AI Could Take Your Job, But It Can't Take Your Real Estate

0:00As many as 30 % of all jobs in the US could be affected by AI within the next five years. Are you confident your career path will last until retirement age? And what are you doing to protect yourself from the unknowns of this rapidly advancing new technology? Today, we're giving you an investing solution to safeguard your financial future. AI may take your job or all of our jobs, but it can never take your real estate.

0:32Hey, everyone. I'm Dave Meyer. I'm a rental property investor and the head of real estate investing here at Bigger Pockets. And with me today on the podcast is my friend, Henry Washington. Henry, how's it going? What's going on, buddy? How are you? I'm good. But, you know, I got to admit, my AI anxiety is like pretty high. How high would you - It should be. Okay. I'm glad we're on the same page about this because I just want to be vulnerable with you, man. On the record, you should be for your day job. Like your investments are probably okay, but you should totally be worried. Being a data analyst?

1:11Yeah, 100%. Or podcast source or both. Yeah, all of the above. Both, yes. So I think this is a good topic for us all to talk about because I don't know anyone who's just like, yeah, this is going to be fine. There's going to be no disruptions. Even if you believe in the technology long term, which I do, I think long term, it's probably going to be beneficial. But I think there's a lot of uncertainty what happens as we transition to a AI supported economy in the next couple of years. So I wanted to talk about that on this podcast and how it relates to real estate. So today we're going to talk about the best way to take control of your finance and how to get started right now.

1:51So Henry, you're obviously roasting me because I do think data analyst is like number one job for a job that's going to get replaced. It's like the first job that's going to go. Which just sucks, man, because like in 2014 or something, I saw these reports like data scientists, data analysts, number one job for the future. And I went back to school and got a master's degree in this because I like job security forever. Ten years later, it's the worst job to have. I just totally got punked on this. But you, I mean, your job before you went into real estate full time was similar, right? It was almost the exact same thing.

2:26Yes. So you would also be screwed if you weren't a full-time real estate investor right now. 100 percent, yes. So I mean, I know you're not an expert in this. I'm not an expert in AI. I've done some research before this show. But like data analyst is definitely up there. But I have a hard time imagining who's not going to be impacted by AI in the next couple of years. Like I think you look at a lot of businesses, a lot of white-collar businesses. I've worked in tech my whole career and this whole industry is really getting shaken up, whether it's product managers or software engineers, another job that has been like a really highly sought after, highly paid skill over the last couple of years are coming for lawyers, paramedics.

3:10Like it's really going to impact the whole economy. It's just a matter of when, right? Like even the jobs that we are now saying are quote unquote, somewhat safe from AI, like they're still going to be impacted by AI in some way sooner or later, right? 100%. There's not a way around it. So listen, I don't want to be totally alarmist. I don't think the sky is falling just yet, but I think there are already signs that AI is impacting the labor market. And I do think that is only going to continue as the technology gets better and better. And so I guess my question to you is like, from a financial perspective, how do you even think about that?

3:47I mean, I think it went out the window when pensions went out the window, right? Because the last time I can remember somebody saying they retired comfortably was because they had some sort of pension or some career where they have some sort of pension-like retirement. Like firefighters have great retirements. Military have great retirement. Like where you get tenured. Like those kinds of things. Those people say they have comfortable retirements. But when's the last time you personally ever heard somebody who had a 401k who was retired say, I have a comfortable retirement? I don't really know, to be honest.

4:23I mean, I think every person who's retired I know has some level of economic or financial anxiety and uncertainty. So I think that that vision that you painted that we talked about has been gone for a while and AI is just going to make it worse for people who don't have a plan, who are solely relying on that 401k income. The way I keep thinking about this, and I know I'm biased because I am a real estate investor. I'm like thinking about all the things that I could do to try and quell my own fear about this and like make sure that I have income. And I'm like, the one thing AI really can't do right now or probably for the foreseeable future is like own assets.

5:06And to me, like that just has sort of reinforced my belief and prioritization of real estate investing, because even though we're in a very uncertain economy, like it does make me feel like real estate is going to provide a really strong backbone for me. That has always been true, but especially in this new environment. Yeah. And I think the value with real estate in terms of AI is it's just way too people facing. Like we're providing housing to people, right? Whether you're fixing and flipping, whether you're short-term renting, long-term renting, like you, the housing is built for people to live in.

5:45The population is still growing. Those people need to live somewhere. My concern from a real estate perspective with AI is if AI does have such a negative impact on the economy, those people still need to live somewhere. And is that going to drive housing prices down because people aren't making enough money to pay for more housing, to pay higher rents because there's less jobs? Like, how does that financial negative impact hurt or help real estate? We do have to take a quick break, but Henry and I will be back right after this. This week's bigger news is brought to you by the Fundrise Flagship Fund.

