Debt, Leverage & Wealth in Real Estate: Beyond Ramsey Rules

0:00I think Dave delivers an incredible message and an incredible value to his audience, which is people that are in debt or people that are in debt or of spending problems, and both of which I think he does a tremendous job in doing. And so all the people that said, I totally missed it. I asked the question which never got answered in your comments, which was and for all the Dave Ramsey fans out there, I'd love you to follow along at home and tell me that you did this exact thing. And when we buy an investment property and I say, Honey, do you like this? When she says, Does the numbers work? I say something like, Yes. And she goes, Well, then we should probably do it if you like it. Love that answer. Thanks, honey. Now, when we go to buy a primary residence call, I know this might sound crazy. She has slightly more feedback. She wants to see things like the kitchen. Of course, she looks at things like the floor plan. Welcome back to Be Wealthy with Brett Tanner. The episode called that many said many said wouldn't come, especially after our last Dave Ramsey episode that did get a little heated on the Internet call, Had some fans reached out with some feedback, both positive and negative, and embrace the negative harnessed the positive call. That's what it's all about. But excited to jump into that. And actually we're going to be filming today. Call Episode 0010. For those that said in that last podcast that we would not make it to episode ten and I would be canceled. Stop traffic. You were wrong. We're back. Cole. We're here, are ready to go. So we're going to film Dave Ramsey part two, and I'll dig in because people said I was disconnected, called the word.

1:34I was disconnected from Dave's core message. And so I want to actually read directly from his website this time. So I won't I won't have anything across there. I'll read directly the information he's giving you and you can decide unless someone's hacked the cycle. Have we checked it? Ramsey solutions dot com is Dave Ramsey is it has it been hacked callers tell him it has not been hacked so this is a live update so in the last since I've been here I came back from our K.W. family reunion. Our company has this annual convention. About 15,000 people took over the Mandalay Bay in Las Vegas. It was awesome to see all the people there and all of my friends in that family. But we got to have Tony Robbins keynote the event, which was really, really cool. I have been to Tony Robbins. I am the biggest fan of his training and teaching, and I went back to call and I read Unlimited Power and it had been a long time. I was probably your age called 24 when I first read A Limited Power. It is an amazing book. I enjoyed it. I enjoyed Unlimited Power so much more now. I appreciated it. I didn't appreciate enough back then. It's one of those books that you read and it ages well, it gets better. Go read Limited Power. But I wanted to share a handful of my takeaways from what Tony Robbins shared and his unleash the Power Within You P.W. For those that know it, Walking on Fire, it is an incredible event that I think everyone should experience at some point in their life. But Tony really said in life we have three main decisions, three main decisions that affect the quality of our lives. So, number one, your first is you get here is what are you going to focus on? You wake up every day cold, What are you going to focus on? You can focus on things that are positive, things that are negative.

3:11You get to decide what information you're putting into your head and for a long time I disconnected from the news. I find when you watch the news online, there's a couple of things. Number one, largely it's an accurate I know it's crazy to think that CNN or FOX or whatever you listen to might be slanted in a given direction. I don't believe what I don't believe. They're all telling you the truth that any at any level. I think there's a version of the truth that they're saying that slanted through their opinions and views. And so you wouldn't need to have any issue to go very far. Then go to Fox, watch the issue, click right over to see it and watch the issue. And how's the same issue presented? Totally different. And so where I went with my news consumption is I said really negative. I could choose the information I was allowing in. So I have sites where the information is reputable and I'm choosing to read the information in the way I want it. And so I try to focus on the positive things and not let the negative get into me. So what do you, in a focus on life, hits you? What do you focus on? Court The second decision you decide we're going to focus on the second thing and say, what does it mean? Right? Because the minute you focus on something, you focus on that moment. You have to decide what it means. So it could be that you're waiting in line at Starbucks to pick up your order, which I'm not against, as Dave Ramsey is what would come up in a moment. But is I'm waiting last Starbucks. I could focus. So I'm standing there. I'm focusing on waiting in line and the meaning is that, hey, I've got this 15 minutes that I could I could check my email, I could meet the person behind me. I could start reading something, I could listen to a podcast, obviously be listening to be Wealthy podcast if you're in line.

4:41And so I can choose that this is an annoying experience. I'm waiting in line and it could be more efficient or I could focus on, Hey, I've got a moment here that I can get better. I can learn something or I can experience someone, or I could have a quick call or whatever and connect with someone. And the last part you decide what are going to do about it. So once you decide what it means that, hey, I'm going to use this as an opportunity, then you could take the action and go do something with it. And so there's just so many things I could share out of what Tony said. But I thought those three decisions or some I want to leave you with number one every day, your three choices. What you going to focus on? What does it mean and what are you going to do side? If you go back to episode seven, the investment that I referenced that I said was a little far fetched being in the boat charter business is coming to fruition, so I should close on that boat here in the next 30 days, call it. You're probably sooner than that. But all systems go as they say. I've only seen it via video to get a chance to get down there, but I am beyond excited to get out and go get my fishing on and I'll be sure to upload those photos photos in mind. We've been we've been doing some boating up here. First of all, that was a great point. It is interesting, by the way, did you know there's a christening process? So when you buy a boat and you remove the boat's old title, there's all these things you need to do, kind of like for like the the superstition of Poseidon, if you will, as I'm deep into them. Yeah yeah. Sense and really so when we remove the name, I actually need to find out the name of the boat is currently but definitely not going to keep it no matter what it is.

