MBA2464 Extended Interview: Dave Meyer – How to Use Real Estate Investing to Retire Early

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Dave, so good to have you here on the podcast.

I was really excited to see your.

Name on my calendar because this is a topic that I wanted to explore not only for the audience, but also for myself. You know, I want to get into how to diversify my investments, my wealth through real estate. And I'm not really sure where to start. But before we get into all the nuts and bolts of that, I want to first welcome you. Thanks for being here.

Thanks for having me. I'm excited to be here.

Awesome. And I want to start by just.

Learning a little bit about you said.

You grew up in Westchester. I want to learn a little bit about, you know, what were some of the influences in your life? What was the first moment where you're like, oh, there's other ways to make money than a paycheck. What was that moment in your life when you were growing up?

It happened for me relatively early. My parents got divorced when I was around 11 years old and that's when my allowance Basically just got cut off. And my parents were sort of like, we're going through a difficult financial time that lasted quite a while, and I wanted to hang out with my friends and do other things. And so I quickly learned how to make money for myself. And when I was in middle school, I started doing things as simple as walking dogs and shoveling snow. I did work at formal jobs in high school as well, but in college, I dabbled in a few other entrepreneurial endeavors, like throwing and planning parties and partnering with local event spaces. And so I just always was trying to find ways to make money. I wasn't really thinking about being an entrepreneur. I was more sort of thinking about how to just do the things that I wanted to do at the time. But it does leave a lasting impression on you. And actually, right after college, about a year out of school, I was waiting tables and decided that I wanted to start my own business. And that's how I wound up first getting into real estate investing.

I love this. You know, I've shared before that I started my journey by selling my Halloween candy to my.

To my schoolmates at school.

Exactly.

The margins are great.

It's so funny. My mom loves telling this story that I think I was in, like, fifth or sixth grade, but she got a call from the school because I was buying baseball cards from kids and then selling them to other kids at a markup. The school was not appreciative of it. I don't really remember doing that, but I guess that's just entrepreneurial.

It's interesting that, you know, that was discouraged, but, you know, you didn't do anything wrong. But I guess, you know, the kids were getting angry, but you touched on something else, you know, busting tables and then deciding, okay, this is not for me. One of the things I talk about a lot, and I want to hear what you think about this is sometimes the best ways to figure out what you want to do is to just do a bunch of stuff that you hate. I remember one of my first jobs was washing cars at a wash bay in a car dealership. And I remember at the end of the day, my hands were crusty and dry, and I was just tired and aching. I was like, I don't want to do this rest of my life. Like, do you agree with this? Did you have the same experience?

Oh, yeah. I had a lot of those jobs in college. I worked in sort of an office, just doing, like, clerical filing work. I hated that right out of school. Another side hustle I tried was working in real estate. But I was cold calling for an agent that was absolutely miserable. You know, there are a lot of things I actually didn't mind waiting tables. I actually kind of found it fun. But, you know, I definitely understand the sentiment. And there was a lot of. A lot of different jobs I had that. Whether it's poor pay or poor treatment, just from either customers or from managers, honestly, I find it motivating, or did find it motivating to want to have a little bit more independence and a little bit more of a say into my own career.

And that kind of stems from that whole feeling of autonomy, like you want to do your own thing. And I think everybody who's listening has that itch and can resonate with that. Having said that, if you meet somebody at a party, how do you describe yourself? Like, you know, we do a lot of things. We're all, you know, we podcast, we write, we sell, we invest. You know, like, so how do you describe yourself first to a stranger, and then if they get interested and they're like, oh, tell me more, what do you say then?

Well, for a long time, I would have described myself as a data analyst, which is what I'm formally trained in, and I've done for a long time. Now at this stage in my career, I am a real estate investing educator. And I basically have taken what I've learned both as an investor for the last 14 years or so and spent the last 8 years professionally analyzing the housing market. And now I get to combine those experiences and talk about it and help people understand how to invest in real estate, why it makes sense, or I should say, when it makes sense to invest and when it doesn't make sense to invest in real estate. And I get to do that in a variety of mediums. So I've written two books, I host a podcast on YouTube, all the other things. Working for a company called BiggerPockets, which is in the US the biggest community of real estate investors. We are just a big software and media company. I love it.

We're going to get into the investing part, the real estate part. But you mentioned you're an educator. That's what you love to do, to teach people how to invest in real estate.

Talk to me a little bit about.

When people come to you. What are some of the common challenges they have? What are some of the common questions they have? What are some of the things that come to you and say, hey, help me with this?

