Learn how to navigate high interest rates, discover profitable deals, and implement winning strategies for long-term real estate wealth. In this episode, Andrew Brill interviews David Meyer, Head of Real Estate Investing at BiggerPockets, to uncover the secrets of real estate success in today’s economy.
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Dave Meyer 0:00 This is sort of where real estate becomes more of an art than a science, because there's not always a very specific way to do this. What I recommend to people is to really think about your long term strategy, because flipping a house and being a rental property investor, they're pretty different businesses. They both fall under the category of being a real estate investor, but if you think about what the skill sets needed to be successful at one it's kind of different, especially if you think about the time investment required to be good at one versus the other, is pretty different. Andrew Brill 0:37 Welcome to wealthion. I'm your host. Andrew brill, how would you like to sit back, relax and let your money work for you while you do something you really enjoy? We'll explore one way to get that done right now, I'd like to welcome Dave Meyer to wealthion. Dave is the head of real estate investing at bigger pockets. He's the host of big the bigger pockets podcast. He's also an author. Dave, welcome to wealthion. Unknown Speaker 1:05 Thank you so much for having me. I'm excited to be here. Andrew Brill 1:08 absolutely. So congratulations on your 1,000th podcast. I know that that milestone just passed, so that's, uh, congrats. That's a that's a big one. I will get there one day. Dave Meyer 1:19 Thank you very much. I haven't been the host for the whole time, so a big shout out to all the other people who have made the 1000 episodes possible. Andrew Brill 1:28 So tell us about bigger pockets, and what you guys do and how it all works. Unknown Speaker 1:34 Bigger pockets is a platform to help ordinary Americans gain the many financial benefits of investing in real estate, and we do that through a lot of media channels. So we have podcast, books, YouTube channels, and we also have software that helps people analyze deals, find markets, connect with agents, that sort of thing. But we believe that real estate is an excellent way to build long term wealth, but it can be tricky for people who don't know how to do it, so we help them do it. Andrew Brill 2:05 So it's kind of a teaching platform, but you also connect people who want to get into this sort of thing. Unknown Speaker 2:11 That's right. So we have all the education you need, but real estate, I think, surprisingly to many people, is really a relationship business. You really need to have a great team around you, and so we also help people do that, in addition to just helping them understand the fundamentals. Andrew Brill 2:29 So how did you get into real estate investing? Unknown Speaker 2:32 It's a funny story. I graduated college in 2009 I moved out to Denver from New York, and, you know, 2009 wasn't a great job market. I was waiting tables and had a couple free days a week, and I'd just go skiing and did it with a friend of mine. And just to be honest, wasn't my smartest friend, but he got into real estate investing and was killing it, and was doing, you know, buying rental properties, making all this money. And I thought, if this guy can do it, I think I can too, and luckily, I was correct. I wound up partnering with a couple people. I didn't have a lot of money at the time, but I was able to partner with a few people to buy a rental property. I self managed it, figured out how to be a landlord, and that was almost 15 years ago, and I've been doing it ever since. Andrew Brill 3:22 So it seems that it's becoming more and more popular, the the real estate investing piece of it. I know you started quite some time ago, but it do you? Have you seen a an uptick in people buying rental properties or buying properties to flip them and stuff like that Unknown Speaker 3:38 On our platform absolutely. When I started at the company, you know, we were maybe had, like, maybe 300,000 members. Now we have over 3 million. So I think that speaks to the growth of the industry in general. And I think there's a good reason for it. First and foremost, real estate is a great way. It is, in my opinion, the best way to replace your income with an investment. You know, stock market's great. There are tons of other asset classes, but real estate has an ability to pay you regular cash flow, which I think is really important to people, because it can help them move up their retirement date. I also think millennial generation, Gen Z, we hear this common refrain that people want to have multiple streams of income. They want to diversify how they earn money. I don't know if that's from distrust of corporate jobs or what. There's just a trend, but it's a great way to sort of add secondary income as well. And the third thing is, it's not that complicated. You know, I know it's intimidating, and that is true, but when you learn about real estate investing, it's pretty simple. It's like one of the oldest businesses there is, right? You're collecting rent, you're trying to control expenses, and if you can learn the basics of that, most people can become