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🦅 Real Estate Investing Strategies: House Hacking, VA Loans, and Creative Deals! | David Pere 💼
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🪖 David Pere shares his journey from military service to financial freedom, revealing key Real Estate Investing Strategies that have helped him build wealth.
He discusses house hacking, VA loans, and creative deals that pave the way toward financial independence. 🏖️
🎨 The conversation explores how David grew his portfolio through real estate using unconventional financing. From remote property management to multifamily investing, David offers insights for those eager to start their real estate journey.
In this episode, we discuss:
1️⃣ House Hacking for Military Members: How to live nearly rent-free while building equity.
2️⃣ Creative Financing in Real Estate: Techniques that minimize upfront costs and maximize returns.
3️⃣ VA Loan Real Estate Investing: How to leverage military benefits to build a property portfolio.
4️⃣ Remote Real Estate Investing: Managing properties from afar and keeping operations smooth.
5️⃣ David Pere Real Estate Journey: How he turned a military career into a real estate empire.
🔗 David Pere’s Links:
💰 From Military to Millionaire
📚 Free Book: The No B.S. Guide to Military Life
🔗 David's Links:
🍏 Forget About Money on Apple Podcast
🎧 Forget About Money on Spotify
📜 David Pere Quotes:
💡 "House hacking isn’t just a starter strategy; it’s a game-changer for building long-term wealth." — David Pere
🔗 "Creative financing lets you control property without massive cash outlay. It’s a strategy anyone can use." — David Pere
🛡️ "The VA loan is an incredible benefit, and it’s one of the most powerful tools veterans have for building wealth." — David Pere
🧠 "Building a community around real estate investing has been crucial to my success and growth." — David Pere
#realestateinvesting #househacking #valoans #creativefinancing #buildingwealththroughrealestate #DavidPere
🎧 Listen & Subscribe: Don’t forget to subscribe for more real estate strategies and financial insights! Hit the bell icon 🔔 to stay updated.
Disclaimer: This episode is for entertainment and educational purposes only and does not constitute legal, tax, or financial advice. Consult a professional for your specific financial situation.
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Transcript
Introduction to Forget About Money Podcast
00:00:00
Speaker
What do creative real estate investing strategies look like in the real world? And which is the best fit for your financial future? Here we go.
00:00:12
Speaker
Welcome to the Forget About Money podcast, where we encourage you to take action today so that you can focus on what matters most to you.
David Perret's Background
00:00:19
Speaker
Today's guest is David Perret. David Perret is a former active duty Marine turned real estate investor and the founder of From Military to Millionaire, a platform helping service members and veterans achieve financial independence through real estate.
00:00:34
Speaker
After discovering the power of real estate investing during his time in the military, David has built an impressive portfolio using strategies like VA loan, house hacking, and creative financing. Today, he shares his insights to inspire others on their path to financial freedom. Welcome, David. Thanks for having me, brother. It's good to see you again.
00:00:52
Speaker
Good to see you again,
First Real Estate Deal Experience
00:00:53
Speaker
David. I thought we would start by discussing the real estate investment strategies you've used to build your wealth, such as leveraging the VA loans, house hacking, and creative financing. Looking back of when you first started and when you got motivated to get into real estate, what was your first real estate deal and how did that experience shape your approach to investing?
Understanding House Hacking
00:01:16
Speaker
Yeah, no, my first deal was a house hack. I bought a duplex. I lived in one half. I rented the other and it was, I mean, that shaped, shape shifted a lot of my, so I've done three house hacks now and I have not paid for a place that I'm living in. Well, outside of military housing since 2015 and I love it. Like I'm like, I'm living for free. That is the single greatest way to increase your savings gap. So I love that. And house hacking's phenomenal. You know, you just,
00:01:46
Speaker
Basically you buy a place that allows the tenants to help you pay the mortgage and then if you do it right when you move out it cash flows and it actually pays you to own it so it was kind of one of those like. I really liked it when i first got into it and then when i moved out i was like oh shoot this really does work like this cash flows this is great and that was you know the light bulb moment.
00:02:06
Speaker
It's a big three as far as your general financial picture are housing, food, and transportation. And house hacking takes care of one of those three. You can possibly live for free or nearly free in many locations, depending on you know your cost of living area and and just what it looks like in your location. But there are ways to use house hacking to really take a chunk out of that big three expensive housing. Absolutely. Can you describe how your first house hack went and white why you did it and how did that set you up for a future deals?
VA and FHA Loans for Investments
00:02:40
Speaker
yeah i mean I did it because I had read Rich Dad Poor Dad and a couple of Bigger Pockets books and I just decided I wanted to jump into real estate and that seemed like the the lowest barrier to entry. I was using a VA or FHA loan to get very low down payment into a property and
00:02:57
Speaker
you know It's not as scary, and this is why I love house hacking, because it's like when you go to buy your first rental property, a whole bunch of people will try to talk you out of investing in rental properties because of tenants and toilets and they're scary and whatever. But when you tell people like, yeah, I'm buying myself a house, they're like, oh, the American dream, good for you. And they're supportive. And so there's no difference between buying a duplex or a fourplex and buying a single family as far as you know there's very minimal difference on the purchase side and people will support you. But on the backside,
00:03:25
Speaker
It's like you buy a single-family house, you pay for everything, or you buy you know a fourplex and you pay for nothing and you pocket what you would have been paying in rent. For my example, I was paying $550 a month. and and Mind you, this is 2015 in rural Missouri. Pricing has changed here and everywhere else. it's You're not paying $500 a month most places anymore. I was paying $550 a month to live in a 2-1 apartment.
00:03:47
Speaker
and my lease was coming due and I found a duplex that was gonna cost me, I think my mortgage on it was 585. So I was like 35 bucks a month higher mortgage for me to
Creative Financing Strategies
00:03:58
Speaker
buy the place and own a duplex with two two bed one bath units and this one was a little bit bigger.
00:04:04
Speaker
And it had a dishwasher in and mine didn't. And it had a little storage shed out back for both sides and the apartment didn't. And it had land and it was mine. And the other tenant, when I bought it, there was a tenant in it paying 450. And so I'm like, well, shoot, instead of like, I'm basically paying 135 out of pocket instead of 550. And yeah, I'm still on the hook for utilities and internet, but I was at the apartment anyway. And so, you know, it allowed me to save, you know, call it $400 a month to move into this place.
