How To Build Real Wealth In Today's Market

What's up everybody? Welcome back to the New and Experienced Investor Podcast. Today we're talking about how to build real wealth in real estate in today's market. I'm one of your hosts. I'm Alex Barnett. I'm the new guy.

And I'm Joe Homs, and that makes me the experienced guy.

You're darn right. Today we're gonna be talking about why real wealth is different from just actually doing deals.

Interesting. Are you going to tell me what it is?

Yeah. You're going to tell us what it is.

I'm going to tell you?

Yeah. You've lived it, man.

Wow. Okay.

You've lived it. We're going to go over the biggest misconceptions new investors have. And by the end of this episode, you're going to know exactly the path to take. So that's fun. Buckle up, buckle in. Here we go. Yeah, Joe, we're going to start because you've You're the experienced one, so you know a thing or two about a thing or two, as they say.

Yeah.

So let's go over the difference between— let's go over the difference between active income and passive income in real estate specific.

I don't know, what is it?

Well, you got, uh, wholesaling, you got flipping, that's active income. But you know, the stuff that you get your hands dirty.

Yeah, I like that. It's better active and Passive.

Yeah.

Passive is like investing in a stock market.

Well, yeah. I mean, in real estate, it's like they consider that rentals, but that's definitely not passive once you get into it.

Yeah. No, then that's not passive at all.

But that's what they— that when you're first getting into it, it's like, oh, I see.

I get it. Yeah. They categorize it as passive because that's how you put it on your taxes and stuff. But you're working.

Yeah.

Oh man, especially if you have rentals, you know, you're definitely working.

Yeah. But I guess the difference is with the rental, you're not selling it, then you're giving it a chance to appreciate. Whereas with a flip, you're forcing appreciation, but it only lasts, you know, 6 months.

Yeah. And creating wealth in 2026, you really kind of have to do a little bit of both.

Yeah, absolutely.

You have to do that active stuff to generate income to hopefully buy some passive stuff.

Right. Yeah, you know, and some people, they have a W-2 job.

What's that?

That's where you're working for the man.

Oh yeah, yeah, that's not good.

You're working for the man.

Working for the man. And wasn't there a song?

I think so. Yeah, I think so.

Okay. Like, you're the song guy, right? You know exactly what that is.

Uh, I'm thinking of a Dolly Parton song.

Yeah, I think so.

She's saying like a 9 to 5 or something. There's a lot of Working for the Man songs.

Is there? Okay.

Roy Orbison did one.

I like the Dolly Parton one. Yeah. Working 9 to 5. Yeah.

Roy Orbison did one as well.

Did he?

Yeah.

Who's Ray Orbison?

Roy Orbison! How dare you! Just like A little bit before your time.

No, he was around my time, but just a little bit. Yeah, not much.

He was probably like—

He died in the plane crash, right?

No, God, no.

Really?

Yeah, no.

Roy?

Roy, no.

He didn't?

Yeah, no, I think he died of old age.

Really?

Yeah, he had a hit in the '80s.

Look that up and hit us on the comments. When did Roy Orbison die?

Yeah, The Day the Music Died. was Buddy Holly.

He died in a plane crash.

Big Bopper.

Yeah.

And some other guy.

I forget.

Oh, Richie Valens.

He died in the same plane crash.

Yeah.

Yeah.

That's why I don't trust those Cessnas.

No.

Don't get in a Cessna.

No.

It's bad, bad news.

Yeah.

So why is flipping a loan— it doesn't necessarily create long-term wealth?

Oh, you're going from deal to deal. It's literally almost like a W-2 job. Yeah, it, it's, it pretty much is. Obviously you have the expertise to, you know, do something like that instead of a W-2 job. You're not sitting in the office, you're not playing on a computer, you're out there actually doing things. So, um, it's, to me, it's more entertaining.

It's definitely more entertaining.

You know, than just Sitting and— oh yeah, talking on a podcast, right?

No, exactly. But I mean, what— when we're talking about wealth and real estate, it really comes from holding the properties. I mean, you see it around here. Look around. Look when you first bought your house to now.

Like, that's—

that's— you didn't— you were just paying the mortgage down, and over time wealth was created. You know, it's, it's kind of, it's kind of crazy. It's a powerful A good way. Powerful tool.

Yeah, that, that's why everybody should, you know, participate in home ownership. Yeah, I think so. You know, because if you wait around long enough, it's, it's gonna go up in price.

It's gonna happen.

Yeah.

That's the part. And, um, you know, there's a compounding effect that begins to happen, especially if you own multiple properties. And I was watching a video the other day, it's like called, um, I think it's like Borrow Until You Die or something.

Yeah.

You know, that, that sort of, you It's the IRS tax code was created for these sort of things where you pay down a property, then you can borrow against it tax-free.

The Rich Dad Poor Dad, that's his philosophy.

Right.

Borrow until you die. And I think he owes a bank over billions of dollars, like a billion or more.

Yeah, you sleep at night knowing that.

Why not? You know, it's like, what are they gonna do? And I've heard him talk before and he said, what are they gonna do, come after me? Well, no, they don't wanna call any of my loans due. It's like, that's nuts. Yeah, so I just keep borrowing more and they keep lending me more. And I go, yeah, that's a good way to go.