6:07Obvious name would be wealthy, but it's actually going to be. I wore the shirt today. We're going to be get free to the the boat is the ultimate expression. Cool of me getting free. No boat? No. Huh? No Beltline. No. No. Fisher Lane. They do recommend, you know, like you like if you're a surgeon, you know, not your way or something. The coyote. Ha ha ha. A more of is of a simple kind of get free kind of guy. So I'll go check that episode out that episodes on all about boat investments investment you hadn't heard of and to think a little differently about your money. And so today I want to jump in to Dave Ramsey part two. And we're just going to talk about three major things. Number one, what is his core beliefs? Because again, the detractors out there in the Dave Ramsey fans are all said that I had a totally wrong. And I want to be really clear. I think Dave delivers an incredible message and an incredible value to his audience, which is people that are in debt. His core audience, right, are people that had spending problems. Total money make over. I've actually read his book. So the world is and I'm not knowledgeable. It's actually published this information in a book and I read it. I didn't call. I'm tell you why I did the book. I actually read it. I didn't listen on Audible. So I can't say how we go there. Not a big audible fan of a big book reading book out fan.

7:28And so in that book, a lot of the things I referenced are in that exact book. So his core audience are people that are in debt or of spending problems, and both of which I think he does a tremendous job in doing. And so all the people that said, I totally missed it, I asked the question which never got answered in your comments, which was once you paid off your debt and once you had your financial world going. Walk me through the 5 to 10 things that Dave shared with you and your wealth building journey that added a lot of value. I'd love to learn what they are and I ask it not in a condescending way, but like to explain to me maybe I'm missing some of it. And that's where I think his teaching falls a little flat in as we go through today. I'm going to point out the points where I agree and disagree. And again, I'm getting this from Ramsey dot com. So if this site was hacked, then call. This could be bad information. But I believe it's the same thing was in the books also and I don't know how to call I has not figured out how to hack books. They haven't done it. They're not I'm going to tell you a call as of right now, and I'm checking if you fact check me if I'm wrong. I is not hacking books. Can they hack audible, though? I don't know a thing. Now, you know what I'm going have to take. So I'm going to take some of our listeners word for it because I don't use Audible so I wouldn't know. Do you need a real estate lender you can trust, you know, hard money lending to trust? Isn't that the real challenge? Right. Especially right now. You see so many lenders are they're really not lending. They've got huge they require 50% down. They're not lending on this product. It's got to land in some really weird box. Well, today's sponsors, my own company versus a capital.

8:54We are a lender in Arizona and a handful of other states. If you're looking for a lender that can close quickly, give you a straight answer and make it happen at the lowest possible rates, that's what we do. It's all of our own money we don't have outside capital. We can make a decision that makes cognitive sense. And unlike other lenders who don't lend on things like commercial buildings or mobile homes or certain pieces of land, we lend on the deal if it makes sense, reach out to us adversary capital com and see what we can do for you. If you're interested in more information, click the link in the description. All right, but jump it in. So number one, here is Dave Ramsey's baby steps. This is the fundamental teachings that he has. And no matter where you are, you need to walk through these baby steps in order. And I actually agree with overwhelming with a lot of them. So we'll see what we do. So number one, baby step number one goal, save $1,000 for your emergency starter funding for the sake of this conversation, let's all pretend we have we're living paycheck to paycheck. We have $300 in our checking account. We have a job, were employed, and we're in credit card debt and card debt. So they want to get everyone on the same page. And so because that is his core audience, I'm not saying that's going to cause a checking account park that I want to get you. I want to get lit up online. I'm just saying, let's just pretend that we're that person. And that's a part of the core audience. And so, number one, save $1,000. The first thing you should do.

10:13I agree. Life happens. We are going to have the things come up. We need to save money. I think $1,000 might be light, but let's get to the point where we've got enough money saved up to have a fund, a resource that we can use to solve life's problems. Right? Can be a break repair. It could be something. It happens in your life. It could be you need to help someone out. But there are times in our lives we're getting $2,000 or more, and I agree with that. So part sub two call. So one, we're good to pay off all debt except the house. I would agree. I would say he says the House because he's talking there. I believe that any debt attached is something that doesn't cash flow where with reasonable reserves you'd have a savings set up for that particular investment. And beyond that, right, if you have debt on it, it is cash flow, durable cash flow. Like I look at debt, if you decide to put debt on a hard money loan, that would be a case of cash flow. If you had reserves and coverage, understand the risk that you're actually taking. So pay off all that and you should people your bad debt. So bad debt, the way I would define it is things that are not attached to positive cash flow with reserves that are durable that can live on. So yes, credit card debt, card debt, student loan debt, all those things I believe you should get out of that Debt is taking money from your future. So I agree. The next thing, you should save 3 to 6 months of expenses. I agree. I totally agree. I say of your burn rate. So again, where we disagree on expenses, Dave's thing is cut everything or cut all of the fun out of your budget. Get as low as you possibly can. And yes, the more things you could cut out, the faster you'll get there.

11:42What I found about people is if you take your budget in someone that's not they're making $4,000 a month and their expenses are $4,000 a month. Yes. Do they need to figure out how to get that down to 30 $700 or whatever? Yes, but trying to cut that down to 2800 removes all of the joy in your life. Instead, I believe that your income opportunity is unlimited. There is no limit on the max of your income. There are people that makes hundreds of millions of dollars per year. So taking your income from $40000 to $100000 is not impossible. Millions and millions of people have done it, so there's no limit on the upward, possibly your income. Yet you can only save if you're spending $40,000 per year. Cool fact you can only save a maximum of 40,000. That would be an expense or zero. And that's impossible. So as you say, though, the more you save, at some point the savings comes at the expense of joy. You are cutting out the things and I agree. Fine. Cut out some stuff. I get the money you're wasting. If you're getting DoorDash every day and you're getting delivery all the time and you're getting bottle service. Yeah, that's the stuff you can cut. I don't know that you need to cut out Netflix. Call for $12 if that brings you tremendous joy. So I think you should save 3 to 6. I think you should save six months of your burn rate. Your burn rate is the money that you're naturally already spending. One thing I know that everyone is watching this is likely comfortable, but saying you're living your wildest fantasy, but you are comfortable spending the money that you're spending right now.