00:04:32
Speaker
And then I moved out six months later. I got orders. I moved to Hawaii and when I did and I rented that side out, it was paying me 200 bucks a month to own it. And so that was kind of the light bulb. I was like, Oh, like while I was in it, you know, I saved $400 a month. When I moved out, I'm still making 200 bucks a month and I have a property manager. So I'm not even
Overcoming Real Estate Challenges
00:04:49
Speaker
doing anything with it anymore.
00:04:50
Speaker
And you know if if I'd gone fourplex, it would have been even better. But I mean, i i ultimately, I bought that house in 2015. It made me you know between $200 and $300 a month for seven years. And then I sold it for $165,000 and I paid $80,000 for it, or $79,900. And so I doubled up on what I paid. I probably put all in maybe $10,000 into that property. between down payment, touching up some flooring, touching up some, some paint, touching up some other things here and there, are probably 10 grand all into that property. I walked away with an $80,000 sale profit plus, you know, call it 15,000 in rent that I'd collected over the last seven years, or something like that, which except 15,000 in net, not rent, but like net
Balancing Real Estate and Personal Life
00:05:35
Speaker
income. So, you know, hard to, hard to argue with that.
00:05:38
Speaker
yeah You mentioned VA, did you purchase that with a VA loan? so No, it's funny. I am probably the loudest voice on the internet about the VA loan and I've actually never used it. So the FHA, I had a lender talk me out of using the VA loan because he said, you can only use it one time, don't waste it on a duplex. We all know that was wrong. yeah And so he cost me probably 10 grand in in principal or in down payment plus PMI plus higher interest rate by going FHA. And then when i lived in san diego i was priced out because i moved there right before they allowed you to they got rid of the limit on purchase price had it had i been had i moved there six months later i would have bought a four-plex in san diego but the timing didn't work and then when i moved here when i got out of the military i learned very quickly what unbankable means and so i actually had to gift my now ex-wife
00:06:31
Speaker
5% down and have her by the property as a conventional 5% down with my name off title
Building From Military to Millionaire Brand
00:06:38
Speaker
because I, once I left the military, I showed zero W2 income and all my real estate taxes are done very well. So they show a loss. And so it's funny when you're like talking to the bank and you're like, what do you mean? you you let me five million dollars this year to buy real estate and i make all those payments and it cash flows why won't you let me three hundred for a house and they're like. I will because your taxes show zero income you don't pay taxes so we can't lend you on your primary but you can buy another property if you want to buy a department i'm like. Oh, so I had to give her the money, have her by the house, then refinance it into an investment loan and pull the money back out. And so I just got an email, like literally as we were logging on that my personal tax return for 23 has done. And that one will finally show enough income that I'm going to refi this house into the VA a probably and pull some money out.
00:07:27
Speaker
But it's, I have probably helped at this point through the community, probably close to $200 million dollars worth of purchases with the VA loan. And I would consider myself to be one of the leading like experts on everything that it it functions. And I've just, it's just been bad timing. It's pretty funny.
00:07:44
Speaker
Yeah, so you're definitely a huge advocate for using the VA loan. Many people who are listening to this podcast right now may not have access to the VA loan. i would If you do not have access to a VA loan, don't
Lessons in Financial Independence
00:07:55
Speaker
fret. just Just read it. Just read all the print. Just make sure you're doing your due diligence on whatever loan product, mor mortgage product that you're looking after. There are many cases And you might even go back against me on this one, but there are cases where the VA loan isn't the best of the options, considering like small print and fees upfront and what you're going to use it for. So if you if you can counter that, I'd appreciate it. But I know when I was looking back for VA loans, I would look at the numbers and sometimes at least maybe for my own personal situation, the upfront fees or I know it's taking, you know, give or take, but for some reason,
00:08:31
Speaker
some of those numbers didn't really look as good as I thought they would look when compared to mortgage products that were being offered elsewhere at that time. Yeah. That's unfortunate to hear. And you're not wrong. That is unfortunately what a lot of people see. And I think the issue is anybody with an NMLS lender license can do a VA loan. And so if you go in and you're like, Hey, I want to do a VA loan, no lender, especially in like Southern California, right? Where they make a payment based on purchase price. So they get a significant commission on a purchase.
00:09:01
Speaker
No lender is going to say, you know what? I don't want that $10,000 or $15,000 commission. I'm not the best VA loan guy. Go talk to this guy. They're going to say, legally, I can do this and I can get it to close. So sure, I'll help you. And they're just not as well versed. I would argue the VA loan is the single best primary residence mortgage in the world.
00:09:21
Speaker
And I would say that most of the times when I see you know fees or overlays or complications, it's usually not the VA loan, it's the bank. It's the lender specifically. And there's just an unfortunate kind of stigma for that. And that's kind of what I'm trying to combat. Because like the VA loan itself, has it's more forgiving on credit score for interest rates. it's more can If you buy a duplex or a fourplex, there's an instant hit to your interest rate on FHA or conventional, but not the VA. a You don't have to pay PMI, so you're saving there. So it's, if done correctly, the VA loan should cost you less in both fees and longevity of the loan and interest rate and everything else. But it's just, you have to find the lender that's like nerded out on reading the guidelines and that's all they do.
00:10:05
Speaker
And so i actually i have a bunch of brokers that i like to recommend because they can go shop you know ten or twenty different banks because unfortunately people go to like you know veterans united usa navy federal and while they all understand the via loan very well. They're huge corporations so there's just fees baked into that that come with running a team that size and so you're not gonna get you know you might get great service with veterans united or usa or navy fed but the odds are that it will still have.
00:10:32
Speaker
some hidden fees or or complexities that a broker wouldn't have to deal with. It's just it's a hit or miss. Yeah, it's it's market specific for sure. And there are situations where it's hard to argue that honestly, because the VA can do renovations, it can do new builds, it can do it's just that a lot of lenders don't do those programs. And so you have to find the person who does. And then, but if you do, it can be phenomenal. Okay, so you mentioned VA a loans, you mentioned FHA loans, what's the primary difference between a VA loan and an FHA loan?