Right, right.

You know, he's not going to leave anything behind.

Yeah.

That's, you know, those are two different things.

Right.

He's using the money now for his lifestyle.

No, exactly.

Which I don't think it's— I don't think he's got an extravagant lifestyle.

Probably not.

No, I don't think so.

I mean, he's hanging out with Trump every once in a while, but—

Is he?

I thought he was. Yeah, he's friends with him. Pretty sure.

I didn't know that.

I mean, back in the day, maybe it was late '90s or something. Yeah, but everyone was back in the day. Um, but it's the difference between if you have a property and you sell it, you say, okay, I want to cash in, you're selling it, now you got to pay all those taxes. Whereas if you just leave it and then borrow against it, right, you, you could get the money out and buy another property, then it starts compounding.

The heck with your kid's inheritance. Who cares about that?

I don't know. Yeah. I mean, yeah.

Spend it as much as fast as you can.

That's it. Well, I guess that's where the trust comes in. The generational wealth, from what I've been seeing, is when you have your life insurance policy gets paid out upon your death, and then that remains in the trust, and then that gets bigger, and then you have the whole family tree just, you know, putting their money into that. But Eventually somebody screws it up.

Oh yeah, yeah.

Eventually someone blows through it all.

You'll have that, uh, you know, grandkid or his grandkid or something. Yeah, they'll mess it up.

Yeah, exactly. There's just no way.

There's no way.

It's like very few families have been able to do it.

Yeah.

And I think you have to beat the child into submission at some point in order to follow the family rules.

Yeah, not give them anything.

Oh yeah, not give them anything.

You know.

Exactly. So, you know, you know, someone's starting from zero today, what should they focus on first? What'd you say?

I'd say wholesaling. Not easy, but you're not going to be spending a bunch of money, and you can hopefully start making money enough to get you into the flipping game. And then once in the flipping game, you should be making way more money. And then obviously you have your wholesaling background where you're actually going to start acquiring your own properties to flip. And then once you have enough money from flipping, Then you want to start buying and holding stuff. Real estate, not stuff. Real estate.

Yeah, yeah, exactly. No, I think that's, I think that's it.

That's usually kind of the, the pattern, the flow.

Yeah.

Wholesaling, flipping.

Right.

And then, and then acquiring buy-and-hold properties.

Yeah.

And where are you? Step number 2?

Yeah, about step number 2.

Okay.

Yeah. Kind of stumbling around as I go. Yeah, it's the best way to learn, apparently people say.

You do a lot of stumbling.

I do a lot of stumbling. Stumbling forward, failing forward as they call it.

I have to ask like 3 or 4 times. You were talking about a deal today and it's like, uh, that's tenant occupied, it's occupied till June. I said, okay, we're not closing until there it's unoccupied.

Yeah, they said that's fine. Yeah, okay, that's what they say.

That sounds good to me.

We'll see.

Um, so yeah, you're lining them up. Yeah, we're closing on one. And you got another one that you're gonna line up in the mix. That's it.

Pipeline. The pipeline is going good. Um, Stephanie jumped in the chat, back from Nashville, seeing all the assumable inventory any investor could ask for. And while there, I stopped at the Johnny Cash Museum just for Baby Barnett. Look behind Joe's chair.

Do you see something back there?

Let me see.

No, let me get up. Let me get up. Find it. Oh yeah, sneaky. Johnny Cash Museum.

Oh, I don't get gifts anymore. Now my children do.

Yes. And they're not even here yet.

They're not even here yet. He's already getting his stuff.

Oh, look at that.

Exactly.

Look at that.

Just where Daddy likes.

Look at that.

That's so cool. Thank you, Stephanie. That's awesome.

I did not. You went all the way to Tennessee and you brought me back a onesie. Nice.

I got to get the matching shirt because that is awesome.

Yeah.

Just cash.

That's nice. Very nice.

Yeah, it's very cool.

Good job.

Thank you.

Good job, Steph.

That is cool. Yeah. If you guys wanna send in gifts to us, um, it's PO Box 13249. I'm just kidding. But yeah, look it up. Look up where we are. So, uh, back to building wealth. Let's go flips versus rentals versus creative deals. When does it make sense to flip? When doesn't it? And what are some rookie mistakes?

It always, always, always makes sense to flip. Doesn't matter what market you're in. Doesn't matter the price. All that matters is you find 3 properties with an after-repair value And then you end up purchasing the property with enough room in it to make money, put the rehab together. So it doesn't matter if it's $200,000 or $1 million at all. And it doesn't matter at all.

As long as the comps—

Rentals are a different story. So we're talking California rentals, 2008, you should have been buying every rental that was out there. Every property. You should have been buying multiple, multiple properties. The cash flows, and then obviously the market starts turning around and it starts going up, and then it gets to that point where it doesn't cash flow anymore.

Hmm.

And so that's when you double down on the flipping. Okay, you've been doing flipping all along to generate that cash to buy the rentals. But then you get to the point where it just doesn't make sense anymore. And, and, you know, for something like that, you really kind of have to go out of town.

Right.

