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From Waitress To Running A $200 Million Dollar Business With Jennifer Wehner

REW Jennifer Wehner | Scaling Your Business

 

When you’re down, there’s nowhere else to go but up. All it takes is the right mindset! Jennifer Wehner, the CEO and Team Leader of The Wehner Group, joins Moneeka Sawyer and talks about resilience. Jennifer shares her success story, from saving tips to running her $200-million business. She also talks about scaling your business through a channel account. Don’t let the recession keep you from reaching your goals. Time is of the essence! Tune in, get inspired, and find out how you can drown those limiting beliefs, get into the opportunity mindset, and seize the chance to take your business to the next level!

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From Waitress To Running A $200 Million Dollar Business With Jennifer Wehner

Real Estate Investing For Women

I am so excited to welcome Jennifer Wehner to the show. Jenn got into real estate in 2003 as an investor, growing her buyer and investor business, and became the top agent in her office within the first full year of being in real estate. In 2014, she started her team, The Wehner Group, and in 2020 sold 373 homes and over $178 million in real estate volume. In 2021, Jenn hit $198 million in volume. Jenn is a mom of four, ages 5 to 23. She owns multiple businesses and investment properties and is also a Forbes author. She’s a foodie, biohacker, podcast junkie, avid reader, skydiver, and a lifelong learner with a ton of curiosity and a wild imagination. Jenn, welcome to the show. How did you get here? Give us two minutes of your story.

I was built with adversity because I was a teen mom at eighteen. I was going to college for Plan X and I knew I wanted to work for myself. I was in Orange County and I was saving up all my tip money, waiting tables at night, going to college, and getting A’s for business, but I didn’t want to work for the man. I was in California. I did the math. I’m like, “You can buy two homes and own them for the price you rent a house in Huntington Beach.”

I moved here, started flipping, working with investors, invested myself, working with buyers, sellers, and all of the fund gambits. I lost huge in ‘08 but also pivoted quickly, and then started to get back into investing in 2011. I grew in my team. Here I am now. I’m a builder. I love building, I love creating. 2023 will be my 28th year in real estate. I’ve also raised all my kids through real estate.

My daughter bought her house two years ago, my oldest. She’s 25. She has made over $250,000 on her house. I’m like, “We’re going to take a HELOC at it and buy your first house and rent that one out.” I love practicing, seeing my kids being able to do it, and being able to have something where you can leave a legacy and you can leave a mark on the world. There’s no other avenue that I have seen better than real estate, which is the American dream.

That was such a quick impactful story. I love when moms were able to help their children to start and create that same empowering business. I love what you talked about buying your primary residence, getting a HELOC, and buying something else. That’s exactly how I built my business too. Ladies, you’re learning it from somebody other than me. It’s a strategy that works and you can do that alongside the other things that you’re doing. She’s going to college. She’s building her own life. You can do that on the side and build multiple million-dollar businesses starting from this thing that’s not even your business. It’s not even your life. It’s that sort of thing that’s happening because you have to pay rent anyways. I love that.

Talk to me a little bit because since you went through the 2008 thing and so did I, I know that real estate is a roller coaster. How can people get through it? It’s a cycle. I do know that in EXTRA, we’re going to be talking about the resilient mindset. Ladies, we are going to do a deep dive into that. Give us a high level. What do you recommend to investors when they talk about the fear of the rollercoaster?

First of all, if we all got into a DeLorean, we would do a few things differently. I had gotten into real estate at the end of ‘03, so ‘04 was my first full year. It was a good year. In ’05, I put Craigslist ads out and sold homes like it was no one’s business. I bought homes like it was no one’s business. I even built luxury homes, so I got into development. When the market crashed, I had to pivot fast because I had kids to provide for. There was no option. It’s that mindset of when I lost everything. I go back to that because I think no matter where you at, maybe you’ve never lost as much as I have or maybe you’ve lost more, we’ve all gone through adversity or resilience in our life.

REW Jennifer Wehner | Scaling Your Business

Scaling Your Business: No matter where you’re at, maybe you’ve never lost as much or have lost more, but we’ve all gone through adversity or resilience in our life.

 

During that time, it was millions of dollars below zero. That’s how much I was worth. There was also an opportunity. 2007 was the year that was flat. 2008 was when it blew up. For me, it was the collaboration where I knew I needed help. In 2008, I got into an REO coaching mastermind and started to get REO accounts. I was already working on short sales, but now I was able to get these channel accounts and get them at a much higher volume and scale where I can build from that.

What I want to do is do some definitions of that. Talk about REO and channel accounts, so people understand what we’re talking about.

REO means Real Estate Owned. It’s bank owned. The home went to foreclosure and the bank got the asset back. Here in Arizona, we were extremely affected by the crash. I had read Robert Kiyosaki and I thought I was setting my family up because all the money I was making from real estate, I was putting back into the investment side of things. I didn’t follow his advice totally because we weren’t cashflowing on a lot of those properties. When the market blew up, I was so heavily invested in one thing, which was luxury homes that I could not sell. I owed $1.2 million on each one. Each one ended up being worth $300,000 to $400,000 at the very bottom.

If I had the collaboration that I had now back in ’05, ’06 and ’07, I would have been prepped, ready and primed for the opportunity because I would have seen it coming. When we have to change when change is already here, it’s hard. You’re caught with your pants down. You change before you have to change, and so much of this is just in your mind. When you’re the smartest person in the room, it’s going to be a problem. First of all, get yourself into a room full of smart people that have been where you’re at and where you want to go.

Get into a room full of smart people who have been where you're at and where you want to go. Click To Tweet

It’s not just in terms of money, it’s a skill level that’s super important, but also look at their lifestyle and their character. Is that somebody that you truly aspire to be like? When you’re in a room like that, it’s the energy, focus and direction. I might be able to see myself one pebble step here. I’m a visionary. I put things together like a step here, but maybe with you, I can see the third step and the fourth step. Maybe we bring a group of girls and now I can see a path laid out in front of me.

It’s the resilience I had because it was hard. I’m a recovered alcoholic. I haven’t had a drink of alcohol in four years. When I lost everything in ‘08, there were some times that my alcoholism got bad because I felt very defeated. In that defeat. I remember crying to God and praying for anything to happen. I was able to shift because when you finally admit defeat, you find a way. I found a collaboration group and the REOs. I was able to build channel accounts. When I have a relationship with you, it’s not just one home. You might give me 100 homes or maybe 200 homes

Is that what a channel account is? You build a relationship with a bank. Is that it? What happened?

It could be anybody. It could be a divorce attorney. It could be an HR department. If you’re an investor, maybe it’s a hedge fund. There are so many different channel accounts, but it’s going to be somebody that’s going to be able to give you business over and over again. Maybe it’s somebody that can give you a business of twenty units a year. Maybe it’s somebody that can give you 200 units a year. It’s going to be somebody that is formed through relationship and opportunity. Obviously, you have to sync on what they want, what you’re providing in terms of value, and what your goals are. When you have those aligned and you can provide the best client experience, then that’s what sets you apart. It’s shifting that mindset of not just a growth mindset but specifically an opportunity mindset.

In every down market, that’s when the most millionaires were made. If I had known so much back then, I would have been more like you. In 2009 and 2010, I would have been buying the heck out of the real estate, which I didn’t. We were broke during those years. Luckily, I had REO and short sale and still a resale business. I took every signed call. I was not too good at anything. I was selling $25,000 homes if that’s what it took, but I was able to get to that next level where I could start to build again.

I love that story. What has intrigued me so much is digging deep into that resilience mindset. I’m so excited about EXTRA. It’s like, how did you get there? I also want to hear more about the channel accounts. I’ve never heard it positioned quite that way. We’ll talk about that in EXTRA. I’ve taken note because I want to definitely hear more about that. I love that you gave a story as an example of we are capable of so much. When you go into that place of despair, which I know so many people did in 2008, including myself, it’s what we can do. I was in despair because I had lost 50% of the value of my portfolio in three months. I watched it all go down.

I remember, like you, I was crying. I was huddled up in bed in the fetal position. I was like, “What was I going to do?” I managed to make it through. Part of that was my own positioning. I don’t consider myself a super smart person, but I did some smart things inadvertently with the advice of mentors and my dad that helped me to get through some stuff. I made a lot of sacrifices. As you mentioned, you’re not too good at anything. You make some sacrifices so that you can keep your life going and that sort of thing. I didn’t suffer from the loss. What I want to hear in EXTRA is what that mindset was when you suffered through that despair and the financial loss.

What we’ve learned so much on this show so far is people who got through it and then the strategies they used to get back on top and to get their lives back. I know that you did that. I’m so excited to hear about your mindset stuff in EXTRA. Thank you so much for the lead-in, so we know what to look forward to. You have this interesting term about renaissance real estate. You talk about being a renaissance real estate agent and investor. Could you talk a little bit about what that means to you? I totally agree with you. This is another thing, ladies, that we talked about in the green room. It’s so exciting. Could you share that with us, Jenn?

To backtrack a little bit. I’m writing a book, the Renaissance Real Estate Agent: How to Unleash the Art of Systems in Your Business. I was inspired by my love of Leonardo Da Vinci and the whole Renaissance is fascinating. Here in Phoenix, we have absolutely been in the renaissance. We here now as a nation are absolutely in the renaissance. It’s a new way of doing business. As with the renaissance, so much of this is foundational. It’s back to the basics and back to the long-term foundations because that advice still applies.

You pick up Think and Grow Rich, and it still applies. Pick up Marcus Aurelius from 150 AD, it still applies. Some of these foundational still apply, but what we are also in is a revolution and an evolution of technology. We have systems. It is a lot more competitive. Any time a market changes like it’s changing right now, you have to be like the renaissance masters, who were able to pivot. They collaborated. They weren’t trying to do this all solo.

In that opportunity, where is that opportunity? There’s an art, there’s a science, there’s a balance, but you find your individuality. You find what makes you different and what sets you apart. I have a strong opinion on something that everybody is an artist. When I say that, it’s each one of us has our own gifts. We each sometimes have our own weaknesses, but sometimes those weaknesses can be our gifts. Sometimes that adversity and those problems that come our way are gifts in disguise.

We each have our own gifts and weaknesses, but sometimes, those weaknesses can be our gifts. Click To Tweet

I even think about that with my alcoholism. I’m an addict. Am I doing drugs or drinking? No, but can I be a workaholic? Can I even be addicted to growth? Yes, absolutely. I could be addicted to learning. When you apply the art and science to your own life, into your calendar, and some of those foundational things like living by your calendar, you’re able to set specific measurable goals. You have to have numbers. You have to know if you have met your goal or not. You’re able to apply your own individuality and your own gifts into the marketplace and create value.

That’s what makes you the artist in your business. That’s what makes you an entrepreneur. That’s what branding is. When you look at the whole as far as your legacy, what are you doing this for? Where’s your money? Where’s your work? Where are your friends? When I say balanced, it doesn’t mean I relax. I very rarely relax. The way I live is a more balanced approach to spirituality. When I am in a good spiritual place, I know my limiting beliefs and my fear are not leading me. It’s my inner voice, my gut, and my inner authority. Everybody has that.

Get past the noise of the media. Know that you have to use media for your business. It’s part of the technology evolution that we’re seeing. Use these systems to your advantage, but work into your highest and best use of time. Ultimately, no matter what industry you are in, time is going to be your biggest commodity. I’m 44. Time is fleeting. I am so aware of my time. I know what my dollar per hour is. I know how I’m spending it. I can look at my calendar and see how I’m spending it. I can look at my calendar for the past year. I can look at my calendar all the way up until the end of this quarter or at the fourth quarter and see where I’m at.

No matter what industry you are in, time will be your biggest commodity. Click To Tweet

I know where I’m spending my time to the highest and best use and what makes me different. I think we have 80,000 agents here in Phoenix. How you’re able to get to the top is a lot of Darwinism, but it’s that collaboration and that individuality. If I can give some advice, one of the biggest things that I let be the barrier for me and what I’m actually capable of is what other people think about me. As you get to higher levels, you grow this pack of haters. Sometimes those voices that you hear in your mind like, “You can’t do this. You’re not good enough,” are not even your voices. It’s the voices of the other people that have hated you. They’re jealous because they don’t think they could do it themselves. You have to start to drown out that noise.

There were a couple of things that you said. Both of these two things, I wanted to highlight. Time is our most unsustainable or unreplenishable resource. What I’ve done in the last 50 years, I don’t get back. I don’t get back that time. We can replenish the money. We can replenish relationships, although relationships are going to support your joy. We can replenish a lot of things, but we cannot replenish time. We cannot replenish our health. I love what you said about those two things that we don’t get back. You want to make sure that anything that you do supports the best use of those things and the best development of those things, the time and its use with health as development.

I love that you mentioned that. It’s so key to success to understand what your time is worth. A lot of people like stay-at-home moms are like, “I’m spending all this time with my kids.” Being a mom is the most important job on the planet. It’s worth your time. Just because you’re a mom doesn’t mean that your time is not worth something. Those sorts of things like those paradigms, you need to understand the value of your time, whether it’s financially, in relationships, in health or wherever it is. However you’re using that time, be clear that you’re utilizing it in a way that’s going to support your bliss.

The haters. My show is all about bliss, joy and happiness. I’m always surprised by how many haters I have. You should see reviews on my show where people are like, “She’s too happy. I can’t listen to that voice,” or “She’s so fake. She has no idea what life is about.” People have said this stuff to me my whole life. I’m like, “How can you hate that?” We all have our perspectives. It’s not necessarily even jealousy. Sometimes it is. What I have found is it’s there on their path, and their path is not your path. I can cry because those haters don’t love me but instead focus on the people that I’m impacting and improving their lives with my voice, this voice that they hate.

Love your haters too because sometimes it’s that chip on your shoulder. Anger is the closest thing to passion. Laugh is the best revenge. You can laugh all the way to the bank, but when you are being genuine and living up, only you know that. When you don’t make your commitment for that day and you could even lie to your coach or your team, whatever, “No, I didn’t make those 100 calls,” or whatever it was, but you know. When you start honoring those commitments to yourself, you start to grow not just confidence but self-esteem. I think women sometimes put so many other people first. We don’t put ourselves first.

REW Jennifer Wehner | Scaling Your Business

Scaling Your Business: Love your haters, too, because sometimes it’s that chip on your shoulder that anchors the closest thing to passion. That is the best revenge, and you can laugh all the way to the bank.

 

Sometimes that’s why we don’t make these commitments to ourselves that we know we should be making. When we talk about health, if I could go a little bit further on that because I’m such a big proponent of it, I have ulcerative colitis, an autoimmune disease. I almost lost my colon in 2015. I had been overweight. I hadn’t been working out past high school. Sometimes you become a mom and work a lot. I also weighed 192 pounds after my last son, and that was after he was out of my body. I still had all that weight to lose. I got into learning more about my health. I will say I’m a junkie when it comes to podcasts and books, but I biohack through diet, exercise and meditation.

I no longer even live with symptoms of my autoimmune disease. I still have my full colon left and I’ve lost all the baby weight plus some. I need to be in good health so that I can be the best mom for my kids. I believe in quality over quantity when it’s my kids. When I’m on with my kids, I’m here. Even if it’s fewer hours, if I have four hours with them a night, those four hours could be like 40.

I don’t feel guilty when I’m working because I know I’m honoring the commitments I’ve made, not just to my business and myself but also to my kids. I’m able to offer them things like let’s take vacations together. They can see through their mom that it’s possible for them in this land of opportunity and freedom in the country that we’re in that allows us to be able to build these multiple businesses, and legacies, and help more people. At the end of the day, that’s what it is. You’re helping more and more people along the way.

I want to sit in that because it’s so true. I feel like I misstepped a little bit when I said that relationships are replaceable. I didn’t mean it the way that it came out. Many of them are not.

Some of them are. Sometimes you do have to cut friends though. It’s not for bad reasons. It might be this person is not growth-oriented. I don’t want to talk about gossip. Sometimes along the way, you’re cutting some relationships to make room for other ones and those ones that are important to you.

Your kids, your spouse or your parents, those sorts of relationships. The other thing that you said about relationships that were so valuable is if you’re the smartest person in the room, you’re never going to grow. For our egos, we want to be the smartest person in the room. What I have found is that if I’m the smartest person in the room, and please don’t take this the wrong way ladies, but I get bored. It’s exhausting because you are carrying everything. I feel it even in this show.

If I’ve got someone where I’ve got to carry the entire show, it’s exhausting on the other end of that. I need a cup of coffee. I’m feeling drained. If I’m talking to people that are significantly smarter than me, and almost every one of my guests is, I don’t ever want to be critical. Everybody has something to offer me. Every single person. You can feel it when someone is elevating you. That’s the thing that I love.

I was talking about this. I have to get away at least once a quarter. That’s pretty much what my travel schedule has been, even though I should be traveling a tiny bit more. I had been sick and I didn’t travel for 3 or 4 months. I was trapped in my own limiting beliefs and the team that I had at that time around. My leadership team is a new leadership team now. It was exhausting. I went to San Diego with my mentors. They had a mastermind. It was refreshing to see that these lies I was telling myself, “I couldn’t do it. This is not possible,” these complaints, this negativity, I go into this room where big things are happening. I am so not the smartest person in the room.

We all had different things to offer. I was so inspired and fueled and energetic that when I came back, I made things happen. I created the new leadership team that I have now that I’m able to now pivot my time from 90% of my team to 10%, and 90% of my network in some other projects like publishing books. It was so integral to get away and not be the smartest person in the room because you don’t even know sometimes these limiting beliefs are limiting beliefs.

Sometimes you don't even know that those limiting beliefs are limiting beliefs until someone else sees them. Click To Tweet

Until someone else sees it or says something completely different. It’s so sweet. I tell this story on my show a lot. I think it’s worth mentioning again here. My little sister, we have this big sister, little sister paradigm like angst. She does not want a big sister. She wants to be the big sister. We have such an interesting thing. She says some things that are so profound and I don’t think she realizes how insightful she can be. I’m always listening when she’s talking.

One day she said something about our nephew that we were talking about. There was something going on. He needed a little surgery. She said, “He’s perfect the way he is as long as we don’t compare him to anybody else.” It was so interesting because I didn’t realize that even I feel like I’m such an unjudgmental person. I was worried about this thing for him, but her saying that shone a light on my own opinions and impressions of what was going on in my mind about this whole thing. It completely released and liberated me to accept him exactly as he was.

I think that’s what happens when you’re in these conversations with people that elevate you. They challenge your thoughts and beliefs. They allow you to release things and liberate yourself so that you can bring in more good stuff. That’s just in my family. It happens in my mastermind all the time. I love that. Our relationships are very important. Speaking of relationships, you talk a lot about legacy, and it’s not just relationships but in lots of different ways. Could you talk to us about leaving a legacy and how to leave it? What’s your perspective on that?

Money is important. People who say, “Money doesn’t buy happiness,” never had money. It’s not just the money. It’s the security. I love to give. I think it’s one of the most selfish things that I do. When I give my money away or my time away to a cause, I feel so good about myself. I don’t have to plaster it all over social media. The more money you have, the more money you can give away. There’s a certain point of money where you can have houses and vacations. Those are all great. Those are all fun to work for, but it’s also more short-term.

REW Jennifer Wehner | Scaling Your Business

Scaling Your Business: People who say money doesn’t buy happiness have never had money. It’s not just the money; it’s security.

 

The more money you have, the more money you can give away. Click To Tweet

At a certain point, you’re going to get to be at maybe a comfortable place if you don’t live, desire, and want all the time. When you think about the legacy you leave, it’s a why that’s so much bigger than yourself. When you think about what our ancestors went through. Maybe they weren’t your ancestors, just some of the greats in history. You can see what human potential is. What are your great-great-grandchildren going to know of you? Can they know you? To me, that is so much more exciting than the house that I can buy, the second home, and the vacations I can take, but it’s what I can do with the money that I make. It’s the impact.

I feel like a calling in the world right now. I think we all know that the world is not the most stable place, but what can we do to provide more value? When I say value, it’s like energy. You’re putting energy out there into the world through your businesses, through a way for them to make their own value. You’re creating leaders. Leaders create leaders. You’re creating a whole energy movement that maybe you will write a book. There will be a chapter in history about you, but your great-great-grandchildren are going to know what you stood for and know what is possible. More than ever, that imagination and that possibility, that’s where it’s at. That’s where we can find that magic that sometimes we’ve lost along the way since people squashed our childhood dreams.

