All right, so here are the bigger pockets we always talk about the importance of analyzing deals before you get into real estate or before you buy a property. That's why we're announcing the all you can eat dinner. I know the all you can analyze a weekend. So this weekend, only from March 12th to March 14th, you get unlimited access to our rental property calculator and the property insights data that rental down the street. You keep and analyze it. That house have you been looking, thinking about doing analyze it all for free.

No limits, no credit card required, no commitment. This is the best way to not only find high quality data on properties and markets you're looking into, but also a way for you to analyze your profits easily, all for free. Plus, be sure to share your analysis on the bigger pockets forums for a chance to win a one on one call with real estate rookie podcast hosts Ashley Care and Tony J. Robinson. Now get out there and analyze some deals.

Again, that's March 12th through March 14th.

This is the Bigger Pockets podcast show 450.

Making this one decision intelligently can either set you up to make investing and growing your portfolio an automatic item that never occurs year after year. Or it can be an immense anchor that makes it almost impossible to get started five, six years of savings. So that's the first part. If you haven't bought your first home and you're doing that, that's number one.

You're listening to bigger markets. Radio, simplifying real estate for investors, large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from bigger pockets. Dotcom, your home for real estate, investing online.

What's going on here when it's Brendan Turner, host of the Bigger Pockets podcast here with my co-host, Mr. David. It's definitely not a first time homebuyer green. What's up, man?

How are you doing? That's a nice name. I like it. You're picking up on my game here and you're not who I am. I'm working at it.

You know, I like the way you end every show. I'm going to start the show that way as much as I can think about it.

But the reason I brought that up today, that'll happen for one episode.

You'll know that I know it's too much pressure, but it has a lot of pressure to come up with nicknames. What I need is I need the world who listen to the show to give me some nickname ideas for David Greene. You can put those on my Instagram D.M. Slide into my DMS and give me some nicknames for David Greene. My Instagram is Beardie Brand, so Beard of the Y. Let me know what nicknames you got for David. But that said, today's show is not about nicknames.

Today's show is about first time home buying, but not in the way you might think. So here's the deal. Bigger Pockets is released, a new book. It's called A First Time Homebuyer. But it's not just geared towards people who are first time home buyers. The idea is really like, what's a beginner's guide to, like, buying real estate? Like, what are all the things? Like what is title insurance? What are the how does that work?

And then even more importantly is how should real estate figure into a person's overall life?

Now, this book is written by two people you probably know, Scott Trenched, Mindy Jensen. They're both host of the Bigger Pockets Money podcast. They've been on the show before. They've even been guest hosts after Josh departed from the show. And we were looking for David. And so they're very familiar with bigger pockets in the world. So they this interview was just phenomenal. We sat down with them and they're so smart. These two guys like Scott Mindy are so smart.

So today's show is just like we cover a ton of stuff. But specifically, make sure you listen for Scott's like short term, mid-term and long term outlook for real estate in general, like the American real estate.

Really, really powerful stuff there. We talk a lot about how going for more expensive properties may or may not set you up for a strong financial position for life.

You'll hear about our kind of debate there.

But our discussion over that, Scott, goes into five tips for finding a good deal. And that is probably like one of the most important things you're going to hear this year. Like this is what you need to do to find good deals in today's market. Whether you're first time homebuyer trying to buy a five million unit apartment complex, I don't care anything in between. His idea of calmly acting aggressively is really good. And then just there's just so much in this interview.

You guys are gonna love it.

So without giving away the whole interview, let's get to today's quick, very simple quick tip today is go pick up a copy of first time homebuyer whether you want to read it for yourself or you want to buy it as a gift for somebody else.

You can get by with a bigger package that comes home buyer book, that's home buyer book. And the book launches on March 8th and it will be everywhere else, like audible Amazon later in the month, towards the end of the month. But right now it's only available on bigger pockets. Again, bigger pockets, I confess home buy a book.

That's it. So that's all I got this episode really good because people get a lot of different perspectives on real estate. I think all four of us really have a unique flavor on the way that we view it and everyone kind of pitch their flavor in. And we had a little bit of a real estate casserole.

Yeah, I love it. Real estate casserole with Scott, Mindy and David and Brandon.

But before we get to that, let's hear from today's show sponsors. Managing rental properties can be tough, stressful and caused you to lose sleep at night.

Did you know it could be easy with rent ready, rent ready is the perfect property management software that can help you fill your vacancies faster, find better tenants and collect rent more easily and even better, maybe even get a good night's sleep with rent ready, you get one flat affordable price for all your units and tenants.

That means they're not going to charge you more. As you grow, the price stays the same. Whether you have three doors, four doors or 50 doors. It's also an easy number to work into your cash flow. And we hope this puts a little spring in your step. They're giving away our listeners 50 percent off any rent ready plan using our special code BPE Spring, get fifty percent of any rent ready plan when you sign up using our code BPE Spring at rent ready dotcom.

That's rent ready. Oriente R.E.D. I dotcom using code BPE Spring as BPE like bigger pockets spring like the season for fifty percent off any rent ready plan.

Today's podcast is brought to you by one of my favorite stores, the Home Depot and Home Depot Pro. For more than 60 years, they've helped pros do more by providing professional grade products and innovative business solutions that address the challenges you face every day, making it easier to manage your business, find efficiencies and improve your bottom line.

With more than twenty one hundred stores in the U.S., Canada and Mexico, you can access more than a million products and dedicated services for today's busy pro there your single source supply house for the products and services you use every day. The know how you deserve. When tough calls come in and the technology you need to keep your business moving forward. Unlock exclusive benefits with extra. The Home Depot's free loyalty program built just for pros. Enjoy exclusive access to timesaving business tools and money saving programs.

Save time, save money and get rewarded. Join today at Home Depot Dotcom such pro extra that's Home Depot dotcom slash pro x t are a.

And now, without further ado, let's jump into this interview with Scott Trenched, CEO of Bigger Pockets, and of course, the wonderful Mindy Jensen, agent, host of the Money podcast and all around Awesome Gal. Let's get to it.

Scott Tregg, Mindy Jensen, welcome back to the Bigger Pockets podcast. Each of you former guest hosts here on the show. Now you're your guests, which is pretty exciting. What's up, guys? How's it going? Thanks for having us.

I'm super excited to be back. I haven't seen you in a hundred years. I know it actually has been a while.

covid put a delay to my regular trips to Denver, but didn't stop David Greene here from Travel in the World and hanging out in Mexico. What's up, David?

What's going on, guys? Yeah, I mean, Cabo San Lucas, it's my first time here and it's pretty awesome.

Yeah. Sometimes you got to take a vacation from Maui, I guess. Right? I don't like to cut myself on the back.

It's been very hard other than I think I just realized for the first half of my life that when people say they're going to Cabo and Cabo San Lucas like that, they're the same thing. Is that true? I think and I've never realized that was the same thing. I went to different cities, but I just put that two and two together that that was the same thing. Like like I'm going to New York versus New York City. That's apparently a shortened nickname anyway.

Well, rather than talking about my intelligence or lack thereof, let's get into the Scott Mini. Your guys is the last few years. So for those who do not know you, I want to start with this one. Scott, obviously, you know you know, everyone knows Scott trans. Everyone knows me, Jensen. But for those who don't, who are you? What's your real estate strategy, BEN? And then I want to move in to talking about the market a little bit.

But let's start with that. We'll start with Mindy. Ladies first, Mindy, who are you and what do you do in real estate?

My name is Mindy Jensen. I do a lot in real estate. I am primarily a live in Flipper, which means I buy a house that is very unattractive. I move into it. I live in it as my primary residence while fixing it up. So I live in a construction zone for two years and then I sell it and make massive tax free cash when I sell it.

