How to get started in Real Estate Business as a Family | The Real Estate Revolution | Episode 8

Coming up on this episode of the Real Estate Revolution.

What's your first recommendation? Is it like, okay, let's go the second house, second home route or retreat center route, or is it more like let's get some of these? I love the like Cracker Jack box, like non sexy, just like making money in the background type rentals. Like, you know, if we're talking about overall wealth, legacy building for our family, what's kind of the best starting point? Is it dream big and go big or is it like, start with these little ones first and kind of build up your portfolio?

This episode is so full of great questions and great strategies. You are not going to want to miss this. Make sure you listen till the end. Welcome back. We have some great friends, new friends of mine that recently acquired through Mastermind, because that's what happens. Mark and Nicole Pasternak. They are in, well, Mark is in commercial videography and Nicole has been doing wedding photography for the last couple years now. They're a married couple that has four kids, by the way. And yeah, they're not just recently married, but they're married, they've got four kids and now they're helping other entrepreneurs with their business. And we had some great conversations at our recent Mastermind meetup. So they are here because they're in the entrepreneur space and they're wanting to start the process of where do we start to invest in real estate? We're making good money. There's certain things. We have four kids. So I'm going to let them fire away on the questions and we're going to develop a plan by the end of this and they're going to see what they what's possible. Thanks guys for coming on.

Yes, thank you for having us. We are so excited. I think, like when we initially met you through the Mastermind, I approached you right away, Steve, because I was like, tell me everything. You know, like, I think for the past 10 years we've been married, we're like, we should get into real estate. And then we're like, it kind of stops there because we don't know where to go next.

And, you know, there's like very few resources out there to tell you, like the beginning part of it, right? It's like you hear all these, oh, yeah, man, now we have 10 homes or 15 homes and we've got financial freedom. And, you know, they make it all sound very easy. But, you know, we've never owned a rental property before, so we have no insight into how do we manage this, how do we even go about finding financing this. How do we. What, you know, what are the, what are the first three steps?

Where do we start?

Where do we start? We've bought and sold homes before that. We've lived.

Sure.

You know, but we've never really bought an investment property.

Yeah. So, like, initial, like, what are the first steps? What would you say to people who are interested in real estate but don't know what to do next?

Yeah, it's like, you know, we've got some extra capital, but it's like, how much do we need? What's our first. What's our first thing that we should look for?

So, so the first step is obviously in finding that person or the masterclass or something that's going to start getting your mind wrapped around the real estate side of things. Right. It's what I do on my podcast, on my YouTube channel, Instagram is just kind of that flow of getting into the mindset of why is real estate important and what are the benefits of it? And that's where a lot of people get a little bit confused is they're like, yeah, I want to have passive income, you know, right now, but I don't have any money. And I'm like, well, it doesn't quite work that way. Right. The investment in real estate, like, where you guys are at because you have four kids, it's the long term, unsexy investment. Right. You're like, okay, we own a house, somebody lives there, they pay the mortgage, and we don't make any money on this investment. It just sits and does its thing. Right. And so for entrepreneurs, what I want them to understand, like, like couples that are in your position is, hey, where do we want to be in 10 to 10, 20, 30 years down the road? We have four kids. What is the legacy we want to build and start getting you to dream about what's at that point rather than what's right in front of you. Because if we can reverse engineer where you want to be, and then we start backwards and we start going, okay, it's going to take X amount of houses and, and we need to buy one house every year to do X. Right. So now we understand, like, this is where we want to be. So if I said, you know, Mark and Nicole want to, they want to create $20,000 a month in passive income from real estate. Well, if we have 10 homes that rent for $2,500 a month and they're free and clear, that's going to produce $25,000 a month in passive income minus expenses to get to where you want to be. Right. So now we have to reverse engineer the price, the strategy to get to that point, because it doesn't happen overnight. Right. It's a, it's a long, like I said, long unsexy process of, or buying investment properties. But here's the goal and here's the strategy because what I see a lot of people in the entrepreneur space do is they start making more money and the, and they either start to increase lifestyle, but they rarely are like, hey, where's, where can I put some money that's going to create assets, that is also going to create tax benefits, that's also potentially like in your case, going to create potential college funds or education funds for our kids. That's where. That's where I like you to be. So that's really the starting is like knowing what you want and also knowing where. Where do we think we want to invest? So you guys are in Colorado, right? So have you even looked again, this is where people need to start. Have you even looked at what things rent for in that area? And then if you look on Zillow, hey, this house rents for $2,500 a month. But then looking at Zillow going, well, how much is the $2,500 a month rental? Is it a $900,000 house? Well, with mortgages, does that make sense? Right. So we start knowing our numbers and what it looks like. But there's also people that are in your position that maybe, hey, where we live is not the smartest place to invest in real estate because the prices don't equal. So we need to look outside that scope and where do we go that it's going to make the most sense? Right. So a lot of people in the mastermind member, our mastermind group that we're in and other people choose to invest here with me because I'm boots on the ground and we have all the pieces in one place for it. Right. So it really just depends in that first rental. And you guys are a little bit ahead because obviously you have four kids. You're not going to do the typical house hack thing.

No.

Right.

We're probably not at the house hacking stage.

Right. You're not going to want to pack your kids up every year and move them.

Right?

So, so, so here's where your starting point is. Where do we get to the first property? Right. So here's the things that have to be in line. So if you look at your primary residence, it probably has a good mortgage on it, probably has a good interest Rate we don't want to cash out, refinance on it. It probably has some equity in it. Well, in your primary home that equity line can usually be 80 to 85% of the value of the property minus what you owe on it. So let's say you know, you had a million dollar house and you owed $500,000 on it. Now you have a $300,000 line of credit. Okay. This is a place where we talk about moving equity because we can potentially use that as a down payment for another house. Yes, you are paying for the equity line and there's a cost there. Right. We get a little bit complicated in the financial side of things but, but it's a way to move debt equity that's sitting in the house doing nothing to something else that's going to do something.