To do it out of town. Well, where she was, Tennessee, she said there was a bunch of assumable loans there and stuff. Those are great opportunities. The difference with, with, you know, going out of state versus staying in state is California, the market does And right out of state, you're like this. So you buy something out of state for $200,000, 10 years later it's $210,000. Yeah. You buy something in California for $200,000, 10 years later it's $1.5 million.

That's true.

Yeah. So that's kind of the difference.

That's a big difference. And, you know, people, investors out here looking towards different exit strategies as far as rentals go. In order to make that cash flow work. Originally it was the Airbnb boom, but that seemed— the bubble kind of burst on that unless you're— unless you really know what you're doing. Co-living is an option, but, you know, that comes with its own learning curve and mistakes. So, um, that's kind of interesting.

You kind of—

you found some stuff, speaking of assumable loans, um, that, you know, were— that was cash flowing out in Victorville, which is— A little further east where the entry price is a little lower.

Yeah, it's like $400,000, uh, 2.5% VA loan, uh, and it does cash flow like $400 a month. It is Victorville.

I mean, you're still gonna get the appreciation.

But yeah, yeah, you, you, um, and you know, my, my, uh, Long-term goal is just to hold on to it. Yeah. And then, um, you know, when I'm gone, my kids can take care of it. But, um, there you go. You know, it'll be a good tax write-off, which is another thing that I'm looking for as well. It's not how much you make, it's how much you keep.

There we go.

So yeah, absolutely. So yeah, no, there's, there's possibilities in California to cash flow on properties if you know what you're doing. And how to do it.

And that's the key. And that's kind of what we're harping on here is, you know, when you when you start with the flipping, I mean, gosh, you learn a lot about just about running your numbers, about sticking to those numbers, working with contractors. Working with contractors. Gosh, you learn a lot about the business doing that.

Yeah.

And then, you know, title, escrow.

Yeah.

All that stuff. Yeah, you know, it's amazing when I'm like talking to escrow companies that have been around for so long that still don't know what, what they're doing, and then I'm over here, the new guy, talking, like telling them what to do.

Yeah.

Strange.

Yeah.

It's really weird. It's just, it's just experience in different ways where the amount of deals that you've done, I guess, you know. Um, well, and that brings us around to creative finance, which fix— which fits into both flipping and Rental buy-and-holds and could, you know, really unlock your journey of creating wealth through real estate.

Mm-hmm.

And I would say that it matters a lot more in high-rate environments, which we're in.

Yes.

Because people can take over other people's loans.

Yes.

Word on the street is Subject to, which is one of the ways we've bought properties, is dead.

What?

That's—

Did somebody tell me it was dead?

That's according to one video.

I have not heard one video.

Let's go ahead and pull that up.

Okay.

And we're gonna find out about it right now.

Today might be the day that subject-to investing dies. Breaking news coming out of an article from ClickOrlando.com. ABG Ventures, who you might know, purchased hundreds and hundreds of properties using a subject-to investment real estate strategy, and now they're walking away from the loans. This could mean that hundreds of people lose their houses. This could mean millions of dollars in losses, and this could be the end of subject-to investing. And I'm not even joking. Now, my buddy Zach Ginn and I were actually hanging out in Virginia yesterday when he discovered this article and made this video, and it went viral. And since he dropped that video in the past 24 hours, I've gotten deep into this case, and there's some things that you just have to know. This is BG Ventures, a financial advisory company. It makes no sense to me. And a lot of you guys may have heard of this guy named Rafael Bito, allegedly. Let's make something clear here. BG Ventures and every name and face that I show So these are all alleged. Don't sue me, bro. All these people are innocent until proven guilty. Okay? This is for educational purposes only. But a lot of people are talking about this individual who, in my opinion, may very well be the worst underwriter in American history. That's just my opinion, and I will show you why I think that. But I think there are more individuals involved in this case. So just want to make that clear. This Rafael Bito seems to be like the front man. It's almost like the fall guy, right? Like he seems to be getting all the heat, and it's probably because, well, he was associated with the sub two community. He was actually a former. Member of Pace Morby's Sub2 community, and he was a notable figure in this creative finance real estate investing space. And why wouldn't he be? He bought like 300 properties. He must know exactly what he's doing. He's like, he's like BlackRock, bro. Well, nah, nah, because when you dive deep, you'll see that this is a house of cards. And yeah, it's fallen. And in my opinion, it's only going to get worse. As Pace Morby says, you know, the, the equity, it comes and goes, but the cash flow, it always flows. But in this case, what if you buy a bunch of properties that are underwater, negative equity, and then they don't cash flow? Let's get into this story. And let's make one thing extremely clear here. I am not blaming Pace Morby at all. If anything, I just feel really bad for the guy because Pace Morby, he always advocates to buy properties that cash flow. And this was just, in my opinion, a degenerate investing strategy. And I feel like I need to make this video to bring awareness to bad subject-to investing strategies so that no more do you Go and find these deals, right? If you're a wholesaler, you shouldn't find these deals. And if you're an investor, you should not buy these deals. Let me explain. To summarize this article, and I'll leave the link down below, you know, please go read it. BG Ventures bought properties subject to. And what does that mean? They took over the seller's existing loan instead of buying a property with cash, right? Or getting traditional bank financing. They just took over someone else's mortgage. Okay. And the reason you do that is these mortgages typically have 2%, 3%, 4%, maybe 5% interest rates. You get a better interest rate and you don't really need to qualify. And it's It's super easy to buy these properties, but the key is you get a low interest rate. So these investors, like allegedly BG Ventures, because they're buying hundreds and hundreds of properties from people at near or over full price because they're getting a low interest rate loan. And the concept is, it's fine, I'll overpay for a property because in 5, 10, 20, 30 years with appreciation, I'll be saved, right? I'll be pulled out from Johnny because, hey, inflation. But it doesn't matter because I'll cash flow on these properties because the interest rate's so low. I'll just rent them out. I'll make a couple hundred bucks a month. What could go wrong? Well, maybe you don't cash flow because Maybe you buy these properties in Jacksonville where the market is going down. Jacksonville, Florida market's going down and the market's actually going down in a lot of places in the US. Yeah. Home prices, they don't always just go up. And to make matters worse, in Jacksonville, Florida, insurance prices are skyrocketing. So now even if you were making $100 or $200 a month, now you're losing money. And now BG Ventures, what are they doing? Well, they are literally walking away from these properties. Why don't they sell them? Max, what's going on? I'm going to go through all the underwriting, all the numbers with you in a here in a second and you'll understand why this is literally the most degenerate real estate investing strategy that I've ever seen in my entire life. This is literally the equivalent of borrowing your grandma's credit card and going short-term call options on GME stock. Like, this is WallStreetBets level. Like, this is gambling. In my opinion, this is gambling. And the big problem now is that these sellers, they still have the debt in their name. And guess what they don't have? They don't have the deed. They don't have the title. Oh, this is bad. Let's just use this property for reference. This house is listed for $200,000. So is it worth $200,000? Well, no, it's not worth $200,000 because if it was worth $200,000, it would have already sold. Right. That's one thing a lot of people don't understand. It's probably worth $190,000, $180,000, maybe even $170,000. Well, a lot of these subject-to investors, what they'll do is they'll say, hey, I'll pay full price if I can just take over your debt. So imagine that they pay $200,000 for this house and the interest rate, maybe it's a great rate, maybe it's 3% interest rate. Awesome. But the problem is that the house was actually only worth about $180,000, right? That's the fair market value. But on the buyer side, there's oftentimes costs associated with buying the property because these subject-to investors, in order to get the seller and the realtor to agree to doing a subject-to transaction, they put some benefits in there. Mr. Realtor, I'll pay your commissions. Mr. Wholesaler that brought me the deal, I'll pay your assignment fee. Oh, and I'll cover all the—

