The Good Stewards Real Estate Podcast

Why Buy and Hold Investing?

Episode Summary

Why did Stewardship Properties go in with a buy and hold strategy? As an investor, you’ve got to determine your why and ours was centralized looking at the long term wealth-building potential as well as the future opportunities for everyone involved in the process along the way.

Episode Notes

Wealth By Buy and Hold Is Slow:

4:20: This is a get rich slow thing, but not too slow.

4:50: You can flip or wholesale to get to buy and hold.

6:17: Look at your portfolio's needs when determining what to do with a property. Can you take on a project or do you need the liquid cash?

Considerations for a Buy/Hold Strategy:

10:24: Andrew’s goal is to keep everything as long as it’s not too expensive to cashflow.

12:30: You have to have diversity in your portfolio, A to C minus class. That’s one of Ryan’s mistakes when he started out.

14:48: Niche, group home story in the expensive Portland market.

17:10: AirBnb can work, but be careful.

20:22: Anything that helps you build up your cash flow is what it’s all about.

22:17: If you are in a more expensive area, don’t give up. Think outside the box and ask yourself if you’re really committed to this buy and hold model.

Survive Till You Thrive in Buy and Hold:

26:13: Analyze your deals up front to determine if you’re doing a cash out refinance or if you’re into the property for 75% ARV on a mortgage. Does it still cashflow? You’ve got to make sure it’s paying for itself.

28:50: Ryan looks at his buy and hold portfolio as a really cool 401k. But on the transactional side from wholesaling, wholetailing and flipping is the “now money”.

30:45: Where you make your, your good, large chunks of money is in the appreciation. In the debt pay down in the depreciation, the tax benefits, and then occasionally you get a really nice cash out refi check.

31:38: Real estate's always generally tight when you're using the BRRRR strategy. People expect just tons and tons of cash flow when you have debt on the property, especially early on, are just kidding themselves. Treat it with patience.

34:52: What thriving in Buy and Hold looks like.

Connect with the Good Stewards:

Episode Transcription

Bill: Here's what thriving looks like. You get to the point where you can refinance properties that have built up equity now have appreciated some, uh, you've rehabbed them and added value so they're worth more now and all of a sudden you get tax free money.

[00:00:19] Intro: Welcome to the good stewards podcast, the only podcast dedicated to seasoned real estate investors who want to maximize the cashflow potential in their business. We are buy and hold investors with a thousand plus properties and markets across the U S who bring an insider's view into the nitty gritty details of real estate investing. If you're looking to develop the mindset teams and systems that can dramatically build your real estate business and net worth, you're in the right place.

[00:00:51] Ryan: Welcome to this episode of the good stewards podcast. I'm Ryan Dossey.

[00:00:55] Amanda: I'm Amanda Perkins.

[00:00:56] Bill: I'm Bill Syrios

[00:00:58] Andrew: and I'm Andrew Syrios.

[00:01:00] Bill: Hello. Welcome to our podcast today. This is an exciting topic we're going to be talking about, but before we do, please look us up at thegoodstewards.com download our ebook. Give us some likes. Tell your friends about us. We'd really appreciate getting the word out. We're going to talk about, uh. I think the truly best wealth building opportunity that people with modest means have in our society, and that is buy and hold real estate investment. Uh, there's precious few things. Endeavors at one can get into, unless they are a software genius or a, you know, or a trust fund baby that they can, they can become wealthy. This is one of them. And maybe the best one.

[00:01:47] I remember, uh, Andrew Carnegie said that 90% of the millionaires in the United States came to that kind of financial status through real estate investment. I've never checked those numbers out, but I got to believe that they're probably close to accurate. Uh, it kinda hit me just the other day. A matter of fact, about three or four days ago, Amanda was driving down a street and, uh, she said, it's so funny, this is, and it's kind of a main street in Eugene, it's river road actually. And she said, all the houses on this street are, are at an angle. They're not straight to the street. And I said. Yeah. You know, you're right about that. As a matter of fact, I owned a house on that street. It was a, you can look it up if you want. It was 2996 River Road. And, uh, you know, as I thought about it, I talked to Amanda over the phone. We were just having a cell phone conversation about this street. And, uh, it was a property that I bought because it had a large lot to it, and I was able to subdivide three lots in the back and sell them off. But then it came to the fact of the house. I never liked the house because it was on a busy street. We actually rehabbed it really nicely, and I thought. I just don't want to own this house anymore. And that's a very poor reason to sell a house because I sold it six years ago for $155,000 I just looked it up  and uh,

[00:03:08] Amanda: 6 or 16 years ago?

