Young and Profiting (YAP) with Hala Taha
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 inspired Dave Meyer to start investing in real estate?
Chapter 2: Why is real estate considered a smart investment?
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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?
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Chapter 3: What is cash on cash return and how is it calculated?
Real estate is such a unique asset class, and I do believe that acquiring assets, particularly hard assets like real estate when you're young, is super beneficial. I'll just name a couple of the reasons I like. First and foremost, I am very entrepreneurial, as I know you are, and a lot of your audience is. And I just love the ability to control the performance of your investments.
It's not something that you're able to do in the stock market or with cryptocurrency or with bonds. And to me, that makes it both fun and more profitable. And then there's other more sort of technical reasons where real estate and hard assets tend to keep pace with inflation. They appreciate over time.
And if you know a little bit about the market, you know that supply is really constrained in the housing market. And so there are a lot of tailwinds that I think will help increase the value of real estate for the foreseeable future.
And if you were to pay attention to the headlines, you might think that real estate is really like volatile and very risky. Why is it actually a pretty low risk asset to invest in?
I think a lot of millennials, I am one, have this sort of housing market trauma from the great financial crisis because that was a very significant crash. But if you look backwards in time, it's really the only crash of that magnitude as far back as we have reliable data. And so that's nearly 100 years. We've never really seen a market crash like that. And if you look at other times where housing
prices went down like in the early 90s, or there are some times in the 80s, it was basically a flattening or prices went down by one or 2%. And usually prices recovered within six quarters, eight quarters. So it's really quite quick. And we can get into why that is.
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 or 3% or 4% in terms of cash flow.
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Chapter 4: How can beginners manage real estate investments?
Chapter 5: What are the economic factors to consider before buying property?
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 or 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. tax advantages and appreciation and loan pay down. So you get better cash flow.
Chapter 6: What are the tax benefits of investing in real estate?
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, you know, 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.
Chapter 7: How do you choose the right real estate market?
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,
Chapter 8: What strategies can help overcome fears in real estate investing?
and you invested 100 grand into that property, you would have a 10% cash on cash return. And we just basically use this metric to measure one part of the benefits of real estate, which is just getting that monthly income each and every month.
So I know before you mentioned that real estate is entrepreneurial. And that's something that I never really thought about. When I think of real estate, I think about investing. But why would you say that real estate investing is actually entrepreneurship?
The term real estate investing is somewhat of a misnomer because although you are typically taking some of your own capital and putting it into this business, you really are operating a business. Even if you buy a relatively simple type of real estate investment, like a long-term, you know, you just say you buy a single family home and rent it out to people.
It's not a ton of work, but 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. And so to me, that's running a small business in a way that buying an index fund or buying cryptocurrency, which are both worthwhile investments or worthy of consideration,
Just all right, you know, that's kind of set it and forget it. Where real estate, you need to be paying attention to your portfolio and decisions and performance, not every day, but on a weekly or monthly basis.
And you actually started real estate sort of as a side hustle. You did it on the side of your career. So talk to us about how you first got interested in real estate and how you got started.
I graduated college in 2009. And if you remember that, it was a very bad job market. And I moved from New York to Denver and was waiting tables. And I had a lot of free time on my hands. And so I would ski a lot. And that's partially why I moved to Colorado. And I had a friend who wound up buying a single family home with his girlfriend at the time. And they were just killing it. And
Honestly, my friend was not super sophisticated. He wasn't some great investor. And I thought if he could do it, I could do it. And I used the resource that I had at the time, which was time to find a good deal. I would drive around Denver and bike around Denver and just look for properties. I went and looked at a ton of them.
I sort of taught myself a little bit of financial modeling, which I had a little bit of a background in. And the numbers just made so much sense to me that it felt I was probably just so naive. I didn't really understand the risk or what I was getting myself into. But luckily, back then in 2010, which there were deals were relatively abundant.
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