So you see where this is going?

Yeah.

Yeah.

Yeah.

They bought wrong. And like he's mentioned, maybe you were cash flowing in the beginning, but now you're underwater because they didn't account for the insurance.

Somebody asked me the other day, Joe, what's a good cash flow for a property? I used to say $200 a month. No, no, that's like not even close. $400 if you know what you're doing.

Right.

You know, and it needs to be— if you don't know what you're doing, you need to build that buffer, and it should be at least $600 a month cash flow.

Yeah.

You know, you're definitely not going to get that here in California.

It's hard.

Maybe some other places.

It's really hard.

But I think this was probably fraud from the beginning.

Yeah.

He just figured out, okay, I can use this tool To get this thing done. And I, I did see a wholesaler fee there, so he's probably the wholesaler in the transaction and getting paid up front as well, right? You know, so yeah, it's just— I don't think it's dead. No, I don't think subject-to is dead.

Exactly.

I, I just think this guy is dead.

Yeah, this guy's done for a while.

Yeah, he's dead.

Yeah.

And, you know, I saw even within the group that, you know, people were going on buying sprees and raising money. And, you know, because sometimes you'll, you'll, you see it all the time, like you get a subject-to property sent to you and it'll be like $10,000 entry fee. That means no money's going to the seller. $10,000 is going to the wholesaler. But, you know, maybe the payment's like $3,500 and it only rents for $2,600.

Yeah, there's a good deal.

Yeah. So, you know, people see that and they're like, well, I'm getting a property for $10,000. Yeah, but you need to hold on to that for so long for that to make sense. And unless you're making beaucoup bucks and you need that much of a write-off to where you can take a loss, which some people I guess can, but it's not smart. It's a precarious place to be.

Yeah.

If you had to pick one strategy for the next 5 years, what would it be?

I guess it depends on where you live, but in California, the only strategy that I see working right now is flipping. And whether that's flipping mobile homes or single-family homes, uh, you know, whatever it is, that still seems to be working.

Yeah, sure do.

And we're just All sitting on the sidelines waiting for the next thing to happen. And who knows what that's going to be, whether it's going to be good or bad. You know, you deal with it at the time because a lot of, a lot of people make money in bad markets.

Yeah, absolutely.

Plenty of opportunity. A lot of people make money in good markets.

Yeah. Yeah. Yeah. You were mentioning today that there's 30% more agents than deals.

More real estate agents than deals. Yes.

You know, and, and it's, you know, when, when the market's going up and up and up all crazy, it's like everyone's in there making money and they're geniuses.

Yep.

And then you start seeing video. I, I, I— my whole basis for everything is based off of YouTube thumbnails. So I'm seeing—

You're doing like this?

Yeah, I'm like, oh, okay, that's what the market's doing.