[00:03:10] Bill: No, six years ago, six years ago, November 10th, 2014.

[00:03:16] I got it right in front of me here. Now, why I looked it up is because, uh, I wanted to see what it was worth now. And of course I looked over and you never can trust those estimates. But it's listed at $290,000. So because I just didn't like the house. Uh, that's the kind of appreciation I left on the table. Now, of course, we don't know if appreciation, uh, if there's going to be future appreciation to that extent, but it does kind of remind me of the power again, of buy and hold real estate that you having put together an asset and having rehabbed it, putting it into your property management pool, uh, you, you've got something that has real legs in terms of, uh, you know, a upside to its value and you can create wealth. If you do one like that, you do six like that. You do, it doesn't like that, boy, just think of the wealth potential that you have there.

[00:04:14] Ryan: I think the big thing you're. Talking about here is, this is a, uh, this is a game of patience to an extent. This is not a, you've used the expression that I've now coined and repeated more times than I can count. Um, this is, this is get rich slow, but it's not that slow. I mean, we're not talking a 2% yield on a savings account kind of slow. Uh, but at the same time, it's also not a. You know, you're not a Bitcoin millionaire in 30 days.

[00:04:42] Andrew: I mean, you're not a Bitcoin bankrupt in 30 days either, though.

[00:04:48] Ryan: That's fair.

[00:04:48] Andrew: Give or take.

[00:04:50] Bill: Well, I also have another term that I like a Ryan, and that's survive till you thrive because, uh, when you, when you dive into a buy and hold, and by the way, there's a lot of ways to get to buy and hold, and maybe I should start with that. One of them is to be someone who flips properties for profit, uh, because that is going to get you into, uh, understanding all the mechanisms you need. So if you're, if you're new on the block with real estate investment, it's not at all bad to think about, you know, putting together a bank account, a purse, something you can draw on for buy and hold. I know people who have done a flip, a second flip, and then they, the third one that they hold and they go through that, you know, kind of three step process, and then they get to a two step process where they flip one, they hold one, they flipped one, they hold one. Whatever you need to do to to point you in the direction of looking to build a rental portfolio is what's going to be in your best interest.

[00:05:51] There's not going to be a lot of people 10, 20, 30 years from now saying, Oh gosh, I wish I didn't have these rental properties that I bought so long ago, which have paid the mortgage down, which I've appreciated, which have paid me rent every month. There's not a lot of regret in that. There's a lot of regret. Potentially in the other direction.

[00:06:10] Ryan: Assuming that they pay for themselves.

[00:06:12] Bill: Yeah, we're going to get into that.

[00:06:13] Ryan: And assuming you're not buying for appreciation. I would also say on the flipping note, you can also wholesale to get there. Uh, so what I did, I think I wholesaled three or four houses, and this was kind of before, like the BRRRR model was really well known. So we got a lead on two properties owned by the same owner. Uh, this is in st Louis, negotiated the purchase price. I believe we paid 45,000. The properties pulled in about 1400 combined. I went to a local community banker wanted 25% down, which I was homeschooled, so I'm not going to attempt to do that math. Uh, something like 10 or 15 grand that we took out of profits from wholesale deals and all of a sudden, I think really became. Investors. Um, I think that's really buy and hold I think is kind of when you get to wear that badge because up until then you really just kind of have a transactional business.

[00:07:03] If you're wholesaling or flipping, you're not, uh, you're getting liquidity, which is something you need. Um, Amanda and I talk about all the time.

[00:07:12] Amanda: It's our favorite topic.

