Stop Treating Real Estate Like a Lottery (Your 2026 Framework)

Real estate isn’t a lottery ticket—it’s a system. In this episode, we unpack our five-pillar “Sherman Strategy” so you can invest with purpose in 2026 and beyond.

We get practical about where your time, money, and risk actually belong. Mindset comes first—becoming the kind of person who learns, shows up, and builds habits. Then we stress-test motives (relationships), map the money (financial), choose your lane (growth), and protect the wins (sustainability). No gurus. No one-size-fits-all. Just a framework you can tailor to your life stage and risk profile.

You’ll hear real scenarios: the single house-hacker turning a triplex into equity, the teacher who leveraged a HELOC into five doors and a plan, and the family shifting paid-off coastal homes into Midwestern apartments for steadier appreciation. We talk velocity of money vs. safety, short-term gains vs. long-term holds, and why recovering seed capital changes the game. We also clear up common myths—FHA/VA occupancy rules, passive “set it and forget it” promises, and the trap of saving small forever.

📌 Key Topics:
 ✅ The 5 Pillars: Mindset, Relationships, Financial, Growth, Sustainability
 ✅ Growth vs. Sustain: risk profiles, leverage, and the goal of recovering seed capital
 ✅ House hacking, BRRRR timing, and when to refinance (or not)
 ✅ Using HELOCs responsibly—and how to “graduate” to bigger deals
 ✅ Tax plays: bonus depreciation, short-term rental loophole basics
 ✅ Exit plans that survive real life (vacancies, repairs, market shifts)
 ✅ Why specialist brokers beat generalists for niche assets

We’re here to help you stop guessing, pick a clear path, and move with conviction. Ask yourself: which pillar needs attention this week—and what’s the next right step you’ll take to build freedom on purpose?

Chapters:

00:00 Introduction to the Sherman Strategy

00:48 The Five Pillars Framework

01:21 Mindset and Relational Pillars

02:45 Financial and Growth Pillars

04:09 Sustainability and Risk Profiles

06:26 Custom Strategies for Different Investors

07:05 Case Studies and Real-Life Examples

09:00 Investment Strategies and Market Timing

15:53 Legal Considerations and Mortgage Fraud

19:49 Tailoring Strategies to Individual Goals

28:24 Risk Profiles and Investment Velocity

29:55 The Power of Leverage in Real Estate

30:40 Misconceptions About Offsetting Income with Real Estate

31:39 Tax Savings and Growth Strategies

33:00 Customizing Real Estate Strategies

35:15 Real Estate Investment for Young Adults

36:58 Balancing Risk and Reward in Real Estate

40:39 Growth vs. Sustainment Strategies

54:39 Specialization in Real Estate Investments

56:40 Conclusion and Final Thoughts

Transcript

 Tanner, a few episodes back. You mentioned, and actually I mentioned it a few times on the podcast, your Sherman strategy I think is what you called it. I wanted to kind of dive into that, unpack it, poke holes in it, whatev whatever it is, and how can someone, if they wanna start, like we'll use a couple of different scenarios, maybe they brand new, want to.

Get into investing in 2026, someone that's been investing for a little while, how would that pertain to them? And someone that's been, maybe they've been doing this for 20 years, but they're at a turning point in their life and wanna change. So kind of if you will, unpack your, your philosophy, your strategy, whatever it is, and how, how that pertains to those different areas.

Yeah. So when, when I first got my real estate license and I was trying to find. A framework and, and I used to do a lot of phone calls just with new investors. It was mostly off BiggerPockets that I would get leads and they just knew they wanted to get started, but didn't really know where to start. And so I tried to build this framework of how to, how to introduce their, um, their strategy.

And I, I mean, I still, I still hold to it today that I think that that was the, the framework of what. I work on even to this day, and it was built around five pillars of where your time goes and the first being into your mindset and be, we talked previously about, you know, becoming the type of person. So if it was, you know, before every time you're in the car, you're listening to music or you know, where does your free time go?

You're playing video games or you know, whatever. Is that helping you get to where you want to go? And so changing the mindset around, um. Instead, I'm gonna listen to podcasts, or I'm gonna listen to audiobooks, or, you know, I'm gonna meet with people who are doing the thing that I want to do. And that's just changing your behaviors to be that type of person.

And then the second was, uh, relational is why are you doing it? That's a lot more under the why of like, it's serving my family, serving my kids, um, and. And it's not to say that, well, once you've got the mindset, then you can just move on to the next thing. It's that you start off by improving it and being, I'm, I'm gonna be more growth minded and, and more open to things.

Uh, be realistic with where I'm at. And as I'm continually building the habits to work on those things, then I can move into bettering my relationships. Is what I'm doing here going to add to or take away from my relationships? And if it's, um. You know, the, the business that I want to get into is gonna take all of my time away and I have to neglect my family.

Well, then it's not gonna serve the end goal. And so being realistic with that, the third being financial. Um, and I used to always joke that if you put the financial before the relational, then you know you're not gonna have a relationship. 'cause they're gonna take ha or they're not gonna have a fi uh, finances.

'cause that relationship's gonna take half of everything. So focusing on what's important first, then realizing the financial. And in real estate investing, it's easy to go from, I wanna start learning about all the different aspects in the mindset. And I'm gonna learn about wholesaling, learn about flipping, learn about rentals, learn about multifamily, you know, commercial.

Then move into the how can I. Add to my family and better my relationships through these efforts. Then it's the financial, well, what are the financial steps that it takes for me to buy my first property? Maybe it's just budgeting, or maybe it's Dave Ramsey. Get to zero. You know, how can I get all of my debt so that, you know, I can be more responsible, start doing the, the envelope methods, anything that it, that, uh, works for, for that person.

And then it goes into the growth and that, and the growth. Stage, I believe, is where you're taking more risks, doing the wholesaling and the flipping and scaling quickly, trying to get, build up your net worth and have more resources to deploy. And for me, in that growth phase, it was, you know, using my VA loan to go get, buy my first house and then build up some equity in that house.

