MI331: The Keys to Real Estate Investing and FI w/ Scott Trench

23:44Because what we're trying to do here, what I'm trying to do at least as an investor is I want a system where I don't have to be exceptional to win. That's the beauty of index fund investing and why half my portfolio is in index funds, right? Is I don't have to be exceptional. I'm getting a low fee, long-term average here, right? Now in real estate, we want to pursue some of the inefficiencies and we'll talk about a good deal later if you'd like and how to find that specifically. But we start with a system that is going to produce a great shot at that kind of 15 % ROI, at least in the early years when we're fairly leveraged.

24:16Because we're doing all this work, we're going to have to probably visit the property. We're going to have to take in real estate. We want a premium over what we can get in the stock market. But the key is here, we need a system where you can be average and still win. And so I think about my portfolio as basically dollar cost averaging every 18 months in real estate. Sometimes I will buy high at the wrong point in the cycle, and sometimes I'll buy low. And it's really hard to know that. And everyone wants to predict the market cycle in that context. But I think first and foremost, it's I believe in that long-term thesis, and I'm going to buy consistently when my position can afford it.

24:51I'm never going to put myself in a position where I'm dependent on the property working out to move my financial position forward. So here are some examples of things that I think get people into trouble. A HELOC, right? I take a HELOC on my primary and I use it as a down payment on my investment property. Well, this creates a huge problem, right? Because I'm financing that property, I may be getting a couple hundred dollars a month in cashflow, but I have to repay the HELOC plus interest. So I'm getting a$500 a month cashflow property and I've used a $60 ,000 HELOC, if I'm paying it back over the next five years, it's$1 ,000 per month in principle before we get to the interest.

25:25And that property is going to suck cash out of my life over that time. So again, I think that the personal financial position is the most important thing. Now, in 2024 specifically, right now that I've couched all of that and saying, don't time the market, start with a plan where you can win in any market condition and trust the plan over the long term. Now I'll predict 2024. First thing I always like to start with is supply. There are about 1.6 million units of housing stock currently under construction in this country. About 975, that's a lot. That's close to the historic high, right? So on average, we form about a million households per year in this country.

26:01Last year, we formed about 230 ,000 households because in tougher economic times, people tend to group up or whatever, right? There's just lower household information. This year, the pressure is going to be even higher on the supply front. We saw modest price gains last year, and we saw rent growth actually decline by just under 1%, which is a rare thing for the US economy. In 2024, I'm expecting rent growth to continue to decline by a couple percentage points because on average, the US is seeing a ton of new multifamily unit construction hitting the market, which is what competes with everybody for rents.

26:37This is a disaster for the multifamily and apartment complex investing space. Those guys are getting crushed. They've seen a 20 % to 30 % likely decline in asset values from the peak in 2021. And I think they're in for more of a bloodbath in 2024 here. I'm going to release an article to BiggerPockets that will come out probably before this recording. That's 5 ,000 or 6 ,000 words describing this pain in great detail. Why I believe that that's the case on the multifamily side. On the single family side, we have a little bit higher than usual, but pretty close to the normal amount of currently under construction supply, about 600 ,000 homes.

27:15Now, these homes that are being built are geographically dispersed across the country, right? So the South and the West are seeing a disproportionate amount of this new construction. And the South and the West in particular are getting crushed right now from a multitude of factors. They have all this new supply. There's a huge bet on inbound migration, which I worry for folks in those areas is a little bit overplayed at this point in time. I think all the people who wanted to move out of California to Texas may have done so by now. And that belief that more is coming, again, could be a challenge.

27:46You've got huge taxes in those states in the property tax front. And a lot of valuations have soared in the last two years, and those are still catching up. So that's causing a taxes increase in there. And you've got insurance costs rising at crazy rates in both of those states, Texas and Florida in particular, but much of the South and parts of the West overall. So those are causing a lot of pain for operators right now. And I think that if I'm looking at investing in those regions, I'm being very cautious and doing my homework on the supply that's coming in at the very least. And then also checking that against that.

28:19Do I have some really bullish projections? Because markets like Phoenix, they got really bullish projections on income and inbound migration, for example. Those might be true, but there's also a supply dynamic and they got a ton of supply coming in. So I'd be really careful and do my homework in those areas. In the Northeast and the Midwest, you have much more muted dynamics from a supply standpoint, right? So you don't have anything special going on or a ton of construction. And I don't think you're going to see a lot of much of a decline in rents. You may even see substantial increases in prices and rents in those areas because they're still more affordable than other parts of the country and you don't have the supply dynamics.