All the good intentions, but we have to bring them back. I think it’s true. This whole thing about giving back, I talk about it a lot on my show, not to brag but to encourage and for people to understand that money can be a very good thing. It was so interesting. I was talking to my swami who runs a school in India that I have been very supportive of for 30 years since it began. I talk about it a lot. I remember talking to my swami one day and he goes, “If you give this much money, we’ll build a building and put your name on it.” I was like, “That would be horrifying.” I don’t want anybody to know because that’s not why I’m doing it.

Put some other inspirational name that means something on that building. My name doesn’t mean anything to anybody but me. Do you know what I mean? I love that you were talking about you don’t need to splash it around on social media. You don’t need to make a big deal about it. The big deal is what happens in your heart. When you have the money, you can fill your heart up in that way. You can help so many more people on a small level and a big level. Money gives you the freedom of time.

Suddenly you’re not head down, nose down. You’re looking up and seeing in the world what people need and how you can help. It gives you so much more freedom, not just financially but it allows your heart to open because you’ve got the time. You’re not exhausted all the time. You’re not working so hard all the time. You’re now much more open to the world if you allow yourself to be. There are a lot of people that have money and don’t do those things. They’re more about vacations, cars, and how cool I am. When they give, everybody knows about it. It’s that sort of thing.

At what point does it become uninspiring? I’ve never seen a U-Haul follow a hearse. You’re not taking that with you to the other side. When you’re doing it for more than just yourself, you’ll always find a way. I think we’ve all been like if we have an appointment at 10:00, I’m going to be there at 10:00. We’ve all had those, “I’m going to go to the gym at 10:00,” and we don’t go to the gym. When you’re doing it for other people, you’re naturally going to be more inclined to show up in your best way because it’s for them. It’s not just for yourself.

REW Jennifer Wehner | Scaling Your Business

Scaling Your Business: When you’re doing it for other people, you’re naturally going to be more inclined to show up in your best way because it’s for them. It’s not just for yourself.

 

They say that accountability is the highest form of love. As parents, it’s hard sometimes to have accountability when you want to make them happy, “Here you go. Here’s the money. Here’s the candy,” whatever. When you know that accountability is the highest form of love. It’s that discipline. It’s that sacrifice. Even love itself takes sacrifice. If you say it doesn’t, it’s a one-way road. We know that’s not the way it is with relationships. It’s about both of you. It’s about both needs and wants. Are we aligned? Can we grow and do this together? That’s where the excitement happens, that spark.

I love this conversation. Where can people get in touch with you if they want more?

I am all over YouTube and the website. I would say the best way to instantly get a hold of me is on Instagram, @Jennifer.Wehner. I check my messages regularly. If you DM me, I have coaching products. We have a network. I love to meet other people from other industries. We do a lot of cross-collaboration amongst industries and also stay on top of cutting-edge trends because it changes daily.

Thank you for that. We’re going to go into our three rapid-fire questions, but I want to remind you, ladies, what we’re going to be talking about in EXTRA. We’re going to talk about creating a resilient mindset and also channel accounts and how you develop those relationships. I’m super excited about that. Are you for our three rapid-fire questions?

Let’s go.

Tell us one super tip on getting started investing in real estate.

I’m going to go to a foundational. Begin with a long game in mind and have a plan. I don’t know wherever you’re starting out. You might have $10,000 saved up. You might have $20,000 saved up. No matter where you are, look at where you’re at and what you’re going to need. That’s going to be that plan. I always suggest either a coach or a collaboration group somewhere. You need to have somewhere you’re going to learn and gain energy from and stay relevant.

Learn the basics and that skill. Learn the expertise that you need. Find your mentor, find your tribe, get your plan in place, and begin with that long game in mind. If it’s shortsighted like, “I’m trying to make $1 million this year and then I don’t know about the next year,” no. Think about where you want to be in 5, 10, 20 and 30 years, and then you’re going to look at the first year. That would be my advice. It’s pretty generic. It’s one of those foundational things that you need to have in place before you can start building the skyscraper.

Find your mentor and tribe, get your plan in place, and begin with that long game in mind. Click To Tweet

What would you say is a strategy for being successful as a real estate investor?

I would tap maybe your wrist here and see if you’re feeling too comfortable. If you are comfortable, chances are you’re not playing the game. Sometimes you have to get out of your way to see the way. Stop and take a moment. Look at where you’re at. Are you on pace with your goals? Are your goals too small? Are you off your goals? Can you increase those goals? Success is like there’s never going to get to the top of the mountain. Nobody reaches the top of the mountain. We all die. Hopefully, we’re going up the mountain, not down. Always keep thinking big.

I use Albert Einstein’s quotes a lot and I love him. He said, “Logic will take you from A to Z. Imagination will take you everywhere.” I do have something called the spiritual wheel. I calendar block this. I do my spiritual wheel exercise every six months or so and see how balanced I am and how much I give myself in the spiritual box, friendship box, money box, work box, and self-care box. Sometimes if I’m lacking in one area, I can pivot that.

Let’s say it’s self-care. I took a painting for example. Now I have every Sunday time blocked for the morning time, so I can paint with my mentor. This is the thing I did because when I looked at my self-care, it was pretty low. I know I needed to do things for myself beyond just going to the gym. When we say successful, are we really successful? Are we happy? Are we comfortable? Where are we going? Where are we at and where are we going? Repause, reflect, revision, recast, and then take action.

What would you say is one daily practice that you use that contributes to your personal success?

I think we do talk a lot about AM routines, but I don’t think we talk enough about PM routines. The PM routines are so important. As a biohacker, I’ve done my PM routines accurately with my Oura ring. For me, no blue light before bed. Look at your calendar. Did you meet all your requirements? Reflect on your day. If you have things in your calendar you didn’t do like prospecting, take it out, put what you did, and then have your plan for tomorrow. Give yourself your win. Have that reflection time and then you could empty your brain out. You’re not trying to go to bed at 10:00 and you’re trying to think about what you were supposed to do.

REW Jennifer Wehner | Scaling Your Business

Scaling Your Business: Give yourself your win, so you have that reflection time, and then you can empty your brain out.

 

No blue light for two hours before bed. I know it’s a sacrifice, but no Netflix and you fall asleep to it. For me, that could be a walk at night. That could be having dinner and exchange. One night, I’m reading this wonderful book, The Motivation Manifesto. I read that an hour before bed. It’s what I am putting into my brain before I go to sleep because who knows where we go when we sleep, but it’s so important we’re waking up. One of the things they say when you start bodybuilding, because that’s what I do, is make sure you sleep first. Why do you start with your sleep first? It’s because it’s all about our energy. Energy is everything.

In those PM routines, building a solid PM routine. Even if you’re at a conference, maybe it’s twenty minutes where you have that wind-down time, that reflection, and that meditation. If you have a hard time meditating because you’re an entrepreneur, I’m going to give you a little biohack here. There are a lot of apps that do it like Breathe and Calm. I like Frequency. You can get the sleep mask, because you want to sleep as dark as you can, with headsets built into it. It’s very comfortable.

I put my Frequency music in so my brain is being trained all night to whatever frequency I need. If it’s insomnia or if it’s delta, I get to pick. It’s those PM routines that help me wake up excited. Even if you don’t feel excited, your energy levels are already amped up. I don’t know if you’ve had a bad night of sleep, but if you stack those, you’re not your best self. You’re not waking up with the clear focused energy that you need to have to attack your day.

I love that you talk about that because we do talk a lot about the AM routine. Even I do, but I have a very distinctive bliss-focused PM routine also that helps me to sleep well. I’m not turning on what I did not get done or should I, and all these things that we turn about. What did I not get done? Should I have said that to that person? All of those things happen in our minds. Having a good strong PM routine is so important. Thank you so much for sharing that. This has been amazing and I’m so excited to talk more in EXTRA. Thank you so much for what you’ve shared in this part of the show.

Thank you. It was an honor to meet you and I’ve learned to replenish. I was taking notes. Thank you so much for having me. I appreciate it.

Ladies, we are going to do more in EXTRA. We’re going to be talking about creating a resilient mindset. We’re also going to be talking about how to build channel accounts and what those are. If you are subscribed, stay tuned. We’ve got more. If you’re not but would like to be, go to RealEstateInvestingForWomenEXTRA.com. For those of you that are not going to be joining us any further but are leaving us now, thank you so much for joining Jenn and me for this portion of the show. I look forward to seeing you next time. Until then, remember, goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you soon.

 

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About Jennifer Wehner

REW Jennifer Wehner | Scaling Your BusinessIn Real Estate since 2003, Jennifer has helped hundreds of buyers, sellers, and investors achieve their real estate goals. Placing in the Top 10 agents in the Arizona Regional MLS, and top 100 Zillow Agents nationwide, Jennifer has a passion for providing excellent customer service. Our #1 Goal is to meet or exceed the expectations of our clients. Jennifer has a large team of full-time, licensed professionals, and assists in resale, new homes, land, and investment properties in Maricopa County, Prescott, Flagstaff and Orlando, FL.

 

 

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Mitigating Your Taxes Through Trusts With Dr. Gina Gaudio-Grace

REW Gina Gaudio – Grace | Mitigating Taxes

 

How can you get iron-clad asset protection, tax mitigation, and pass your wealth down for generations without judgment liens or levies? Business coach Dr. Gina Gaudio-Grace calls this the trifecta package, and it’s achievable through a trust structure that she shares with us today. Dr. Gina is an Asset Protection and Tax Mitigation Specialist and the Founder of Abundance Group Trust. Tune in to learn more about this multi-generational trust that lets us keep the wealth in the trust to do more good in the world with.

Watch the episode here

 

Listen to the podcast here


 

Mitigating Your Taxes Through Trusts With Dr. Gina Gaudio-Grace

Real Estate Investing For Women

In this episode, I am so excited to welcome to the show my friend, business coach, and personal mentor, Dr. Gina Gaudio-Grace. She is a retired attorney and a 1991 graduate of Notre Dame Law School, where she was the lead note editor for the Notre Dame Law Review. Dr. Gina holds a PhD in entrepreneurship and business strategy, and she’s a Certified Wealth Management Specialist and a Licensed Document Preparer. Dr. Gina is also the Founder of Abundance Group Trust and the Cofounder of the Abundance for All Foundation. Her personal mission is to touch the lives of every person on this planet in a meaningful way.

Gina, welcome to this show. I’m so excited to have you here.

I am so glad to be here, Moneeka. As you know, I love every opportunity to get to talk to you, and now, I get to talk to your audience as well.

I know. I’m so excited to share you with them. I read Gina’s bio but I want to give you a little background on why we are talking. Gina has been my business coach for several years. She understands my heart and that my heart is about serving you. I do this show in service to you so that I can expand your possibilities and help you to live a blissful life.

What’s also interesting is the reason that I chose Gina as my coach is because her heart is the same. We were talking before the show in the green room that our relationships are different, our businesses are different, and our doggies are different like everything in our life is. We march to the beat of our own drummer. We’re very individualistic women but the other thing that makes us very similar like two peas in a pod, she says, is our heart to help the world.

She’s that person, so it made sense when she was my coach because she understood my heart. I never will work with a coach that someone that doesn’t understand bliss and my heart. I’ve been through many coaches but Gina was one that I stuck with for years because she understood those things. When we had conversations, I didn’t have to re-explain my priorities or my values because she had these very similar ones.

I feel so blessed to have her in my life. Now so long ago, we’ve been talking about trusts. I’ve had people on the show before that have talked about trust. I’ve pursued and built trust myself and have not been very happy with the outcomes. Not because the companies weren’t amazing in what they did. They were. The trust that I have performs what they were supposed to do but they’re not giving me the full spectrum of what I need.

When I was talking to Gina about this once, we were on the call as friends having a conversation. She was like, “Moneeka, I need to tell you about this trust that I built.” She has been working with other people in the industry who are very well-known for the trust that they build. She, herself, as a retired attorney took what other people are doing and added her own specialty to them based on her education as a lawyer in Trust Law.

She’s got this amazing trust. Interestingly, she and I were having a hard time recording. I never record on Saturdays. That’s my day off but the only day I could get Gina on the phone to record was on a Saturday. I had this niggling instinct that somebody out there needed to know this. As I say, I’m here in service to you ladies.” I’ve had this happen before where I recorded a show.

I was going to release it in 3 months and I push it up to 2 weeks because I feel inside that someone out there is needing to know it as I get this intuitive sense. Anyways, I had this intuitive sense and I texted Gina. I was like, “We’ve got to do this before the end of 2022. Someone out there needs to know this.” For any of you that are thinking, “Moneeka, that was for me.” I’m saying here I am recording for you. I love you.

That’s why I pushed it to a Saturday. When you told me that you had that instinct and I know your instincts, I’m like, “I’m wiping whatever I got. I can do it on Saturday,” so here we are.

We’re doing this for you guys on a day that neither one of us would ever record. We love hanging out with each other, so that makes it a lot nicer.

We do.

After that very long intro, here is Gina and we’re going to talk about trust. I’m totally excited. The other thing is that I am in the process of creating this trust myself. I have been hearing about this trust from Gina. I am very conservative, you know this. I have 10,000 questions. I’ve listened to all of our conversations many times so that it sinks into my brain because this is not something that I understand. It’s not intuitive and you can do that too.

That’s the nice thing about a recording is you can listen to it. If the 1st time it doesn’t make any sense, the 2nd time you’ll pick up a little bit more. Listen to it ten times because this isn’t stuff that normally we talk about. You can listen to it over and over again. You don’t have to feel dumb about it asking questions.

For those of you that want to talk to Gina personally, we’re going to be doing a webinar on the 20th of October 2022 from 1:00 to 2:30 PM Pacific Time so you can come and talk to her live and read to this a few times before that. If you are coming in later and you miss that date, the webinar is going to be recorded. There’s a lot of information, but Gina, we’re going to turn it over to you. Tell us about this amazing trust.

Before I do, let me say the whole reason I went to law school in the first place. Teaching is not what I do. It’s who I am. In the third grade, I went and researched to find out how could I be a high-paid teacher. I saw all my teachers who had second jobs sometimes as garbage men. I’m like, “That’s not for me but I got to be a teacher.” That’s why I went to law school.

Law school professors made more money than any other teacher. Had I known that being a coach and mentor and having a business like the one that I have now with Trust, where I teach all day, every day, would pay as well as it does and serve people as well as it does? I probably never would’ve gone to law school in the first place.

I don’t that you would’ve created this trust if you hadn’t been to law school. I think that in life, every step of the way turns us into who we are now.

It does and it pulls all of me together. I also have a PhD in Business and Entrepreneurship. That came into play with the trusts as well. Everything I have done for probably the last 40 years, all got pulled together with the trusts. I wish I could say this is something that even I learned in law school but it’s not.

Before we launch into this because I want to hear that story, could we start by saying what this trust does, so ladies know if they’re even interested in reading this?

How about we start with what is trust then I’ll answer that specific question.

That sounds perfect then we can come back.

What is trust in the first place? A trust is set up for usually avoiding state taxes and probate taxes. It’s a way of taking the legal parts of ownership. There’s equitable title, beneficial interest, and dividing them among multiple people and because it’s divided among multiple people, that’s why it’s able to offer benefits.

A trust is usually set up to avoid state taxes and probate taxes. It's a way of taking the legal parts of ownership and dividing them among multiple people. And because it's divided among multiple people, that's why it's able to offer benefits. Click To Tweet

Trust got started way back in 1600 in England with one of the Kings who wanted to protect his wealth. That’s when we got spend full of trust and trust in general. Fast forward a few hundred years, the early 1800 are old money families like the Kennedys, the Carnegies, the Gettys, and the Rockefellers. They all started amassing the fortunes that their families have now and they wanted protection. What did they do? They set up trusts.

Now back in 1800, we didn’t have an Internal Revenue Service and Internal Revenue Code. That came back around 1913 and 1914. Fast forward a hundred years and those families now have big money and lots of assets in their trusts and they’re being fully protected. Now, the government needs a treasury, so they’re setting up the internal revenue service and the Internal Revenue Code. These families didn’t want their trusts taxed to death.

Lucky for them, they had friends and family in high places in Washington that were part of writing the very first Internal Revenue Code. Since the inception of the tax code in early 1900, there has been a provision that gives tax mitigation benefits to our trust. I doubt it’s ever going to be taken out of the tax code because there are too many big high-powered people that make use of it with their trusts. With this trust, it’s a very novel trust structure.

For most people who have even heard of a trust, their context is usually a living trust. A living trust is what’s called a Grantor Trust. It’s typically something governed by state statute. State statute prescribes what it needs to do and how it needs to work and it provides one benefit, you get to avoid probate taxes when you die. That’s about all it does. In a grantor trust, which is what that trust is. You give assets to the trust but it doesn’t protect the assets at all. For families that have lots of wealth or are growing their wealth actively, you need something more than the living trust.

I was first introduced to a similar trust structure, although still a little different, back in 2004. Back then, my business was coaching, mentoring, and joint venture brokering. The woman that introduced me to it has since retired. She had something she called an Intellectual Property Trust. It made any income derived from intellectual property 100% tax deferred. I’m like, “You can do that?” I took 2.5 years of trust law in law school. That’s two years longer than any other required course of action in law school. You’d think I would’ve known that but I didn’t.

When you go out to trust lawyers, they each specialize. A lot of times they’ve heard some of this other stuff. What I found as I’ve been doing research is you go to a trust lawyer and they’re like, “We haven’t heard about this or you can’t do this.” Until they do more research. That’s so relevant because you haven’t heard about it. A lot of people won’t have heard about it.

For years, I’ve been researching and studying trust, and let me tell you. On this particular trust structure, conservatively I have something in excess of 6,000 hours worth of research. It’s not a small amount of research. I don’t expect any of my clients to go out and do even six hours of research. That’s why they have me. When I found this trust in 2004, it worked phenomenally well until 2010 when the person that introduced me to it decided to retire.

It was structured in a way that was required to renew annually with a new fee. When she retired, she didn’t give us a way to continue renewing. All my back taxes that had been deferred came due instantaneously. It was horrible. I went on a mission in 2010 to find another trust that could continue. My tax defer all the way that I had had it. I had not been able to find it until about a few years ago. When I found similar trust but not intellectual property trusts, every time I looked at them, I found another issue.

Down the rabbit hole, I’d go doing more research, which is what led me to the unique structure that we have now. It combines 7 or 8 different kinds of trust into a singular trust so that it can provide ironclad asset protection. When I say ironclad, I mean ironclad. No judgments, liens, levies, and often, even divorce are going to reach assets held in this type of trust. I’m not going to explain why now but we’ll get into it a little later.

The second big benefit is tax mitigation for real estate investors. First, under Section 643 of the Tax Code, any capital gains income, the capital gains taxes are completely and totally eliminated, not deferred. Second, any passive income, which for real estate investors, is rent and lease income. It is 100% tax-deferred in perpetuity. Now, if we have entrepreneurs who have active business income, which you would have from a brick-and-mortar business whether you’re a dentist, a chiropractor, a doctor, a carwash, or whatever, you usually have active business income.

Using a multiple trust structure that I like to call the trifecta package, we can even find ways of getting rid of the taxes on the active business income completely legally. Tax mitigation is the second large benefit. The third one, and to me, the singular most important one, is helping to pass wealth down for generations. This is not a trust that dies when you die or when you and your spouse die.

This is a multigenerational trust. It is going to be here from one generation to the next generation and so on. We don’t have crystal balls so I can’t tell you how many years that is. Until 21 years after the death of the last heir to the last beneficiary, the trust continues to exist. At the time that it terminates, everyone has been gone for 21 years.

At that time, whatever remained in the trust, usually the IRS seizes it, sells it, and uses it to satisfy all the back taxes for all those years. For people like us who want to make a difference in the world, what we’re able to do because of this unique structure is gigantic because we’re keeping the wealth in the trust so that we’ve got that much more to do good with.