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10:25Welcome back to the BiggerPockets podcast. I'm here with Henry Washington talking about how AI is disrupting our entire industry. Let's jump back in. Okay, we've mused enough about AI and shared our thoughts about it, but maybe tell me what you think the benefits of real estate investing are in this kind of environment. Is it just the same as they've always been, or is there anything different to you. The benefits of real estate and then the benefits of trade work. Yep. A hundred percent. Trade work got really uncool as technology started to advance. And so people were like, why would I go learn how to be a plumber and get my hands dirty when I can go and get this super cool technology job?

11:07And now technology has advanced so much that it's like, people are like, why would I go get that technology job that could go away in a week when I can go learn how to be a plumber and make$150 ,000 to$200 ,000 a year starting out. And so I think that owning the real estate, yes, you get the tax benefits, you get that cash flow, you get the appreciation, but the safety from an AI perspective is that it is people-focused. And AI will help us operate our businesses better through helping us do things that typically took a lot more time to do, which can technically help you grow and scale your real estate business faster now by leveraging some of the AI tools, but you just, you can't take the people out of real estate.

11:50It just, it's not a thing. For sure. Yeah. I want to get back to how AI can benefit real estate in just a minute and the trades. Cause I want to talk to those, but yeah, I want to just hit on like why real estate, because you could say the same thing like, Oh, you know, AI is coming for your job. You should invest in Bitcoin or you should invest in the stock market. And to me, I think that the real lesson or the thing that I'm taking away from this is ownership. Like you need to be an entrepreneur and own your own business so that you have control over the way AI is being adopted around you. Because if you work for another corporation, someone else is going to make a decision about where they can cut people and where a machine can do that job.

12:36Now, as Henry said, AI is going to impact real estate in some way. And I think it just really is like in these kinds of scenarios, you get to decide what you spend your time on and what AI is used for. That's going to be like a defining differentiator for how people fare over the next few years. And I'm not saying that's right. I just think that's the way it is. And that's all the more reason for people to pursue entrepreneurship, whether it's real estate investing or something else, to just like have that say and have some control over your income and your future. Yeah. I mean, that's what I like about real estate is the amount of control that I have.

13:15A, yes, control over the income that I make, control over where to implement technologies or not implement technologies, but also just control over my finances and being able to make money the way I want to make money and when I choose to make money, which it was more of a luxury 10 years ago and even more of a luxury 20 years ago because that path of go to school, get a degree, get a job, work the corporate ladder and retire was easier to do. It was more achievable. But as technology has grown and the ease of that has dwindled away, becoming an owner of something has become more important. Because I hear and I see a lot, especially on social media, where people say, you know, stop telling people everybody needs to be a business owner or an entrepreneur, right?

14:13Like you, you know, there's always that crowd that's like, you know, this isn't something you have to do. You can just go be an employee. And you can. Yeah, it can. But that path isn't as guaranteed as it used to be in terms of being able to do that and then retire comfortably. And it comes with sacrifices. Both of these paths come with sacrifices, right? Because the sacrifice of the nine to five is less control. Somebody can take your job from you and then you have to go find another one. And for some that'll be easy and for some that'll be more challenging. But the sacrifice for entrepreneurs is like, you got to go get it.

14:53Self-motivation. I saw a TikTok where a guy said, entrepreneurship broke is worse than nine to five broke. Yes. Because nine to five broke, you know when your next paycheck is coming. Like if I can make it a couple more weeks, I got a little bit more money coming in. But entrepreneurship broke. You don't know when that next paycheck is coming in. You got to go make the money. And so that's the sacrifice you make with ownership is you got to go make the money and you may make it every couple of weeks. You may make it every couple of months. You may make it once a year. It depends on the industry that you're in and how you set up your business.

15:28And so you've got to choose your heart for sure. I just think that the nine to five path isn't as secure as it used to be. And you should be thinking about how to protect yourself. And we're just here to tell you and talk to you about how to do that in a safe way, safer way with real estate. That's the whole point of us being here. So my question, though, to you, though, is like, let's presume everyone agrees with this, that real estate is a good way to sort of hedge against the uncertainty that AI is bringing. Like, do you think you would change your advice to the average investor who's not a full-time professional investor, how they would go about it in this era?

16:08Or, you know, would you keep giving the same advice you have been? No, it's the same advice. That's the coolest part about real estate to me. How you do it essentially has remained unchanged over the course of its lifespan, right? Like the whole point of making money in real estate is finding something that has an opportunity for you to add value to it, buying that thing, adding the value, and then monetizing it at its new higher value, whether that's renting it out, whether that's selling it, whether that's midterm renting. The exit strategy isn't important. The goal still is, has always been, and will continue to be for the foreseeable future, is to find something that has opportunity for you to make it more valuable.