28:56On the interest rate front, I think that the markets are crazy right now. And I'll probably be completely wrong and you can play this next year and laugh at me about all of this stuff, of course. But I think that the markets are a little crazy right now. On the interest rate front, the most important interest rate to real estate investors is the 10-year US Treasury. The 10-year US Treasury is hovering around 4 % right now. That's important because it's lower than the overnight Treasury rate, which is about 5.5%. quarter, 5.3%. What this means, usually the 10-year is about 150 basis points higher than the overnight rate in a typical Euro curve.

29:34So what the market's saying is they expect a recession so deep and so bad that the Fed is going to cut rates by nine times to get it to about two and a half to 3%. I think they're nuts. The Fed is not saying they're going to do that. Yes, the Fed screwed up in 2021 and let inflation get out of control. Since then, they've been the least bad central bank in the world. I love using the word least bad because it offends the fewest people when that. That's a compliment to Jay Powell. I think he's handled this better. US is a loan among major world economies that is doing all right right now. Everyone has an opinion about what all right is, but they're not seeing the devastation that a lot of people predicted.

30:14They're seeing asset values crater in the commercial real estate space, for example, but we're not seeing the wealth of the middle-class America being eroded right now from those decisions. We're not seeing mass layoffs and they've got a lot of room to run. I take them at their word when they say they're going to lower rates three times in 2024. I believe them. If they do that, after that, I think it's anybody's guess, right? And you're flipping a coin if you think they're going to continue lowering them, keep them the same or raise them. And I think from that point, that means that 10-year is going to climb, right?

30:46That 75 bps down puts your from five and a quarter for the overnight rate, puts your overnight rate at four and a half. That puts your 10-year at six if the market's stabilized from a long enough time perspective. And that's not crazy in the context of historical interest rates for this country, right? Despite what a lot of people listening to this will say. So I think that there's every possibility that that happens. I don't think the 10-year will get to six, but I think it will climb up and up and up up probably 100 basis points over the year. And that's going to continue to hammer your commercial real estate space.

31:17But despite all this talk about interest rates, it's not going to hamper your single family housing market nearly as much. And why is that? Explain that. Yeah. Explain that a little more if you would. Yeah. The reason for that is that a 30-year mortgage is tightly correlated with a 10-year treasury, but it's not perfect. There's usually a certain spread between 30-year mortgage rates and the 10-year treasury. Right now, that spread is higher than normal. I think it's by about 75 to 100 bps. I should have had this one ready. People listening, go take a look at this if you're interested. But I believe that as the 10-year rises, that spread will compress and mortgage rates will stay in the high sixes, low sevens throughout the year in 2024.

31:57So I think that there's a reasonable chance that US housing stock on average, again, And regional differences are going to be the story. They were the story of 2023, and they will be the story of 2024. Some people will feel tons of pain, and some people will see their properties and rents soar, depending on where you are in the country. And I'm betting on the Northeast and the Midwest as potential places in 2024 for appreciation. I think that the Southeast and the West are in for some potential pain in 2024 from a rent and pricing standpoint. So in states in particular, what states are you... You mean like Texas, California, what would you say the areas that will experience pain, what states would those be?

32:38I think big markets in Texas and Florida are going to be among the hardest hit. Austin, Texas, I think is in for continued challenges. I think Tampa, Florida, I think these big metros in Florida and Texas are the ones there. Now, I am going to commission a study here at Bigger Pockets to see where that supply is hitting because that's where I think you should be the most afraid if you're an investor. Supply is not your friend as a new investor or as an investor in this country. I want to specifically talk about your buy box. So you mentioned every roughly 18 months you're making a purchase. Let's talk about what your buy box looks like and how for a new investor, how they can think about and construct their own buy box to test out a hypothesis.

33:17Yeah. So first of all, again, that's 2024. So take that how you will as an investor. And despite the fact that I think Denver, Colorado is squarely in the, I'm not loving the prospects for 2024, I plan to buy another property here in Denver in the next year, probably in the later part of the year. But I know that despite my prediction, I could be dead wrong. I could be right about everything and wrong about something else that comes in. And I'll bet you this, that in 30 years, my investment made today in Denver, Colorado is going to perform better than the one in the Midwest. 2024, Midwest is going to perform better.