I like that one.

Yeah.

I mean, Yeah. Oh yeah, no, I don't like what you said.

And the thumbnail will be, everyone's quitting real estate.

Yeah.

Why every investor is quitting. And I'm like, oh, it must be a lot of people quitting right now. It's gotta be bad out there. Um, but you know, it's about the long game. That's one thing that like real estate really did was make me see beyond the next day.

Yeah. You know, you were like a day-to-day person. Well, that's what you were from. From— yeah, that's what tour is, from one venue to the other.

That's it. Yeah.

And that was, that was your goal for the day. You go to the other venue, you got there, and then you're thinking, okay, the next day is the next venue. Not—

that's it.

Not 100 years down the road.

I know.

Not, not a baby.

Not a baby.

Yeah. Wow.

Yeah. Now I'm like—

You did that for a long time.

Did that for a long time. Now I'm like, oh, if I take the right peptides and supplements, I'll live another 60 years.

Yeah, or you can do the, the Trump account. Oh yeah, open that up. $1,000 the government gives you, and then start sending out the link to all your family and friends. And oh yeah, hey, you can donate.

Yeah, exactly.

Why send gifts, you know?

Oh, I know.

Send money to the kid.

Well, that— okay, so this is what I came up with. Tell me if this is a good idea. You know how we go, okay, we're gonna be like minimalist with all these toys, but you can't stop the grandparents or anybody else buying the kid toys. So my My plan was I'm gonna tell them I'm teaching him about business, so any toy that you give us, we're going to resell, take that money, and then put it in an account for him.

No.

Why?

No, that's disrespectful to the grandparents. Well, that's what I'm saying. The grandparents are there to spoil the child, okay? And when the child comes over to the grandparents and says, hey, Can we go to Lego and get a Lego?

He already sold that and I put it in his account.

No.

I told you.

No, no, no, no. Grandparents get the toys and then you give them the link to the Trump account and they add in addition to that. Okay, maybe say, out of all the toys you buy him, could you match that with a donation? There we go. Okay, that's good. That, that would work.

Yeah.

But yeah, don't tell grandparents that they can't do things for their grandchildren.

No. Okay.

That's not gonna work.

Putting a stop to that right now.

Put a stop to it.

Okay, fine. Let's go over the wealth ladder framework. We kind of went over it. Um, this is where you kind of bring structure to the whole everything that we're talking about. Step 1 is the learning and earning phase. That's where you can come here, take Joe out to lunch, He'll tell you exactly what to do and then you just do it. And this could include your first flip or wholesaling. This is where you're making a lot of mistakes. You don't know what escrow is, you don't know what title is, but you can stumble through your first deal and make a pretty good paycheck.

Yeah.

Then you do the capital stack. That's where you reinvest your profits. Maybe now you can Go out there, get a hard money loan. You can cover the gap funding. So now you're doing your own flip by yourself. You know, you start push the bird out of the nest. Push the bird out of the nest. It's hard. It's really hard.

And yeah, the bird keeps coming back.

I don't know why.

It comes back. It's kind of like a cat. You feed a cat, you know, milk.

Mm-hmm.

And he keeps coming back every day. And people go, why does this cat keep coming back?

Cat's the smartest animal on the planet. That's why.

You're like feeding him milk. Yeah. Okay. It's like, if I get free milk, I'm gonna go back.

Exactly. You know, yeah, that's it. Free milk, baby. Um, then after that, you're gonna start acquiring assets. These are the long-term holds. That's gonna be a different beast. So then again, come in here, take Joe to lunch and ask him what you should buy. I'll tell you what you should buy.

Buy and hold on to everything for the rest of your life. Do not sell. There you go. Do not sell. Flip, flip, flip, and then buy and hold and buy and hold. And buy and hold.

That's it. Then you can leverage relationships, bring private money in, and start scaling it, because now you've got the system, credibility, credibility.

Yeah.

And you know what to do.

Yes.

Hopefully you've gotten all those mistakes out of your—

Hopefully. I don't know, I'm still working on you.

It still happens, still happens here and there. Um, where would you say out of all those Like you find that most investors kind of stall out or they're unable to move to another level. Out of all the investors that you've met—

We're back at the first step.

Out of all the 500 investors from BiggerPockets that Joe has met in the last 10 years—

We're back to the first step.

They can't even get to step 1.

No, they can't get past step 1.

They can't get past step 1.

Past step 1. It's like, oh, I want to do it. I want to do it. I want to do it. And then 3 or 4 years later, hey, Joe, remember we had lunch 3 or 4 years ago? Yeah. Well, I'm thinking about, you know, jumping back in. Did you jump in in the first place? No, no. That's why I'm calling you. Let's have lunch again. Okay. Let's have lunch again.

Or they do the, I should have listened to you because if I would have—

Yeah.

That hurts.

Yeah.

Especially, especially right after COVID.

Yeah, exactly. That's exactly what I did. Went from a musician traveling in a van to now a seasoned investor.

How many people were in the van? I think I've asked you this before.

Oh, we got 4 band members, we got a merch guy, and then a tour manager. So 6 people.

Oh my God, in a van?

Yeah, it's easy.

Wow.

That's easy. Yeah, everyone sleeps comfortably.

