Young and Profiting with Hala Taha (Entrepreneurship, Sales, Marketing)
Dave Meyer: Build Your Real Estate Empire with Smart Investing | Entrepreneurship | E326
Mon, 30 Dec 2024
When Dave Meyer graduated in 2009, the job market was bleak. Inspired by a friend who found success buying a single-family home, he decided to give real estate a shot. Although Dave was unable to qualify for a loan on his waiter’s salary, he managed to secure his first property using creative financing. He continued to spend his spare time managing his properties until his tech startup failed in 2016. At that point, he decided to focus on real estate, combining his experience with his data science skills to build a thriving career at real estate platform, BiggerPockets. In this episode, Dave explains how anyone can start and scale a real estate portfolio. He also shares tips and strategies to navigate today’s housing market. In this episode, Hala and Dave will discuss: (00:00) Introduction to Real Estate Investing (01:52) Why Real Estate is a Smart Investment (05:50 Understanding Cash on Cash Return (06:29) Real Estate as Entrepreneurship (07:40) Dave's Real Estate Journey (18:29) Managing Real Estate Investments (25:59) Economic Considerations in Real Estate (29:32) Understanding Depreciation and Tax Benefits (32:31) Exploring Hot Real Estate Markets (34:14) Overcoming Real Estate Investment Fears (37:35) Quick Fire: Pros and Cons of Different Deal Types (41:39) The Appeal of Commercial Real Estate (44:03) Development and Lending in Real Estate (48:43) Final Thoughts and Advice for Aspiring Investors Dave Meyer is a seasoned real estate investor and the Vice President of Data and Analytics at BiggerPockets. With more than 14 years of experience, he has grown a thriving real estate portfolio, starting with a fourplex he bought at age 23. Dave has authored notable books like Real Estate by the Numbers and Start with Strategy, where he combines his analytical expertise with actionable advice for investors. As the host of two popular podcasts, On the Market and the BiggerPockets Real Estate Podcast, Dave educates listeners on smart investing strategies. Known for developing tools like the Market Finder, he has made data-driven decision-making more accessible for investors. Resources Mentioned: Dave’s Books: Start with Strategy: Craft Your Personal Real Estate Portfolio for Lasting Financial Freedom: amzn.to/3ZLMG6e Real Estate by the Numbers: A Complete Reference Guide to Deal Analysis, written with J Scott: amzn.to/4fo4BFY BiggerPockets: biggerpockets.com On the Market Podcast: youngandprofiting.co/3OZKWS5 BiggerPockets Real Estate Podcast: apple.co/4fpTZGo Sponsored By: Airbnb - Your home might be worth more than you think. Find out how much at airbnb.com/host Found - Try Found for FREE at found.com/profiting Shopify - Sign up for a one-dollar-per-month trial period at youngandprofiting.co/shopify Active Deals - youngandprofiting.com/deals Key YAP Links Reviews - ratethispodcast.com/yap Youtube - youtube.com/c/YoungandProfiting LinkedIn - linkedin.com/in/htaha/ Instagram - instagram.com/yapwithhala/ Social + Podcast Services: yapmedia.com Transcripts - youngandprofiting.com/episodes-new All Show Keywords: Entrepreneurship, entrepreneurship podcast, Business, Business podcast, Self Improvement, Self-Improvement, Personal development, Starting a business, Strategy, Investing, Sales, Selling, Psychology, Productivity, Entrepreneurs, AI, Artificial Intelligence, Technology, Marketing, Negotiation, Money, Finance, Side hustle, Startup, mental health, Career, Leadership, Mindset, Health, Growth mindset. Finance Finance, Financial, Personal Finance, Wealth, Stock Market, Scalability, Investment, Financial Freedom, Risk Management, Financial Planning, Business Coaching, Finance podcast, Investing, Saving,
Chapter 1: What makes real estate a smart investment?