I am also a real estate agent in Colorado and I am the community manager for Bigger Pockets and the co-host of the Bigger Pockets Money podcast. With me, as always, is my illustrious co-host, Scott Trench.

Thanks, Mandy, for the illuminating intro there. I'm I'm Scott Trench. I'm the CEO of Bigger Pockets. I, I'm an investor here in Denver, Colorado. I've got eight units, about one point six, one point seven million in assets within that portfolio. And the last couple of years have been a little quiet for me on the acquisition front in my personal portfolio, I have been spending more of that time investing in syndications. And last year I really set up property management, rehabbed and tackled a bit of maintenance that I had been deferring.

I guess I'm the CEO and I've been deferring maintenance on a couple of my properties and finally took care of that this year. And so I was able to reset them, do a big refinance, take a lot of cash out. Now, I'm back into acquisition mode looking for that next deal.

That's awesome, guys. Well, speaking of next deal, it's been a crazy last year, obviously, with the real estate market covid doing some crazy things and things that I don't think any of us really necessarily expected. I sure didn't. I was. Worry that we're going to see a crash or something happen and all of a sudden instead it's like somebody shot a bunch of steroids into the real estate market the last six months. Why do you think real estate has gotten so competitive?

And I don't even call it hot? I guess the best word I can use for it. The market's gotten hot almost everywhere in the country. Why is that? And then I'll ask, where do you think it's headed? But let's start with that one. Mindy, why do you think it's gotten so crazy lately?

I think there are a bunch of factors, of course, covid I think a lot of people who were considering selling but maybe didn't have to sell has decided that I'm not going to have random people traipsing through my house, bringing their covid into my house, and then I catch it and maybe die. So I think there's a shortage of sales just based on the market or the pandemic itself. I think there are ridiculously low interest rates. I know they're ridiculously low interest rates that are fueling people who I can upgrade to a better house.

And we didn't have anybody building houses from 2008 to, what, 2012 13, 14? I mean, in my area, they're just starting to do these massive builds again. And it takes time. And there's people that are still moving here, but there's nothing to buy. So prices just keep going up. I just sold a house on Friday for more money than I thought was ever possible.

I keep hearing that story over and over. Scott, what do you think?

Yeah, I would agree. I think the first the biggest lever is going to be interest rates. The payment matters more than the price to most homebuyers. And frankly, most landlords like all that, like 50 percent rule. Your expenses are not magically changing, you know, in those to those types of things based on interest rates. So if your interest rate if your your payment goes down, you can afford to buy it. You can pay more for the same property and achieve this the same or greater cash flow.

So I think that interest rates are the number one biggest lever. And then the second one is going to be the stimulus and just the injection of cash and liquidity into the economy in general. I think that last year a lot of people weren't spending as much money as they typically would, at least those who would be potential competitors of yours when buying homes and rental properties. And so people are now in a position to buy with liquidity and low interest rates.

So I think fundamentally that's what's driving that. And then I also think to many great point. The other factors are all many of them are also fueling this. There's been an exodus from apartments to single family homes. Single family rents have gone up. Apartment rents have fallen over the last year. Single family housing prices have exploded by significantly more. I think it was like single family rents went up by three or four percent and prices went up eight, nine percent over the year.

I think that's that's showing a fuel in demand from apartments to single family homes as rentals, but an even greater preference to buy, I think, fueled by that interest rate shift. So, you know, other things, lack of housing starts, continued population growth and then inflation in expectation of inflation in general are all, you know, fueling real estate right now. Who knows how long that will continue, but it hasn't been a bad year for those who held real estate going into twenty twenty.

Well, I was hoping you would know. You don't know. I mean, come on, Theo. Bigger pockets doesn't know what the future holds for real estate. I don't know, man. Well, I think we're all good. No, but really reality.

What if you had to guess, what do you see twenty, twenty one looking like for real estate.

I guess there's two, three set three buckets long term. I believe fundamentally that if I hold real estate and invest consistently but not aggressively over the long run, that I'm going to build meaningful wealth in real estate. And so that's my fundamental approach in the short run. My guess in twenty twenty one is that we're going to see another year of big growth. You know, I looked at this this data said a while back that suggested that, you know, many markets around the country are way overpriced at a five percent interest rate, but way underpriced at a two point eight percent interest rate.

Again, the payment matters more than the price for many homebuyers. So, you know, for me, that suggests that given the you know, I don't think the Biden administration is going to not inject money into the economy and create liquidity for lots of ordinary Americans. So I think that that there's a good chance that we see significant price appreciation in twenty, twenty one. What will happen over three to five to seven years? Will there be a correction?

I mean, if interest rates rise, that could be that's certainly a huge threat to real estate investors at some point. But that, you know, the Fed seems to be signaling a two or three years of low interest rates. And then you always wonder if and when those interest rates ever rise, if inflation, the real estate investors friend does not kick in to a certain degree and keep property prices and rents afloat there. So I think there's a lot of things to worry about there.

And, you know, your source and the CEO have bigger pockets. So I have a bias towards real estate investing. But that's that's kind of my take on the current situation.

Well, I do think that the market is going to continue to go insane. I had three real estate closings on Friday, which is pretty crazy for me. And I'm showing no signs of stopping. Every property that comes on the market is instantly under control. In a bidding war and the people that are losing out now are continuing to make offers down the road. All these people that need a house in February, they can't get it in February are offering in March and April, in May and June.

And it's just going to keep pushing out. And you can't build a house in a day unless you're on whatever that TV show is, where they come and fix all your houses for free.

But you can't build a house in a day. So all of these houses are going to take time and the existing houses aren't being sold unless the people have to move. So because there's I mean, that's another thing. They're not able to find a house. I'm not going to sell a house because I have no place to go. So I just I don't see 20, 21 slowing down very much. Maybe at the end of the year, like December 31st, we might have a bit of a slowdown.

But then January comes and, you know, like Scott said, there's all these people that have all this money that they were supposed to spend in 2020 and they couldn't go anywhere or do anything. So they didn't spend it and it's just burning a hole in their pocket. So they're buying something. I think there's going to be a lot of pent up demand for at least the rest of this year.

I'm going to throw this that you, David, to and a second, because I know you got a lot of insight in the market, but I've I've said this from the beginning that I think that, you know, real estate is very heavily geared by fear. And do people feel confident in owning real estate or not? Right. If everyone suddenly afraid of owning real estate because they thought it was going to collapse, like, I think we would have a massive problem.

So as long as consumer confidence in housing and real estate in general is moving up into the right, I think we'll probably continue. This will happen in 2008. Largely was. I mean, besides the obviously there was a lot of foundational things that were wrong, but all of a sudden everyone got afraid of real estate. And that's why everyone I mean, everyone said real estate was a horrible investment back in 08. And it really was they weren't wrong.

Everything was completely overpriced. But right now, I think a lot of our fundamentals are still pretty strong. So crazy. All right.

So, David, what do you think as far as what the market's going to do? I think there's more variables right now than there ever has been in my lifetime and maybe in the history of real estate. Like Scott was saying, interest rates affect home affordability a ton. If rates go from two point eight to five point eight, the what a home would sell for is going to be drastically changed. And then we don't know, is the Fed going to print more money or are they going to stop printing money?

I think that you will actually drive yourself crazy trying to figure this out, because I asked myself, why is there so much demand like people have to be moving from somewhere to go somewhere else? So wouldn't it always be the same? But many made a great point. They're not building more houses. We haven't built houses in a very long time. It's getting difficult to do that. So I tend to say rather than go crazy trying to anticipate what's going to happen, focus on the things you can't control, like defense.