That's a great starting point. I never even thought about it that way.

Right, okay. So most people go ahead.

I was going to say. So let's like can we give you real numbers and, and kind of.

Yeah, please, please. I always try to protect people's privacy.

As to what they want to do.

We're pretty open.

Yeah, it's all on the county auditor website.

Exactly, exactly. So we, we bought this home almost a year ago and we bought it for $875,000. We put about 25% down and I believe the total loan was like 664 and I think we paid off 20 to 40 grand somewhere roughly within there. So let's say we've got $600,000 in our, in our, you know, mortgage and it's probably, the value is probably right around still 875.

Well if you didn't know, I've released my first book and published it is available on Amazon Limitless Real Estate Strategies. I wrote this for anybody in the real business. I don't care if you're a real estate agent, lender, wholesaler, investor. This will help you change and break some myths that you think are out there. It will also change your life, change your legacy and ultimately help you build wealth while creating win win strategies. So pick it up on Amazon today. So I guessed pretty close without knowing.

I know.

So you know, we take that 600 to 900 aspect and you would go to maybe a local bank. Credit unions aren't great. I try to find that local connection and I don't know if your real estate agent up in that area that you used would have a connection. For somebody that specializes in home equity lines of credit like in Phoenix we use Bell bank because they specialize it and they make it super simple. All my clients go there. In fact, Rich and Shelby just did theirs through, through our contact here. So in that aspect, they're going to want to see you leave 10 to 20% equity in it. So let's just say it's worth so about $200,000. Equity in it is what the bank is wanting, is going to want to see. So you probably have 100 to $150,000 worth of equity that's untapped right now that you could tap. Now, equity lines are tricky because they are adjusting with interest rates. So as interest rates have risen, the equity line interest rate is like 8 or 9% right now. But it's a mindset of things will change and are we preparing ourselves for opportunity? And this is, this is where we want to get into this whole idea of investing is, hey, I want to be prepared for the opportunity when it arises, not chasing the opportunity.

Yeah.

And this is the difference in real estate, right. Is that we have a certain goal we want to get to. There are certain things that we want to do. And I always tell, you know, my investors and people I work like, we're not buying houses just to buy houses.

Yes.

We're buying them because they make sense and they fit inside the plan that we designed to get from point A to point B. So doing the home equity line now prepares you. I have this equity line to tap if the right thing comes along. So that's phase one. You also might have cash. You also might look at your business year and say, hey, based on what we've talked about for rental property, I'm just going to pick a price. We've said we're good at buying a 3 to $400,000 house somewhere as a rental. We don't know exactly where. What makes the sense. We can talk about that in a second. Now, you have a price point saying, okay, if we buy a $400,000 house with $100,000 down, what is our mortgage payment going to be? And is rent going to cover it or get close to it? Right.

And should that cover the. The home equity line of credit that we would take out from this current home?

It's probably not going to. But consider this is you're moving equity from one place to the next. Right. We're not buying boats with the equity line. We're moving the equity from one place to the next. Now, if you've got cash, great. But it also works from a standpoint of, let's say you could buy an Investment property right now and you tap that $100,000 line of credit. But you knew that part of our plan was we need to save $100,000 every year for the next down payment. Now you're just paying that equity line back faster. Right. And so we're kind of speeding the process up. So it's kind of like taking a draw, putting it back, knowing that we do need to pay this off. But we can also, depending on where you're at, this is where some people tend to agree and disagree. So I'll ask you this question in a second. Is that even if the rental property is negative, a couple hundred dollars a month, not that I'm a big proponent of negative cash flow, but there's different trade offs and we're looking at time. Right. Everybody's like, I want cash flow. Well, that's great. When interest rates were 2%, cash flow is tougher now because they're at 7. But am I buying a decent rental property or buying some equity that allows me to capture this opportunity to when I can refinance it? Right. Can I negotiate a better price? Does it need more work, those types of pieces on the investment so that we're kind of, we're kind of building in a little bit of room? Yes. There's some negative in this for right now. And I like to ask this question. If I said, hey, this property you're going to buy has $50,000 in equity in it, but it's going to cost you $500 a month to hold it for. Would you trade $6,000 for 50?

Yes.

Right. But you have to stomach that negative each month you're like, I mean for you guys just adding a fifth kid, Right.

I think we're always.

Right. So, so the other thing too that I ask couples like in your, your situation, right. We've got four kids and so everybody wants passive. Right. So what do you guys invest in, a 401k or an IRA right now?

Yes.

Okay. How much cash flow comes from that? None. Right. There's none. But we've been trying to try to.

Keep it low so that it's not taxed. Yeah.

But we've been trained to put money into that as a means to saving for retirement. Right. If we compare a 401k to real estate and the same amounts of money, the 401k is your money and you're, you can borrow against it, but you're going to get taxed if you pull it out before retirement. But you're putting 3 to 4 to 500 $1,000 a month away. Right?

Right.

It doesn't create any cash flow for years down the road. So why isn't it the same thought process in I can buy a $400,000 asset, which is like depositing $400,000 in your 401k and I can put 100 or 80,000 down on it 20% and I control a $400,000 asset that if I have to put $200 a month into that 401k, somebody else paid the other 300,000 off. And we haven't even talked about tax benefits and we haven't talked about appreciation over time. Right. So your 401k is money you have to put in. So if you wanted to buy $400,000 of stock, you got to buy 400. It's got to be $400,000 cash. You want to buy a $400,000 house, it only costs you $80,000 to buy a $400,000 asset. And, and here's the difference. Your $400,000 cash you had to put over here. It's growing now at that, say 6, 7% on the money you put in over here. If you put 80,000 in, you're getting the benefits of appreciation on a $400,000 asset, not an $80,000 asset. Okay.

And somebody else is paying for that, ideally.

Correct? Correct. So it. Go ahead.

No, I was just going to ask. So you know, when you're thinking about that, right. Like we bought our home on a traditional 30 year mortgage.

