This ALWAYS Happens Before A Housing Market Crash… | Michael Zuber

18:57Who knows? But I do agree that demographics are concerning, but it's 10, 15, 20 years from now. And oh, by the way, we're the greatest country in the world. And all we got to do is turn on migration again. And that problem goes away.

19:12Graham Stephan:So how could you be wrong about your prediction? So I ask myself that question all the time. There's macro and micro. A macro wrong. I fundamentally believe that Donald Trump, President Trump, wants to win the midterm elections. That's something I fundamentally believe. And in order to do that, he has to get the Strait of Hormuz open. And he has to have inflation start coming down. Also, he just put up Kevin Warsh. And my, again, prediction, guess, whatever, is he's going to cut interest rates somehow, some way, probably by blaming AI for deflation. If those don't happen, stuff blows up, right?

19:49That's something I could get wrong. Micro level. Again, I've been studying my market of the Central Valley for 25 years. Fresno, where most of my units are, is a very red county in a blue state. If that flipped, that could be a problem. So there's all kinds of things that could go wrong. But again, I ask myself these questions every day, and I pivot all the time. I've made some very big calls, and I'm not afraid to make them again.

20:16Graham Stephan:Now, millennials and Gen Z have been called a renter generation. What do you think is a policy change that would actually get them into a house by 2030? We have to make it profitable to build entry-level housing. I don't think we understand what entry-level housing is in this country. The average home in 2024 was 2 ,300 square feet. The average home in the 1950s was sub 1 ,000. We need that extra bathroom, that extra bedroom, this extra this, this extra that. That's not entry-level housing. That's like the next jump or the jump after that. But again, the millennials, Gen Z, you don't have options.

20:54Condos are your best thing, but then you have to deal with HOAs. So we have to find a way to make building smaller homes profitable.

21:02Graham Stephan:How would it be? Because my understanding is that back then in the 1950s and 60s, land was really abundant. You didn't have all these regulations. You didn't have these standards. And because they had to follow so many things and pay a premium for the land with way more risk with labor, they have to build that just to make any amount of money. If they built any less than what they currently do, they would be losing and they just wouldn't build to begin with. I completely agree. if we can't, as I said, if they can't do it profitably, they won't do it. And that's why we're not building them. So I don't have a silver bullet or an answer.

21:37You could find government land to give them away, but most of that lands in places people don't want to be. You could try to lower regulations. There's all kinds of things. You just, you have to have a focused effort to say, hey, you know, again, I'm just thinking off the top of my head. If you build a home that's less than 1 ,000 square feet, we'll waive X, Y, and Z conditions. That could work, right? You have to create a stick and a carrot. And right now there's neither.

22:06Graham Stephan:Now, in terms of affordability, Ben Shapiro says that if you can't afford an area, you should just go and move to somewhere else that you could afford. You got a lot of backlash for this. What is your take on that? I say you live where you want and invest where the numbers make sense. Again, there are folks that want to always be around their family. The family unit's important, and that's awesome. That should be celebrated. That's why I think a lot of folks are getting into these multi-generational living. You're actually seeing builders here in Vegas that have multi-gen properties being built for that.

22:39I think that's going to become something. So I would not be so, I'll say arrogant to say something like that. Dude, we live in a free country. And if you want to live where you want, Great. You just have to realize that you have to make other choices. When do you think it's worth it to buy a house versus rent right now? In 2026. The only answer is if you get a smoking deal. If you get something that's 15, 20 % or percent below real value, which can happen, but it takes work. So how would you minimize the work and maximize the reward? Like if someone wants to go out there and find a place 15 % off, what would they do?

23:18Graham Stephan:Yeah. And how do you know it's 15 % off? Because I see some of these deals where it looks like 15 % off, but then I'm like, well, no, it's just not worth 100%. It's worth 85 % of what they're asking. So let's talk about what I did. So I tried to buy rental property where I lived at the time in Silicon Valley, which I lived in Mountain View. And I spent a year every Sunday looking for this magic cashflow. It didn't exist in 2001 and it certainly doesn't exist today. So I had to make a choice. Where could I go find cash flow? Because I was not going to bet on appreciation. I'd already lost my ass in the stock market.

23:53So I wanted cash flow. So ultimately, we found Fresno, California, which was two and a half hours away by car, five hour round trip. But what did we find? We found Norris Drive, 1818 Norris Drive East, 93703, look it up on Zillow. We bought it for 107. It rented for 1095. It beat the 1 % rule. That's all I knew back then. So that's what we got. And that's where we started. So invest where the numbers make sense, but live where you want. What about though for buying a primary residence? So I'll tell you what I did. So 2023, I made a decision to leave California and move to Vegas. And we were looking all over the place.

24:32This is again, where interest rates were going up. I think at the time, interest rates were seven and a half percent. And we put a budget of a million dollars. That's just what our budget was,$950 to$1 million. And all the existing homes didn't meet our needs. But again, back to the problem with the 52-year spreadsheet identified as builders had a problem. They built the wrong inventory, right? They built for the wave, and then they were letting properties out at the wrong time. We now live in a part of Henderson that's up in the hills. We got something that was 15 % off. It had zero lot premium with a view.

25:08So you guys know that that's money. Somebody else backed out, so we got all the upgrades for free. And they gave us a 4.99 % fixed 30-year mortgage. So again, I always look for the deal.

25:22Graham Stephan:So when does renting and just saving the difference of buying actually make a significant difference? Well, I think today it's probably true for most people because I don't think most people want to do the work. So let me go back and answer that question, how to do it. The only way I know how to do it is get remarkably disciplined. I have this idea called a buy box. I'll give you my buy box from 2001. Again, remember, I didn't live there. I didn't know anybody. I had no experience in this calendar. So good, so good, so good. New markdowns up to 70 % off are at Nordstrom Rack stores now. Stock up and stay big on shoes, tops, dresses, accessories, and more must-haves for summer.

26:02Join the Nordic Club to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. So I picked 93703. It's called the Mayfair District. I picked single family homes. So not duplexes, not condos, nothing else. I picked three or four bedrooms, two car garage, two bathrooms, one story. Why is that important? because I looked at that criteria and that criteria only every day for three years. So 99 % of the market might as well not have existed. But by looking at that market, that criteria every single day and tracking the changes, A, you know what it's worth, and B, you know when you can get a deal.

26:55That's where most people get wrong. Most people say, hey, I want to buy something. And they're over here, and then they're over here, and then they're over here. You get no economies of scale. You don't know if anything's a good value. You're just guessing. You're trusting Zillow of all things. It's just people today don't want to be disciplined and do the work.

27:11Graham Stephan:Do you think people are better off buying a house today than renting? We had someone on recently who was making the argument that the average person is never going to invest the difference. And buying a home for the average person out there is a good financial decision, even today, even at 6.5 % interest rates, because the alternative is that they would just spend the extra money. There's certainly a lot of truth in that if you watch consumer behavior. We do not save money. You get a STEMI check, you spend it. We actually just had record tax returns. You guys know the tax returns were up 12%. Guess what happened?

27:46They spent the money in Q1. Look at all the retailers, Ralph Lauren, all these other folks. It's just we never save money. So there's a lot of truth in that given consumer behavior. But back to the crux of your question, I don't care if you buy a home or not. If you want to, I suggest doing the work and getting a deal. You make your money when you buy. This is the difference between real estate and the stock market. The stock market every second of the day, even Bitcoin or crypto, you know what it's worth every single second of the time. Real estate is inefficient. You can if you work long enough and you make enough offers and you follow up enough and you learn the different creative mechanisms and you find the right seller.

28:24This is about finding the right seller. You can make hundreds of thousands of dollars the day you close. Most people won't do that. Is success in real estate more complicated or difficult? Ooh, complicated or difficult. I've never been asked that. I don't think it's complicated. I think it's remarkably simple, but it just takes more work than most people want. And the simple answer to that would just be create a buy box, have your boxes you need to check. It needs to have this many rooms, this many bathrooms in this location with a pool, no pool, yada, yada, yada. And then look at it every day for 20 minutes a day because it doesn't take a lot of time, right?

29:02I think it's just Leotter or somebody talks about 18 minutes to be in the top 5 % of any skill. That's all I'm asking for is 20 minutes a day. So you would say if a random viewer out there listened to that advice, that would maximize their likelihood of success in real estate. I'll even go one step further. If they do that every day for the next three years, like I did, they will A, learn their buy box. They'll know what value is. They won't have to question it. And B, they're going to have an excellent opportunity to find a discount because it's just a law of large numbers. I've written 100 offers and gotten nothing.