[00:07:14]Ryan: My power company is not going to accept equity for my bill this month right. They want, they want cash. But when you really go from that dealer or transactional business model and mindset and transition over into the buy-and-hold piece, I think is really where you start. Uh, turning the wheels of building some wealth.

[00:07:37] Bill: Ryan, if you could just how, how do you decide whether you're going to wholesale something that is, you're going to, you're going to basically flip the contract, or if you're gonna flip something that is your, you're basically gonna do a rehab and sell it to a homeowner. How do you make that decision?

[00:07:51] Ryan: I mean, I try to avoid flips at all costs. I mean, I would, I would rather wholesale, which is, I close on a home and then listed on the MLS for the widest exposure. Over doing kind of a, um, a rehab, but it, I think really just kind of comes down to the particular deal. And sometimes it's a matter of we attempt to wholesale it. We don't get maybe an offer that's enough of what we want. We go to wholetale it maybe that doesn't work. So, okay, we're going to pull this one back off the MLS and, and flip and turn it. Um, I think I would hit on how I decide what I'm going to turn into cash versus keep for the portfolio. Um, is we, we try to own assets that are typical for the area is what I'm after.

[00:08:35] So, if I'm in an area of 1970s, you know, cinderblock three ones, um, that are, you know, 1200 square feet, that's what I'm looking for. If I get a 500 square foot house. I'm going to let somebody else play that game. Um, you know, on the same side of things we've had in a class areas. One time I got a lead on a log cabin and it was like, there's not comps for a log cabin. Uh, so I'm typically looking for what's typical for the area. And then I'm also really looking for like minimum of a thousand. Thousand square feet, typically three bedrooms, one and a half bath being ideal. But I mean, obviously my favorite of the vinyl villages, four bedrooms, two and a half bath attached, two car garage. But I think it also really just comes down to. What your portfolio needs at that time. Uh, you know, are you in the position where it makes sense for you to take on another project? Or do you need to pull in some cash? And we've, we've had, you know, phases where we kept everything. And then we've had other phases where it's like, we need to sell some stuff. Um, or, you know, we need to turn the inventory we have coming in. So I think it's kind of just a, a running balance of. What does vacancy look like? What do construction needs look like and what do cashflow needs look like? That's how we make our decision.

[00:09:56] Andrew: What do log cabin needs look like? We'll be having an episode on log cabins?

[00:10:03] Ryan: The answer is never, you're not Davy Crockett

[00:10:08] Bill: Andrew, I know you guys in Kansas city have bought kind of a, uh, a continuum in terms of the lower-end homes to middle homes. What, how do you decide that in terms of keeping in your rental portfolio there?

[00:10:24] Andrew: I mean, usually our goal is to keep everything we can buy as long as it's not. Um, as long as it's not too expensive, just simply cashflow. We generally avoid buying really bad areas. We had a couple of experiences with that. And, uh, it was not good. So we did liquid or a few of those things just cause we didn't want to hold them. It wasn't like a, it wasn't a strategy per se. Um, I think if you're buying in really bad areas, generally you need to be a specialist at it. Um, it's not for the uninitialized.

[00:10:52] Ryan: Or a slumlord either/or.

[00:10:54] Andrew: Yeah. Or slumlord. Um, yeah. And uh, um. But we generally look at properties kind of ranging from, uh, the lower leg, kind of low working classes for should probably be like a, what we call like a cashflow play where it's high cashflow,

[00:11:10] Ryan: like a C, C minus.

[00:11:12] Andrew: Yeah, C minus probably, um, two, uh, which we're not, we're not looking for a large amounts of appreciation. It's a little harder that built-in equity or not, uh, much of it, but it will cash flow better up to sort of middle class, uh, which would be more of an equity we're looking for. We're not going to get much cashflow. Maybe a little bit of a break even. Uh, but. More equity, uh, and also more chance for appreciations as areas tend to appreciate more. And then in the middle, which is kind of lower middle class, probably our bread and butter sort of a. You know, C plus B minus, um, which kind of get a little bit of both. Uh, if you're getting into the more expensive properties, uh, like houses that usually homeowners buy, those are hard to rent out and make work, with any sort of debt on them.