REW Gina Gaudio – Grace | Mitigating Taxes

Mitigating Taxes: For people who want to make a difference in the world, what they’re able to do because of this unique structure is gigantic because they’re keeping the wealth in the trust so that they’ve got that much more to do good with.

 

You even structure that in the trifecta as part of the way that you do things because you do a family foundation in there too. Ladies, I’m jumping ahead but that was part of what excited me so much. In her trifecta, she’s got the personal trust, the business trust, and a personal foundation to help do more good in the world.

It is a private family foundation and is a 501(c)3 tax-exempt organization. Using those three trusts together, I know it sounds like I’m bragging but it blows my mind all that it can do for both you and your family and the heir that you haven’t even met because they’re not even born yet. Even the whole world, given the foundation, is a part of the mix. I’m very blessed. This was something that you’ll be okay with me saying was divinely guided. This is not something that I figured out. The universe and energy led me to this. I cannot take credit for it myself. It would be so wrong to do that.

Gina, there was a story you were going to tell before we talked about the benefits but I want to recap the three big benefits in a couple of sentences. What are the three big benefits?

The first one is the Ironclad Asset Protection. No creditors are going to reach this through judgment, liens, and levies. I even have two clients that were able to protect properties from an imminent domain. One in Arkansas and one in Louisiana. The second big benefit is the Massive Tax Mitigation. With the trifecta package especially, we can sit down at the beginning of the year, have a conversation and I can ask, “How much do you want to pay on taxes this year?” Regardless of what the answer is, the strategy using the three trusts together, we can come up to that exact number.

The tax mitigation is like capital gains, passive income, and active income for all three of these.

You’ll never have to do a 1031 exchange ever again.

I was about to slip up and say that. What was the third benefit?

The third big benefit is Transferring Wealth To Future Generations and doing good in the world.

I wanted to let you know that those are the top three things that we’re talking about. If this is interesting to you, please stay tuned. Who’s not interested in it? Isn’t it cool? I wanted to make sure the ladies got to read that, Gina. You were heading into a story. Do you want to do that?

Back in school, I didn’t learn about any of this at all. In law school, you take one semester of Trust Law, that’s it. I was very interested in trust, especially for businesses. I took two extra years of Trust Law but I didn’t get to learn about it then either. Had the woman not brought this to me in 2004 with Intellectual Property Trust, I don’t know that I would’ve ended up here now. The more I learn about trust, the more excited it gets me.

Every year, Notre Dame is different. This is the 49th year in 2022. In October 2022, they put a symposium on and it’s the Trust and Taxation symposium. I’ve known about that years ago when I was in law school. Even in that symposium, they didn’t talk about what you can do with this trust structure. They did finally, for the first time, in 2021 in the 48th Annual Trust and Taxation Symposium. Guys, don’t be like, “Why didn’t I hear about this?” I’m telling you, even lawyers aren’t going to have heard about this. It came from this unique journey that I have been on for so many years.

Gina, my question as you tell this story is you can’t make up a trust, can you? How does that even happen that you can create this individual unique trust out of your learnings? I thought that a trust was a thing that was created by the IRS. There’s structure and all of this other stuff around it. How do you create it?

There are two kinds of trusts. There are Statutory Trusts and Contractual Trusts. What we’re talking about is a contractual trust, not a statutory trust. In a contractual trust, it has to follow the rules of contract law. Where do we get the Rules of Contract Law? The Uniform Commercial Code. That’s been adopted in all 50 states. When I first started down the path of writing this trust and creating it, I started by looking at the uniform commercial code to make sure we were going to meet all of the contract law requirements.

I took what’s been done in the past through other contractual trusts. I combined 7 or 8 of them into one instrument. The rules are governed by things like the Uniform Trust Code. We have one. It’s been adopted in almost every state. We also have something called the Uniform Principal and Income Act. It’s been adopted in better than 40 states. Uniform Principal and Income Act governs accounting principles for what’s called a Complex Trust. It’s called Fiduciary Accounting.

This is in the Tax Code in the IRS, yes?

This is not in the Tax Code. This is separate from the Tax Code but in the Tax Code, it says, “When it comes to what’s called a complex trust, it is governed for tax purposes by a combination of the trust instrument itself.” That’s first and foremost. Second is a local law, which is the Uniform Principal and Income Act. Third, by the tax code, which is very strange. Who would’ve thought that something other than the tax code would control federal taxes?

A complex trust is governed for tax purposes by a combination of the trust instrument itself, the local law, and the tax code. Who would have thought that something other than the tax code would control federal taxes? Click To Tweet

I am here to tell you if you want to look it up, go find it on the IRS website the 1041 Tax Return Form. That’s the form that a Complex Trust would file. Scroll to page two. On page two, it starts with schedule A. The middle is Schedule B. Read line eight. Line eight says, “Enter accounting income for the tax year as dictated by the trust instrument and local law,” right on a federal tax form. As I realized all of these things, I’m like, “Oh my goodness.” I have a contract that has to follow contract law that, for other principles, has to follow the trust instrument and local law. Pulling it all together was not as difficult as you might think because I’ve been writing contracts for many years.

It’s all supported. I know when you and I started talking about it, you sent me the whole IRS code regarding trust.

I sure did.

It’s all supported in the whole trust. All of this is completely legal according to the IRS, right?

My partner is a practicing attorney out of Burbank, California. He’s an estate planning attorney. I would go to him when I had questions about estate planning stuff to make sure that we were complying with all the rules there. It works in all 50 states. The way this trust is structured, it is treated as a common law trust. What that means is it works in any country whose legal system follows the common law like the UK and many countries in Europe and South America. It’s all over the world. More than 70% of our legal systems are based on common law. This trust gives you flexibility even if you want to be living abroad because of that where a living trust wouldn’t work out, just so you know.

That’s an American thing. One of the questions that I asked you back then is when you’re looking at the IRS Code, the laws are so old. It’s all written in 1980 or 1972. It’s way back then. My concern is what if it changes? Am I going to get caught in this whirlwind or trapped by the IRS when they changed the rules?

As I said when I told you the story about our old money families here in America, Section 643 of the Tax Code is what gives us the tax mitigation power that the trust has. It has been in place since the very first tax code was written. Now, fast forward to 2021 when Vice President Harris and President Biden took office in April 2022, they have to disclose their tax returns for the first time once they take office.

Also, at the same time, Dr. Fauci came on to head the COVID task force and had to do the same thing. All newcomers to Washington have to do it. If you look at their publicly available tax returns, you will see that they received income from their tax advantage trusts that take advantage of 643 of the Internal Revenue Code. Many people in Washington are making use of trusts that use this part of the tax code. I can’t imagine any of them being willing to make changes to it because it’s going to hurt them, not just hurt us.

In the current administration, they’re doing that but this is true for almost every single administration, would you say?

I haven’t gone back to the mid-1990s. I haven’t gone any further back than that but every administration since the mid-1990s, it is 100% true for.

It’s not just the current. It’s the way that they do business in Washington.

There is something that governs how tax attorneys practice law and what they have to do in front of the tax bar. It’s governed by something called Circular 230. It’s put out by the IRS. In Circular 230, there is a section that says, “Members of the tax bar, tax attorneys, are allowed to write written opinion letters that their tax paying clients can rely on.” Now, it’s got a very prescribed format that has to be followed and has to include certain details.

REW Gina Gaudio – Grace | Mitigating Taxes

Mitigating Taxes: How tax attorneys practice law and what they have to do in front of the tax bar is governed by something called Circular 230.

 

If a taxpayer, meaning all of us, were to rely on a written opinion letter from a member of the tax bar, the IRS later came back and said, “That letter is wrong. They are not allowed to assess penalties at all.” For my clients, we have a team of tax attorneys who are all separate practitioners in their own practice. They can’t be part of Abundance Group Trust but we can make introductions to them for you. If you want the best protection I could give you from something happening down the road, we’ll set up a time for you to talk to one of the tax attorneys so you can get a written opinion letter. I don’t want to say it this way but it’s like a get-out-of-jail-free card in Monopoly because it will protect you.

There’s one other piece with those partners I want you to mention.

Every one of the attorneys that work with our clients not only has the normal malpractice insurance. They also have errors and omissions coverage. The reason being, and that’s $1 million per occurrence. Each one of them is required to carry that or they’re not working with our clients. That way, God forbid, something did happen and the IRS says, “No, the letter is wrong. Now you owe back taxes plus interest.” It might not be the equivalent of malpractice. You can’t recover against the attorney’s malpractice insurance but the errors and omissions policy would certainly cover you for up to $1 million per occurrence. That is good peace of mind.

We got all of that stuff that I’m like, “These are the things that make me nervous.”

If you heard about that, you weren’t even willing to have a more in-depth conversation with me.

That’s true. Ladies, you need to know that. Gina is a close friend of mine. I trust her. I’ve trusted her with my business. I’ve trusted her with my life in so many cases and vice versa but I was not willing to continue any conversation about a trust unless I knew it was fully legal and I was fully protected in case something came up.

I didn’t push you. I knew at some point when the time was right, we would have that conversation. I’m so excited that we finally did.

Me too. Now that we’ve gotten all out of the way so people can open up, let’s talk about trust.

My favorite. Let me talk about it this way first. I promise to tell you what a complex trust was. You’re going to laugh but there are two kinds of trust. A Simple Trust and a Complex Trust. It doesn’t mean that it’s complicated. It’s a legal term. The legal definition of a complex trust is any trust that is not a simple trust.

I hate lawyers who do that, but what is a simple trust? A simple trust is a trust that must distribute 100% of its income at least annually. A living trust is a great example of simple trust. For those who understand LLCs that are single-member LLCs, it’s a pass-through entity. You don’t have to file a separate tax return for a single-member LLC. It’s taxed on your 1040 return. A simple trust works the exact same way.

It’s a pass-through trust because it’s distributing 100% of its income at least annually. That income gets taxed on whoever received the money called the Beneficiary whoever that person is on their 1040 return. In a complex trust, the trust is not required to distribute ever until it terminates. With a complex trust, especially with ours, it has income.

The income gets added to the corpus of the trust. Corpus is Latin for the body. All that means is income comes in, it gets put in an account in the name of the trust. Now that it’s in the name of the trust, it’s not required to get distributed. Instead, it can be invested. It can be used to pay for lots of things. The list of what it can’t pay for is shorter than the list of what it can pay for.

There are only three things it cannot pay for and that is food, fun, and fashion, meaning clothing. It can pay for health, so medical expenses. It can pay for educational expenses. I went from Gina Gaudio-Grace to Dr. Gina Gaudio-Grace, when I set up my trust and realized, “I can use tax-deferred dollars to go back to school and get my PhD,” so I did. That was so much fun.

Education, it can also pay for maintenance and support. For your children, it can pay for food and clothing until they turn 21. It can pay for their education from preschool up through graduate school and post-graduate school. Now, the other cool thing about it is because the trust is not required to distribute ever until termination, it becomes an exempt asset for purposes of financial aid forms. If your children are going to private school, you do not tell any of the financial aid forms about the income or assets held in this trust.

It is the only trust that is totally exempt from financial aid. Let me tell you what that does before I tell you in other ways it’s an exempt asset. On a financial aid form, when you don’t report it, you’re going to look like a popper on paper. I have one family. It was one of the first ones I experienced this with. It was so incredible. Their son wanted to go to my alma mater in Notre Dame. They had about a $20 million net worth.

Notre Dame’s tuition that year was about $74,000. We set up the trust. Now it’s time to file for financial aid forms and they’ve got practically nothing and practically no income. Notre Dame reduced his tuition from $74,000 to $15,000 and he got need-based money, not student loans that had to be repaid but grants to cover the $15,000, plus room and board, and books. That’s what happens when everything is in the trust and there’s no income and assets to report outside of the trust.

When everything's in the trust, there's no income and no assets to report outside of the trust. Click To Tweet

It’s also an exempt asset when it comes to Medicare and Medicaid. You set this up and everything gets sold to the trust, not gifted to the trust. Once it’s in the trust, if you ever needed long-term care, you go into long-term care and you instantly qualify for Medicaid because it is an exempt asset with no look-back period. In so many ways, this is incredible from what it can do for helping with educational expenses for your children, grandchildren, and great-grandchildren to what it can do with things like long-term care.

That’s awesome, especially for me, I’m a sandwich generation. I’m taking care of elderly parents and then there’s also kids going to college and that thing. That’s amazing on both of those sides but what happens to me in the middle? What can I use it for in my own life?

Pretty much everything just not for food, fun, and fashion. If we set up that trifecta package we talked about with the personal trust, the business trust, and the foundation, your foundation is so incredible. It’s because as a founder and trustee within the foundation, the foundation can pay for fringe benefits. One of the fun things that the trust cannot pay for is vacations. The foundation can pay for family retreats to solidify the family unit up to once per quarter.

If you want to do more vacations than that, like Moneeka who loves to travel all over the place as often as she can, then in between family retreats, you can go on what is called site visits. Maybe Moneeka decides she wants to go to Bali. She goes to Bali. She goes and looks for some good work that her foundation can do while she’s there. That is a legitimate use of the foundation’s money and therefore, a foundation can pay for the whole trip.

I do that. I go to Bali and look at what we can do to help.

When we combine them together, the list of what you can’t pay for is way shorter than the list of what you can’t pay for, pretty much anything. It’s going to own all of your assets through a sale to the trust. Let’s say you’ve got your primary residence. You’re going to sell that to the trust. If the trust doesn’t have money when you do it, it’s going to give you a specialized form of promissory note called the Demand Note.

That demand note’s going to have a small interest rate based on the AFR tables that the IRS sets. It’s 3.5% now. If we took the value of all of the assets at basis that you sell to the trust and put that all into a promissory note, anytime you need money to cover food, fun, or fashion, you take it out by reducing the value of that note. 3.5% is the tax rate for the interest, so 3.5% is what’s going to get attributed to interest income on a 1099 INT. The balance of it is all repayment of principle on your note.

You don’t get taxed on that.

No, not at all because it’s repayment of principle. It’s incredible what the trust can do. You literally live your life and run your business out of the trust or the foundation.

Isn’t that hard, like more paperwork and complication?

You would think that because we didn’t learn about this stuff in school. I am here to tell you, 30 to 45 days after you set it up, you’re going to wake up one morning and feel like you just had the biggest a-ha moment of your life. It’s a paradigm shift. From that moment forward, you’re going to realize it’s easier than what it is outside of the trust. Everything is simpler. You don’t have to scrounge for deductions to get your tax bill down at the end of the year.

It’s all going to have tax deferral or elimination of taxes, so you don’t have to worry about it. I think it keeps people more honest on their tax returns, but believe it or not, you don’t have to scrounge for those deductions. It doesn’t need to be deducted because it’s tax-deferred or tax eliminated, which is awesome. In the beginning, it will feel hard but hang in there. Get through the training that we provide and the handholding that comes with it. It will simplify everything, especially business.

Talk to us a little bit about the training because that’s valuable. This is one of those things that I have to confess with the trust that I personally have built already. They committed to lots of training and I pay $50 a month for all of this stuff. I feel like I never got trained and I don’t have access to people. I’m still paying for that. Those are a couple of things. Are there maintenance fees? Talk to us a little bit about the training.

I’m going to start with a second question first. Remember, how I started this was business because of what happened to me in 2010 when I lost my tax deferral. You don’t ever have to pay after the initial investment if you choose not to. The Trust is yours. It won’t ever get invalidated. You continue to use it for generations to come with my blessings. No extra payments on it at all. It needs a tax return but any entity you set up is going to need a tax return every year anyway but that’s it.

For training, every Trust has a training podcast anywhere from 6 to 8 hours in length. It’s given to you in video, audio, and written format. Whatever style you have for learning best, you’ve got it right there for you. Each lesson will come with assignments. At each step, you listen to the training, go off and do the homework, and come back and do the next step. We also include things like we have calls three days a week. There are Q&A calls. On Wednesdays and Fridays at noon Eastern, it deals with the Personal Trust. On Mondays, one Monday is the Business Trust, the next Monday is the foundation.

My commitment to you folks is every one of those calls will be me leading it. I don’t ever leave that up to other people on my team. In addition to all of that, those are all kept in podcasts too, written, video, and audio format for all of those calls. We also include a Trust advisor. I have seventeen Trust advisors on my team. All of them started out as Trust clients and then became Trust advisors. These are not people who learned about the Trust and I’m paying them to do something. They came to me wanting to work with clients because they love the trust so much in their own lives.

That changed everything for me. I’m so blessed to have had that happen. You get your own Trust advisor. That Trust advisor is there to help you in any way, shape, or form that you might need over the course of the next twelve months. If that’s not enough, you get a tax advisor. We include the investment, the first year’s tax return, and consulting with the tax advisor throughout the next twelve months. Now, at the end of the year, if you want to continue receiving all of those different pieces of support, it’s $2,000 a year for the personal trust, $1,500 for the business trust and the foundation, that’s a gift for me to you.

We are here to support our clients. My mission is to touch the life of every person on this planet in a meaningful way. I can’t do it on my own. It’s by working with my clients, helping them to more meaningfully touch the lives that they come into contact with. Together, that can be our reality. I am here to support you as much or as little as you would like.

Thank you for that. What happens if they don’t pay the extra $2,000, $1,500, or whatever then something comes up with a trust? if something maybe goes wrong or there are questions, what happens then? Do they get any support?

They still have access to the support desk where they can ask a question. If the answer something went wrong and the Trust is getting sued for some reason. We may need to come in and help oversee it. If it’s something that would jeopardize the trust itself, we’re going to do that without having you pay us a bunch of money to do it.

If it’s something else that you need support on, we can either do something on an hourly basis or that should come back into support packages later on. Whatever serves you best. I am always accessible through email and text. Every client has both my email address and my text. I have an entire succession plan in place. At some point in time, not any time soon, I’m going to either pass away or decide to retire or who knows what.

My nephew, Ben, who I helped raise, I have no children, is 32 years old now in 2022. He is our fulfillment director and he will be taking over for me when I am gone. In addition to Ben, we have an endowment that we’ve created at the University of Notre Dame that will be paying for three scholarships each year. One for a law student, one for an MBA student, and one for either a Master’s of Accounting or a Master’s of Finance.

Those students who receive the scholarship will be required to work with us for one summer throughout their education. It’s a way for us to get to know them and them to get to know us. Ben will be pulling in one from each discipline when he takes over. When all of them decide to retire, they will pull in three more to take over so that your heirs will have the same level of support that you had.

I would not be doing my job of serving our clients had we not found that solution to make that happen. We even have trainings already ready in a podcast for successors. None of our clients have passed away, so their successors haven’t had to take over but successors are welcome to come into the live calls now. They can go through trainings now, whatever serves you best. When you are gone, the training is ready for them.

I’ve got so many questions, Gina, as always, and we’re out of time.

I know. That’s why I said let’s do a webinar together.

Let’s do that. Ladies, if this is intriguing to you, there are a couple of things that we have that I want to offer you for more information. As I said, I’ve been talking to Gina about this probably for many months. I’m very slow like nothing happens until you take action but here I am, a year and a half later.

It’s because you take your commitment to your readers so seriously, Moneeka. I can say that honestly as your business coach and mentor. Until you have 100% comfort with something, you’re not going to bring it to your people. I commend you for that and encourage it.

As a business coach and mentor, until you have 100% comfort with something, you're not going to bring it to your people. Click To Tweet

Thank you. My heart for my ladies is like the thing that drives me, and in my own business. Ladies, I know that you feel this too. You don’t want to bring something to your family that you don’t feel confident about. I didn’t want to bring this to my husband until I felt like I could talk about it. It’s like driving a car.

I don’t need to know all the mechanics about how a car works to drive it but I need to know enough to take good care of it and make a sales pitch to my husband about why I want this particular car like my Tesla, for instance. I need to know enough and for me, I think I need to know a little bit more. I’m a little bit of not a brainiac as in smart but a brainiac as in I need a lot of information before I make decisions like this.

If you want more information, the first thing that I would recommend is please read this show a few times. Maybe you feel like you got everything out of it. I always get a little extra when I listen to a show over and over again. If you can stand it, I would read this one a few times. When I say open up, I don’t mean like I have any interest at all in influencing you but for me, getting a lot of that initial stuff out of the way allowed me to move forward to get more information.

