner’s insurance will cover you in case you’re sued up to a certain amount. I would just talk to the insurance company, and I would make sure that you’re covered for an amount that is in proportion to what a judge might award somebody if you end up getting sued.
That’s one of the reasons I’m starting an insurance company is to help investors in situations like this as well as to ensure my property. So reach out to me if you would like us to give you a quote there. But the properties that I bought in my name, I didn’t move all of them into an LLC. The first properties I bought, they’re still in my name, and they’re just protected by insurance. So I think a lot of people assume LLCs are safer than they are. Doesn’t mean they’re not safe, doesn’t mean they’re not important. They have their role. But oftentimes the people that I know that are putting their properties into legal entities, it’s not always for protection. It’s more so for tax purposes. And the last piece that I’ll say is this becomes more important to put them in legal entities like LLCs when there’s a lot of equity, or you have a high net worth.
If you’re in the military, you’re grinding away, you’re getting your second property, you’re probably not in a huge risk of being sued. When you get a $1 million of equity in a property or within an LLC, now, there is incentive for someone to go after you and try to sue. But until you get a bigger net worth, it’s not as important. Because if you only have $50,000, $60,000, $70,000 of equity in a property, after legal fees, it doesn’t make sense for a tenant to try to sue you for something unless you really, really screw up because there’s not a whole lot for them to get. So don’t overthink it. I think you’re doing great. Make sure that you’re well insured. Buy the next property. After you’ve got several of these things, we can revisit if you want to move their title into LLCs.
Another reason that I’m not leaning towards it is when you do that, most times, you trigger a due on sale clause in your agreement with the lender that they have the right to come and say, “Now, we want you to pay our mortgage back in full.” They don’t always do that, but they can. And here’s my fear that isn’t talked about very often. When rates were at 5% and they went down to 3%, for a lender to trigger the due on sale clause and make you pay the whole mortgage off, they would lose the 5% interest that they’re getting from you, and they would have to lend the money out to a new person at 3%, which is inefficient. So of course, they don’t do that. But what have rates been doing? They’ve been rising.
So now I’m warning people, if you’re getting fancy with this type of thing, if you’re assuming somebody else’s mortgage and the lender finds out about it, or if you’re doing this where you’re moving the title from one thing into the next and hoping they don’t find out if your mortgage is at 3% or three to quarter, whatever it was you said it was at, and rates go to 7%, 8%, 9%, 10%, now the lender can triple their money by calling your note due and lending that money to someone else at 9% or 10% instead of you at 3%. You might actually see banks going through their portfolio of loans and saying, “I’m calling this one, I’m calling this one, I’m calling this one.” That would make sense to me.
So now with rates going up instead of down is not the time to try to move things out of your name and into a legal entity if there’s a due on sale clause. Hope that my perspective makes sense there. Again, I’m not a lawyer, but that’s the Greene perspective that I’m seeing. You guys have been asking great questions today. Our next question comes from Jeff Shay in California, where I live. Side note for all of you that don’t live in California, first off, no one calls it Cali in California. I don’t know where that started, but everyone outside of California refers to as Cali, but none of us call it that. It would be like calling Texas, Texi or Arizona, Ari. I don’t know where that started. It’s just a lot of syllables maybe, but you are guaranteeing that people will know you’re not from California if you say Cali.
And when someone says they’re from California, your next question should be, which part, Northern or Southern? Because they’re basically two different states. They have hardly anything to do with each other. So I’m not sure where Jeff is from in California, but if it’s in Northern California, it might be near me. Jeff says, “I’m 31, and my wife is 33. We’ve been investing in real estate. Our properties are more appreciation heavy, and eventually the plan is to sell off to purchase more cashflow-heavy properties or dividend stocks to maximize passive income. How do we begin to calculate when we can start doing this? Does the 4% rule still work in today’s financial landscape? Thank you very much.”
Jeff. I love this question. You’re doing it the right way. Let me give some background into why I think you’re taking the right approach here. So in general, real estate makes money in several ways, but the two main focuses are cashflow and equity, and it tends to operate on a spectrum. So it’s not like it’s cashflow or equity. It’s a lot of cashflow and less equity or a lot of equity and less cashflow, but there is some markets that fit right in the middle. Dave Meyer refers to these as hybrid markets. If you would like to know more about that, check out the bigger news shows that I do with James here on the BiggerPockets podcast network.
But the point is you have less control over cashflow. This is one of the ways I teach wealth building for real estate. Of course, we all want cashflow, and for you, Jeff, you’re trying to maximize how much cashflow that you’re going to get in retirement because that’s when it matters. When you’re not working anymore is where you need that cashflow. But I don’t control cashflow. The market controls that. I am at the mercy of what the market will allow me to charge for rent. That’s the only way I can increase cashflow is either raising rent or decreasing expenses, and it’s very hard to decrease expenses. You can only decrease them so much. Paying off the mortgage is one way, trying to keep vacancy low, trying to keep repairs low. But when things break in houses, your tenant controls that much more than you do.
So what I’m getting at is you have a lot less control over the outcome of cashflow. You have more control over the outcome of equity. You can buy properties below market value. You can buy them in areas they’re likely to appreciate. You can buy at times when the government is printing more money. You can force equity by adding square footage, fixing the properties up, doing something to increase the value. See what I’m getting at? Equity allows a lot more flexibility, but it’s not cashflow. So the advice I give is to focus on equity when you’re younger, grow it because you have more influence over that. And what I mean is you can add $50,000 of equity to a property much easier than you can save $50,000 of cashflow. I mean, think about how long it takes to save $50,000 of cashflow after unexpected expenses come up. That’s a long time.