00:11:00
Speaker
Biggest difference is FHA requires 3.5% down, VA requires zero. But the other differences are, like I mentioned, the FHA will add a half to a three-quarter points onto your interest rate for multifamily. The FHA has a slightly stricter inspection, not too bad, but it is worse. FHA will have PMI because you paid less than 20% down, you'll be paying private mortgage insurance, which you know I don't remember the exact rate. It it kind of fluctuates, but it it usually, for what I've figured, it generally comes out to around a dollar a month for every $1,000 purchased. So on a $100,000 home, you're probably looking like an extra $100,000 a month on your mortgage. and that
00:11:40
Speaker
It doesn't go to principal, it just you just eat it. um And you're going to pay that until you get to a 20% equity position and then go back to the bank and ask them to remove it. I had one other there. Oh, the Earl, the the refinance side and the appraisal side is better with the VA loan. But realistically, the FHA is not a bad product. it is It is what I would recommend to anybody who doesn't have access to the VA a loan and it's what I used on my first loan.
00:12:04
Speaker
Was your first purchase a multifamily? Duplex, yeah. Okay, duplex. So two doors. And if you have a VA loan, can you, what can you purchase? What are you limited to as far as multifamily? Yeah, up to four units. And you can also, there's no limit on purchase price anymore. So whatever your credit and income will allow. Oh, that's the other side. The FHA caps you at, I'm going to mess this up. I think it's the FHA caps you at 54%.
00:12:32
Speaker
back-end debt-to-income ratio and the conventional is 49%, I might have that flip-flopped. The VA doesn't have a debt-to-income requirement, so I've seen as high as 78% close on a property, which I don't know that I'd necessarily recommend going that high under DTI, but he actually landed a really, really cool... That was a $1.93 million dollars duplex on Venice Beach, like right across the street from Muscle Beach in in Santa Monica.
00:13:00
Speaker
and the guy bought it for one point nine three it's been four years last i talked to him it was worth two point seven and he had two roommates living in his side so all the debt to income showed points you know seventy eight percent. Those two roommates were paying him as well so when you have the tenant and the two roommates he was coming out of pocket like five hundred bucks a month to own it so.
00:13:18
Speaker
I met a little on the beach in California. That deal went so well that he got his real estate license. It was like, I'm going to help other people do this. Nice. That's VA limits. Is the FHA limit you as well for the same type you can only do with four doors? Four doors under the same roof. Yes, yes, yes, yes. Four doors and then they'll add an extra half to three quarter points if it's multifamily on the rate and they have the debt to income capped at somewhere under 55%.
00:13:48
Speaker
In the military, most people move around a lot. If you get stationed in San Diego for 20 years, you're like a unicorn. There's like two two arguments here. You have people that say, fire buy a house on every duty station. And then you have people say, don't buy it because you're just going to move in a couple of years. Where do you stand on that? I stand, I think, in the middle. Okay.
00:14:07
Speaker
I think the phrase should be, buy an investment property at every duty station. And therefore, what I mean by that is, if you can't justify it as an actual investment, just don't. So like for me personally, I did not buy in San Diego. So I mentioned the six months after I moved there, they raised the limit on what, you know they they got rid of the limit on your first purchase.
00:14:30
Speaker
And had that been the case, I would have bought in San Diego. I didn't buy because when I looked at all the data, I was like, you know, home prices right now are on average $70,000 more than they were in 2007 prior to the crash. We're at the top of a cycle. I don't like the tax implications of San Diego. And because I'm capped at whatever it was, 850 at the time, I can't buy a multifamily property. I'm priced out. I don't have the down payment to make up the difference.
00:14:58
Speaker
Had I been able to buy a triplex or a fourplex there, zero down, I would have 100% done it and it would have made sense, but I didn't. Now, I will say I was dead wrong on that because COVID happened seven months later, eight months later, and prices went berserk and I could have made you know six figures off that house, even though I only lived there for two years. yeah But with the debt I had, I made the right decision in my mind.
00:15:19
Speaker
So I would tell people buy an investment. I would say if you can buy like a five or six bedroom, single family house and rent to roommates, or if you can buy a duplex, fourplex, fourplex, if you can buy in a situation where you can basically live for free and pocket your BAH and it'll at least break even when you move out, then yeah, why not? And as far as, you know, long distance, I have friends who self manage properties in four or five different States. I could never, I would just hire a property manager, pay the 10 to 12% and just let them deal with it.
00:15:46
Speaker
There are always horror stories about less than ideal property managers and I get that, but I'd rather have a you know ah an 80% solution than try to do everything myself from across the country, but that's a personality thing. Some people have the personality for dealing with tenants.
00:15:59
Speaker
I do not in the least. Yeah, I'm i'm a 99 eye on the disc. I want everybody to love me and I believe everybody's story. I take it at face value. And when someone comes to me with a sob story, I buy into it and none of that makes a good landlord. That's true. That is, if you listen to this, this that's a great, that's a great point of advice there because when I first, I got into real estate in 2011 and I've had up to seven properties at one time. I'm now down to only three, but at the very beginning,
00:16:28
Speaker
I was like, you know you want to be a good guy, whatever that means. But then you don't you then you realize very quickly that they will just straight up lie to you yes and to get what they want. and And you just got to be that guy or that girl and stick to your process. Stick to those credit score requirements and i make sure you do your background checks and all that stuff. That keeps you out of trouble most of the time. I agree.
00:16:50
Speaker
In your experience, what do you think the most overlooked or underutilized real estate investment strategy is? I mean, I'm as cop out as it is. I really think it's the house hack. I think that's the single best, at least first move you can make. And I know people who do it even now, like for example, this house, the upstairs is an Airbnb and it's a two unit, right? The downstairs is my office. And then I live in the back in a tiny home.
00:17:15
Speaker
Can i make spending on the month anywhere from couple hundred bucks to twenty five hundred bucks or to fifteen hundred bucks a month on this is an airbnb and i mean it's a bit of a headache i have to deal with clients or you know gas and there's a little bit here and there. so I've actually debated shutting it down just for that but i'm also in a financial position where i can eat the mortgage and be okay.
