Speaker A argues that renting a $23 million Beverly Hills home and investing that capital in businesses beats owning. He'd pay $120-140k monthly in rent versus a $6,500 mortgage, but deploy $23 million into acquisitions that could generate $4-6 million in profit and double to $35-40 million in value, far outpacing real estate's typical 4-5 percent annual return.
And that's why I end up believing that we shouldn't own any homes and we should just rent them all. So when you're looking at the math there, that's $23 million sunk costs that's put into the house that I'm not getting back because that was the equity, the cash I had to put in. Then you have still with that, you have the monthly payments of roughly $6,500. And again, I'm off by a few grand, call it $2,000, $3,000, but let's just go with easy Numbers on the $23 million, you know, because I was talking to my wife, I can go rent a house, like a nicer house. It won't be as nicely done up, but it'll be bigger. Land will be bigger. It's worth more, but it'll be older. It's still in Beverly Hills. And let's say I can rent easily 3-year contract, $120,000, $140,000 a month. I could just negotiate that. Now you may look at that as, let's say I get it for around $130, we'll go to the middle point.
Yep.
And I'm at $65, that's roughly double what I'm paying.
Yep.
But the $23 that I have now—
Opportunity cost.
That $23, I can, I wouldn't say easily, but I would say I'm probably like 80 to 90% certain that I can ink out, call it $4 or $5 million for on the worst case scenario. 5 on a good case scenario without any growth, just like buy businesses and ink out that much in profit. Plus there's opportunity to grow, but some could decline. But if you just keep it simple with just say 4 on the really low end, which would be a terrible deal for me, and I usually wouldn't spend $23 million to only make $4 million in profit.
Yep.
But even at $4 million, it's just like, okay, $130,000 a month. You know, you start looking at that, that's less than $2 million a year. And you're just like, I'm making foreign profit.
Plus that those businesses scale too over time.
Yes.
All right. So I wanted to take a moment to tell you about my podcast co-host Neil's agency called NP Digital. And they work with a whole host of global companies or global organization. Also, Neil has SEO tools such as Ubersuggest and AnswerThePublic. All you have to do is go to npdigital.com to learn more. And we'll see you on the other side. Because the other thing too is if you look at the real estate returns, oh well, you're going to get a return. Okay, what are you getting? Like 4 or 5% a year on real estate? Maybe, maybe, maybe a little better. But on business, what is your return that you're getting on it?
That I'm getting on my business?
I'm just talking about like in general for people, your return's going to be a lot better than 4 or 5% a year.
Well, not just that. If I spent that money buying the businesses, the businesses are probably worth double when I integrate them in. So if I spent $23, I'm probably inking out conservatively $35, $40 million just right there off of thin air, just from the purchase. But we usually don't buy stuff unless we know we can cut costs and grow it. So I would hope the $23 turns into at least $50 and turns into at least something like on the low end, $5, $6 million in profit, if not more.
My point is your internal rate of return is going to be a lot higher. The other thing too is if you buy homes and things like that, then you have to actually manage it. It's like when Sam Ovens is like, well, if I buy a TV, then I have to watch it. So yeah, like it's like it's It's cognitive load. Yes.
And that's why I end up believing that we shouldn't own any homes and we should just rent them all.
I believe, okay, and I think you're doing this, but like, I believe owning a home for your family is fine, but I think owning a bunch of homes just is a pain in the ass for me. Anyway, that's all I'll say. A jack of all trades, guys, is better than a master of one. See you tomorrow.