33:53But in the next 10 years, in the next 10 years, almost certainly in the next 20 years, for sure, in my opinion, come back and see me in 20 years and we'll debate it at that point. But I think that Denver is going to see that price appreciation and Detroit, for example, may not. That's the theory there. My buy box in Denver, I really like big, nice, luxury multifamily. And so my favorite type of property is like a four or five bed duplex on each side. Say more about that. Why is that that you want a big duplex like that? I believe that there's a rise in high income earning renters. I believe that those larger units offer the ability to diversify your strategy.

34:34So for example, you can do a sober living if you wanted, right? You could do a rent by the room strategy and produce a lot more cash flow. They're the type of units I want to live in. And I think that that's important, right? Is that I'm buying stuff that I and my family would live in. I literally live in one of these types of duplexes that I'm describing here, right now, here in Lakewood with my wife and our one-year-old baby and our cat. And it's wonderful. So I like that for a number of reasons. I also think that it's closer, it's better cashflow potential. So this property, for example, would be valued at around $750 ,000 to$800 ,000.

35:08Each side would rent for just over$3 ,000. The mortgage on that would be about$4 ,500. And that gives you a pretty good shot at cash flow with a long-term traditional rental strategy, more if you want to get into one of those creative strategies. The price point is also high enough where I'm not competing with folks that are buying their first house hack or small investment property. So that's the kind of stuff that I particularly really like and feel like there's a reasonable competitive edge and the kind of thing that I'll probably buy here in 2024. So is that who you rent to? Is it like sober living homes and do you rent out rooms by the room?

35:45Or talk to me about that a little bit more. You mentioned those strategies of why you like that. Is that how most of your portfolio looks? So that's what I'm going to buy this year. Most of my portfolio looks like what I bought my very first duplex, two bed, one bath units, one bed, one bath units, up and coming areas, those types of things. So I did very well with that strategy for a long time, but it is a little bit more intensive from a management perspective. And I'm preferring the kind of B plus A neighborhood investing these days as an investor. I do have to put more cash down in order to purchase those.

36:2025 % on a$800 ,000 property is a significant chunk of cash, but I prefer that personally and believe it's the right approach for me today. My other units typically, again, are in up and coming areas, duplexes. I have two other duplexes in the Denver area, a triplex and a quadplex. The quadplex is one bed, one bath and rents each unit for$1 ,000 a month. So a very different type of property than what I'm describing to you here. And my tenants in the nice properties, there are actually five individuals that pulled together to rent the property on one lease. They've been great. They live next door to me.

36:54Always take care of the place, quiet, nice neighbors, help us out from time to time. And you focus strictly in Denver. You wouldn't go to Detroit just because of the values or whatever the numbers might look attractive right now. Your long-term thesis is strictly Denver, correct? Yeah. I may change that at some point in the future, but to this point, I've only invested in Denver because of that thesis I just told you about. I'm making a long-term bet on appreciation of Denver, Colorado. I think people can live anywhere they want in the world these days and do a lot of jobs. And they choose to live in Denver for the access to the mountains, the great city that we've got here, beautiful weather and sunshine, and the four major sports teams.

37:34Great. Just overall, there's a lot of things to like about living out here. Mountain view out our window. So I think that that's fundamentally my long-term bet. And I can de-risk the portfolio to a substantial degree as I'm operating it. I can go to a property, change the locks and paint if I need to, if times get tough. I can move on from my property manager and self-manage the portfolio. I think those are huge advantages that I'd be thrown away if I invested out of state. But if I was going to go out of state, I'd be going in 2024 and I was looking for cashflow, for example, specifically, I might be going to upstate New York or one of those Midwestern cities like Cleveland.

38:09Let's take a quick break and hear from today's sponsors. Hey, it's Sean O'Malley, just popping in with a quick message. If you like this podcast, well, I've got great news for you. We've got a handful of other shows for you to explore, from learning about Bitcoin to embracing a richer, wiser, happier lifestyle. Just go into your podcast app and type in We Study Billionaires to find our collection of shows. We Study Billionaires is our flagship podcast, and we've made a name for ourselves over the years by interviewing the best investors in the world, including Ray Dalio, Howard Marks, Joel Greenblatt, and many, many more.