00:17:37
Speaker
But I mean, I have a 4,800 square foot, six, three and a half where half of it's my office, half of it's an Airbnb. I live in the backyard and I live here for free with three dogs and the Airbnb covers mortgage, utilities, insurance, taxes, internet, you know, so I love it. And I'm like, why, why spend money out of pocket on something you don't have to. And if you can save what your you know, arguably, arguably your largest expense, which is housing, living, and you can save that money and reinvest it elsewhere. Like, as long as you actually reinvest it elsewhere, you'll be financially free way faster than if you were paying that. So I love that strategy.
00:18:17
Speaker
so We talked about VA, we talked about FHA, and we talked about how you can use those financing options to do house hacking, but you've acquired properties using other creative financing methods. Can you walk us through ah one of your more unconventional deals and and why you chose that approach?
00:18:34
Speaker
Oh, yeah, this is the the reason I don't answer with this being the underutilized method is because it's not for the the novice, right? okay There are so many ways to get creative in real estate. And that's one of the things I love is if you own a house and I want your house,
00:18:51
Speaker
We can have a conversation and ultimately however we decide works for both of us is fine. People get stuck into lenders and agents and this, that, and the other, but I mean, my my second property was a 10 unit. I put 4.9% down because the bank gave me 85% and I went to the seller and said, I really like our deal, but I don't have 15% down because I'm active duty.
00:19:13
Speaker
would you be willing to let me make payments to you on the 10% difference?" And they said yes. And so they sold the property. The bank paid out 85% to them on the closing day. And the last 10%, I paid them 8% interest for a few years, and then I paid off the note. And so I got into a 10 unit for $10,990 out of pocket, and I sold it four years to the day later. And when I sold it, I netted a hundred and twenty five thousand dollars on it um the sale and so that's you know that's an example just getting the seller to carry back part of the down payment i'm doing that this week i'm walking on tuesday i am walking a self storage facility this is just a good friend of mine who we've been talking about this kind of stuff forever he knows i want to get into self storage.
00:19:58
Speaker
and he's going to carry the 20% down payment. So I'm going to pay him a little bit more than I would if I was just going to buy it outright and he's going to carry the down payment. So instead of having to come up with $300,000 down, I'll come up with zero down and I'll just make the payment to him over time. And he's okay with that because I'm paying more, which allows, you know plus he's getting interest on that money.
00:20:22
Speaker
and so you know, instead of him getting, I don't know, $500,000 at closing, he'll get $200,000, but then he'll make interest on the other three until we pay it off. But I'm getting a property that will still pay me every month to own it. And I didn't have to put any money down. And so I look at it as, you know, you know, I'm 100% leveraged on that. So there's risk there, right? But if the numbers are good, which they are, and it's an asset that's fairly stabilized, and you can run it, then that's all fine. And I kind of look at it as, you know, let's say I put $300,000 down on it,
00:20:52
Speaker
And it saved me 2,500 bucks a month. I'd rather eat the 2,500 bucks a month and not put $300,000 down and keep the money in my bank. And then if something goes wrong, I've got money for it. But I'd rather eat the 2,500. I mean, I'm not going to do the math on that. yeah But it would take me a long time to come up with come up to $300,000 worth of pain. I would be willing to bet I don't own that asset by the time I make $2,500 equal $300K.
00:21:20
Speaker
So I mean, that's, that's like the time my kid's going to take over the asset, right? So yeah and the reality is what'll happen is we'll make that payment for probably three years. The property will go up enough in value that we'll refinance. When we refinance, we'll pay him off and then we'll own the property with equity and no other investor. It'll be a win-win for everyone. And he gets, he gets tax advantages cause he won't take the capital gains hit all in one year. It'll be spread out. So it'll be a different tax bracket. So there's, there's ways to structure stuff like that where it's winning weirdest one I've ever done.
00:21:50
Speaker
was a house that it had a fire in it. And the guy, he was just set on a price. And I was like, dude, I think the price he wanted was 38,000. I was stuck at like 32. And I was like, there's just no way I can come up to that price. And this is, you know, I mean, it had a, it was a full gut grease fire mess. And I was like, you know what? Like, look, if 38, like if, if, if the most important thing to you is winning on price, what if I could make that payment to you, but I made it when I sold the house.
00:22:20
Speaker
And he's like, well, what would that look like? And I was like, well, it would look like me putting no money down, making no payments to you and paying no interest. But when we're done flipping the house, you get paid before we take any money because you'd be the only mortgage on it. And he was like, yeah, if it gets me 38,000, it gets me 38,000. So 11 months and 15 days later, he got a check for $38,000 when we sold the property. And we got to renovate this house without having to pay any i mean I paid $623 in property taxes on the day I bought it and then I made no payments to anybody and renovated the whole house and at the end we sold it and when we sold it, we paid him out. We made our money and we went our way and that was so you know zero down, no interest and no payments for 12 months. How did you get the money to do the renovation? Was that through a future loan?
00:23:05
Speaker
I actually had a private lender give it to me. So I had a good friend. I have a couple of people in my Rolodex at this point that I'm like, yo, I'll pay you, you know, one, 1% or 1.10% interest. And then they lend me the money. and And same thing. I always negotiate making the payments at the end. So when we get all the way through the deal, I just pay them as a lump. And they're, most of them are fine with that. Most of my lenders are through a self-directed IRA. And so it doesn't matter to them if they make the money every month or if they make it all in a chunk at the end because they can't use it anyway.
00:23:36
Speaker
and ironically enough on that property i went way over budget on everything and i basically lost four thousand dollars and my private lenders the only person who made any money on it cuz he made all he got all his payments it really wasn't even in the over budget it was the city came in with new zoning codes and there was a whole bunch of weird.
00:23:54
Speaker
Like by the time we got done i had converted the entire attic into a really sick office is probably my favorite part of the house and because of all the delays with things. Two months before we refinanced the change the height requirement for zoning on a permit for an office.