And, you know, um, buying my first property, using other people's money to buy that property. And then the fifth is sustainability is how can I preserve my wealth? And for me, and I have some properties where we're gonna be getting out of partnerships and taking our cash that we make from that and deploying it into stable things that are gonna provide us with cash flow.

And so I don't think that anyone's in any one phase. And I, it's not, I, it's not to say that sustainability is only for, you know, 65 and up and growth is only for younger guys. Right. I know people that are probably in their seventies or eighties that are still in that growth 'cause they're still taking massive risk.

But they have certain parts of their portfolio that they pull outta that massive growth, the high risk stuff. And they put it in more stable assets 'cause they want to preserve it. And it's still kicking off money babies, but it's, it's moving from. Something that maybe it has a a risk profile of 15% upside, like 15% return is my target for this investment.

That's a growth stage investment. And if I try and go into a growth stage investment with a sustainability mindset, I'm gonna be left disappointed or left holding the bag. So then moving into that sustainability is, well, I've made really good money with this 50,000. I recovered my seed capital. I'm gonna redeploy that.

The, the profits from that into more high risk strategies. I'm gonna take that 50,000, put it into something safer that it's never gonna make me double my money, you know, year over year. But it's, it's gonna continue going up in value. So you kind of break out the different latter three categories based on.

Risk profile. Yeah, I think that's fair to say. And, and I, I, what I don't think is that any one person is in any one of those areas at any given point. I think it's more of a tiered strategy of when you start working on the mindset and then you can make it a daily habit of we, what we talked about changing from listening to the radio to, I'm gonna listen to podcasts and, you know, um.

Instead of going to the bars, I'm gonna spend more time with my wife and kids. You know what? Whatever that looks like for the individual, it's just making those more of a habit. Okay. So do you have any clear cut guidance or is it just kind of opinionated, I guess, or? Um. Personality driven as far as each category?

How's that work? Yeah, it, it's more, it's always been more personality driven. It's, it's more of just, these are the frameworks of the conversation that I'm gonna have. And I, and I start off those calls, they're usually half hour calls. And I used to have my calendar stacked. I would do maybe, I don't know, 10 to 15 of them a day and just every single day be talking to more people.

And I'd start off with the same, same pitch essentially of I'm gonna, I'm gonna fire things at you, and it's gonna feel like drinking out of a fire hose. But the more we start working together, the more it's gonna start making sense. And so I can give custom tailored strategies to each individual like I I, and it's more me trying to uncover what it is they're looking for.

And you know, I got, I had a, a single guy that was looking for a rundown property that he could house hack and force a lot of equity into. And so we found him that property and it was a triplex. He forced a lot of equity into it and he's doing really well. He is cashflow positive. He just reached out to me last week and said, Hey, I'm looking for another property now.

And so his is that growth phase of. It's high risk to do a construction project, especially with no experience. But he knew that that's what he was looking for, but it had to be nice enough to where he could get into it with, uh, an FHA or a a, uh, conventional loan. So it had to qualify for financing. It can't be a rundown, you know, SHQ.

So it's finding that threshold, knowing that his goal is he has a retirement number. And so when we start with the end in mind, his sustainability number is, I would love. To have $10,000 a month of just cash flow coming in for my investments. So we know, okay, you need this much in paid off real estate.

The same way that a financial advisor would look at it, you know, if, if your goal is to retire with X dollars amount, you need this much invested. So we gotta invest a thousand dollars a month. I think the same way, but with real estate. I think you can get to that end number a lot faster if you're willing to be risky in the growth phase.

And so he's forcing a lot of equity into it. It's gonna get him to that sustainability number where he can take his portfolio of maybe he's moved five times in the last 10 years, and every time he forces a ton of equity into it, sells all those off. Now he has $3 million and paid off real estate that's just gonna kick him off 6% per year.

And so that's where he'll move to the sustainability. But does that mean that he's gonna retire and he'll only ever do safe investments? Absolutely not. 'cause we're, we're all glutton for punishment. So as real estate investors, you gotta be a little crazy. He will, I'm sure park that money in that. Safe 6% harbor and then move back into doing other flips and other things to keep his time busy.

Yeah. So actually just seen this, this morning. I, I'd never done the math and obviously this doesn't take any interest or, uh, compounding effect or anything like that into consideration, but if you just save a hundred dollars a month, it'll take you 833 years to become a millionaire. Mm-hmm. A thousand dollars a month.

It would be 83.3 years and $10,000, you could do it in a little bit over eight years. A point to saying that is we always hear, oh, just say, you know, $10 a paycheck, a hundred dollars a month, $50, you know, whatever it is. Holy cow. That takes forever. So I, I mean, you have to have some kind of, obviously the stock market as people.

I don't know. I, I was reading something the other day and someone said about live off from 70%, invest the rest, the 30%, and, and in that by two single family homes a year. Uh, with that 30%, I, I'm like doing the math in my head. So they're saying, do you know, put in a 401k, uh, IRA, whatever. So say that's 10%.

You're putting in there that gives you 20% left over to buy two single family houses. Like how many hundreds of thousands do you need to make in order to buy two single, say you make $200,000. So that's 40,000 to buy two single families. Did I just do the math? No. I mean, single family for $200,000 and it's a $40,000 down payment every time.

Well, yeah, but that's one single family. Mm-hmm. So they're saying to do two. How many, $200,000 single family homes are you finding across the nation, especially today? So it's just sometimes these long, long tangent to say sometimes these, these, uh, one size fits all, uh,

social media post aren't necessarily good. Have you ever read Brandon Turner's seven years to Seven Figure Wealth? I, I don't know. Is that the one, I mean, is that where he kind of started with the habits or the property stacking or, yeah, essentially. So he, he wrote this many years ago. Uh, it, it's a, uh, like an ebook, like a flip book kind of thing.