Right.

When you go think about, especially in the climate that we're in, are you thinking of like, you know, you know, five year arm, a seven year, like what's the kind of the philosophy there on what type of mortgage you get?

Yeah. So when we're dealing with lower interest rates, like back when they were in the three to fours, you'd be looking at a 30 year fixed.

Right.

Right now you might be looking at arms or buying the loan down a little bit or the rate down like on a 2:1 buy down, which is the payment starts out lower and those, those both apply on the investor side of things. So yes, we're trying to keep that, that cash flow as much in line as we can because we all can probably think that the rates are going to change sometime in the next three or four years. Right. They're probably going to come down. They can't stay where they're at. I mean they could, but let's all be hopeful that they come down. Right. So it's kind of a temporary Thing of, okay, we have a holding pattern and that's where whatever we can do to keep the payment down for two or three years, as long as it's not something that. Here's what I don't like about arms, and this is what happened in 2008. A lot of those adjustable rate mortgages hit and the rates had gone up and people couldn't refinance. Right. So they couldn't even refinance without bringing a bunch of cash to the table. So you, you always have to look at like, what's the worst case scenario? So in some cases, if it's not too far off, I'd say, hey, just do the 30 year fixed, pay the little bit of negative and be prepared to refinance it when it comes time.

Right, right. That makes sense.

Right. But, but all that's going to depend on lender, what you're putting down. There's so many variables to the financing side of things that it's when we find that plan that hey, yes, we want to buy an investment property, yes, we've been qualified, yes, we have our down payment. Now we're on the hunt for the next opportunity. And the way I work with my clients is, okay, we've gotten you prepared. When I call you, the only answer is yes. Right. Because I found something for you and we need to move on it because we were picking up some sort of deal from that aspect. So that is one way that we look at it.

Okay, so sorry, go ahead, you can go. So, you know, I know that we could go out, go find our local realtor and, you know, probably go find a property and buy it and then try to figure out how the heck to manage this thing? Or is there a better way to be working with somebody who is experienced in this and kind of create a partnership?

Yeah. So partnership I would not do from the standpoint. Right. What you want to own. You want to own. There, there's, I mean, you can do partnerships with people in different aspects, but we're talking about building for your family like you want to do it on your own. There's different ways to partner with people, like on money that they don't have ownership and that's a whole nother bag of squirrels. But in your starting point, it's like, what are we building and what do we want to own? And you know, the place to start. It goes back to mindset. Right. We're having this conversation here because what's going to happen is you're going to call your real estate agent and you Go, hey, we want to find a rental property. And the first question you should ask that real estate agent is, if I want to buy a rental property, how many rental properties do you own? The reason I say that's really important. If the real estate agent doesn't own investment properties, they're going to have a hard time guiding you in the numbers and the aspects, right? That's one of the reasons that makes me so good at what I do here is because the amount of properties that I own, the amount of investors that I've worked with, and understanding the financial background in investing, right? So it's not a knock in my industry. It's one of my goals and my passions is teaching agents to understand this part of the business. Because there's so many people that want to invest. And the worst part is somebody like you will go into to your agent and they were great when they sold you the house. Everything was great. You're like, hey, we've got $500,000. We want to buy a rental property. What do you think? You put it back on them to say, what do you think? Because you don't have the knowledge of what you want to invest on, and you're relying on that person's expertise in traditional real estate to guide you to a rental property. And here's what typically is going to happen. Oh, if you're going to buy a rental property, you know, we might want to buy something newer, we might want to buy something bigger because it's $500,000, right? So we can buy a bigger house, which is going to get more rent. And that's so far from the truth, right? So when somebody comes to me and says, I've got $500,000 to invest, I'm like, how many rental properties do you want to buy? They're like, well, just one. I'm like, well, what if we took that $500,000 and we bought five properties that you can depreciate that are going to appreciate that you're going to have tax advantages on. Here's how we leverage that, right? So I can help them split it up and kind of tackle what they're trying to accomplish. The other piece is understanding your buy box. This is something that is so important. The buy box is critical, which is knowing if you guys are going to invest in Colorado. You would want to know, like, what is the ideal rental property in Colorado, right? Wherever you're at, is it a larger home? Is VRBO more ideal? What about long term? And then you start looking at long term. Liabilities and what I talked about with a larger home is here's what happens in Phoenix. And I see this all the time through the property management company. Somebody gets hooked up with an agent, they got 500,000 cash and they take them to an outskirt town like Surprise Buckeye. And like you can buy a 4,000 square foot house. It's going to be a great rental. It's got seven bedrooms, six bathrooms, 12 AC units and a pool. And I look at that and go, oh my God, do you know what you just did? And here's why. Whenever we buy a rental property, we want to do everything we can to reduce our long term liabilities. Okay, what are our long term liabilities? Multiple AC and heating units, right? Because on a single unit, you just got to replace it once. If it's broken, it's broken. You got to fix that. When you have two, you've got double the problems, you got three, you got triple the problems, right? Then you start looking at, well, do I want to be in a homeowner's association, right? What, what is the return on the homeowner association? It's not that it's bad, but I don't like super high homeowners associations. And homeowners associations are one more level of tattletailing on tenants, right? So that you're getting notices from the management company or the HOA to the management company, the management company, the tenant, you're like, and for me, I don't care if you park in the rocks. That's why I don't own things in hoa, like just take care of the house, I don't care. Right? So it doesn't make any difference. Then you start looking at something that is really important, which is what is the location where the tenants might stay the longest. So for us, we looked at certain areas based on data from the property management company. Like, well, if you look inside the loop, which is going to be loop 101, there's, they're going to be smaller, older homes, they're going to be close to schools, bus lines, the working class, right? And their kids are going to settle in school and they're not going to want to move. So our average tenant is about five to seven years right now. Why does that make a difference? Because if a tenant turns every year, that's repairs, it's a new leasing fee, it's expense that we don't think about. So I'm really big with the management company, like, hey, I want my tenants to be here like five years. I only want to pay you six times to lease this house over 30 years.