00:24:12
Speaker
And I was two inches short on the ceiling. And so I lost 1800 square feet of your or 800 square feet of of value to the home. And I'm like, well, we would have been profitable if it wasn't for that. So just a bunch of weird things. Also my favorite before and after photos because that house was a smoked out black burn shack and we turned it into a beautiful home that was so nice. One of the guys on my real estate agents team bought it before it ever made it to the market. Pretty cool before and afters, but and a lot of learning lessons, but it was also really cool financing. You know, I'm like, if I had to pay interest on that money the whole time, I would have lost more. Well, you seem to be doing well for yourself. I mean, you can't win them all or I guess you can. I guess the lesson I would take away from that is things happen. I mean, even if you're smart, even if you've got the right team, even if the numbers work up front, it can be a curve ball thrown and and you can, you can swing in a mess, but you just gotta you know learn and then move forward. Maybe, maybe.
00:25:10
Speaker
your next purchase you you actually looked looked at the height of the ceilings. ah No, because this I and need taller ceilings. I don't know. You've just got to learn to move forward. It's all learning curves. Yeah, and all good. I just look at it as an educational experience. I've i've definitely taken hits on a few properties, but they are grossly outweighed by the rest of the wins.
00:25:32
Speaker
For a beginner, let's say in the military and out, so two routes for a beginner and the military for a beginner who is not in the military, what do you think is the best overall first purchase? Is it a fourplex? Is it a single family home? Is it going commercial like a storage unit?
00:25:49
Speaker
I think it depends on your goals and your family situation, but I would say, yeah, if you can, if you can house hack a fourplex or a large single family home where essentially you find a way to make the house pay for itself, that's the single best thing you can do because now you freed up.
00:26:06
Speaker
what you would have been spending on rent and mortgage to go towards future investments, which allows you to have a better, you know, a better reserve and a better base. And it just makes life less stressful. And so I think that's a huge win because you're learning all about landlord, you know, being a landlord, you're getting cashflow, you're getting depreciation, you're getting appreciation, you're getting principal pay down, and it's not costing you anything but some time if you do it right. So I think that's the best.
00:26:31
Speaker
and I think there's so many ways you can go from there. I know you you say that's complex. We didn't even get into tax liens. Tax liens are even weirder. There's all kinds of creative stuff. i mean We bought eight tax liens for $16,500 this year last in August when the tax deed sale came up and that was five houses and three vacant lots, one of which is 25 acres.
00:26:49
Speaker
and And you know i mean what what happens with it is we won't see the profit from that like we won't we won't know for a year if we actually get the house but either we get all of the money we put into the properties plus ten percent interest or we get the property and so you know last year we bought five.
00:27:07
Speaker
And we actually had all five of them pay us back at 10% interest, but this year like, Nope, we're going to be okay. Yeah. We'll see what happens. We actually, one of the lots we actually took over, it had actually gone through two cycles of auction. And so we actually took over one of the lots on the day of the auction. And so what we did was we rolled the, the tax lien money from the last year where they'd paid us interest into, we bought storage containers, like mobile ISO container storage units for that lot and throw them on it.
00:27:36
Speaker
And so we were able to buy, I want to say it was seven containers and each one will rent for about 150 bucks. So we'll be at whatever that math is, I don't know, 950 a month in gross rent on a vacant lot that we bought for like $500. And I mean, we had to pay for the the the containers, but I mean, they'll pay themselves back in 18 months, not even.
00:27:59
Speaker
And that's a lot that actually conveyed ownership to you after the year and a half or year? Yes. Okay. That's cool. Yeah. and So there's some there's some crazy strategies out there, but like I said, wouldn't go that route as a beginner. So we've talked about a lot of, well, a lot, at least a handful of real estate investment strategies. Going forward, what what is the strategy that you've heard about or don't have particular experience and that you think you might want to use. I'd like to get into developing. That's the one that excites me. I'd like to do some ground up stuff. But the one that I'm working towards right now is more boutique hotels. We just bought one in December. We're under contract on another one right now, actually.
00:28:38
Speaker
You'll appreciate this. At this time, as of four days ago, we're under contract on a 17-unit bed and breakfast in Julian, which is a beautiful area, not too far from you. And it was actually Jack Dorsey's house or residence at one point, which is interesting. Anyone who knows boxing, he's a legend, old-school legend.
00:28:56
Speaker
I like the idea, and this is kind of a niche I'm carving for myself, I like the idea of putting people and or money together to create deals where I get a small equity chunk for basically allowing the deal to happen. So somebody I know who's a good operator comes up with a great deal and either doesn't have the money or doesn't have some piece of the equation that they need to take the deal down.
00:29:19
Speaker
and I'm able to either find that person or find the money and help them. And then I've i've successfully negotiated myself a 35% stake in 13 single family homes, a 10% stake in an RV park, a 12.5% stake in a hotel, and I'm currently working on a 50% stake in a cell storage unit. And in all of those, I will bring very little money to the table and very little time to the table But I'm creating win-wins for other people and getting really huge stakes. I mean, I could take 100% of that self-storage unit if I wanted, but I don't want the hassle. So I get less hassle, less return, but I keep my time. Taking a huge step back, you were in the Marines for how long? 13 years. 13 years. So you did not retire. I'm not sure if you medically retired or not, but but you you didn't do the traditional 20-year retirement. First off, that's 13 years in. Thank you for your service, of course.
00:30:08
Speaker
That's no easy feat, I understand. yeah And financially, you didn't get that pension then. So you took a leap out of active duty military into this world of real estate, which you had already had some experience by that, by the time that you left. So you had the confidence to step out, which I do think many people in the military kind of get stuck in the military, even though they really want to get out because they don't do things that could either make their life easier or more productive or more profitable outside of the military while they're still in the military.
00:30:39
Speaker
yeah So kind of I mean, great benefits, nobody argues with that. You got a pension, you got medical, it's pretty good as far as the benefits, but it can be a very, very challenging and daunting 20 years or however long you're in the military. So first, congratulations to you. Second, how did the real estate piece fit into your overall net worth pie as you were coming up on a retirement? And has that changed as you move forward from there? Because you've been out for how long now?
00:31:08
Speaker
in In seven days, it'll be three years. i would When I left, I'd say my net worth was like right at a million, and I probably had 140 of that in TSP, probably five in an IRA, and then the overwhelming majority in real estate.