successful investors. Andrew Brill 4:56 Can this replace a job you can actually make a living at doing this sort of thing, right? Unknown Speaker 5:01 Absolutely and that has become a popular refrain, I think at bigger pockets, what we try to stress is that that is not always the objective, and it's not necessarily the easiest thing to do. You start with a ton of capital, you could probably replace your income in a couple of years, three to five years. I think if you're starting from scratch and just have an ordinary job, it is reasonable to think that in 15 years you can retire, and to me, that's an amazing benefit. You know, if you're starting earlier in your career and you want to retire in 15, 20 years, for most people, that's cutting their working life in half, which is a very compelling reason, at least to me, to get into real estate. Andrew Brill 5:41 So you're sitting at your favorite ski resort, and you decide, okay, you know, it's time for lunch, I'm gonna sit down at the table and grab a sandwich. And you hear some people talking about, you know, investing in real estate. And they're saying, Yeah, this, this, I can never do it. I don't have the capital. I don't know how to do it. What advice are you giving them to say, no, no, stop, right there. You can do this, and here's how you do it. Unknown Speaker 6:02 There are many ways to get involved. And one of the things I love about real estate is that's so customizable to your individual circumstance. So if you're someone, let's just start with the beginning. If you're someone who just wants to get into the game, you can put as little as 3.5% down and buy four units, which is pretty incredible, right? There's basically the way real estate financing works, is anything that has four units. So a triplex or fourplex or fewer is considered a quote, unquote, residential property, and that means you can get a residential loan on it. And so if you live in that property, you can put it, you can get an FHA loan, which is a government program designed to help people afford homes, and you can put as little as 3.5% down. So if you're buying a, you know, duplex, let's say that is $400,000 that means you can put a little bit over $12,000 down and own two units. You can live in one side, rent out the other, and maybe it cash flow is positive for you, but at the very least it's going to be greatly reducing your your housing costs, which is as good or better than making more money because it's tax advantaged. So there that is, I think, the easiest way for people to get in. And I don't think a lot of people know that you can buy multiple units for as little as three and a half down. Andrew Brill 7:29 How would one find that out? Dave, you know, it seems so easy, you just rattled it off. But how do you find that out, other than going to bigger pockets and asking, How does somebody find out that. Look, you know what? This isn't the entry into this isn't that difficult. Dave Meyer 7:46 so a bigger pockets, obviously has resources for it. I encourage people to also just talk to lenders and agents. I think there seems to be an aversion, or people are nervous about reaching out to a real estate agent or real estate lender. All of them will talk to you for free. So if you have questions about what you qualify for, what's possible in your neighborhood, then just reach out. And these are typically professionals who are, you know, incentivized in their own way to help you navigate the home buying process or the property buying process. And most of them can really help you. I do encourage if you're going to be an investor, to look for a lender or an agent who knows how to work with investors, because there's a little bit of a different tilt there. But that's another great way to do it is just have the free conversation and see what you can learn. So many people ask me all the time. They're like, do I qualify for this own I can't tell you, but a lender can, so you should go and speak with them. Andrew Brill 8:44 So how do you avoid you said something interesting, it could create positive cash flow. I would assume, if you're going to get into a rental property and be a landlord, so to speak, you would want positive cash flow. I understand if you're living in one unit, renting out the other the positive there may not be positive cash flow because you're actually living in one of the units, but if you're going to try and make a living at this, or at least start the process of getting to a point where you could make a living at this, you would want positive cash flow. How do you evaluate that and make sure that happens Unknown Speaker 9:19 absolutely and there's a sort of a debate in real estate investing on do you need positive cash flow? Like, do you just do something for appreciation? I'm pretty adamant that you do want positive cash flow. I It's not the most important thing to me. I am happy to get three, 4% cash on cash return similar to a dividend or a bond yield, and then enjoy the upside potential of appreciation. But I totally agree with you that it puts you in a risky situation to not have cash flow. Real Estate's your friend when you can hold on to it for a long time, and if you're coming out of pocket every month, you may be forced to sell before it's ideal, and that's something. You want to avoid. The