Yeah.

Okay. You brought up a word a lot of time called management companies. Right. We haven't really talked about that. So we buy a home and it's like, do we. That's one of our main.

Yeah, I think like with.

Do we manage it? Like, sure.

We don't have extra time to be managing a second house. We barely have time to manage our first house.

So it's like, how do we find that?

So typically it's, you know, like in your area. If you guys are going to invest up there, I would help you locate an agent that kind of has some sort of investment mindset. And then also most real estate agents will have some sort of property management company that they can refer you to, like we do here. You know, my mom owns the management company and makes it simple. But I never recommend people try to do self management. It's just not worth it at the.

End of the day.

And here's why is that most states are very tenant friendly versus landlord friendly. And if you violate the rules, it can cost you a lot of money.

Right.

And so I prefer to have a property manager. And depending, most management companies will charge you between, you know, anywhere between 5 and 10% of the monthly lease. Right. So you might be 150 to $200 a month, depending on the price range, to manage the property. And what that does is that all the tenant calls go into them. They dispatch repairs, they're going to make sure that the money's being collected. If people are late, they're collecting late fees. They're taking all of that stuff out of you, you know, for a couple hundred bucks a month.

Yeah.

And it's the correlation to that is it always cracks me up. People will go to a financial advisor and they will pay them 2% of whatever money they put in. So let's say 100,000 bucks. They're paying 2 grand a year for them to manage that $100,000. But people gripe about paying $2,000 annually to manage a house.

Yeah. And it's like unless you, unless you want to be the one that, that is your career to manage homes or to manage investments. Great. But it's like we're not thinking about one home. We're thinking your scenario. How in 10 years can we own 10 homes?

Yeah.

And be cash flowing.

Right. Yeah. And that's, that's kind of the goal is like, how do we get here? And you do it because you guys are both busy with kids the last Thing you want is the tenant calls. So you're kind of paying for peace of mind.

Yes.

At the end of the day, it's a cost, it's part of doing business. And keeping in mind that the goal for the management company is that they are there to help preserve your asset. But the asset is not only the house, it's the tenant.

Yeah, right.

So if the management company treats the tenants like people and not like tenants. You know, I know a lot of management companies that like treat the tenants like dirt. The reality is the tenants are the most important part because they're the ones.

That pay the bills and taking care of the house day to day to correct.

Correct. So a good management company will have good vetting of tenants and they will be able to guide you through those processes. They're going to have good vendors to utilize so you're not involved in repairs. So it's not worth trying to nickel and dime. I mean, even for me, we own a construction company that my wife runs. Right. When there's properties that need minor repairs on things, I don't, they don't call my wife to make the repairs. They use their own vendors.

Right.

Because I don't want to get in the mix. We're trying to schedule coordinating and if you've ever tried to schedule anything on a rental, you got to coordinate with the tenant, the vendor. When somebody get like, I don't want anything to do with that.

Yeah, right. No, absolutely. I mean, I'm actually shocked to hear that it's as low as you said it was. I think that's at least been one of my hesitations, like who's going to management and how much is it going to cost? I'm like, you're talking $2,000 a month, like 2 grand a year, that's 200amonth.

Is that, is it more when you Airbnb or vrbo?

Yes. So VRBO is a whole different animal. Vrbos, if you are going to take your hands off of it, which we've done, and let a higher end management company run it, they're going to take 20 to 25% of gross lease. Right. So when we did our one in South Scottsdale, I think we had a gross income of about 90 grand and they took about 3:30.

Okay, right.

So are you thinking then like with that in mind, like it's smarter to go for a long term rental property more like a house or an apartment or a condo versus doing something like Airbnb or vrbo?

There's two scenarios there. One where you Guys are at. And I'm going to go through this two different ways. One is, yes, you're thinking about, hey, we're going to buy some Cracker Jack boxes, right? These are going to be unsexy investments. They're going to do their thing.

You.

It's for the long term, right. The second piece, which is where I get into different strategies, like I'm doing with another Mastermind member right now, is the second home strategy. Right? So if you guys, where you live, you're like, hey, we would really like to buy a cabin an hour and a half from here. And it's a VRBO community, It's a ski community. It runs spring, summer. All those things you can then go through. And you can potentially buy a second home and then do exactly what we did, which is where we rented it every other weekend. Right. So you get a chance to kind of utilize it. You clean it up when you leave, then you rent it out. Some people have had really good success on, like just doing friends and family on every other weekend. So the second home strategy into a VRBO is great because you get to experience it and there's a lot of other financial benefits to it as well.

Yeah, I was going to ask you about that because I think, like, as we've talked about, kind of going back to your initial statement of like, it's about mindset, it's about the legacy you're leaving. Like, I think a big part of what we want to leave for our kids is not only the investment of these houses and what that can do for them and us financially, but definitely the experience level of it too. Right? Like, how awesome would it be to have a property? Like, there's so many places an hour and a half, two hours from here that are gorgeous. Or how great would it be to have a property in Scottsdale that we go spring break to every year? And especially, once again, like, thinking about the financial benefits, like, maybe not immediately and maybe not cash flow wise, but like, instead of us having to pay for a residence for vacation, we have places that we can go to that we already own and that hopefully cash flow positive.

So I love that you brought that up because I think it is a misconception where I hear people like, yeah, I want to buy something in Scottsdale so I can use it when we vacation. That's not a great start because the reality is you're. I mean, you can book out, you know when you're going to use it, but if, like, you guys are flying down here with four kids, right? You're definitely going to be planning ahead. And always you might block something off in the calendar and then go oh crap, we're not going to be there. And now it's not rented versus right. If it's not being used, we will use it but if not, we're not going to block off income producing dates when that same amount of income can go rent us something that will work just fine. Right now with the second home is a little different when you talk about like going up north or whatever it is because you are utilizing it on a regular basis. So your stuff is in the garage, your stuff might be in an owner's closet, you're living in the house and let somebody else rent it on the other weekends. Which is a whole different aspect than hey, we're going to have a house down here that we can go and use. Yeah you can, but don't buy it for that purpose that hey, we're going to buy this so we can use it. We're buying it as an investment. If it's free when we're around, we can use it.