00:31:27
Speaker
and Right now, I'd say my net worth without counting evaluation on my business is right at like 1.6. I think my business is going to do 1.2 in revenue this year and be about 300 in the EBITDA. And so I'd like to think that depending on how you skin it, I'm right around two and a half. but That's all, you know, I don't know that I could really sell the business. So that's why I just don't even count it in there. I also don't count my primary. Like this thing, I've got 115,000 probably in equity in this. And I don't count that in my equation. So realistically, we're probably around two, two and a half. Ironically, I went from about 140 to probably a 10th of that in my CSP because I, well, during the divorce and amongst other things, I suffered some, some fun.
00:32:11
Speaker
unexpected expenditures and the tsp was something that i was like i can access this capital a lot easier than i can access the capital in a hotel that i only own twelve percent of. So i did alone and i'm repaying part of it and then i also liquidated some of it which is not a move that i would recommend to anybody and i move that i wish i hadn't had to make but also like you alluded to i was very confident in what i was doing on the business end and in the real estate endd and so i knew that if i made that choice i could.
00:32:36
Speaker
ultimately still earn a great return on that money. And then I'd say I'm up from 5,000 in my IRA to when we max out this year, we'll be probably right around 20, but right now we're at 16 something, 16, five. And then I also got, I had 15,000, well, 12,000 in an account for my stepson. I lost that in the divorce, but that was something I built over the last couple of years.
00:32:56
Speaker
I got $15,000 in the UTMA for my son. But yeah, definitely skewed towards real estate and business. And then it's interesting because I have a whole lot of like I owe use. So that's what's funny about the real estate game. I'm expecting a roughly $20,000 check.
00:33:11
Speaker
in December from an acquisition that we've already made. We just delayed it till December to make the payout. I'm waiting on somebody's tax returns to get done so he can refinance a property we sold to him on creative terms. And that'll be a six figure check to me once he refinances. I've got all these deals that I have equity in that I won't see for five to 10 years. I've got vacant lot that I sell or finance to someone and the balloon comes due in March.
00:33:36
Speaker
So i'll make I've got $17,500 coming back in March from that, or the lot, and then I sell it again for more. All these tax leaves. like So it's it's it's interesting interesting because it's like I look at my bank account and I'm like, oh my gosh, where's my money? And then I'm like, oh yeah. i've got you know If I didn't work another day, this like if I just shut everything off today,
00:33:55
Speaker
not including rental income at all or business income. Like if I just shut everything down, I've probably got around $200,000 coming in in the next 12 months from various things that'll just pop up and it's like, all right, it could be worse. So I like talking about money and and how how we use money as a tool for happiness and living more fulfilling lives. Part of that is trying to balance net worth versus cash flow versus time ah versus equity. I guess equity would be a part of net worth if you did count it. Do you have like set guidelines that you have for each? like Because it if you do set some of those guidelines, it kind of helps you manage risk because you don't want to be over leveraged, but at the same time, you don't want to be cash poor. but
00:34:41
Speaker
equity rich, you know, that, how do you manage all that? Yeah, I, I try to operate on the, the profit first model. And so what I, what I do is let's say I dropped a hundred thousand dollars into my revenue account, which is not necessarily realistic, but you know, I would budget like whatever the expenses, whatever percentage goes to, I think I put 10% in profit, 15% in taxes. And then I've got like a 5% that goes towards a reserve. And so those all go to different accounts.
00:35:11
Speaker
And then the rest goes into an operations fund and i just run the entire business and everything else out of the operations fund and then basically what i do is at the end of the month or at the end of whatever the next big drop hits. Whatever was left in operations fund i throw into either paying down a debt or a new investment and so i try to keep my account super lean cuz i'm just inevitably like if i had.
00:35:33
Speaker
$250,000 sitting in my operations account. I know myself well enough to know that it would not last very long. And so I'm like, I am basically live paycheck to paycheck by force. And it's funny because I've got like an executive coach and he calls me out on it. He's like,
00:35:49
Speaker
He's like, dude, like your bank account is still, I'm like, yeah, well, you're right. My, my bank account shows, you know, three grand in it, but I paid off $35,000 in debt this month, or I threw, you know, $15,000 at my kids, whatever, you know, so it's, it's, it's interesting. Cause I, I just basically stuff it into paying down loans or, or whatever, whatever I can. And and then I'm like, I can always access that later if I need to.
00:36:17
Speaker
I would, I mean, I am in the process right now. I've got an ad out and I'm hoping to interview this week for a full time CFO. And so I'm going to have a full time bookkeeper on staff who manages everything because it has gotten like, I still manage things financially and it's just, it's too much.
00:36:35
Speaker
It does sound like a lot, and I and i hope that you can find some kind of calm by bringing somebody on board to maybe help you just keep it all tidy. Not that you couldn't do it yourself, but it's a lot, when you especially when you start changing your formats of how you're getting different deals, because different factors affect different veals. Speaking of factors and and what can affect overall portfolios,
00:36:57
Speaker
Many people are worried about a market downturn. We've already seen it in real estate in many, many areas like Florida, Austin. I know you're in Texas. I don't think you're near Austin, but I don't know if you are or not. I'm in Missouri, actually. I just go to Texas all the time. Oh, okay. Yeah. And so I think we've probably peaked out. We'll see what the lowering of interest rates does. I think it'll probably still like hold up the real estate market for a little bit longer here.
00:37:19
Speaker
But if you're worried about a market downturn, not only through you know stocks, and I'm not sure what poor what portion of your overall net worth is in real estate versus stocks, that might be something we want to get into in a minute as well. And then why? For economic uncertainty, what advice do you have for the people who think who might be saying, I don't want to buy a piece of real estate right now because there's many headwinds and we're already seeing many places start to dip in overall value.
00:37:44
Speaker
Yeah, I would say I'm probably 90% real estate and the other 10 stocks. And it's not necessarily because I don't like stocks so much as just my real estate continues to outperform my stocks. So no matter what I do, it it just keeps skewing. I am putting money in stocks, not as fast as I probably will in the future because I basically reinvested the business right now as my main ah ROI. um But the other thing is, I have figured out a couple different ways for me to leverage basically buying real estate without having to come out of pocket. and so it's It's very easy to skew my net worth higher on the real estate side when you know I either have to put $10,000 in stocks or have the stock market go up. Whereas in real estate, I can basically create that net worth out of thin air.