If that’s what you are needing or wanting, that’s an opportunity. Read the show a few more times. We’ve also got some other things and opportunities that we want to present to you. You’ve heard how much time she’s spending on the trust and the training, so she doesn’t have a lot of extra time. On that other extra time, she’s talking to clients. All you guys that call, she’s going to be talking to you.

She has a lot of appointments. Her time is very valuable as is all of our time but she is very graciously offered to do a webinar for us. This is just for my community. She holds friends and family to webinars where she’s held one. It’s now in the can and that’s for all of the people that she’s affiliated with. Because she and I have a special relationship, she’s offering an opportunity for my ladies, which I feel so grateful for. Thank you for that.

You are so welcome.

We’ve got a date where we’re going to get together and talk to you ladies on October 20th, 2022 which is a Thursday, from 1:00 to 2:30 PM Pacific Time. Check your time zone and you can adjust for that. Anyway, that’s going to be a time. I will say this about Gina and myself, we will stay on as long as the questions go. I know she’s had webinars that have lasted two hours but we want to make sure that your questions are answered. This is an important topic for wealth building, wealth sustainability and legacies.

I consider myself wealthy. I’m very grateful to have what I’ve had, to have the success that I’ve had, and to be able to grow my own wealth, but we don’t hear about this stuff. In another one of Gina’s webinars, she said she has a billionaire client who had never heard about this stuff but this is how the educated wealthy.

I’m not talking educated like in college. I’m talking about the wealthy that get educated on their money. This is the thing that they do to continue to build their wealth and to pass wealth down to organizations and causes that they believe in, their families, and so forth. You’re getting a very special education here and something that certainly people in the middle class don’t hear about.

Think about the Bill and Melinda Gates Foundation, Jeff Bezos and his foundation, and Warren Buffet’s Foundation. Their foundations go hand in hand with their trusts and how did they get to the point that they’re at? The trusts were the secret sauce.

The more money that you’re able to hold onto, the loft of compounding, the more that that can grow, which gives you more opportunity to do good in the world and your family. Family first then do good in the world. It makes it easier. You don’t have to struggle so hard to keep making that money because you’re not giving as much of it away. I know that there are a lot of emotional reactions to this by people that don’t understand the way that it works. That’s why I’m here to educate on that. I want to give you an opportunity to know if that’s something that you’re not going to learn anywhere else. I didn’t know about it.

REW Gina Gaudio – Grace | Mitigating Taxes

Mitigating Taxes: The more you can hold on to, the more you can grow it, giving you more opportunity to do good in the world.

 

Most of the people that I know about it don’t know about it. Most of the lawyers that I talked to trust lawyers don’t know about it. It’s a gift that Gina brought this to me and I wanted to make sure that I give you, ladies, the opportunities. Take advantage of it if it feels right and good to you. Please come join us for our live webinar. You can ask Gina questions. That, again, is on October 20th, 2022 from 1:00 to 2:30 PM Pacific Time.

If you’re coming in later, you’re reading this in a replay. That is also going to have a replay. You can go to BlissfulInvestor.com/TrustWebinar. When you go there, there are going to be a few things that you get to see. I was introduced to this whole concept by a podcast that Gina did with somebody else named Cassie. She had a huge stock capital gain that she was dealing with and was searching for some answers and she had a huge amount of experience with trust. She was able to ask good questions. The webinar or that particular podcast was to die for. It was good.

It’s 47 minutes but watch it. It’s amazing.

It’s good. It’s audio only. Anyway, when you go to this URL, on that page, it’s going to ask you to log in so they know who you are. With the Thank You page, you’re going to have a couple of things. You’re going to have Cassie’s podcast, Cassie’s Q&A webinar, so you’re going to get all of that information, and then you’ll get either the login information for our webinar that’s coming up or if you’re coming in later, you’ll get the replay of our webinar. You’ll also get information on how to contact Gina so you can move forward. Those are the things that you’re going to get if you go to BlissfulInvestor.com/TrustWebinar (https://abundancegroup.com/moneeka-trust-webinar/)  We’re trying to give you as much information as possible.

Don’t feel rushed. Take your time. Give yourself the time to listen and learn and ask questions in your own mind then see if you can find those answers and the information that we’re giving you. When you’re ready, set up some time with Gina. This has taken me a while. Don’t worry if it takes you a while. However, I will say there are some of you out there who are coming out of our stores end of the year. You have had huge capital gains in 2022 and you’re trying to figure out what to do.

That’s why I had Gina on now so that those of you that need her can take advantage of her services before the end of 2022. A lot of this stuff, for the mitigation of taxes, you have to do it in the year that you’re finally the taxes for. You can’t do this by April 15th, 2023. Did you want to comment a little more on that, Gina?

Especially with the foundation being a part of this, you have until the end of 2022 to donate money to your foundation. You can donate up to 30% of your adjusted gross income. For most clients, that means a reduction of their tax bracket. It can make as much as a 35% to 37% reduction of what you pay in taxes but only if you do it before the end of 2022. It’s crucial to Moneeka and I that we get this information into your hands ASAP so that if you need that help, you’ll have it and you won’t have to worry about it from now on.

That’s why we’re recording on a Saturday, ladies. We wanted to get this out to you while you could still think about it. It’s October and I don’t want you dealing with this during the holidays necessarily unless that’s your choice. At least, I’m giving you the information a little bit sooner so that you can take advantage of it. That’s what we’ve got going on. Gina, thank you so much for your time. I love hanging out with you.

Thank you, Moneeka, for having me. I am so looking forward to continuing the conversation and working with your ladies. As you know, you and I have had our hearts joined in helping these women for so long now. It will be wonderful to interact with them directly.

I’m looking forward to that too and to the ladies getting to meet you and me getting to share you. It’s going to be fun. For those of you that have missed, like you’re in January or February you’re reading this, it’s not the end of the world. You’ve got many more years ahead of you over earnings, taxes, and all of those things.

Still, go get the information and get the seeds in your mind so that you can move forward. It’s something whether you take advantage of it or not, ladies. Part of what wealthy people do is learn. We’re in constant learning because there are things that come up in life and you think, “I know about that because. I heard this once.” You know where your resources are to go back and find that information.

I’m trying to train you, ladies, into becoming those wealthy women, the independence, but also the mindset. Much of our mindset isn’t uplifting which we have to do. Part of bliss is having the resources inside of you and the knowledge or the constant learning that helps you to grow your life in the way that you want. Does that make sense?

It sure does.

I hope, ladies, this was super helpful for you. I’m looking forward to seeing those of you that can join us on the 20th. Remember to go to BlissfulInvestor.com/TrustWebinar (https://abundancegroup.com/moneeka-trust-webinar/and I will see you then. I’ll see you in the next episode. I appreciate you, ladies. Remember, goals without action are dreams, so get out there, take action and create the life your heart deeply desires. Love you. Bye.

 

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Why You Need To Start Investing In Residential Assisted Living With Isabelle Guarino-Smith

REW Isabelle Guarino-Smith | Residential Assisted Living

 

Have you looked into residential assisted living options for your loved ones? Did you know that rather than spending thousands, you could be the one earning and producing cashflow, all while having your senior relatives receive the best care? That’s what investing in residential assisted living is! Isabelle Guarino-Smith, COO of Residential Assisted Living Academy, is here to elaborate on this win-win-win approach to caring for your aging loved ones. She joins Moneeka Sawyer to share how she first started looking into assisted living after the need came up in her life. After learning more about the industry, she turned what could’ve been a financial crisis for the family into a massive opportunity. Tune in to this episode filled with incredible insight and information on how you can earn while helping seniors receive the best care possible.

Watch the episode here

Listen to the podcast here


 

Why You Need To Start Investing In Residential Assisted Living With Isabelle Guarino-Smith

Real Estate Investing For Women

I am so excited to welcome to the show, Isabelle Guarino-Smith. She is a graduate of Arizona State University, a former flight attendant, a Walt Disney World intern, and now Residential Assisted Living Academy’s leading lady. She has been working as the COO of the company for several years, keeping everyone in line and on task. She’s been featured in many magazines and articles on the topic of senior housing and was given the title of one of the top influencers in senior housing. She also won Aging Media’s Future Leaders of Assisted Living Award in 2020. That’s pretty impressive, Isabelle, welcome to the show.

Thank you so much for having me. I’m excited to be here.

You had a varied career from flight attendant to Walt Disney World intern. I love that. How did you end up in assisted living?

It’s interesting. For us, it started with family. My grandmother fell, she broke her hip, and the doctor was like, “She can’t go home alone. She needs 24/7 care.” Many of your readers might have been in that same situation themselves with aging loved ones. This happens to almost everybody. This happened to us and it was like, “What do you do? Do you pay for in-home care?” That is incredibly expensive. “Do you quit your job and take care of your loved one full-time?” That’s your full-time thing. I’m not born to be a caregiver, so that didn’t make a lot of sense or you put them into a home.

As soon as you say it, you feel icky. “I can’t do this. This is my beloved grandmother, mom, dad,” or whatever the case may be. For us, it was like, “Let’s find an alternative option. Let’s find something that we are comfortable with.” When we realized it was going to cost $5,000 a month to have her stay in one of these homes, or we did quick math and we are like, “We could make $10,000 a month if we owned the real estate in the business and she could live for free.” It made a whole lot of sense to say, “Let’s get involved on the real estate side, give her the best of the best care, and we get two birds with one stone.” It started with something close to home for me and my family.

We have had to make this decision for my father-in-law. We did end up putting him in a home because he can’t move at all and he’s so big. We can’t lift him. We can’t clean him. It was impossible and there was nobody at home. We are not natural caretakers in the way that they are in these other places, lifting, cleaning, diapers, and all of that stuff. What’s fascinating is that they were originally going to charge us $5,300, but now that he’s in it, it’s costing close to $10,000 because there’s all the added care.

The $5,300 was base care. We had to up-level, ratchet it up because he can’t even get out of bed. We kept ratcheting it up. Now, we moved him to memory care, but then there were other things that are not covered. Sometimes Medicare covers some of this. In our case, it didn’t cover anything, but the other interesting thing was diapers. We are paying $1,000 a month on diapers or a physical trainer to come in so he could continue to move his hands.

He lost the use of his hands so we can no longer feed himself. Now he’s in memory care, but we were trying to have his hands continue to be used, and so we had someone coming in to train him with his hands. That was costing $1,000 a month. It’s amazing once we go down this path what it costs. What an interesting strategy you came up with to deal with that cost. That’s fascinating.

I tell that to people all the time. I say, “What’s the difference between a big box facility and a residential assisted living home?” I say, “One of the things is the cost of care.” When you move in, they tell you it’s going to be a certain dollar amount but you didn’t take the bath on Tuesday. You took it on Saturday and they are like an extra $500 or you tried to run away, an extra $1,000.

They knock things up. You get that first bill and it’s $8,000 and you are like, “What happened, dad? I signed up for $5,300.” I tell people this and they are like, “There’s no way.” I’m like, “Wait until it happens to you. You are going to look for an alternative to say, ‘How can I get this where it’s one flat rate?’ No matter what happens to them, they are getting the best of the best care. Low caregiver to resident ratio, and then if you can own it and be cash flowing and holding that real estate, it’s a win-win.” I say that story all the time. Now I’m going to have to shout you out and say, “For real, it’s happening.”

There were all these little things. They give them a little emergency button that they wear around their neck. As he can’t reach over and pull the cord, so he’s got this little thing around his neck where he kept pushing the cord. He’d like, “I need my cell phone plugged in.” He kept pushing the cord. They started charging us for every single push on that cord. They are like, “We are not supposed to get that push 200 times, but we can’t control him.”

He needs someone there.

That’s right. It was so fascinating. I’m like, “Thank goodness.” I talk all about how money is good. I keep taking such good care of my father-in-law and I’ve been like, “We are not going to yell at him. We are not going to yell at these people that are taking care of him. We are going to try to figure it out.” They were providing diapers for $1,500. We are now ordering them on Amazon with a subscription for $1,000.

We are finding ways to cut back our costs, but we are not so freaked out. It’s not like our budget is going to die because we are doing this thing. It’s interesting what good things money can do for us. That’s all I’m saying. We can take care of the people we love. I’m so excited Isabelle to talk to you because I’m in it.

I was having a conversation with my dad. He’s fallen three times. I’m trying to convince him to use a walker, which he will not do, but then I’m like, “Use a cane.” My dad says to me, “I have lived my life. If I die now, it’s okay.” I’m like, “I’m not worried about you dying even if I don’t want you to die. If you fall down and your quality of life disappears, what is that going to be like for you? Could you please start using a cane or something so you stop falling?” We talk about this for an hour. He says, “I will think about it.”

He takes a fall. What if he breaks something? They don’t heal. Now suddenly, they don’t get to be with their family because they are either stuck in a room. If we could afford care at home, we have got this $10,000 expense for another parent or they are in a home. It’s a difficult thing like what you described. I had this conversation with my dad, “Dad, you need to manage your quality of life. That’s the thing. If you are alive, we would rather you be happy.”

It’s real life. The thing is right now, your dad is in the Silent Generation, not Baby Boomers. In the Silent Generation, there are only 47 million of them. Baby Boomers are 76 million. We are about to double the need for care and we don’t have the systems to be prepared for the silver tsunami. Baby Boomers don’t need assisted living for another 20 to 30 years. It’s their parents who are in it. If we are already 1.3 million beds short, and there are only 43 million and we are expecting 76 million over the next several years, what’s going to happen?

No one is pumping these beds out that fast. It’s a massive crisis or mega opportunity, and it’s something that everyone is going to deal with. It’s either going to be your loved one or your own self lying in the bed, writing a check to somebody else, or you can play the ownership role and take care of your own loved ones and yourself and maybe even leave a blessing or leave a legacy to your own kids. It could be good.

Tell us what is assisted living as you are defining it because you said something about assisted living versus big box. Let’s talk a little bit about that and how you are defining it.

What we teach and train on what we do ourselves is residential assisted living. It’s senior housing but in a residential home, in a single-family neighborhood where there are only 6 to 16 seniors living in that one home usually in private bedrooms and private bathrooms. They have shared common spaces like a living room, dining room, and front room, maybe even a library or hair salon. These are more upscale homes in nice parts of town.

In the home, there’s 24/7 care help with activities of daily living, getting up, walking, bathing, taking medications, eating, or whatever they need. In some of these homes, there’s a private chef but there are always 24/7 caregivers and a licensed administrator who’s running the business. The role we play in that we teach other people to play is that owner’s box.

Owning the real estate and business, not working and living in the home, but owning and operating the business in that sense. It’s different from a big box because it’s not a big commercial facility with hundreds of beds. The resident-to-caregiver ratio is different. The big box facility oftentimes is 15 to 1. If they are telling you it’s lower, ask them if it’s staff or caregivers, because oftentimes they will include staff which means chefs, janitors, front desk, people, and landscapers.

A landscaper is not caring for your dad. They should not be included in the staff-to-resident ratio. It’s the caregiver-to-resident ratio and you can get fifteen people. I can’t take care of fifteen people at one time. I don’t think you can. That’s impossible, so we are setting up those caregivers for failure which is why they are saying, “We are going to charge you more when your dad dings this all the time,” because they don’t have the time and capacity to come to visit him that often.

That’s sad. That’s not okay. We need to give our seniors better quality of care and life. In our homes, it’s usually a 4 to 1 or 5 to 1 ratio. It’s also a much smaller environment, so you can have eyes on the residents at all times. That’s what we teach people to do. It’s still senior housing. It’s an alternative and a real estate investment opportunity for those who are in that world.

We need to give our seniors better quality of care, better quality of life. Click To Tweet

How is this different than a nursing home? We have got the assisted living and the big box and then there’s also the nursing facilities.

A nursing home is typically where doctors, nurses, gurneys, and IVs are. It’s medical. In assisted living, you can be licensed to care for memory care. You can be licensed for respite and hospice, but you can’t be licensed in a physical home to do nursing care. That’s where they do have to transition on to that. Most people will stay in our homes until they pass on to the next life or they will move on to nursing care because their needs are too great for what we are licensed to care for.

It’s more medical. When would someone need that?

It’s when you have had assisted living for enough time and then maybe something happens right where you need to be hooked up to IVs and you need a 24/7 doctor watch on you. It could be health declining. It could be that you had a bad fall. Most people don’t leave our homes. They pass on from our homes. It’s a very small percentage who move to need that level of care, but it ranges. It’s person-to-person based on your health and your needs.

Talk to us a little bit about the business of this. How much money can be made? How is it set up? Tell me a little bit more about that. didn’t even see it as an option when I was doing research on these homes. What I saw were the places that had 55 to 100 rooms. We chose a place with 55. There are active living communities, where there are single-family homes and they are all around them.

There’s this big community area and so they have their party areas, their pool, maybe a golf course close by, maybe an on-campus store or something like that, but they are all living in their own single-family home. Those were the two that I was seeing. Tell me a little bit more about what you are talking about and how the money looks around that.

Where do you live?

At the time, I was living in Campbell, California.

That’s good to know because 61% of assisted living beds are in residential assisted living homes. We are the majority, but no one knows about us because there’s no big sign out front. You could drive by one of these homes and never know it was a care home. You never know that in California, you are allowed to have six residents in a home. Those homes could be a 4-bedroom, 3-bath. That could be a 5-bedroom, 4-bath. It’s not this massive, crazy, huge home. You could have driven right by and never known that it existed. Those solo owners don’t have the marketing dollars that Brookdale, Sunrise, and Atrium have. It’s different.

REW Isabelle Guarino-Smith | Residential Assisted Living

Residential Assisted Living: 61% of assisted living beds are in residential assisted living homes. We are actually the majority, but no one knows about us because there’s no big sign out front.

 

How do people even find it then?

We created a map called the RAL Home Locator and that’s the website, too, RALHomeLocator.com. There you can see all 30,000 of these homes that exist across the country right now. You would be what we consider a Daughter Judy, the person who’s in charge of their loved one’s care. They are the ones searching for the care, maybe paying for the care, checking in on the care, complaining about the care, praising the care, or whatever it might be.

Daughter Judy will start researching exactly like you did, trying to find homes in the area to see where we should put them. What options are available? There’s an entire industry of people called placement agents who will usually work with families like you to say, “What’s your budget and options?” and then they will pass out business cards. They get paid if you choose one of the homes they send you to. They will try to find a good option for you, but also, they are getting paid for it. It’s not free labor. They might be recommending smaller and bigger homes depending on the needs of your loved one.

There are organizations that will place your loved ones that can help you with that. That’s awesome because I couldn’t even find that when I was looking. I wonder, “Am I lame? Why couldn’t I find this stuff? Do you Google for this?”

Lots on Google. Lots online. This is starting to become a concern for everyone. We are like a baby industry. It’s growing in popularity. Back in the day, it used to be they would come live with you and now people are working two careers in one household and that doesn’t work a lot of times because you’ve got your own kids. It’s the Sandwich Generation.

You’re taking care of your kids. Now you’ve got to take care of them. It’s a lot and it’s not that you don’t want to. It’s not the same as it used to be. We are starting to see a lot more popularity in that. A lot more national and local placement agents are popping up a lot, more online marketing, and things of that nature. It’s going to be red corvette syndrome. Once you’ve been exposed, you start seeing it everywhere.

Tell us a little bit about how the money works with this stuff.

We were saying that the national average to live in one of these homes is $4,500 a month. That’s going to totally range depending on what city,-state, or county you are in. If you are in California, the California state average is $5,250 or something like that, but depending on your county or city, it could be different. Salinas is almost $7,100 on average and Stockton is $3,500. It ranges.

If we did national numbers and we said $4,500 a month per person, in every city or county, you are also allowed to have a different amount of maximum amount of residents. Six to sixteen are the rules in most cities or states, California is six. I’m in Arizona. Ours is ten. If you are in Texas, it’s sixteen. If you are in Florida, it’s twelve. If you are in Jersey, it’s fifteen. It ranges everywhere.

Let’s say we did ten since it’s right in the middle of 6 and 16. $4,500 a month times 10 residents in the home. That’s $45,000 coming in every single month, but you have your expenses, the food, the cable activities, and paying for your staff, all-in expenses, including liability insurance, maintenance, and everything.