13:09So knowing that, why don't we take that amount of money and every month we're going to have a checking account here, we're going to drop that money down and we're going to see what happens at the end of the month. At the end of the month. Do we have more money or more months left? If you've got more month left, what we learn is your burn rate's not the right number. We're trying to lock into that. I think you want to get six months of that. So I agree there. Invest 15% of your household income. I would push for more. Again, the difference of my messaging is I'm focused on abundance and not scarcity. And if you read the articles and you go through Dave Ramey, go through the article links, we're going to put in the show notes and ask yourself, are these written in abundance or are they written in scarcity? And it's all written in scarcity. And I have not found a single thing in my life that improved by focusing on scarcity. So 15% your income actually can be more because as you're if you lock in, if you're in this example, if you were manage to take your expenses, you're making $40,000 and you got them down to where you were spending $35,000 per year. So you're freeing up $5,000 rather than trying to get you down to $28,000 per year. I would rather you focus and ask the question of how do I go take my income for 40,000, 80,000? Because if we can keep your expenses the same, we've actually got an extra $40,000 versus going from 35 to 28000 is $7,000. Now, I know that's not rocket science core to figure out what I just said, that 40,000 is greater than 7000, yet people spend their entire lives focusing on the 7000. You can only save so much instead of cutting the thing that gave you joy. What if you enjoyed it? Get your Starbucks and read a book on how to improve your skills and how to grow your life. It's all about asking different questions. You're going to get the answer How do I save more money? Yes, you need to save money.

14:49Why don't you say, How do I double my income? And that be the thing you repeat every single day? Again, there's no limit on the upward mobility of your income, so either you can save more than 15%. So I disagree a little bit. There. Save for your children's college fund. The best way to save for your children's college fund is becoming wealthy yourself. Okay. Yes, I'm not because because most folks invest in a 529 plan. Right. Would you put in money and you pay after tax dollars. It comes out of their taxes. All the returns are tax free and you can buy college. That's awesome. But by the way, if you do this the right way and you invest it in a piece of real estate when your child was born, by the time that they get to college, that, number one, they can live in that house if they want. You could sell the house and pay for college. Investing in the correct assets is the answer. A 529 plan is not going to save you anything. If you can't save money and you don't do things right, you're not going have the money to do college or anything that you wanted. So why not make the right decisions in looking at is college We're looking at we're going to have other expenses in our life beyond college and so having a method to become wealthy, meaning I'm going to invest X amount of dollars makes a lot more sense than parking them in vehicles that dictate what they're invested in. Right. I don't love mutual funds and ETFs. I'm not saying it's bad if you want if you're looking for the easiest way to build wealth. There's a really great book. It's called The Simple Path to Wealth. We can link in the show notes, and it's all about buying the Vanguard Total Market index, and you're just buying basically every stock in America.

16:14And over a 30 year period, it's going to go slowly like this. It's awesome. You can set it and forget it. You never got to think about it. It's a really good way to land in. You would you would end up being wealthy, But I think there's better things you could do. But I would like to bet, I think that everyone has an unfair advantage. We've covered that and a lot of episode in unlocking your unfair advantage. You can go back to episode two and we'll link the other episodes. We referenced that there's ways that you can get better returns and then as you get wealthy, you're likely going to want look at your taxes and other strategies around it. So investing only in mutual funds might not be the matter because I doubt that everyone on here is the foremost authority when it comes to mutual funds. I know that I'm not in, so I have $0 in the stock market because I invest it where I'm going for revenge. The next year. So we're saving for the kids college fund. I disagree. I think there's a better way to do that. If you are going to invest through a college fund, I would recommend a Coverdell. Why do I like a Coverdell? Because you can actually self-directed it and you could put it into the investments that we talk about, which would be where you have your unfair advantage. My kids do have a cover little account, and they invest alongside me into deals that make sense. He talks about paying off your home early. I think it depends, right? Court Should you pay off your home? Yeah, it's a great strategy, but right now I carry debt on my primary residence. I have a 3.35% jumbo rate call on my home. Now, why would I why would I put additional dollars down call? So mortgage rates today, we just looked 30 year fixed mortgage not on a jumbo rate for for the average sales price of $5,000.

17:44And in Arizona 7.01 is the average 30 year fixed rate. As we film this today in March, I have a 3.35% on a jumbo, which we'll just pretend those things are the same. And so I can go in Treasury bills and get over 5%. So why would I call pay additional money down that yields less return. Now, again, if you're planning on torching all your money and lighting it on fire, you should always put your money in the hands of other people, i.e. put it in a 529 plan. Senator, your financial advisor, getting some pension planning can't touch. Get your money very far away from me if you're going to light it on fire. But if you've got to have the discipline, what creates wealth is discipline. So you've got to have enough discipline to get there. The only way to do that is to actually get control of your life and make decisions that make cognitive sense. So paying down your home if their interest rate was 9% or eight, yeah, I think that's pretty smart. Paying it off now at a 3.35 percentage rate. Totally disagree. And lastly, number seven call, if you follow steps one through six, which were you know, there's there's a few missing gaps in between there. But if you get to number seven kaboom call you're there ready You know number seven is build wealth and give, huh? There you go. You get to number seven. Well, I don't know what happens between paying your off or I'm off early and then where you bam build wealth and give. But boy, does it sound cool. So as we're on this journey, that might be step 47 on Bret's list because I think you're going to a few more wealth building things.