[00:11:58] And so if we're getting into those, when we do, we usually flip them. Like we're doing a flip right now on a house that's, um, we're probably going to list for 290 or $300,000 and that, you know, would probably rent for about, you know, 2000, um, that's not going to cover the expenses. And so that doesn't make sense. We can make a decent profit on it, we'll flip it, but that's not generally been our strategy. We want to hold pretty much everything.

[00:12:23] Ryan: Something I want to highlight there is you have a range. I think a lot of people I'm going to buy in this one particular area because I like. There's particular asset class and if you want to build a portfolio of size, you do have to have diversity. And I think that's actually one of the things that I would say. Uh, we did a little wrong in my portfolio and one of the things we're working on fixing moving forward is we really didn't do many of the working class type place. Um, a lot of our stuff is, is higher. You know, vinyl village, he built post 2000 and it rents really well. It doesn't cash flow very much, but like Bill mentioned on the appreciation swing, we just recomped our entire portfolio and we had single assets that went up 20 $30,000 in the past year, 18 months, but at the same time. You got to pay staff, so that has to come from somewhere. So I think having a, having a diverse, I mean, it's just like stocks, right? You wouldn't be just in tech or just in medical or just in us, or just an overseas. If you're playing the stock game, chances are you have a diversified portfolio, which ideally you should somewhat recession proof your assets. This is kind of the same way. If you only have a class assets that just pay for themselves and there's no cashflow. You could potentially be in some hot water. If you have, you know, large expenses come up. Um, you know, on the same end, you don't want to just own C class properties that don't appreciate. Cause if the market appreciates, uh, I have friends in Denver, that particular assets went up to 300% in the past couple of years. If all you owned were low end properties, you missed out on that fun.

[00:14:09] Bill: You know, in in upper end areas and some of our listeners are likely living on the coasts or in places that are really, really hard to make cash flow if you have any debt on them at all, particularly if you have 75%. LTV on them, which is what we want to get because we want a BRRRR out of our properties and get our money back, uh, as much as we possibly can. But, uh, you have to really kind of be a niche player. You have to look for the opportunities. Uh, one of the properties we just bought in Portland and, and almost have completed rehabbing. We're gonna rent as a group home. Maybe you can speak to that a little bit, Amanda, and gives, give us a numbers on that.

[00:14:48] Amanda: Well, it's sort of a to be determined. So hopefully it's something we can report on. So if we were to rent it as a single family house in Portland, we would probably be looking about 20 to 50. Um, you know, it does have five bedrooms. It's on a large lot, but it's not a giant home, but it is all one level. And so it sort of lent itself to the opportunity to maybe bring in like an adult foster care, uh, you know, that it's a really, uh, strong business model, not that we're going to run, but that people that do run these, you know, um, take care of seniors or maybe a disabled adults in like a smaller home environment and, um, you know, so basically they're running a business out of it. We're trying to figure out what the bank, if they would look at that as. Sort of a commercial use of our residential property, and if that could affect the value since we really, when we rehabbed it, uh, we did extra things to attract a residential care facility to come in and, you know, take over the lease on this and, you know, a house that would rent to a family for 2250, we can run out for probably $4,000 to a residential care facility. We have a couple of places like this in Eugene. It's worked out really great for us. Um, it's just, we're trying to figure out if the bank can figure out with the appraisal and the appraiser a different sort of a value than just value as a residential home. Because at the end of the day, the resell value could go to, uh, an adult care facility or individual homeowner. And how would, you know, like, how would that affect the value moving forward? For us? $4,000, rent's going to go a lot more, a lot further towards our, uh, cashflow than the 2250, which would barely cover, um, the PITI on it. So it's still a. Work in progress that we're kind of finding our way through.