16:55And then you make it more valuable and you monetize the higher value. Now, as time has moved on and technology has advanced over the course of real estate being owned by the common person, there have been tools that have allowed you to do that more conveniently. It was a whole lot harder for someone to drive for dollars before apps like Deal Machine existed. And it was a whole lot harder for someone to identify distressed properties before the Internet existed. And you had to go down to the courthouse and look up all these properties that you drove by and saw and then manually look them up to build a list to reach out to those sellers.

17:37Like the people who were doing those tactics prior to the Internet had to spend a whole lot more time to get the result that you and I can get at the click of a button on our phone now. But the how has always been the same. They were trying to identify properties that had opportunity to add value. And so all AI is going to do for us is help us get that more conveniently. But the how hasn't changed. And I don't think it is changing. We got more about AI and how you can actually use AI for a positive benefit in your real estate investing business right after this quick break. Stay with us. April is a beautiful month.

18:19Flowers are blooming. The days are getting longer. Everyone's outside. Everyone except you. You are stuck in the seventh circle of tax hell. You forgot to separate your mileage. You've got cash transactions that your CPA is refusing to touch. You replaced the HVAC in March, called it a replayer, and just learned it should have been capitalized and depreciated over 27 and a half years, or possibly 39 years. And now you owe penalties you didn't know existed on income that you already spent. If you had a rough tax season and never want to relive it, it's time to download Stessa. All year, Stessa's AI tracks your income and expenses and maps them to Schedule E categories.

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21:07At first it works. You qualify with your income, your job, your tax returns. But as you grow, that model starts to break. Now, it's not really about your personal income. It's about the income from your properties. That's where DSCR lending comes in. And it's why a lot of investors end up working with lenders like Host Financial. Host Financial qualifies deals based on property income, not personal income. So you're not dealing with W-2s or tax returns or DTI constraints. And with 80 % to 85 % LTV, you can stay more flexible as you scale. It's just a different framework. one that tends to align better with how investing actually works.

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22:01Welcome back. I'm here with Henry Washington talking about how AI can help you in your business already and where we think the industry is heading as we adopt AI. we talk about on the show a lot, trying to figure out what you're good at, because there's so much to do in real estate investing. You can't be good at all that you can't do all of it. And for me, for 15 years that I've been doing it, I felt like I was good at market analysis and deal analysis. And that doesn't even matter anymore. I'm just wondering if that is even a skill. It's not a skill anymore. It's a button on a piece of software.

22:38Exactly. And so I need to evolve, I think, as an investor. And I've done value add stuff in probably not the most efficient way. I'm a long-term investor, so I'll buy stuff. I'll probably take longer to do value add than you do. I probably pay a little bit more than you do out of convenience. And I've thought hard about that. I've told you this, but I think I mentioned on the show that I'm flipping my first house actively, not because I necessarily want to flip houses, but I want to get better at construction. Like I want to learn the business a lot better because that's a skill that, you know, you can read about, but you can't really get good at it unless you're like on a job site learning about it.

23:18And so I'm just trying to learn new things. Even 50, I told you before I can't learn new things, saying that I'm trying to learn new things. But like, I'm just trying to think about like what my advantage is going to be as an investor. And it's really, really changed for me over the last couple of years. Yeah, that's a phenomenal point and very true because you're right. Those are skills that a real estate investor did need to know. And I'd argue that any real estate investor that's going to grow a substantial portfolio, in other words, you're going to own more than just a couple of houses. You should still probably understand those skills.

23:55Oh, for sure. It's amazing to me how many people cite metrics to me, like they've chat GPT'd it, and they have no idea what the metric means. They're using it in the complete wrong way. Or you can pull a list of top markets to invest, but that ability to connect why that market is good to your own personal strategy and your personal circumstances, absolutely, you're still going to need that. But that could probably be the first year of your investing, learning how to do that. It's not something that's going to be an enduring benefit and skill that you're going to out-compete other investors on.

24:32I think there are enough tools out there that are sophisticated enough that if you don't know how to analyze a deal or analyze a market, you could probably use some of these tools and pick a decent enough deal in a decent enough market. Now, does that mean it's the right thing to buy? No, I think you do need that second tier of kind of skill set that you were talking about. But for those who don't want to put in that time and effort, it's a whole lot easier to get the dart on the dartboard than it used to be. Oh, for sure. There's just amazing tools that just run an estimated cash on cash return for every property on the MLS, right?

25:11That used to take hours. And I thought that was part of my skill because I'm good at that kind of thing. and I could run deals and faster than other people and I could make an offer or whatever. Now, it just doesn't even matter. I mean, I would never invest based off those numbers, but I could sort down to 10 or 15 deals that I want to hand analyze a lot faster and soak in everyone else. So I think that's the way I've been thinking a lot about this is like, there's always going to be an ebb and flow of interest in residential real estate. When interest rates were really low, people flooded into this market.