way to buy real estate invest investments in a safe, relatively low risk way is to just get good at running the numbers. And this might sound complicated, but it really isn't real estate investing, particularly when you're just buying a rental property, there aren't that many inputs. There aren't that many expenses. You're basically going to look at what your rent is, and then your primary expenses are going to be your debt service. So presuming you take out a mortgage, but you're going to have mortgage, you're going to have insurance, you're going to have taxes, you're going to have to have repair costs and maintenance set aside. So that's, I think, a common place where new investors get tripped up is they don't set aside money to make sure that when things inevitably break, that you have money to cover them. I also recommend people keep a vacancy reserve. No one wants to have vacancy in their apartments, but it happens, and so you want to make sure that you have money to cover all of your expenses in those months. And if you do this, this is those process called deal analysis. I call it underwriting, but if you underwrite your deals very conservatively, where you think, hey, things can go wrong, and you sort of plan for them to go wrong, and you do the analysis and the numbers still make sense, then you only really have upside, in my opinion, because you've planned for the worst and the best can still and something better typically happens. So that's what I recommend. And bigger pockets. We have calculators you can use to do this. There are other ones out there. If you're good at Excel, you can figure this out yourself, but it isn't really all that complicated. Andrew Brill 11:39 Hanging on to the real estate. Obviously, if you can avoid vacancy and continue to rent it out, or have people living in your properties, you hang on to them instead of flip them. Or is there a point where you say, You know what? The value in this area is going up so much that it pays me to flip this, take the cash and invest someplace else. Unknown Speaker 12:04 That's a great question. This is sort of where real estate becomes more of an art than a science, because there's not always a very specific way to do this. What I recommend to people is to really think about your long term strategy, because flipping a house and being a rental property investor, they're pretty different businesses. They both fall under the category of being a real estate investor, but if you think about what the skill sets needed to be successful at one it's kind of different, especially if you think about the time investment required to be good at one versus the other, is pretty different, and so I recommend people start there. For me, as an example, I work full time in bigger pockets. I don't flip houses because it's too intense. I just don't want that in my life. I would rather buy a property. And I have a modest, pretty solid portfolio now, but I have a rule for myself where I don't spend more than 20 hours per month on my portfolio, and for me, I just keep buying rental properties because of that. Now, do I miss out on some possible appreciation and return because I take that approach Absolutely. I have friends that are really good flippers, and they make way more money than me on a lot of deals, but they probably don't work full time, or they're spending, you know, 30 hours a week on this property, and that's still a very valid way to make money. And especially, I think if you're early in your investing career and you want to build up some capital to buy rentals and retire of the long run, it can be great. But I think people really need to think about the lifestyle and skill set on top of just the returns, because unlike the stock market, where it takes the same amount of time to own a dividend stock versus a growth stock, real estate investing, we call it investing, but realistically it's entrepreneurship, and you need to ask yourself, what type of business you want to run? No wrong answers, but I recommend the self reflection before you jump into it, because you if you do something like a flip or a heavy renovation without knowing what you're getting yourself into, you can find yourself in a very time consuming business, and potentially one that can get expensive. Andrew Brill 14:19 what do you say to the person who says, You know what? I don't want to be a landlord, but I do want to invest in real estate. Dave Meyer 14:27 There are many, many good passive options for being a real estate investor, and they sort of run the spectrum. There's sort of this spectrum in real estate between super active, which would be like self managing a flip. You're there every day. You're doing all of it. On the other end of the spectrum are probably REITs. You know, you can invest in publicly traded real estate companies. Get some of the benefit of real estate, but that's probably not the most, the highest return that you're going to get. There are two or three strategies for more. Some folks that I recommend the two, two or three of them I do. So one is just investing using a property manager. This does require that you do some work. So I still, personally, I invest. I live in Europe. I still invest in the United States. So I work with a real estate agent to find properties. I do the deal analysis