Right, right.

But the second home is, is a different thing. And one of the things, you know, you guys are in the entrepreneur space, which I tout a lot with people, is the financial ability of buying a second home. Second homes have zero tax write off. You can't depreciate it, you can't write the interest off on it. It is 100% expense unless you buy it as a second home. You live in it part time, you rent it out part time. Now it's classified as a rental which means you can depreciate the property. You also, because you guys are entrepreneurs, you have companies that, let's say you're going to go up there and entertain a client or you're going to give a weekend to a client. Now your business is going to rent those off weekends from you personally. So you're going to take income from the company, pay for the personal asset combined with some of the rental income and it makes that second home a wash. But you're able to get money coming out of the, the, the business to pay for some of that asset personally. And that's how you kind of structure and there's more complications to that structure. But it is one of those things as entrepreneurs that we did early on and it works really, really well and it's a great wealth building strategy. And then when you think about the second home, like for us we go up to Munds park all the time. That's where we always go, so it's permanent. Once we got done feeling out that house, we turned it into a permanent VRBO and we bought another one. Right. And now that VRBO covers the cost of this one. So there's a number of different moving parts on the VRBO side. But if you're gonna buy VRBO just to buy vrbo, it's a lot of work or it's a lot of money. Right, Right. And it's kind of like, take your pick on what it is and where. I see people doing the best in the VRBOs are the ones that really work. The VRBO. Like, it is a themed VRBO. It has all kinds of different things that go with it. They're using it for retreats. It's not just a vrbo. It was very, very specific, specifically set.

Up and strategically marketed and all that kind of stuff. Like, there's. There's more business pieces that go to it than just, like, a classic rental property.

Yeah. So if you look at previous Mastermind members, Cena and Keisha, they did a. Their first vrbo. They were students of mine as well, and I coached them through some stuff, and they did their first VRBO in Denver, and it's called Peach House. It was specifically designed for bachelorette and women's retreats and women's getaways. 100%.

So smart. That's so smart.

But Keisha's podcast is geared like. I think she just surpassed 8 million downloads on her podcast called Empower.

Her.

Her podcast is Female Dominant, which is drawing crowds to the VR. So do you see where she used this to do this?

Well, we've actually talked quite a bit about that as far as, like, the Pasture Next is kind of more our lifestyle brand that we're growing and scaling. And, like, we've always talked about potentially having real estate as a piece of that puzzle. So I think that's, like, a really good way to think about it is kind of how that VRBO or Airbnb might fit your market instead of just, like, anything that's out there. But, like, what is your audience actually asking for in a rental property? Like that?

Yeah. Well, this is also where we get into. Because you guys might be on similar path that Wendy and I are in, is you get into this dream of where we're at and where we want to go. And part of that is looking at, like, hey, if what we're going to do is the passern acts and, like, talking about your avatar that we talked about at Mastermind is this second home. You're buying, are you going to upsize it in order to use it for retreats? Are we going to dream bigger than what is actually here and go, yes, we're going to do retreats here or yes, we're going to, we're going to rent this out for Mastermind retreats or VRBO or whatever that looks like so that it fits into not only what you're doing now but what you're doing in the future.

And I, that's so funny that you said that. I just got goosebumps because like that's something we always have talked about. I mean like probably since day one of getting married is like hosting retreats in some way or capacity. So I guess kind of like follow up to that. So like kind of bringing it down to like, okay, starter baby steps. I'm like, yes, let's go buy the retreat house in the mountain. Then I'm like, okay, wait, we need to figure out what's, what's kind of like, okay, we got the line of credit. What's your first recommendation? Is it like, okay, let's go the second house, second home route or retreat center route or is it more like let's get some of these. I love the like Cracker Jack box, like non sexy, just like making money in the background type rentals. Like, you know, if we're talking about overall wealth, legacy building for our family, what's kind of the best starting point? Is it dream big and go big or is it like start with these little ones first and kind of build up your portfolio?

Yeah, so that, that's, that's really great. And this is what I do for a lot of people is kind of getting into a private strategy and talking about, about the dream and then working it backwards. Because while the second home is great, is it one of those things like, hey, maybe right now, you know, in five years we'd like to have a big enough place to do this. So let's buy something small that will work for us and the kids and as a VRBO to test it out, how much are we going to use it? What is it going to look like? What's it going to feel like for a vrbo and be ready to capture that opportunity. So you know, here's the dreaming part. You're like, okay, we love. Well, I always bring up Muns park because that's where we go. If you love Munds park so much and you don't own anything up there, then go rent a small VRBO up there and see if you like it right do we love this? Do the kids love it? Is it something that we can do? The cool thing about VRBO is you can go experience any second home community you want on a weekend for pretty inexpensive, right? It's inexpensive testing. And so you do that and then you figure out like, hey, this would work. We would use this. And you start to think about your schedule. Right. So you guys have four kids, which usually involves sports and you guys going in 12 directions and there's only two of you. That's why we had two kids, because it only takes two of us to manage them. Right?

Yeah. We had to hire a whole nother property manager for our kids.

Right. But it is something to think about because, you know, one of our friends and partners, when their kids were little, they were up there all the time. When their kids got bigger, they were involved in sports. So they were, they weren't being able to get up there every weekend. So it is some things to think about as to at what stage do we want to do this right and are we better off just. Right, right. So when you're, when you're dealing with kids and family, those are some of the things that we talk about in that bigger dream of when is it? Because for right now, the kids are scattered all over the place. Maybe we just rent something when we like to and test it out and it's still on our dream board. This is what we want in five years because the kids will be at a different stage and we can do that. But right now let's kind of go through. Where should we start? Well, let's start with your kids. Right. One of your questions, what was it.