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41:07Between the screener and Legend Investment Portfolios to reference, I've gotten a ton of ideas from TIP Finance. What are you waiting for? Take the next step in your investment journey today with the right tools at your fingertips. Grab your device and type into your browser, theinvestorspodcast.com slash tip-finance to get started. That's theinvestorspodcast.com slash tip-finance. All right, back to the show. Yeah, I saw a list just last night about the top markets, and I think Buffalo was number one. Cincinnati, Columbus, and Cleveland were all top 10, I believe. So it's interesting to me, But I totally agree with you just staying hyper-focused on the market where you live so you have that control over your asset.

41:55I can't imagine investing out of state, honestly. I think that if you're going to invest out of state, it's got to be for cash flow. It's got to be in a place that you believe is long-term appreciation prospects. And a good reason to invest out of state is, hey, I live in San Francisco and I make$120 ,000 a year and it's just never going to happen here. It's going to take me seven years to do that. And I'm unwilling to move to any other locations. So I think there's good reasons to do that. But I think if you're anywhere but maybe pockets of California, where it's totally unattainable, maybe New York City, maybe a select number of other cities, it's good to bias towards your local market if you believe in the long-term thesis for that local market because of those risk mitigation factors that I just went through.

42:36I think it drives returns over time. Everybody has problems in this business. And if you can self-manage and operate your way out of them, you're not going to enjoy doing it, but you're going to, I think, thank yourself that it was within a half an hour drive of your home. So you followed this steady, maybe unsexy path. I think I've heard you describe it as unsexy, but it works, right? This path with real estate towards financial independence. Looking back on your journey, is there anything you would have done differently? I watched dozens or hundreds of people race past me from a real estate perspective, just buy tons of property in the late 20 teens and create huge amounts of wealth.

43:17So obviously, in hindsight, 2020, maybe there's some different bets you'd make. But one of the things I found is that many of those same folks could never stop. Once you start doubling the penny, it gets very addictive. And a lot of those folks are the ones who transitioned into fund management and capital raising and bought tons of apartment complexes, hundreds of millions, tens of millions of property, and they are screwed right now. They're at risk of losing all of their investor capital in many of these cases. And there's nothing they can do. You can run an apartment complex perfectly in Austin, Texas.

43:52You can have your marketing dialed in, your operations dialed in. Your asset value is just worth 40 % less than it was two years ago because the market's crushing you between interest rates and the new supply coming on the market. And so I think that what I am proud of or what I'm confident in with my approach is this concept of a strong financial position, slow and steady. 20 % returns are great, but they're not great if you compound at 20 % and then go bust with $100 million. I'll take my 12 % or whatever it is that I'm getting on my portfolio. I should probably go back and compute it and reprise everything here to understand that.

44:27But at a lower rate and likely be able to compound it forever. without real, any material risk of a BK, bankruptcy, BK. Yeah. I know you're a fan of Warren Buffett and he's got that one quote. It's like, rule number one is never lose money. Rule number two is never forget rule number one. And to your point, you also, another idea of Buffett is buying below intrinsic value. Do you see coming up like opportunities in any real estate asset class where there'll be opportunities to buy below asset or, you know, replacement cost? Because it's been tough to do that recently? Yeah. So I think that in 2024, as all this inventory comes online, especially in the multifamily space, you're going to see something really interesting opening up.

45:12And I think that's where people are going to start trading in effect. And one person's pain is another person's gain, right? So I think there's a risk of cap rates going from prime multifamily cap rates going from 5 % where they are now to 7 % or 8%. That would be an enormous destruction in value. But at that point, now you're getting a 7 % or 8 % cash on cash return from a high quality multifamily asset. I think that's a very realistic possibility. I'm not saying it will happen, but I wouldn't bet against. I'm not betting against it at this point in time in 2024. And I think that could be a possibility at the end of the year.

45:47You had mentioned a little bit about your portfolio and it sounded like you do some index fund investing. I mentioned I did this interview last week and this guy mentioned the 401k. Another idea that he had was he didn't want to do any index fund investing at all because he felt he had much more control in real estate, much more control over his ultimate returns than he ever would with investing passively in an index fund. Can you share some of your thoughts about that? I think that's a great question. So I approach personal finance. I think there are two conflicting but simultaneously true philosophies about building wealth.

46:20One is that you need a formula to get to financial freedom. And the other is that you need to seize opportunity when it smacks you in the face. And those are at odds, right? We'll discuss this with couples, for example, and one individual in the couple will be like, no, we need to put all the money in cash and throw it into the business. And the other will be like, we need to be investing in the 401k and stock market. And I think they're both right. And I think that's how I've approached my personal financial situation is there's the foundation and the consistent formula that moves me towards financial freedom, where every month I'm putting more into index funds.

