Podcast Summary
House hacking: Subsidizing mortgage through renting out property: House hacking allows new investors to get started in real estate by subsidizing mortgage payments through renting out a portion of their property. This strategy was used by Rob Abasolo to build a successful real estate empire.
House hacking is an effective strategy for getting started in real estate investing by subsidizing your mortgage through renting out a portion of your property. This strategy was exemplified by Rob Abasolo, who house hacked his way into building a successful real estate empire. House hacking can take various forms, from renting out a spare room to converting unused space into a rental unit. The origins of Airbnb itself were based on this concept. By not paying a mortgage and instead using the rental income to invest, individuals can significantly grow their portfolio and wealth over time. This strategy allows new investors to get started even without a large down payment. So, if you're considering getting into real estate investing, house hacking might be a great place to start.
The importance of balancing resourcefulness with investments: Being resourceful saves money but investing in timely solutions can lead to long-term growth and avoid missed opportunities.
Being resourceful and frugal, also known as "broke mentality," can be beneficial when starting out in real estate or entrepreneurship, but it's important to learn when to let go of this mindset and invest in convenience and quick solutions to save time and money in the long run. Charlie Epstein shared his personal experience of struggling with this mentality even after achieving financial success, and how he's learning to balance it with making timely investments for the growth of his business. Jason Brett also shared a similar experience of holding onto a small expense for too long, leading to frustration and missed opportunities for enjoyment. The lesson here is that while being resourceful is important, it's also crucial to recognize when it's time to make an investment to move forward and avoid wasting time and energy on unnecessary battles.
From broke to barely making it, the financial journey of Matt and Trey: Unexpected expenses and income uncertainty can lead to financial stress and instability. Being prepared, saving money, and finding creative solutions can help overcome financial challenges.
Starting a business or even just making ends meet can be a challenging and uncertain journey, often filled with hope and doubt. Matt and Trey shared their experiences of financial struggles, from being completely broke to barely making ends meet. They described the feeling of being hopeful when they thought they had enough income, only to be met with unexpected expenses and uncertainty about when payments would come in. The fear of overdrafting or missing bills added to the stress and hopelessness. Matt's turning point came when he started renting out properties on Airbnb and discovered new ways to make money. Trey related to the feeling of being broke and the fear of not having enough time or money to build a business or achieve financial stability. The conversation underscores the importance of being prepared for the unexpected, saving money, and finding creative solutions to financial challenges.
Airbnb as a tool for financial gains through rental arbitrage: Airbnb can help individuals offset living expenses or generate profits by renting out properties in popular vacation destinations. Cash flow is essential for new investors, while experienced investors may prioritize appreciation over cash flow.
Airbnb can provide significant financial benefits through rental arbitrage, allowing individuals to subsidize their living expenses or even become profitable investors. Marc Bell shared his personal experience of using Airbnb rentals as a way to offset mortgage payments on second homes in popular vacation destinations, generating substantial profits. Elliott Bisnow emphasized the importance of cash flow for new investors, stating that it is often the most crucial factor when approaching a real estate deal. However, as investors gain more experience and financial stability, they may prioritize appreciation over cash flow. Overall, Airbnb can be a powerful tool for individuals looking to supplement their income or even build wealth through real estate investments.
Importance of both cash flow and appreciation in real estate investing: New investors prioritize cash flow, but appreciation is crucial for long-term wealth growth. Aim for both in real estate investments.
For new real estate investors, cash flow is crucial as it helps them reach their goal of quitting their 9 to 5 job and becoming financially independent. However, as their portfolio grows, appreciation becomes increasingly important in building generational wealth. The speaker shared his personal experience of making $57,000 a year from a tiny house investment, which was more than his previous salary. He emphasized the importance of focusing on increasing income from real estate to reach a desirable monthly or annual income, but also recognized the importance of appreciation in growing net worth over the long term. He encouraged investors to strive for both cash flow and appreciation in their real estate investments.
The importance of building a strong network and learning from others in investing: Building a network of like-minded investors and learning from their experiences can significantly enhance your investing journey. Focus on growth and effective communication to reap rewards in the long run.
Building a strong network and learning from others can significantly enhance your investing journey. Marc Bell, the founder of TIP Mastermind, emphasized the importance of having a community of like-minded investors to learn from and share ideas with. He shared how the TIP Mastermind community has helped him step up his game and build lifelong relationships. Adam Cecil's concept of growth mode and harvest mode also resonated with Marc's experience, where he focused on growing his investments and cash flow for several years before eventually reaping the rewards. However, even with passive income streams like Airbnb, maintaining a high standard and effective communication with guests requires effort and dedication. Overall, the key takeaway is that building a strong network, staying focused on growth, and putting in the necessary work can lead to significant rewards in the long run.
Automating Short Term Rental Management: Hosts can save up to 80-90% of their time and keep more earnings by automating tasks like messaging guests, managing pricing, and ordering supplies using property management systems.