29:37I've done that before. Another thing that people say is extremely relevant in today's climate with high interest rates, low affordability would be creative financing. Sure. I'm curious, what's your experience with that? And do you think that that's a viable solution for someone that wants to get involved in real estate, but they don't quite have the means to do it? Yeah. Creative financing is one of those tools that everybody should learn, but let's define creative financing first. So let's call traditional financing 5 % down owner occupied or 25 % down investor. Let's just define that as standard.

30:09So creative financing is anything other than that. Typically involving the seller giving you some of the loan, right? Whether it's a first, a second, or something of that nature. So yeah, creative financing is very powerful. I've used it half a dozen times, maybe 10 times, but it's always finding the right seller. It's funny. One of the things that I've looked at the last year is what owners of people in my buy box have greater than 50 % equity. So what am I doing with that? What I'm doing is I'm giving them two offers. I'm giving them a low cash offer, but I'm also giving them a higher number, assuming they could take some equity back as a second loan.

30:50So yeah, creative financing is a tool. It is a very valuable tool. It doesn't work all the time, but yeah, it's certainly a valuable tool.

30:59Graham Stephan:Where do most people go wrong when it comes to creative financing? First off, I think too many people sell it as the magic beans or the magic sauce, and they don't know all the required paperwork. It does take a lot of paperwork to protect you and to protect the seller, which should be paramount in this situation. So you've got to work with title escrow lawyers, depending on where you are in the country. But I think the paperwork is the biggest thing people get wrong. They think they can just take a napkin and, you know, Joe Schmo signed it and that's not how this should work. There should be penalties for mispayments.

31:28There should be ability to foreclose all those things. I think people treat paperwork like an afterthought and it should not be. How could you become a professional in real estate? Meaning you're an investor, you're making money, you're just doing real estate for a living when you have no money. Again, that's not who I am, right? You guys know lots of really famous people like Pace Morby and all these other folks. They're real estate people. I was an employee, guys. I had a tech job. I was an accountant. I was a sales guy. I was a W-2 employee. I'm not a full-time real estate investor. I now do real estate on my taxes because I get 16, spend 12, so I don't need any more money.

32:05But yeah, I'm not that person. I tell you to live below your means. That's the You know what the three-step process to get wealthy is? It's been 100 years this has been true. You want it? Yep. Live below your means, so create discretionary income. That's step one. You have to have money that you can plant, whether it's stocks, crypto, classic cars, whatever your thing is. I don't care what it is. I got a buddy of mine who has a seven-figure portfolio and ice hockey cards, but that's his thing. That's his jam. So be it. So again, have disposable income. Step one, either make more money or spend less.

32:39Olivia and I, at 30 years old, so this is 23 years ago, we spent every penny that came in. Over the course of 18 months, we spent half. So we had 50 % of our income that we could sock away to real estate and deal with the problems, right? Broken water heaters and evictions and all that other stuff. Step two is you got to become elite at something. Find your thing. Is it crypto? Is it stocks? Is it being a YouTube podcaster? Whatever your thing is, commit to that. Become elite. And this is the one everybody hates. You got to do it for a decade. You need time to compound. You need time for proof of concept.

33:18It's just, we all want things easy today. We want instant. It's not how wealth works. Wealth is slow and consistent and sacrifice. One thing I find really interesting is how you constantly say, okay, well, like we'll make 50 to 60 a month, but we'll spend 12. You're like one of the maybe two people we've ever had on this podcast that are like, I'm content with where I'm at. I don't need more real estate. I don't need to keep growing. I have enough margin. I'm curious, what makes you different than most people who continue to push off the goalpost? And how are you able to do that? Is it a better way of life?

33:51Well, I'm certainly not in a position to answer that last question. I will tell you that I'm happy. I'm more than content. I can do anything I want when I want with whom I want. And that's pretty amazing. How are you able to do that with 12? Most people would argue. I mean, would argue, okay, well, if you have a family of four and if you have this, then you probably need $30 ,000,$50 ,000 a month. I would argue$50 ,000 a month. Yeah, he would argue you need$50 ,000 a month. Well, our daughter is 35, so she's already out of the house. So that's part of it. It's just Olivia and I. And we only have one, I'll call it a vice because it's probably more than most people spend, and that's eating out.

34:26We love to eat out and get good food. We don't look at prices. But other than that, we stay home. We're kind of boring.

34:32Graham Stephan:And what would you tell someone who feels like they've done everything right. They follow your advice. They save money. They avoid debt, and they still can't afford to buy a house. What I would tell you to do is keep grinding. It's not easy, but simple. Back to the earlier point, you just got to keep going. It's only three-step, guys. If you don't have enough down payment today, get more of a down payment. Live below your means. Here's a true story. I just want to get as close to accurate as I can. So it's probably 2015. We've been buying real estate for 14 years. We probably have over 100 units.

35:09I go to a housewarming of somebody who reports to me. So like, you know, like you got people to report to you. So I'm a director and this manager reports to me. His house is better. We live in a condo. We never upgraded our condo. We had a 1300 square foot condo, never upgraded. We had cars that were 10 years old, right? We just never, we took all our money and socked it in real estate. So he had a better house. He had a backyard. We don't have a backyard. He had new cars. He had a third car. We don't have a third car. His kids went to a better school district. So after this, and again, he reports to me, which is really what screwed with my head.

35:48I'm trying to drive home, and it's only five miles probably, maybe six. And I get about halfway home. I have to pull over because I'm bawling. I'm crying. Because for 12 years, I've asked my family to sacrifice. live below our means. And I don't know it's working. 12 years. And this direct reports is living better than me, or at least I thought so. So first thing happens is Olivia drives us home because I literally couldn't see the road. And then she pulls up the spreadsheet and shows us where we are. Because I had a job that took me all over the world. I worked 60 to 70 hours a week. I had no idea where we were.

36:31I was always next deal, next deal, next deal. And then she pulled up the spreadsheet and showed me it was working. What does working mean? Cashflow was coming in. We were, you know, we could live on that, that number at the time. So it just, it, it, it dawned on me. But again, I had that moment after 12 years in building a hundred unit portfolio that I didn't know if it was working. Cause I'm an employee. I'm not a guru. I'm not running around doing on stages and all that stuff. It's not my thing. I'm just a simple guy who loves to... I interviewed Graham one time and he talked about his fish tank.

37:03For me, the economy is my fish tank. I have done the same thing for 35 years. I wake up at 6 a.m. For the next 90 to 120 minutes, I'm reading financial news because it's a big puzzle to me. It's fun. It's fun for me to watch all these things work together. That's entertaining for me. And now because of YouTube, I just do a daily show at 7.30 and live and let the world know. I haven't, dude, I, it's like 300 people watch it, but I love it. So again, I don't have these big desires. I don't want to be a billionaire. I, you know, I, one of the nicest things that Pace Morby ever told to me, because I, I talked to him occasionally was Zuber, you got to know thyself.

37:45And that was, that's like a big weight fell off my back because I suffer the same comparison that I'm sure most guys do. Like, why can't I do that? Why can't I do that? This, that, the other. but you know at some point I got I got I have more than more than what I need so 59 60 60 oh hey I didn't see you there I was just getting a quick little bicep workout in and technically I didn't even need to be counting my reps this thing counts for me six seven reps in it won't forget great timing though because amp is actually sponsoring today's episode and they sent one over for our new warehouse gym this is amp the smartest home gym on the market think of the cable setup you'd find at a commercial gym, but in your house.

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39:27This episode is in partnership with Airbnb. Graham and I are literally always traveling for the podcast. And in fact, these past few weeks have been very brutal. We have worked so much, but there is light at the end of the tunnel. I'm actually going to both Thailand and Japan for the next three weeks with a couple of close friends. I cannot tell you how excited I am for that. The beaches in Thailand, to die for. The food in Thailand, amazing. And I'm telling you, it's going to be a blast.

39:50Graham Stephan:If you travel a bunch, you probably don't think twice about your home sitting empty. But when you're away, you could actually list your place on Airbnb instead of leaving it unused. And if you've ever considered hosting but weren't sure how you'd manage everything, the co-host network can help make it feel a lot more manageable. With this, you could partner with a local co-host who has hosting experience. It can help manage things like creating a listing, managing reservations, messaging guests, and helping make sure everything runs smoothly during your stay. Honestly, it just feels like a practical way to make better use of a space while also bringing in a little extra cash while you're away.