But it was su it was, I thought it was super helpful 'cause. He says, you know, you buy a single family or duplex in year one, and then year two you're figuring out how to manage it. You're building up, you know, taking the cashflow from that, your active job, you're taking some more cash, putting it aside. And then year three, you go and buy another property.

Year four, you buy another property. Year five you buy three properties, six, you know, seven. So on and through that stacking after seven years, you should have a million dollars in real estate. So I've, I've basically built the same. Philosophy. Now, I, I don't think that it's, when you say a million dollars in real estate, you're not saying a million dollars, you're saying a million dollars equity mm-hmm.

In your real estate portfolio, or are you saying a million dollars? I, I'm, if I remember correctly, his, his flip book thing was about a million dollars in equity. After seven years, you should be able to build a million in equity. By buying this strategy, taking all the cash flow, using it to buy the next property and so on, and some of your active income, and in seven years you'll have a million dollars in equity.

And if that million dollars in equity is earning, you call it six to 10% interest, you know, you're, you should be able to make a, a, another decent chunk to be able to compound that faster. But what I've found is that that's too slow for most investors, which is why I think the growth strategy makes more sense, is they, they need to go and double their equity every year in order to get to where they want to go in less than 10 years.

Is that possible in today's market? Do you think it's possible to, unless you're active in real estate, as a pass passive investor, is it possible to double your equity in seven years, 10 years? Passive. No, I don't, I don't think so, but I don't, I don't think that, and when I think of passive strategies, it's, it's investing in other people's projects or, or whatever.

But well, may, maybe you have a good, maybe you're making a quarter million dollars a year as a, you know, IT consultant or whatever you're doing, and you're living off from that, let's call it 70, 70%. And so you have whatever that comes out to $75,000. A year to invest. I only wanna buy properties that are in myself.

I'm gonna start an LLC. I'm gonna do this Brandon Turner, uh, strategy that you just talked about. I forgot the name of it, but it how I'm invest $75,000 and year buying one single family. I'd give you what? $300,000 home you can buy every year. By putting 25% down. Mm-hmm. Can you double your portfolio in 10 years?

I absolutely think so, and especially when you, when you start packaging 'em together, and like the, the investor that I'm talking about, he's forcing the equity in there, so he might buy it, like he bought that for, I don't know, it's 185,000 and it's probably worth two 20 now. Maybe two 50. And if he goes and buys another one, does the exact same thing, you know, buys 185, 200,000 for, I mean, there's a rundown, triplex, and then makes it worth $75,000 more.

Plus the equity he has tied into it now. Now he's got a quarter million dollars in equity in three years. I mean, you do the math, you do that three more times, there's a million dollars right there. How active is he in there? Doing the work, is it, I mean, basically a side hustle, I'm assuming. Yeah. He still has an active job and so, but for him it was renovating a unit.

He lives in that unit. Once he's done renovating it, then you know, he'll move into the next unit, put a tenant in that first one. And so what he's done has been very smart. It's taken him a year and a half to do, um, well, yeah, not quite a year and a half. So, um, he's, he's done it a very smart way. He is a single guy and so he, he has that luxury to do that, but he knows exactly.

What he wants to build before he, um, before he has a family and has kids and wants, you know, and I, I joked with my wife about it. When we first learned about real estate and we were looking at houses, it was like, oh, we can use our VA loan to, you know, get a fourplex. I'm not living in a fourplex and I'm not sharing our yard with neighbors and all that stuff.

It would be so much faster to do it that way. Might like we would've grown our wealth so much faster doing it, but. It, it didn't fit our lifestyle at the time. We, we already had six kids with a seventh on the way, so, yeah. So I always think about this. I, I don't know how legal this is. I haven't, I haven't looked into it to find out, but my situation, like we would love to go overseas in travel.

What if I bought a fourplex as my primary residence? I did short term rental or something, Airbnb on one that I lived in. And just travel overseas for a year. Is that legal? From, from my understanding, it wouldn't be, and so I'm, I'm pretty sure if, if I'm not mistaken for VA FHA and a conventional primary home buyer loan, uh, not, not saying conventional as an investment.

'cause with a conventional primary home buyer, you can go as low as like 3%. Usually it's around 5%. But with an investment conventional loan, you gotta put 25% down usually. Um. But your intention at the time of purchase has to be that it will be your primary residence and you'll live at, at a, a minimum of six months outta the year.

And so, and it might even be more than that, but um. That being said, the, the way that I've seen people do it in the past is they buy the property, life changes, jobs change, whatever, that the lender's not coming in to check and knock on your window and make sure that you're sleeping in there at night so people do it.

I agree. I mean, I, I guess I'm, I'm not, I, obviously, I'm trying to skirt the rules, but I'm not trying to do it legal. 'cause you can get into mortgage fraud mm-hmm. By, by doing it illegally. And so that's why I said I haven't done any of that. The, the checking to see if that's legal because I mean, technically you're living there and you're just subletting it.

Well, put it this way, the FHA loan, it's, it's for primary home buyers and it has to be your first time purchase. If you move into a house and find out the neighborhood's not safe for your family or your work changes or you know, anything like that, then. You, you can go and buy another house in that same year, in that first year, and you didn't commit mortgage fraud.

But if, I mean now they're watching this and they know that you're premeditating this, so you, you might not have that same luck, but if you, before you buy the property, say, I have no intention of living in it and I'm just gonna use this for the low down payment that's mortgage fraud. And so, yeah. And maybe it's, maybe it's not illegal what I'm saying, but.

As we're talking about, I, I think it definitely goes against the intent of, uh, of the law or the rules or whatever, you know, like it's, it's made to be the VA loan and the FHA loan is made to get somebody that. Maybe can't afford another home or doesn't have the down payment. Get 'em into a, get 'em into a home.