There are several themes and barriers that people experience when wanting to invest in real estate. I think the Most common these days is fear that the housing market, at least in the United States, is going to collapse. And that fear makes sense given that most of us. I'm a millennial, I think most people who are millennials or, you know, really most people have a very real memory of the 2008-great financial crisis and what happened with the housing market then. And we can get all into that in a little bit. But that's a common fear that people have. The other two are one. Well, I shouldn't say one. The other two are funding and figuring out how you're going to fund real estate because it is a capital intensive industry. And then the second is just how to operate the business because it is entrepreneurship. People call it, quote, unquote, passive investing, but it's not. Investing in the stock market is passive investing. Real estate actually operates more on a spectrum where some types of real estate investing are almost entirely passive. You can invest in funds or something called syndications, where you basically do nothing. On the other end of the spectrum, you could be actively flipping a house, which is as much work as a job. And so I think for most many people, it's difficult to figure out where you want to fall on that spectrum. I imagine for people in this audience, you, you already got your own entrepreneurship going on, you're running your own business, and you probably want to fall more on that passive side of the spectrum, which is entirely possible. It's mostly how I personally invest, but I think a lot of people feel like, oh, I don't want to actually be on site every day and don't realize that there's a lot of ways that you can invest in real estate without doing that.

Yeah, and you touched on that fear 2008, the, you know, the financial crisis, the housing crisis, all the stuff that happened. You know, my parents are Egyptian and the Egyptians have this saying that says those who burn their mouth on soup blow in their yogurt. So like, they're like, overly, you could.

Use that if you want.

So people are blowing on their yoga right now. You know, they're like, oh, this is.

Going to burn my mouth.

You know, just being burnt once causes them to be. You know, obviously, I don't want to.

Say pessimistic, but cautious.

And that's healthy, I think, in some regard. And it also depends, like you said, on the market itself, us versus other places. Like, for example, here in Australia, the.

Housing market is absolutely insane.

Like, it doesn't make any sense. The housing prices are going skyrocketed high. The, the rent Yield is just not there versus rent versus buying and all that kind of stuff. But people are so bullish on buying property here in Australia because of how fast the property increases in value. You know, people that bought before COVID their properties that went up 20% already, it's like, it's just pretty insane what's happening here. But I want to talk a little bit about the business owner that I know who's listening right now is like, hey, I. I'm making dividends. I'm making profit in my business. I usually just reinvest that money into my business. Sometimes I take some money off the table so that my family can go on a vacation. So this heartache is not worth nothing. But I'm thinking about investing in real estate, maybe in an investment property. Maybe I'm looking for other opportunities.

What is a way for them to.

Say, hey, I have maybe a lump sum I can put as a down payment? Where do they get started?

Especially for the fact that this is not their focus.

Like their focus is really just running their business and making sure that doesn't, you know, go sideways. Give us some advice on like a little bit about, like, is there an education piece they need first? Is there, you know, something that they are not aware of and should they just jump in two feet forward and don't worry about it? I'd love to hear more.

I think that you hit it on the head when you said that there's an education piece. I think just getting a beginner understanding of the different options for real estate is a great way to start and just understand all the different things that you can be considering for people who are running their own businesses, like your audience. I think there's probably two critical questions that you want to think about first. First and foremost is do you want to be actively managing your investments or do you want to be passive? And the critical distinction here is whether or not you are an accredited investor. For people who don't know what that means, it's this somewhat arbitrary distinction made by the US government where if you make $200,000 a year or more, or you have a net worth of a million dollars or more, you are considered, quote, unquote, accredited, which will open up opportunities to you, like investing in real estate funds or syndications, sometimes called private placements, where it's basically you take your money and you give it to hopefully a very experienced operator who will go and buy probably a commercial asset for you, which is like a large multifamily building that's going to probably be A relatively stable investment, throw off a cash on cash return, somewhere between 4 and 8% going to provide you with phenomenal tax benefits. You probably won't pay any taxes on any of the income that you earn on that rental property. And so that is a really good way if you're busy with your business, but you want to diversify to go into that. So I can talk more about that in a minute. But that's a critical sort of distinction if you want to be an active investor. There are benefits to that. Usually your returns are a little bit better, but you have to put in the work, as every entrepreneur knows. I would recommend for most people who have other things going on to consider the most stable vanilla type of real estate investment, which is long term rental properties. So that's just buying what I would say is either a single family home or a two to four bedroom multifamily, so four units or fewer and buying that out and renting it out to long term tenants who are going to use it as their primary residence. This is a very good long term way to build wealth. It's not going to make you huge sums of money by next year. But if you're trying to say, hey, I'm running my business, but I want sort of a secondary income plan, I want to be able to retire in 15 years, it's amazing because 15 years from now your cash flow is going to be excellent, you're going to have amazing tax benefits, you'll have paid off most of your mortgage and you'll be in a really, really good position with relatively low risk. And again, happy to talk about sort of the risk element too, if you want to get into that.