40:20At one point, I hosted my place on Airbnb. I kid you not, the guy that checked in was a fan of the channel. I've never said this before. It was a crazy experience, but the entire setup was very straightforward. Everything ran smoothly, and it turned into a genuinely great experience overall. If you're interested in hosting and you want a little help getting started, find a co-host at airbnb.com slash host. So on this very impressive 50-year spreadsheet that you made, what were some of the most interesting findings, the most relevant findings that the viewer could use right now to educate themselves, to put themselves in a great spot?

40:53Well, let me answer that with the one thing that was shocked me the most, and that's about inflation, right? We've heard, you know, we had 9.1 % currently, if you believe CPI lie, 3.8, whatever it is, they're all talking about 2%, 2%, 2%. So the one question I asked myself after building it was, have we ever had a period of time, an extended period of time, where inflation was over 2 % and it was CPI. And the answer, surprisingly, was 1987 to 1997. CPI inflation was over 2 % that entire decade. So we're talking about the Fed getting below 2 % and it's been above 2 % for four years. But guys, we've been there before.

41:33It was over 2 % for an entire decade. So what we're going through today is maybe not unusual or unheard of as sometimes the media makes it out to be.

41:43Graham Stephan:For someone who studies the market so much, have you noticed any correlation between the stock market and the housing market? Because it seems as though the high-end market is really tied to stocks. And if stocks are doing well, housing does well. There is no question that there's a correlation in certain cities, Seattle, Austin, San Francisco, San Jose, markets like that, where there's absolutely a correlation in the stock market. And again, you could see that in transactions because I talk to agents almost every week around the country. And when the stock market takes a big dip, which has done a couple of times in the last year, showing stop, all this other stuff, because again, it's their asset wealth there.

42:19But I actually want to ask you a different question. Back to the 52-year spreadsheet, because I knew I was coming here today. We've obviously had three years, and I think we're going to have a fourth year double-digit S &P 500 growth. Do you guys know if that's ever happened before?

42:35Graham Stephan:Yes. Do you guys know what happened the next 11 years? It was suboptimal growth. It was flat. I have the numbers here on the spreadsheet. Right. It went from like 1280 to 1302 or something after 12 years. So I thought that was interesting. Now, why would that happen? Well, it's called reversion to the mean, guys. You've had four years of 20 % growth, and you've probably heard Warren Buffett and everybody else say stocks return 8%, right? You guys have heard that. Well, you just had four years of 20. In order to get back to the historical run of eight, you're going to have some rough years. So I've heard the argument, though, that we can't look back 50 plus years in the market because our economy has fundamentally changed since the internet.

43:25Graham Stephan:And when you look starting the year 2000, the price to earnings ratio has skyrocketed. And now that could be the new normal. And even though we are high on the scale of the new normal, we're not at the peak. And with AI and with our global economy, everyone kind of rising at the same time, they say that these elevated returns might continue longer than you would expect. Well, again, nobody has a crystal ball and that is absolutely possible. history says it's not going to end well. Again, if you want to talk about AI, again, stock market, all of that, I look at it all the time. I think there's a lot of circular revenue in there.

44:08I do think that, again, studying economics, if you go back and look at where we've had crises before, you could look at railroads, you can look at utilities, you can look at the internet, DSCL lines, all of that. There's a time where money comes flying in. Right. It just keeps investing. Every idea is funded. And then it's not. And, you know, I don't know why AI would be any different.

44:33Graham Stephan:Now, if mortgage rates dropped to 4 % tomorrow, what would happen to the housing market? Would it be that prices explode or would it be that supply finally begins to catch up? Well, I love that you asked that question because my brain always goes to why it collapsed to 4 % because that's a different answer. For example, one of the reasons it could collapse to 4 % is we are now in a depression. Unemployment's 11%. It could be something nasty like that. Or it could be the other side. Kevin Warsh says we've got some new whiz-bang inflation measure and it's 1.8 % and we're this, that, and the other.

45:09And then he could cut. So there's really two answers to that.

45:12Graham Stephan:Let's see the second answer, because he wants to do what's called trimmed averages. Correct. Which would basically take out the extremes of the inflation report. So in this case, he would take out the extreme of rising oil. Correct. All of a sudden now inflation goes from four down to 1.8 within target, and then they could cut rates. Absolutely. So if that were to happen, because that seems plausible. Oh, it absolutely is plausible. I think Kevin Warsh is going to do three things. One is change the definition of inflation, go from CPI to this median trimmed or whatever it's called. He's also going to stop the Fed presidents from communicating so much.

45:47And then he's going to use technology to get better economic metrics. This whole telephone survey nonsense is going to be flushed down the toilet. So those are the three things you could expect Kevin Warsh to do inside 90 days. So what you're describing is a rosy and fun picture. it's really interesting. I actually think prices would go down because I think we've had four years of restricted selling. And if you take rates to 4%, enough people who have been just kind of getting by, like we talked about earlier, I think a lot of them would list immediately. And anytime you get more supply in a very short window, prices will fall.

46:27So I actually think that median home prices fall maybe for four to six months if interest rates go sub 4%, which is probably most people would disagree with. But I think that's pretty certain.

46:42Graham Stephan:So do you think anyone can be a real estate investor? Can? Yes. Should? No. Who should and shouldn't? It's folks that can understand this is a journey. It's a 10-year journey to building wealth. There will be lots of twists and turns and some very bad days. People will steal from you. Stuff will break. Permits will be a problem. Not everybody can handle the ups and downs of real estate. Can everybody? Sure. Should everybody? No. I don't think everybody's wired to sacrifice for a decade, deal with the BS that happens, and still smile at the end of the day because there are some very hard days. Is it still worth it to invest in real estate though?

47:26I don't know why it wouldn't be. Again, if you can find the right deal, if you can get the right debt structure and you can hold for more than a decade, history says you're going to be okay. You got to own assets. Dude, we live in a fiat-based economy. This is what drives me crazy. You guys think that we're going to go back to the gold standard or something crazy like that? No. We're going to grow our way out of this. They're either going to default or we're going to grow. Dude, inflation's a feature, not a bug.

47:51Graham Stephan:So why wouldn't you just invest in the stock market instead. Well, again, I think everybody should do their thing. I have a very dark history with the stock market. I turned from seven to two to go to 40. I chose to become a real estate expert. If you want to take the time to study the stock market, if you want to take the time to do that, then you should do your thing. I'm not here to tell you that real estate's the right answer for everybody. In fact, it's probably not the right answer for most people. Most people should buy index funds. Most people should buy mutual funds. They should save for their 401k.

48:23But if you want to grind and you want to have a buy box and you want to be a freak of nature and look at it every day for three years like I did, then I welcome you to the party. You can get wealthy that way. Real estate is inefficient, guys. The stock market's not inefficient. The price of Intel or the price of NVIDIA is known by everybody on the planet at every second. That's not how real estate works. I just sold a duplex. I told you that in the opening. I value this duplex on my financial statement at$400 ,000. I would not have bought it for anything more than$250 today. I had somebody offer, somebody reached out to me.

49:01They wanted to run a sober living facility there because it's two four-bedroom, two-bath houses on one lot. So big houses, like 1 ,800 square feet or something. It's perfect for what they want. So I didn't want to sell this house or this duplex. I have a list of properties that I'm going to give my daughter, Teresa. And this was on that list because it just prints money. right? It's easy. It's yards. It's got a fence down the line. So it just operates like two houses. It's not connected. I wasn't going to sell. So he kept pushing, kept pushing, kept pushing. And I finally said 599. Again, I valued it at 400, right?

49:36I'm like, Hey dude, if you want to pay 50 % over, I'll sell. So I say 599, he ghosts me, or at least I think he ghosts me. Turns out he's got grant money from the state of California. And he comes back to me at five and a quarter. Again, I value it at 400. So I come back at 550. We settle at 537. I also take the commission from 5 % to 1%, as is nothing else.

50:06Graham Stephan:How is that responsible from the state of California to throw money at a property significantly above what it's worth? They have a need, and that is the only house or the only setup. They identified five properties, and mine was the unicorn that fit their need. And the only way to get it from me was to overpay. So I'm not here. I'm telling you right now they overpaid. See, I'm going to say this. I'm not saying it's illegitimate, but I've like Nick Shirley's video on the hospice situation. I've seen it. It just makes me think that when I was doing real estate in Los Angeles, the sober living people who would reach out were always seen as a bit of a joke because they would come in and offer like double the price for anything.

50:52Graham Stephan:and they were always the most unscrupulous people who would just come in and they would be wearing chains and this and that, and they'd drive up in a brand new Benz, and they just didn't seem like a sophisticated investor or business, but somehow they had 30 grand a month to spend. It made the wheels turn that something's off. Something's off, yeah. So I have no idea if that's what this person, I only did everything over the phone and email. because I had a team down there. But yeah, it could have been. But again, we sold it, we raised more capital, and we'll probably put it in apartment buildings.