Um, and that's kind of the, the reasoning for it, basically the way that it was presented to me. And obviously I'm not an attorney, but if the same with tax law. If you can look your auditor, your IRS auditor in the face and tell them this was a legitimate business expense. Like I, I needed to buy this Xbox for my business.

And you can say it with a straight face, then go for it. But they can, I mean, it's up to discretion. And so if you're looking at an investigator and saying, I used my VA loan to buy this house, and then, you know, my, my. Wife's dad got sick and we decided to go travel and go, go see you know, him or whatever.

That's why we're not living in the house. But that was never the intention before you bought the house then. Okay. But if, if you're already going into it thinking, I'm just gonna get this low down payment and then go travel, like it's gonna be hard to look an investigator in the face and tell him, honestly, I had no intention of doing this.

So let's circle back to what we were initially. You were talking about your, your buddy or a guy, you know, so let's go back, start of the conversation. How's the conversation go? How do, what are some of the questions you ask? How do you get him in that triplex? How do you, how do you know that this is what he's looking for?

How do you get him in there? How do you next phase of growth or next property, how, just kind of unpack that whole. Yeah. So I mean, it comes from a lot of, uh, a lot of initial calls of, of, just from that first conversation I hear where they're at, like what they say. I, I think I wanna get into real estate and like start uncovering.

Can, can you give a couple examples of what you would ask? Obviously you pray, haven't done this in a little while, but if I was a new client calling you, how would you walk that dog, if you will? Yeah, so I'd, I'd ask, you know, um. How much education have you done on it? And that's part of the mindset. Mindset pillar of.

What, what about real estate interests you? What sectors, what strategies? And I mean, I can, I can start to tell pretty quickly if they're educated or if they just saw a 32nd clip on YouTube and decided, ah, I could try this. And so if it seems like they're one of the latter type where they just saw a clip thought, you know, it's a quick way to rich is I would start providing resources of like, you know, look into this, tell me about this strategy.

What, what do you think of this? And, and maybe that's, um. The house hacking idea of, of they have like, finding out their resources, how much money do they make? Um, I'm very open about those conversations to, to get an idea of where they are, and then I can recommend strategies. And if they say, like I've, I've had client call me before and said, you know, I've been working at my job for 18 years.

I have, you know, 500,000 in my 401k and I have 50,000 saved up and I think I want a fourplex. I go, okay. Or usually they'll say, I want a five to, you know, eight unit and I wanna live in it. So then I can start to correct some of those things that are misconceptions and say, well, if you want to do the house hacking strategy, the best way to do it is to go into a two to four unit.

Because then you can use those primary home buyer loans. Now you can buy an eight plex and you go live in it, but you still have to get commercial financing and treat yourself like a tenant because you're buying it as a business more than a primary residence. And so just educating them on those strategies and start to narrow 'em down.

And then I start really vague and I start sh showing them properties of, you know, I could do five minute underwriting and just look at a property selling for 400,000. This is the rents that it's bringing in. This is what you'll have to pay out of pocket and then send it to 'em, and they just like, ah, I don't really like that area.

Like, okay, then we need to be more realistic on the price, and you need to probably spend the next six months setting aside another $20,000. Whether it's picking up a side hustle, you know, DoorDash do something to make a, an additional income stream, or we go into that financial pillar of is there anywhere we can cut some fat out of, to put that aside for your end goal of investing and being realistic with, with, you know, you're not gonna get into this with zero money, you gotta put something in and, um, and then so usually I can uncover what their goals are and then help them build a strategy with the end in mind of.

You know, let's start by buying that fourplex and then give it a couple years of cash flow. In year three, we'll reconvene say, do you wanna do another one of these fourplexes? Or are you ready to do a more aggressive strategy? Because then maybe you can go leverage against that fourplex, take out a heloc, and then you can hard money lend to yourself to go fund your next projects.

And you can combine that with other strategies to do that growth, that high aggressive. I had one, one investor call me from outta state. Um, and he said, I'm, I'm a teacher, uh, in, on the West coast. And my, uh, I'm divorced. You know, I have no kids at home. My house went up in value a ton. I have a hundred and whatever, $120,000 line of credit, and I really want to retire myself in the next six years.

And so I did the math and I showed 'em for you to make the same salary that you're making right now, you are gonna have to do very high leverage activities that are high risk. But if, if it pays off, which there's no guarantee it'll pay off. But if it pays off. It can get you there in six years. So he used his HELOC as a down payment on that first property or No, he paid, he used that entire HELOC to pay cash.

Cash for a property and then took all of the rents and I think it was like 50% of his active income to pay that HELOC down aggressively. Then he had some available on the heloc. He borrowed some money from a family member, bought four more units in, I think it was year two or three. So now he's got five units and he takes all the cashflow from all those to pay down the heloc.

And then he's looking at the, he had to invest, I don't know, $30,000 into the, the duplexes to increase the value of those. But now he has a substantial amount of equity built up. And so he started with $0, zero of his own dollars. He used a line of credit, family money, borrow, borrow, borrow from the bank.

And now he has equity of 300 to 500,000. And so he's looking to take those five units, 10 31 into a bigger building, so somewhere between eight and 12 units, and the cashflow will be a little bit less, but the appreciation will be more. He'll, he'll still be doing the same debt pay down strategy and taking his active income, which has increased over the last few years.

So he has more to contribute to be able to build up his equity faster. And so while he's not cash flowing a ton, it's not, you know, anything to run home to, he's created almost half a million dollars in equity just by being extremely aggressive. Part of that's market timing. Part of it's, you know, buying the right assets, but he has a higher risk profile.

He referred his, uh, parents and his brother to us, that both his parents and his brother had paid off real estate on the west coast. They realized it's only going up, you know, two or 3% per year. And some years it's, you know, not doing great. So they sold off some of those paid off properties, bought apartment buildings in Omaha that, you know, are maybe just covering their expenses, but they're getting a lot more of that appreciation.