You mentioned multi unit properties. Is that like a few apartments in a building? Is that what you mean?

So yes, in the US at least, anything that is four units or fewer is considered a residential property. And this is a key distinction because lenders, people who are going to provide mortgages for you, see them very differently. And you can get much better financing terms. And if you're buying something four units or fewer, you can get a lower interest rate, you can get longer fixed debt. So there's a lot of advantages to that, which is why I recommend for most people to stick with that asset class. The other reason is that they're sort of tailor built for the small to medium sized real estate investor. 80% of home sales in the US go to primary residences, which makes sense, right? And those people are primarily looking for single family homes. So you're going to have a lot of competition in that market. On the other hand, you have big hedge funds, private equity, institutional investors. They want to buy real estate, but they don't want to buy thousands of small properties. They want to buy, you know, a couple dozen 300 unit buildings. And so that sort of leaves these small residential buildings, two to four units, as sort of a sweet spot for a lot of, you know, what we call, like mom and pop investors. But by mom and pop, we mean people who have other stuff going on and are trying to use real estate to diversify their portfolio.

Okay, that really paints the picture. My uncle does exactly that. He actually has, I guess it's like a townhouse kind of thing or a mother daughter it's called. But there's I believe, three or four apartments in there, and he lives on the top apartment and he rents out the rest. So I could see when you mentioned those benefits. That's one of those education pieces that a lot of people don't really know.

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What about commercial real estate? I'm sorry, go ahead, keep going.

Yeah, I was just gonna say what you're. It sounds like what your uncle's doing is what we would call house hacking, which is living in one of the four units that you're buying. And to me, that is the single best way you can get started in real estate investing if you want to, for a host of reasons. One, again, you get residential financing, but you also get owner occupant financing, which is even better than residential financing. The best loans that you will get, at least in the United States, are owner occupied residential financing. So that is really beneficial. The second is you learn a ton. I personally did this and you know, living at the property, interacting with your tenants, doing a lot of the maintenance yourself, is a great way to learn if you're going to try and build up a portfolio. And the third is that it doesn't necessarily even need to cash flow to be financially beneficial. As long as you can reduce your cost of living significantly, it's going to benefit you. So I know a lot of people who work full time jobs and want to get started in this and they basically buy a triplex, rent out, live in one unit, rent out the other two, and they may not be making $1,000 a month, but they've essentially gone from paying, let's say $1,000 in rent a month to paying nothing and getting the benefits of appreciation and all the tax benefits that come with real estate.

And fun fact, that's actually how Arnold Schwarzenegger became a millionaire before the movies is these types. Yeah, yeah.

Is that true?

Big fan of his. In this part of his, his documentary is before he even got his first role, he became a millionaire through this type of real estate strategy. And he did it because he didn't want to have to take, you know, roles that he didn't want to take. He want only leading man roles. So he was like, I don't need the money because the real estate is taking care of me. So fun fact.

Yeah.

Wow, that's super cool. I had no idea.

So what I was asking before was all about, you know, I have a friend that's in commercial real estate. So what about like, you know, buying property like a warehouse or office building, you know, does. Are there any advantages to that, that or is that a little bit more risky?

I do think it's riskier, particularly right now. We talked a little bit about 2008 and housing markets and crashing. And while I personally believe that the residential housing market, at least in the United States is in a pretty stable spot right now, could go down a little bit, could go up a little bit right now. But relatively stable commercial real estate in the US and in a lot of ways globally is experiencing a real big shock right now. And there's a couple of reasons to that. And commercial real estate is a pretty broad term, but office space, as you mentioned, is the riskiest asset right now. We've seen actually property values decline almost 50% in some cities, 30 to 40% in a lot of others. So commercial is kind of almost quietly, unless you're in the industry almost having its own like 2008 moment where we're seeing just massive declines in value, a lot less demand. And that to me makes it a little bit risky right now. Personally, I think in, you know, 6 months, 12 months, 18 months, there's going to be huge buying opportunities though, because we've seen these industries really see big price adjustments after huge, you know, property value growth during the pandemic. It's sort of correcting right now. But if you are new to investing, I would not recommend commercial real estate unless you're going to do one of those passive options that I said where you are essentially investing in an operator. So you find someone who really knows a specific asset class. And that's really important because I. Operating an office building is very different than operating a multifamily unit, is different than retail, is different than self storage or data centers or all the different things people invest in. And so if you're new, I think you find a good operator and you can invest with them. It's sort of like angel investing or VC investing basically for real estate, it is not super liquid, which is something to consider because usually you invest for five to seven years with these people and you can't really get that money out. But it is a great way to invest. I personally do it a lot myself. But it is not advised, especially in today's climate, to jump into commercial by yourself trying to buy it and trying to operate that business. Because there's a lot of complexity to the operations. And right now, actually the biggest complexity is financing. It's really difficult to get good loans on those type of assets. And that comes with a lot of risk.