If you have yourself in a strong financial position personally, you can you don't have to worry about what the market's going to do. You can give yourself that really long time line to make sure that that you are safe in the market performs like it does over time. And I think that'd be a great way to kind of throw that back to Scott, maybe and ask them what some advice that they have for people protecting themselves so that they can play the real estate game the long way.

You just said it. Their financial foundation that you're investing from is the key piece. And like I said, like, my strategy is to invest consistently but not aggressively in real estate over a long period of time. What do you mean by that?

That means that I'm not I'm not leveraging to the point where I can't sustain the payments. I'm not I'm not using up all of my liquid position at any one given moment in time where I'm at the mercy of a bad month or a major rehab or those types of things. I'm investing in what is a very sustainable approach for me with a property or major investment every year or two that I can then sustain over a twenty, thirty year period. And I believe that that isn't going to achieve a really strong compound annual growth rate for me over time.

And allow me to weather the inevitable dips. I'm going to experience a problem or a bad market over the course of a 30 to 50 year investing career. So I am at all times prepared for that downturn with my financial position. And what does that financial position? I save a ton of money every month and it's a it's a flywheel. So at first you save a few hundred, then you save, you know, 800, 900 and a thousand and fifteen hundred than two thousand.

And that's a slow compounding of time. As you buy a property, add it to your cash flow, keep your expenses low, earn more income from your job, and then slowly compound that. I keep a large reserve that I add to with each additional property purchase. I put down a reasonable down payment and finance with a conservative fixed 30 year mortgage on each one of my properties. And, you know, again, just kind of keep the ball rolling.

Each deal has the capacity and is intended to accelerate my financial position, but no one deal can ruin me either. So I think that's the that's the strength position for me. I think, David, you have a very similar approach with what you do.

As far as my investing strategy.

It well, as far as your as far as your capitalization, I believe you always make sure you have great equity in your property and it's really well stabilized before pulling out the cash and borrowing again and build the next thing. You make sure you have strong cash flows from your other business lines to support that. And you have a diversified, strong portfolio that you intend to keep for the very long run.

That's exactly right. And that's because I got tired of trying to anticipate. All these variables that I never could control when I realized there's two things that cause you to lose money in real estate, you didn't have enough in reserves, so you couldn't weather a storm or a mistake you didn't see coming or you didn't have enough cash flow. You were more money was going out that was coming in. So if you put a lot of money aside and you make sure more is going out, that is coming in.

All of the fears and the worry that stopped people from taking action sort of just go away. And it's also empowering because we control that. We control what we spend. And to a large degree, we control what we make by the job that we go take or the risk that we go take or the way that we perform. Now, there's a lot of psychology behind all that, but still that's within our power. So, yes, that's exactly right.

And part of what I'm really excited to hear is what advice you guys have for someone who wants to get in this game, who agrees with what we're saying, but they're just afraid of taking that first step or they don't want to take it wrong.

Don't take it wrong. I mean, make us good that in the end. You know what? I think a lot of people and David, I greatly respect you, but I have to disagree. This is not a game. If you are investing in real estate, it isn't a game because a game you can lose and you don't want to lose this game. This is an investment and you need to approach it as a large amount of your money that you're putting into a property.

Even if it isn't your money, it's somebody's money. And you need to be able to protect that money. So I could own a whole lot more real estate than I currently do because nothing currently makes sense. It doesn't make financial sense to buy a property that then doesn't cash flow. I can't find anything right now that is cash flowing. So I'm choosing not to jump into this game. I hate I'm sorry. That's a that's a sore subject for me because so many people said, oh, I want to get into the real estate game like you are going to lose money because you aren't doing it right.

And I know you do it right, David. So I'm not saying you, but let's talk about that.

What are some of the things that you see people doing wrong when they're trying to get into real estate that we can remedy now? Oh, No.

One, erase their map. Oh, the numbers don't work. Well, let me just fudge this little number here. Let me change this number there. Let me you know, it doesn't quite work, but I know there's going to be appreciation. How do you know Scott is talking about appreciation and he's making a very intelligent assumption based on things that he's read. He's not just guessing that there might be appreciation. I mean, it's kind of a safe bet to think that there's going to be appreciation in the Denver market because everybody and their mother is moving here.

But that doesn't mean that you can guarantee ten percent appreciation if you buy a property in Denver. So look at what you think you can get. And, oh, it's six to eight percent. Or what did you say that was just that's got six to eight percent in Denver?

Well, that's what it's been historically for the last twenty years, is like five, six, seven percent. The yeah. I mean, with appreciation, you have to you have to make a number of assumptions. We can get into that kind of stuff. There's two ways, right? There's whatever the market delivers to you, the buy and pray portion of real estate investing. And then there's the portion that you deliver to the market, which is the forced depreciation component of that.

The more you can benefit from both, I think is important. I think it's foolish to buy and pray, but it's also foolish to ignore the fact that, hey, the expectation in Denver for good reason is that prices will appreciate and so will rents and that will have an impact on your PNL that you can't depend on. You can't have make or break your portfolio, but you also can't ignore. Otherwise you're going to get squeezed out and potentially miss out on a chance to build wealth.

So I think there's lots of lots of components with that. But I think the fundamental thing is not having a long term approach, understanding your exit options when you go into any deal and buying from a position of financial strength every time that you invest in real estate.

What I was getting at here was Scott said five to seven. OK, great, if you are counting on seven, but it's only five, your numbers are going to be screwed up. If historically it has been between five and seven, count on five. If you come back with seven, you just won the game. But you are making a conservative assumption and I think there's a lot of people out there making very aggressive assumptions. Oh, well, the market went up five percent last month.

It'll continue to do that forever. Twenty eight says no, it won't, 100 percent agreed.

I would also encourage people as they're thinking about things like appreciation and you guys on this as well. It's very easy. And this goes to a miniseries or math thing. It's very easy to choose appreciation periods.

And I would even say this about like a lot of years of life.

But to pick a time line that makes it look very favorable and be like, wow, this market's really growing heated up. If you were like, for example, you're like, wow, look at from twenty twelve to twenty twenty the real estate markets done, blah, blah, blah. I'm like, well yeah of course it has, because that was like the bottom of the markets at the top of the market. And so you'll start noticing this with a lot of like for example, investment company is syndications.

Whatever is when people are trying to sell you something, they're choosing timeline's of which to talk about whatever that thing is.

And so it's just something to be aware of is that you're picking more objective data when you're making decisions on like where rents going up or what's the market improving. Versus like, you know, I would look at it like like the 20 years, I think that's a pretty good 20 years is probably a pretty long enough to encompass a couple recessions, maybe, you know, 20, 30 years. But even that doesn't say anything about the future. Like Denver could have had a big bump and then it just stops.

I don't think it will. Obviously, there's a lot of other things pointing to that.

But just in general, is banking on appreciation can be dangerous anyway.

And speaking of appreciation, I'm curious, you know, we're going to talk to you in a minute about how like buying your first house or buying a primary residence. I know you guys just wrote a book on that. Who should rely more on appreciation versus cash flow? I'm curious of your guys. Is opinion that I'm going to fire that at you as well. David, I want to start with Mindy. Mindy, appreciation versus cash flow in real estate investors.

What's important, don't diminish one over the other. However, I think and this is a personal opinion, but I'm right about a lot of things, so I think it's a good one. I think you should invest for cash flow because you can't predict appreciation. And in the Colorado area, in the Denver area, I've lived here since 2012. I have seen it go up, but it could flatten out. And I just sold a house. I got a lot of appreciation, but I forced that appreciation.

I would not have realized so much appreciation if I hadn't forced it. And yes, there would be still appreciation, but nobody could have predicted this ridiculous appreciation that we've had in the past eight years or even in the past eight weeks.