During that period of time, you probably mill a lot more than $50,000 of equity. I mean, it might be 10 years before you get $50,000 of cashflow, but equity doesn’t help you when you want to retire. It’s a number on paper. It’s not cash in the bank. So the advice, just like Jeff is doing here, is to build your equity, grow it as much as you can. Then when you’re ready to retire, convert that into cashflow. Now, Jeff, you said, “Does the 4% work rule still work in today’s financial landscape?” I’m assuming what you’re meaning is you should invest your money to earn a 4% return because you’re going to live for a certain period of time, and that then your money should last you for how long you’re going to live. All right, so what is the 4% rule?
According to Forbes, the 4% rule is easy to follow. In the first year of retirement, you can withdraw up to 4% of your portfolio’s value, if you have 1 million saved for retirement, for example, you could spend $40,000 in the first year of retirement following the 4% rule. Now, I’m assuming what this means is if you can earn a 4% return on that money and only withdraw 4% of said money, you won’t run out of money in retirement. If that’s not exactly the 4% rule, I’m sure the FI people are going to be screaming. Let me know in the comments on YouTube. But it’s not super important if I have the rule down. What is important is that Jeff is asking, “How much money do I need before I can start withdrawing it, so I don’t run out of money in retirement? And at what point do I want to convert this equity into cashflow?”
So the good news is you’ve got the equity to convert, meaning you’ve run the race well. Good job, Jeff and your wife. You guys are 31 and 33, so it doesn’t need to happen anytime soon. Okay? Keep investing in these growth-heavy markets. Keep buying under market value and keep adding value to everything that you buy. I would wait until you no longer want to work or enjoy working. If you could find a job that you work until you’re 60 or 65 and you like it, it’ll be a lot less stressful to just keep working than it would be to try to retire at 50 and always wonder what’s going to happen. Now, here’s something that I think are headwinds that are working against you. Inflation is growing so incredibly fast. If I gave you a $1 million 30 years ago, you would feel a whole lot more secure than with a $1 million today.
What’s it going to be like 30 years from now when you’re in your early 60s? Is that million dollars going to be worth the equivalent of a $100,000 or $200,000 in today’s dollars? You wouldn’t feel very good retiring with a 100 grand. That might be what a $1 million is worth 30 years from now. It might be worse than that. I know this is hard to imagine, but if you went back 30 years and you looked at how much houses cost, you’d probably find that they were like $80,000, $90,000, a $100,000 in areas that they’re now $600,000, $700,000. They’ve gone up a lot, and we’ve printed more money recently than we have over the last 30 years. So I’m expecting inflation to be a beast. Now, this is good if you own assets. This is good if you have a lot of debt. This is very bad if you don’t want to work anymore.
In fact, when I first realized this, my plan of retiring at 35 and never working again evaporated because I realized the $7,000 of passive income that I had accumulated at that time was not going to be enough to sustain me for the rest of my life because of inflation. My rents were not growing at the same pace of the cost of living and all the things that I wanted to do. That’s when I realized, “I guess, I got to keep working, but I’d rather be a business owner than work at W-2. I got out of being a cop. I got into starting a real estate sales team, a mortgage company, buying more rental properties, doing consulting, the stuff that I do now, writing books.
Can you find something like that, Jeff, that you like doing, so you can keep working? Because my fear would be that the $40,000 that you might be living on right now, if you had a $1 million and you were using the 4% rule, would be the equivalent of $8,000 when you actually want to retire, not enough to live on in a year unless you move to a Third World country. So it’s a moving target is basically how I’m going to sum this up. By the time you retire, I don’t know if the 4% rule is going to work in today’s financial landscape, but I’m betting on, no. I’m betting on inflation being really, really bad and cashflow being hard to find for a significant period of time. So rather than investing to try to make money so I can retire, I’m investing to try to maintain the value of the money that I’ve already earned.
So if I earn a $100,000, I want to put that $100,000 in a vehicle like real estate where it is going to lose less, even if it doesn’t keep pace with inflation. If inflation is at 30% to 50%, I’m not bleeding as much as if I put it in a different investment vehicle. I realize that this is not a sexy concept, but it’s defense, and I think more people should be thinking defensively, including you and your wife. So keep doing what you’re doing, but we’re not going to make our decision on when you take out that equity and convert it into cashflow until much later in life, when you’re not able to work anymore. Now, what you still could do is you could take off some chunks. Let’s say you grow to $2 million of equity investing in California real estate, maybe you rip off 400,000, 500,000. Put that into a market that cash flows more heavily or an asset class that cash flows more heavily like a short term rental.
And then to get some cashflow coming in from that while you keep a 1.5 million in equity, let that snowball to another 2 million. At that point, rip off 500,000. Repeat the process. You could probably do three, four, five cycles of that before you retire if you do it every five or six years. All right, Jeff and Jeff’s wife, thank you so much for submitting this question. It was a great one to answer, and I got to highlight what I see going on with our economy and the future. And that is our show for today. I am so grateful that you all join me for another Seeing Greene episode. I love doing these, and I love your questions. If you’d like to be featured on the Seeing Greene Podcast, submit your questions at BiggerPockets.com/David because that’s my name, aptly titled, and hopefully we can get you on here too, especially if you can keep it under two minutes, one minute. Those are even the best.
And when we first started doing the show, we got a couple complaints that we had people submitting seven-minute questions, so we’ve done a much better job of getting those narrowed down. But we could not do the show without you, the listener base, so thank you very much for being here. If you would like to know more about me, you can find me online at DavidGreene24, or you could follow me on Instagram, Facebook, Twitter, whatever your fancy is at DavidGreene24. Send me a DM there, and we can get in touch. All right, if you’ve got a minute, check out another BiggerPockets video, and if not, I will see you next week. Thank you, guys, and I’ll see you then.