51:30What are some of the biggest lies about investing in real estate that you're seeing spread online? Because I'm sure that you see a lot of crazy content, especially from some famous and potentially people see these people as expert real estate investors. I think a lot of people do two things that annoy me about real estate investing. A, They try to make it sound easier than it is.

52:21And B, they try to sell the lie of you don't need any money. I think both of those things are, they're going after the wrong crowd. They're going after the crowd that doesn't have the money to scrape together to, you know, really get into this. And that's why they should just make more money or spend less and keep saving. But I think there's a lot of unscrupulous people that are selling the idea of easy and also a version of no money down.

52:44Graham Stephan:So what's your thought then about just buying real estate right now outright in cash as an investment? So back to the answer of debt. And this is why what we're going through today in multifamily is exactly what happened with residential and the GFC. It's the debt that blew up and it's the payment that blew up. You could add on top of this, you know, insurance taxes also in some parts of the country. But guys, it's always the debt. Resolution RTC, debt. Savings and loan crisis, debt. It's always the debt that grows up. So again, what I tell most people, and you'll hear me fight against this all the time is just get 30-year fixed rate debt.

53:21Don't get arms. I don't care if your plan is to live there five years. Don't get a seven-year arm. 30-year fixed rate debt because you guys don't realize, you guys probably do, but the audience doesn't. We are so uniquely gifted with the 30-year fixed rate mortgage. It is a one-way bet. If rates go up, do nothing. Rates go down, you can refi. Canada, five years. Australia, 10, whatever it is. It's the debt that blows up. That's why Canada's real estate market's in trouble is because the debt's blowing up.

53:48Graham Stephan:So is it worth it then to buy in cash? If you have the cash, is that a good bet? Again, if you're going to... So the answer to that question, Graham, is where are you in your journey? If it's your first property, most of you will never get there doing the Dave Ramsey, save, save, save, save, save, because the price will just get away from you. You can't save fast enough. I believe when you get to the point you can have 50 % equity, that is great. I think I said the numbers earlier, we're at 25 and nine. So that's even below 50%. But that's where we're comfortable is at the right around the 50 % number.

54:22But again, we were not there for a decade. I took every penny out of real estate the first 10 years. I did cash out refis, 1031 exchanges, all that stuff. Because again, I was about growing the base. So you just have to decide what kind of investor you want to be. Are you growing the base and just keep rolling the equity up? Or at some point, do you want to get more conservative? So where are you in your journey is the answer.

54:44Graham Stephan:What's the most difficult part about being a landlord? I'll answer that in two different ways, because being a landlord for a single family home is very different than apartment buildings. So we'll split that up. So being for a single family home, it's probably dealing with late payments. Because again, in a single family home, the tenant does all the maintenance, or at least most of the maintenance. They're supposed to do the yard and water and all of that. So again, is dealing with tenants who are telling stories or lies. So collecting rent. And then multifamily. God, it's so I was not ready for this.

55:20It's like you're a counselor. He's parked in my spot. His music's too loud. The radio's this. The baby's crying. The dog did this. Blah, blah, blah. So you're a social worker. How do you invest your margin outside of real estate? Because if you're able to save an additional$40 ,000 or so a month, what do you do with it? Do you buy stocks, crypto, real estate, save it? No, we actually enjoy life at this point. I told you guys earlier, we did three weeks in Australia. That was from the gravy. We just did a week in BAMP. That was from the gravy. We're doing a cruise in a month. That's from the gravy.

55:52So we're enjoying life. So you're just spending it. Yeah, we're enjoying life. Because again, I think most people just keep changing the goalposts. And I've been very good about not doing that. How did you not do that?

56:07I don't know if it's... I can only speak for guys. It is tough for a man who's a AAA personality to kind of check out. And the nearest thing I could tell you is we've climbed this financial mountain now 25 years. It's been 25 years. And what Olivia and I have agreed to is we're going to sit down and we're going to enjoy the view. I am not saying I won't stand up and climb higher later. That's how I get around this. I think at 53, I still have a good 10 or 20 years to really get in it if I want to. But I also know that at 53, I could sit here for 20 more years. So I do, how I get around it is I give myself permission to stand up and grow if we want to.

56:56And that is enough for me to not have this voice in the back of my head calling me a loser. Because even where I'm at, the people that we interact with, most of them will call me a loser probably. Because, you know, I'm not striving to be a nine-figure person or this thing or that thing. I'm like, dude, I got a pretty good life. And so at what point do you think most people could live a life like that? That is the most important question. I believe most people don't know what their life costs. They don't know what their life costs. They don't know where the money's going. So I suggest most people do a 30 or a 90-day audit and track every freaking penny.

57:34Because you've got to know what your life costs. That's what we did. Then what we did is we did a need versus want analysis. Do we need this or do we want this? And we were ruthless. We did this together, but we took our expenses from 100 % to 50 by being ruthless. So from$24 ,000 a month to 12. Well, again, I was 30 years old at the time, so it was probably eight to four, something like that.

58:07Graham Stephan:Did you notice a lifestyle difference from eight to four? Or was it like all these things that you just weren't paying attention to? Our friends did not know what was going on. That's the most thing. That's what it is, right? Again, I was in Silicon Valley and a sales guy and people would drop crazy money on belts and shoes and new cars and lease payments and keeping up with the Joneses. We were just not participating. We were made fun of, I'm sure, right? Because again, we had, you know, at the time, eight or nine year old cars. I know we were made fun of at our silly little 1 ,300-square-foot condo, right?

58:40Because we could have easily upgraded three or four times. So yeah, we had to change our network because we just refused to participate in the culture of consumerism.

58:50Graham Stephan:I'm always curious how much other people are making. When I see them living this crazy lifestyle, I'm always wondering, is that like a paycheck-to-paycheck thing? Or is that like they're making way more? or like, I know hundreds if not thousands of people in the Silicon Valley and I mean, a salary at Facebook is 386 grand. 386 grand is the average salary at Facebook and most of them are living paycheck to paycheck because they do dumb shit with money. It's crazy. It's wild. Now, some of that's because it's expensive to live there. Let's not, and then they, and again, both parents work so their kids in daycare, right?

59:28So there's some of that real life stuff but no, So I'm sure you both have seen articles about people making$200 ,000 or$300 ,000 living paycheck to paycheck. It is all over the Silicon Valley.

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1:01:42Graham Stephan:So start your business today with the industry's best business partner, Shopify, and start hearing today. On top of that, you can also sign up for a$1 a month trial today by going to shopify.com slash ICH. Again, that is shopify.com slash ICH with the link also down below in the description. Thank you again to Shopify for sponsoring this episode. So what's the secret to financial independence then? Well, that's actually really interesting. You guys did an interview with Caleb Hammer. You asked him something like, have you seen people be successful at this, right? Taking his advice and getting on this track for financial freedom.

1:02:18And his answer was very spot on in my opinion. It's people who have gotten fit or done overcome something hard. Why was that? I mean, that was the most valuable part of that conversation for me, because it is so true. Getting financially fit is a 10 year journey. And most humans cannot do that for 10 years. But you know what? A health journey, six months. You could change your body in six months, right? So again, I think he's right. The people that are going to figure out how to get wealthy have done something hard and seen the benefits. Because if you can't make those connections, why are you going to sacrifice?

1:02:56So again, I think if you want to get wealthy, get healthy.

1:03:00Graham Stephan:You know what's something crazy is I read that there are more people in the United States that have a million dollars or more than have a six pack. I've read that too. And it's not even close. It's pretty crazy. That's crazy. And when you really think about it, a six-pack is simply eating less calories than you, what? Let's be honest. Neither of us three have a six-pack. I'm just saying. Neither of us three have a six-pack. Not yet. Okay. How many people do you even know that have a six-pack? Jake Udell. Mike Parker will claim he does, but he knows he doesn't. And if you're watching this, Mike, you do not.

1:03:37You maybe have a two-pack. Jake does. Jake has a six-pack. He probably got etching. No, he didn't. I don't know. Very few people have six packs. Liverking is one of them. Liverking etching, you know?

1:03:50Graham Stephan:Gosh. Yeah, but no, I really do think if you accomplish something hard, and it could be anything. It could be learning a second language or whatever. It's just something that takes shorter duration. You're much more likely to get wealthy because you make the connection. It just reminds me of the same thing. It's the Dave rant. I feel like every single time someone just absolutely drops a bomb on the podcast, I'm like, that just sounds exactly like something Dave Ramsey said. What you just said is it's the same thing that he said where it's like, how do you actually motivate someone to change, which is effectively what we're asking here.