But my strategy for them was completely different. And I told them that you guys don't need, like, whereas, um, you know, your brother is getting. A hundred percent leverage on all these properties. 'cause he is using his HELOC and using bank financing. I think you guys really need to look to put 40% down on any of these properties because you're not looking for that high growth.

You're looking to park money and still get some of the benefit. So anyways, that's long-winded story of like all these three family members all have completely different strategies based on where they're at at the time. And so the, the brother and. The, the parents, they're in the sustainability for their funds, whereas he's still in that growth and they've been investing for pretty similar amount of time.

They just bought differently. So would you say based on your down payment. Is kind of, I'll back up to a few weeks. When we had this initial conversation, I said something about I wanna take 50% of my profits from business. So say I make a hundred thousand dollars, I wanna take $50,000 and buy a single family home.

And you said I was more in the sustainment face doing it that way. I guess I look at it still growth because I'm growing my portfolio. I'm growing. Stuff. Um, I'm protecting against downside risk, uh, as far as inflation and all that. 'cause typically real estate's an uh, inflation hedge. But you would, you would characterize that as sustainment versus growth, correct?

Mm i I think it depends on what it is that you're buying. Like if you're gonna buy a a hundred thousand dollars property and put 50,000 down, I mean that, then yeah, I guess it does come to the down payment. The percentage of that property, if it goes up 6% per year, you know, you get a 12% return on your investment.

But you're only really creating 6,000 in equity. But if you take that 50,000 and you buy a, um, what would that be? 200? 250? Yeah. $250,000 property. Putting the minimum amount of down payment possible. You're not gonna cash flow, but you're looking to get more of that upside. So because your return on the actual dollars that you invested would be much higher if that property goes up three, three to 6%.

Okay, so you kind of base it off from the risk profile of each deal, if you will. Yeah, absolutely. And kind of gone by the um, well, I mean, I mean, put it this way, if I have a million dollars in cash and I buy a property worth a million dollars and it goes up 3%, I just made 3% on my million dollars. But if I take that million dollars and I spread it out amongst five, you know, $200,000 property or whatever, whatever that math is.

Then every time that one of those properties goes up 3%, my net worth has gone up significantly more than if I just had a, a property paid off cash. But if what I'm looking for is more of that cash flow and that safety. Of, I want it to continue going up in value, but I also, you know, want it to be able to cover its expenses.

Then I, I, that's more in sustainability 'cause I'm parking money, so, and I think if you tie it less to the down payment and more to the velocity of the money, it's probably easier to understand just 'cause my velocity is much higher using that money as a minimum down payment on multiple properties than it is on $1 million property.

Yeah. I. At the end of the day, it comes back to velocity and how much, uh, risk you have, how much debt you have, I guess. 'cause that's what you're doing is you're leveraging the, the amount of debt or That's the beautiful thing of real estate, at least in America, is you can leverage all that debt to in order to buy more.

If I had to use your million dollars and I want to buy stock, I can only buy. I can diversify and buy multiple things, but I can only buy a million dollars worth of stock versus if I have a million dollars, I can go buy four or $5 million worth worth of real estate. Mm-hmm. To your point, if it goes up 6%, it's really like going up 24%, or 20 or 30% versus.

The stock market, if it goes up 6%, it just went up 6%. So that's kind of the Yeah, and I mean, leverage is, is one of the big powerful parts of it. I mean the, the depreciation, the equity, you know, the, the debt pay down, all, all of those things combine the benefits of real estate. And so that's, that's where talking to a couple like.

I talked to a couple who they said, yeah, we really wanna buy apartment buildings. And like someone asked, okay, what's your reasoning for wanting to buy apartment buildings? Well, we wanna be able to offset some of our income. That's a misconception because buying an apartment building is not gonna offset your active income.

That's the active bucket in the passive bucket because, so I said, well, what if you took that exact same amount of money and you bought a. Airbnb property in Florida, in, you know, Tahoe, some somewhere, and your, so there's the short term tax loophole where you can take the depreciation from that property to offset your active bucket.

'cause you will make more money with the tax savings off your active income than you would by buying that apartment building. That's probably going to appreciate more, but that's not your goal right now. And so that's where combining the strategies to figure out where exactly they're at. I can provide better recommendations.

Yeah, I mean that is the beautiful thing about real estate is if you have a million dollars, go back to your million million dollar scenario. And I buy a property and I say, I spend a million dollars buy only, buy $2 million property. But I could have potentially saved $250,000 in tax savings right there in year one.

That might be the only thing I care about. And then next year I can do the same thing and still save $250,000. And that's another way that I'd look at it as far as growth. 'cause time, value of money tells me if I'm saving $250,000 in year one, like that's way better than anything. And now. Yes, I might only be getting 6% or 12%, uh, growth or whatever it is on that money, but I still save 200, $250,000 in taxes year one.

So what with the new cost? Uh, I say new. The reinstituted bonus depreciation. Bonus depreciation, cost thing, thing. I think that's a game changer for. Real estate and looking at real estate for the long run and, um, making it part of your, your play. Mm-hmm. And, and part of that risk adjustment is like, I've had people come to me and say, I really like my job.

I've only been doing it for five years, but I plan on doing a full 20. And I, I have this money, I don't need cash flow, I just wanna park it in some real estate that's paid off when I'm ready to retire. So my recommendation for them would be, okay, go buy every single year, buy that single family house for the next 15 years, and put them all on 15 year notes.

They will break even. You know, we, we can adjust the down payment percentage based on where the interest rates are at the time, so that maybe this house, you gotta put 35% down the next year. Interest rates went up, you gotta do 45% down. But if every year you're putting that money aside and you're buying another property on 15 year notes, and then you take any cash flow that you have from one to pay off the next one in 15 years, you'll have, you know, 15 paid off properties.

And now there's more logistics that go into it, but ultimately that, that family could have, you know, I don't know what the $3 million in equity and paid off real estate. You can do a lot of damage with that. Not to mention the cash flow at the end of that. Right. If, if they wanted to or they could just pull loans out.