Oh yeah, right.

You're just getting, you know, $5 a day per diem. Don't spend it all in one place now.

How much a day per diem?

I think— no, I think we did like $20 a day or something.

For the whole day?

Yeah, for the whole day.

Yeah. Okay, because I used to have a broker that I worked with and he had a rule. It had to be a $5 lunch.

Okay.

We couldn't go any place Unless it was $5 or less.

Well, back then you probably could have found a place.

We could. Yeah. But it was like Carl's Jr.

Okay.

Um, what's that other place?

Now it would be like Tim Hortons.

It was like, um, what was the name of that place?

Red Robin?

No. Uh, it's another place. It's like a fast food place. But anyways, it was $5 and he, oh, he loved McDonald's. I could not go to McDonald's.

Oh.

He loved McDonald's.

You can't get anything at McDonald's for $5. Maybe now.

Back then we did. Yeah. Back then we did. And he was— he was such a nice guy. He was a good conversationalist. He was a wealth of knowledge. I learned a lot from him as well.

Wow.

So yeah, it was a good time. $5 lunch.

Is he still alive?

No, he's been gone for a while. Yeah, he was older.

Okay.

He was even older than me. Way older.

Oh, okay.

Yeah.

Good man. Good, good man. Okay, since we're talking about building wealth, we need to talk about what destroys wealth. We've all been here, folks. You may be here right now. Um, one, overleveraging. Overleveraging.

Yeah.

You got nothing in the deal.

Like the subject-to type stuff?

Subject— yeah, exactly. Subject to. Yeah, you borrow money all around. Um, you borrowed, you overborrowed, you're underwater now.

And yeah, using your home as an ATM machine, that'll do it.

Oh yeah.

You know, divorce, that's another big one.

Oh yeah.

Yeah.

Yep.

Loss of a job as well. I mean, hopefully you have enough of, you know, a room if you do lose your job. You should, you know, they say you should have at least 6 months of income in case you do lose your job. But yeah. You know, if your job is that type of job that's getting phased out, you know—

There's going to be a lot of those.

I think during Trump's first administration or right after, they were telling the people that were building the oil pipeline to, you know, they weren't going to do that anymore. I think it was Biden's administration.

Oh, yeah.

And they're saying, you guys need to be coders. Oh, yeah.

Learn to code.

Learn how to code.

Yeah. Yeah. Here we are, 2026. Yeah, you don't need to do that anymore.

Yeah, that's not a job.

Chat and everything else is doing it for you.

That was like all the people that got, uh, laid off from the Washington Post, and then they're, they're out there like picketing.

Yeah.

And they're like, people are like, you should have learned to code. Yeah, those are the same people like writing those articles.

Yeah, you should have learned to code.

You should have learned to code, bro. Well, I mean, even music, music's like pretty much done.

Uh, movies, movies are done. Pretty done. I was telling my wife the other day that I think the future of Movies is I'm a big Star Trek fan.

Yep.

Okay, and I think all I have to do in the future is say, okay, Star Trek, the original episode. Okay, there was like five, four or five years. I don't think it was even that long, like three years or whatever.

Okay, series Shatner and yeah years.

Yeah, so I want you to take the same characters, chat, anthropic whoever.

Yeah.

And I want you to create new episodes for me.

Yeah.

And that's going to be my TV in the future. Everybody's TV in the future. So, you have your favorite shows, you just basically say, here, just create more shows. Use the same people and create more episodes and shows. And, you know, and it'll ask you like, do you have an idea on a plot? Yeah, sometimes I do. Sometimes, you know what, just Make one up. Oh my God. You've got all the information from the previous series.

Right.

Just make one up. You know, use those same characters, the same plot, and, you know, just figure out something different. Don't you think that would be— did I just invent something?

That's gonna be unreal. Yeah, you did.

Yeah.

You can put it into an app or something.

Yeah.

It's gonna happen. It's like, well, we need like—

just talk to the computer and say, you know, this is what I want you to do. I want you to create A whole next year series on this series.

Yeah.

And then show them to me.

Probably need a whole lot of data centers to make that happen, but they're gonna be in the sky.

Oh God, it's gonna be up.

Yeah, literally in the cloud.

Yeah, that's where Elon's gonna put them. That's, that's why they call it the cloud, you know that? Yeah, it's going up because it's going up there.

Yeah, well, now he's talking about going to the moon. That's his big thing.

Do you think that we actually landed on the moon?

Oh, Joe, don't get me started on that. You've seen the videos.

They did a good job. You know, they made a movie about that, that, you know, we did not land on the moon. It was all make-believe.

Who directed it? The moon landing?

Who was it?

Stanley Kubrick.

Oh, okay. Yeah, I like Stanley.

I know.

He's a nice guy.

Yeah, he's a good guy. Stanley Kubrick directed the moon landing. I mean, if you go, if you go back and watch it now, it's kind of hilarious. But at the time it was mind-blowing.

It was.

And then they go, well, where's the old footage? And they're like, oh, we deleted it. So I don't know. Yeah, it's hard to trust them. But, but anyway, we could be going soon. Um, the second thing, lifestyle inflation. You know, you start, you start flipping, you start buying more gear. You think it's gonna— you think it's gonna live forever. You think you're gonna keep it.