1:04:22And he just says, take it from the eyes of a farmer. Will a farmer plant the crops? Will he water them on a schedule? Will he do all of the things, tend to his plants to make sure that they grow? if he thinks they won't actually grow into a nice yield of corn. No, he won't. But if he knows that he does, if he does all the things correctly, then he will have a yield, then he'll do it. And so it's just like the faith, in his opinion, the faith that if you put good in, you'll get good out, which is effectively what you're saying. Have you been through something hard, worked hard at it, and had a yield?

1:04:54Yeah, seen the outcome, and then you're willing to do it again. I want to give a shout out to Dave Ramsey. So I've seen a lot of presentations in my life. I was a sales guy, so I saw lots of these. He gave the most meaningful presentation I saw. It was at a Think Media event with Sean Cano. And Dave Ramsey basically was on stage saying, I've been saying the same thing for 40 years. He hasn't deviated. And that was such a great thing for me to hear. Because again, I think getting wealthy is remarkably simple. And I'm going to keep saying the same thing. You guys heard me talk about Ibox. I've been saying the same thing.

1:05:27So the fact that Dave Ramsey, after 40 some odd years, is saying the same thing and still impacting lives, I love that. I love that. That was the most impactful speech I'd ever seen.

1:05:37Graham Stephan:What do you think about the fact that Dave Ramsey would not borrow a billion dollars at 0 % interest? Again, you can never judge a man to each his own. I would certainly take that money, throw it in a T-bill and enjoy the money and then pay it off. It's brain dead simple to me. But again, if you're anti-debt and you don't want it, that's, you know, I get it. I will say that his, based on the context of his life, context aside, I don't think it makes sense, But in the context of his life, it actually kind of does make sense. If you already won the game, what do you have to gain from 3 % in a T-bill?

1:06:09Yeah, if that's the question. But if you take a broke person, he would tell them, oh, you shouldn't do that. I'm like, okay, well, in that case, it will actually change their life if they do that. But for him, it's not going to change his life if he gets 3 % on a billion. I completely agree with that. Again, it's really funny. I've seen a lot of people, quote unquote, win the game and they make one more play and it blows up. I knew a guy back in the GFC who was worth 10 million bucks and he didn't take one 50K loss on a custom home and his entire empire broke. What do you mean by that? So he's trying to sell a house.

1:06:41He was selling big at the time, two and three million dollar homes in the Bay Area. Now they're probably seven or eight million. But he was into this house and the buyer wanted to get a 50K credit for something. I don't remember what it was. And he said no. So he had to put the property back on the market. and then it sat and sat, and the interest kept eating him alive. And then that caused another one and another one and another one, and then he was wiped out. How common is that? Well, I'm glad this goes back to that spreadsheet. This is why I had to build that spreadsheet, because it's more common than you're not.

1:07:20People, you know, they don't realize the cycle changes. They always think the cycle is going to go up, and cycles, that's not how cycles work. Cycles go up and they go down, and they go up and go down. So back to building the spreadsheet. I just wanted to know if I was going to get hurt again. So yeah, cycles happen. Do you think I'm missing out by not investing in real estate more aggressively? Again, you guys have, you are the top 0.1 % of what you guys do. You should be full on that. Real estate would distract from your gift. It's hard. Now, if someday you get married, for example, and she is interested in real estate, you could get her to be a real estate professional and things of that nature.

1:08:04But I think you are so, dude, lean into what you're really good at. Like selling covered calls. Do you think that I could just then save up as aggressively as I possibly can, buy a place cash, and then just rinse and repeat that process? Would that be smarter then? Because then I could probably eventually apply for real estate professional status. No, you're never going to. No, you're never going to. No, I don't, I don't work too much. Let's just, you know, call it for what is in the event. I do end up filing as a real estate professional. I don't work too much on the iced coffee hour. You're the income differential would not make that.

1:08:35Okay. It's not going to happen. Sorry. I've thought about it too, but it's not going to happen, but your wife could, that could happen. You guys heard it here. So he's getting married. Yeah. If you're a real estate professional, if you're a real estate professional and you're a woman. You want a date? Yeah. Let me know. Let me know. So yeah. Okay. Noted. I will not. So let me answer that. So again, if you are committed to real estate, because you just believe it. Again, I always go back to know thyself. I would not own properties free and clear. I would get 50 % loans. That's what I would do if I was in your situation.

1:09:08I have this house right now. I might move out of it at some point. I have$400 ,000 in debt on it. it's probably worth$700 ,000. I live in it now, so I have the exclusion from the capital gains tax. Should I then sell it when I move out or should I just rent it out? It's 2.875%. I don't know all the numbers, but assuming it would cash flow, I guess, assuming it's not, I call it an alligator when you have to feed it every month. Again, at 2.87 or whatever it is, I assume it would cash flow. Just keep it. You just keep it. Here's my argument though. Well, hold on one sec. So again, you could keep it and try it because again, that five-year exclusion, you could try to be a landlord for three years.

1:09:48Yeah, that's what I was thinking. And if you don't like it - Then sell it. Then bounce. But sorry.

1:09:52Graham Stephan:The problem with Jack's house is that any amount of vacancy or one repair or one major thing would eat up a significant chunk of the profit. And if one thing comes up in the year, the amount that he's netting on this, even with his mortgage, is so insignificant that it's not even worth his brain power. Like just doing one episode, one episode, a year of the iced coffee hour would surpass the rental income. So, again, I want to lean into my two earlier answers. Again, you guys are very, very good at what you do. And you should lean into a new income streams and partnership. You guys are at the first inning of what should be a multi-inning game.

1:10:35So keep going. And you're right. You know this. Real estate consumes brain. It's like brain damage. And that could set off a bad day and it can cause you to do this or do that or you get antsy. But that said, I do believe that real estate for guys like you could just be a forced savings account. So, I mean, you've got to know thyself. That's the way I see it. At the very least, I have diversification of investments. All of my money is in stocks. Do I want more money in stocks or could I at least have$700 ,000 invested in Las Vegas real estate? I don't think that's the worst thing in the world.

1:11:12So again, I think with that five-year exclusion, you try it out for a couple of years and you see if it impacts your job. The second it impacts iced coffee hour, sell the damn thing.

1:11:21Graham Stephan:But then there's going to be that cliff of like year three where maybe it's like, well, maybe this is good enough. But year four comes around. You got to replace that roof. All of a sudden, the AC goes out. You should be - Tenant moves out. And then it's like, well, then you lose the 250 capital. Well, you should - Well, yeah. That's why the three years is you got to be really on that. Because if you're going to get past three, you're in it for 10. Right. What do you think about investing in commercial real estate? So define commercial. So anything that's like multifamily, multi-unit, apartment complex.

1:11:52I'm talking like living. So multifamily. Yeah. Just so we're clear. Multifamily is an investment that I am looking at personally. Why? Because in the spreadsheet, it showed me that after interest rates went up with Paul Volcker, the RTC occurred eight to 10 years later and properties were sold at significant discounts. So earlier in this episode, I told you about selling a duplex, the fact that we've raised seven figures. I am looking to buy multifamily apartments at 60 to 70 % of debt. That's what I'm looking to do. Now in my market of California, that's probably still a year away. That's already occurring in Texas.

1:12:28I've seen some things in other parts of the country, but this bomb, it's going to be a great transfer of wealth. And I look to be a part of it. So I think multi, If you have the stroke, it's multifamily for me. Brandon Turner said something that I thought was very interesting. He said the value of real estate is effectively the cost of the real estate. It's a commodity. Exactly. If you can build cheaper, then the value of real estate will go down. And he thinks that AI will cause things to become so deflationary that you'll have humanoid robots that are able to build a house. This could be 15 years, but they can build a house in a tenth the time and a tenth the cost.

1:13:07And if that's the case, then you'd have perfect houses propping up everywhere, which would increase the supply, and then values would go down. What do you think about something like that? How will AI just affect real estate in general? So first, I'll say that I do believe AI is going to be hugely deflationary. It's going to be deflationary in areas other than housing sooner. I don't see the world the same way because, again, it's not only the construction of a home, but it's also the land. A lot of the great pieces of land are already done. They're already taken. So I think what happens is the land in the hills around here with views, that gets more valuable because now you're just building little shacks next to each other.

1:13:52So I think you're going to see K-shaped housing. You're going to see the before and the after. What return do you get on your portfolio? Well, you're talking to a 25-year vet. Do you want return on equity? Do you want a return on capital investing. Let's do return on assets first. Return on assets. So what would that be roughly? 12, 11 and a half, 12 % probably? And then return on equity. Well, here's the truth, guys. I have no money in any of my deals today. I've refied everything out. Where is your money? So the money that I put in is a down payment across our portfolio has already been refied out.

