Recently I was hosting a couple at one of my Airbnb properties.

But this couple was different.

They were different because just a few years before, they had been a client of mine when shopping for houses in the area where I live.

They were a fantastic client and a group you wanted to put the extra effort into.

We toured endless houses and scoured the MLS and Zillow for other options to go look at.

Both the husband and wife had good-paying jobs that were earning them north of $300k/year as a couple.

As a result, they were looking to buy their first home together for roughly $1M-$1.2M.

That number may seem daunting, but keep in mind that interest rates were at all-time lows.

After about the 20th property, I suggested something a little more creative to my clients.

What if they house hacked this?

For those that don’t know what house hacking is, I will give you the 30-second pitch on it, but you can read more about it here.

House hacking means finding ways to generate income from your home.

Traditionally, house hacking meant buying a multifamily property, living in one unit, and renting out the others so that the tenants pay the owner’s mortgage, and the owner builds equity while maintaining the property.

So back to my client, I suggested they look for a multifamily home in the area where they could live in one unit and rent out or Airbnb out the other units.

The clients were interested in learning more about it and kept asking educated questions about how it was done.

That is until they popped THE QUESTION!

How much will this cost me?

As soon as they asked me that question I knew it was over.

Not because the cost is not an important factor when it comes to buying real estate, but because a savvy investor asks how much will this make me?

See buying real estate is only a cost if you are unable to create positive cash flow out of it.

That’s why Robert Kiyosaki, the author of “Rich Dad, Poor Dad” explains right off the bat that your house is not an asset, it is a liability.

Don’t believe me?

Stop paying your mortgage on your house or the property taxes and you will quickly find out who owns the house that you live in.

Back to my clients and their housing search.

They were looking for a single-family or condo between $1M-$1.2M, but when I told them to go the multifamily route they would be looking at a cost of nearly double that.

The average person and the average investor would immediately experience a panic attack just by the sticker shock.

Unfortunately for this couple, they were your average investor.

Despite their medical school and MBA backgrounds, they couldn’t wrap their heads around how their first home purchase could also be their first real estate investment.

Ultimately, they ended up sticking with renting.

But in hopes that you don’t make the same mistake that countless others have, here is what the numbers would have looked like for my clients.

Do you see the difference now?

If my clients had gone with the multi-family they would have made $28k/year in profit vs it COSTING them roughly $60k/year to own their single-family home.

Funny enough my clients and now AirBnB guests remembered the same conversation we had a few years before.

After they checked out, the wife shot me a message, “It’s killing me that we didn’t house hack when you told us to, I get it now!”

Don’t be like my clients, find ways to make real estate a profit center vs a cost center.

PS. If you haven’t read Rich Dad, Poor Dad, privately message us back here for a free copy.

I played a lot of sports when I was growing up.

By a lot, I mean I was on two basketball teams and two soccer teams at any given point in time.

I loved to do this and my parents liked me doing this because I was a very energetic kid.

The only way I could keep myself out of trouble is if I had a good outlet to burn off some of that excess energy.

I was fortunate to have many great coaches throughout my lifetime.

One of those coaches was my 8th grade AAU coach, Coach Doran, whose favorite line to use when talking to our team in the huddle was “this game is chess, not checkers.”

At the time I really didn’t think too much about it, but today, that saying is ingrained in my mind.

Why?

Because in order to win in life you need to understand if you are a checker player or a chess player.

Of course, I don’t mean this literally, but metaphorically.

Both games are great to play and you are not a lesser person if you like checkers more than chess or vice versa.

But knowing your preference will help you understand what you want in your life.

For those that haven’t played either game in a long time here is a quick refresher.

In Checkers, you can only move forward and never move backward.

The person that wins is the person that eliminates all their opponent’s checkers.

In Chess, you can move forward, backward, diagonal, you name it. Each team has 16 pieces with 8 pieces being pawns and 8 pieces being a form of ancient hierarchy.

These respective pieces do not have the same role or capability and they should be used strategically.

The person that wins this game is the person that gets checkmate to the opponent’s King.

Checkers has a clear endpoint as there are only so many moves that can be made to wipe out the other team if you cannot retreat.

Chess can be played for days and can be won in 5 moves or 500 moves.

Dr. Marion Tinsley said it best when describing the difference between Chess and Checkers: “Chess is like looking out across an ocean. Checkers is like looking down a well.”

So where am I going with this?

In investing you can be a Checker player or a Chess player.

There is no right answer.

One might “make” you more than the other, but that same one might require 20x more time for you to effectively operate.

For example, if I am investing in the stock market, I could hire a financial advisor to manage my portfolio.

In theory, this financial advisor will be playing Chess with my funds and trying to get the upper hand vs the market.

Unfortunately, decades of research have shown that roughly 90% of financial advisors don’t outperform the market.

If that is the case you are paying someone else to lose at Chess for you.