[00:16:54] Ryan: I think a couple other options if you're in a higher priced area. Um, ADU attached dwelling units, um, is something, you know, I know people doing it in California. I know people doing it in, um, Texas fact, one of Stewardship's partners is doing some stuff in Austin with those. Another option is Airbnb-ing out. If you have something like a duplex. From a cashflow perspective, you may be able to get a lot more money going short term. Now, one caution I would make with that. Um, your business is dependent on somebody else's business. And I had a good friend of mine who owned about nine properties in Hawaii, and when the regulation changed. He all of a sudden, I mean, the market was just flooded with Airbnb properties that don't cash flow unless it's a short term rental. So all of a sudden, you know, um, all of a sudden he had to liquidate nine assets he bought because regulations change. So be a little cautious of that. Um, not just adult care facilities. We've had pretty good luck with a couple of state run programs. Some of them being like, parole type stuff. Um, we've had some pretty good luck with some of the kind of group homes, and then, uh, I'd say kind of the other, um, I don't know that I have any other short, any little cashflow boosters.

[00:18:10] Bill: Another one is, creating an apartment in a house. We bought .

[00:18:16] We bought a house for 325,000 and I don't know, Amanda, how much money we put into it, at least 25 I think, but what we were able to do, it was somewhat.

[00:18:27] Amanda: Double that. Double that.

[00:18:28] Bill: Really? It was that much? Look it up while we're on the line.

[00:18:34] Amanda: Oh, I sent it to you earlier today. It was, our budget was 25 it was 46 and counting.

[00:18:40] Bill: Okay, 46 and counting. Darn.

[00:18:42] Ryan: Is that the one at your house, Amanda?

[00:18:45] Amanda: No.

[00:18:45] Ryan: One thing I think our listeners should know cause I think this is fascinating. Um. Bill owns well over $100 million worth of real estate at this point and house hacks he has. Is it two apartments that are basically in your attic?

[00:19:00] Bill: One apartment with two bedrooms,

[00:19:03] Ryan: one, two bedroom apartment? Amanda does something similar. Um, this is not a bad strategy.

[00:19:08] Amanda: I built my home with an ADU in it. So I have an apartment on the other side of my garage.

[00:19:12] Bill: It's the only property in this subdivision that has an ADU built into it, which is really cool.

[00:19:17] Amanda: And it covers a third of my mortgage, so it's pretty amazing.

[00:19:21] Ryan: I would also say with these, um, I was having this conversation with my wife and she was like, you're out of your mind if you think I'm, if I'm going to have somebody on the other side of my wall again, like, we've, we've been in houses for so long, um, I've stayed at Bill's house. I spent time at Amanda's house. You cannot tell. Like, if this is done right, this isn't like, you know, you're at a college dorm and you can hear people on the other side of the wall, or even like a condo or like, Oh, you know, they fell down the stairs. If this is done right, it's virtually undetectable to anyone that, I mean, like with Bill's house, I wouldn't even have known there was apartments. If he told me I couldn't park in a particular spot. So that's another, um. On the getting started in buy and hold real estate investing is potentially a good option.

[00:20:10] Bill: Anything you could do to build your cashflow up, because that's really what it's all about. And to finish this, a story about the house that I thought it was going to cost us 25 the cost is 46,000 to rehab.

[00:20:22] Amanda: Just so far...

[00:20:23] Bill: It's finished amanda!

[00:20:25] Ryan: It's going to go over 50.

[00:20:26] Bill: I brought an appraiser through the house on Monday all right.

[00:20:29] Amanda: Okay, okay.

[00:20:29] Bill: They were really impressed. Anyway,

[00:20:33] Ryan: they better be for gone double over the budget. Yeah.

[00:20:38] Bill: Um, the extra apartment. I mean, we even put a washer dryer in this space in the basement that was, uh, somewhat set up for this, but we completed it putting walls in, putting a washer dryer in, uh, just making the separation total.

[00:20:54] And yet there's a door that allows you to go through that. We would lock on both sides, if in fact, and also separate entrance into this, uh, into this apartment that really makes it pretty nifty. But. It could be rented as two living units. But there is a niche market out there of folks who would love to have an independent apartment in their house with their house next to their house that they could rent to, uh, their, you know, their, uh. Grandmother or their mother-in-law.

[00:21:25] Amanda: Or house their 20 year old son they don't want to keep track of.