Interesting, because I was noticing in Sydney, in the cbd, in the central business district, a lot of the commercial offices are now being converted to residential buildings, which is quite hard because these windows now have to open and they have to change infrastructure and the ceilings and all that kind of stuff. It's a big investment. So they wouldn't be doing it if they didn't think that this is sort of a situation that's gonna stay for a while. Going back to, okay, I. I gotta. Let's say, for example, I have $200,000 where I want to, you know, put a deposit on something and maybe it's a four unit little apartment complex or maybe it's, you know, a few homes. Is it as simple as going to the bank and saying, hey, this is what I want to do. How can you finance me? Is there a way for me to shop around? Do I need to do this under the umbrella of a business entity or do I just do this under my name? You know, like I'm asking all these nitty gritty questions because I know people are thinking of them.

Oh, for sure.

Yeah.

Honestly, it kind of is that easy. I think the main steps that I would take if I were new to this is one. Just educate yourself. Basic 101 how to be a property owner. You know, I think it's important that if you're going to do this, that you take the responsibility of being a property owner seriously. It is your duty to, you know, provide safe, good, quality housing to the people that you are renting your properties to. And you should know what you're getting yourself into. So I think that that's number one. The second would be to, to pick a market that you want to invest in. Because, you know, I, my expertise is in the United States, but there are many other countries where people are able to be, you know, investors. I think honestly, the better word is real estate entrepreneurs. Like, it's, you know, for the people on the show, like you are starting a small business. And so I think picking the market that you want to invest in is super important. And I'm happy to talk about some of the nuances there. Then you basically just have to find a deal, which usually just involves contacting a real estate agent who understands investing. Not all of them do. And then once you have a property, that's when you go to the bank typically and say that you want to get a loan because the bank needs to evaluate your credit worthiness against the asset that you're trying to purchase. Because, you know, if you're say, if. Let's just say you make 100 grand a year. If you're going to look, buy a property that's 300 grand, they're probably going to be fine with it. If you're going to buy something that doesn't cash flow and cost $2 million, they're not going to be fine with it. So I think you have to present them with the property that you're looking at. But the good thing is if you do this four unit or fewer, they're not like looking at a business plan. They're trying to understand you. No, it's residential. So they're treating that as if you were buying your own home. And they will. In most cases. It depends on your background, but in many cases, they will consider the rental income or the potential rental income as part of your income. And that's important because the bank is evaluating something called the debt.

Interesting.

They just basically make sure that you service incorporate that in the loan application. That's interesting.

Okay, yes. And those have been some changes that have happened recently to benefit, I think, real estate investors. That's not the purpose, but it does benefit real estate investors because now if you buy a property and it has adu, an accessory dwelling unit, basically like a garage with an apartment over it, you can count the potential income for that apartment as your income. So the bank says, okay, we can lend to so and so because they're going to be. They have their W2 job or their business that they operate, plus the money that will come in from this property.

I found that very interesting because just from a business point of view, that's not guaranteed cash, but the bank is so willing to give the loan that they're willing to say, hey, you have the potential, you have the earning potential to make that, and we're going to consider that in your income so that we're able to approve the loan.

They're going to do it whatever they can.

They give you the loan is basically the answer.

That's right. It depends on the situation. When I first got started, you needed to be, you needed to have a rental property business for two years for them to do that. So it was less based on the property and more based on your, your track record as an operator. But now things are changing. One of the big trends in the United States is to quote, unquote, upzone properties, which is there is a housing shortage in the United States. And so they're making it easier for property owners to add an accessory dwelling unit to add another unit. And that's why a lot of the mortgage rules have changed, is because if they're going to do that, they want people to be able to buy those homes. And so they've sort of allowed it so that you can get a mortgage on those properties.