46:53I'm putting more into a savings that are going into the next rental property. And I'm consistently applying that formula that I know has a good high probability, has a very high probability of getting me to my end state over the next couple of years. And there are opportunities that you need to seize in life and go after with your time and resources, right? Like the jumping ship from my corporate job to bigger pockets, for example, like a real estate opportunity that comes up in life that's an all-in bet for that very first one, like my first duplex was. So I think that I completely agree with him.

47:25However, for me, I need both. I need to feel like I have a formulaic approach that will get me there no matter what. And then I'm taking a couple of quality shots that can move me towards my goal. When I was early in my journey, we didn't talk about this. Every quarter, every 90 days, I was trying to take a new shot, if you will. There was the house hack. I tried to start a winter gloves for driving e-commerce business. I thought about winter tire rentals as a theme here. None of them worked. I drove for Uber. I was a tutor and wanted to get into that so I could start a tutoring company for that.

47:57So none of those things worked, but they didn't require large amounts of dollars for me to test out from an ideation standpoint. So I agree with what he's saying and feel that there's a formula that many people, myself, as part of that need. Yeah, that makes sense. Is there anything outside of real estate and index funds that you also are investing in? My biggest investment is BiggerPockets, the company I lead. So I invest significantly in it and am a big participant and feel very strongly about its success as a company. So that's a huge position in my portfolio where most of, I would say the risk is one private company that I feel really, really passionately and strongly about.

48:35And then on top of that, I also invest in hard money notes. So as a rental property investor, a hard money note is when someone is going to fix and flip a property, they will borrow at a high interest rate, usually 10 % to 14 % interest, depending on how much cash they put into the deal. And then they will fix up the property. They'll complete the project as fast... They'll either new build or fix and flip or do a major remodel or somehow otherwise stabilize and transform the asset. And then at that point, they'll sell. After they fix the transfer on the asset, they'll sell it or refinance it and pay back the loan.

49:10So these are short-term loans, kind of six months to two years, typical time horizon, high interest rate. And I like them because I feel like, hey, if I'm going to lend to somebody, let's say they're doing a$400 ,000 fix and flip, or they're buying a property for 400 grand, going to put 100 into it and fix and flip it. Well, if I can lend on that and the worst case scenario plays out, I can foreclose and finish the deal myself, place a tenant, and now I own a property for 20 % to 30 % off, if you will, from the purchase price. So I like that a lot. And that produces a lot of simple interest yield, which is very freeing.

49:44So I have a couple of those notes and plan to continue to expand that position. Now, are these towards friends that are in the business or people that you've just met through your bigger pockets contacts? Or how do you do the underwriting for these loans? So there's an industry called hard money lending and hard money lenders typically have funds. So they'll borrow from an institution 30 or raise capital from investors like myself, and they'll raise 30,$40 million, maybe have a line of credit with a bank for another$10 million. And then they will lend out those funds to various borrowers. So if you have a$50 million fund and you're lending out$500 ,000 hard money notes, that's 100 loans.

50:24If you want to do more than 100 loans, you have to sell some of those loans or let them mature. And so the hard money lenders, because they originally get points, they make 1 % or 2 % profit each time they originate a note. They're very anxious to do as much volume as possible. So you got to be careful because you want to make sure you're not buying the notes that they don't want on their balance sheet at that point. And you got to do your due diligence. But I like doing that because hard money lenders that have an established reputation and a portfolio of loans typically have a process for doing due diligence.

50:55They'll send me 1099s, handle all of the payments and those types of things, and give me rights to foreclose directly if I don't like working with them. And so I shop with hard money lenders available through the BiggerPockets platform. Nice. You've got a pretty diversified portfolio with all the stuff that you've got going on. I wanted to hear a little bit more about your CEO of BiggerPockets. I wanted to hear what your average day is, like running the company, managing your own portfolio. You've got a young kid right now. How do you manage all that? And what are your days looking like lately?

51:24Yeah. So I'm a big planner and goal setter. My wife and I sit down once a quarter and go through our vision. We update it and tweak it. It doesn't move quite as much anymore, but it used to move a lot. Well, we think we want this. We think we want this. We kind of have settled in that that provides a lot of clarity for those. I then have a set of goals that I want to do for the year and a set of goals that I want to do for each quarter. I translate that into a weekly planning session on Sunday evenings with my wife, where I say, here are the big three areas that I want to move forward. And here are the things that I want to do this week to get those things done.