[00:21:28] Ryan: If my mother-in-law's in there, I'd keep that door locked? Now you ain't coming upstairs,

[00:21:35] Bill: so whatever it takes, but instead of renting it for probably about. Oh, maybe 2300 we're looking at $3,000 if we rented with that niche apartment that can be re re rented out by the person there. If we have to now this, this is a little touchy, we would rent them separately and we probably even get more rent out of them. Uh, we, in that case, because the utilities aren't, are combined, we'd have to pay the utilities and bill it back. That's not our preference. We could maybe get a few hundred dollars more per month on that, but our preference is just to have one person oversee the whole thing. They pay all the utilities and they rent out that extra space in any way they want

[00:22:17] Ryan: to. I would say the, I think the point here if you're in a more expensive area, is don't just like throw your hands up and give up. And this doesn't work for me cause I'm not in the Midwest. There are people in your market that have figured out how to make this work. Um, I was looking at just San Diego, which is where I live right now. And there was a, there's a single family that owns something like 3,500 single family houses now. I can tell you there's no way they have a negative cash flow on 3,500 assets. Their, their burn rate would be insane. Now, that doesn't mean there's maybe some that they don't bleed a little into this, that they make it up on. And obviously this was acquired over probably decades, but there are people in your market that have figured this out. It may not be a, you know, conventional. Um, one of the other things build does is student housing. It's rented out by the bedroom. Um, and some of these are houses, right? So there, there is a way to make this work in just about every market. It's just a matter of are you willing to figure it out or not?

[00:23:19] Amanda: And think outside the box. And are you committed to this buy and hold real estate model? I mean, it's not for everyone. We clearly are committed about it. We devoted a whole podcast talking about how much we love buy and hold real estate. But you know, it's just because  we believe in it. It's what we do. And you know, Bill's initial point, um, it's really just a way for the layman to build longterm wealth, and that is again, belts getting rich over a long period of time. It's not going to happen overnight and it's not going to, is that a get rich quick and it does require a lot of work. So

[00:23:58] Ryan: we need to do some slogan t-shirts.

[00:24:01] Bill: Let me point you to our ebook. If you haven't gotten that ebook, you need to get it chapter one will settle the issue for you as to whether buy and hold is really worth pursuing. In chapter one, it goes through the fact that buy and hold is the ideal real estate investment strategy. Well, let's go through these, uh, this acronym a little bit. I is for income. D is for depreciation. That is, you have tax advantages. E is for equity buildup. A is for appreciation,L  is for leverage. And then there's one more I that I want to put in there, and that's the fact you're dealing with an inefficient market.

[00:24:40] But let's, let's maybe start with leverage because this is the power of buy and hold real estate. We'll start at kind of at the end there. Leverage means that I can control. Uh, with, with $1, with $5, with $10, I can control $100. It's like a Teeter totter. You're on the very end of the Teeter totter. The other person is on the very front of the Teeter totter, and you have all the control. Even if that person is heavier than you, you can lift them up because of leverage leverage in our business culture is, is in precious few places. It's very hard to leverage your money. Uh, they will let you leverage, uh, I think your stock portfolio by 50%. Uh, that's, that's as far as you can do it because there was a time when you can leverage 90%, and a lot of people as a market turned down, lost their shirt and drug a lot of it lending institutions down with them. So where in the world can you leverage your, your money, use other people's money to enhance, uh, the control that you have? Well, real estate investment is one of them because again, you're, uh, unless you're a trust fund baby, you don't have unlimited funds. So you're putting in a few of your dollars and you're borrowing the rest of those dollars, either from a private lender or seller, financed a conventional bank alone. Uh, and with that, your, you're able to exponentially control assets that have the potential to give these benefits of I D E A L.

[00:26:13] Ryan: I. I think one of the other points to make here is with leverage this does not make sense if you do not have cash flow, so this is, you have to analyze the deal from the standpoint of if I'm doing a cash out refinance or if I'm into this thing for 75% of what it's worth on a mortgage. Does it still cashflow? And I think not only looking at that initially, but also reviewing that on an annual basis makes a lot of sense.