Real estate is not that complicated. 90% of the rental properties in the United States are owned by people with one to 10 properties. These are just normal people who are doing this. And the amazing thing about real estate investing is that
Why would you say that real estate investing is actually entrepreneurship?
Because even if you buy a relatively simple type of real estate investment, you got to do something. You have to find tenants, you have to run the books, you need to be a good property manager, provide a quality place to live. To me, that's running a small business.
What are some of the tax benefits that people can get from real estate?
The most common one is just known as...
Yap gang, I was today years old when I learned that real estate investing was really just entrepreneurship. I learned this from Dave Mayer, the guest of today's episode. Dave is the VP of Data and Analytics at BiggerPockets, the host of the popular On the Market podcast, and the author of the new book, Start With Strategy.
Whether you're a seasoned investor or want to start real estate as a side hustle, Dave is going to give us a masterclass in real estate investment, economic considerations, and an overview of deal types so that you can figure out the investment strategy that's right for you. Let's jump right into this amazing conversation with Dave Mayer on real estate.
Dave, welcome to Young and Profiting Podcast.
Hala, thanks so much for having me. I'm really excited to be here.
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Chapter 2: How can I calculate cash on cash return?
And so I was able to find something in my spare time while I was still working 30 or 40 hours a week. And that's a really common way for people to get into real estate. And honestly, despite what a lot of social media talks about, that is the most common way for people to continue in real estate. You don't need to be a full-time investor.
It is very commonly used to augment your income, either from a W-2 job, from another small business, or just other investment classes.
And so talk to us about this first deal. You were 23 and then you ended up buying like, I think it was like a multifamily home and you raised money to do this. You didn't use your own money. So talk to us about this deal.
Chapter 3: Why is real estate considered a form of entrepreneurship?
I was, you know, I made decent money as a waiter, but literally they paid me in cash and all the money I had at the time was in my bedside dresser. So I could not qualify for a loan. And people look back on 2010 sort of nostalgically right now in real estate saying, oh my God, there was amazing deals. And there was, but getting loans was really difficult in the aftermath of the financial crisis.
And so I, as a waiter, was not able to qualify for a loan. So I brought in three partners, two people I knew and a family member, and we each split the down payment on this property four ways equally. And the property was a four unit in Denver, in a great neighborhood, and people will be jealous of this, but it was $457,000 for four units in Denver, which is not possible anymore.
So that was the basic structure. The problem was I did not have my 25% of the down payment. And so I wound up taking a secondary loan from another one of the partners at a 6% interest rate. So I was basically borrowing twice on this. And then I self-managed the property. And normally in real estate, the property manager gets 8% to 10% of revenue.
And so I basically took that 8% to 10% that I earned as the property manager to pay off my secondary loan and did that for seven or eight years until I built up enough equity and then we sold the property.
So it just goes to show you, this really is entrepreneurship. You're like raising money. You're trying to manage stuff. You have like a business model going for it. So how did your portfolio grow from there? And how much time did you spend in real estate?
For the first couple of years, I didn't have money. So I think for the first four years, I just operated that one deal. I was actually, I started a different business, not in real estate. And so I was very involved in a startup that I had created in technology and was really into that for quite a few years. And so it sort of went on the side and I didn't have money to pay people to do anything.
So I was still self-managing the property, probably I don't know, 20 or 30 hours a month. So still, it's a significant amount of time. That's what I did for a while until 2014. I bought a similar type of deal, another multi-unit in Denver and was continuing to self-manage. And I lived in that one.
And this is sort of one of the things I love about real estate is it's so customizable to any circumstance. And what I chose to do, because I was looking at a bunch of deals, is I chose to buy a property on the same block as my first one because I was running a startup. I didn't have that much time.
And I thought, hey, if I'm going to manage this business, I want to just be able to walk down the street and mow the lawn instead of driving all the way across town. So then for, I guess, two more years, I was just managing these two properties. It was seven units, it's time consuming. Until 2016, the company I had started failed, and I was trying to figure out what I wanted to do,
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Chapter 4: How did Dave Meyer start his real estate journey?