That's your problem.

I've had that problem. Not anymore.

No?

Once I listened to Charlie Munger, now that I have a kid, I'm buying all my pants from Costco. I'm washing my shoes instead of buying new ones, and then only buying shirts from the Goodwill. Oh, there you go.

Okay.

You know how quickly it changes.

Okay.

Uh, number 3, not understanding taxes. This is a big one.

That's a big one. Yes. Like I said, it's not how much you make, it's how much you keep at the end of the day. So yeah.

Well, and somebody— I was watching a video and they were explaining that the tax code is written for investors because they, they want people to invest, create businesses. They want people to buy real estate. So that's why there's loopholes and the people that take care of them. It's not even loopholes, it's just written that way.

Yeah.

So the people that follow those codes are able to get their income down to zero.

Depreciation. Anything in taxes.

Yeah.

Can you imagine that? And I mean, that's super, super, super rich, right? I've got the formula down. And plus they have all the money and the attorneys to fight all these things. It's the people at the bottom that don't have anything.

Yeah, it's like the middle class and the poverty level that have to pay like 45% tax, especially out here in California. It's nuts.

Really nuts.

And then we're like, where'd the money go? They're like, we don't know.

I saw something on the Super Bowl. Because they played the Super Bowl here in California, they have some sort of special tax For the players.

Okay.

And they tax them like 35% of what they made. Yeah. And this one guy was saying that, um, I think they made like $175,000 for just playing in the Super Bowl. He says after the tax and everything, he owes, he owes more on the taxes than he actually got paid.

I think Gavin Newsom like showed up and was like hobnobbing with people.

Was he?

No. Yeah, he was back.

I didn't see it. Yeah, it's like—

I just saw videos of him like, yeah, back in the backstage, just knowing he's just funneling so much money from that.

Yeah, I think, uh, what's the Facebook guy? Zuckerberg. I think he's moving.

Yeah, they're almost going to Florida. They're making it insane.

He bought this $45 million mansion or whatever in Florida and—

Oh, really?

Yeah.

He's going Florida, man.

They're all speculating that he's gonna move there. It's like, why not?

Well, yeah, he doesn't really have a home. He lives in the cloud. He does, because he owns like part of Kauai.

Yeah, I was gonna say he has a big, big thing going on over there, you know, but basically still ancient land. But I'm sure that Hawaii is the same as California. They're, you know, taxing the hell out of people over there, so Why not go to Florida?

Yeah, I know. They're welcoming these people. Yeah, yeah. I mean, um, yeah, even Nevada is like, come here, you know.

Oh, the other thing I did hear the other day as well, there's a petition going around, and if you see it, please sign it. Um, basically, if you're 60 or over in California and you own a Property, yeah, that you live in. Yeah, you don't have to pay taxes, property taxes anymore.

Okay, I mean, that would be nice.

Yeah, I'm in. That'd be really nice if it—I think it needs like 875,000 signatures to get on the ballot. But believe me, when it gets on the ballot, oh yeah, the baby boomers are going to say we're in. Yeah, really, you know, and I'd rather not pay the government money with the way that they're. Using our money just literally to throw it away.

Right.

So why give it to them? I think that's a great plan.

I think it's great.

I think everybody should sign it.

Some places have like a homestead exemption, which is—

Oh, that's kind of like— that's not— that's nothing. That's— oh, that's if somebody's trying to take your property away from you.

Oh, I thought it was a tax thing. No, no. Okay.

No, no, that's if somebody's trying to take your property away from you, you can shelter a certain amount. Yeah, no, no, don't, don't go down that road.

Well, I only know because I have one property in Alabama, and the guy that was living there had some sort of tax thing because he was living in it. And now that the investor owns it, it went up like 3 times for property taxes. So there was some sort of something he had in place.

Yeah, the, the homestead is basically, you know, let's say it's $100,000 and the property's worth $100,000. If somebody puts a lien on a property, they can't get you out of that property because you have it homesteaded for that $100,000. Yeah, it's just, it's just protecting your property and, and whatever value that is that they put on it. Don't, don't even get me started on what the homestead laws are here in California because there's nothing, you know, there's nothing.

They don't do anything.

No.

Next on the list. Mistakes that destroy wealth. Emotional buying. Yeah. So you have to have the property for some reason.

Yeah, that's— I guess that's what a normal buyer does. It's an emotional buy. Emotional thing, you know.

And then the last one is market timing obsession. A lot of people fall into this. They're waiting for the market. They're waiting for the interest rates. They're waiting.

They're waiting. They're waiting. They're waiting. They're waiting.

And when it comes time—

Yeah, I get, I get a call every year from friends, and it's usually around tax time. Hey Joe, I just met with my tax guy and he told me the same thing he told me last year and the year before. You better buy something because you're paying too much in taxes. I go, yeah, we have this conversation every year. Do you want to buy something? Uh, no, I just thought I'd call you and say hi. Yeah, it's like How many more people do you want to get hit over the head with? You know, it's like, hello, you know, it's like, hello.

Come on, people, take action.

Yeah. It's, it's really hard to time the market. Right. Um, you know, unless you have that crystal ball, I have it once a year.

Yeah. Oh yeah, that's right.