[00:26:46] You know, I had, I had a property that was a, it's an a class house. I love it. The guy who's in there pays like clockwork every single time, actually pays early normally. And I was like, you know, this has been a really good investment. I wonder how well it's done. And you know, I have a, Amanda sent me over the spreadsheet and I think on this particular property and 18 months, we'd cash flowed $400. Well, that's not, you know, I'm not retiring anytime soon on the the $25 a month I'm getting there. Now the property's paying for itself. That includes all maintenance and everything, but that's something you want to be pretty cautious of of is this actually going to. Bill has the expression, if, if it can pay for itself and then a dollar, he'll do the deal.

[00:27:28] I think...

[00:27:28] Andrew: I would go a bit more than that personally.

[00:27:32] Bill: My, conservative son.

[00:27:34] Ryan: Bill's a bit more of a leverage man than our average listener, but I think the point there is you've got to make sure it is actually paying for itself. You know, getting a. $20,000 cash out profit is great, but if you now bleed $200 a month, it doesn't make sense.

[00:27:52] Bill: There is a point in buy and hold real estate and this way called survive to thrive, because if you're going to scale, you can do property management yourself up to maybe 20 units, 25, 30 units. I don't know. You can, so you're, you're kind of running around doing everything, which I did and most of us did when we started. That's just the way you've got to start, but at some point you start hiring this out and that's when your cashflow doesn't usually meet the demands of having a payroll also. That you have property management either you're outsourcing it or you're doing it yourself. And so at that, that's where the real crux of the difficulty comes. And you need to be prepared to make that jump. If you're, if you want to scale it, you've got to got to figure out how to, how to keep your cashflow high enough and uh, yet keep, keep building your portfolio at the same time.

[00:28:50] Ryan: Yeah. I think that, you know, the way I've looked at it, and I think I'm actually good with this analogy. I view my buy-and-hold portfolio, like a really, really cool 401k. This is something that's, I'm not, I'm not expecting a dividend this month, right? I'm not expecting a dividend next month. This is something that I'm like, my retirement is taken care of at 26 and that's, that's pretty dang cool. And will continue to go up even from there. But I look at the transactional piece, the wholesaling and flipping and wholetaling, that is kind of the now money, right? So, you know, I know a lot of people that, Oh, I want to get to 10 units so I can retire, and you know, cool, I'm getting $2,000 a month. First off. That doesn't do much for me in San Diego. But it's, you know, really like what if instead you took that 2000 a month that you're hoping to cash flow put that back into marketing and then use that to find other deals or find properties to flip. In Indianapolis, our average profit on an asset we choose not to keep is right around $17,000. Right? So it's not very hard to, um, make a very livable income wealth building longterm wealth.

[00:30:10] A friend of mine, uh, wanted to become a full time missionary and was like, I'm trying to just add up how many rental properties I need in order to make this work. And I was like, first off. Well, it's property management gonna look like with you in Africa. Like who's who's doing that piece? You look at it from a cashflow perspective. His goal was to pull in something like 3000 a month. It's like you only have to do a couple of deals a year to have that sort of income. So, you know, I would say maybe that's a little bit of a paradigm shift, but I know even just from what I've seen being around a lot of buy and hold investors, you know, really where you make your, your good, large chunks of money is in the appreciation. In the debt pay down in the depreciation, the tax benefits, and then occasionally you get a really nice cash out refi check. Um, but I wouldn't expect it to be this like fairy tale this is going to be passive, I'm going to retire with 20 units, uh,

[00:31:03] Amanda: collect my mailbox money.

[00:31:05] Ryan: Yeah, yeah, exactly. I mean, I would look at it a lot more of you're building longterm wealth, like five, 10, 15, 20 years down the road. And then use the skills you've developed there to generate kind of your now income. If you don't like your W2 job.

[00:31:23] Bill: Andrew, I wonder if you might share just a little bit about nine years being in Kansas city, you guys finally had a refinance that gave you quite a bit of breathing room here recently, which is pretty cool, but it was tight up til now.