00:38:28
Speaker
i can I can send a few emails out to people that are really solid investors, raise money, and get a 10% equity stake in an RV park or a 12.5% equity stake in a hotel. I can create that money or that net worth without capital, whereas the stock market, that's just... you can't. I mean, unless I was to go and leverage against my account and pull money to bet against it. I'm not that guy. So maybe a day trader, but not me. So my index funds will just probably never catch up percentage wise. I'm not actually, I'm so up in the air on the real estate market. I don't believe everybody's concerned the real estate market is going to be the straw that breaks the camel's back. And I think it's the auto industry.
00:39:12
Speaker
I think automobile industry is going to be what crashes and I think that's where people are going to get hurt and I think real estate might you don't see a dip for one Missouri to in ah eight Missouri dipped 12% at the worst so I'm not as worried.
00:39:28
Speaker
Because we're already, the median home price in the country is $420,000 and we're at $220,000. So like we're so under priced here that I'm not as worried about our hit. But the other side is that coin is, and like I think they call it the lock-in effect right now. But you know if you're sitting on a 2.5%, 2.75%, 3% interest rate on a property with $150,000 in equity, you're not going to sell. So you're not going to move. And so the high interest rates, you're like, well, I'll just stay here. And so people haven't We have a egregiously or ah a a abnormally high amount of people locked into incredible debt on long-term fixed rate primary residences. So in 07, everybody was on subprime crazy, you know, I made up my income, I can't afford my mortgage. And in 2024, people are like, it would cost me more to move anywhere, I'm going to just stay here. And so I think if anything, I think we will see like the apartment syndication world,
00:40:27
Speaker
or maybe the short-term rental world. Some of the more investor-specific markets take a hit, but especially, I think, vacation stuff because that'll go when if the market goes. But I think the straw that pulls will be either automobile or unemployment. And then if that gets bad enough, yeah, some people might end up in foreclosure. But I don't know that it'll be to the what people are calling for because Again, you're locked into incredibly low and affordable debt and you have equity. So if your situation got but bad enough, you could refi, you'd have a higher rate and that would be unfortunate, but you could pull, some of these people could pull six figures.
00:41:06
Speaker
highs mid six figures out of their house and just live on it. And so it's an interesting spot to be in where I see the investor market potentially taking a hit and I see other markets taking a hit, but the homeowner market, I feel like feels pretty propped up to me and I might be dead wrong on that, but who knows? That's right. I don't think anybody knows, but you make a lot of good points. What is enough for you? It seems like you've got a lot going on. You're building, building, building. What is enough?
00:41:32
Speaker
You know, it's interesting. I don't know. I never had a desire to be like a billionaire or a nine figure guy or, you know, and then the other day I had a really crazy idea and it excites me and it is a billion dollar idea. And I'm like, I have the ability to chase it now. So for me, I don't know. I live a pretty, like, I would say I live a fairly balanced life. I mean, so far this year, I, last year I went to 36 states, three countries,
00:41:58
Speaker
And I spent almost five months out of my hometown, on off, on off, on off. And so, you know, it's like, I've actually told myself I want to slow down and have more of a routine here. And, but yet this year, you know, I took my kid on vacation for a week to Tennessee to our hotel. I took him on to Tampa for four days. I'm going to take him skiing in Tahoe this winter. It's like ah I'm getting time with my son, quality time, traveling experiences with my son.
00:42:23
Speaker
I have great friends all over the country and I can pop in to see them or they pop here or I go to events. You know, I've got a motorcycle, a comfy car, a good gym. I don't have my Porsche yet, but that'll probably happen in the next year.
00:42:36
Speaker
I've got the toys. I've got three dogs that love me. In fact, you know like life is honestly better right now that it's been a long time. And when you ask like what's enough, I'm like, we actually just decided to cap my membership at 500 people so that we can kind of just let it... you know We don't need to chase that because it it will serve better if it's a tight community. And so that's very fulfilling to me. But then I'm like, I don't, I'm happy. I'm not like chasing a goal. I'm just chasing what feels good. And so the ability, it's really cool that I have the ability to sit down and like, you know, we've got like mutual friends, Sean Gillespie, Doug Nordman, like I've got phone calls with them this week to flesh out this, what could be a billion dollar idea and ask for advice. And I'm in a position where I could, I feel like I could build something like that and bootstrap it. And it would be ridiculous. ridiculously huge over to undertaking, but fun. And I'm like, as long as it's fun and fulfilling, fulfilling, I'm in. Does this idea pull you away from real estate? 100%. Yeah. Oh, so that's but that would be a huge decision for me. This would be a legitimate business. I can't say that real estate is an illegitimate business.
00:43:41
Speaker
No, no, no. I mean, like i'm going to like this is I can't really say more than that because i i won't yeah I don't have stuff out maybe when we're done recording, um but this would be like 500 to 1,000 employees trying to reshape the financial space.
00:43:56
Speaker
And it's one of those things that i'm like i'm blessed to be in a position where i could pursue that i don't know if enough is enough man like it's not about money for me i'm not i don't be wrong i like money but i'm terrible with money i am overly generous i pay people more than i should i give money away like it doesn't matter at all. And the money is never been.
00:44:15
Speaker
It's nice. I mean, don't get me wrong. Like it's a lot easier to say money doesn't matter when you're pulling in, you know, paying yourself $60,000 a year, then also traveling $60,000 a year, then still have business stuff that you can write off. Like I'm living a good life and I get a hundred percent disability. So I'm making for that. Like I'm doing great. So it's easy to say money doesn't matter when you have money, but also that's not what I'm chasing. What I'm chasing is I have realized that without a purpose,
00:44:41
Speaker
I will die inside and I would need something. And like the moment I had this idea, like I'd been struggling to get to sleep on time and struggling to wake up and and like just being in a bum because I was like comfortable and this idea hit and I'm like, I've been at the gym at 6 a.m. for the last three weeks. I've been going to bed on time. I've been like everything just aligned. I'm like, all right, I need to chase something. It's way more fun to chase a big goal.