19:12But let's see, as we jump these episode, let's just see call. Do we unlock this strategy that we're missing? Because I am interested. So number one, I'm going to buy a home. And Dave says that a 15 year mortgage is the way to go. For those that say he doesn't say that again, I'm on Dave Ramsey dot com and unless it was hacked I'm going to read directly from what's on the site here. The main reasons that we teach buyers to choose a 15 year mortgage instead of a 30 year number one color is let me say my reasons are here. There's three really good ones. Call There's three reasons that you need. You just need the three. That's all it is. Number one, you're going to save tens of thousands of dollars. And the way you do it is because call a 15 year mortgage is going to get paid in half the time of a 30 year. That's what they're saying on the site. And I'm going to go to I'm going to go in a minute to my calculator to verify that 15 is half a 30 I so far. I know. But then you got months and then then what do you do, step six or seven for that seven and be on. So now, Kim, hold on, I'm here. So a 15 year mortgage is going to save you $10,000. Okay? Okay. Because of the 15 year because you're paying off. Really Cool. Now the average person lives in their home less about seven and a half years and trades up or trains down. So we're not going to get into that part of it, but we're just going to pretend that everyone does slowly. You know what? I hear the story all the time cause people just are like they're paying their mortgage and they get two payment, 180. They're like 179 kaboom, 180. It's paid off. And by the way, in the comments, why don't we just how many people have paid a 300 a 30 year mortgage for 360 payments straight and then sent that last one in?

20:46I would love to see in the comments how many people you've met in your entire life of anyone you ever talked to. So now anyone you've ever talked to or yourself, how many people have paid 360 consecutive payments? Because even if they stay in their home, what do people do? Call they refi finance? Well, thank you. Those are audio wasn't an audience at home. That was call who is in the sound booth, by the way, joined by call today. We remodeled the vet in here last time. So you might have noticed there is a few different different scenario. Different. And you do have. Yeah, well, we have plans. We have a subscriber. And I got to tell you what, I didn't even and I'm not even doing my job. We've got a subscribe button and that's on Baby Yoda and that's the kind of hip we're hip. I don't know how we have a baby Yoda, and I know how we got the subscriber thing up there. It looks like it's in my handwriting. We also have a I don't know if he notices a Brett and Taylor Tanner family, a family photo in a pot. And boy, if you if that camera ever slips and tilts the other way, it's a total disaster because there's a there's a thing a silver bullets over there and a whole bunch of other stuff but so cool We got to get we got to get real here. So, okay, we're going to save tens of thousands of kids 15 years, right? Big deal. You're going to build equity in your home faster. Okay. Well, if you pay more towards principal, that will do it. I mean, that's logical. I get that. But he says one way to build wealth, the value of your home minus what you want is to pay back the principal your loan faster rather than just interest. Since you're making bigger payments, you're paid on the interest faster, which means you're paying until the principal every month.

22:14On the flip side, solid payments on a 30 year will have you paying down the entry lot slower, so less of your payment will go to the principal. Okay, got it. And now we're getting in the saving tens of thousands of dollars. Is he because you say now we pay it off in half the time. That's where he saved the money. So it's kind of a two parter, but you do save. But I'm sure he references on the site. You will save money on the interest rate. There's a difference. Luckily for everyone watching your today, we did some of the math in. So the math is today and I've got to get my handy 10bII financial calculator. I use this constantly so today if we were to go get so why wouldn't we look at call how does this work in the real world right let's go to I don't know March of 2024 and just do a little comparison of Dave's advice. And for all the Dave Ramsey fans out there, I'd love you to follow along at home and tell me that you did this exact thing and I want to hear that call. So we're to do a $500,000 house. And if we bought this house on a 30 year fixed mortgage, as of today, the rates are 7.01%. That's at the best rate ever call. That's a national average because I know that people will fact check this. We're going to buy a $500,000 home. We're going to put $80,000 down your payment, your principal and interest payment only. This is not include tax insurance is 2700 call in $97 427 97. Now because you go to a 15 year mortgage, the rate is less, you pay less interest.

23:43There is an incentive to get a 30 or get a 15 year mortgage as opposed to a 30 year. And so what does that do today? It's 6.53% is that average. So 6.53. We're going to change that and then we're going to change the month call. And they tell me in our our fact checkers online, tell me the difference in a 30 year mortgage, which is 360 payments to a 15 year, they tell me that's 180 payments until they tell me. And so now the new mortgage, same down payment. So it's a still a 420,000 or a loan amount at 6.53% on a 15 year is 30 $665. So I'm going to do some quick math here. The difference between 3665 and 2797 is $868 a month. So you're payment will be $868 more per month. Now, here's the part we don't talk about Dave Ramsey's. So, number one, I do believe you should put 20% down because I don't like paying PMI. So if you're going to save, I think property mortgage insurance is basically a tax on people with a lack of down payment. That's all it is, right? It stands for a lot more things. But they're charging you because you didn't have enough money down at greater risk for the lender. So they're placing that on you and it's basically on a loan like this. And I'm guessing it's probably around $300 a month on a foreign or 20,000 or a loan on something that you will pay forever. So that's in addition to this payment you see here. So the other thing Dave's not talking about because you're paying was higher, you're going to buy less home.

25:10So as he as your payment goes up, banks look at you and they're going to prove you on your total debt. The debt of this included your other debts to your income ratio. Right. They're actually looking at coal. Can you afford to pay us back? I know it's crazy, but banks like to loan money. The people that can pay them back and they charge you more if they think there's a chance you might not paying back in. So if you look at this, so whenever you go and increase your payment by that $860, what's going to happen is you have to buy a smaller home. Now to Dave's point, which is all about pay everything off, go conservative, get the cheapest possible thing. Yes, that will work to get you out of your total debt faster. My argument, of course, is it also brings less joy. If you thought a $500,000 home, you're like, Oh, Brett, you and your your luxury talk on this podcast, a 500,000. Our home is the average sales price today in Arizona. I think it's crazy expensive. It's actually the average sales price in. So now if you're going to reduce that, like if you've got to come down to now buy a 4000 or home 375 so you can hit the 15 year call, my argument is that that house isn't going to feel the same as someone who's sold over $3 billion worth of real estate as we're filming. This is a real estate agent. I could tell you what, I haven't seen a lot of people walk into a 500,000 a home and go, You know what, be really great is a 350,000 or version. That's about 60% of this thing. I've never heard anyone say it. So again, there's the reality. Yes. The best thing for us to do it all, go build tents on land that we bought for five grand and throw up some solar grids and live for free.