myself. That's something I'm good at, and so I do that myself. I create budgets and perform us. And then once I buy something, I turn it over to a property manager that I know we can connect you with property managers at bigger pockets, but you should screen a couple of them and find one that's good for your business. And it does still take managing your property manager. You should know that it's not just like, hey, I bought this thing. You're in charge. You know, they're technically, in a way, your employee, and you sort of need to meet with them. I talked to mine maybe an hour a month, so it's not a lot, but you need to pay attention, you know, you they'll send you reports. They'll send you, you know, financials. And you need to look at them and ask questions and be a diligent business owner. So that's one option that probably, of all the passive options, is the least risky and I think, a really stable way to build investment. The next one is something called turnkey investing. There's some companies that will find rehab and then manage properties for you, so they'll basically do the whole thing. That's a great way to invest. You just need to be diligent about vetting the company, because you're putting a lot of faith, obviously, into the operator. There are many good, reputable ones, but I assume there are also some ones that might not do the best job with the renovation. So you want to be very careful there. And then the third one is one that I love. It's called syndications. And so this is basically when investors pool their money together and buy large assets. It's kind of similar, it's very similar to the private equity model, where high net worth individuals, and you do normally have to be accredited for this option, so that just call that out. If you're accredited, you can usually join together as a limited partner and select a GP, a general partner, who will buy, usually a large commercial asset. So this might be a big multi family. It could be retail, it could be office, and all of the work is up front there. You do some vetting of the operator, you look for the deal. Then once you fund that investment, it truly is passive. You don't do anything. You can review the financials, but it's entirely passive. I do this. I like it. Of course, the trade off is liquidity. You don't get to choose when to sell. You don't have control over the asset. But if you can find good operators, this is a really good way to sort of leverage the experience and expertise of of experienced investors and do very little in terms of time commitment. Andrew Brill 17:52 So finding partners is a good idea. If you're you live in Europe, you invest in the United States, you said you work with a real estate broker. Are you invested in certain areas, or is it all over the country? Dave Meyer 18:08 Great question. So I split my strategies a little bit for anything that I own directly, so rental properties that I personally own in my own portfolio, I've kept it to two markets, so one in the Midwest, one in Denver. And I do this because there's limited upside into you know, trying to maximize the exact right market, what I recommend to people is to find a couple of good markets that fit your strategy. So for the Midwest, tend to be great cash flow markets. Denver tends to be a great appreciation market, so I do one of each, and then within those markets, pick the best team, because, you know, one, there's cities that might grow faster than Denver, but if I have a great property manager, a great lender, a great contractor in Denver that's gonna have a bigger impact on my long term returns than being in the number one fastest appreciation market in the country. And so I've found good teams in these two markets, and I feel that that's good enough diversification for my own direct ownership. When I invest in syndications. That's more of a free for all you know, because, again, I prioritize in those types of deals the operator. And I happen to know and have found great operators, markets on the West Coast, in the south, in Texas, in the northeast, you know, all over the place. And when I find a good deal and a good operator, I'm comfortable investing in multiple places, because I don't have to put together the entire team. As long as I like the general partner, they're and I trust them, I'm going to trust them to find, you know, do all the marketing, to find the great property manager, to have all the contractors. And for me, I've been doing this for 15 years. So I've come to a point where I have a well diversified portfolio. This is how I choose to diversify. If you're just getting started. For most people, it's best to just pick a market that you have a good team in and go in for a couple years and really learn the business. Andrew Brill 20:15 But it's best to have a team not not really go this on your own. Is that a good strategy? Unknown Speaker 20:21 As a capital partner, you can go on your own. I think it's really just about finding a team of support. And so you need an agent, right? Unless you're a real estate agent, that's super important. You need a lender. Most people don't buy cash. And you need a property manager if you're going to do it. And even if you self manage, which a lot of people do, which I actually think is a great way to get started, is