1:14:29So I have none of my own capital. And I already gave you the numbers, 25 and 9. I have none of my original capital in that number. So it's infinite returns. It's a very nice number.

1:14:40Graham Stephan:Do you think today's prices are more about land scarcity or just bad government policy? Oh, government policy. I think what Nick Shirley and others have done, but he's the most recent, have shown fraud, waste, and abuse is everywhere. NGOs are everywhere. I think, you know, my personal guess is we're losing 30 % of our money to waste, fraud, and abuse. What do you think is a public policy that people think is compassionate but actually backfired? Rent control, right? Rent control has never worked. In fact, I think it was a German economist once said, the fastest way to destroy a city other than bombing it is rent control.

1:15:23Why is that? because you stop investment. You have no movement. You have a family move into a three-bedroom. The kids move out. They don't leave. Then you have people coming up that can't get housing. Look at New York City. New York City has the largest rent control by quantity, and like 20 % of their units never get repaired because it's not economical to do it. So it just deteriorates.

1:15:47Graham Stephan:Yeah, it's one of the policies. That was the reason why I kept one of my properties completely empty because I knew once I rented it out, I wouldn't be able to ever sell it with a tenant in there. Yeah, if you're in the wrong part of town. Yeah. There's even a triplex that I have, and I've kept one of the units empty for seven months, another unit empty for five months just because it doesn't make sense to rent it out. And if I didn't have the rent control and I just had the freedom to say, hey, listen, you could live in here for a year. I'll give you a great price because otherwise it would be empty.

1:16:25Graham Stephan:But after a year, I want to sell it. So I'll give you a 60 days notice. You can live there for a year. You can't do that, which is so crazy that you lose control over your own property the second they move in. They have more rights than you do. L.A. County is probably one of the only counties in the country. If you gave me a house, I would sell it immediately. There's no way. It's communism. So what places do you think investors should absolutely avoid? And where should people be looking for ease of being a real estate investor and success? Again, L.A. County is the most obvious one you should avoid with the 10-foot pole.

1:17:05I think you should avoid most high-priced cities. and I'll give you a list, San Francisco, Austin, Seattle, New York City. Because if you go to most of those markets, you're betting on appreciation. And that's not who I am. And that's not what I want you to be. I want you guys to have cash flow. So again, you're going to be in tertiary markets. You might be in the Midwest. Yeah, that's what I would do.

1:17:27Graham Stephan:Is there any version of rent control that actually works? I have not seen one. I've not seen one that works. And I've read lots of studies. Are there any policies that you think would just be a good idea to implement? And it could be both for the landlord or the tenant. One thing that intrigued me that I read last year, I don't know where it went, was trying to encourage ownership, almost like rent to own. I think it was Blackstone or somebody was doing that in one of their communities. I think finding a way to get tenants on the property ladder. It's got to be ethical. It can't be, you know, 5x or whatever.

1:18:05But if there's a way we can help people that are paying rent on time ultimately become owners of said property in eight years, I think that would be wonderful.

1:18:17Graham Stephan:What do you think of the anti-landlord movement? I think it's an anti-wealth movement. You know what's crazy? I saw this post on Twitter, and it keeps coming up over and over and over again. there's a landlord that had not gotten paid for like six months and he pulled up in front of the property and took a photo and the tenant just got a new e-class mercedes yep and the landlord said i can't believe it this tenant owes me twenty thousand dollars but just bought this new mercedes they've not been paying their rent what's going on and all the comments were like good for the tenant. Yeah, anti-wealth.

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1:19:53Graham Stephan:Why? Why do you think this is occurring to such a degree? Because Adam Carolla made a really good point. He was saying, you know, back when, at least when I was growing up, you'd see a guy driving down the road in a Ferrari, and you would just think, oh, man, if I work really hard one day, and I save my money, and I do something great, I could get that Ferrari. Yeah. But now it's like, oh, look at that douchebag in a Ferrari. I can't believe that person. and let's throw a rock at the Ferrari. I think of all the good things that social media has done, I think there's plenty of bad things. And probably the worst thing is they've created echo chambers where you just continually get fed the same nonsense.

1:20:32Because again, I sold machine learning. I sold AI products for a decade. And they're non-thinking really. They're just giving you what you ask for. So if you're watching that content, you're going to watch more of that content. and it just becomes this toxic soup of negativity. I think one thing that too many people have lost is hope. If you don't have hope, none of this matters. Dave Ramsey. And you know what's so funny is that it's that exact philosophy that is keeping people just broke. Like if you don't think that you can do the right things and then the right things will come back to you, you're not going to do the things.

1:21:14You're just going to say, oh, yeah, look at this person. They're a landlord. They probably were passed down wealth. It's like, hey, guys, the studies show that that's not how most people become wealthy. It's because, oh, it's passed down generation to generation. All of a sudden, you just live a nepo life. That's just not the reality of the situation. And if you think that that is, you're going to think, oh, well, success is just out of my control. It's just the fact that I was born in the family I was born into. I live in the areas I live in. I went to the school that I went to. None of this is possible for me.

1:21:41So instead, I'm just going to leave hate comments and think that rich people are rich because of something they can't control. Yeah, I can't help you. If you have no hope, you're not even going to be in the game. Yeah, you think that you're poor and like you think rich people are rich because of something they can't control and you're poor because of something you can't control. It's like, hey, if that's the case, you're going to stay that way. Yeah, if you don't have hope, you can't go anywhere. You can't play Go. You're not going to be in the game. I actually use this analogy with some of my friends.

1:22:08right there you guys go to or you guys have been to sporting events right there are some people who live in the parking lot all they want to do is drink beer and scream at the tv they're not actually in the stands and then there's people that are actually on the field too many people today are comfortable being in the parking lot drinking and saying dumb shit i want to be in the stands or even on the field and you know i i think most people are comfortable just saying hey it's Friday, let's get drunk.

1:22:38Graham Stephan:How important do you think it is, though, to really push yourself? Like, it seems like you're at a very comfortable point. But do you think that it might be a benefit to kind of put yourself against the wall a little bit more and force yourself to keep going? So let's talk about that. So again, I lived that life for 30 years. I had a sales quota. Every 90 days I could be fired. I was obviously raising a family, trying to keep marriage happy, traveling 100 ,000 miles a year. So I live that in more ways than not. And I just don't have to do that anymore. Right. But I do reserve the right to start again.

1:23:18But again, dude, if you make 40 and you spend 14 and you're already spending the others on crazy trips, why? But that's the difference is that you're able to finally draw that line. Correct. Like what is the difference in the thing that you're saying and the difference in the way that Graham feels. So you two are a lot closer. I know Graham casually. My guess is he's going to always change the goalposts. Part of that's because you guys are around billionaires, right? You guys are interviewing Mr. Wonderful and all. So you're around people that I can only dream of. So you're seeing these things.

1:23:55I'm not seeing them, right? They're on TV for me. But yeah, I mean, and again, dude, I was to say he's only, you're 30, 31?

1:24:03Graham Stephan:36. 36. Oh, damn. Yeah, I know. So again, I didn't come to this until I was 51, right? So again, age has something. When you get to be 50, more than half your life's gone. I was a grinder just like him, different numbers, but same thing. I'm not going to judge anybody, but I do think, I think he'll just move the number. He'll go from 50 to 100. Well, I was thinking, because I do a lot of research on the value of a dollar today and what it's worth. Sure. And I did this whole analysis with Grok that said that the ages between 42 to 45, the optimal ages to start shifting from saving to spending, given your life expectancy.

1:24:48Graham Stephan:Bill Perkins, yeah. Yeah, given your life expectancy and overall health. Yeah. And then starting in the mid-70s, your health significantly declines. I've seen that, yeah. So it said that with compound interest, age 43 to 45, that's when you should shift from saving to spending. I would love to see you, because I don't know if this is true and it may have been taken out of context. I heard you spend 2 % of your income. No, he doesn't. I heard that on a togy. Oh, no. 0.5%. Okay. Well, no, no. 2 % is what I base what I could spend. On his assets. Oh, yeah. I don't look at income. Income he doesn't spend any of.