[00:31:38] Andrew: Well, I mean, yeah, real estate's always generally tight when you're using the BRRRR strategy or when you're trying to trying to cash flow. I think people, yeah, people expect just tons and tons of cashflow when you have debt on the property, especially early on, are just kidding themselves. Um, but we finally started to tap into some of the equity we'd built up over the course of, of time. Some of our first refinances, uh, that went through in 2012, 2013 we decided to, there's been a lot of appreciation in the market. This was quite a bit of principal pay down and interest rates were higher. So it makes sense to refinance those, and we've finally pulled out a good chunk of change, and we could have refinanced them earlier if we really wanted to. We really need it to. Um, uh, but, uh, well one thing we were, we had more properties to finance newer properties and so limited number of banks give, willing to give us a limited number of loans. We wanted to prioritize those. We've kind of gotten to the point where we don't have as many properties to finance on the front end, and so we can use some of those banks to refi older properties. And finally, pause the money, get some breathing room. It's a very nice feeling to, to pull out a substantial chunk of change, uh, from properties that you own for, for a good amount of time.

[00:32:56] But it takes a while to get there. It is really a slow.  I wouldn't say an arduous process, but a slow process and it's something that you need to treat with patience. It's, it is a get rich slow scheme. It is. Um, it is the, uh, uh, you know, from the old Stanford marshmallow experiment, this second marshmallow, the, uh, the thing

[00:33:17] Ryan: That's, like the fourth  marshmallow.

[00:33:19] Bill: Delayed gratification,

[00:33:20] Andrew: Delayed gratification. And that is really the name of the game and why, why real estate works so well.

[00:33:27] Bill: I would say if you're the kid in that Stanford marshmallow experiment, the five-year-old sitting in front of the marshmallow who's said, if you just wait 15 minutes, we're going to give you a second marshmallow, or you can eat it now if you want to. If you're the kid that's going to eat it now. And can't wait, probably buy and hold real estate investments, not for you. But if you're the kid who can say, you know, I can hang out here and, uh, you know, fidget around and look at that with, uh, you know, longing eyes. If I can get another one in 15 minutes, that'd be two, if you're that kind of kid, buy and hold real estate investment is probably in your future or could be in your future. And I would significantly encourage you.

[00:34:07] Ryan: Real quick before we close, just cause I want to highlight something here. Um. Andrew's Kansas city portfolio alone is an inc 5,000 company. That is a huge accomplishment, but I think the thing to take away from that is that doesn't mean they're drowning in cashflow, right? When you're doing longterm buy and hold, this is a longterm strategy, and I think a lot of people kind of have the misconception there.

[00:34:34] Andrew: Inc 5,000 is based on revenue. So you can be bleeding. You'd just be hemorrhaging cash.

[00:34:41] Amanda: Which thankfully you are not, but.

[00:34:45] Andrew: We are not, but you could be. And

[00:34:48] Bill: here's the other,

[00:34:48] Ryan: basically just told some people Santa's not real.

[00:34:52] Bill: But here's the other advantage, if you can, if you can survive to thrive, here's what thriving looks like. You get to the point where you can refinance properties that have built up equity now have appreciated some, uh, you've rehabbed them and added value, so they're worth more now. Uh, and all of a sudden you get tax-free. Money. Now you are incurring a debt or you're increasing your debt that you have to now pay more for per month likely. But all that money that comes in  is not taxable because it's a loan. And so it's just another huge advantage to buy and hold.

[00:35:32] Ryan: Dave Ramsey would not approve.

[00:35:33] Bill: But we were fans of Dave Ramsey, except when it comes to real estate debt. And with that, maybe Dave, if you ever want to come on our podcast where we're open, we're open to have you on. So if anybody knows, Dave, please, please let them know. Hey, join the good stewards one of these times. Dave, we'd love to have you or maybe send in a question or comment that you would have and for the rest of you as well, we'd really appreciate those comments. Uh, if you have a topic you'd like us to talk about in the future, please send that in as well. And, uh, yeah, check out thegoodstewards.com. We'd love to have you join our community. Thanks.