doing a lot of the property management yourself. You just learn the business really well, and you save, you know, eight to 10% of your revenue. But like finding contractors, for example, is just something that you need to do in the business. It's not the most fun part of the business, but you need to find someone who's a good plumber, who's good an electrician, and that's what I mean by team. You don't necessarily need to employ them, but you need to have someone you can rely on when your tenant calls you and says, the toilets broken. Because I think that's the thing that people get. That's why people don't invest in real estate, right? They're like, I don't want to be called when the toilets broken, and neither do I, but I have a good plumber and a handyman who I can call, who will happily take my money to go handle that for me. And at first you need to, you know, take some time to build up that network of people, but once you do the business really does become pretty autopilot. Andrew Brill 21:45 Do you still own your first rental property or the first property you purchase? Unknown Speaker 21:49 No, I actually sold that in 2018 mostly because of partnerships. Like I like I said, I sort of joined with a bunch of people. There was no animosity, but, you know, after owning the property for eight years, some people wanted liquidity, so we wound up selling it, and I used something called the 1031 exchange, which is one of the many tax advantages to being a real estate investor, and bought a couple different properties with the proceeds. Andrew Brill 22:17 This show was sponsored by better help, and these crazy times we live in. It's probably the last thing on your mind, you and your self care. We all deal with it, work, kids, obligations, bills, you name it. Everything takes priority except you. If you've ever worked out or been an athlete, you've heard the saying never skip leg day, but how about never skipping therapy day. That's right, I'm talking about taking care of you, talking to someone who will help ease some of your burden so you can get back to what it is that makes you happy. I talked to a therapist, and it really helps to take the edge off everyday life. Maybe you're going through something and can't really pinpoint what is, what it is that's bothering you, if you need to talk to a professional or thinking about giving therapy a try, give better help a try. It's easy, entirely online, convenient and flexible to fit your schedule, just fill out the questionnaire and get matched to a licensed therapist anytime. Never skip therapy day with better help. Visit Betterhelp.com/wealthion today to get 10% off your first month. That's better, h, e, l, p.com/wealthion, walk me through your first deal. You know, it's almost like walking into a test that you're you know, you're prepared for, but you're just not quite sure. Walk me through your first deal and what that was like. It's just because viewers are out there thinking, You know what? Maybe this is a good idea, but I don't know. So walk me through your first deal and how that went. Unknown Speaker 23:53 What I did was first connect with a real estate agent and started looking at deals. I know this sounds backwards to people, but I really recommend starting this way. One, I actually think it's fun. I like looking at real estate, and I enjoy going to properties and checking them out. But two, to find funding and to figure out this business, you need to be able to identify good deals. That's really where the challenge comes, and so getting good at that is is super important. And so I, at the time of my first deal, did not have a lot of capital, but I was able to identify a good deal, and I had learned how to do some financial modeling the stuff we talked about, and was able to figure out that I had found a very good deal that was probably better for potential partners than bonds, than the stock market, than other alternative investments, and I put it together, you know, in a professional way, and went to friends and family that I knew and was able to raise money. A was four of us the. That went in and sort of split the down payment. I didn't even have enough money for my fourth of the down payment, so I got took out a secondary loan from one of the other partners at a 7% interest rate, and then I self managed the property to pay off that secondary loan. So I basically took the money as a property manager, and reinvested that back into the deal. So it wasn't the most lucrative at first, it wound up being a Grand Slam over over time, I made a great deal of money on that deal, but I was 23 at the time, and I was just very eager to better my financial position, and was sort of willing to just hustle my way into it. And I did, I think the thing that people hear that story and they're like, Well, I don't have money, and I'm like, Well, if you go to a partner and say, Hey, do you want to buy real estate? They'll say, Yeah, maybe. What? Real Estate, you know? And so I recommend you start with the deal finding process, because that will make your conversations, either with partners, your financial planner, your spouse or yourself, a whole lot easier. When you're looking at something concrete and saying, Hey, this deal will net me a 7% cash on cash return. It's probably going to get me an annualized