1:25:26Graham Stephan:And he spends maybe 0.5 % of his assets. I don't spend any, no income. So my philosophy is this. If I make$100 ,000, it's not$100 ,000. All that is,$2 ,000 a year in perpetuity forever. Maybe$2 ,500 if we call, you know, 2.5 % of that. So the way I see it, every$100 ,000 I make,$2 ,500 a year. And that's what I mentally live off of. But he doesn't actually because that's still too much. Like, actually, how much, like you spend. I don't need to yet. You spend maybe 0.5%. I don't like to spend the money now because I don't need to spend the money now. But I like the option to be able to. You'll never need to spend that money.

1:26:08Realistically, it's whether you want to now or you want to later. It's going to be a matter of want.

1:26:13Graham Stephan:But according to Grok, it's better for me to wait until 42 to 45 to start drawing down. But that's for most people that don't have the nest egg that you have. That's like telling the average, like, are you really going to compare your financial situation to the average financial situation? Yeah, but it's invested and it could drop 50%. And so I also calculate the 50 % drawdown. Yeah, but there are studies that show 2.75 % has never failed, even if you did it at the beginning of the Great Depression. Mentally, it would be stressful for me if it drops 50%. Because then I'd base it on the 50 % value.

1:26:49The way that I see it is this, basically, if you were to encapsulate everything you just said, But mentally, if you can't handle it, then that suggests to me you are mentally very fragile. And I think if you're going to try to solve - No, it's very strong.

1:27:01Graham Stephan:Mentally very strong. Because I have the fortitude not to be influenced by others' opinions. Yeah. There you go. I actually disagree with that. I think that makes you mentally weak to not be willing to be challenged with a potentially stronger opinion. Right? I could be challenged. It doesn't mean I'm going to fall to someone else's opinion. Well, you can't choose whether or not you're being challenged. You're being challenged right now, whether you like it or not. But you can choose how you respond to better logic. No, I'm open. I'm open. So as a complete outsider to this fun, entertaining conversation, I've already seen, again, I'm an outsider, so maybe it's wrong.

1:27:37But I've seen Graham already start to loosen up. He's taking more trips than I remember him doing before. Premium economy, too. Dude. Well, he's tiny, so he could fit in coach. It's easy for me. Tiny. But I think he's already evolving. Now, some of these numbers are just like, you know, he's kind of like Warren Buffett. Warren Buffett didn't need all that, but it was the game. He's playing the game. Don't say that, man. Why would you compare him to Warren Buffett? That's like the worst thing that you could have possibly said. Compare him to Scrooge or whatever. Yeah, like not Warren Buffett. Mr.

1:28:16Burns. You have so many other comparisons and you pick Warren Buffett. the reason why he does this is because people they say stuff like that you have to say hey graham you know like i the reality is everyone's gonna say jack why are you telling graham how to live his life at the end of the day i'm not doing that and if you heard our private conversations they don't necessarily go like that i'm always very encouraging yeah and saying like graham i really wish that you would spend your money a little bit more on on things that literally just improve the quality of your life like if you want to go see a hockey game because your dad's in town Like, go to the hockey.

1:28:48Oh, yeah. Take your dad to the hockey. Come on.

1:28:49Graham Stephan:We had this challenge, and the challenge was to spend a certain amount of money in a month. And so I created this budget where I had to spend it in 30 days. Okay. And I'm actually falling short of that. But I was able to take out family when they were in town. We saw a hockey game. We went out to a few really nice dinners. And I got to say, it was great. Right. And just allocating that to the side of having to spend it gets rid of the, I don't want to call it like the hesitation of like, oh, I don't really need that. Or we don't have to go there. We could get takeout instead. Yeah. And it helps.

1:29:28You need to realize that you have done some amazing things and you have lots of rewards that are already raining down on you and more will come. But you also got to enjoy life. and if that's taking your family to a hockey game or spontaneously taking your wife to New York, you've got to have more experiences. It can't all be work, and it's not all about savings as well. So I've done some crazy trips. I did a six-star cruise that was 50 grand or whatever it was, and when you're on a cruise like that, it was less than 100 people, so it's a high-end thing. you're around people that are worth 50 to 100 million easy but almost all of them admitted that they worked too long think about that you're worth nine figures you're 80 years old your wife died i remember a conversation with i think his name was mike or mark he's like i've told my wife we'd travel but i just kept kept i just kept going for the next number she gets cancer she's out in six months.

1:30:33Then he quits and now he's traveling and he cries all the time because he's not with his wife. You just don't know what's coming. This number here, you should set some of that aside and just help people or go explore, rain goodness on other people in your family. It will make you a happier person, I promise you. What are the best things to spend money on experiences not stuff it's not that rug that drives you crazy in your house it's experiences and i would challenge you the next time you go to japan fly business there's nothing like lying flat well he's flown business before on someone else okay yeah you i don't know if you bought your own business flights before yeah oh really zip air okay well that that counts

1:31:22Graham Stephan:As long as you can lie flat. But like, hear out Graham's perspective. He's like, yeah. So explain how your justification goes into not wanting to fly business in the future. Depends on the flight. I said if I can't sleep on the airplane. And when you're flying out in the morning, let's say 9 a.m. Sure. I'm not going to get any sleep on the plane anyway. So I think it's a waste to have a lie flat seat. when I'm not going to be able to sleep. I'm just going to sit there and toss and turn. So I may as well save a few thousand dollars when I'm not going to be able to sleep. Now, on the other hand, I think if it's an overnight, like a red-eye flight and you could get sleep on the airplane and wake up the next morning, then I think, okay, I could look at the value of the next day and just say, okay, then that's a good expense.

1:32:14I would challenge you to change that. I would say any flight less than three hours, economy plus whatever you want to be is fine but anything over three hours it's just a better seat even if you're not lying flat it's just you're not crammed you're not getting bumped into you're not getting economy a premium economy is nice like those seats recline like i've traveled on every

1:32:35Graham Stephan:airplane your international premium economy i thought is i thought international premium economy is if you don't fly business class on every six hour flight you're doing life wrong where are you flying? How long is the flight and what are you flying? It's 13 hours, but it's broken up between two flights, five hours and then seven. With anybody or just Denmark? Me and Macy. Let's go to Denmark. If you ever fly anything less than business with your wife, I'm going to slap you. You might need to slap them. We already bought the flight, but maybe come back. I'm just saying going forward. This one doesn't count.

1:33:16Yeah, this one doesn't count. But again, You have the ability to sprinkle little pieces of goodness on the people that you care about the most. That's what you should be thinking about. You should be surprising Macy with business class. Don't even tell her because she's probably thinking you're going to be in economy.

1:33:33Graham Stephan:But then here's the thing. And then all of a sudden now that becomes the new like the minimum. So what? So what? Sometimes it just feels like you're wasting money. And then it just feels as though that's an irresponsible amount of money. You need to declare—how many flights do you take a year personal? Not business, not all that. Not that many. Maybe three. If you are taking any flight over six hours, in those three, that's not business class, you're not being a good husband. Why do you say that? I'm trying to find an angle that will open them up to doing that. I don't think that's the angle. That's not the, I took a shot.

1:34:19The point being, I want to see it as your friend. I think the quality of your life will be improved. I agree. Genuinely, and I've said this for years, and every single person that we bring on this podcast, whether they're an AI expert, whether they're an entrepreneur, whether it's Kevin O 'Leary, whether it's Michael Zuber, whether it's Pace Morby, whether it's Alex Hormozzi, whether it's literally any single person here, Dave Ramsey, we all say the exact same thing. So tell me what is it within your logical driven brain? tell me what it is that makes you think that you could be right and every single other person that's ever been on this podcast not a single person has said your level of frugality is productive because i'm happy is your wife is your wife happy yeah okay if that's the case then i can't i i have nothing to say against that if that is the case then i fully yeah but again as somebody who's two decades older than you almost two decades older than you i will tell you um life gets short and the things that you're going to miss is not the stuff, it's the experiences.

1:35:21And if you're taking three business class flights a year with your wife, and again, you guys are going to eventually have kids, and then that's going to dent the travel. Just make it more meaningful and more enjoyable. A six-hour flight in business class is better than economy plus. You can't argue that. It's better. Yes, it's more expensive, but that doesn't matter to you. It does. No, it doesn't. It does. No, it doesn't matter to you. It doesn't matter. It doesn't matter to me,$8 ,000. So it certainly doesn't matter to you. If Graham is happy, then I have nothing to say. No, agreed. If that is truly the case, I just question whether or not that is the case.

1:35:59But if you say it, and in your heart of hearts, that is the case, I will believe you.

1:36:05Graham Stephan:I'm just looking out for you. I would be happier with$8 ,000 and flying premium economy. That would make me happier. like I just don't get that much more enjoyment okay from the bigger seat fair enough if you're happy Graham that's all we want for you that's the most important thing yes now that we have excoriated you what can we be improving on both of you yeah I don't think you can improve on it your speaking skills are great I mean maybe improve some title thumbnails in your channel Instead of going live, just post videos without the live aspect as it cuts down on viewership. Gosh, Jack. Where to start?