A lot of my entrepreneurial friends are interested in real estate as an investment, especially after Covid. They just felt like, oh, wow, the world can end at any moment. This is nuts. I need a physical asset. I need something that's real, that's tangible, something that's not in digital form or something that I can't liquidize quickly. Do you think it's ever a bad idea to buy property just to secure an asset? Is it like a bad time ever, or is it just, hey, if you're going to hold onto it for long enough, you should be okay.

I definitely understand that sentiment after Covid for sure. I think generally speaking, real estate is one of, if not the best risk adjusted investment. I personally believe that real estate will continue to at least keep pace with inflation indefinitely. And that is because it's a physical asset. Like you said, it has always kept pace with inflation. And counter to what a lot of US Remember in 2008, the only time that the housing market has, quote, unquote crashed in US history is in 2008, at least far back as we have reliable data for. And so I think it's important to remember that while that can happen again, nothing is off the table. That that was a very unusual circumstance that was brought on largely by bad debt and really lax lending practices. Of course that could happen again. Right now, if you look at the quality of credit and debt in the housing market, it's very high quality. And so that particular risk is not as acute as it once was. I advise people, if they want to do something like what your friend is friends are suggesting is just to make sure that it breaks even. Because real estate goes up over time. There are times when it dips, you know, when I say crash once, I mean like that's like a 10% drop. There are other times, you know, when it fluctuates, goes down 2 or 3% like any market. And so as long as you have the ability to decide when you're going to sell, you probably are going to do pretty well with real estate investing. And the only reason you wouldn't be able to decide when you're going to sell is if you faced some sort of liquidity problem. And as long as to me, the best way to mitigate that is as long as your property is bringing in more cash than you're spending on it, that mitigates the liquidity risk. And that way you can hold on to it for however long that you want to buy it. The only other caveat is for most real estate investments, you do need to hold on to it for at least two or three years because the transaction costs are pretty high. So if you buy a property and even if it does well for one year because of the closing costs, because of the commissions that you have to pay, you're probably going to lose money even on a good deal if you sell it after a year. So I think you have to be thinking, I'm holding this for at minimum three years. And I think if you are more conservative in your investments, you should be Thinking, I want to hold a minimum five years. And you're in almost all periods of history, you're going to do pretty well on real estate if you follow that formula. The only caveat would be if you bought at the absolute peak of the housing market in 2006, it would have taken you 11 years to make your money back. And that is the longest period in history. But usually if you buy at any other time, you'll probably be profiting after two years.

Maybe it kind of equates to even just starting a physical business like a pizzeria. Like, you need to be in it for at least a few years to recoup the cost of the oven and the furniture and the fittings. You know, you're putting in so much money up front, you know, in order for you to make any money off this thing and then be able to sell it for profit, you know, I think it's a good way to look at it. And that's good advice. You know, I even like the five year. And five years goes by like this, you know, like, you know, 20, 19 feels like yesterday. Oh, man.

Yeah. And the great thing about real estate is that in addition to a lot of the costs being upfront, a lot of the effort is also upfront. And after the first year, you know, what a lot of investors do is they buy a property, they do something we called stabilizing the asset, which is upgrading it, you know, making sure that the apartments are safe and nice and good quality, and then rent it out. And hopefully you have the same tenants for five years. Ideally, or maybe, you know, you still have to, of course, do maintenance and repairs and take good care of the property, but the amount of effort does decline over your hold period. For most, that makes a lot of.

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So let's go back to this example. I went to the bank, they approved my loan. I got my property. Now, you know, I now have put it on the market. I'm going through applications for tenants so that I can get some rent from these, from these units, these two extra units that I have. Walk me through like I'm a new landlord. I don't know what makes a good tenant. What am I looking at in these applications? What is hell yeah and what's a hell no?

Yeah. I think the most common ways of analyzing this is mostly just in terms of credit score is what most people look at. And then history of eviction, criminal background are really the things that I look for. Want to make sure that obviously there's no history of violent crime or anything like that. A history of eviction is something that you want to pay attention to. Not that that necessarily disqualifies everyone for every property, but it's something you want to at least have a conversation with a potential tenant about and then making sure that their income to their rent price is an appropriate ratio. I personally, you know, most budgeting experts believe that you should spend no more than 30% of your income on housing. And I personally try to find tenants. That is true. For I don't want to create quote unquote rent burdens where people are spending more than they should on their rent. That's not good for them. That's not good for me. And so I want to make sure that people can reasonably afford the places that I rent out.

So what makes a good landlord? They're in the unit now. They're paying me rent month after month. How do I make sure that they want to stay and that I have this tenant as long as possible?

I love this question. I think it's something that a lot of people don't think about, but it is super important to be a good.

I see them as like a customer.