26:42But that's not probably what's going to make us most happy. Cool. And so I'm not saying to go out there and torch your money for torching money's sake, but I am saying that I think some of this advice is problematic. So for all those that got a 15 year mortgage and loved it because when rates were at, you know, I have 3.35% on my mortgage and you got 3.0 and on a 15 year, but then you refinance it later and now you're up at six or seven most likely. But I didn't. I kept mine at 3.35 because I didn't pay it down. And I had the money going to investments that made sense. And as rates change, I adjust because I can make a logical decision based on math and not emotion and not the teachings of someone who got in trouble in debt and then tells you debts, bad debts, not bad debt, just a tool. And tools can be used the right way and tools can be used the wrong way and overleveraged. And too much debt is terrible. We all get that right. Credit card debts, bad cadet's bad. I totally get all that. But I don't think that debt always is always bad. And so if you look at the average, you know, first time home buyer today, I don't think that's realistic in standing up for a 50 year mortgage, especially with rosy prices and affordability. I don't think this advice works today. So now I want to go look at what does he tell us about investing in real estate. So let's go. We went through the seven the the seven baby steps that got a few gaps between six and seven. We went through the 15 year versus the 30 year. And now let's go coal.

28:05We're we're at the point where let's invest in some real estate. Let's really do this thing and let's go big. So there's six simple steps here. Call there's only six and we're going to talk strategy. Your first investment property should be your primary home. Now, see, I'm already confused. I don't even know what that means because I own a number of rental properties and I'm gonna walk you through a difference because as you go down the road and you have a partner, you know, mine's my lady friend, Taylor Tanner. And when we buy an investment property and I say, Honey, do you like this one? She says, Does the numbers work? I say something like, Yes. And she goes, Well, then we should probably do it if you like it. Love that answer. Thanks, honey. Now, when we go to buy a primary residence call, I know this might sound crazy. She has slightly more feedback. She. She wants to see things like the kitchen cause she looks at things like the floor plan, you know? I know this is crazy. Things like she looked at the backyard and like, you know, like the direction of the home. You know what I mean? Like, it matters her, like garage space. I'm going to tell you what she's never won. Sally Brett And that investment probably have what many garages are. There are there are enough garages for the tenants stuff. It's never come up. She's never asked about the floor plan. I've got some of the I don't like to brag. I think some of my rental property has the worst floor plans ever seen. Okay. But so in a primary residence, what I've said, I don't think there's anything about investing in a primary residence.

29:32I actually call this going to sound crazy. This may break the internet cool with this. I've never tried to make money on my primary residence. Why? Because we make decisions that make no cognitive sense. Example I just built a pickleball court in my backyard that will absolutely the next buyer will pay $0 for this. And guess what? It brings me tremendous joy. I can't I can't be more excited about they're playing pickleball. But my point is that it's an emotional decision. I'm doing it for me and I'm doing it for the reasons to me. I don't go to my primary residence say, Boy, I really hope this skyrockets in value. Yeah, I'd like to own it over the long haul call and I'd like it to go up in value. But it's not my investment thesis of how I'm going to become wealthy. Was buying one primary residence because I was an investment shark. Why? Because we all have a partner and we all we're all human beings. We're all going to make emotional decisions. And as it comes your personal life, I think you lean into that and try to make the most smart one you can and realize that some of your personal things are going to be around happiness and your dollars that you invest are there for investment purposes, and those dollars can have total logic and zero emotion based on them. So as you go through this, when he says your first investor, probably your primary residence, I don't think that's true. And if you've ever built a pool in your primary residence, it costs $80,000 and then they give you a $15,000 in the appraisal. You probably know that that wasn't the most shrewd investment I've ever seen. Call, call, if you.

30:50I'm not a wizard on this, but if we spend 80 and then they give us 15, how do we make money? Do we make it up in value? We make it up in volume. I don't think you lose money on this one. If you do a lot of this, you do it enough times and show the market's big enough. You can go public and people really buy it. So. All right, cool. So number one, investments obviously goes without saying, pay cash. Again, this is from the website that people say he doesn't say that he unless it was hacked, he says, yup, you read that right. You should always pay cash in full. He even clarifies you did hear that, right? This is not hacked. That's what you heard. Any time you buy or rent investment properties cash in for don't even think about going into debt for this exclamation point. Now, our advice might be the opposite from you'll hear from some of these investing real estate investing gurus. But the truth is there's no such thing as good debt. Agree to disagree. Debt always equals risk. That is true. That is true. Debt does equal risk and the riskier your investment. Why does it have to be risky? Put a pin in that will come back to it. The more likely you are to lose everything. Dave. That's how you lost the money, man. And I went to a restaurant once called and I don't tell a story all the time. I went to a restaurant once and I know this is going to shock people. I had a bad meal of food. I had an experience to where I had a sandwich was a French dip. So one of my favorite places, by the way, in a win in there. And I ate it immediately. I left corn. I didn't feel well.

32:24Okay. You know, I was a little sick. Honestly, I was kidding. Cause the real story and as a result of that bad French dip, I did not stop eating food. To this day, I have continued to. And by the way, you know, I did chalk it up to a bad day. Went back in there. I still eat the French dip. There is just one day wasn't great. So just because they've got crushed with debt doesn't mean you're going to get crushed with debt. It does not mean that all it means is that unnecessary risk is unnecessary and that if you're buying smart investments that have cash flow, you've done your due diligence, you have reserves, and you're playing from a place where you have a plan with cash reserves. Again, the diligence you've done all the right things. You've taken as much of the risk as you can, and that's what we all have to take risks in our life. Everything we do is risk your only job as an investor is to correctly price the risk to the investment. An investment that promises 35% plus returns has insane risks because that's the only way you can generate those types of returns. And so when you really think about you're going to save up for your first investment properly, I could tell you I didn't do that today. Do I buy properties for cash all of the time, But I didn't get here by being able to do that today. The reason I pay all cash cool for a lot of the investments because they actually don't make sense to take on investment rate debt at eight or 9%.