Chapter 5: What are the economic factors to consider when investing in real estate?
Chapter 6: What are the benefits of managing real estate investments?
But if you often people when people ask me that question, I say just Google the median home price over time in the United States, and you'll see that it's largely just gone up into the right for the last century.
That reminds me of stocks. It's kind of like stocks just always go up, right? So you're saying housing prices just always go up. So it's a good long-term investment. So talk to us about why real estate is a good way to achieve financial independence.
Real estate is, in my opinion, the best way to earn cash flow from an investment. And for that reason, it's a great way, and a lot of people use it to replace their income. It's not the only reason to invest in real estate. It's not the only benefit. But I think
Rather, stock market, if you even get great dividend stocks, you're talking about 2%, 3%, bond yields are 3% or 4% in terms of cash flow. Whereas real estate, even when you buy something on the market, you can get something at 6%, 8% cash on cash return, in addition to many of the other benefits like tax advantages and appreciation and loan pay down. So you get better cash flow.
And the amazing thing about real estate investing is that for the most part, your biggest expense, which is your mortgage, will get fixed in place because you lock in that price. And then your rent, the income that you're generating goes up over time. And so if you buy something that has a 6% or 8% cash on cash return today,
By the time you want to retire, say that's 15 or 20 years from now, that could be a 30 or 40 or 50% cash on cash return, depending on a lot of decisions you make with your business over that time. But that's why it's so valuable is those rents tend to keep pace with inflation or at least exceed inflation or sometimes exceed inflation.
But your expenses are relatively fixed and that creates a growing margin over time.
So for all the newbies out there, what is cash on cash return?
So cash on cash return is a simple metric that we real estate investors love. And you basically just calculate it by how much cash flow you generate in a year. And you divide that by the total amount that you have invested in a property. So if, for example, you had a rental property that made 10 grand in a year after all of your expenses,
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Chapter 7: How can I structure a property management deal?
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Chapter 8: What should I know about Dave's new book, Start With Strategy?
But if you're good at it, it's more lucrative than long-term rentals. And Honestly, I only own one, but I kind of think it's fun to own short-term rentals and sort of be in the hospitality business. But I will say one other thing I'll say is it's a little bit more capital intensive because I learned this the hard way. Furnishing them can be very expensive.
So you need to make sure that you have a proper amount of money set aside to make the place really nice and stand out. Because again, there's so many competitors right now that if you just like do the Facebook marketplace kind of thing where you're just getting cheap furniture, it's probably not going to work.
That's so interesting. So long-term rentals, you don't have to worry about furniture. People are just renting them out for like a year at a time. Short-term rentals is like your Airbnb, your Vrbo. Is that subletting too or no, that's different?
I don't recommend people do that. It's kind of legally questionable in a lot of places and can be some places it's perfectly legal, but I don't think that's investing in my mind. I think it's like an arbitrage game. Yeah, it's kind of like a job. And there's nothing wrong with that if that's what you want. But if you want to like build a business, I think you need to actually put some capital in.
Okay, fix and flip.
Fix and flip is a great way to make money, but it's basically a job. I think people need to think about how much time they want to commit to it because it can be 20 hours a week, it can be 30 hours a week. It's a steep learning curve. Renovating properties can be very difficult. You don't really know what you're going to get with any particular property.
Working with contractors is much harder than working with property managers. I said earlier that, you know, if you have some basic managerial experience, you can manage a property manager. Working with contractors is kind of its own business, its own game. And so I sort of recommend to people sort of progressing to that.
Maybe buy a rental property and do a small renovation and learn that way and sort of build up to doing an entire house flip. I just signed up to do my first one ever. I'm 15 years into it and I'm not managing it. in that.
But if you really love real estate, and like you find it fun, like I and a lot of people do, it could be a great, great avenue to building active income in addition to sort of building long term rentals to sort of set you up over the long term.
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