I mean, houses are going up ridiculously right now because there's no demand. I'm sorry. There's no supply. There's plenty of demand. There's no supply. So I think that if you don't invest for cash flow, you are buying yourself a problem, you're buying yourself a job. And there are people in the bigger pockets forums you talk about, oh, well, I bought this house and it doesn't cash flow, but the appreciation is going to be great.

You can't know that. You can guess you can make an intelligent assumption, but you can't guess.

And I think a lot of people who do that are also aggressively instead of conservatively guessing their their appreciation amount.

Yeah, I think it depends on your goals. Right. My goal is to sustain sustainably, invest consistently, but not aggressively over a very long period of time. And so within that context of that goal, it makes sense to go after the long the best average long term appreciation in both rents and property values that I can find. And then to find as much cash flow as I possibly can to to alleviate my risk over that period, I believe that will generate more wealth and more freedom over time than than approach.

If my goal were to race towards a spreadsheet model of financial freedom as aggressively as possible, I would completely have a different approach and I'd begin investing for cash flow and likely a completely different market and different set of circumstances.

I had a buddy one time asked me and I'm going to say, is that you to David in a second? But everybody once asked me and I think I said years ago on the podcast, but he said, should I invest in this property in San Diego? And I looked at the numbers and I'm like, dude, you're going to lose money on this every month. It's a guy I know, but should I invest in this? And it was like six hundred thousand dollars single family house that would like guaranteed lose money.

The mortgage didn't even get covered by the buy the rent. And now he's a millionaire. He was already earning over a million, several million dollars a year in revenue from a very stable business that was that he owned that was very stable. And so like he's I was like, yeah, honestly, I don't think that's a bad choice. And I bet today that property is probably worth, you know, three years ago he asked me that probably probably worth over a million at this point.

And so I told him, yeah, you know, you're one of the few people I would say that. Yeah, you could take that gamble. It is a complete gamble.

He's making no cash flow, but ten, 20 years down the road, if he bought a property for six hundred in a market like that and had no problem holding onto it, it's one of the all I'm saying is it's one of those few cases in life where it illustrates that it's your position dictates the the game that you play, like the way that you play this, to use a phrase that he hates it because, like, I shouldn't have done that at that point in my life, like I needed the cash flow.

You may not have been there, David may not have been there. Or maybe you are so listening to people, any of us. I mean, myself included. David, our books don't matter. Like, you have to like look at this thing with some self awareness and say, look, where am I at right now in life? And I'm am I eraser mathie my way into getting a deal? Or legitimately, can I afford the extra risk of a of a deal that doesn't cash flow or doesn't cash flow much?

So, David, what do you think? A cash flow appreciation? How should an investor consider those two and and the play between them?

I think you made the point that I would make as well. It depends on the person. It depends on, like Scott mentioned, the goals. But also Minnies advice is really good here, too, because many people listen to this and hear what Brandon and David buy. Six hundred thousand dollar San Diego properties that don't cash flow. So that's a strategy that works. But they don't have the capital coming in or the reserves that we would have to be in a position to do that.

And that's what I really want to stress. It's not the same formula for everybody, not every football team plays the same way there seems it can take shots down the field that are really big, but they know if we don't get this, we have a really good chance to still pick it up a first down through the running game or whatever else that we're doing. I tend to think that bigger wealth is created through appreciation. However, if you don't last to get that appreciation, doesn't do anything for you, it's kind of a big shot down the field.

So it's not a one size fits all situation. I think that in general, for most people's paths, you start off with cash flow because that you are not going to lose anything that way and it is going to get you momentum going and you will know when it's the right time to go for some of those bigger plays where maybe for some people you actually are losing money every month. But it's OK because over the long term, here's the thing about appreciation that we're not mentioning, though.

It's not like if your house goes up one hundred thousand dollars in three years, you just made one hundred thousand dollars. You have to sell it if you want to receive that. And then there's closing costs that are also associated with that. So it's easy to fool yourself into thinking you made big wealth and like that becomes a game. Oh, look at all my equity that I created. It can go away in a second. We all saw that happen in 2010.

So when you're doing this, you actually have to understand what you've got. You've got equity that's not the same as cash. If you want to turn it into cash, there's going to be some costs associated and those costs are really significant. So, Scott, many I want to throw this back to you and ask you guys, where have you found is the sweet spot where it makes sense to sell a property and move on to the next one?

Well, I don't think you have to sell the property. I think you you're talking about a return on equity, right. That's fundamentally getting to here. And when you like and to put it in the simplest terms, I have a hundred thousand dollar house. If the house goes up by if I paid cash for the house, I have no debt on it and the house goes up by three percent. I have made a three percent return. If I have twenty thousand dollars in equity on the house and the house goes up by three percent, I have made a 15 percent three times five return on equity.

And you're absolutely right. That will be diminished by closing costs at a reasonably kind of percentage based like like like ratio over time, as the property appreciates.

When does it begin to to decline? I mean, it's a bell curve, right?

I get more leverage when I have more I get more leverage and I have more leverage.

Right. I want to have more debt on the property. And as I pay down that debt and my appreciation boosts boost the value of the property, my debt to equity declines. And so as I'm riding that curve down, my return on equity is falling each year on average. If things are going well and I have got a good problem, I've got a lot of wealth and I'm earning a lousy return. And so, again, I can either sell the property in 10, 30, one exchange it, or I can refinance the property.

Right. And so refinancing the property will allow me to do the same thing and I can deploy that to buy more, more, more property. So that's exactly what I did. I had this problem. I remodeled my properties. I made them as valuable as I possibly could this last year. And I got them appraised and then pulled out as much cash as I could with which to make my next investments. If I'd own the properties for a longer period of time, I might have opted differently and sold them at ten thirty one exchange them.

Reason being is because you begin to lose some of the the advantages of depreciation and accelerated depreciation on certain components of the the property, which makes it more advantageous if you own the property for like 15, 20, 25 years to just sell and start it over again rather than cash out reify.

You know, one way to quickly illustrate this is a real, real life property I have right now. I have a property with two hundred thousand dollars of equity in it. I'm just sitting there and that's like after telling a realtor fees and everything, if I were to sell this property, I would clear about two hundred thousand dollars that I could put into another investment.

I'm making about a thousand dollars a month in cash from this property, which is twelve thousand dollars a year. So if you were to look at that and say, OK, I'm making twelve thousand a year on a two hundred thousand dollars of equity or two hundred on our investment, it's a six percent return because twelve thousand divided by two hundred thousand equals six percent. I'm basically making six percent of my money right now.

Now if I were to find another and it's in a market that I do not believe is going to appreciate, its like at least not to a great degree. So there's no like hold out for like it might go way up in the future.

It's just like some, you know, western Washington, Aberdeen, Washington market. So what I'm going to do is I'm going to sell this property because I'm like, I can do better than six percent. I mean, I could dump my money to open door capital, make my own company and get higher than six percent. So, like, I'm going to take that and we call recapitalization or redeploy that. I'm going to sell that property and then I'm going to put that money somewhere where I can get maybe an eight percent return or a nine percent or 10 percent or whatever that return is.

I'm going to take that money elsewhere because my return on equity is really low. I've got other properties probably making a two percent, three percent return on equity right now, which is a good time to to know to sell it.

So, hey, let's take a quick break from this episode. We'll continue in just a moment. But first, let's hear a word from our sponsors.

You know, real estate investing has the potential to be many things that could be rewarding, delivering long term growth and cash flow. It could also be time consuming. Managing tenants down payments, property managers, the. Ultimately, though, it could be easier, or at least that's what the team at fundrise believes fundrise is an investment platform designed to make real estate investing simpler, smarter and easier. With investments in more than 200 properties collectively worth more than four point nine billion dollars fundraises revolutionizing the way you invest in real estate, giving you the opportunity to own a professionally managed portfolio of high quality private real estate.