A good property owner. That's exactly right. You just took the words out of my mouth. Exactly. I think a lot of people see this as some, for some reason, some like adversarial relationship, which doesn't make sense to me. Like you as the property owner are a business owner and your tenants are your customers. And you ask what makes a good landlord? And I think it's the same thing that makes any good business owner. It's looking for mutual benefit and for, for thinking about all your stakeholders in your business. So that's you as an investor, of course, a stakeholder. But your tenants are a stakeholder. The vendors that you work with, you know, your electricians, your plumbers, those are stakeholders. The community that you invest in are your stakeholders. And trying to find mutual benefit and ways that everyone can be better off because you operate a business in that community is to me, the hallmark of a good landlord. And you know, at Biggerpockets, that's what we try and train people to do, is to be positive members of the community and to be adding to their all the stakeholders in the real estate industry.

Having said that, do you think it's.

Beneficial or even advisable to get an agency to get a property manager to be a middle person to maybe ease the tension between you and your tenants, where they can just contact that agency, they can contact that manager and say, hey, you know, the dishwasher is not working. And then they can contact you and say, hey, we got this message from the tenant. How do you want to proceed? We can fix it, we can replace it, whatever. Like, is that a better situation for you as the, as the property owner?

Honestly, I think it depends on the person. I did self management of my own properties for nine years and it was great because I learned a ton. I've dealt with some of the strangest situations you will ever imagine and had mostly wonderful relationships with my tenants and everything went well. That said, I moved to Europe in 2020 and had to figure out how to hire a property manager to be an intermediary. And I love it. I have to be honest, it's really nice to have someone focus on what I the operational management or the property management of a deal. And that's dealing with tenants, helping, you know, when they have maintenance concerns, repair concerns, talking to them, redoing the leases, sort of like the administrative stuff, making sure that the snow gets plowed, that kind of stuff. And then I can focus on what I call is sort of the asset management, which is thinking more strategically about how the property is servicing my business and my portfolio as a whole. So as an example, my wife and I recently just bought a new property and we're trying to think about, okay, should we renovate it now? Should we add an ADU in the back should we. What upgrades should we make? And, like, those are sort of the strategic things I can be thinking about and have more time to think about because I'm not answering the phone and doing all the administrative stuff, which is super important and obviously needs to be done. But it's nice to have another person helping with that element of the business.

What about rent increases? You know, for those who rent, they know that that is a possibility every time they renew. How do you approach, you know, the idea of increasing rent, knowing when to increase it, how much to increase it, all that kind of stuff?

This is a. It's a delicate thing to think about. As a real estate investor, I personally am not very aggressive with raising rent and I never have been. And I just believe that when you have a good tenant, that is the best possible thing for your business. And I do think it's, you know, you can raise rents to keep pace with inflation, you know, and make sure that you're staying up to date on, you know, market rents. But having someone who cares about your property, who's happy in your property is better for your business in the long run than making another $50 a month or even $100 a month. And I have lived that, and I really strongly believe in that. That said, when people leave, for whatever reasons, I do try and get rent back to market rate, if I've let it lag a little bit, then you try and get back to what is competitive and what is a fair market value for your rent. So that's sort of how I think about it, and I'm happy to say I think in 14 years, I've never had a tenant leave because of rent prices, because we have always been able to work out reasonable rent increases based on sort of what's going on in the broader economy.

Awesome. I want to get into a couple of different options when it comes to real estate investment that I know some of our listeners are thinking about. One is rent vesting. People that want to live in a really prime location, they want to live their best life. They don't necessarily want to buy a mortgage at that property. They want to rent that property because it's got an ocean view or it's, you know, right downtown or they're in a major city like New York or, you know, Paris or whatever it might be, and they want to take their extra money and buy property in different locations and be an investor there. Is this something that you're okay with, you recommend, or do you think that people are wasting their money?

I do it. I Rent my primary residence. When I moved to Amsterdam, my wife and I decided to rent for a couple of reasons. We didn't know how long we wanted to live here and wanted the flexibility of renting, like I said. And we were talking about if you buy something and you decide you want to leave, if you've lived there for five years, you're probably going to come out top. But if it's only a few years, you might lose money to transaction costs. So I think it's a perfectly good idea. It really depends on your lifestyle and in a lot of ways it's actually a better financial decision, particularly right now. I'm not as familiar with the Australia market, but I saw something yesterday that said that in the United states, in all 50 of the biggest cities in the country, it is cheaper to rent than it is to buy. And there are many good non financial reasons to buy a house if you want to. Not every decision has to be an optimal financial decision. If you want a place that you know you're going to be able to live in for 10 to 15 years, that's very valuable and you might be willing to pay up for that. But if that's not you and you're just trying to make a pure financial decision right now, it might be better to rent and in a lot of instances it is better to rent and then to use that money to buy, you know, a duplex rental property, a short term rental.