ROI of 15% over the next 10 years. That's something you can look at and evaluate if you're just thinking, Hey, should I be a landlord? It's a little less tangible and harder to pull the trigger on, because you don't really know what you're getting yourself into. Andrew Brill 26:31 So being in Amsterdam, how do you find or Europe? How do you find deals now you do just totally trust your real estate broker to say, hey, you know what, Dave, we found this for you. Let me know what you think Dave Meyer 26:44 I do a combination of things. So I have a real estate agent who sends me deals. Those are both on market and off market deals. I also use a tool we have in bigger pockets. It's called the deal finder. Basically allows you to simulate. It's like it looks like Zillow or realtor, you know, but it allows you to estimate rent on your rental returns, cash on cash returns. And so I look at that, and I use that to screen deals, then I analyze them. So I use a calculator and say, Hey, here's the expected rent. Here are all my expenses. How does this stack up to, you know, alternative investments is how people invest, right? Like you look at one option versus the other. So I look at different real estate investments. I invest in equities as well. I, you know, I weigh this against putting more money into the stock market. And once I've decided that I like them, then my final step is actually having my property manager go walk the property. For me, I do trust my real estate agent, but their specialty is identifying deals negotiating. Property Managers specialize in what tenants like and what they're going to ask questions about, what there's going to be demand for, and so before I put something under contract, or before I make an offer, I always have my property manager go over there and say, You know what, this is a great deal. Or just the other day, I was looking at a deal that was supposed to be a two bed, one bath and and he said, This is a great deal, but you know it, it says it's two bedroom, but there's actually no dividing door, or you have to walk through this bedroom to get to the second bedroom. People aren't going to like that, so it's gonna actually get rented, like a one bedroom, even though there's two. So like that kind of vice is invaluable. And I also go to these markets at least once or twice a year, that sometimes it's after I've bought things, but I do think it's really important to go lay eyes on them. You don't have to do it all the time, but I think one just maintaining those personal relationships with your property manager, with the other people. So getting a sense for your property manager, getting sense for the neighborhood, is always important. You know how, how things change over time, so I still think it's important to physically be there, even if it's just once a year. Andrew Brill 29:03 Are there certain areas that are better for rentals than than other areas that are residential? But if people really are not renting in that area Unknown Speaker 29:14 that's one of the things I recommend people look for when they're picking a market, is the homeownership rate, because it's true. There are some areas like particularly the suburbs or rural areas where home ownership rate is super high, could be like 70, 80, 90% and so it doesn't necessarily mean you can't rent, but your pool of renters and your demand is going to be less. I personally like markets where there's a high percentage of renters, because you're always going to be able to find a tenant, like college towns or areas where young professionals live, those tend to be really good areas. I like those. I also like areas with with families as well, just in more urban areas where there's more rent or pool, but I. Doesn't necessarily have to be young professionals. Families still make great tenants as well Andrew Brill 30:04 So talk to me about the interest rate now, and I know that there's there's lending involved, that not everybody walks in with a pile of cash and buys everything for cash. The interest rates right now are on the higher end. I mean, I of my first mortgage, I paid a lot more than 7% but they're on the higher end. How does that figure into you know, purchasing at this point. Unknown Speaker 30:26 higher interest rates have definitely made it harder to find cash flow. I don't think it's changed the fundamentals of long term real estate investing, but it is much more difficult today to just look on Zillow or bigger pockets and find a deal right off the bat where you're going to generate positive cash flow. It's still definitely possible, but it depends on the market. Higher price markets in particular, have it's become difficult. So in those markets, the strategies that works best are typically what's known as a value add strategy, where you buy something that is not up to its current highest and best use, but you make it, you know, you renovate it, and that can vary from a gut rehab to painting and putting down floors. I like to do the lower end the Lower Lift kind of value add, but it can still be generate great cash flow. But if you look at markets in the Midwest, or actually a couple markets in the northeast, you can still buy cash flow right now. And I think the truth is that if you can find deals that are good right now and give you the right