Yeah. Refinance. I mean, refinance 10 31. There's so many options, but. It's, it's just customizing the strategy to them. And, and it's not to say that that strategy is a sustainment strategy and this strategy is a growth, but it's more around the mindset of being realistic with what kind of risk profile you're operating in.

Someone says, you know that they really need the cash flow. They, they want outta their W2 job right now and. Um, they don't wanna lose money. They're very, you know, scared of losing money. Well, then the growth strategies that I have are not gonna work for you because you're gonna lose money sometimes. Now we, we keep doing it so that the winners beat out the losers, but they would be one who, even though they're in their early stages, I would say, then you need to buy properties that you can have a substantial, substantial equity position going in.

Which means you need to save up more money before you even start. And that would be a sustain a sustainment strategy. 'cause they're more worried about wealth preservation than they are about wealth creation. And if they say, well, I want, you know, low risk and I want to double my, my equity every year, it's not, you can't have your cake and eat it too.

Yeah. It's interesting because I hear so much about real estate's so expensive, you can't, you can't afford it anymore. No. Body in their twenties can buy a single family home and live in it. Insert reason and excuse for days of why, why we can't do it anymore. And well, I agree that things have gotten more expensive.

There are things like VA loan, the FHA loan that'll get you in for 3.5%. Like, I got an 18-year-old, she'll be 19 here in four months or whatever. And I, I keep trying to tell her why you're in college. Bye. A single family home. Get a four bedroom, rent it out the other three rooms to your friends. Let that compound for the other two, three years you have in college.

You can move out at that point in time, you've lived in it long enough that you can just move out and rent it out to somebody else, or you can just sell it. Take that equity and buy another home when you move back to Omaha and that will give you such a leg up versus you're paying the same amount, you're, you're actually losing money by not doing that.

Mm-hmm. Not, and when I say losing money, I mean monthly because if you're paying $500 for rent, she can, if she gets a four bedroom mo, more than likely be paying less money. You know, maybe she's paying two 50 versus $500. She's spending $250 more a month for however long she's done in college, 3, 4, 5 years, plus losing out on that, on that equity and the loan pay down from her.

Yeah. And while, while I agree that that is the best, the smartest strategy to do, I would say that the, the risk there. Is what if she can't find anyone to move in with her? Can she sustain that mortgage in the, the entire mortgage compared to where she's at now? And then the other side of that is when things go wrong, if you're renting, things go wrong.

It's not your problem. You still pay $500 every month. But if things go wrong when you own the house, you gotta come up with five grand to go replace a, you know, a furnace. And well, I would, for the first one, I would say. It's hard 'cause they're already trying to find a four bedroom place. You know, with roommates and stuff like that.

There's no difference there. Whether they're paying another landlord or she's the landlord. The part I will and I agree with is if they AC goes out, now she's got a 5,000 bill, you know, hail damage or whatever, and you got a deductible or whatever it is that is. Part of the risk, but I would argue in three years she would at least break even and plus recoup for $250 a month.

I, I, you know, obviously you can. Run 20 different tests on that and see what happens or doesn't. And, and I think, I think what I'm saying is if she's got four friends that are already ready to go into it, then great. But we underwrite it as what's the worst case scenario of the stress test of if all four of these stay the entire four years of college, then yeah, life's great and it works out perfect.

But what we know about real estate is it never works out perfect. So look at what's the worst case scenario. Worst case scenario, three of my roommates move out. It takes me six months to be able to find another replacement that I'm comfortable living with. And can you sustain that for that amount of time?

I would argue, going back to what you said earlier, my goal was to live in here with three roommates. Something happened and. All my roommates were in a car. They drove off the side of the cliff in Lincoln. There's no cliffs in Lincoln, but you get the idea. I had to rent it out to somebody else because it was the only way I could make it work.

Yeah, there go then. Then you have another exit strategy and I, and I say that about any investment opportunity. Is if, if you're buying this and it only makes sense if everything works out perfectly, that's something that I would probably recommend against. But if you have three or four different exit strategies where it's like, if it works out perfect, I make you know, a 20% year over year return, and if it doesn't work out as good, I can at least break even.

What's the worst case scenario? Because a 18-year-old kid that's been living there for three years, if they wind up, they can't afford the mortgage and they wind up getting foreclosed on. That's, I mean, that's gonna do a lot of damage to them. So I just think taking all those risks into consideration.

Yeah, a hundred percent. I mean, it's, it's investing, it's not, you know, guarantees. Mm-hmm. So it's like anything you put in stock, I, I put money in. What year was it? 2006, 2007, something like that. And Chevy, um, like, you know, the car dealer? Mm-hmm. And all that went bye-bye in 2008. So it's investing like I would've thought the Chevy was a safer, safer bet than real estate investing, but all that money went down to zero.

So, and they gotta. Yeah, that's a whole different, still burns my butt with all that, but yeah, there's nothing that's not guaranteed, so. Mm-hmm. Yeah. And so I, I think the, the strategy has to be tailored, but it, I mean, it changes over time. It's not fixed. It's not like I, I have certain. Uh, dollars, seed capital that I might be using on a growth strategy and certain dollars that I wanna put into a sustainment strategy.

And it, it's, if you look at, um, traditional retirement accounts, like they, they have them in, how much do you want in growth stocks and how much do you want in treasury bonds like it, it's a 60 40 profile. You should do the exact same thing with real estate investing. And we had Dean on before, he talked about dollar cost averaging.

Let's say that I have a million dollars that I'm investing and I put I, I have a very high risk tolerance, so I have 80% of it in a high risk strategy, which is hard money lending and flipping, and you know, all those really risky strategies. And 20% of it, I have it parked in real estate that I just want the appreciation and the tax benefits.