33:46That is very, very hard to make cash flow and to find a ten or 11% Cadbury properties, I can't do that, so I can't say to sit here and pay cash when I didn't do that. And I became really wealthy from investing in reality by not doing it, did I take unnecessary risk? No. Did I get smashed in 2008? Not because of debt. I got smashed because my investment model was stupid and it was speculative. Instead of basing it on numbers, I base things on emotion. Back then. And so I still think you have a planet paying cash for all your investments. If you save up and do that, is it is it safe? Yes. Does it take forever? Probably. When the average person has a hard time saving any money at all? I think saving hundreds of thousands of dollars of it before you make an investment is challenging and so diversify. You've always heard the phrase don't put all your eggs in one basket. This investment applies here. This IT wisdom applies your investments when you reach a specific step in your finances. More on that later. We teach you that you should have 50% of your household into retirement accounts, retirement accounts, and inside those accounts you should use good old mutual funds as the foundation for your wealth building strategy. And after that's locked and loaded, you can start investing in real estate and oh, don't cash out your retirement savings to buy property or anything new. Your real estate funds should be separate. Okay, so diversify. There's two arguments here, right? Diversify. Put put everything in a lot of things. There's another school of thought. Has put all your eggs in one basket. Just manage the basket. And I've gone that route. Right. My vehicle for investing happens to be real estate. I have an unfair advantage is I am a real estate agent.

35:18Any specific market and understand other markets across the country. And so it is not that hard to learn another market. Does it take work? Sure. And so I look at this and say, I've made all of my money by putting my eggs in one basket. I would actually argue that Dave has done the exact same thing. Dave made 100% of his money by putting his all of his eggs in the content basket of talking to people who have debt and who have spending problems and getting them out of debt. And so this isn't all a Dave Ramsey not I'm merely reading his information and say he does a tremendous service. Dave, if you're watching, I know you're not, but if you are, what you do for people in debt is valuable. And I think you've done a great job. And I think if you own that space, that's wonderful. But along the way you want to monetize your audience. So you started selling real estate, leads in mortgage leads and other things, and you did that and you had to bend the message a little to try to hit a bigger, wider audience so you could actually make money and do it. And if we could just be honest about it, that's what happened and that's totally cool. I have an issue around the transparency around it. I don't think the advice is all good for all people, and I think that you should listen to this and I think you should go read the links here, but the show notes and go listen to my other episodes and don't take one just of itself and ask yourself if I'm investing in you and believing in what you could do in your own model, or if you think this scarcity minds, it's better for you and then pick your person. By the way, you're not paying this podcast Coconut sponsored. I want to be sponsored by VRT. I want to be followed by fluid board and all the other cool things out there, you know, like tiger boats or just something cool just for name, but cool. We're doing this to actually help people think differently and dispel the financial mess because people are out there talking about things they haven't actually done.

36:55Dave did not make his money by being an investor. He invested money once. He had a lot of it. I made all of my money. I got tied up here. Oh, cool. Oh, I made all of my money actually doing the thing I'm telling you to do, which was I made it as a real estate agent. I made an investment in real estate lending and things tied to houses. All right, next, Dave said, number three. What? Our third step here. Cool. Stay local. You know, think global, stay local. So stay local. I don't buy a property in Arizona. If you live in Illinois, I'll tell you, that's actually not great advice, because if you're watching this and you're sitting in San Diego and you say, let's just save all cash to buy an investment property, we only need a crisp 1.4 million to save that up. And then we jump from step 6 to 7 and you build and give it all away. It's going to take a couple of clicks. It's gonna take a couple of beats for us to get there. And so I actually the best thing I ever did and it actually closed yesterday. Cool. So I can speak intelligently about it and it'll actually probably be our next episode talking about some properties that I sold in Alabama. I bought properties around U.S. manufacturing, Mazda Toyota and I bought those homes. I've sold 21 of them. As of right now in I am 1031 exchanging that into a triple net investment like a Starbucks or something like that. And I made a tremendous amount of money by moving out of my market. So staying local, do I think your first investment should probably be local?

38:14Sure. I don't know that you should be there forever or if your market is San Diego or high price, your first investment may not be there. It may not because it may actually not make sense. It might be a good to hire a management group, a product manager, even if you're a local to help things. Runs really are not a good idea. Like the idea. See this again, You're getting information said to you by someone that doesn't actually own real estate as an investment. And so call if you don't own it, you're like, wow, maybe do it yourself, stay local, think global, but you're not actually asking the question of, Of course I should be management. Of course should I should. I'm a great real estate agent. Of course I need great contractors and vendors. And of course I try to get great tenants or a great property manager is worth their weight in gold. And I will tell you that it's the absolute it's not even a cost. There's no cost in life. There are good and bad investments. There's no costs. Step four and this is step four on really how to get wealthy and how to invest in real estate in in four steps. So number four, be prepared for risk. So usually renting out a property isn't as simple as getting renters and renters in there and checking in once a year. Call If you read that online boy or you wrong, you in for a shock. So Dave tells us that home on a loss of work that sometimes rentals sit empty four months ago four months ago which can be tough if you're not financially prepared and even the best situations, appliances still break in, roofs leak. They do the best way to prepare for the risk increase, but it is with a fully funded emergency fund.