Whether you're new to investing or you've been investing in real estate for decades, fundrise has a portfolio that meets your goals and what they're easy to use. Website and mobile app. You can track your performance and watch as properties across the country are acquired, improved and operated via dynamic asset updates, giving you all the benefits of owning real estate without the hassle of managing it. So if you're ready to unlock a new level of real estate diversification, join their community of over one hundred and fifty thousand investors by visiting fundrise dotcom.

Such bigger pockets, that's few. And r i. S e dotcom slash bigger pockets to have your first three months of advisory fees waived. Again, that's fundrise dotcom slash bigger pockets. If you have 30 minutes free, you never have to worry about a break in at home ever again. That is how quick and easy it is to set up a security system with simply safe. It's the kind of thing that is so easy to do. You can do it during a Netflix binge, watching the game or listening to a certain podcast.

I personally love simply because I don't like to be locked into long term contracts or spend a bunch of time and money setting things up. Simply say it is incredibly easy to customize for your home. Just go to simply safe dotcom such pockets. You can easily choose the exact sensors you need or get help from one of their experts. And we'll get to your house in about a week, which means by this time next week, you and your whole family can go to bed knowing your home is being guarded.

It's easy to assume everyone in your house already feels safe, but they might not. And it's worthwhile to talk about and simply save is a small, easy step to make sure everyone feels safe at home. Going to simply safe dotcom stocks pockets today to customize your system and get a free security camera that's simply safe, simply safe dotcom pockets.

With that said, I want to pivot this slightly because this is something that, you know, we wanted to make sure that we covered on today's show. You guys wrote a book, right? And this does this does really I'm going to bring this right back to this topic here in a moment. This idea of like the equity that we build an appreciation because, you know, a lot of people here that are listening to show, I guess half the people here own a house already.

They already own their primary residence. So they might be thinking, well, I don't really want to talk about buying your first house because, you know, I've already gone past that. So the first thing I want to get out out of the way is why should somebody keep listening to this episode as we talk about single family houses and further in your position because of that, why should they listen?

Why is this important? Well, I think that the housing decision is the largest financial decision made in middle class America today, and it makes or breaks your ability to build wealth in asset classes like real estate or other aftertax vehicles. In a general sense, you know that the typical American first time home purchase is putting all or most of their lifetime accumulated liquidity down into the property in the form of the down payment and assuming a high fixed monthly cash outlay in the form of their mortgage and assuming the maintenance and capex that associated with maintaining the home.

And so making this one decision intelligently can either set you up to make investing and growing your portfolio an automatic item that occurs year that occurs year after year.

Or it can be an immense anchor that makes it almost impossible to get started. Five, six years of savings. So that's the first part. If you haven't bought your first home and are doing that, that's number one. Number two is, you know, in many relationships, one spouse is the eager listener of the bigger pockets real estate podcast and the other rolls their eyes and is not very interested. And so perhaps the conversation we're about to have could save you as the spouse that is particularly interested in investing several hundred thousand dollars with which to you could redeploy in real estate over a few years by making a smarter home purchase decision.

And third, if none of that applies to you, maybe it'll help you with your next home purchase. Or you can deliver this to somebody who is about to make this decision for themselves and may be able to save them a big chunk of money as well.

Let's put it this all the time, like you've been in Maui, people on vacation here a lot. And then they see me out on the street or whenever I'm at Starbucks and they'll come up and like, it will always be a couple, right? Because I'm always there a couple destination. And the one couple will be like, hey, you know, Brandon, nice to meet you, Bob. We talk for a second and then they'll always turn to their spouse or their other.

And they say, this is the guy that I was telling you about that lives here in Maui that wrote that book. And every time the reaction is the same.

Wow, honey, great. Good for you. I like to feel like I don't care if this guy is not that interesting and you're like, try to talk to him about like we're on vacation.

Stop talking about real estate. So anyway, totally, totally a thing.

All right. So let's let's start here. I percent agree, by the way. Yeah. Like, even if you already own a home, this stuff is important because it may change what the next purchase are going to make. It may change how you view money in general. And so I want to start with that question is what are some ways that the primary residence that somebody lives in will long term affect their wealth in life like 20, 30, 40 years down the road?

Like, how does their like why does the house this is the point you guys make over and over in the book.

But why does the House make such an impact long term? Let's start with you, Mindy. I know it's got you just had a little bit of that answer, but I'm going to go deeper here.

It goes back to the things that you harp on over and over on this podcast. Jujitsu you have to buy, right? Yeah, jujitsu. And you have to buy. Right. And that applies to your primary residence as well as any investment you make. If you pay too much for your primary residence, if your mortgage payment is at the very tippy top of what you can afford, how are you going to save? Where does your extra money go?

Nowhere, because you don't have any extra money, because every dime you have is going to your mortgage payment. And I think that when people are first starting out, oh, I'm going to buy a house, how much can I afford? What is the most amount of money I can part with? And that's not the right question to ask, especially when you're a first time homebuyer, but when you're a home buyer of any type. If you want to be able to grow your wealth, you don't want to put all your money in one basket where all it can do is sit there and do nothing for you to sustainably invest in real estate.

You are either going to need to generate a large amount of monthly savings with which you can use to put the down payment and finance the properties. Or you're going to have to run a real estate business where you are creating value in the form of managing rehabs and those types of things.

Right. The typical real estate investor in this country does not own more than 10 units, 90 percent of single family homes, duplexes, triplex and complexes are owned by investors with ten or fewer properties, casual investors like myself buying properties over the period of a decade. The folks you hear are doing more than that are the exception in this market, not the rule. When you buy. Let's use this example. I'm a typical American. I'm owning I'm earning eighty thousand dollars a year.

And over the last three or four years I've saved up forty thousand dollars. My lender qualifies me for forty four hundred thousand dollars in a mortgage. Right. What is my what is my typical purchase. Well, my lease is expiring in two months. Therefore I better buy real quick. I fall in love with this. I put down 40 grand, I get an additional five grand from dad to cover the closing costs, and I move into the property and live there happily ever after.

My payment has gone from seventeen hundred a month in rent to two thousand a month in mortgage. And I also have another three hundred a month to set aside in housing expenses. But I don't do that. I actually just live paycheck to paycheck with, you know, a three thousand dollar cushion. And so when those emergencies come up, it's always a big financing issue. And I have to reopen my revolving credit line with mom and dad in order to finance those.

Right. That's not a position from which to sustain a real estate investment. And even if I want to, I'm making very slow progress on a very fixed cost there just by by and it will take me 10, five, 10, 15 years to build up meaningful home equity with which to use. And there's other types of things. Compare and contrast that to somebody same exact position who puts down fifteen thousand dollars on a two hundred and fifty thousand dollar property.

Well, now I've got I still got one hundred and fifty thousand dollars in access to credit with which to invest. I've still got twenty five thousand dollars with which to invest and I've made a huge change there. Or compare that all the way in the extreme end of the spectrum. And by the way, our book is not about house hacking, it is mentioned. But like when I did it, I bought a duplex, put down twelve thousand dollars and began collecting rent immediately, which increased my income immediately, increased my ability to borrow within a year from that because I have rent on my tax returns and in a year from then I'm making that eighty thousand dollars a year, but I'm qualifying for a million dollars in financing to buy more property and I'm able to accumulate more cash.

The first home purchase is makes a huge difference in terms of amount of liquidity you're going to have available following it and the amount of liquidity you can accumulate on a go forward basis. And I think it's a it's a central fork in the road for folks to think about and consider when they're going about their wealth building journey. You can always buy the house in the hill to the fantastic, beautiful home in Maui after you have assets to pay for it.