Maybe on that home, it might be $30,000 a month, then your debt service. Are you going to lease this home or own this home? Your debt service, your mortgage, and your payment on the property. Let’s say it’s another $5,000. You can get a pretty nice home for $5,000 a month in most parts of the country. That means this one home is netting you as the owner $10,000 a month. That’s just an average home. There are a lot of markets where the average number is a lot higher than that so you are getting more per resident. That’s a quick, easy, or fast example of how to get to that $10,000 a month on one of these homes.

You are saying that you have one caretaker per 4 or 5 residents. When you were talking about all the costs of the staff, that includes everybody. That includes the chef, the activities director, and the gardener.

It includes all of it, but also think it’s a single-family home. You need one landscaper coming once a week, every other week. It’s not a crazy expense. In my own personal home, our landscaper comes every week and I pay them $100. It’s a line item. The chef is the same thing. In some of these homes, the caregivers do the cooking and that’s what they do and what they are responsible for caring for the residents and doing the cooking and cleaning.

In other more high-end homes, we talk about the different levels of homes based on where the home is, what amenities you have within the home, and things of that nature. A level 3 or level 4 home would not have a private chef. The caregivers would more than likely be doing the cooking, but a level five home probably would have a chef.

My nicest home, we have got a chef there who does made-to-order breakfast and fresh lunch for them and then cooks the dinner. He’s out the door by noon. The caregivers at night warm up whatever he prepared for dinner so that it’s ready to go, but they don’t have a chef there. There are different amenities for different homes. Because of those amenities, the residents are going to be charged different amounts.

The level of care also plays a heavy role in how much the resident is paying. When we say the average in the home is $4,500 a month, you might have someone like your dad who’s paying $9,000 or $10,000 in the home, and you might have someone who’s paying $3,000 in the home and other people in the 4 to 5 range, and so an average is out to about $4,500 a month.

You don’t necessarily want to fill your home with a bunch of high-need clients because that’s going to overwork your staff. A business doesn’t work unless you pay attention to the three legs of the stool, the residents, the staff, and the business. You can’t focus on the business and making money. No. You’ve got to care for the other people involved in this and make sure that all those components are there making sense and working well.

A business doesn't work unless you pay attention to the three legs of the stool: the residents, the staff and the business. Click To Tweet

That’s a lot to think about.

It’s a whole business. If you have one, they could live for free, you could live for free, and you cashflow.

You own the real estate but someone else manages the whole thing and you pay that person.

That’s your licensed administrator. In the real estate world, you could call them your property manager but they are much more than that. They are licensed through the state as medical professionals who are able to care for the residents, but they also might do many other things. Hire and fire your staff. Tour and market your home. They might be in charge of all the other contractors like we were talking about, the chef and landscaper as someone to come over and do activities. They could have whole varied roles and responsibilities for them.

I like to find an administrator. My one administrator oversees all three of my homes. I have one phone call with her a week and I visit the homes every other month. The way we have set it up is passive. In the beginning, it wasn’t that way but we had to start to formulate that and make it become that way. That’s what I like to share with other real estate investors how to do. Most people don’t want to be hands-on in the home doing anything and it’s like, “Not what we do. Not what I want to show you how to do. I want to show you how to do this more passively.”

In the old days, we had real BnBs, not Airbnbs. We had real Bed and Breakfast. There were all these rules and regulations about you having to have a certain kitchen. You had to have a certain number of bathrooms. There were all these rules. I’m assuming that you can’t get a big house and turn it into a senior living without following all regulations. There’s got to be other stuff. Talk to us a little bit about that.

There are rules and regulations and I love that because you don’t want anybody getting into this industry. We want quality people who are willing to jump through hoops, have the right heart, have the right passion and are going to care for our seniors. These are people’s lives. I’m totally okay with rules and regs. In every state, these homes need to be licensed. The physical home has a license. It’s mostly based on senior safety.

REW Isabelle Guarino-Smith | Residential Assisted Living

Residential Assisted Living: There are rules and regulations because you don’t want just anybody getting into this industry. We want quality people who are willing to jump through hoops, who have the right heart, the right passion and are going to care for our seniors.

 

The home does not have to be ADA-compliant, but it needs to be as close to that as possible. Meaning wider hallways and doorways ramps, and guardrails, maybe fire suppression or sprinklers, different things of that nature to make it safe for the seniors. If you have to be Tom Cruise to get out of the house, it’s not senior safe. We want to make sure they are safe. That’s a priority.

The physical home will have a license. The state requirements are a pretty bare minimum. Most states say 80 to 100 square feet per person. That is tiny. That’s not okay. Our rule of thumb is 300 to 500 square feet per person. If you are going to have ten people in the home minimum of 3,000 square foot home, upwards of 5,000 is much more comfortable.

Most of these seniors are going to want a private bedroom and a private bathroom. You are going to have a hard time finding a 10-bedroom, 10-bath home on the market, but you can buy a 5 or 6-bedroom home and convert it to become. There are four ways you could get into the industry, and one of them is buying a single-family home and converting it to become. All of our homes are 10-bedroom, 10-bath, but they didn’t start that way. They started 5 or 6 bedrooms and we converted them and now they have those ten bedrooms.

Using the space a little bit differently, but whatever the state says, we go above that. Make this nice and comfortable because the seniors deserve it. If they are going to be paying a pretty penny, they are going to be comparing you to the other homes where they are getting a private bedroom and private bath. You need to be able to supply that.

When you were talking about this, let’s say we buy a 5-bedroom, 4-bath single-family home. They are quite a lot of them here, but they all have lots of stairs. I was thinking of one that’s on the market close to my house here in Sacramento. It used to be San Jose. All of the houses are like these old, beautiful Victorians or craftsman.

I live in a craftsman which is fun, but there are so many stairs and the hallways are narrow. People were much smaller in those days. Talk to me about what does that look like? How do you find these places? What do you do if you are in a situation where the only houses that are coming on the market are heavy in the stairs, narrow hallways, and that type of thing?

You can add chairlifts and elevators. You are going to need something because the seniors typically cannot climb the stairs at that point. The thin hallways are tough because unless you are going to knock down the house and redo it, there’s sometimes not much you can do when you have a historic home like that, and you don’t want to take away the beauty of the way it was built. There’s some history in that and you don’t want to remove that.

Honestly, I would say that probably in those types of homes might not be the right fit because you would prefer ranch style. You would prefer a single level. We have a guy in Jersey who’s got a four-story home. On the East Coast, everyone’s got a basement. He is got a nice big built-out basement, two stories, and a full third story up there that’s stunning. He added in a residential elevator. It’s $30,000 but it’s a one-time fee that you pay. If you are going to be making that back, that home, he cashflows $40,000 a month because all his people are paying over $8,000 and he has 15 people in that home. All private bedrooms and private bathrooms, it’s stunning.

I would say it might not be the right fit because of the style of homes there unless you can add in a chairlift or an elevator and those stairs. I don’t know how well they do with the chairlift and the homes because they are so tight that sometimes an elevator might not work either unless it was the perfect property. Going a little bit outside of town where you have ranches, where you have more land, and where you have that capability, Daughter Judy only wants to drive a certain distance from where she lives.

Find out the demographic research on 50 to 70-year-olds who are in the upper middle class and own their home, where do they live, eat, work, sleep, and play. We want to put the residential assisted living home right near them because they don’t want to drive 45 minutes to go see mom or dad. They want to go right on their way home from work. Doing that demographic research is a great place to start, and then finding those properties that already lend themselves to this.

Doing that demographic research is a great place to start. Click To Tweet

How far does Daughter Judy drive usually?

They say that usually, they want to be within a 5 to 10-minute radius of them. The 5 to 10-minute radius in Oklahoma is completely different than in LA. Depending on where they live, that could look very different but most Daughter Judys want to be close. Can I ask how far are you from your dad?

This is an interesting story. This is my father-in-law. We have lived down in the Bay Area for many years so we have been close to him. My parents were two and a half hours away in Sacramento. When we moved him into his home, he was 25 minutes away and it was a bear because we were so busy. I work at home, but still at the end of the day, driving down there, you are hitting all the traffic.

For twenty-five minutes, we thought, “This is nothing. It’s fine.” We did a bunch of research. We found three places that we liked and we let my father-in-law pick. He gets to have some say in this. We visited the different places and he picked this place and we were like, “He likes this place. Twenty-five minutes.” It was so hard for us to get down there more than once a week, and it felt terrible.

Now, we have moved to Sacramento to be close to my parents. Now I’m 15 minutes away from my parents, and 2.5 hours away from him. We are looking at moving him up to Sacramento with us, but he’s in hospice. That’s another whole long story. Now I live fifteen minutes away from my dad. When he was at his home, it was 25 minutes and you are right. We couldn’t figure it out, trying to get all of us there together. If I could go one day, my husband could go a different day, but getting the two of us there together with the traffic and all of that stuff was hard.

It’s a lot harder than people think. When we talk about a location for residential assisted living, I always tell people, “The first key is finding out the demographics of the area because they are the decision-makers more than likely. They want mom or dad near them.” It’s like, “I don’t care if you have the perfect house, if it is not near the right demographic, it won’t work.”

What they are looking for is always price, proximity, service amenities, and then the feel when they walk in. How do they feel in their heart, mind, and soul? Is my parent or my loved one going to be safe here? Are they going to be comfortable here? There’s a real feel to a lot of these and sometimes you walk in and you are like, “No.”

REW Isabelle Guarino-Smith | Residential Assisted Living

Residential Assisted Living: What they’re looking for is always price, proximity and service amenities, and the feel when they walk in.

 

I did that. I was like, “No. This is not going to work.”

Sometimes you walk in and you are like, “I can live here. This is pretty nice. I could do this.” You want to have that wow factor and that feeling when they walk in. You want to make them feel comfortable, and that is one of the perks and benefits of residential assisted living. It’s a home. It’s not home-like. It’s a literal home. We grew up in homes. Who doesn’t want to stay in a home? This is pretty much the only option besides in-home care which is super expensive.

Tell us a little bit about how we can take advantage of this and how we can learn more.

We teach and train people how to do this because I do it myself, and then we teach people how to do this. We have three-day training events there in Phoenix, Arizona, but we also have online courses. If anybody wants to get started for free, check it out. We have got webinars and free books at RAL101.com where you can learn the four different ways you could get started in this.

You could learn the three smartest options for you to participate in. Maybe it’s as a lender. Maybe it’s owning the real estate or the real estate and the business. We go through all those options and then the five keys to success. You can learn and know all more about that on RAL 101. We are going to stick around for your special readers and dive deep. I’m excited to be able to share with them a little bit more too.

What would you like to share in EXTRA? We didn’t decide beforehand because she was like, “You are going to have questions,” but I have got so many questions. It’s hard to narrow them down. I like the four different ways to get started doing a deep dive on that. You’ve mentioned something. What did you say?

We said 4 smartest ways and 3 options to participate depending on what role they want to take, and then the 5 keys to success. I could do either on anyone.

I wish I could get your input on this. Let’s get the ways to get started. I hope I picked the right one. In EXTRA, we are going to talk about the ways to get started in this industry. It’s in her URL. You can go there for all of their trainings and all of that information also. In EXTRA, we will be talking about how to get started in this business. That was so amazing. Such great information. Is there anything else you want to add before we move into our three rapid-fire questions?

You are going to get involved with this one way or another. At this point, you have an option on how you want to participate because like me and you, a lot of times you get slapped upside the head with this and it hits you and you’ve got to deal with it right now and figure it out. It’s not like this, “My mom might need this in 20 or 30 years.” It happens and it happens quickly, and then all of a sudden you are like, “What do we do?”

You're going to get involved with this one way or another. At this point, you have an option on how you want to participate. Click To Tweet

Les Brown always says, “Be prepared for opportunities.” I like to educate myself as much as I possibly can so that when the opportunity arises, I’m ready to take action. I encourage everybody reading, all the ladies, if this is ringing a bell to you, to be prepared for that opportunity. Start educating yourself. Start getting prepared. Whether it is you investing in someone else’s, owning your own, or learning about those options. If and when you are a loved one ever needs this, you know what to do, or else you are going to be scrambling and it’s a scary time of stressful time. There are so many emotions. Start educating yourself and getting prepared. That’s my best advice.

There were some thoughts that came to me as you were talking. It’s been hard for us to think about putting our parents in a home. I’m Indian. In our culture, in the Eastern cultures, we traditionally don’t do that. What’s also true is that in Eastern cultures, there was someone responsible to take care of the parent and the parent still did not always get the best care.

In our case, we couldn’t lift him. He’s 250 pounds. There was no way that any one of us that was dedicated to this could. My sister lives at home with my parents, but even living at home with my parents, if one of them were to go completely down, she can’t physically lift them to clean them, change diapers, change the bed, and do all of those things.

It’s not a matter of whether we don’t love them. I only work 5 to 10 hours a month. I tell people, “What are you doing with your time? Why are you not taking care of your parents?” I have felt guilt around that, and I know that a lot of women will and the truth is I am not capable of giving him the care a professional would.

I would rather have someone come in-house, but you talk about it being hugely expensive. When we were looking at the cost, even at the $10,000 a month that we are paying now, had we done the cheapest in-home care and we would not have hired the cheapest, the cheapest would have been $15,000 a month.

We were going to have to remodel parts of the house to make it possible because he needed to be able to get into the shower so we are talking about another $50,000 expense. If we were to get him the care we wanted, it was going to be closer to $20,000 to $25,000. That’s the care that he’s getting in the home. We have our hearts in the right place, but we don’t realize how difficult things can become.

The other thing that is a very difficult conversation to have with the elderly is long-term care. My parents have long-term care, but I’m very aware of the fact that my father-in-law thought he had long-term care. He thought he was going to be covered by Medicare. He thought all of these different things, but there are a whole series of rules where we get no help, not even a single dime. Nothing.

My parents have long-term care, but the long-term care will not cover things like diapers, physical therapy, or personal trainer. There are also big rules about that. There are going to be lots of out-of-pocket things that come up that you need to be prepared for even if they have got long-term care. I have got six parents that we are going to be looking at with this stuff. What have you set up for this situation? My father-in-law did think that he had enough cash to cover him, but nobody anticipated the cost, and so he did not. We ran out after the first year. Those are some things to think about.

The other thing that was interesting as you were talking is in these homes, one of the things that you can do that’s cool is to make it a cultural home. For instance, all of us Indians put our parents together because they have so much in common. They can do their pujas together. They can play teen patti together.

Certain cultures have things that they do and they want to do it with people that understand. They don’t want to have to be explaining their culture with every little thing that they do or say, their idioms, or the way they take their walks in the morning. We have got a Chinese home close by. I have been looking for an Indian one in case I need it.

You could also do cultural ones. It’s not segregating. It’s allowing them to feel a little bit more at home like they have got people that understand them in those later years of their lives. If you could do a home that’s only 6 or 10 people, you are much more likely to be able to build a community that’s more culturally sensitive. Would you agree with me on that?

100% and I always tell people that we have a home here in Arizona called Shalom Home. It focuses on the Jewish culture. They eat kosher food, they celebrate the Jewish holidays, and to me, that’s a beautiful thing. I always encourage our students, “Don’t be afraid of niching down. If you want to do a home that’s vegan, fantastic. Do you know how many Daughter Judys are going to be so excited to put their mom or dad in a vegan home?”

Whatever it is, it could be religion. It could be ethnicity. It could be all women or all men. Whatever you want to do, you can do that because you are going to appease someone’s need. Let’s be real. As people age, a lot of people who are aging right now in America maybe weren’t born here or maybe didn’t grow up here. There are a lot of times when you start having memory issues, you go back to your native tongue, your first language.

REW Isabelle Guarino-Smith | Residential Assisted Living

Residential Assisted Living: Don’t be afraid of niching down. It could be religion, ethnicity, all women, all male, whatever you want to do, you can do that because you’re going to appease someone’s need.

 

It’s hard when someone’s taking care of them who doesn’t understand that or doesn’t get it. Now they are getting frustrated with each other because I love niched homes. You can totally do it and a ton of our students do those specialty homes and it’s such a fun way to meet an important need in society and in culture. You would be happy to be paying what you are paying if he was in a home that had only five other residents, he had eyes on him at all times, and it was an Indian-centric focused home. You would be excited about that. You would be like, “I will write that check.”

They are all watching Indian movies and they are playing the Indian cable station. They are playing Indian music over dinner and all of those things. It makes them feel so much more at home. There are lots of red everywhere because Indians love their red. The china looks a certain way. My dad and I have talked a little bit about this. One or the other of them go, we are fully aware that there could be these possibilities. He has said over and over again, “I don’t know that being an elderly man, I want to restart full relationships in an environment where people don’t understand me at all.”

It’s a valid fear. It’s a beautiful thing to be able to provide that. One of the blessings about being in this industry is that there’s a lot of cashflow, but our company motto is to do good and do well because you can make a massive impact on people’s lives. When you have these families who are grateful and thankful for the services that you are offering because they truly know it’s better than what they are ever going to get anywhere else, you feel good about that.

To me, making an impact in the world is important and valid. Being able to provide that to your community is a beautiful thing even if it starts selfishly with, ”I want it for my family.” Who cares? It’s going to grow into something that you are going to bless other Indian families and Indian people as long as that home exists. You pass that home to your kids. They can have that. It’s a contribution to society and that’s a beautiful thing.

Thank you for that. Are you ready for three rapid-fire questions?

I’m ready.

Tell us the super tip on how to get started investing in real estate.

I would say the super tip would be is location. If you want to start this, it’s finding out that prime location so that then you can start getting excited about finding those homes, niching down on the rules and regs and what you are going to do there. Location is key. Find out where the Daughter Judys are who can afford the home and then move from there.

What would you say is one strategy for being successful as a real estate investor?

We have been teaching and training for many years, and the number one quality trait that I see, whether it’s men, women, young, or old, in real estate or not real estate, that they all have in common is grit. People who are willing to get hit in the face, get back up, and do it again. If you are going to be in the real estate world, you better believe that’s going to happen quite a few times if you are going to be in it for the long run. It’s important to have that in your heart and soul. If that’s not you, then that’s fine. For me, the biggest strategy is having a strong passion and sticking to that grit. Keep going and keep trying every single day. Never give up.

The one character trait that they all have in common is grit. People who are willing to get hit in the face and get back up and do it again. Click To Tweet

What is one daily practice that you do that would contribute to your personal success?

I have learned about myself and this might be a little too woo-woo for anybody reading, but for me, I’m like a nature girl. If I don’t spend an hour outside, I go crazy. Especially like working from home or traveling or whatever, a lot of times you are indoors all day and you don’t realize, “Why do I feel icky? Why do I feel off?” I have to spend time outside, feeling the sun, and being outside. I will bring my computer out there and work. That’s fine, but I know what works for me.

I always tell people, “You have to find what works for you. If that’s starting the morning with a walk, then you’ve got to do it.” I learned that I don’t feel right if I don’t spend time outside. Now, it’s part of my daily routine and it helps me re-energize and live my best life. All that I ever want for anybody is to be able to show up 100% themselves.

Thank you for that. Ladies, stay tuned for EXTRA. We are going to be talking about the four different ways to get started in this business. If you are subscribed to EXTRA, stay tuned. If you are not, you can do that by going to RealEstateInvestingforWomenEXTRA.com. For those of you that are leaving us right now, thank you for joining Isabelle and me for this portion of the show. You know how much I appreciate you, and I look forward to seeing you next time until then remember, goals without action are dreams. Get out there, take action, and create the life your heart deeply desires. I will talk to you soon.

 

Important Links

 

About Isabelle Guarino-Smith

REW Isabelle Guarino-Smith | Residential Assisted LivingIsabelle Guarino is a vibrant young professional with experience beyond her years. Time spent working for Walt Disney World Company and US Airways shaped her professional development to her current role with AL Family. Isabelle is the COO of the AL Family of companies including the Residential Assisted Living Academy, Pitch Masters Academy, Residential Assisted Living National Association, Four Homes to Freedom, Family Legacy Homes and Residential Assisted Living National Convention.

With a degree in Human & Family Development and minors in Religious Studies and Communication, Isabelle’s skills are broad and far reaching. She enjoys all organizational tasks, planning and running corporate events, leading teams to reach their financial and personal goals. In college, Isabelle was Chi Omega’s elected Secretary but she also took on leadership roles in every job or club she has ever participated in.