I'm not gonna get much cash flow off it if. That 80% goes up, you know, and winds up being 90% of my portfolio, then I could take 10% off of that. 10% that I have redeploying every year into high risk areas and buy another property. And then I have my 20%, I have my balance back, and then as my lifestyle changes, I get closer to retirement whenever that number is, whatever day it is.

And I'm like, well, you know what? I'm kind of more at a balanced strategy. I want 50 and 50. I can take from that high risk repetitive flipping business and put that into parking into real estate. Now I get your argument that in putting that money in investment properties is still a growth strategy, but I would say it's more of the wealth preservation than something that's like, my goal is short-term capital gains.

You put it akin to bonds or something like that. As far as, so yes, it's growing, but it's not. Mm-hmm. You know, my 4% on bonds isn't gonna make me rich. It'll just sustain me. Exactly. Through, through the bad seasons. Exactly. And and that's the same thing is if I'm buying rental properties to hold, yes, I get that.

They're still growing. The goal is not for you to lose money on them. But what I think, I think what would be, be a more. Accurate example is short-term capital gains and long-term capital gains is the growth stage is, I'm trying to get short-term capital gains. I'm trying to expand my money quickly and when I reach those certain thresholds, I'm gonna park it in things that are long-term capital gains.

I gotcha. So, yeah, I just, my way of investing is, I don't, my, my short term capital gains is. Business. Mm-hmm. Not real estate. Yep. Versus someone that maybe they're flipping, maybe they're younger, like you're talking about your buddy with the triplex and moving from unit to unit and renovating a as he, as he lives in a, and then renting him out afterwards.

You know, I would more, more, uh. That's more akin to flipping than mm-hmm. Active versus passive. Yeah. Yeah. So, but yeah, I mean, I've done both. I've flipped a couple houses. I ended up keeping 'em all, but, uh, just 'cause the market was changing at that time. But I mean, that's sixplex that I bought with you, like those two bottom units.

We pretty much, you know, had to rip all the sheet rock off the walls and all that. 'cause of damage and whatnot. And so more or less a brand new unit at the time was done, but I, I don't know how much of that I would do again. Well, and, and that's, I've, I've had apartment buildings that we go into with a short term strategy.

Like our goal is not to hold this forever. Like we're gonna go in, we're gonna force some value. I mean, we bought one for, um. I dunno, 400,000. We go put money into the units, extremely high holding costs, and then we go and sell it. And then I've had single, or I have a duplex that we just parked money, we, we had to fully renovate the unit.

So it did have an active component, but our goal, or our intention going into it was not to. Um, refinance and pull our money out or just sell it and, and turn a profit. It was to hold it so we put the money into it so that we could get a better tenant. Hold it long term that that seed capital is following more of a sustainment strategy than a growth strategy.

If my goal, let's, let's say I take 50,000. I go buy a property, I renovate it, I refinance it really quickly. Then I, I would say that the initial project was the growth strategy, the secondary project was the sustainability. 'cause now I'm gonna hold onto that and let it do its thing and take that seed capital and go redeploy it in another one.

The B strategy, I think it's a combination of both. It is starting off with growth, with the intention of refinancing, taking your seed and redeploying it. But what happens to that, that first property? It's no longer in the growth strategy, it's now in the sustainment. How would you characterize this? So. I obviously very bullish on real estate, part of my long-term wealth strategy.

How would you classify this in your system? Say I buy a 12 unit apartment building and it's dire need of renovation and maybe we non-renew people when, when the lease is up and turn the units. Renovate 'em. Maybe it's 1950s, units that haven't been touched in 70 years. Bring 'em up to 20, 25 standards, re-rent 'em out at higher rents.

I'm not doing any of that work. I have a property manager. They manage whatever I said, all 12 units. Is that statement, is it growth? Is it both? Because I'm not actively doing anything. I'm paying our property manager to do it. How would you. Classify that is, is it a hybrid? What, where would you go with that?

I'd, I'd say sustainment. I mean, 'cause what you didn't mention is your exit is, everything you said is, I'm going and I'm doing these things. I'm hiring people to do it all, and then you're gonna hold it. And so if you're holding it, then any money that you use to buy the property and any money used to put into it, you're leaving in the property because you're trying to improve it to make your return on investment for that capital last longer.

Yeah. But I could always. Refi out. I, so maybe, maybe it's a long term burr, if you will. Maybe it's a three year burr, but I can still get my money out at any point. Maybe it takes three years, two or two years to, to turn all those units. I could still refi after that and say, I bought it for 600 K and that's worth 1.2 million.

I can take all my money out plus whatever I have invested in it and basically have a $1.2 million asset with nothing in it. No, no money in it, right? So then on the front end, you had a growth intention. You went into it to, to add value to the property, increase the rents, get that sustaina that, that, um, stabilized rent to then go to the bank, refinance, pull out your seed capital.

So that's the end of your growth phase there. Yeah. And then whatever you do with that capital, that initial 600,000, that, that's its own strategy now. But that property that, now you said 1.2 million, you pulled out your 600,000, you have a 50% equity position in it. Right? All of which you created in my, in my head.

I bought it for 600. I put 300 into it. It's worth 1.2. Okay. So you have, you have, if you pulled out all your initial investment. So you pull that 900,000, you have a 300,000 of equity that you created. So you maximized your leverage there, but you're, you're gonna let that ride and then you're gonna take that 900,000 and go redeploy it somewhere else.

So I, I think that it's more the intentionality behind the strategy. And if you take that 600,000 plus the 300,000, and the goal is to get it back out and redeploy it, that's a growth strategy. Because if it was a sustainment strategy, you would buy, you would put 600 into it, put another 300 into fixing it up, and then you would just leave it there and let it cash flow.

Now, that's not the best way to lize your money. Are you saying that's, in what case is that when you I bought it for 600. I put 300 into it over two years. And I leave it in there. That's a sustainment strategy because you're lowering the velocity of your money in order for the safety of your cash flow and your debt service.