About the kid thing we've talked about? I think, yeah, this is it. We've talked about owning a property for each of our kids. So we've got four kids and you know, owning some sort of investment property for each of our kids so that, you know, when they hit 18, they could use that for school, they could use that to start their own business. They can keep running it and use it as an investment for their future. You know, there's obviously a lot of different things we could do for it, but we've talked a lot about kind of that idea of like a property for each kid.

Okay, I love that. Can I give you a suggestion since I have the 20 year old kids?

Please.

I wouldn't put names on anything. And, and here is why. In my opinion, this is the way Wendy and I have structured it. The rental portfolio is meant to produce cash, flowing income into the trust beyond when we're living, the boys are being trained in that as well. You could give them a one time payout at 18 or 20 of, let's say $100,000 in equity. If that was kept as a rental, you're talking about hundreds of thousands of dollars of passive income in the future. Now you guys are building your portfolio which is part of your legacy, building the portfolio for the kids, which by the way, this is where it's going to, where it's going to come together. We are having the conversation with our 20 year old now, which we just found a house the other day which would be perfect for them. It's down the street, they're not ready for it. Now am I going to earmark that one because they're closer now you guys could live somewhere different right now, right? In 10 years, right? So it's going to change. So it's not so much naming it for the kids as it is your legacy. Then when the kids get to that point, you're like, okay, this is how we are going to partner on your first investment property, right? And then you're going to buy that first house with that child because they're going to have low down payment. You can be a cosigner on it. There's a number of different ways to do it. And now you're helping them understand the process of the investing rather than just giving them something. Now here's the other part of it. Here's what I do like about it. Let's say you do, you have four kids. You're like, we want to, the all four of them are going to go to college. Okay, now this is a different naming. Hey, we want to have four rental properties that are, you know, your kids are eight and younger, right?

Yeah, eight and younger. Eight down to two.

Okay, eight down to two. So the eight one we've got some time to make up, right? Because they're already 82 year old, not so much. You almost be, you know, 2/3 of the way paid off mortgage with 2 year olds. So now you look at, hey, they're going to go to college, I'm going to buy a house as a college fund, not for them, but in 10 or 15 years when they're ready to go, if they go, then we can do a cash out refinance, we can do an equity line and we can pull equity from that to pay cash for school and then the tenant will continue to pay that off if they don't go to school. You don't have to do anything with it and you're not being penalized for it.

Yeah, right.

If you invest in a 529B plan, it is specific for education and it's your money you have to save. If they're going to spend $150,000 at college, you know, compounding interest, you have to save X amount per month. Well, if I do the same thing in real estate and somebody's paying down that balance, I can go pull money out of that house tax free to pay for college and allow the tenant to keep paying down that house and going through that process.

Go ahead.

So I think like, kind of might not like last question, but like most important question is really around metrics of what should we look for?

Yeah, what should we look for?

You know, let's say we have a hundred, $150,000 to put down. What should we look for in a house to make sure that, you know, we invest into this? It's going to be a long term investment. What are the metrics that we need to know?

So you start thinking about, you know, is, is where I live or close to where I live, somewhere where we can invest, does it make sense? So the simple numbers of what does something rent for versus what does something cost, then you start looking like, okay, maybe this doesn't work. Where else can I look to see? Because here's, here's where the education comes in. I hear all kinds of people, oh yeah, you go buy a $30,000 house in Detroit and it's going to be great. And you're like, well, if you can collect the rent.

Yeah, yes, right.

And they're like there. But then, I mean, I had a friend Invest in Alabama four years ago. They bought a bunch of $100,000 homes. When the houses were 200,000 in Arizona, Arizona doubled in value. Alabama might have seen 10% in appreciation. And it was a huge problem during COVID So it's thinking about like, yeah, it's a more expensive property. It's not cash flowing as well, but does it make more sense for our future long term? Now if you've got 30 grand cash sitting around, you're like, I want to go buy a cracker jack box in Detroit and it's going to make me $500 a month and I own the house and I'm willing to deal with whatever that looks like. Great. It just depends on what you're comfortable with and what you want hands off with and how you want to make those investments.

Right, right.

So some of that is determined by where you're at in life and what you're comfortable with and what the numbers play out to be. So I'm just going to give you a scenario. If you're like, hey, we've got $100,000 to put down on a rental property, what is the best thing we should do? Right. Well, I'm always going to look at Phoenix and go, well, let me show you what you can do here. And here are the numbers and here are all the pieces that are here. That is an option. And, you know, there's a couple of other states that I might know of that might make sense that I can refer you to someone to also look at those. And you might, you know, explore. Maybe you guys lived somewhere else that you liked or. I mean, Phoenix isn't the only place to invest, but it's finding places where you have some potential growth. You're probably not looking at blue states because they're not landlord friendly. You know, if you look at all the crap that's happened on the west coast, you know, during. During COVID you want to be careful. Right. Like, how are the landlord laws in those states? Right. Amma, is it going to be a problem? And do I end up paying for somebody's rent for three years? Right. Because they certainly didn't care about the investors and the money that they had to pay out. But the tenants got free rides on stuff. Well, we didn't have a lot of that here. Right. So it's kind of looking at what. What are those potentials? And then you just hone in on a price range and go, this fits what we want to do. We want to buy one of these a year. But you're also being educated to where, hey, we had a friend invest down in Florida and we kind of like the numbers down there. We're going to buy another one down there. But what you're doing is you're learning to question what you're doing and how you're doing it. That's where. That's where the mechanics come in.

Right.

Do you think, is there value? Like, you know, obviously the numbers and that's the most important as far as breaking down where you should invest. But, like, once again, we have four kids. Our time is very limited. Is there something to looking close to home first or. Because we're looking at property managers and things like that, it doesn't necessarily matter distance from us.

It's not going to matter distance from you because you're not going to be maintaining it. It's finding the boots on the ground that you trust okay. To help you make those decisions. Right?