39:44Yes, you should have a reserve, but it's not all tenants and trash. It's not what it's all about. So I get to tell you and my my dad yesterday I gave you the worst advice ever and my dad's one of my mentors. He said, I told you not to invest in real estate. You did. Anyway, I said they started investing because you told me not to. But. But his thing was that it's nothing but toilets and tenants. And I have this voice I do for my dad. It's a nutty professor, which I got to tell you, he loved growing up. And I always said, you invest in if you invest in the real estate side of the bed, tenants, tools and trash. So this I'm like, Where did you learn this three T model of investing tenants wasn't trash, Dad. I mean, what do you mean? Well, this is what they say, as the people say about it. Well, okay. I don't think that's entirely true. I've never have. I had a roof leak, but roofs still leak. Yeah, of course roofs leak. But I haven't had, like, something flowing in. Like. Like we had a waterfall in a living room or something. I mean, if I had a car drive through the front door and end up in the middle of the house, sure, that happened once. But it was an insurance issue and it was a long time ago, but still be prepared for risk. Yes, things are going to happen again. It's appliances break, but all of these things. First of all, you get an inspection. You could know lots of a properties don't sit vacant for months on end. Now with poor management or poor management. Yes. Could you have it said vacant for lots of months? Of course that could happen. Next, he says start small call, start small. So number five, not sure if it's investing for you. Let's just say real estate's not ready for you.

41:07You got to test it. So maybe you can rent out a space above your garage or an extra bedroom. And I'm quoting, I'm reading this. I'm not even adding into it even for a few nights at a time. That'll give you a taste of what owning a rental is like. It's also wise to talk to other real estate investors, get lunch with them and ask them what they wish they would known before they got started. This is actual verbiage. Maybe you can rent out a space above your garage or an extra bedroom that is as close to real estate investing cool as a skateboard is to a Ferrari. Both are modes of transportation. Both will get you from A to B both well, but they're not the same thing. I think we're going to recall that a skateboard is not a Ferrari. Now, we may disagree in the comments. I'm dying to see skateboard or Ferrari, but renting your space above your garage or an extra bedroom. I got to tell you, what I haven't had is a tenant in my spare bedroom. Yeah. Oh, hey, honey. Who's that? That's Jason. He's here for three nights, and we're kind of run a little bed and breakfast out of here. So, honey, if you don't mind tomorrow, you whip up some eggs and I'll. I'll. I'll make the bacon. It's going to be wild. So that's not real estate investing. I don't know what the hell that is. That's Airbnb, which I also blasted. I think Airbnb's perfect for people that are bad at math. Their hearts must be hilarious. Joke.

42:35We'll give you plenty of time to give us those comments in the back. By the way, if you're liking what you're hearing and you want some raw truth, now's the time to smash that subscribe call. Hit the like, smash the subscribe because we're on to number six, which is the one I do agree with. Higher real estate agent. Thanks, Dave. But Dave saying that because it gives leads to real estate agents, I'm telling you that because actually great agents are fantastic people. They should be a part of your wealth team. Why? Because they sell lots of real estate. The thing you're buying in, they have a tremendous amount of insight based on the number of transactions they've done. Now call them. I tell you, I didn't know tremendous amounts when I first got started. I don't go to a real estate school and they go 90 hours and I'm getting started. But everyone's got to start. So you get a great broker, you're at Mentor, they're helping you get those deals done. Now, having sold over $3 billion, the Real Estate Corp., I know a few things that are about the home buying and selling. I've had a few bumps and bruises, and a great real estate agent is worth their absolute weight in gold. Now, do you need to get one from Dave Ramsey? And so he gets a rip off the top and a referral fee? No, you don't. You can go find a great one in your market, get a referral from someone you know that is buying investment real estate that is buying investment. Really buy with your real estate agent. I'll give all your blasted rates to your real estate agent. Should be investing in real estate. And if they're not right, I might not use that person for investment. Real estate. All right, Just. Just a just a concept. All right, So this the fact checking that we got in the comments from last time was a, Dave doesn't say that beans and rice all the time.

44:05He says once you're out of debt, get off those beans and rice and just yourself. You can now add a protein to the bean in rice in addition to the the burning the beans. So he kind of says that, but it's all scarcity driven. Go to the website. We're going to link in the show notes and get you to read it and see, is this written for abundance or is this written for scarcity? He says You can have a mortgage on your house. He says. You can, but it should be 15 year. But you really should pay cash. If you're going to do not do that, then do something that also doesn't make sense. Get a 15 year mortgage. By the way, if you want to get a 30 or 15 year mortgage, get a 30 year mortgage and then pay it off in 15, you can always add the difference to it. But what does it give you flexibility if your life changes? You had a need that $868 I gave example early might come in pretty handy call if you needed it. And in the months you have extra money you could put that down. But I think I don't think there's a single person that's going to watch this, going to disagree with that concept and the extra savings and interest rate doesn't isn't worth the risk. The Dave Ramsey, as it were, risk isn't worth the risk of the higher payment, and it's not worth living in a crappy your house is not going to make you happy because I find out you'll be much more successful if you're enjoying your life. So in go read that. Lastly says you don't have to live cheap sake for cheap sake all the time. At some point you can take a vacation call at some point when this plan is just in between step six and seven, which in between step six and seven, I got to get it here in between paying off your home early and then building wealth and giving just those just just that one little step there that's just ever so small.