51:56There's a whirlwind that goes on at work every week that can blow you completely off course. But this simple ritual of just setting once a week, getting back on track has been very, very powerful for me because most weeks I'm able to get most of the things that I set as the priorities done or at least advanced. Sometimes it's literally this one email. Got to send this email to this person to begin this series of events cascading. I get that done on Sunday nights and that helps. So what does my day-to-day look like from there? Well, Mondays, I usually leave free to focus on the big quarterly priorities that are coming up that particular quarter.

52:28Tuesdays is when I typically record podcasts and create content. Wednesdays, I typically do my one-on-ones. Thursday is a catch-all for internal operating reviews, board meetings, or whatever else that I got to do as a CEO. I have a lot of 30-minute calls with various folks, whether they're sponsors or new potential partners or customers or whatever. I try to meet a customer once a week for coffee and just kind of, Hey, what's your real estate journey? How are we doing? What do you like? What do you don't like? Give me the goods on VicarPockets. I like to do that over coffee and beer. I find you get really good information after three beers with a lot of people.

53:00And then Friday, I have a one-on-one with my boss, our chairman, an operating partner, and we have more catch-all time. I also get a lot of content done. So that's my typical week now. But in Q2, that will completely change because I like to reset my calendar every quarter to make sure I'm focusing on the most important stuff. I wanted to hear about the transition when Josh and Brandon left BiggerPockets. What was that like for you taking over and filling their shoes? rather? Yeah. So it's been interesting. When Josh stepped away in late 2017, and I was... By the other people in the company, I was actually elected as acting CEO at that point.

53:39That was a really interesting dynamic because Josh had to step away from personal reasons. We didn't really have a formal succession plan. I didn't have the ability to fire, promote, change compensation for these folks. But for a period of months, we operated the business and were able to drive things forward. And it was a democratic election in a sense? Everybody had bigger pockets, had a vote on who should run the company? Among the small leadership team at that point. So it was not a company-wide election, if you will. But that was interesting. And a few months later, Josh named me president, and I had those powers officially.

54:11I reorganized the business at that point in time. And some folks didn't like that reorganization. But I was like, hey, if I'm going to be running things, I'm going to make sure I know what everyone does. And I know why that function exists. And I couldn't have said that for five or six different roles. And so some of those people loved the new role and thrived in the new position. And some said, nope, I'm out. And we actually called that the bigger apocalypse at the time. That was very challenging for me because there was some turnover because people didn't like the changes I was making in this first couple of months.

54:402018 ended up being a fantastic year for us. And we recapitalized with a private equity group out of Omaha, Nebraska called McCarthy Capital. And they brought in a chairman of the board who was kind of my boss. And he was a mentor, tough coach. Hey, here's what world-class looks like. And you're not it right now with these things. And he never said it like that. But I knew I was like, oh boy, I've only had my experience. I haven't had the experience of working with 20 other CEOs and 50 different chief financial officers, whatever. And so over the next five years, we developed a strategy for BiggerPockets.

55:16We understood our market much more clearly. We put together a leadership team with, you know, I learned what good and bad looks like from various leadership team positions. And I went through the pain involved in reorganizing the business and putting those roles together. And we grew the company over that period of time as well. Today, we are thriving, we're as strong as ever as a company and have a ton of different hosts, talent, authors, representing a variety of different viewpoints. And I think we've really shown that. But I think the beauty of BiggerPockets is it's not about my views on real estate, 10 of our other hosts will disagree violently with what I just said about the markets and all those kinds of things.

55:53It's the community and crowdsourced feedback of people who try their best, think they know what they're doing, and disagree and debate each other and know that they're probably going to be wrong on a variety of different things and that there's always new strategies popping up. Yeah, the community is huge. I mean, that was such an important part for me in my learning early on when I had a pro membership and just being able to bounce ideas off of people. It's just invaluable. Absolutely. I think that's the power of it is it's not one man's secret sauce to real estate investing because there's no such thing.

56:20It's the crowdsourced wisdom of the community and the new tactics that are constantly popping up to make money. Before we wrap up, I want to do a quick fire round if we could. So I wanted to hear what's your most controversial or contrarian take on real estate is. I think it's the risk of a 30 plus percent additional cratering in multifamily asset values in 2024. Large apartment complexes, I think, are one of the most at-risk asset classes in this country right now. What are you currently reading? I see a bunch of books behind you. I wanted to hear what you're currently reading. I'm currently reading Number Go Up about the crypto boom and bust.