To answer your question, this is how upside down it is in Australia. I'll give you an example. Like a three bedroom apartment in a prime location in Sydney, you would pay something between 4,500 to $5,000 in rent, Australian dollars. That property is like $3.2 million. It would be like 12 grand.

Yeah, yeah, yeah. So it doesn't make any sense. And I know a lot of people in the US at least I'm not sure how it is in Australia, have been conditioned to believe like culturally it's like homeownership is the way riches is. That's your nest egg. And there is some truth in that. It is a very good savings account. You know, it's like you put some money in, it forces you to put some money to the side. It will probably gain some value for appreciation, but not as much as people think, especially if you consider inflation. And so there are a lot of reasons that people in the personal finance community believe that buying a home is actually not an ideal financial situation. And instead you should rent and invest in other assets, whether that's real estate, your Own business, the stock market, whatever.

The other real estate investment model, that this might be opening up a can of worms. But I've seen a lot of people get into this, especially in the U.S. airbnb. Airbnb, they buy property and they rent, put it on Airbnb, they furnish it, they put it out. I've heard incredible success stories. I've heard nightmare stories, horror stories, and somewhere in between.

What's your experience with this?

Is this something that you think is not a great idea for somebody who's getting started? Or maybe this is something that needs a further education. Love to hear what you think about this.

Well, everything you just said is correct, that it's both great and there are horror stories, but that's true every business. That's just entrepreneurship. But I will say that renting, what we call short term rentals can be a very good business. It was for a couple years an excellent business, I'd say from 2015 to 2018. 2019 was sort of what I would describe as like a gold rush era in Airbnb when it was an inefficient market. There wasn't enough Airbnbs for demand and so you could buy them and people were putting up pretty low quality product and still doing well. In the last two or three years, there's been a little bit of a reckoning in the Airbnb space, probably rightfully so. Demand surged during the pandemic to probably unsustainable levels and has come back down. People are going to hotels again, they're doing international travel again. All the staycations we were all going on are slowing down a bit and there is just an enormous increase in supply. I think for like two or three years in a row, there was 20% plus increases in Airbnb supply. And so there was just too much of it. And I have seen in my own Airbnb, I own one, the level of bookings go down and I hear that across the industry that revenue is down. Even Airbnb has reported that, you know, they're a public company, so you can find out that their revenue per unit is down. It's still way above pre pandemic level. So keep that in mind that it's sort of a correction, not some crash. But I think what's happening here is what happens in every industry is that it's become an efficient market where you have to be a good player, you have to be a good business person to succeed in the industry. And it's no longer this free for all. Where you could Just buy anything.

Yeah. And I think one of the things that I have a friend of mine that has a property, Airbnb for a year, did okay, but didn't like the inconsistency and the revolving door of different tenants and then went long term, just rented out long term. But the thing that he told me that was interesting is that he realized that he was not in the real estate business anymore. Now he was a hoteler, he's competing with hotels now he's competing with other options for vacation lodging. And that's a tough market to be in. That's a whole business model, you know, that's a whole thing. So that's something to consider. And I love your insights on like just realizing that, you know, there is some ease in once you get the tenants, at least you're. If they're good and they're stable, you don't necessarily need to worry about them for another year. You don't have to find another tenant, at least for a year and maybe 18 months or 24 months spending on the lease. But with Airbnb, it's like every few days and that's tough.

Yeah. For me, I might be one and done on Airbnb. To be honest, I'm not sure I'll ever do another one just because it doesn't fit my lifestyle. I don't like the idea of having guests all the time. One has had headaches. I'm not looking to sell it. I think it's great. Property is a good business and learning experience, but I'm not interested in competing against hotels or constantly thinking of new amenities. I have some friends who are incredible at this. Like a friend of mine just went and he bought this property and he's building these custom mini golf courses in the background and he's putting in pickleball courses. And the properties do amazing and he loves it. It's just like a passion, you know, he really likes running that business, but that's not me. And if it's not you, I wouldn't recommend it because you're going to constantly need to be evolving and thinking about new trends, how to. It's a lot more marketing. Whereas a long term rental, people generally want the same thing. They want a safe, comfortable place to live. And yes, you need to update amenities and finishes, but you know, you're not reinventing the wheel when you're upgrading.