Isabelle loves to volunteer her time and skills to missions work across the world, bringing donations, helping build different projects and sharing God’s Word. Isabelle runs her own charity trips to Jamaica bi-yearly to help donate time and money to Denham Town’s Gold Age Care Home. If you need something to get done quickly and properly, you know who to call! As of 2022 Isabelle has started taking the stage for RALAcademy as their leading lady and lead educator on the topic of senior housing. She is an excellent speaker carrying on her father’s legacy of “Doing Good & Doing Well” with RAL!

 

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Sallie Wagner: Increasing Your Real Estate Investments With Physical, Mental, And Social Resilience – Real Estate Women

REW Sallie | Real Estate Investments

 

Mindset is everything. It is one of the ingredients that draws success. In today’s episode, Sallie Wagner, a number one international bestselling author, shares the tools she used to increase her real estate investments. Without taking action with the right mindset and skillset, we wouldn’t be able to reach our path to success. In this conversation, Sallie shares that social resilience is the driving factor in building your network and an outlet to ask for help or to provide help when needed. If you wish to increase your real estate investments, tune in now to this episode and learn more from Sallie!

Watch the episode here

 

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Sallie Wagner: Increasing Your Real Estate Investments With Physical, Mental, And Social Resilience – Real Estate Women

Real Estate Investing For Women

I am excited to welcome to the show, Sallie Wagner. She is a number one international bestselling author, lawyer, real estate broker, speaker, and life alchemist. She provides broker and contracts compliance consulting services to 2,500 plus real estate agents throughout Florida. She also owns and operates a real estate school. Her powerful transformation tools include the Emotional Freedom Technique, which you guys have heard EFT, and Neuro-Linguistic Programming, NLP, clients move into action for rapid concrete results. Clients reclaim conscious choices in their lives and discover and live the life that makes them come alive. Welcome to the show, Sallie. How are you?

I’m fabulous. Thank you so much for having me.

I have been looking forward to this show. I love my mindset shows, and the strategy shows are important but I’m all about the mindset with the Blissful Investor thing. Could you give us a high-level version of how you got to where you are? Why are you doing real estate, and why are you taking this angle?

I spent most of my career in the corporate world positions like general counsel, house counsel, and those things primarily real estate related. I worked for big corporations managing and working on real estate transactions. I have always been involved in real estate throughout my decades, long career, longer than I care to admit. When I looked at going out on my own, it was natural that I would start doing something in real estate. That’s how I started my own business providing compliance services to real estate brokerages. I teamed up with my colleague now. We do broker and compliance services to brokerages throughout Florida.

Talk to us a little bit about why you chose mindset as the thing that you want to talk about now. I know how important it is. Why is that your highlight?

Everything comes from that. Bob Proctor said, “It’s 95% mindset and 5% what you do.” It all starts with a mindset. When you think about it, it makes sense because mindset includes the stories we tell ourselves about ourselves. We have this constant chatter. What are the things you are telling yourself? Are they things about, “I’m successful, productive, and powerful? I can be in business on my own,” or is it the snarky six-year-old who is going, “What are you smoking? What are you thinking about?” You wish you could do all those things. It all starts with a mindset.

If I may, I do a lot with critical thinking, and there’s a progression. It will sound familiar to people, I’m sure but thoughts determine feelings, feelings determine decisions, decisions determine actions, actions determine results, and results reinforce those thoughts. Everything starts with thoughts. Everything starts with a mindset.

Thoughts determine feelings; feelings determine decisions; decisions determine actions; actions determine results; and results reinforce those thoughts. So everything starts with thoughts. Everything starts with a mindset. Click To Tweet

I was having a conversation with a woman. We are starting to invest in some different things. My husband handles the stock portfolio. I handle the real estate portfolio but I’m interested in some other explorations now. There are many new opportunities. I want to discover all this stuff. I’m talking to this one woman about some of this stuff, and she has a mastermind that they have developed. It’s three women. One of the women is very wealthy. She was like, “I will put $400,000 into this investment.” It makes me choke. I can’t imagine putting $400,000 into anything that’s not real estate. Anything that’s liquid but that’s silliness too.

She was funny because she said, “Hanging out with this woman, my mind has completely changed. I look at things in a different way and make quicker decisions. I have a lot more confidence in my decisions, and I’m not derailed by people around me that are telling me that it’s not going to work or they are expressing all of their fears and projecting those onto me in my decision-making process.”

I was proud of her. There were two big things that I took away from that. I didn’t need to share with her. She was doing a great job but those two things that I loved were understanding that your mindset is going to determine your success for all of the reasons that you said. The second thing is that your mindset will evolve based on the people that you hang out with. Much of the time, people out there are scared of real estate, the stock market, and all these other things because they don’t know, and that’s fair.

It’s because they are scared, it does not mean that when they share their fear and impose that on you or project it on you, you have to take that on. You need to be around people that are going to uplift your mindset and support your goals. If there are people that are where you want to be, and they say, “That’s not a good idea,” that’s the person you listen to. You want to listen to your mentors, coaches, and people that are successful in the industry that you are looking to be successful in. In general, most of us don’t understand.

I experience fear around crypto, NFTs, and all these words that I don’t understand but because I understand that I don’t want other people projecting their fear onto me, I’m careful not to project my fear around those things onto people that are successful at that or starting out in that. My only suggestion is to make sure that your mentor, where you are learning, is someone who is where you want to be. They have experienced success over the long-term.

Even crypto has been around for several years. People can have gone through cycles and experienced the roller coaster that Bitcoin is. Whatever it is that you are investing in, don’t take on there. Hang out with the right people but your mindset is the first place because if you are not in the right mindset, those people are not going to want to hang out with you.

Isn’t that true? If you were, “I’m scared. I don’t want to do it. I can’t take action. This won’t work,” and all those things. Those people don’t want to hang out with you because you pull them down. We always want to hang out with people who are our equals or our peers and learn from one another. The one thing that you do not want to be bringing to the table is negativity.

I hijacked that but that’s why I’m excited about this conversation. Not only because it’s you, Sallie, and I’m excited to talk to you but I had this conversation and saw the level of success that is created by managing that mindset. Talk to me about some of the tools that you use. We are going to be talking about the tools of the business but the tools that you use for your mindset.

I use the acronym M*S*G, Mindset, Skillset, Get Off Your Asset. It gets a chuckle. It’s memorable and brings together some important principles. As important as mindset is, most of us are not taught to have that right mindset. If anything, we are taught not to because, as you said, we have all these messages from people around us. We are constantly bombarded with society, family, and friends. Most of them are all well-meaning, and yet, it changes our mindset to one that is suboptimal.

We're constantly bombarded by society, family, and friends, which changes our mindset to suboptimal. To have that mindset, many times, we need a new skill set. We need to learn skills about how we identify mindset. How do we change it? Click To Tweet

To have that mindset, many times, we need a new skillset. We need to learn skills about how we identify mindset. How do we change it? How do we maintain it? How do we make sure we are in the room with the right people? If you are in a room and you are the smartest, prettiest, funniest, and most successful, you are probably in the wrong room.

It feels super good. It’s a great ego boost. You will learn in every room. I don’t want to say you are not going to learn but you are going to be elevated if you are in a different room.

That’s part of the skillset to learn that and to listen to those mentors and people who are where you are planning to be because it is a plan and goal. You are going to get there. It’s a strategy. It’s not hope. It’s not wishing people who are where you are going. Those are the people you want to be around. You want to cultivate that mindset of openness to be able to receive that information instead of being close and going, “I know that. I have tried and done that. It didn’t work.” How many people do we hear like that? That’s a skillset.

I want to go back to that, Sallie. That is super important. I want to highlight it. Many of you ladies have heard this stuff before. You have even read it on my show before. There’s nothing new under the sun, ladies. It’s all said in different ways. There are new techniques that are altered, adjusted, and brought to the market and in our minds.

We have EFT on this show a lot. People were like, “I heard that on Moneeka’s show,” and then they will tune out. The thing is that if you are hearing it from a different voice, other things may click with you. The last EFT person that was on the show was in 2021, and she did a process for us. Maybe that didn’t work for you but you are a different person now than you were before. Your response to that technique may be different or maybe Sallie does it a little bit differently because there are different ways, and everybody puts their own personality into the process. That’s for the healer as well as for the recipient.

I know you, ladies, are respectful and great but don’t tune out because you have heard this before. Stay fully engaged and present. The other thing is that because you’ve heard something doesn’t mean it doesn’t work. If you have tried it, you are in a different place now. If you haven’t tried it and you’ve just heard it over and over again, you might consider trying it because nothing happens unless you take action.

I want to highlight that because I have heard it before, and I’m guilty of this all the time too. We have so much stuff coming into our minds and our worlds. The, “I have read it,” is a protection mechanism. When you are listening to somebody that you respect, put the I have read it aside and come with a beginner’s mind.

I’m holding my hands up. Studies show that when you hold your hands up, your mind is more open. You are more receptive to learning. You are better able to learn and retain information. Be open to knowledge from wherever it comes.

REW Sallie | Real Estate Investments

Real Estate Investments: Be open to knowledge from wherever it comes.

 

Ladies, you can go to BlissfulInvestor.com, so you can see how she was holding her hands. That was beautiful. Go ahead and keep going.

Skillset, and we have to put it into action. If we don’t take action, nothing happens, and nothing changes. That is an important skill to be able to take action because we have that tendency to procrastinate. We all do it. I have written articles on procrastination and how to overcome it. It’s a skill that we have learned to cope with certain things. Taking action is a skill that we can also learn to overcome that procrastination. It all goes back to the skillset and the mindset. That allows us to take action and put everything into practice. Otherwise, it’s a picture on the vision board.

REW Sallie | Real Estate Investments

Real Estate Investments: Taking action is a skill. We need to learn to overcome procrastination.

 

Part of the skill is learning to be decisive. It’s learning to trust yourself. Could you talk a little bit more about some of the skills that helped to build that mindset?

Anything that is resilience related. I speak a lot about resilience. It’s such an important thing, and resilience is M*S*G in practice. Four major areas of resilience in our lives, physical, emotional, mental, and social, all come together. As you build physical resilience, your body is more capable. You are better able to withstand the challenges that come to you if it’s stress, illness, injury or whatever it is.

There are specific ways to build that with physical activity. If you are sitting for more than an hour, studies show that your body is going to deteriorate. When you are coming up on the hour mark, stand up, move around, take a couple of steps, do something, get into physical activity, avoid negative substances, and binge-restrict behaviors.

The negative substances are not always about alcohol and drugs. It could be caffeine, gluten or whatever. It is harmful to me personally. Binge restrict is not always about eating and drinking. It could be that streaming service, all those things. Emotional resilience is our ability to access our positive emotions when we choose. That’s a mindset. We don’t get caught in those low-frequency emotions but can choose to respond rather than react to life events.

We have mental resilience. This is our ability to come up with systems and processes that have a different perspective mindset. Access our creativity, come up with creative solutions and consider different people’s perspectives on things that are opening our minds to mentors and knowledge. The last one is social resilience, which is our community. Our ability to ask for and give help to others, families, friends, neighbors or everyone in our community. Studies show that the more connected you are to your community, the more successful you are likely to be. All those things that can build resilience are important in life and business.

Could you talk to me a little bit about social resilience and what you mean by people being more successful based on social resilience?

Social resilience is our ability to connect with others, family, friends, society, communities, and groups that we are members of and the ability to know that there is somebody there when you need help, you can ask for help, and they will give it to you like a trusted mentor, for example. That’s social resilience. The ability to give help in return. The more connected we are socially, studies show that we tend to be more successful in life and business because we have those networks of people we can call upon. Here is a fun thing. People can build a little bit of social resilience. The next time you have a chance, shake hands with somebody. As you do that, tell them, “Thank you.”

I always refer to studies, and studies can say anything. However, the studies show that when we do that, the touch and the expression of gratitude, we produce a hit of oxytocin in our brains, which is the trust hormone. That makes it more likely for us to want to help and support each other in business, life, and whatever ways. The more we do that, the more we deepen that oxytocin trust bond and self-serving. That’s a fabulous time to ask somebody for a referral because you have already softened them up with oxytocin.

It has been such a fascinating thing over the pandemic over the last couple of years how our communities have changed dramatically. We spend more of our time on Zoom and less of our time touching one another and saying, “Hello.” Even when we see each other and are in each other’s energy space, we don’t touch each other.

We have changed the way that we socialize. Some of it’s certainly going to stick. I couldn’t have this interview with you, Sallie, if it weren’t for amazing Zoom. I love that. I think that our communities and having that physical, at least being in people’s energy space, are important. One of the big keys here that you mentioned, and I want to highlight it, does still need to be the right people. That does not mean you don’t hang out with your friends or family. The people that you love certainly have a place in your life and should. It should be valued, loved, and cherished.

When you are thinking about progressing in your business, you also need to have a community that supports that evolution, growth, expansion, open mind, new ideas, and lots of opportunities. You need that community to support you in that way, also. Much of the time, we are social resilience, and we focus on our personal life, like, “I need support because my parents are elderly. I need support because someone I love passed. I got something that I’m dealing with,” whatever it is.

I’m not good at asking for help. I’m getting better, and there’s a receiving it without feeling guilty. Those are all skillsets too. We are used to it in our personal lives. We tend not to want to do it in our business lives because, as women, we feel like it makes us look stupid. The problem is that if you are afraid of looking stupid, you are going to look stupid because you are not learning. You don’t know what you are doing. You are pretending that you are something that you are not. People can see right through that. Did you have anything you wanted to add to that?

I have experienced that myself, and for me, it was perfectionism. That mindset of, “I have to be perfect. If I ask somebody something, that shows I’m not perfect.” We miss out on many opportunities because of our mindset. I’m not perfect. More importantly, I don’t have to be. Something to remember here is that it’s not what you don’t know that holds you back. It’s what you do know that’s not true that holds you back. The idea that I have to be perfect is something that is not true that holds me back in business and life. When we can identify those things, and that’s all part of our mindset, then we are open to asking and receiving.

It's not what you don't know that holds you back. What you do know is not true – that’s what holds you back. Click To Tweet

My little sister once said about my nephew because everybody was saying, “There was some stuff going on with him.” My little sister said, “He’s perfect just the way he is as long as you don’t compare him to other people.” That is something I take with me so much of the time because I’m like, “I don’t know this. I don’t want to look dumb. I don’t want to ask too many questions.”

It is about perfectionism because I remind myself, “You are perfect the way you are, as long as you don’t compare yourself to other people.” Allow yourself to be who you are because who you are now is you are heading to the next place. There are going to be people that are going to be delighted to help you get there.

Unless you ask questions, you are not going to know if you are hanging out with the right people because there are going to be people that are going to judge you and get snarky. Don’t hang out with them. Thank goodness you didn’t find that out after several years of investing in that relationship. Find out fast. If they are not going to tolerate your questions, curiosity, personality, and goals, they are not that person that’s going to help to elevate you.

That is another thing that brings up one of those things that we know that’s not true. Everybody has to like us, so we have to like everybody else. I’m not saying to treat people disrespectfully. However, it’s okay if you don’t want to be around certain people and they don’t want to be around you. Find the people who are supporting you in your goals, accomplishments, and vision of where you are going in life. That’s okay. Not everybody is going to be there.

Not only is it okay. It is preferred. We only got 24 hours in a day. You only have a certain amount of time to be social. Make sure it counts. Make sure it is fun and good for you. Make sure it is one of your bliss things, not one of your obligatory things. We only got so much to give. You want to make sure that when you are giving, you are also being nourished, elevated, and all of those things.

Maybe it’s me but I had similar conversations. It was such an epiphany when suddenly, it was like, “Not everybody has to like me and I’m okay.”

I’m a people pleaser too. I will be like, “The person didn’t like me.” Now, I give it about five minutes, and then I’m done. It doesn’t matter. I allow myself if I’m feeling sad or definitively if I did not have a connection with that person. It felt a little bit bad but then I realized, “That person that I didn’t have an affinity with if I tried to build that relationship, how many phone calls, emails, and time would it take to build a relationship with that I don’t have an affinity with and how much pressure and work?” If it was a fun person we were aligned with, then we enjoyed spending time together. This show is all about taking action. Let’s talk about taking action and creating a plan for building that mindset to achieve certain goals.

There are three things you want to consider with mindset, perspective, reason, and will. With perspective, we have talked about this before. It’s our ability to view things from other perspectives. We all probably remember the story of the blind men and the elephant. Each of them experienced the elephant in a different way, with trunk, tail, and tusks, and they defined it in a different way based on their perspective.

REW Sallie | Real Estate Investments

Real Estate Investments: There are three things you want to consider with mindset: perspective, reason, and will.

 

Could you tell us that story? I haven’t heard that one.

There were 9 or 10 men who were experiencing the elephant. One person had a trunk, a tusk, a tail, and an ear. They were all talking about, “What was the elephant? Describe it.” They all described it differently because they had all experienced a different part of the elephant. They were all right because there was the tail. That is what it felt like but they were all wrong because their perspective was incomplete. The truth is that our perspective is always incomplete.

Depending on what our perspective is, it’s either going to move you forward or hold you back. Be aware that we tend to have blinders on. That is partly because of our training and how our brains work with the reticular activating system. We see what we are looking for. We don’t see what we are not looking for. If you can open that up and take those blinders off, you broaden your perspective. That’s all part of the mindset. Become aware of that.

The easiest entry point into mindset is to look at the results you have in your life. If you are happy with those results, perfect. Do more of what you are doing. If there is a result that you are not quite happy with, then the easiest entry point to change that is to look at your thinking about that and change your thinking. All of that, and perhaps the answer as you change your thinking, is to have a different perspective. In LP, we call that reframing. Everybody heard about reframing. Tell yourself a different story, and you are going to get a different result.

REW Sallie | Real Estate Investments

Real Estate Investments: As you change, your thinking is to have a different perspective.

 

It’s funny because I will frequently say, “You are always making up stories. Everything that goes up in your mind, you are making up.” It’s your story. You might as well make up stories that make you feel blissful. Is it stories that make you feel bad?

I have a perfect example if you don’t mind. Years ago, I was with a successful real estate agent in this area, and she was doing some lead-gen cold calls. She was starting to make a call. She said, “I’m going to call up my friend, Bob.” I’m making up a name. I’m like, “She knows Bob.” She called him up, and he hung up on her. It was a cold call. She didn’t know this person. I thought from the way she approached it. It was her friend because that is the way she approached it. That was the story she was telling herself about Bob.

When he hung up on her, she was like, “We got disconnected.” I’m like, “Are you stupid? He hung up on you. You didn’t get disconnected.” She called him back and was like, “We got disconnected for some reason. I’m sorry.” She tried to talk to him again. He hangs up on her. She was like, “We got disconnected again. He needs a smile. I’m going to ask an agent on her team. I’m going to ask her to go and see him at his house and give him a smile because he needs somebody to make him smile.” That’s the perspective. That’s the story she was telling herself about. She was there to contact her friend, and if her friend was not happy to hear from her, he needed somebody to help him smile. Those are the stories that we can tell ourselves to change our results.

I love that you and I are mindset people, and we are both like, “What?” It’s funny because it sounds hokey. Those of us grounded in reality know what’s going on but does that help us? I don’t want to have fun doing cold calls. I would probably have a lot more fun if I had her attitude. The reality is that we create the story in our heads. We have the story. We create the reality for ourselves. We are not necessarily creating the reality for the world around us. Although many times we are because people take on our energy and start to experience life differently when they are around but you are experiencing your own personal response to any given situation.

That’s the emotional resilience to be able to tap into those positive emotions when we choose so that we are responding rather than reacting.

Emotional resilience is being able to tap into positive emotions when we choose so that we can respond rather than react. Click To Tweet

Let’s talk about developing the action steps to achieve specific goals.

That is important because it is not only the goals. It’s the system and the process because goals can be overwhelming and intimidating. We look at the goal and think, “How am I ever going to get there?” It’s all about reverse engineering goal setting to the present. You ask yourself, and people will recognize this, “What is the one thing I can do that will move me in the direction of that goal?” I break it down into daily steps that will move me in the right direction every single day. It’s important to do that because if we’re focused on the goal, we’re living in a constant state of failure. I’m only successful when I get to the goal.