56:58And what's your takeaway so far? Is it Bitcoin specific or is it just the whole arena of crypto? I was not a fan of crypto. I've tried to read both sides of the argument. I think that the side that is most rational to me for crypto fans is the one espoused by Seyfedean Amos from the Bitcoin Standard, which in there are Bitcoin maximalists. If you're going to bet on crypto, to me, it makes sense that Bitcoin specifically would be the winner. That would be your hard currency that would potentially replace fiat currency long-term. All of the other cryptos have never made sense to me. This book confirms, I think, that skepticism and I think exposes the Wild West of just how many scams and absurdities were going on just a few years ago in that space.

57:48Yeah, that was a game changer for me too, reading The Bitcoin Standard by Safedine. I had a bunch of different, quote unquote, crypto speculations. And after reading that, I stuck strictly to Bitcoin. It's like, there's going to be a winner take all. And there might be some use cases for a couple others. But in general, there's going to be a winner take all. And it's pretty clear, I think, what that winner will be. Yeah. The main thesis, and I haven't finished the book, so we'll see how it ends. I probably should know this, but is around how a lot of these coins claim to be stable coins and were backed by US dollars, but then they weren't actually backed by US dollars.

58:22So when something that's supposed to be worth a dollar is worth even 98 cents, the whole thing collapses. Because why would you be the last two people out of 100 to leave your money into it and not get your money back. Yeah. The unfortunate thing I think is like, there's so much of the crypto stuff that's conflated with Bitcoin that that's a whole nother topic and a whole nother rabbit hole. The reason I don't invest in Bitcoin, even if, you know, I think that the Bitcoin maximalist approach is the most reasonable take on crypto overall is because at the end of the day, crypto or Bitcoin would be a currency.

58:57What would I use the currency to purchase? I'd use the currency to purchase things that I want for my lifestyle or assets that produce income and are likely to appreciate in real value like real estate. So I'm just like, I can invest in Bitcoin or I can purchase rental properties. And which one is the better bet long-term? We'll see. There's a case where Bitcoin takes over the entire world economy and becomes worth the value of all of the cash in the world and what goes up soaring in value. But even at that end state, I would then use Bitcoin to purchase rental properties and receive payments in what, Satoshis or whatever.

59:29So I think that ends up being how I've kind of rationalized this whole world of crypto into, yeah, I'm just going to stay out of it because the goal is to have the cash flowing properties at the end anyways. There's an argument that's made that there's a lot of monetary premium that's in real estate, that Bitcoin will, well, who knows what percent, but it will suck some of that monetary premium up. But yeah, it's hard to know. Time will tell for sure. But I don't know. We all have to make our bets and it's a risk no matter what you do. But like you said, there is no right answer for everybody.

1:00:01Scott, this was a lot of fun. I really appreciate your time. Do you have another book in you? Is there anything coming out that we can look forward to? I'm not personally working on a book right now. My kind of passion project, if you will, is something for BiggerPockets. We're calling PassivePockets. So because we're seeing this pain in the commercial real estate space, and a lot of folks have put together syndications in the space to raising capital, I think a lot of investors didn't really know what folks charge for fees or what the business models look like or how to underwrite them or the risks inherent in the commercial real estate world.

1:00:35And so we want to really put together a product to educate folks on how to think about those passive investments. We've really focused on the single family, small multifamily duplexes that people personally own and operate and not as much on these larger funds and passive investments. So that's what we're working on. I don't know if a book will come out of it, but it'll certainly be a lot of content. Passive pockets. Cool. I'll have to check that out. So for people that want to find out more about you, find out more about BiggerPockets, just what you guys are up to, what's the best way for them to do that?

1:01:03You can just find me on BiggerPockets, post in the forums and tag me. You just type in the at symbol and Scott Trench, and I'll come up. You can ask a question there and I'm happy to respond and engage all day. Cool. Scott, thanks so much. I really appreciate your time. This has been fun. Thank you, Patrick. This is great. Okay, folks, that's all I had for today's episode. I hope you enjoyed the show and I'll see you back here real soon. Thank you for listening to TIP. Make sure to follow Millennial Investing on your favorite podcast app and never miss out on our episodes. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com.

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