Yeah. And I would argue that, you know, your friend, he's playing in a different market now. He niche to the point where now he's in the entertainment Industry. He's kind of helping people, especially these larger properties that can house 12, 15 people. Now you're hosting a team retreat, now you're hosting a family reunion. And now not so much competition. Like you can't. It's not, it's kind of hard to find a place with pickleball.

That's right.

Or a mini golf course and like that. And that's. They're buying more than just. Or they're renting more than just, you know, a place to put their head on, you know, or rest.

And that's what it takes now though, because there's so much supply that if you just own another two bedroom condo in a pot, even if it's in a popular destination, how do you stand out from every other two bedroom condo? You might be a great operator, you might have a great place. But think about how difficult it is to market yourself differently than everyone else. And so you can either compete, I think, on amenities, like my friend is the one I own. I like to think we compete on location. It's in a ski town, so it's in, you know, like there's a limited supply, you know, of places there. And so I think those things can work. A beach town, a lake, you know, like those kind of things where there is one amenity that's not going away that people are really going to like. But I think in a lot of markets, just assuming that you're going to be able to buy it and get it rented out at a good rate is not always true.

Dave, I really enjoyed this conversation. I got so much out of it personally. But I know that all our listeners are absorbing so much. They're not driving, they're writing things down, they're making mental notes of, okay, this is where I'm going to get started. This is how I'm going to do it. I'm going to check out Dave after this, see what programs he has and we'll talk about that. Towards the end of the episode, guys, I'll be giving him a shout out and making sure that you guys know what to do next. But as you wrap up, what can.

You leave our audience with in terms.

Of one thing that they can do to help improve their mindset as they start this journey?

The most important thing for any real estate investor is to start with the end in mind and not think about what's going to happen to the housing market in a year or two years, but think about what your long term objective is. Because if you're trying to make money quickly, you might want to consider things like house flipping or, you know, some of the sort of short term strategies. But if you say to yourself, hey, I'm an entrepreneur, my goal is to invest for 20 years from now or 10 years from now and sort of getting clear on what you want that end goal to look like, it's going to help you really focus in on the right tactics and the right strategies. Because there's so many different ways to invest in real estate. It's, you know, we call it just this one thing, but there's dozens of different approaches that you can take. And just taking, you know, even an hour to sit down and think about why you want to invest in real estate, what, you know, outcomes are you hoping for and on what timeline is really going to help you think through and start taking actions today that can help you sort of build that long term portfolio.

Guys, you heard it first. Dave Mayer, thank you so much for the great, great advice and the conversation. I really enjoyed it. It was super comfortable and not intimidating at all. And I hope that those who are listening, if you something went over your.

Head, if something that was unclear, make.

Sure to just rewind.

This is a podcast, guys, rewind.

Listen to it again and reach out to Dave and we'll show you how to do that in a moment. But thanks again, Dave, for your time. Really appreciate it, man.

Thanks so much for having me. This was fun.

Love that conversation with Dave Meyer. Super honest, super transparent, easy to follow. I took a ton of notes just.

Listening back to that and even right.

After the interview, right after the discussion I had with him, I highly recommend you do what I'm doing and order his book. Start with strategy. It really helps you get started with crafting your own real estate portfolio. You can find this book by just going to biggerpockets.com and going to the menu. Go to books, go to all books. You'll see the book right there.

It's a beautiful cover.

This will consolidate the ideas and give you a plan of action. So instead of just sitting around and just wondering what you should do, start taking the steps so you don't have regrets. Thanks so much for listening to the $100 NBA show and thanks again to Dave Meyer. Check them out over at BiggerPockets.com, check out their podcast and all their great articles. Thank you so much for listening to today's episode. If you love what you heard and want more of this great podcast, hit the follow button on the app you're using. Whether it's Spotify or Apple Podcasts it shows the algorithm that you love the show and allows us to reach new audiences so that we can continue to grow and reinvest into this podcast to help you and your business.

Thank you in advance for doing that.

Before I go, I want to leave you with this. Everything that is new is going to be very challenging at the start, but what I found is that once you get started, once you start learning and building your knowledge, like Dave mentioned, things start to get demystified, things start to get simpler. It's not as hard as you used to think, it's not as challenging, and usually that learning curve is actually shorter than you think. In no time. You are pretty much an expert yourself. Learning through experiences, learning through the knowledge and the books that you have been recommended, like today's book recommendation. Start with strategy. This is going to give you more confidence as you go about in your journey, in whatever you pursue. Thanks so much for listening and I'll.

Check you in the next episode.

I'll see you then.

Take care.

Of.

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