Yeah.

So it's like, hey, we're gonna invest in Phoenix because Steve's there and we can find something that is a good deal and he knows what the rental market is. We have the contracting piece. That's great, right? Because you start to see, like, here's all the pieces I need to understand.

Right?

So this might be a good place to practice and get your feet wet and then go, okay, now we understand it and this is what it should. Should look like. Now we know what, it's going to model that somewhere else.

Y. Y.

So the real thing you're saying here is hire Steve and Phoenix because he's going to help you figure out this whole real estate portfolio? I mean, like, no, but seriously, I.

Think, like, with four kids, it's like what we've learned as an entrepreneur is finding the right. Finding the right people in the right seats who are passionate about your business. We're going through this right now and with many different vendors and employees and contractors. Like, it is about finding the right people who you can not just trust, but, you know, they are just as passionate about your success as you are.

And that's where in the real estate investing side is.

Who.

Who do I trust and where do I trust them at? And can they get me all the way through the process? Because the last thing you want is, yeah, we invested in Florida and now I can't get the property manager to call me back. I've got to find these things. Right. You feel like in limbo and you're so far away, there's not a lot you can do. And so, you know, here it's really easy for me to take you through the process. I mean, it's like, hey, this is what you're qualified for. I will go find that for you and deliver it with a bow. Right. Tenant in place, all the things. And then you start realizing, like, well, do I really want to invest somewhere else even though it's cheaper, or do I want to stay somewhere where I feel secure in what I'm investing in?

Absolutely. Like you said, just to like, reiterate that, like, it's just so important to have the right people who understand the goals and align value wise. And like, what you said just, yeah, are aligned and wanting the same successes that you want. Because at the end of the day, like, we're not professionals in this. This isn't our area of expertise. So, like, we need to find the right people who are going to help make all these things possible and tie them up with a pretty little bow.

And, like, you know, I know we've had a couple conversations with you, and Nicole's had a few more, but it's like, even just in this hour, it's like, literally the last 10 years of.

Our marriage, everything that we've talked about.

We'Ve talked about real estate. It's always been on our mind. And every time that we make a little bit of extra money and we're stashing it away in savings or in our, you know, investment accounts, it's like, well, wait, should we think about real estate? Right. But, like, we. We've never had a really clear. Either a clear picture, clear vision, or a clear partner who we're like, oh, okay, cool. This makes sense. Whereas, like, just in the last hour, it's like, oh, you mean we can talk to you, obviously, offline of this podcast and tell you, hey, here's how much money we have.

Yep.

And, you know, I. I understand it's not as easy as, like, oh, yeah, you'll literally just tie a bow and give it to us. But, like, having somebody who's been doing this for years and is like, here are the practical steps is, like, it's just so relieving and, like, motivating. And we're like, what do you want to sign up?

Like, I know. I was gonna say, like, you know, I don't know.

We've been so ready for the slides.

Five years, side eyes of us being, like, everything that you're saying, oh, this is exactly the piece that we.

This is what we didn't have.

Yeah. This is the information we didn't have. This is the connection we didn't have.

So.

So thank you for taking the time to, like, go through these things with us. Because your knowledge is so vast, and I think the creative use of money and wealth management is, like, it's not taught. It's not taught, but it is so smart. Even just what you were saying about an education plan versus a property, like, if our kids don't go to college for whatever reason, I mean, you know.

I talk to my financial advisor all the time. I'm like, hey, what are these experiences? Exceptions to the rule? Is it like, my kid wants to be a chef and I can go over to France for a couple months while they, like, go to culinary school? Is it like, you know, it's like.

But there's so many different reasons that our kids might not go to college.

And then there's 10. Say we grow it to 500, 000. We take it out. Great. Now we got 450.

Yeah, right. Yeah. I mean, and that's, That's a nice, like. Right. Well, and there's. Yeah, there's. There's no tax. You know, when you pull equity out of a property, which. And again, if you're negotiating with school, can you negotiate better by paying with cash? Right. From that? And guess what? It's kind of sounds lame, like, because somebody will tell you, well, you're going to go refund. You're going to go pull cash out and finance their education for the next 30 years. Yeah, but somebody else is going to pay for it, too.

Yeah.

That's the difference, right?

No, just like the way that you've kind of reframed the perspective on wealth building and legacy, like, it's just genius. So, truly, thank you for taking the time to walk through some of this stuff. I know. Like, we'll probably be texting you right after this call, like, okay, when do we sign up?

Yeah, well, I mean, we'll. We'll go through the strategy session, right? It's. It's four weeks. We go through it, we dive deep into it, and then, you know, at the end, we've got something that's built out that says, this is what we're doing. And also, hey, if we make more money doing the things, we can also speed this up if we want to. And what is really, really important to anybody listening to this, like, when we go through these things, my biggest piece that I add value in is getting you in the mindset of being prepared around real estate. And there's an investment mindset of, you know, Nicole, if you're out getting your hair done and your hairdresser is like, oh, my God, my mom just passed away. She left me with this house that is just falling down. You'd be like, oh, oh, I'm buying.

I'm in.

What do you got? Right? But most people, here's their response. Oh, I got a realtor for you. That doesn't solve her problem. But if you're like, I'm an investor, I would like to buy that. Right? That's the conversation that ends up happening. And that's where, you know, investments are made and wealth is created and problems are solved by going, hey, I really want this. And there's a way to do it. So it's say yes and figure it out later.

Right?

Like, okay, tell me more about the house. What's wrong with it? What's it. What's your pain point? What do you need? Do you need money? Do you like, you start understanding those questions and then you're like, oh man, these people are talking about houses again. What do they got? Right?

You start seeing all the opportunities that are there, that are literally there every day. And without kind of this framework and mindset around it, you just don't know it, but they really are so prevalent. And, and I think we've always seen that potential. We just haven't had the practical steps of, okay, that sounds like a great idea, but what am I going to do with this dilapidated house? You know? And so I think that's just this clarity piece that you add of. Not only do you have kind of the big picture vision, but you also have all the little building blocks to help people get there.