But if you chose to play Checkers with your investment then you could simplify your strategy, reduce your fees, and have a higher likelihood of seeing your investments grow.

If you want to do that, then you could put your investments in index funds.

In the example above, it might make more sense for you to personally play Checkers.

Where would it make sense to play Chess with your money?

With Real Estate Investing!

If you want to play Checkers in Real Estate, then go buy a REIT. That will go up and down with your stock portfolio.

Or go buy a single-family home which will be impacted by the sales price of your neighbor’s house next door and the interest rates being offered.

If you want to continually beat the market, then go into Private Real Estate investing.

Fundrise has a really good page that shows all the data on why someone should consider investing in private real estate.

But the watch out in Private Real Estate investing is the same as working with a financial advisor that can beat the market.

You need to do your research and pick a team that has a track record of success and an investment approach that aligns with your preferences.

If you want to see what type of investor you might be, then you can take our quiz.

Heads up, Chess vs Checkers is one of the questions!

If you live in the US, you know that a few weeks ago there was a very scary incident in the NFL’s Monday Night Football game between the Cincinnati Bengals and the Buffalo Bills.

During the 1st quarter of the game, Bills Safety, Damar Hamlin, experienced cardiac arrest on the field and had to be rushed to the local hospital.

Fortunately, Hamlin has survived and is on the path to recovery.

The secondary story that emerged from the Hamlin incident is what the NFL would do to resolve all the playoff scenarios.

The Bengals/Bills game was one of the marquee matchups of the season, with the winner of that game pretty much securing the 2nd seed if not the 1st seed in the division.

However, since the game was unable to be completed it left the NFL in a bind.

Ultimately, it was the Chiefs that got the 1st seed even though they lost head-to-head to the Bills, and it was the Bills that got the 2nd seed over the Bengals since they had a better record, even though they were at the time of the game being canceled, losing to the Bengals.

That left the Bengals as the odd man out.

But even worse for the Bengals, if they lost their final game of the season against the Baltimore Ravens, they would have to do a coin flip to determine if they would get to host a home playoff game even though they were crowned the divisional winner.

Now spoiler alert, I (Dan) am from Cincinnati and I have a slightly biased opinion of how the NFL managed this.

To clarify the outcome of the NFL’s decision, if the Bengals would have lost to the Ravens they would have had to flip a coin just for a home playoff game even though they had a better winning percentage than the Ravens.

However, the Bills would be given the 2nd seed over the Bengals and home field advantage against the Bengals since they had a higher winning percentage than the Bengals.

The controversy is the fact that the Bengals had to flip a coin despite the higher winning percentage but yet the Bills wouldn’t have to in the same scenario.

Now that I am off my soapbox and praying for a Bengals victory today, I want to shift our attention to a coin flip.

A coin flip in essence is a 50/50 chance of you getting the outcome you want.

Would you bet $1 million on a coin flip?

Unless you are a BIG gambler you probably wouldn’t take those 50/50 odds of losing $1 million dollars or winning $1 million dollars.

Why not?

Because there are much safer ways to earn a million dollars without risking it all.

Do you want to know where?

You guessed it, real estate!

Real estate is one of the best risk-to-return ratios out there.

You probably won’t double your money immediately like you could in a coin flip, but you would have a high likelihood of doubling your money in about 4-5 years with greater certainty that your principal investment would be protected.

Ultimately, what you do with your money is up to you.

But would you rather flip a coin for your future success or failure or take a more trusted route to build generational wealth?

Go Bengals!

If you don’t receive our week-in-review emails, then maybe you haven’t seen this summary below of how the markets performed in 2022.

But you would have to be living under a rock if you didn’t know that there was complete carnage in the markets in 2022.

Every indicator was bleeding red in 2022.

(As a personal aside, if you like country music, then Ronnie Dunn’s Bleed Red is a must-listen.)

Now back to the markets, if we wanted to be real estate specific then you can see that all US REITs were down 25.1% in 2022.

The popular private real estate investing company, Fundrise, was up a whopping 1.5% across its portfolio in 2022.

But hey at least they didn’t lose money like all the other groups.

But what about us? 

We had a busy year.

We sold 6 deals and acquired 3 new deals.

In the 6 deals that we exited, we delivered to our investors an average annualized return of 23% and an IRR of 19%.

Was this below our historical average of 27% average annualized returns and 23% IRR? 

Yes.

But did it crush any other comparable?

Absolutely!

That is roughly 50% better than REITs, 30%-50% better than stock market indexes, and 20% better than our friends over at Fundrise.

So 2022 was a bad year for most, but you want to hear some good news?

2023 can still be a good year for you irrespective of how the macroeconomic environment behaves.

How?

By investing in private real estate investment opportunities.

The only bad investment in real estate is the decision not to invest in real estate.