return right now, they'll only get better when interest rates drop. I'm personally not one of those people who thinks we're going to get back into the 4% interest mortgage rates anytime soon, but they'll probably come down in the next few years to the mid fives. That will save you a couple 100 bucks a month on your mortgage if you if you refinance them, and that will only improve your returns over time. That said, I never recommend people buy deals that only will work with a refinance. That's really risky, in my mind, because we obviously don't know where mortgage rates are going to go. We can guess, but I would only buy a deal that pencils out today with high interest rates. And it's sort of one of these things where it's like, you know, trial by fire. If you can find a deal during a difficult time, then it's going to be very, very good deal over the long run, but it definitely makes the identification of a deal process harder. Andrew Brill 32:24 Do you take the proceeds from the rent and put it into the mortgage, or some of them, obviously, some you're looking for some income, but do you try and shorten the length of your mortgage, and, you know, increase the cash flow over time? Because once you get rid of that mortgage, it's all other than taxes and maintenance and that stuff. It's all it's all free cash flow. Unknown Speaker 32:47 That's a big debate. I personally don't at this point in my real estate investing career. I really love fixed rate debt, and I like to lock it in, because it's one of the benefits of real estate, and it's very unique to the United States, where you can get a mortgage and lock in debt for a long term. Because even though, even though that payment stays the same, like rent goes up, we've seen that a lot over the last couple years, and that's why real estate investing is such a great inflation hedge, because rents keep up with inflation, at the very least, if not exceed inflation. Meanwhile, your debt payment stays the same. And so I personally am content with that. I think as I get older and approach what I would consider a retirement, maybe 1015, years from now, I'm in my mid 30s, then I would do exactly what you're saying. I would de leverage as I approach my real estate investing career, either by making additional mortgage payments, like you said, or when I buy a property instead of taking out the max leverage and using an 80% mortgage, I'd maybe put 50% down or 40% down. That does hurt your long term return potentials. Leverage is one of the great benefits of real estate investing, but it reduces your risk, and if you are one of those people who's actively trying to replace your income, that can be really beneficial. But again, I work full time, so I'm not trying. You know, my goal isn't to, like, fully replace my income, and I prefer to enjoy the benefits of leverage and appreciation right now. Andrew Brill 34:23 Last question, Dave, what are some of the pitfalls if someone wanted to get into this, and you got into it with some other people and so that, I guess, you manage that risk a little bit. But what are some of the pitfalls someone has to look out for either purchasing their first property or saying, you know, I want to get into this, but I don't know what I'm doing. Unknown Speaker 34:45 I think the biggest risk in real estate investing is overly optimistic assumptions. When you analyze a deal, as I was saying, it's pretty easy to analyze a deal. You figure out what the rent is, what the expenses are. A lot of people get. Really excited and see, oh, during the pandemic, rents went up 10% a year. That was very anomalous. It's probably never gonna happen again. It may. But who knows? I wouldn't count on it. So what I advise people to do is rely on historical growth rates. So that deal analysis is probably the main pitfall. The second one is people biting off more than they can chew. I think it's really tempting to look at a fixer upper and say, Oh, it's so cheap. Real Estate, like most markets, are pretty efficient, you know? And so if there's a if there is a deal that's cheap, there's a reason for it, and it probably means that there's a complicated and potentially expensive renovation in store. If you're experienced at real estate, fantastic way to make money. But I recommend for people, just try and hit a single right away, like you don't need to make a ton of money. I would recommend, I mean, just getting an average rental property is usually going to get you 10, 12, 14% annualized return. So it's still better than the traditional, you know, the average of equities, of course, you're working for that. So you have to decide if that, you know, time commitment is worth it to you, but to me, getting that 12% 13% return on your first deal is a learning experience. You know, you got, you're an entrepreneur, you got to learn your business, then you can take bigger swings in the long run. But at first, just buy something simple, learn the business, and start building your network of other investors, of contractors who you can rely on. Once you have that in place, that's when you can start taking the bigger swings. Andrew Brill 36:33 you ever run into a situation where, or I guess you know, someone's getting involved in in real estate investing, they find a great property, good property. Now they want to