Now, if you're going to maximize your velocity of money, you're gonna refinance and pull out as much of it as you can, which then it hurts your cash flow. It increases your cash on cash return. Your risk is much, much higher when you have a 75% loan to value than if you had a 50% loan to value or even a 0% loan to value.

And so doing it the other way would be growth, basically doing a long, long term bur would be a in the growth. I gotcha. Yeah. Um, I would say potentially, I mean, obviously I hate speaking in, you know, absolutes, uh. But potentially I think this risk is, or this is lower risk because I have two years of data.

I know how this unit or how these, uh, units are performing. So when I go to Refin, refinance out of it, versus a true bird where you never had it rented. You. You can say, Hey, I've been getting this. This is where I'm trending over the last two years. Obviously this will slow down because the renovations are done, but I have rent renovated this unit in the first two months.

We got up to the standard. I've gotten rents to here, and we've grown one to 2% every year since then. And so you have. Very good data to show the bank. You can set your loan up that you can. Break even. You can cash flow, you can lose a little bit, but you, you can, you can turn that knob a little bit more and have more fidelity into it by doing it that way.

Yeah. Kind of a, a tangent if you will. And I, I agree a hundred percent, which is why I think that you can be in the sustainability phase and you can. Move backwards into, and I say backwards, you can adjust strategy back into the growth phase, and that's where my investment philosophy is at. Now, when interest rates are two 3%, I'm saying leverage as much as you can, buy as much as you can, take on all the debt possible because that's the way that you ize the most.

But with interest rates going up and cash flow or just being able to cover debt service is more important. I would much rather park all my cash and a money or all my cash in a property. If I, if I was sitting on 500,000, I would just pay off that property in cash. I'd probably get a better deal on it too, which then creates five, 10% upside off the bat.

And then let it run for six to 12 to 24 months. So for that exact same reason is I know how it performs when interest rates dip. I want to go refinance outta that property. Now that property is on a growth strategy because I'm not looking for it to be paid off in just cash flow. I, I don't care if it cash flows or not.

'cause I just took all that seed capital. And redeployed it. And that was one of the first pieces of advices, uh, that I got when I started BiggerPockets, was I, I met with a guy that had been doing it for 40 years, one of those gray-haired guys, and he said that the number one goal of growing your investment portfolio is recovering your seed capital.

That's the whole idea behind the birth strategy is recover your seed capital. And so I think if you were to differentiate between the growth and the sustainability strategy, it's what is your intention behind your seed capital Is am I leaving that money tied up in there to give me that protection so that I know that I'm not gonna have to ever be burdened by a mortgage payment or am I looking to get it back as soon as possible to send it out and make more money?

Babies? Yeah, you always want more money, babies. That's right. So be fruitful and multiply. Yeah. Well, like I said, I, I had no intention. I just want to kind of go through it. You've mentioned it before, we've never covered it on here. Obviously there's, there's a million different ways to skin a cat. So every, everybody's gonna be different.

Your philosophy is gonna be slightly off from mine versus. You know, we had Owen on here before Owen's philosophy's different. Um, you know, there are so many different, based on how long we've been in the game, how we're making our money and what, what our goals are in life, and how many kids you have.

There's so many different, uh, variables to, to throw in there. Different niches too. I mean, so many different niches. Just, I mean, it, I think. If you went a mile deep in any one strategy in real estate, like you could find endless resources. If you're like, I like mobile home parks, there's 15 different ways to invest in mobile home parks.

You could, you can buy the mobile homes themselves. I mean, so I, I think that that's where the mindset of just be, become a lifelong learner. And when you, when you start with that and then move in through the phases, it's like then, then you can focus on those last two, which is, what's my strategy for this property?

There are some properties I look at where I'm like, I, I just wanna park money, get a 15% return on it per year when I sell it. And if it covers expenses for five years, then I'm happy. So question along that, you mentioned mobile home parks. That kind of made me think of it. You're an investor and I wanna be a mobile home expert.

Do I only look for brokers that are mobile home experts, or do I look for a broker that. Maybe he does a little bit of everything. I know you started off multifamily, kind of went more commercial, but storage is a whole different bear multi or uh uh, mobile home parks is a different bear. Would you, do you think it's better to get a broker or real estate agent, whatever word you want to use, that's specializes in that or does it matter?

I, I think specialization is key. I mean, you find a generalist, you're gonna get generalist advice. But if I was, if I was looking for, I, I knew that I wanted to go buy, um, industrial property. I would probably go to an industrial specialist, like an industrial broker where all, all they do is industrial.

'cause they're gonna know things about fire codes and sprinkler systems and, um, the value of 18 foot doors as opposed to 12 foot doors. And, you know, the, the type of trusses and the, the building materials and all stuff that I, I've never had to worry about in multifamily 'cause it's a completely different ballgame.

So, um, now if someone, uh. Was, I mean, if they wanted a more generalist approach, then yeah, go go to the broker who's dabbled in everything. But I think that going to a specialist is probably your best bet. I would not be the best person to go to for heavy industrial manufacturing, anything like that. 'cause I've never done it.

I've never learned the the, because there's a lot of hidden things in each industry that people would know if you went to a retail specialist where all they ever touched was storefronts and all that stuff. They're gonna not gonna know the first thing about what it means to have a, uh, an 85% economic occupancy in multifamily.

Like they, they, they just don't translate the same. Perfect. Well, I think, uh, we've beat this to death and, uh, at, at least gave somebody a good idea of where to start. And they're picking up this podcast in 2026. I think there's a lot of good insight and variables in there. And like I said, there's no one size fits all.

Things. So use this as a litmus test of what you want to do. You know, take, take your, what fires you up and kind of take this and make your game plan for that. So, on that, if uh, you don't have anything else, uh, I think we're, we're done for today. You're done for the year. I'm done for the year. So it's a wrap for 2025.

All other recordings will be in 2026. Yep.