Yeah, there are definitely some tips and tricks we have learned over time. Building what we've built and helping other people build what they build. Right? So it's, it's all those pieces that we, we combine and put that together. Well, are you guys full? Are you brain dead? Feel good?

We're literally so excited to go out and start investing in real estate, like tomorrow. We're like, forget everything else we've been talking about all week, like, call Steve. This is our next move.

So here's, here's what I encourage you to do. And anybody listening, this is what I encourage you to do no matter where you're at in life. I don't care how many kids, whatever it is, is like sit down and dream together and say, hey, if we could have, at whatever age it is 20, 30,000, $5,000 in passive income, that's the goal, then we at least have something to shoot for. And now we start to reverse engineer. Like, is it one house? Is it two houses? You know, is it four houses? Some people think it's more than it is, but it's not. And you're like, Great, I need three houses to create $7,500 a month in passive income in 20 years. Right? It's like, I love having this conversation with a first time homebuyer and saying, okay, you're 20. Do you want to have $75,000 a month in income by the time you're 50? Well, yeah, why wouldn't I?

Yeah.

I need you to move three times in the next three years. That's all I need you to do.

That's it.

I just need you to live out of boxes like a homeless person for the next three years and not sell any of these and not pull any money out. And you will have this amount of passive income by the time you're 50. Yeah, it sounds easy, right?

Well, no, sure, but like time is.

Well and I just love the way you frame it in the big picture and that. Like we talk about this so much too with just this concept of like really the goal at the end of the day is to be creating a life you love, right? Like to be actually enjoying your life day to day. And I think it's so easy to get caught in the day to day and the grind of it all that you forget to dream and like see these big picture things. And this is what we talk about all the time too. Like what do you want your life to look like in 20 years? Like, is it 75amonth in passive income? Is it a house on the mountains overlooking the ocean? Is it like actually dream about what those things look like? Because then all the pieces are going to fit into place to make those things happen. I mean truly, even this conversation to get all woo. It's like, it's so serendipitous. Yeah, serendipitous. Because it's like we truly have been talking about things like this for so long and actually finding that piece of. Finding somebody who can help guide us through that process. Process is.

Yeah, but like, and like here's a pratto example. We've been talking about this for 10 years, right? Like what, what if we would have done this two years into our marriage, right?

So let me. So let's just talk about that for a second because I think it's really important. So 10 years ago you guys had gotten married, you probably bought your first house. But ever since then, do you guys look back at the houses that you've owned and said, we should have kept that, why didn't we? And you probably didn't. My guess is because nobody gave you that advice.

Exactly right?

So that, that is where my goal comes in, is to show people, hey, there are multiple ways you can do this. Do you want to know all your options? And then choose the adventure that fits you best, not what fits me best, right? I don't need to sell you anything. What I do need you to know is what exactly is possible? Because you look back like I talked to a guy today that's like, you know, hey, you know, you're, you're on. He was just talking about his owning two houses. He bought another house and then he sold them for no reason. He's like, I don't even know why I did it. He's like, I just thought it was the right thing to do. So that type of Thing.

And I think that's kind of like where we've been in the real estate place.

Absolutely.

We just kind of think this is the right thing to do, so we've done it.

If anyone's out there, it's like our Last home was $400,000 dollars. Right.

Right.

We had.

Right.

2.75 interest rate. And we put a lot of money. It was like our. Our payment was like 1500 bucks a month.

Yep. And then.

Yeah, we sold it for 525, I think, or 540. So, sure. We made $140,000 on it. But if we would have kept that and rented it and rented it where interest rates are now.

Yep.

Yep. It would have been stupid. But we didn't know that two years ago.

Right.

You know.

Right.

We didn't have that knowledge.

Right. So, you know, it's. It's just a strategy and a knowledge and. And that's, you know, really, you know, I appreciate you guys coming on and sharing, you know, where you're at in the journey, and I'm. I'm looking forward to helping you build that strategy for what's next.

Yeah.

We can't wait to talk to you more. I think that's the thing. It's just like, that this conversation is making me want to encourage everybody that's listening to this is like, start thinking about it now.

Yeah.

We thought about it 10 years ago, and I'm not looking back regretting anything. Like, we. We've done it actually really well. We're really happy with our life. But, man, we have four kids now, and if we would have thought about this in the beginning, in the beginning and searched out, you know, mentors, advisors, people like yourself.

Yeah.

You know, it could. It. We. We're not in a bad place by any means, but we could have been in a better place, you know?

Yeah.

So it's like.

Yeah. Yeah. And now. Now we just shift gears. Right. Because you'll see, I mean, after this call, everything will be a different perspective.

Yeah.

Right. Every time you think about selling a house, you're like, wait, should we do this different? Right. And so there's all kinds of strategies that work, and it just. Again, you know, we build the strategy that leads to. To what your dream life is, not. Not somebody else's.

Yeah. Well, thank you so much for sharing your knowledge, not only with us, but obviously all the people who are listening. I just. I think you have such a creative approach, and I'm so excited for the knowledge that you're sharing with people, because I think not only does this create wealth and legacy, but, like, I think this has a lot of potential to create a lot of freedom in people's lives that they don't know how to get to. You know, whether you're investing in your first property or you're just trying to buy your first house, like, the perspective that you're bringing to the table is so unique. So. So thank you for sharing it and being you and just putting it out there.

Well, thank you both for. For showing up and appearing and we'll talk a little bit more offline.

Sounds good. Thanks, Steve.

Appreciate you guys. I hope you enjoyed that episode of the Real Estate Revolution. I hope you'll join me in the revolution through stevedvalentine.com this is where the podcast the Limitless Circle. Private mentoring, coaching, and all the real estate that we do. Plus there's future exciting courses in there as well that might interest you. Looking forward to connecting you soon. And I hope that you will share and subscribe this podcast if it had value to you.