But you can't. But you shouldn't do it with your first home purchase.

So here's all on A to relate this back. I think that's an important point that great people, they maxed out. What they can spend again is that they're asking the wrong question. How much can I afford rather than what's smart? Like, what's the what's comfortable, I think is what you said, Mindy.

But let me relate this back to appreciation. Let's say an average market is going to appreciate five, let's say five percent for easy math. A property that's one hundred thousand dollars is going to now be worth one hundred five thousand dollars next year, maybe a hundred and ten the year after. Hundred and fifteen, obviously, there's a compound in there, so be a little more.

But you buy one hundred thousand our house because that's the lowest price that you can get your spouse on board with. Right. It's the cheapest property you can find that you're comfortable living in. Keeps your payments goes. You can invest your money elsewhere. Five years go by, your hundred thousand dollar property is now worth a hundred. And let the hundred and thirty thousand dollars good job versus you buy the house for a million dollars instead and that million dollars goes up at five percent appreciation.

Now you made fifty thousand dollars the first year. Fifty the next 50 days, let's say now you've made a quarter million dollars because you bought a more expensive house because appreciation at percentage wise gives a way higher amount to the higher dollar. So I guess what I'm getting at with this is how would you balance that? And I know we're late or that's I'm trying to tie this back to depreciation. Conversation is like a lot of wealth is built by appreciation.

Appreciation goes faster with the higher end. How do you balance those two things of being smart with your money?

But making more housing is an expense, and the more you buy, the less wealthy you become. So when you buy the million dollar house, sure, you're getting proportionally that same amount of appreciation compared to the hundred thousand dollar house. But you're also assuming a much higher fixed monthly mortgage payment.

You're paying a lot more and you're wrapping up your any equity you have in that three percent, five percent compounding asset write that you could if you buy the one hundred thousand dollar house and the exact same circumstance, you have the option to invest the remaining nine hundred thousand into other real estate assets, which will generate significantly more wealth than the equity that is in your your your fancy SHYMANSKY home with that. And so, again, housing is an expense and you are paying for it in the form of your house.

The more you buy, the less wealthy you are with that. It's so even though you're benefiting from that, the reason people call it an investment is because most people only allocate money into their 401k and then pay down their mortgage. It's by far by hundreds of thousands of dollars, the largest investment of any kind that they're even conceivably making. Is this the money that's going into their home equity? It's not an investment. It's a cost. And it's less expensive over a long period of time than renting.

But it's not a but the more you buy, the less wealthy you are when it comes to housing.

Well, and I think the point isn't, should I buy thousand dollars or a million dollars? The point is, should I spend every dollar that I have and buy the absolute most? That I can or should I look at the market and make a more intelligent decision that will allow me more room in my current budget, in my present day budget, and also allow me to invest for the future? One hundred thousand are property in the million dollar property.

It depends. You make one hundred thousand dollars a year, you make it five hundred thousand dollars a year. Right. Like those questions like again, goes back to know yourself, know your position, don't strap yourself out. Because the typical American problem is like as their income goes up, I mean a lot of theft. Your life is about this, right, Scott, that you wrote that your life is fantastic book. It's like as the typical American or typical person enticements, the Americans here, they make more money throughout their life.

They spend more money and they get trapped in the cycle of debt, which just never like they never get out of. So they never have the extra disposable income to dump into investments. So, yeah, the million dollar property does go up the same percentage wise, let's say, as the non millionaire property. Great. Doesn't mean your primary residence has to be that one. I think that's a really valid point. Now, speaking, you mentioned the word like you can get a much better investment.

I want to I want to talk about better investments or just good deals in general. I know a lot of the book is about buying these good deals. How do you find a good deal in your primary residence? And I'm assuming this applies to all real estate in general. Right. Like, how do you how do you how do you recommend finding good deals?

I have is five step process, which I'll ramble on for about two minutes, 30 seconds here. You could just set me up if I. Yeah. All right. So I think there's five things which one is good at creating that position of strength. Right. We already talked about that. We ought to go into more detail of that. The second is a timeline perspective. And this is this is like the first blindingly obvious mistake that I see a lot of first time homebuyers make.

Peers, friends, family. Where it is, is it's, hey, my lease is expiring on July 31st, therefore, and it's May 1st right now. Therefore, I need to buy a property ASAP because I'm thinking about buying. Great. So you're going to rush. And again, let's use the example of forty thousand in savings. Eighty thousand dollars in income. You're going to Russia.

Four hundred or three or two. Fifty three or four hundred thousand dollar decision. In order to meet the artificial constraints of your lease timeline, call your landlord go month to month. Right. And pay the extra hundred bucks because that that will give you so much more power, freedom, flexibility in in making that decision purchase. You don't have to create an artificial timeline. Same thing with like the 90 day challenge brand. And I know that's a great thing to get motivated with that stuff.

But you don't construct the artificial timeline. You simply put yourself in position to buy by the end of that 90 days where you've got your deal flow and those types of things moving. Right. I would add to two quick points.

And let's continue on. Number one, this reminds me of the ten thirty one exchange rate, the ten thirty exchange as you when you sell a property of 45 days. And you guys, for those who have been listening to Shell for a long time, have remembered one like two years ago or three years ago when I went through that 45 day thing, it was hell. And I ended up buying a property that I should not have bought because I had this.

It was a real timeline. I had forty five days to identify property and I bought something that ended up being a terrible investment for me because I didn't have the core for as David teaches in the market, now I'm going through another ten thirty one right now and it's super easy because I have the core four and I'm just buying a condo here in Maui for a vacation rental. But the same thing applies when you're on a timeline. It's hard to make a good decision.

Sometimes you end up making a an emotional decision. At the same time, though, and this I'm curious, your thoughts on this Parkinson's law says that work expands to fill the time allotted for it. And we all think that's true. Right? If you had a month to finish a research paper in high school, it would take you a month to finish that paper if you had two days is finished in two days. This applies to almost every year of life.

The reason I love putting constraints on things is constraints lead you towards a bias towards action. So how do we reconcile that of like if I just have I can buy a house anytime I want to. Now, I may never buy a house because there's no reason to buy a house, because I'm just there's no timeline versus I have to do it before my lease ends. Now I'm going to force me to actually take action. How do you reconcile those things, Scott?

I don't think it's the right framework for approaching it. I think I'm I'm not as good as David, so maybe he can help me out here with this. But this is this is going fishing. You're going fishing. When you're buying a house, what are you going to do? Say I've got it. I've got two hours to catch a fish. Right. That it's an impossible starting position, at least if you buy into the framework I'm about to describe.

What's the opposite of buying a fish, David? What's the opposite of a fishing from a framework analogy, David?

I mean, something that you actually, like, have control over because you don't have control over catching a fish. Is that what you're getting into?

Yes. Going to the market to buy fish. Yeah. Like, that's a goal I can set down for my day. And if I take two hours to do that, I'm doing something wrong. Yeah, maybe maybe we'll get a better what as time goes on. I was so weak. Well yeah those are good.

I like them. I like that. I think what you guys are getting at is Scott's trying to protect people from making a bad decision and Brandon's trying to protect people from not making a decision. And if we can reconcile those two desires and motives that you guys are working with, we can have the perfect way to describe this. There we go.

Yes, he just. Yes, thank you, David. You just saved us. That was that was wonderful. OK, so we continue on. So we go again. Five steps starting from position of strength. Second is. Creating a patient timeline where you can go fishing instead of going to the market to buy a fish, and then the third is knowing exactly what you want. Right. And again, very simple, basic things. But a lot of investors are like, oh, I don't really know.