While short term rentals can offer a level of passive income, they also require active management. However, with the right tools and strategies, hosts can automate many aspects of their business, such as messaging guests, managing pricing, and ordering supplies. By doing so, they can save time and reduce the need for a property management company, which typically charges a significant fee. For instance, hosts can use a property management system to automate messages, price adjustments, and even reviews. They can also set up subscriptions for recurring supplies and communicate with cleaners through the system. By automating these tasks, hosts can save up to 80-90% of their time and keep more of their earnings. However, it's important to note that there is still a human element involved, and hosts should be available for any issues that arise. Overall, the key is to find the right balance between automation and personal touch to run a successful short term rental business.
Managing Opportunity Costs in Real Estate Investing: Successfully managing opportunity costs is crucial for maximizing cash flow in real estate investing. Focus on areas with high tourist traffic and eclectic towns for consistent demand and minimal marketing efforts.
Successful real estate investing, particularly in the early stages, requires careful self-management to optimize cash flow. Trey Lockerbie emphasized the importance of this in the context of managing opportunity costs. Ross Gerber shared his investment strategy, focusing on areas with high tourist traffic and eclectic towns, where the demand for rental properties outweighs the supply. These areas include national parks, state parks, vacation destinations, and eclectic towns. Gerber's rationale is that these places attract large numbers of visitors, and investing in properties in these areas can result in consistent demand and minimal marketing efforts. While alternative options like RV rentals and car rentals can also generate income, Gerber and Matt Spielman agreed that traditional real estate investing in rental properties can offer more consistent returns and greater potential for long-term growth.
Renting out assets in the sharing economy can generate income and potentially even profit: Renting out depreciating assets like cars and RVs on platforms like Turo and Airbnb can generate income, which can be used to invest in other assets or cover expenses. Regulations can impact profitability, but understanding and complying with them allows for successful participation in the sharing economy.
The sharing economy, specifically platforms like Turo for car rentals and Airbnb for lodging, can be effective ways to subsidize the cost of owning assets, such as cars and properties. By renting out these assets when they're not in use, individuals can generate income and potentially even make a profit. For instance, having multiple cars listed on Turo or an Airstream on Outdoorsy can lead to significant earnings. However, it's important to note that assets on wheels, like cars and RVs, are depreciating assets. While they may not build wealth in the same way that real estate does, the income generated from renting them out can be used to invest in other appreciating assets or cover their expenses. Additionally, regulations can impact the profitability of these ventures. National parks and vacation destinations, in particular, tend to be more owner-friendly due to their reliance on tourism-driven income. By understanding the rules and complying with them, individuals can still successfully participate in the sharing economy while contributing to local economies.
Diversify your short-term rental listings for regulatory safety: Consider listing in multiple locations for regulatory safety and invest in areas with demand and friendly regulations, while carefully considering features like hot tubs.
Diversification is key in the world of short-term rentals, especially in light of potential regulatory changes. As the speaker shared, having listings in multiple locations can provide a safety net if one area cracks down on short-term rentals. Furthermore, the impact of Airbnbs on real estate prices is a topic of debate, with some arguing that it contributes to skyrocketing prices while others claim it's a small percentage. Regardless, it's important for hosts to consider the potential impact on their specific market and invest in areas where there is a demand for short-term rentals and a friendly regulatory environment. Additionally, features like hot tubs, while desirable, can also cause issues and should be considered carefully.
Considering a hot tub for rental properties: Weighing pros and cons: Hot tubs can bring extra income but involve high maintenance costs and potential damages. Creative financing options like HELOC, DSCR loans, and partnering with others can help acquire rental properties with minimal cash down.
While a hot tub can potentially increase your rental income, it also comes with significant maintenance costs and potential damages. Therefore, it's essential to consider whether the additional revenue justifies the potential hassles and expenses. On the financing side of real estate, there are various creative solutions to acquire rental properties with little to no cash down. One way is to use a home equity line of credit (HELOC) to buy and rehab a property, then refinance and get the money back. Another option is a DSCR loan, which qualifies borrowers based on the projected rental income of the property instead of their personal income. Lastly, partnering with others and using their money (OPM) is a successful way to scale up quickly, although the terms may vary depending on the situation.
Public.com's High-Yield Cash Account Offers 5.1% APY: Public.com's cash account has a high-yield rate of 5.1%, making it a strong contender for those looking to earn substantial returns on their savings. Long-term real estate investment requires a consistent strategy and focus on potential growth, despite rising mortgage rates.
Public.com offers a high-yield cash account with an APY of 5.1%, which is currently one of the highest rates in the market. This is higher than various other financial institutions, including Robinhood, SoFi, Marcus, Wealthfront, Betterment, Capital One, Ally, Barclays, Bank of America, Chase, Citi, Wells Fargo, Discover, and American Express. While it may not be the absolute highest rate, it's a strong contender for those looking to earn a substantial return on their cash savings. Additionally, Ross Gerber emphasized the importance of thinking long-term when it comes to real estate investments. With rising mortgage rates, some may be hesitant to enter the market. However, Gerber advised that a successful real estate investment strategy requires a long-term perspective and consistent investment. He recommended working harder to secure better deals and avoiding overpaying, even with higher interest rates. Ultimately, the key is to focus on the potential for long-term growth rather than short-term gains. When it comes to making smart financial decisions, trustworthy sources like NerdWallet can help individuals find the best deals on credit cards, savings accounts, and more. By comparing and researching various options, individuals can make informed decisions that help them save money and reach their financial goals.