buy another one, but they have a mortgage out on that first one, and their regular job is doesn't qualify them to get another mortgage. So how do you combat like, okay, you know what the bank says? I'm over leveraged, or I'm leveraged to the point where I can't get another mortgage. Unknown Speaker 37:02 There are two great strategies. One is just partner. You know, sometimes you can find another investor who wants to partner on a deal. I might have a better or, you know, a healthier debt to income ratio where they can qualify. The second is that there are more different types of loan products that won't look at your personal credit so this is similar to how commercial real estate is financed, where instead of looking at your individual credit worthiness, you look at the quality of the deal. That's how you know, if you were to buy a retail property, an office property, the bank would look at you. They're called debt service coverage ratio loans, or DSCR loans, and they'll basically look at your underwriting and say, okay, Dave, this is a good deal, like you've found a property that will cash flow, and we, because of that, feel confident that you're gonna be able to pay your debt service, and if you can't, we're gonna be able to take over a cash flowing asset from You. And these do tend to be a little bit more expensive in terms of interest rates than a conventional loan. But as an investor, you know this is a business, and eventually you're going to have to get away from conventional financing and owner occupied financing. It's just inevitable. So it is a good option. I would just advise people to look at the terms. Sometimes there are balloon payments or prepayment penalties. You know, the loans can get a little more complicated. There's nothing wrong with that, but make sure you fully understand the terms of those loans before you sign anything. Andrew Brill 38:33 Would you set up a separate corporate? I know I said to my last question, but I keep asking questions. Would you set up an LLC or a separate corporation to keep all your real estate in one place, as opposed to having it all in your name? Unknown Speaker 38:48 This is a big debate in real estate, because find the bigger pockets forms full of this question. I'll just tell you. What I do. I put every property in a different LLC. I don't know if I'm just paranoid. I like to keep each property in its own LLC. So if anyone, you know, there's just limits liability, the maximum you could lose on any one lawsuit would be what's contained in that one LLC. I also just think for reporting purposes, it's helpful because, you know, I have some deals with one partner, another deals with another partner, and I just keep it all separate. It does create a lot of different bank accounts. So if that that gets complicated, but usually, when you reach a scale where that gets complicated, you're able to find, you know, hire a bookkeeper and a CPA to help you manage that. That's what I do. Andrew Brill 39:35 thanks so much for joining me. Other than bigger pockets, where else can we find? You know, the bigger pockets.com bigger pockets podcast, can we find you on social media where we can get tips and things that you're up to? Unknown Speaker 39:47 Sure? Yeah, I am pretty active on Instagram, where you can find me at the data Deli. I am a sandwich enthusiast, being from New York and I. You can find I frequently talk there just about real estate tactics, but also a lot about economics and Mac and how macroeconomics changed the housing market. Andrew Brill 40:09 And where do we find if we wanted advice or become part of the bigger pockets community? Where do we how do we do that? Unknown Speaker 40:16 Just go to bigger pockets.com. You can join the community for free. As I said, we have over 3 million active and aspiring investors there. It's a super helpful community. There are very active forums. People just trying to help each other build long term wealth through real estate. Andrew Brill 40:31 Are there people there looking for partners? Unknown Speaker 40:34 Oh, yeah, all the time. Yeah, it's there's tons of people looking for partnerships. That happens all the time. We do a lot of live events, you can great place to network. And so recommend you. You check out bigger pockets.com. We have pretty much everything people need to get started. Andrew Brill 40:50 Awesome. Dave, thanks so much for joining me. I really appreciate it. And if anybody is looking for a way to get into real estate, bigger pockets will get you on the right road to helping you figure that out. Dave Meyer 41:03 Thank you so much for having me. I appreciate it. Andrew Brill 41:06 That's a wrap on another discussion here on wealthion. Thank you for joining us. If you need help being financially resilient, please head over to our wealthion.com sign up for a free, no obligation portfolio review with one of our registered investment advisors, and remember to follow us on social media for the latest news and information to help you invest wisely. And if you could like and subscribe to the channel, we greatly appreciate it. Don't forget to hit the notification bell so you can find out when we post new videos to the channel. Thanks again for watching until next time. Stay informed. 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