I want some of that cash flows. I want to get rich, whatever it is. No, I'm buying my first home. What do I want? I want a three bedroom, two bath, 1950s builder later in this part of town, this part of town or that part of town, I'm looking for a two car garage, at least again, at least those two bathrooms, because my marriage will dissolve if we only have one bathroom. I'm looking for a yard for the pets and this type of school district and that type of stuff.

You should be able to write out a paragraph or two that outlines in crystal clear detail exactly what it is that you want and have you and your spouse on the same page for that. So that's step three.

Can I riff on that just for one second? I think this applies perfectly to real estate investors by an investment property, as well as the more clear criteria is, the more likely you will find the ideal, the more specific you'll be, the more likely you'll take action. So I talked a lot about the crystal clear criteria, and that is really knowing what location you're trying to buy in the line. What neighborhood you going to buy? In what condition are you willing to accept?

What property type do you want? Single family house, multi duplex, whatever, what price range you're going to buy in and then what would make it a good deal? I call it profitability. So for anybody, real estate investors or even buying your first house, having that crystal clear criteria. Yeah. Just makes to help help you make way more informed decisions. So I'm glad you said that's got.

Absolutely. So that's that's knowing what you want. Right. But then it comes down to defining what a good deal is in your market. And this, I think, is where people get tripped up because a good a good deal is the property with the attributes that you want selling at a low price relative to other similar properties or comparables. Right. And so for this, what most people do when they're buying their first home is they'll look at Zillow or Redfin or call up their agent, look at the listings, and they'll look at all the active listings.

And they'll be like, this is terrible. There are no activities I like for active listings. They all stink. They're they're all either way overpriced or they are, you know, got something weird, like an obelisk in the front yard or something. You know, that that's not good. No. Instead, what you do is you don't even look at the active listings. You look at the sold properties and you say what has actually transact in the last 90 to 180 days?

That fits my vision. And one of a couple of possibilities are likely when you first conduct this exercise. The first is that no properties have sold that meet your meet your criteria. That tells you that you are living in fantasy land and what you're looking for does not exist. Right. I want the quad bikes in Denver. That is, you know, two hundred thousand dollars. Each unit rents for two thousand dollars apiece, meets the four percent rule and we'll cash flow.

But it doesn't exist. Right. And is in perfect condition. So so that will give you a grounding in reality or there's going to be a million properties, which means you need to refine and refine your search. And what I recommend is refining that search until you have five to ten properties in the last 90 days, maybe stretching that out to the last hundred and eighty days that you can say, yeah, barring a crazy problem, an inspection like a foundation or like finding out that there's a seed establishment right next door or things like that, I would have bought those five deals or ten deals as my home.

Now I know what a good deal looks like. Right. And I can say, OK, great, I can get to my fifth step here. I've defined what I want and what a good deal is. And now I can go fishing. And if five properties have come on the market in the last hundred and eighty days, out of ten properties in the market in 180 days, that means one property on average is coming on the market. That's a good deal in line with what I want every 18 days.

So that means once every two and a half weeks on average, sometimes it'll be four weeks, sometimes two. Oh, come on. All at once. I need to be ready to pounce. I need to be able to calmly react aggressively to that deal. Right. And so that's where you say, I got my preapproval in line. I my agent and I are on the same page and we're ready to write an offer when that deal comes on the market at two thirty, I, I'm not leaving work right away, but I'm making plans for that.

I'm canceling all my evening plans and getting ready to offer on that property in real time. And that I think is how the first time homebuyer, the first time investor stands the best chance at getting a good deal. Again, you've got to have a number of reasonable deals in the market to have a chance in this, because right now, in many parts of the country, it's such a seller's market that you're getting multiple offers, you're getting outbid.

People are bidding on things without waiving inspection deadlines and those types of things. You can't afford to do that. As a first time investor, first time homebuyer, I think so. You need to be able to know what a good deal is, act on it and be willing to lose a few in order to do that. If you have one property the last 180 days, that was a good deal. You might be fishing for a very, very long time.

If you've got five to 10, you've got a reasonable chance. I love this idea. I think this is some of the best advice we've heard in the podcast, like ever. And what I mean by it, because it applies to everybody, whether you buy that first time home or are you just trying to buy a 500 unit apartment complex? Like, does it look like are you at a position of strength? Right. Like, do you have a good patient timeline for making sure you make a good logical decision, not an emotional one.

Like, do you have a clearly defined criteria? Do you know what a good deal is like? Do you know what a good deal is? Do does exist in your market? Can you point to examples where that has sold recently the right number of them? And then can you go in Pownce that I love you said calmly act of calm, lead, act aggressive. Is that what you said? I think I love that right, that those steps apply to every single person trying to find good deals today.

Look, I can't find any good deals in my market. Like ask yourself which those five things are you feeling right now? Like, have you actually done those things? Nope.

And the answer might be, hey, there really are no good deals in your market that make any sense, but conduct the exercise and then find out they're zero. And then you're like, OK, great, I can stop wasting my time now and feeling about I can go pick another market or do something that's more constructive than whining about the lack of deals. My market, because I already answered the question, it's done. There are no there are none that makes sense that I would buy.

I'm going to just correct Scott really quickly because he isn't an an active agent as I am. You have to be prepared to lose a lot of deals. And the reason is right now in this market, it's fate, this market. I've never seen a market like this in all of my decades of real estate investing. And it's very difficult to be representing buyers right now. So right now might not be the best time for you to start buying a house.

But it's always a good time to know your market and know what the good deals are and see what's out there. But Scott said that you need to be prepared to lose a few. I think you need to be prepared to lose because who you're competing against is not you. It's not the person who's making a smart decision. We just interviewed a guy who lives in Japan, and even though he lives in Japan and pays taxes in Japan, his real estate in America that is more than twenty years old, is depreciated at twenty five percent a year or something like that.

So he's essentially paying, what, zero taxes because he owns real estate in another country.

And that's your competition in Hawaii? Brandon, they don't care that it makes no money. They don't care that they can't rent it out. They don't care anything. They're taking twenty five percent of that million dollars and writing that off on their taxes. So they're paying no income tax. It's worth it to them. And then in four years, they'll sell it and go buy something else. And there's supposed to be closing up this loophole. But, you know, I'm not suggesting you move to Japan.

I'm suggesting that your competition isn't always somebody who is thinking rationally or working under the same stipulations and guidelines that you are. So make the decisions, make the offers that are intelligent for your circumstances because your only competition is you depending on how big your pool is.

Right. If your pool is five properties in 180 days, that's not very many. That's that's one property every thirty six days that's coming on the market. Right. You need to you need to up your offer price and offer a firm competitive offer each time. If your pool is there's fifty properties in the last 90 days that you would have bought, you couldn't afford to lose twenty because you're going to eventually going to get a winner on that. Right.

And so it's just kind of understanding that that dynamic in your market and reacting rationally to to the current circumstances.

I just want to say one other thing. If you listen to all the words that are coming out of Scott's mouth, he is not saying, I woke up and I decided to buy a house and I got into the game. He's making a lot of smart decisions based on a lot of research that he is choosing to do. He wants to make an informed decision. So this is one of the reasons why I hate that that comment. Oh, I want to get into the game.

It's not a game. And if you play it is a game, you're going to lose a lot of money. It's all one gigantic game.

It's not fifty or five hundred hours of research going into buying your first home, but it's fifteen.

Yeah, it's more than just waking up. Some people way over analyze and spend one hundred hours because they don't want to take action, but the majority of people don't spend any time and they just buy because like, like you said Scott and you're my lease is coming up soon. I better do it, you know, go buy something. So I think there is an appropriate level. And I think the tips you laid out here, Scott, especially those five things that we kind of dug through.