Consistent and strategic real estate investing is crucial for success: Avoid overpaying, don't spread oneself too thin, have reserves, and focus on long-term approach for successful real estate investing. Consider future value and overall market conditions instead of solely relying on interest rates.
Consistent and strategic real estate investing, rather than trying to time the market perfectly, is the key to success. This means avoiding overpaying, not spreading oneself too thin, and having reserves for unexpected events. The market may bring good and bad deals, but a long-term approach can help mitigate the negative ones. For example, a $500,000 home with a 2.8% interest rate would cost $700,000 over 30 years. At a 5.8% interest rate, the home price would need to be $375,000 to achieve the same net cost. While it might seem daunting to pay less upfront, the house's future value is crucial. Stig Brodersen, a real estate investor, shared that he has had mostly good deals, with cash on cash returns ranging from 30% to 100%. He now targets deals with a 20% cash on cash return due to rising interest rates. Even in a 10% cash on cash scenario, he considers it a good deal. The overall housing market depends on supply and demand. Although interest rates are increasing, the housing supply shortage keeps prices competitive. Stig also mentioned that he has had few bad deals in his investing career. Instead of focusing on the interest rate alone, investors should consider the property's future value and the overall market conditions.
Real Estate: Aiming for 10% Returns and Leveraging Tax Strategies: Stig Brodersen targets a 10% return in real estate, but values its tax and leverage benefits. He recommends using 1031 exchanges to defer capital gains taxes and exploring various legal structures for building a portfolio.
While achieving high returns is desirable, real estate investor Stig Brodersen considers a 10% return as relatively good, even in an illiquid asset market. He believes that real estate offers more tools for wealth growth through leverage and tax strategies, which can outweigh the potential risks. Brodersen also mentioned using the 1031 exchange to defer capital gains taxes when selling and reinvesting in another property. When building a real estate portfolio, he suggested considering various legal structures, such as trusts, LPs, GPs, or setting up an LLC. However, he acknowledged that there are many legal strategies to consider. Overall, Brodersen emphasizes the importance of understanding the unique advantages of real estate investment and how it can complement other investment vehicles like the stock market.
Teaching others what he's learned in short-term rentals: Ross Gerber's transparency and openness about his short-term rental business inspired others to start their own, leading him to become a co-host on the BiggerPockets Real Estate Show.
Ross Gerber, a successful short-term rental entrepreneur, strongly believes in teaching others what he's learned through his experiences. He was inspired by the lack of resources available when he started in the short-term rental space and wants to help others avoid the same struggles. Gerber's transparency and openness about his business have resonated with many people, leading some to quit their jobs and start their own short-term rental businesses. He became a co-host on the BiggerPockets Real Estate Show, fulfilling a personal goal and allowing him to reach an even larger audience. Gerber's story is a testament to the power of sharing knowledge and the impact it can have on others.
Unexpected opportunities can lead to growth and rewarding experiences: Unexpected calls and interactions can lead to significant growth and learning, as demonstrated by Elliott Bisnow's experiences with HGTV and podcast guests like Ed Mylett and Brandon Turner. Resources like David Greene's BRRRR book, the Rob Built YouTube channel, and the Host Camp Airbnb mentorship program can also provide valuable insights.
Unexpected opportunities can lead to significant growth and learning experiences. Elliott Bisnow shared a story about receiving a call to potentially fill in for Brandon Turner on HGTV, which came as a surprise to him. Despite initially not wanting a show, he later realized that interacting with individuals in need of advice through his BiggerPockets platform was more rewarding than having a TV show. Elliott also mentioned that some of his podcast guests, like Ed Mylett and Brandon Turner, had a profound impact on him, leaving him feeling inspired and motivated. He recommended resources such as David Greene's BRRRR book, the Rob Built YouTube channel, and the Host Camp Airbnb mentorship program. Overall, Elliott's experiences demonstrate the value of embracing new opportunities and learning from others.
Exploring Real Estate with the BiggerPockets Real Estate Show: Learn from diverse real estate experts, discuss various asset classes and niches, and gain insights from the BiggerPockets Real Estate Show.
For those interested in real estate, the BiggerPockets Real Estate Show is an excellent resource to explore various asset classes, niches, and learn from diverse experts in the field. Rob and his guests discuss a wide range of topics, making it an ideal starting point for beginners looking to dip their toes in the real estate market. To access this valuable content, listeners can subscribe to the Millennial Investing podcast by The Investors Podcast Network, and visit theinvestorspodcast.com for additional resources. Remember, before making any financial decisions, it's essential to consult a professional. The BiggerPockets Real Estate Show is copyrighted by The Investors Podcast Network, and permission is required for syndication or rebroadcasting.