45:37You can really you can you can enjoy yourself. You can treat yourself to a moderately priced vacation. And so with that, my point that I'm making here is listen to all this and do what's best for you, but go out and ask yourself Anything I presented today doesn't make cognitive sense to you because I know that it will because I had to learn all this stuff. Not because I was smart, because I did it the wrong way. I have listened to people like Dave. I didn't get a 15 year mortgage. People tell me, Oh, Brett, you'll pay it off so much sooner. Yeah, you eliminate all the cash flow in your investment real estate to. That's the part they don't tell you which you know that does creates more risk. I learned that because I actually did some of the mortgages and I didn't listen to Dave by less as someone else who was equally goofy on that in that standpoint. And so, again, I love Dave. I want to repeat this because I know I'm going to get lit up and we're at a mark code mark moment now Mark the moment for the editor because we need to go back and we're I said, Dave does a great job. So if you're listeners, you're in debt and you have card debt, you have student loan debt and credit card debt, and you need to understand that. You do need to live less expensive day to get a debt. He is your go to guy. He is your go to guy for all the people says, Oh, Brett, I would want you to step in to the podcast or sparring with Dave anytime, anywhere. Dave I'm ready. I'm in I'm in wealth fitness shape right now. So if you want to step in the ring and talk about wealth building, I got to tell you my wildest fantasy, let's go. You're happy to come to your office. All right. We want to go with that call. So much information. I think this is going to be clear.

47:08The air and just smooth sailing from here on in with the Dave thing. But I want to go to our Facebook group. So go join our Facebook group. We're going to put a link in there where you can join and ask questions. And my old college buddy here. So when he it's very rare when you recognize a name you haven't seen in I haven't seen in person in over 20 years. He says he wants to learn more about originating hard money, loans and notes and ten books to read about it. The fundamental book, Right. I always talk about the bankers code. A buddy of mine now wrote a really great book and wrote the book, in my opinion, which is the Bankers Code. He also wrote Debt Millionaire, I think, or the Debt Code. And when you get those two other books from George Antone will drop in the show notes too. But all those books really, really anchor in some of the concepts we're teaching here, which are spreads, risk and loan constant, right? He goes in those concepts, what do we call We have the Debt millionaire and then we have the wealthy code. Everyone should go read. I would read Bankers Code Debt, Millionaire Wealthy Code. All those books are great. The next book I would go read would be a book called Invest in Debt by Jimmy Napier. Napier will drop a link in the show notes there. And when you're doing that book you've got to get the 10bII calculator. I have it on the app on my phone. It is one of the most used app my phones and I calculate different rates of return for different timeframes on investments. If you have the app and you and you buy the book, invest in debt, and as they're doing the stories in the book, you can go do the calculations.

48:38It will teach you how to use the calculator to model out financial returns. And Andrew, that is how I would learn about the hard money lending business to get started. All right. Our next person's name is Dylan EOS are boss. I'm going to be firm on that. I know. I'm nailed. Nailed it. Thank you. Call. We'll have to show that name in here. Or maybe we won't, because we can't. But I think I've nailed it. When paying your kids, how does it show up on your finances? That when paying your kids, how does it show up on a financial statement expense to what account and what are they paid for it? So I would recommend setting up a family management company. Get with your CPA. The reason you want to do that is you could pay your kids and you could avoid the payroll tax if you structured it correctly, but it's a little complicated. We can actually just jump into it here, but ask your CPA how to do it. They'll give you the exact answer. Keep in mind, this is for your kids working in your business, doing real jobs at reasonable wages, that you're documenting the actual work they're doing. They're actually doing the work. So you got to make sure you're doing that. Make sure you're right, that money would come out of this family manager coming in actually into their checking account. And then you could use that money to pay for things already paid for them. If you want it, you could use it for sure, but you can't just take the money and sweep it back out your counter.

49:51Not really pay them. I mean, it's got to be legitimate. They gotta be doing real, real work. Now, you also ask, how do you find your financial Sherpa? You look for a an RIAA, right? A registered investment advisor might be the place to go, but you're looking for some. What you're looking for is a fee per service. You're paying them X amount of dollars to do this project that not the investment. You're paying all the expenses of the investment. You really can't see it. That's where you get overtaxed. But the question is, would it be smart to build up capital at a young age? In my twenties, I watch your videos whenever you put in how you'll see was getting arrested. I have over $20,000 in a savings account. Now you should 100% save that money in a high yield savings account for right now. I would go back and watch the episode on the burn rate, get your savings account up to six months of your burn rate. Once you have that that money should be placed in a high yield savings account or Treasury bills. Beyond that, once you have the next 20,000, you 1,000% should go invest it in. It might not be in the way you think. Can we cover that in another episode? Maybe you'll find which one. But the way that I would have said or will link to the YouTube video we did, I'll show you the biggest investments probably in you. The investments in the very beginning when you were twenties are all going to be books, courses, tapes and seminars to increase your skills to radically change your income. That's the best investment you could possibly make. Putting $20,000 in a mutual fund that hits 8% is cool. Even if it hits 10% calls out of the park. That's two grand. So $20,000 invested over year at a 10% rate of return is $2,000. However, if you invested $20,000 in yourself, is it possible you could make $20,000? Cool. That is very possible.

51:23And so that would be one year. That would be every single year for the rest of your life. So I always initially and for a very long period of time, the greatest investment you will ever make will be in you. And with that, we are ready to wrap today. We covered a lot. We talked about Tony Robbins. We talked about being a boat captain. Not only is one of the greatest things ever, but a tremendous real estate investment, not a real state investment with a boating investment. And we went through really the difference in methodology and nuance between what I said on on day one, which many people said I wasn't fair to Dave. I don't know how I could have been more fair today. Been reading the actual information he publishes on his exact website. And so I walked through the difference in a 15 year and a 30 year mortgage. Why you should always have a 30 year mortgage and pay it like 15 should you choose to do so. But you should look at the Treasury bill rate compared to your 30 year mortgage and let that dictate whether you're shoving additional payments, add it up and all things finance and what makes sense in real estate investing, saving up to pay cash for every single thing you do on an investment basis may not make sense. And it's actually not how any of the wealthy people that I've ever met my entire life did it. So with that, we're wrapping up. For those that said, Call will never get to episode 0010. This one's for you closing out here. I'm Brett Tanner. This is Be wealthy. I'll see you on our next episode.