So you spend this fifteen by reading our book for five of those hours and then doing the research for the other ten.

You're good to go. Speaking of the book, tell us about the book, Krako. What's it called? Working people get it. Do you mean this book? A first time home buyer, the complete playbook to avoiding rookie mistakes. It is available wherever books are sold. But on March 8th, you can get it from the Bigger Pockets bookstore. No, I wasn't talking about that book. I talk about David Greene's book sold.

I'm kidding.

Oh, so you have to look at that. Of course I have that to this. A good book. Thank you. David knows a thing or two about real estate. Yeah, that was an amazing book. Is a good book. I actually my brother text me the other day. We're talking about now with David's book, I love it, but my brother talks to me because he was talking about, you know, getting his real estate license.

He's got it now. He's trying to get started. I'll just read David's book and he talks me like two days later. He's like, oh, my gosh, this was the best thing I have ever read. This changed my life. So I did a good job, David and I know him to get those texts as well from my brother when I tell him to read Scott Mendy's book as well. You guys, should people read this book or not trying to buy their first house?

Yeah, I would say I mean, you can I would I would certainly say if you're going to like trying to buy rental properties, read the book rental property investing first. If you're trying to house, specifically read the house hacking book. But this I think I believe perhaps somewhat arrogantly, that this is the best book ever constructed on buying your first home in the more traditional sense around that. And if you're thinking about doing that or want to to do that, that would be a good place to start.

But no, it is not an investing book per say, and probably not the place to start when it comes to investing, unless you have not yet made your decision about whether you're going to rent or buy it, in which case you should start with this book, because it will make a huge difference in your ability to sustain investing over the long run.

Yeah, it's also one of those books that I would recommend as like one of the most important gifts you can ever give anybody who's young or even like anybody who does not yet buy a house like you should grab that book and give it to somebody, because, like now you're benefiting them hundreds of thousands of dollars, maybe millions of dollars over the course of their life because of one book, which is awesome. So, again, where do they get it?

At bigger pockets, dot com slash F.T. Be first time homebuyer, bigger Proxicom home buyer book.

Both of those will take you to the same spot. All right. With that said, I know David. Yeah. I just want to ask this one last question. Should agents buy this book to give to people that are considering buying a house? Yes.

OK, thank you so much for that question that I'd even ask you to ask me. But part of the reason that I wrote the third section of this book, it's the step by step process of buying a house. What is title insurance? Well, I don't know. I've never bought a house before. I guess I'll just do it. Well, you should know why. And do I need a home inspection right now in this market? There's a lot of stuff going on right now in this market.

There's a lot of agents who are saying you should waive the home inspection and cover the appraisal gap if you want to buy the house. No, I am not advertising or advising any of my clients to waive the home inspection or cover the appraisal gap. And I still have a 100 percent success rate right now, fighting houses for my clients. And there's reasons behind it. And one of them is making a smart financial decision. And you don't want to go into a house and not know that there's method in the basement and mold in the attic and because you didn't get a home inspection.

So, yes, if you are a real estate agent and you want your clients to know everything, have them read this book.

And I think that this book is will demonstrate a lot of trust, will build a lot of trust with your clients if you're an agent because you're talking about how to make a smart first time home purchase, it's not necessarily rushing into the biggest, most expensive property right away. And while that might mean a slightly different commission or might take if you're going fishing rather than going to the store to buy a fish that might, you know, delay the commission to a certain extent.

But it also means that you're much more likely to get repeat business if this person is then able to buy investment properties or those other types of things. So I think there's a ton of trust to be built with this book. And like many said, a lot of answers to the nuts and bolts of the transaction process as well. We kind of recommend, like, hey, before you go and talk to an agent, you should be able to answer a lot of these basic questions.

So you should be getting a client after reading this book, who's coming back to you saying, I know exactly what I want, I know what a good deal looks like. Can you validate those assumptions? And let's go fishing rather than somebody is kind of just like wondering, figuring out what they want to buy or not. Someone is ready, willing and able. But on that potentially patient timeline is what we're trying to to to teach people with the book.

I love you guys. Well, go check it out, everyone. Bigger pockets, dot com flesh. I want to buy the book that's gotten Mindy wrote Bigger Pakistan slash home buyer book or be.

Yeah, or I want to buy the book. This got butyrate.

Yeah. What about the book that's gotten out. I love it. All right. Well, let's go to the show. Let's get to my favorite part.

It's time for the famous for the famous for the part of the show.

We ask every guest every week the same questions. And I know each of you have answered these before, but they may have changed. So let's go ahead fire again and fight. I'm going to shift this first question. Normally, on the Thursday episodes of the show, we ask favorite real estate related book, but we all know your favor. Real estate related book is one of David's. So we're going to just skip that one.

And I'm going to ask the question that I ask our Sunday guests, which is, is there a habit or trait you are currently trying to develop in your own life?

And what is it? Oh, inbox zero. I'm currently failing miserably, but I'm trying really hard. All right.

I just read Atomic Habits recently, which I thought was a great book. And I'm. Trying to adopt not the habit, but build the system of maintaining my body like an athlete, I'm like in that kind of thing. So that's what I'm working on right now, is the workout regimen and diet.

Number two, what is your favorite business book? Non Bigger Pockets book that I will reference is going to be The Psychology of Money by Morgan Housel, which I read recently was fantastic. Quick, easy read, very relatable, but very powerful.

My favorite book is Superfans by Pat Flynn. It's called Super Fans The Easy Way to Stand Out, Grow Your Tribe and Build a Successful Business has quite a few tips on how to build a big audience.

I would not be here today if it weren't for Pat Flynn. I would say that we would not have the podcast today. We wouldn't have any of that. So thanks, Pat.

Scott, Mindy, what are some of your hobbies?

I love to recycle and snowboarding. Well, I like to cycle in the summer, snowboard in the winter, and I like to knit all year round.

Why have I never received a knitted item from Eumundi? I'm actually kind of offended right now.

I don't have a hat. Do you or do you not live in an area of the world where it's eighty five degrees every single day? I'll send you a sweater. I expect you to wear it.

Eighty two in the winter. Eighty eight in summer. I expect you to wear that sweater. I'll wear it every day. Scott, I'm a reader.

I enjoy video gaming from time to time and I play rugby. What's your game. What's your video game right now? I'm back into Halo.

Actually, we're live in the middle school days.

Yeah. Say, what are the two of them? Three. I've been in the Starcraft lately, so there you go. All right, last question for me. What do you think separates successful real estate investors from those who give up, fail or never get started?

Many people who make a plan instead of jumping in with both feet, people who intelligently plan out their business instead of treating their investments like a game.

I'll say a system of tracking. You're building your vision, creating goals, backing into them on a monthly or a five year, three year, one year, quarterly, monthly, weekly, daily cadence and updating them every single day. I think that's the most powerful thing you can do. Not everyone has to do that. But I think that's that's one very, very powerful tool that I've used to. Great effect over the years. Our guys.

That was amazing. Thank you so much, everyone. Go check out their book, what's called, again, first time homebuyer or that.

The first time homebuyer I kept saying and the complete playbook.

No, the first time works and check it out. Thank you guys for joining us today. It's been it's been fun to go listen to Scott Mindiola on the Bigger Pockets Money podcast as well. It is a phenomenally good show. And you guys do a good job getting some amazing guests to help people get their financial position better. So thanks, guys. Thanks, Brandon.

Awesome to be on the show and share all this. So we appreciate it. Thank you. Guys, this is David Greene for Brendon. Don't hate the player, but hate that he calls it a game turner sucking off.

You're listening to a bigger pockets radio simplifying real estate for investors, large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from bigger pockets. Dotcom, your home for real estate, investing online.