I have it once a year, but, uh, they take it away from me for the rest of the year. So, It's, it's hard. It's hard to time. Just, you know what, if you need to do something, make sure that fundamentals are there, that you're making money on the property, whether it's like a buy and hold or a flip, and just pull the trigger. Move on.

There you go. That's it. So if you made it this far, thank you very much. We are going to leave you with an action plan. This is for someone that wants to start building wealth in real estate starting this year. You've been sitting on the sideline. You're that person. You want to start this year, here's your first 3 steps. Pick one strategy, just start there.

Mm-hmm.

Whether that's wholesaling, flipping, even if you're gonna buy rentals, because we have people that show up at your meetup, they have a W-2 job, they have money saved up, they can afford a rental. So that maybe that's it. But, you know, learn one strategy. Number 2 is master underwriting. This is where people want to get real sloppy and impatient and not understand every single thing that goes into it. With flipping, it's, you know, not just the contractor, it's also the financing, it's also the holding costs, the little trips to Home Depot that never end.

Mm-hmm.

Um, all that stuff, it all adds up, and then by the end You're like, wait, where'd my money go? So master your underwriting. For rentals, I'd say people, they leave out a ton of stuff that they didn't think. They're literally just like, okay, what's my rent minus the PITI? But there's also PITIA, which is— what was that?

Association.

Oh, yeah. You got maintenance.

You also have management if it's out of the—

Management.

the country or out of the state.

Yeah. You know, everybody else gets paid and then you do at the end.

Yeah. I mean, Victorville's 2 hours away. It's almost like another state.

Yeah.

You know, right? If this— you want to go to Victorville to change a garbage disposal?

No, no, no. You're going to pay someone to do that. And then lastly is build relationships, whether that's, you know, lenders, private money, contractors, mentors. That's what you're going to do. That's your action plan. Pick one strategy, master underwriting, build relationships.

Yes, you can build those relationships at our monthly meetups. We have one coming up at, uh, the end of this month, uh, Mike Morawski, February 23rd at Norwood, 6 o'clock. And we had a sellout crowd last time. And we had a great time, and I'm sure we'll have a great time again. So come and meet.

We always do.

And talk to everybody that you can.

Exactly. Come out of your shell a little bit.

Yeah, please.

Don't be scared.

Yeah, I tried to call some people to come up last month and, you know, get them out of their shell, but they didn't want to.

Scared. If Joe calls on you, just bite the bullet and tell them why you're there.

Just come up. You know, there was that one guy. He was young guy that had the cleaning company.

He did a great job. Amazing.

He did. He did a great job.

And I'm like, yeah, this guy, this guy knows what's up. He did a great job. So yeah, again, yeah, or if you guys want to meet with us, you can always reach out. Oh, actually, let me put this up here. You can always reach out. Oh, I thought I had— take this.

If we had a real producer, we wouldn't have these issues.

There we go. Yeah, take that.

If we had a real producer, but our producer's off on maternity leave.

It's been a long time. Geez, how long does it take to make a baby?

We're getting close.

We are getting close. Yeah, like less than 10 weeks.

Wow, I'm excited.

Less than 10 weeks, this is gonna be filled with a dirty diaper.

Yeah. Are you gonna change diapers?

Yeah.

Oh yeah, that was part of it. I was telling somebody the other day, I had 3 kids, I don't think I changed more than 10 diapers.

It's a different time back then, Joe.

It was.

I had to promise to do everything, so I'm gonna hold up to my end of the bargain here.

Okay. We'll see how long that lasts.

I'm hoping— this is my plan— is like I just do it like so clumsily that she's like, get out of the way, let me do it.

Oh, that's a good trick. I like that one. Yeah, I like that one.

So yeah, there's always just stuff running down the back of his leg after I change it.

That happens if you're perfect.

Oh, okay.

Yeah, that happens if you're perfect.

All right, well, yeah. We could just hose them down.

These are children.

They're children.

They don't care.

They're children.

Yes.

They're easy.

They could take a lot. Yeah, you know, exactly. How many times are you dropped in the head?

Oh, at least a dozen.

Yeah, at least.

Baker's dozen.

Yeah, yeah, yeah.

That was before they knew about CTE. This was early '80s. All they— it was like the 3-second rule. They'd pick you up Dust off the head. Yeah.

You're like, hey, he's fine. Well, that's the first one. You know, the first one you're like this, right? The second one you're like— the third one you're like, it's fine.

They're fine. Go play.

Yeah, you know, go play.

Yeah, even if your third one's a girl.

Go play.

You got it.

Gotta make them tough. Yeah, you know, you gotta make them tough for this world.

That's right, toughen them up. Yeah, different generation. So, uh, right on, you guys. Well, appreciate it. Liz says hi.

Hey, Liz.

Um, yeah, we'll be back here next week, and then we have some guests coming in. I have some people booking out. Yeah, yeah, people coming in, wanting to come in.

Nice. Okay.

So we will give you guys a full update on our very, very exclusive guests for 2026, and then, um, You'll be there and you'll get all your real estate knowledge right here. So keep it locked in. Thanks everyone for watching and make sure to share this far and wide, and we will see you on the next one.

See you then. If you want some more advice on real estate Investing, reach out to us one-on-one.