1:36:48Oh, man. There's just so much. How old are you again? 27. Wow. My daughter's 35. Wow. 34. Okay. All right.

1:36:56Graham Stephan:For a while, I would say Jack would jump from thing to thing to thing to thing to thing. And it's a little scattered. Like the real estate investing thing. Yeah. Like the options thing and all these different things when like just the time would be better spent on the podcast. Yeah. Yeah. You guys. Yeah. I would. I mean, I don't know what you were doing, but you guys have your. That was my answer for real estate is if it's going to take my chair away from this. You guys are the first inning of a 10 inning game. Yeah. Go nuts. I guess sometimes my only my only thought is that I wish we would go heavier on the podcast.

1:37:28Graham Stephan:Like I'm always like. What do you mean? What's just what is the word heavier? Like, drop everything. Like, the podcast is always, like, the number one. And for Jack, I don't think he's happy with that being, like, the number, like, above all else. How many do you do a week? We do five a month. Five a month. So this counts as one? Yeah. You do five a month. Okay. Yeah. Okay. But I would like to see, let's keep growing, expanding. Let's travel anywhere at the drop of a hat if we need to. I think Jack is a little more balanced. Now, maybe that's a healthier approach. I actually don't disagree with everything that he's saying.

1:38:01Like, I would say that my actions actually do go in accordance with drop everything in order to travel somewhere. We've had one experience over the past, however, and I was just really sick, which is the reason I was like, okay, well, like, podcasting is like, yes, it's a means to an end, but it's also an enjoyable journey. And I want to make sure I'm enjoying the journey. Where is this thing in a year? You guys have any idea? Study. And play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College Deal. Everything you need to study and play with select Windows 11 PCs.

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1:38:56Graham Stephan:Zootopia 2 has come home to Disney+. Let's go! Get ready for a new case. We're gonna crack this case and prove we're the greatest partners of all time! New friends. You are... Gary the Snake. And your last name? The Snake. Dream Team. In new habitats. Zootopia has a secret reptile population. You can watch the record-breaking phenomenon at home. You're clearly working at it. Zootopia 2. Now available on Disney+. Rated PG. where do you want it to be my gosh i would really like i was a little worried about the five episodes a month and keeping the cadence on that without sacrificing quality so far we've done a good job at that love to continue that but i think there's so much more like in terms of iced coffee hour membership content i really feel like that's a huge expansion do you have that today so we do so we set up a membership where they get early access to every episode but a week early uh it's It's the full uncut because sometimes for the main episodes, we'll rearrange segments or we'll cut out something that we feel like is hurting retention.

1:39:58Graham Stephan:And how many folks are a part of that now? We have 1 ,400 people. Nice. Okay. But I think that we could expand that. I want to do - Do you have tiers? Yeah. So we have two tiers, but I want to be able to also like we could do maybe a Q &A with you. Yeah. Or a dedicated members episode separate from this. Or like a Jack and I episode a week. Like, I feel like there's so much more that we would expand on. I would definitely suggest, I mean, maybe you do it at your highest tier, whatever. But yeah, like doing one of these and then doing a Q &A. Yeah. If you want to try that with me, I'm game. Post this.

1:40:31Graham Stephan:What I would really like to do is a live Q &A. Yeah, of course. So like, let's just say this episode posts on a Sunday. Sure. And we could say, hey guys, Wednesday. Exactly. For channel members, we're going live. Yep. You watch this episode, any questions you have, this is it. If you want to test it, I'm in. Yeah. Just give me a week. deal this the problem is like those ideas hinge upon other infrastructure on of other things i didn't know that that like that would complicate things whereas i would rather focus on just like overall exposure and growth so like what that would look like is like better distribution of the podcast more more clips more yeah it's just stuff like that how many posts are you guys doing a day it's so many yeah it's i don't even dozen dozen yeah i mean twitter alone could be a dozen Okay.

1:41:17Yeah.

1:41:18Graham Stephan:It's a lot. So stuff like this, and then it's a conversation of, you know, what ends up happening is that we end up focusing really just on the core product, which is the podcast. But then I look back six months ago, I'm like, oh, if we had started this thing six months ago, we would have done this and this and this. So that's something that I think over the next two months, we're going to start to see as soon as we could get ahead. Yeah. As soon as we have three episodes already done, edited, uploaded with intro, like everything, then I think we have the breathing room to start saying, okay, here's how we could grow.

1:41:51Graham Stephan:So that's our next goal. I like the fact that both of you are, from where I'm sitting, have different ideas, but you guys are still moving forward together. That's cool. That's fun for me to watch. Yeah. Fortunately, it's been one of, I mean, well, it's the only partnership I've ever had and it's the easiest partnership I've ever had. Who knows? Maybe I'll get another one. It'd be the most difficult one I've ever had. I promise it'll be worse. We've been really lucky because I think at the end of the day, what makes it easy is that both Graham and I, surprisingly are pretty easy individuals. It's kind of weird.

1:42:18At this point, we've known each other for so long. Yesterday was a six-year anniversary of the iced coffee hour, and we had been working together for quite some time before that as well. So obviously we're very familiar with each other. I've lived with the guy, unfortunately. I've had the displeasure. Yeah, I would flush after I peed, and he would get upset and ask me if I could pay for each flush, and that is not a joke. I kid you not. He will say it's a joke. He'll say it's a joke. He's not joking. He looked up the cost per flush in Santa Monica. I'd have left a hundred bucks on the table and said, go for it.

1:42:48It's insane. But fortunately, above all else, it's become more of like a sibling-like relationship, which I think is what's displayed on camera. People say, oh, Jack and Graham, they're just constantly bickering and bantering. Yeah. And we do it off camera. Maybe even worse. But we also travel together and we hang out and we do all these things like brothers would. I don't think anybody thinks you guys hang out. Oh, yeah. Oh, yeah, yeah, yeah, yeah.

1:43:12Graham Stephan:Yeah. Wow. Also, we started this new business idea. So it's in the works right now. It's called extradollar.com. Okay. And it's to optimize credit card rewards. Ah. To give you reminders of things that expire. Sure. For instance, the Amex Platinum, Dell credit, Uber credits, DoorDash credits, travel credits, like all these things that people forget about. It's going to be a good way to send out reminders. and then as a premium version, you're able to link your cards and track different rewards. So that's the goal. We're working on it. And it's open right now for people that want to sign up and just will keep you posted when it launches.

1:43:55Graham Stephan:And then those people that sign up will be the first ones to be able to try it out. Sure. Make sure it's working properly and then we'll roll it out over a bigger audience. That's fun. Because we realize, I think we want to do something outside of the iced coffee hour because it's so difficult with this business is that if we travel for three weeks, everything basically grinds to a standstill. Yeah. And so it's either we have to, like, run to get ahead, and then we could just, like, coast for, like, a few weeks. And then you have to run to catch up, yeah. Like, with Chris Camillo, we have to film with him and then post within a few days.

1:44:27Graham Stephan:Otherwise, like, what he says might be outdated. Yeah. And so it worries me even then. It's like filming three weeks in advance, like, so much could change in three weeks that even what we said today might be like, oh, maybe that's not as up to date. So we got to do something outside of the podcast for longevity. Well, I have no doubt that you two guys will figure something out. You've proven time and time again to continually think, iterate, and you're not afraid to flush bad ideas. You give them a shot. Some are bad. You're afraid to flush a little bit. Yeah, apparently a penny. I'll give you 20 bucks on the way out, so it's got them covered.

1:45:06But yeah, I think you guys are onto something. Keep innovating, keep getting creative, keep just getting around the right people. Part of getting in life is being in proximity. You guys have the ability to be around some amazing people. So hopefully that rubs off and gives you even bigger possibilities. Michael, thank you so much for coming on the podcast. Guys, thank you so much for watching. If you want any more information, you want to learn more about real estate, I highly recommend you tune into the lives All of that information will be linked down below in the description Where you can also find Extra Dollar Where you can also find the Index Grams Group Where you can also find probably other things as well Everything is down below in the description Yeah, subscribe, like Thank you so much for watching Thank you Thank you for coming on the podcast Thank you Until next time See ya Ryan Reynolds here from Mint Mobile I don't know if you knew this But anyone can get the same premium wireless for$15 a month plan that I've been enjoying It's not just for celebrities So do like I did and have one of your assistant's assistants switch you to Mint Mobile today.

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