I’m going to lose 20 pounds. If I have only lost 19 pounds, I’m still a failure because I haven’t met the goal but if my goal is to improve my health and nutrition, and I’m doing things every single day, I’m successful every single day because I’m moving in the right direction. Systems and processes over the goals always. Break it down into daily steps. “What am I going to do now that will continue to move me in the right direction?”

That may change from day-to-day because we are going to course correct. It’s not always a straight line to that goal. The NASA Apollo moon projects were off course 97% of the time and made it to the moon and back. It was because of that constant course correction. We are always going to be adjusting and correcting our course from day-to-day, and yet, we are still moving in the right direction.

One way that you can launch into action is, first of all, to write your goal and your steps down. When you do that, you increase your chances of success to 56%. There are only three steps. The next step is to share that goal with somebody. You have an accountability partner. Maybe it’s your mentor, a coach or whomever but it’s an accountability partner because we can’t hold ourselves accountable. We have to have somebody else do it. When you do that and come up with those daily action steps, you increase your chances of success to 64%.

The accountability partner should not be someone who is going to be supportive all the time. What I mean by this is that you should be embarrassed if you report that you didn’t achieve your goal. Not like so much that you don’t want to show up or get the response from the other person that you don’t like them anymore. I do think that it’s important that you should be embarrassed with your accountability partner to say, “I didn’t do it.”

You should feel like you have to explain why and what your plan is to catch up. Your accountability partner is not your best buddy where you were both like, “I didn’t lose anything last week.” “I didn’t lose anything last week, either.” We might as well get a milkshake. I had those accountability partners. I’m telling you, it has the opposite effect.

It’s a weird thing because I have these in my life. It’s not that you want to do it for them. Somehow there is something about that relationship that inspires you to be the best you. That is why you do it. Not to please them but to honor yourself. If that makes sense.

You should value their opinion enough that if they say something that’s hard to hear, you are able to step back and not get all flustered, offended or defensive. You are able to say, “Maybe they have a point. Let me think about that.”

You need to be willing to listen with open hands. Listen so that you are receptive to the learning and without being defensive that you are going to go, “What do they know?” The third piece is to make progress reports back to that accountability partner, which is what you were saying. At least once a week, you are reporting back on your progress over the past week because accountability is key, and the progress report is key. When you do that, you increase your chances of success up to 76%.

You must be willing to listen with open hands to be receptive to learning. Click To Tweet

I want to say that this isn’t hocus-pocus. If you know anybody in corporate, what have they instilled? It’s the agile program. They got two-week sprints. At the end of those two weeks on their deadline, they have to report to everybody what they achieved, how they had the course correct, what didn’t work, and what did work. If now you found that that system that you guys were all working on isn’t working, you have to course correct completely new products and new features.

The whole agile framework is about accountability. That’s all it is. They know that they got a two-week window to achieve a certain number of goals. They are given, discussed or created those goals all for themselves and have a whole accountability meeting to figure out what’s next. It’s done in corporate all the time. I haven’t yet met anybody in the last several years that is not on some version of the agile format. It’s because we may not be in corporate, and we may not have that experience. You have to create it for yourself. With agile, they do a two-week thing. Sallie is recommending one week. You need to find what works well for you. 1 month or 3 weeks is usually not going to work.

It takes too long in between reports because it is easy not to do it. You think, “I got a whole month before I have to do it.” It never happens. You are setting yourself up not to succeed there.

This has been good. Thank you so much.

It’s a pleasure.

Ladies, we have a surprise for you in EXTRA. Sallie, who’s an NLP master, is going to give us a process. She calls it the Ring of Power, which is stacking anchors so that you can choose different states. We call it in NLP states. A state is like confidence, passion, calm, self-reliance, and joy. There are lots of different states, and you can use these states for different things. I have different Rings of Power for when I’m going on a date with my husband, making cold calls, sitting at my desk, speaking or doing a show.

You can create these different rings that you can hold at different times so that you can use them in your life. We never had anybody do it for you ladies on this show. It’s a tool that I use all the time, every day. I got many of them. I’m super excited that she is going to be sharing that with you. It will be a useful tool. I’m excited that Sallie has been generous enough to offer that in EXTRA. Thank you for that.

It’s a pleasure.

Sallie, could you tell them a little bit about your free gift?

It is an eBook. It is entitled, Reboot Your Thinking With M*S*G. We have already talked about what M*S*G is. Reboot Your Thinking is a signature coaching program that I develop. This is a little taste of what that is. As we develop the mindset, skillset, and action, we must reboot how we think.

REW Sallie | Real Estate Investments

A Quick Guide to REBOOT Your Thinking With MSG

M*S*G is Mindset, Skillset, and Get Off Your Asset. I love that. The URL to go to get this free eBook is BlissfulInvestor.com/reboot. Thank you for that. Are you ready for three rapid-fire questions, Sallie?

I am.

Give us one super tip on getting started investing in real estate.

Start small, and figure out what the market is before you get started.

What is one strategy for being successful as a real estate investor?

Continue to stay knowledgeable about what is going on. Understand the basics and things change, particularly in the area of Fair Housing, which can be very problematic for people.

What specifically are you referring to there?

For a lot of property managers, at least in this area, there are testers in the area, and they are being hit with claims of Fair Housing violations for various reasons. For example, it could be with screening for criminal background checks, service animals, emotional support animals or familial status. Those are the hot-button items that I’m seeing a lot of.

What is one daily practice you do, Sallie, that contributes to your personal success?

It is all around building resilience. I find ways to build resilience in those four areas, physical, emotional, mental, and social, every single day.

Ladies, thank you so much for joining Sallie and me for this portion of this show. If you are subscribed to EXTRA, stay tuned. We got more. We are going to be doing a Ring of Power Process so that you can be powerful in whatever you are doing in your day or business. Stay tuned for that. If you are not subscribed to EXTRA but would like to be, go to RealEstateInvestingForWomenExtra.com, and you can check it out there.

For those of you that are leaving Sallie and me now, thank you so much for joining us, and thank you for all that you are doing in your life and for continuing to stick with me. I love you, ladies. I’m looking forward to seeing you next time. Until then, remember goals without action are dreams. Get out there, take action and create the life your heart deeply desires. I will talk to you soon. Bye.

 

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Data-Driven Real Estate Investing With Stefan Tsvetkov – Real Estate For Women

REW Stefan | Data Driven Real Estate

 

The real estate industry has been growing faster than ever because of technological advancements and other factors, leading investors to analyze data more easily. Listen to your host Moneeka Sawyer as she talks with Stefan Tsvetkov about the importance of data-driven real estate investing. In this episode, Stefan shares his knowledge and key insights about the market and different scenarios you can review so you won’t make mistakes. If you understand data analytics, you can make better decisions and generate more income. So, tune in to have a deeper understanding of the market and the industry.

Watch the episode here

 

Listen to the podcast here


 

Data-Driven Real Estate Investing With Stefan Tsvetkov – Real Estate For Women

Real Estate Investing For Women

I am so excited to welcome Stefan Tsetkov to the show. Stefan is the Founder of RealtyQuant at RealtyQuant.com. It is a company that brings data-driven and quantitative techniques to the real estate industry. They are on a mission to add industry value through education, investment, technology, and analytics. He is a financial engineer turned multifamily investor, analytics speaker, and live webinar host.

He holds a Master’s degree in Financial Engineering from Columbia University. Entering his finance career, he managed $90 billion of derivatives portfolio jointly with colleagues. He was featured on multi podcasts and webinar events including Elevate, Best Ever Real Estate Show, and Investing in the USA. He is the host of the Finance Meets Real Estate webinar series.

Welcome to the show, Stefan.

That was a great introduction. Thanks for having me.

Tell us a little bit about you. Give the executive version of how you got to where you are investing in real estate and why you love talking about analytics.

I’m a financial engineer. Originally, I’m Eastern European. I came to States. I went to Columbia and New York for my graduate degree. I worked in the financial industry for about a decade. In the last couple of years, I’ve been a real estate investor as well as a founder of a technology analytics company in the real estate industry called RealtyQuant. I took on analytics related to that. We publish market evaluations as to how over, under, and fairly valued our different markets are. We also do data-driven investing and build different technology and tools in the industry for that.

We’ve had one person come on and talk about data-driven real estate, but he wasn’t an analyst. This is exciting. Don’t be shy about talking about numbers. We can handle it. I’m super excited to hear how you run this. First, let’s define data-driven real estate investing.

It incorporates different data science or technology techniques for investing or discovering inefficiencies and opportunities in the real estate market. A big part of that is automated underwriting. Automated underwriting where you can pull thousands of on-market and off-market listings and underwrite them even to a partial extent. Later, you would perhaps need to go to the property in person, but it is still this preliminary analysis.

Automated underwriting is a big part. To that, there are different machine learning also that comes into play a bit. These are things like computer vision where you are able to see real estate images and define the condition of those properties. You can define the condition scoring based on real estate images or texture descriptions and also extract other intelligence from texture descriptions.

There’s also financial modeling for off-market inventory in the commercial multifamily space. That’s very useful. It’s a set of techniques for finding deals and markets. On the market side, it’s also engaging valuations. It’s having appreciation predictors and downside predictors for your markets. That’s so very useful in the commercial multifamily space. In residential investing, you’re able to gauge markets and pick the best ones. That’s what data-driven investing is. It’s a slightly different approach than the more local real estate investing, and there are good reasons for that such as you want to be vertically integrated. You want to have your team within a location. You want to understand that location really well.

Data investing is more agnostic to that. Thus, you try to gauge those markets somewhat in a bigger way. You’ll be able to scale and do this anywhere in the US. That is the difference. It’s also getting your own intuition with the data rather than reading reports. That’s not data-driven in my mind. If you’re purely working on reports, it could be, but it’s a little bit hard without also interacting with the data yourself or an analyst on your team doing it. It takes bigger insights with that.

With the reading of reports, do you think it takes more insights?

Yes. It takes more than a summary reports of what are the best markets in the US for this and that. In my experience, at least, you need the whole data for the whole US everywhere. It’s a bigger endeavor.

If someone invested in undervalued markets at the peak of the global financial crisis, they would outperform. They didn't perform great, but they still performed. Click To Tweet

How did you get started investing in real estate? I want a little bit of context. How did you get started and why did you move from where most of us are where we’re looking at reports or listening to the news? We’re trying to invest locally because those are markets that we understand. That’s the more intuitive way that most of us invest, and you moved to more data-driven. Could you give us a little bit of your journey? How did you get started, and how did you get to where you are?

I’m in New York. The first property I bought was with a house hacking strategy. Many people are familiar with that. I bought a multifamily post in New Jersey. I lived in one unit and rented out the other one. I thought it was working well. There was a beautiful discount on the price as well. I thought, “I should work into it more professionally and find investment opportunities as a professional investor.”

From there, I started as a residential investor doing condominium conversions in the New York City area and other projects. I started pulling lots of data. I pulled perhaps 6,000 on-market and off-market properties within three hours from New York City and would have them underwritten on different strategies. It’s not only that, then you can compute your cap rates and different things like that. You can also underwrite on strategies that are otherwise hard to think about at such a scale for so many properties such as condo conversions or perhaps converting a residential to a commercial property. That was the way I started.

I’ve been doing residential deals in the New York City area in the small multifamily space that are close to markets like downtown Jersey City and WeHo which are very close to the city and some in upstate New York. From there, I’ve been transitioning to the commercial multifamily space in the Midwest and working for different deals in places like Iowa, Minnesota, and more fairly valued markets at that time.

When you moved out of New York is when you started becoming more data-driven. Is that true?

No. I am still physically in New York. I was data-driven when investing around in the New York City area as well. We pull residential listings for many. When you’re transitioning to commercial multifamily, the market side becomes more relevant because you’re not in your local market. You want to pick the best markets out of state. There are also concerns about whether they are overvalued or if we are going to have a recession. That prompts some of that analysis on the market side.

That’s a perfect segue. Let’s talk about how to determine if a market’s overvalued or what is the downside risk. Let’s talk a little bit more about that. 

That is a million-dollar question if you think about it. Think ahead of the global financial crisis. Ahead of the global financial crisis, there were investors who invested in, for instance, California or Nevada. Those had a 50% decline, roughly speaking. They were extremely successful investors. That’s more speaking to the residential single-family space for this discussion because the commercial multifamily market is a bit of a different dynamic with cap rates and so forth.

Some of those investors lost all their networks. They were not the biggest investors, but the biggest people you watch in podcasts in the US. They were extremely successful and they were extremely successful with their operational process. They knew how to find deals, yet, they lost a lot of their network. The reason is those markets were extremely overvalued.

On the contrary, there are others. One of the bigger syndicators purchased his property in Midland, Texas. It was his first syndication. It had a super huge return. The reason is that Texas was undervalued. That’s ahead of the global financial crisis. This is a backward discussion. It was undervalued at the time that didn’t decline. They did decline but at a 4% average. They declined very little. They declined on their income, but on valuation terms or normalized terms, they didn’t.

I want to stop right there quickly because you’re going fast. It’s super awesome. You’re coming in with a lot of good stuff. I want to highlight some interesting things that you said. Which decline are you talking about? Do you talk about 2008 and 2009?

REW Stefan | Data Driven Real Estate

Data Driven Real Estate: You don’t just get to compute your caps and different things like that, but you can underwrite on strategies for properties that are hard to scale.

 

Yeah.

That’s what you’re referring to. I’ve been through three of them, so I want to make sure I knew which one you were talking about. In many of the markets in California, we were overvalued. I tell this story on my show many times. In 2009 and 2008, I lost 50% of the valuation of my properties in a period of three months. Things dropped so fast. When you go to a market like what he’s talking about in Texas, it’s not overvalued. It still did have a response to the crash, though, but it was only 4%. That is what he’s quoting us at.

It doesn’t mean that the other markets don’t move, but it’s a gentler move down. The correction is much easier to make that happen. In California, we saw a correction. It took about 6 or 7 years, and not all markets recovered. Only some of them recovered. Location was a big deal. I don’t know the rest of the country, but based on what you said, I wanted to point out that it’s not that because you’re in a low-risk market, you’re not going to see a drop. It’s that it’s a much gentler drop in response to the national or international crisis that we had.

Some markets in North Dakota at the time could see no drop as well. They could see zero drops. That was during the global financial crisis. Since you asked me what is the definition, the definition is price deviating from fundamentals of income population and housing supply. This is a fundamental analysis similar to the stock market.

I did a back study for the past three recessions. The global financial crisis is 1 of those 3 recessions. The correlation for the Metropolitan Statistical Areas or MSAs was of decline with the market evaluation and the peak ahead of the global financial crisis. Price decline peaked to bottom over the next roughly four years and one quarter on average. There are different periods in different regions, but those are declines that took four years forward. The correlation between the magnitude of decline and valuation was 89%. That’s huge. Declines were predictable in magnitude ahead of the global financial crisis.

There were people who were talking at that time. I don’t want to go into too much detail. He was a guy from Massachusetts. He doesn’t come to a local market monetary but he was on CNN in 2005 and 2006. This is practiced by the Quadrants Institution and done by Moody’s Analytics. This is studied for entrepreneurs. It’s done by my company, RealtyQuant. For your audience’s benefit, we do publish the data for every US County. We have 2,700 US counties. We have every single county if it’s over, under, or fairly valued. That is a statistical predictor of declines in the recession. It’s an important one. I’m not sure if it’s a good time to share my screen to show a table on this.

He asked me for permission to share his screen. I said yes because those of you that are going to check this out on YouTube will get the visual benefit of this. He is going to walk us through this. If you’re audio-only, don’t worry. He’s going to walk us through this. This also might be a good time to go check things out on YouTube. You can look me up, Moneeka Sawyer, and you’ll see all the YouTube things. It’s all yours.

Thanks. Are you able to see tables in an Excel sheet?

There are a lot of numbers.

That’s a big table with a lot of numbers, but I’m going to give you the gist of it. What I’m showing here is ten years ahead of appreciation or price changes in the US. These are how different markets perform after a mild or a severe recession for ten years forward based on how over, under, or fairly valued they are. It’s the peak ahead of the recession. To repeat, this is how different markets perform for ten years forward based on their evaluation and based on how overvalued the peak of a recession goes, and how different markets perform following that.

The 1990 recession is referred to by most economists as a milder recession. The global financial crisis is a scenario for a severe recession. That is what this table shows. It’s a lot of numbers, but it’s extremely interesting. It gives a perspective for many investors. At this time, investors have had the price performance in Western and Southern markets. The first column on the table shows overvalued percentage. The valuations in some Western and Southern markets are 20% to 30%. Some are in the 40% to 50% range. That’s overvalued. I can get to that part as well.

The goal should be where do you get the best appreciation? That's what you should care about. Click To Tweet

This has a picture of the United States and all the different states and markets. We’ve got a little bit more clarity on which states he’s talking about.

I’m showing a picture of the US and what is the overvaluation or undervaluation in different US states. This is the deviation from fundamentals. The dark-colored states in the picture are to the West and to the South. Idaho, for example, is at the top. It has been reported by Moody’s Analytics and other studies. It had a consistent observation for everyone with Boise, Idaho being the most overvalued city in the US. You can even search for different methodologies by Mark Zandi, Chief Economist of Moody’s and others, or RealtyQuant in my capacity. It’s generally consistent. Boise is at the top of 800 US cities.

Idaho is over 50% overvalued. On the counter, the Northeast and Midwest are under to fairly valued. These variations have been accelerating a lot with inflation since 2021, starting with what was a fairly valued US market at that time. I know it’s a lot of numbers, but it’s extremely important. I could put a lot of work into that myself.

It’s not to get a doomsy perspective. In the Western market, Idaho, Nevada, Arizona, Utah, and Colorado are overvalued to an extent. It’s less so than Idaho, but still to an extent. I speak to investors and syndicators who say, “We think these markets have such strong fundamentals even if they have a bit of a decline for some time. Let’s say they have a 5% to 10% decline. They’re going to do well afterward because they have such strong fundamentals. There’s so much job growth there.” That’s not what history suggests. What happened in the previous recessions was markets were at the very peak of valuation.

I suppose we take either at 54% overvalued. I have a table that shows the valuation ranges of how overvalued different markets are and how they perform ten years ahead. Markets that were in the 50% to 60% range were extremely booming ahead of time. For instance, the 1990 recession is a milder session. We have nothing doomsy. Nobody even knows about this as far as the real state declines.

I know about that one. I lost 20% of my value.

It’s a very milder session. There’s nothing terrible happening in your state. If one invests in a metropolitan area that is valued at 50% to 60%, which is the case of a few metropolitan areas in Idaho and some other states, what happens is not the situation of a milder recession where the market declines quickly a little bit and jumps back. What happens is the market declines a little bit, but it doesn’t jump back quickly. It takes a long time for that decline to happen. In that case, it took eight years. What is more important is, what is the relative performance over ten years of a market like that that was overvalued versus the other ones?

For instance, in this case, older markets in Metro areas that were over about 56% only appreciated a little bit. It was 16% over ten years. They were heavily outperformed by the undervalued ones. That is not intuitive. That’s not what people are imagining for Western and Southern extremely booming markets. They’re imagining that those are fast markets. The Midwest is a small market. Other places have small markets that are steady. They’re not slow and steady. They are expected to outperform another recession. It’s interesting. Undervalued markets following a recession outperform the overvalued ones. It’s important to know that the overvalued ones were also the top-performing ones ahead of the recession.

Ahead of recession correlation between how overvalued they are and how well they’re doing becomes very high. They’re doing incredible. For instance, if we go to 1990, that’s Hawaii. Hawaii was the top state at that time. They were 150% top from their previous market cycle. They were the top market. Nobody would easily imagine unless doing this kind of fundamental analysis that their prices are going to be lower 80 years later. They’re going to have the weakest price performance for the following decade. That was the strongest performer. That’s why fundamental analysis is extremely important.