00:45:06
Speaker
Very cool. Regarding real estate, what is your single most important lesson and you've learned about using real estate to achieve financial independence? Oh, there's so many. Honest to God, I think it's just getting around other people that are crushing it in real estate, tuning out the the noise of people that will nay say but haven't been there, done that, and listening to the people who have been there, done that.
00:45:27
Speaker
And I think it's also the acknowledgement that in real estate, unlike any other venture, other than maybe like mergers and acquisition, you can create value out of thin air if you understand people, relationships, and the game. And so there are ways to really set yourself up for success, even if you don't have capital to throw at it. And and I mean, there's just, I have friends who I have a buddy who earned 5% equity on a 300 unit apartment complex while he was in college because he helped them with underwriting and solved a problem like fixed a mistake they made. and they you know That's not always the case, but there's ways to earn your space in real estate. and so People are always like, I don't have money. like That doesn't necessarily matter. The guy I'm bringing into this self-storage unit is going to take 50% equity
00:46:19
Speaker
and he's not gonna put a dollar into it that's gonna be the deal hey when issues arise i'll be the money or find the money you're gonna manage the deal and the problem he has time i have your capital or ability to find capital and together we can run fifty fifty on a deal where i'm happy cuz i'm like i'll throw money in a problem and and not deal with it and he's like.
00:46:38
Speaker
I'll deal with the problem and not throw money at it. And we will win. I look forward to seeing how your future deals, how your current deals turn out and then what your future holds for you as well. It's it's great to see your passion and inspiration. And that same attitude has actually motivated you to start a brand, which is a couple, at least a couple of years old now, I believe from the brand's name is ah from S per your shirt, ah from military to millionaire. And it's resonated with many. You said your group right now is 400. Is that correct?
00:47:07
Speaker
Yeah, the the paid group is 400 people, 405. What was your original purpose behind creating it and and how has that mission evolved over time? Well, that group honestly was that I wanted a place to, I wanted a community for myself with service members and vets that were serious. And I just kind of realized that without at least a little skin in the game, people are never as serious as they are when they're skin in the game. So I was like, all right, well, we'll charge 50 bucks a month and we'll see what happens.
00:47:34
Speaker
And then it's grown a ton since then. and We no longer charge 50 bucks a month, I wish, but i there's overhead now. But I mean, we have coaches now and we have three calls a week and and squads that we hold have for accountability and and and probably like eight different master classes and courses and probably $10,000 a year worth of like discounts on various things that you can get access to. and But it's just, it morphed from, let me create a community of people that are serious to be my peers.
00:48:03
Speaker
into just really helping people achieve their goals. I mean, it's crazy. I did a poll in there probably a year ago and I was like, hey, what's your what's your return on investment been in this group? you know Lost money, 1x, 2x, 5x, 10x. And it was like 75% said 10x. And then people the people who were saying 10x in the form were all commenting like you know in the In the google doc there like you should have had a box for a hundred extra thousand extra and one of the guys like just straight up message me on facebook it was like i ran the math i put this much money into the war room since i joined. And i've made this and it was like like an eighteen hundred percent return or something and it's just you know it's just when you.
00:48:46
Speaker
cultivate really good people into a space. It's funny because I'm not even the guy, like these people are doing deals together. I'm the small fish. I've got eight, nine figure entrepreneurs in there. And it's just cool because it's like people, it's taken on a mind of its own now. And so that's kind of why we're going to cap it because I'm like, I don't want it to lose its its luster of of being studs, but it's cool. So how do you balance sharing your personal financial journey or even continuing to build your personal net worth with educating the others?
00:49:14
Speaker
I focus on the education at this point. It seems the more that I help others, the more that I win. you I mean, of the so far this year I've closed three deals, 130, you know, hotel, a duplex and a 13 single family house package. All three of those were brought to me by people in that community. All three of them I got into without any money out of pocket. And yeah, I i might spend an hour a week on my real estate.
00:49:41
Speaker
as far as like management. So it's, it's pretty sweet and I can manage it better for sure. I'd rather keep some of the time and I'm like, whatever, but yeah. And then we're under contract right now on another one and potentially the self storage and both of those deals will be done with people in the community and both of those deals will be done. A one for sure will be done without any money out of pocket and the other one we'll see, but I mean, they're both. So I think it's,
00:50:05
Speaker
They kind of go hand in hand. It's crazy. I went from like sending out mailers and and all kinds of craziness to land deals to deals just kind of coming to me. I definitely want to learn more about that aspect of what you're doing. Is from military to millionaire only for military active duty or retired or ex-military? Yes and no.
00:50:25
Speaker
Okay. the All of the online content for you know the masses, no. The podcast, the YouTube, the blog, the book, the brand, the Instagram, the Facebook, the you know all that stuff, no. It's applicable to everyone, anyone, spouses, whatever, nor beyond civilians. I would say probably 80% of what we talk on there is applicable to anybody. And if you replace VA loan with FHA loan and and thrift savings plan with 401K, then I'd say 95% of what we talk about is applicable to anyone. The paid community, yes, the only people allowed in there are currently serving our veterans. We don't even allow spouses unless there's unless there are significant others active in the business.
00:51:04
Speaker
And that's not because I'm against spouses. I pulled the audience because one of my best friends and partners on a hotel I own is a Navy spouse. And he was like, can I join? I'm like, let me ask the group. And they were unanimously like, nope, not unless his wife's the one. And and I was like, OK, sorry, it's a culture thing. like They really like it being the actual service member. They all get along really well. And I'm like, I'm not messing with it. So we do have spouses, but they're all partners together. So ah basically, it's like,
00:51:32
Speaker
If your spouse is interested in real estate and you both want to join, great. If your spouse has no desire to be involved at all and you're not the one serving our veteran, then sorry. David will include the links to whatever it is you want to share with this audience in the YouTube description and podcast show notes. David, this has been an incredible conversation. It's been awesome to catch up with you. Thanks for sharing strategies that you have used for to build your real estate. I guess empire at this point, you've got a lot of different things going on and and this all seems pretty incredible. you're You're inspiring me a little bit more too, so I need to do some some deals or something. Well, thank you. It's been fun, Dave.
00:52:10
Speaker
And thank you all for watching and listening.