If you want to take control of your financial situation then check out our scenario planning calculator to see how real estate might fit into your portfolio.

Good luck in 2023, we hope it’s a good one.

New Year… New You or Old You?

Welcome to 2023. Here is to hopefully a better year than 2022 in which markets plummeted, interest rates skyrocketed, and we saw a war in Ukraine.

If you are like most people you are committed to the New Year’s resolution you have made for yourself.

Unfortunately, your 2023 goal will be gone by Super Bowl Sunday in February if you are like most people.

In fact, roughly 80% of people will have failed their New Year’s goal by February.

So how do you make sure you aren’t in that 80%?

You have to be smart.

No not IQ smart, but SMART.

If you haven’t heard of the acronym SMART, let me quickly explain.

Specific: The goal should be specific and easily understood without confusion.

Measurable: The goal should allow you to track your progress.

Achievable: The goal needs to be realistic.

Relevant: The goal should be related to your overarching values, dreams, and ambitions.

Time-bound: The goal should have a set target date of completion.

A SMART goal incorporates all of these criteria to help focus your efforts and increase the chances of achieving your goal.

A recent poll by Statista below shows the most common New Year’s resolutions for 2023.

Given that 39% of people want to save money, 37% want to spend more time with family/friends, and 19% want to reduce the stress of the job, we figured we could give you a SMART example of how to achieve those goals.

The answer is a SMART goal involving Real Estate.

Here is an example that could help solve all 3 goals listed above.

Specific: Be financially free within 5 years so that I can retire from my job and live life on my own terms with the people that I love.

Measurable: I will need to replace 100% of my current income earned from my job with 100% passive income.

Attainable: I have $1M currently saved up for investing, if I invest that $1M today and follow the historical private real estate returns of doubling my money every 5 years then my $1M will be $2M in 5 years.

At that point, I can choose to:

1. Reinvest the entire $2M and live off estimated cash on cash returns of 7%-10%.
2. Reinvest some of the $2M and keep the rest to apply toward my living expenses.
3. Do whatever I want.

Relevant: I have always said that my relationships with my friends and family were most important to me, but for the last 20 years those relationships have had to be put on hold while I worked my job to keep money coming in.

Time Bound: I will start investing today, in deals that offer at least a 1.8x equity multiple and 15% IRR. I will continue to do this until I have diversified my $1M of investments across projects that meet these criteria. Then I will track the performance of these investments to see if I can retire earlier than my 5-year target.

Now, this is just an example, but hopefully it gives you an idea on how you can achieve both your short and long-term goals.

If you want to see how we can help you achieve your goals, then schedule some time with us at your earliest convenience.

Good luck and Cheers to the NEW you in this year ahead.

It’s the holiday season and for many of us, that means we will be traveling to see our loved ones.

The two main ways we will get there are by car or plane.

Our personal preference is always to travel by plane vs car on any trip that will take over 6 hours to drive.

Why?

Because it is faster to fly.

But many people would prefer to drive regardless of how much longer it would take.

Why?

Because they feel safer.

But is that “feeling” actually true?

According to the NSC (National Safety Council), the odds of dying in a car crash as a driver are 1 in 114, and 1 in 654 as a passenger.

The odds of dying in a plane crash are 1 in 9,821 when you include commercial and personal plane crash incidents.

We are no mathematical geniuses but it looks like the risk of mortality from a car crash is in the range of .15% to .8% whereas the risk of mortality from a plane crash is .01%.

Meaning even on the low end you are 15x more likely to die in a car crash than in a plane crash.

Now let’s flip this scenario into investing.

Why do more people invest in the stock market vs private real estate?

Because they feel safer.

But are they really?

No!

Let’s objectively look at the facts via the Sharpe ratio.

For those that don’t know what the Sharpe ratio is, it is a measure of risk-adjusted return.

It describes how much excess return you receive for the volatility of holding a riskier asset.

Take a look at the 5, 10, and 20-year historical averages of private real estate with, stocks, bonds, and public REITs.

5 Year

10 Year

20 Year

Are you seeing what we are seeing?

Turns out what we all originally thought was dead wrong.

Private real estate has the same risk level as a bond while generating significantly higher annual returns than a bond.

Meaning that when you invest in private real estate you are getting the safety of a bond but the growth of a stock or REIT, is only better.

To take it back to our fly vs drive scenario, you can achieve your wealth goals faster and safer when you invest in private real estate vs if you remain with the standard forms of general investing.

If you want to play around with some numbers you can try out our scenario planning calculator here to see if Anthem might be a good fit in your portfolio moving forward.

And if you like those projections then we encourage you to schedule some time with a member of our leadership team to review your goals and create a blueprint for your success.

Next Steps:

1. Play around in our scenario planning calculator.
2. Schedule a call with a member of our leadership team.
3. Register for our upcoming office hour Wednesday, December 21st.