Similarly, if we go to the global financial crisis, California, Arizona, Nevada, and Florida were the four big overvalued states at that time. In the table, they had the worst bottom performance consistently year after year for ten years ahead. That’s extremely important. On the contrary, if someone invested in undervalued markets at the peak of the global financial crisis, they outperform. They didn’t perform great, but they still performed. Let’s say 20% over the course of ten years is extremely poor performance, but it was not negative. It was better than the others, so they outperform.

This isn’t true of the whole state. California is a huge state. There are different pockets that perform differently. It’s the same with Texas.

REW Stefan | Data Driven Real Estate

Data Driven Real Estate: The Midwest are small markets, and, like other small markets, they are steady. They’re not slow and steady; they are expected to outperform a recession.

 

These are the statistics for the MSAs or Metropolitan Statistical Areas.

What he’s saying is that, for instance, California was 52% overvalued. It went down 50% in five years, but then its recovery up to ten years took it to 25% down. It was still a negative 25%. If you look at some of these other markets that were maybe 6% or 3% overvalued, they went down initially during the crisis by 1% or 2%. One of them went down 3%. After ten years, they had gone up 18%, 27%, or 17%.

As opposed to these highly overvalued markets that are still down 25% from when the crisis started, in ten years, they’re still down 25%. In these lower-valued markets, they went down a little bit. Their recovery was not phenomenal, but at least it was recovery. We weren’t negative. We were closer to 18% or 19% after ten years.

That’s a great summary. Thank you for that. I don’t want to focus on too many numbers. It is the big picture intuition of it. The big picture intuition is valuation is extremely important in general, but it is even more important than the turning points in the market cycle. When we’re at the peak of a market, it’s the most important variable that overshadows fundamentals themselves. At the other times, I’m like, “I’m going to be forecasting fundamentals.” That’s how I get to the best appreciation. The goal of this is not a doomsy thing. My goal is where I get the best appreciation. That’s what I care about.

As commercial investors or residents, we do our forced appreciation. As good business people, we generate our business and business profit in this way by being quality investors on the forced appreciation side. That’s always there. If you do that well in a recession, you do it well in other times. You still don’t want to have the effect of markets overlaying on top of that. That is the goal here. That’s why I want to show this complicated table with many numbers. It’s to point that across different levels of overvaluation ahead of a recession where one is mild like in 1990 and one is severe like the global financial crisis, the undervalued markets is a big shift in what most investors are thinking.

Austin, Texas is an extremely booming market that has very strong fundamentals. It happens to be that Austin, Texas is overvalued. That overvaluation has to find relative to those fundamentals. Some investors say, “There’s so much housing shortage. Real estate is not going to decline because of the housing shortage.” That’s not true because housing shortage depends on how you define it.

If you take the broad housing shortage, which is the US Census Bureau total population in that market versus the US Census Bureau housing supply in that market, that is reflected in the numbers that I’m showing. They’re reflecting income and also population to housing supply ratios. Austin, Texas is the best market, but if prices run too forward, it’s going to underperform. That’s a consistent observation. There are around 400 metropolitan areas here and these are two very different recessions. Investing in a 50%-plus overvalued market, which is likely to be the top performer in the market cycle and going to have a reversal in price performance.

That is so not intuitive. You think that a strong market, once it goes through a recession, will continue to be strong. That’s very interesting. The numbers prove to be exactly the opposite.

It depends. In itself, a strong market would recover better, but that is even the comparison of the 1990 recession versus the global crisis. In 1990, why did they have markets that were over 40% to 50%, but they only dropped 15%? The reason is it’s not that the global financial crisis was a “crash” of sorts so much. It was a severe recession and the recovery of fundamentals was very weak.

I know you did mention a sharp decline in some months. I feel terrible about that. That sucks, but in the big picture, the declines took whole four years. Prices still kept dropping. With those four years of declines, what happens in a mild recession is that the fundamentals are strong and they catch up. Even though the market is overvalued more, it ends up declining less because there is a strong recovery. It’s not that one is a crash and the other one is another crash. It depends on how severe that recession is and how strong the economic recovery is from a fundamental perspective. That’s, at least, my perspective.

From this standpoint, it’s true that a strong market would recover faster. That happens in markets that may be overvalued and may recover fast and well and would get a small decline. That is possible. The question for me is not only predicting downside risk. We don’t have a recession yet. That’s all hypothetical. There’s no official declaration of a recession still, but if we were to have one, how do we forecast appreciation? Where is there going to be the best appreciation? This is suggesting that it’s not going to be in the booming ones anymore and they would underperform. The reason is valuation.

If you think about real estate prices, you could have a change in value and it doesn't show due to illiquidity. Sometimes, that could be a no transaction. Click To Tweet

I can go overvaluations in different cities, but that is what the studies suggest. It’s a very different scenario. For instance, we had a recession such as a dot-com bubble in 2001. I’ve studied that one, too. It’s a different scenario. If we have that and there isn’t any significant overvaluation in the market, which there wasn’t at the time, then nothing happens. That’s because they’re mostly fairly valued and things continued going forward. That’s what happened. They continued going forward and then they became overvalued ahead of the global financial crisis. It was a fairly valued period.

It was very fairly valued, but we had a lot of people that lost jobs. People couldn’t afford homes. We did see the markets pull back a little bit to accommodate all those people that couldn’t get homes. Rent went way up because people’s credit got screwed up. Some other issues that happened there that did cause the market to go down a little bit, wouldn’t you say? They’re not strictly statistics.

That could have been perhaps in new listing prices or some of the more transitory kind of data of sorts. At least in the recorded statistics for prices, they’re showing no decline anywhere. It’s quite interesting.

This is the difference between real life and statistics. I want to talk about 1990. I’m sorry. I was mistaken when I said we lost valuation on that one. I do remember that. I was in college. I was listening to my dad and what happened there. I wasn’t personally involved. In 2001, I was personally involved. In 2008, I was personally involved.

In 2001, it was interesting. It was the dot-com crash. It was in Silicon Valley, which is where I lived and where I owned all my homes. This is a market-specific thing. During that time, because of the bust, so many people lost their jobs or had this weird thing that happened with stocks. If you would get laid off, you would have to exorcise your stock and then owe taxes. They couldn’t afford the taxes, so they would have to either sell their homes. There were some weird things that were happening in Silicon Valley. Your numbers are probably national.

What was interesting to me was property values dropped about 20%. During that time, they recovered very quickly. Interestingly, rents went up dramatically during that time because people that would normally buy were not able to buy anymore. When you say you look across all metropolitan areas and you didn’t see anything, that’s interesting to me. San Francisco, San Jose, and Sacramento areas are big metropolitan areas in California. They didn’t see what we saw in 2008, but they saw some discomfort. They recovered quickly, but there was some distinctive discomfort.

That is extremely interesting. If you think about real estate prices, you could have a change in value and there’s illiquidity. The price at which those transactions would happen would be lower. There could be a big decline in unrealized terms. Let’s say it is something like COVID.

What he’s talking about is what I always say. You don’t lose money and you don’t see the valuations change until selling happens. It’s all on paper. That’s all I wanted to add.

That’s the Federal Housing Finance Agency or the main government agency following US prices. The specific thing for 2001 is the 400 or so metropolitan areas in the US. There is San Jose and San Francisco. In the MSAs, they don’t have the data, but then, you did experience it in real life. That’s quite interesting.

That surprises me and confuses me a little bit. How is that possible?

It’s interesting. That’s what you observed, but on the other hand, we haven’t heard anyone else say about any real estate declines in 2001.

REW Stefan | Data Driven Real Estate

Data Driven Real Estate: What happens in a mild recession is that the fundamentals are strong, and they catch up. Even though the market is overwhelmed more, it ends up declining less.

 

What is true is that anybody that could hold, did. Rents were going up so fast. My property dropped 20% in value during those couple of years. It was not immediately, but it was over those two years. It recovered quickly. During that entire time, rents were going up dramatically, so I could hold property. When you’re talking about the numbers that are only going to show when people sell, maybe people were holding. What do you think? Is that a possibility?

Was it multifamily, perhaps?

Mine was all single-family. I’m sorry to challenge you, but it’s interesting, isn’t it?

It could be segmented in the market or possibly in neighborhoods. Still, that’s the whole MSA. As you are saying with the dot-com bubble with some people losing their jobs in some regions in Silicon Valley, perhaps some neighborhoods had declined and others still continued going up. It flattened out the metropolitan area. This is still a pretty high level for the whole metropolitan area. That one that did not have declines is another single metropolitan area. You’re making a very good point. If you’re in a neighborhood, the decline doesn’t matter. You have the same effect. It doesn’t matter what the market did. It appears that perhaps other neighborhoods did better.

What I’m learning from this is that the market went down, but then it recovered very quickly. Rents went up, so holding was easier. What I love about this is that as you talk about the market data, it showed that there was no real decline. I was in a pocket where I experienced a decline. As long as I held, I had time to be right, but it was still a good time to buy. This is such an interesting thing for people. People were asking these questions every day. They were like, “Interest rates are going up. I want to capture the lower interest rates, but markets feel overvalued. Is it a good time to buy?”

Your statistics show that even during that time, it was an okay time to buy because everything was valued fairly. Even though I personally experienced a decline and many of my friends did in Silicon Valley in this little bubble that we were in, it recovered very quickly. We were able to hold. It was still a good time to buy even then. The recovery happened very quickly even though you saw a dip. That’s what I’m taking from that. What do you think?

I agree. You’re making great points there. If we think of what we are doing here, it is a very high-level fundamental analysis. If we start making it super granular, it’s going to be working less well, I suppose. If we go to super tiny neighborhoods and try to do fundamental analysis, it’s not going to work too well. For instance, in my data counties’ predictive power is less strong than states’ predictive power, but it happened with metropolitan areas for some reason. I don’t know if it’s the quality of statistics of those versus counties.

Metropolitan statistics have extremely high predictive power. That’s a little bit interesting. I’m sure if I went to ZIP codes, neighborhoods, and so forth, it’s going to get harder because there are going to be so many other factors. You’re making a point that there is also the liquidity thing. These are quarterly governmental price statistics. If your price dropped for two months in between and jumped back to the same level, then that’s not even detected. If the neighborhood dropped, other neighborhoods increased. It is smoothened out.

On the other hand, for a fundamental analysis like that, perhaps we want it smoothened out. It’s not even going to be tied to fundamentals if it’s too not smooth. It’s like these other things that are either not fundamental. That is the thesis there. You make a great point that it is not applicable to where your property can still decline or your neighborhood can still decline. It’s the broad market.

You were talking about appreciation of the properties with these statistics. We’re not talking about increases in rents or any of that stuff. In a lot of these stable markets, rents continued to go up even though they didn’t appreciate as fast. They didn’t go down as much. Their rents went up dramatically. When you’re looking at which markets to invest in, you want to look at the statistics of whether the markets are going to appreciate whether they’re going to take a hit when the markets go down or when we have a recession. If you’ve got some markets that you’re interested in, you want to keep in mind what your cap rates are, what the rents are looking like, and how those are going up, wouldn’t you say?

I agree. That is a great point, especially for commercial multifamily investors. We’ve seen that very much in this period with humongous rent growth in some markets. Those are different dynamics. If we think of cap rates in the commercial space, they’re driven in a theoretical sense. They tie to something in finance called the Dividend Growth Model. It’s the denominator in that one. It’s the discounted cashflow analysis for commercial property. There are interest rates there. It’s the risk-free rates and then risk premium on top of that.

If prices don't decline too much because we have a robust economy or strong recovery, then the decline is about 18%, which takes a long time. Click To Tweet

Also, what is reducing the cap rates is the expectation for future income growth. That would be the same for any business and valuing other companies as well. That wouldn’t be only for commercial real estate. It would be the same methodology. That methodology derives from a mathematical series of discounted cashflow analysis of any company, business, or property. Rent growth is extremely important, and that drives cap rates in a theoretically valid way. That is a whole different dynamic. We’ve seen that in the commercial multifamily space.

We see it in single-family homes, too. If you’re out there buying a portfolio of ten homes, or for me, whatever I own, we see that in the cap rates also. When we’re buying a single-family home, how is that? We want the property to appreciate, but we also want to know that we’re going to be cashflowing within a certain number of years or hopefully, right away. Those sorts of things matter. When we had our bubble burst here in Silicon Valley, it was the rents going up that saved us from having to sell because we could carry our mortgages still.

This is so interesting. I feel like we could talk forever, but we’re running out of time. First of all, thank you for all that information. You blew up my brain. I’ll have to read this again. Ladies, you do the same. There was a lot of good information. What I want to talk about a little bit is the states. Who’s overvalued? Who’s undervalued? Where are the opportunities? Where should we stay away from?

From your perspective, this is the end of the first quarter of 2022. It’s only the first quarter. The second quarter hasn’t come out yet because that’s a fundamental analysis based on the governmental statistics of income, population, and housing supply. Those will come out soon. Those take time. This is the first quarter of 2022, but it’s not going to be too different. It changes a little, but it has kept increasing. What’s important to notice is that US real estate was quite fairly valued even through the first quarter of 2021 at the broad level.

This surprises me a lot.

The way to see that at the country level is there is a study by Niraj Shah at Bloomberg Economics. He had it for different countries in 2019. It came out at the beginning of 2021 as well. US real estate has pricing combinations, for example, and that’s a good one I can explain why that works well, but in another discussion. It was around zero. That’s very contrary to some countries.

Other countries were reported to be SCANNZ Economies. That’s Sweden, Canada, Australia, Norway, and New Zealand. They were overvalued even as early as 2018. They still don’t decline because there are economic conditions. There’s no trigger for them to decline. There are low-interest rates and so on and so forth, but they are overvalued since then. That’s driven by central bank policies in water and small coast oil-exporting economies. Their real estate has been reported to be overvalued. That’s by Bloomberg Economics and other sources.

US real estate was fairly valued. I had it in my data as well that it was fairly valued. I started doing this in 2020, the beginning of COVID, on my end, it’s RealtyQuant. This is data powered by RealtyQuant.com. As late as 2021, the first quarter of US real estate at the broad level was close to 0%. If we take the US real estate broadly at this data, it is around 13% only. The whole nation would be only 13%.

It’s not a small number because if you take the global financial crisis, it’s the same government data in the FHFA data, the global financial crisis in the same one would be past 20%. That’s already 2/3 of the global financial crisis. You have to keep in mind that’s a history many years back. Most other time periods tend to be slightly undervalued. This is the material overvaluation, but that is at the whole level. The whole level doesn’t matter so much to particular investors.

If you go to specific states, it gets more overvalued. The reason is that we have undervalued states like Illinois. We have fairly valued states like New York, Pennsylvania, New Jersey, and so on and so forth. What was overvalued is Idaho. It is above 50%. Idaho has been the leader. The states of Nevada, Utah, and Arizona are above 30%. We have Texas, Florida, and Colorado at above 20%. There are, in total, ten US states in Q1 of 2022 that are above 20% overvalued. They’re all Western and Southern states. That’s Idaho, Arizona, Utah, Nevada, Florida, Washington, Texas, Colorado, and Montana.

On the contrary, if we go to the opposite end of the spectrum of what’s undervalued, I’m not saying that’s necessarily desirable. That ends up being desirable over the next decade, but not necessarily until a recession hits in that period. The undervalued ones are still the markets that are not performing well, which are Illinois, North Dakota, West Virginia, and Connecticut. They are not trending. They are poor in their fundamentals, but they do tend to carry less downside risk simultaneously in a recession because they didn’t get overheated.

REW Stefan | Data Driven Real Estate

Data Driven Real Estate: If we go to super tiny neighborhoods and try to do fundamental analysis, it will not work too well. For instance, a county’s predictive power is less strong than a state’s predictive power, but it happens with metropolitan areas for some reason.

 

Boise is at the top. There is Boise MSA and Austin. There are some other MSAs in Idaho, Nashville, Phoenix, Tampa, and Dallas. These are booming and strong markets. They’re incredible markets. They have incredible people who have made fortunes in those markets. That’s completely true. In the past few years, things accelerated with inflation. Those are some overvalued cities. It’s half at the county level. Perhaps, there are some other ones that can be based on county data as well. That’s a good list around the top ten.

The important thing to notice is it’s not that it’s predicting necessarily big declines in something. Let’s say Boise’s overvaluation is at 74%. That sounds very high. In Boise, if we experience a severe recession like the global financial recession, that would be a decline. I have predicted declines in different scenarios. If you have a GFC-like recession, which nobody expects, then the decline for Boise’s overvaluation of 74% evaluation will be 46%.

That’s if we have a huge crash in the market.

If we have a milder recession like 1990, even though it’s overall at 74%, but because the recovery is going to be so strong, the decline is only 18%. To clarify, that overvaluation is still a real thing because that 74% overvaluation is going to go to zero. It always does. It’s not that the number is fictional. Some investors might say, “If something is overvalued, it stays overvalued.” That doesn’t happen. It doesn’t stay overvalued. It will go to zero in valuation terms. If prices don’t decline too much because we have a very strong economy or strong recovery, then the declines will go about 18%.

That decline takes a long time. It takes six years. Especially for small declines with big overvaluation, it tends to take a long time. It could be even eight years forward. Over these eight years along that period of time, incomes increase and populations and housing supply ratios change in whichever way they change. Those fundamentals shift in a way that they compensate for valuation. They drive it to zero. That is a strong recovery case, but this is an example of what would happen.

We take the case of Austin, Texas. It is an incredible city with hugely strong fundamentals. Though exceeded by the pricing, what would happen to its valuation is it will be around 66% overvalued. The model for the severe recession that I have has a 40% decline and only 15% in a mild recession. Those are all possible. It’s not a doom thing. I’m a positive and eager investor who wants to continue investing my funds in a recession as well. What is important to me is how to make a model to forecast appreciation and what is the best one.

Here, it’s suggesting that even without incorporating in a model fundamental forecasting itself but purely looking at market valuation at the peak ahead of the recession, so to say, I can take the simple model and invest it in the undervalued MSAs. Those would be very counter-intuitive at the time. Those would be MSAs like San Francisco and San Jose. They were undervalued at the time with population issues and all kinds of issues.

Purely, what the history suggests from those two different recessions at different times in US economic history, if you will, is in both of those cases, the lowest markets of most undervalued metropolitan areas outperformed over a decade forward. That is extremely interesting for me. We have to keep this in mind. They were performing poorly at that peak. That’s why they were undervalued at that time. It’s a mix of those weak fundamentals. It would be below the prices or those weak fundamentals, but they do tend to have weak fundamentals.

There is a strong correlation between how strong a market is and how overvalued it becomes towards the end of a market cycle by overheating, like investors taking up more stuff there and so forth. That’s an interesting thing. For me, this is the perspective of how you forecast appreciation in those. It becomes counterintuitive because that’s shifting the whole expectation of investors. It’s also how we’re accustomed to the west and south as the booming places and how it perhaps is statistically likely to shift in the next market cycle.

That was awesome. How can people get more information? I know that you’ve got a free report. It’s the free state-level market valuation report. To get that, go to BlissfulInvestor.com/Markets. You can download that. How can they reach out to you?

My website is RealtyQuant.com. That’s the best way to reach me. They can also read my blog about some of the things we discussed. They can look up the data that we have there for 2,700 US counties. I also have a YouTube channel. It’s Stefan Tsvetkov – Finance Meets Real Estate on YouTube. It’s a weekly webinar.

We don’t have time for three rapid-fire questions. We are going to try to do an EXTRA. We’ll see how this goes. Stay tuned if you are subscribed to EXTRA. If you’re not and you’re leaving us, thank you so much for joining Stefan and me for this portion of the show. I appreciate you. I hope it was helpful. I look forward to seeing you next time. Until then, remember, goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you soon. Bye.

 

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About Stefan Tsvetkov

REW Stefan | Data Driven Real EstateFounder of RealtyQuant, a company that brings data-driven and quantitative techniques to the real estate industry. On a mission to add industry value through education, investment, technology, and analytics.

Former financial engineer (Columbia MSFE) managing ~ $90 billion derivatives portfolio jointly with colleagues. Multifamily investor, analytics speaker, and live webinar host.

Featured on over 40 Podcast/Webinar events including Elevate, Best Ever Real Estate Show, Investing in the U.S. etc. Organizer of Finance Meets Real Estate live webinar series, with ~3000 subscribers and over 80 live webinars.

 

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