Why I'm Selling My Rental Properties (I Owned 130)

0:00I know there are people on the social medias that say rents never go down. Everyone I talked to told me I was an idiot.
More difficult is all of the listings you're going to have to take for the rest of your life because your property isn't making any money.
Return on equity tells you how lazy your money is. If you're disciplined, all of your days look the same. If you're undisiplined, all of your years Look the same. welcome back to the be wealthy podcast. i'm Brett Tanner. I am joined by the one and only Katelyn Mitchell. Katelyn, I know I say this every time, but gosh, it's good to be back with you on the Be Wealthy podcast.
I got to tell you, it's one of my favorite places to be. Thank you So much for having me back.
Well, you know what, Katelyn, what we didn't know all those years ago, you and I just used to do this banter when we're driving around a car or we're in a meeting, and we used to have this exact same conversation we have the whole time. And Cole and his genius was like, "You two should do this show on a show." And that's what this is. It's two

1:03friends, two friends sharing their ideas, breaking it down, and trying to help other people go a little faster. So, in Cole's genius though, today's episode is actually found by Cole. It was his idea. And I don't know if you know how all this came to be. So, I think you may know some, but you may not know the full story. So Cole, you know, was going through and he's responding to direct messages we get on the social medias. And Katelyn, when I say social medias, it just just think all of it, okay? I want you to think everything. Like cool stuff you don't even know. It's all these are direct messages that are out there on the medias. And he's going through it and he noticed something interesting and he was like, "Hey Brett, I noticed in your direct messages some of the people that message us, we last messaged them five years ago. And five years later, they're asking some of the same questions.
Interesting.
Uh they're asking questions like, "Should I buy a rental? Is now a good time? I'm thinking about a short-term rental. I'm thinking about buying

2:05crypto." Right? The people are anchored in their ideas. Five years later, they're living the exact same life. And then he's like, "Brett, I I've only been here like three, three and a half, four years, but I know where you were five years ago. And I look at what you're doing today and you're not even asking any of the same questions, right? You're living a radically different life. And it anchors that point that we talk about in our room all the time, Katelyn, which is people believe they can do way more than they can in a year, right? I see people's annual goals. You got someone making $400,000 a year and they're like, I'm going to make $2 million next year. I'm like, maybe that's hard to do. Hard to 5x your income. That same person though that wants to 5x their income in a year. If I said, "What's your fiveyear goal?" They'd go like, "Well, I'm going to get to three million." I'm like, "Wait a minute. You're going to get to two million in one year and then the next four years you only get 1 million more. That doesn't make any sense. It's not how it works, right?" Like, and so what we do as people, Katelyn, we so far underindex, we so underestimate what we could do over long periods of

3:09time, but for some reason, we radically overestimate what we could do in a year. And so this episode's really about the path that the journey I went on in the last five years. Uh, and we filmed our last episode. I'm going to go back and watch it, which is the seven mountains people climb. One of the mountains I was climbing was this mountain to get a thousand single family rentals. And I realized I was on the wrong mountain. You can go back and watch that episode and make sure you're not climbing uh the wrong mountain. But you know what, Katelyn? What five years is? It's 1825 days. It's enough time to change every single thing in your life, Katelyn, or you can change absolutely nothing. The five years is going to go by either way. You're either going to be a radically different human experiencing new levels of growth, or you're going to be doing the exact same thing you're doing today, and it's going to feel like Groundhog's Day. And the choice, Katelyn, is choice.
And there is a saying that's going around, and it's just if you said, "What's echoing in my head?" It's this one sentence, Katelyn. When you're really disciplined, all of

4:12your days look the same. And when you're undisiplined, all of your years look the same.
Say that one more time because I think that's so impactful.
If you're really disciplined and you have tremendous amount of discipline in your life, be that health, your relationships, your strategy, your work ethic. If you're disciplined, all of your days look the same. If you're undisiplined, all of your years look the same.
One of the things we hear in the real estate business is
I got in here I came in here for the freedom.
I came in here because I like houses and people. Well, give it a minute. You're going to hate both. That's a funny joke, but
but but my point is that people get into it for the freedom. Well, it's the discipline that creates the freedom.
You've got to have the most disciplined life and on the backside you'll have the most free life you can imagine. But most people, right, are undisiplined and all of their years look the same. So five years ago, Katelyn, in 2021, I owned 130 houses. Today, I own about 19 on the way

5:15to zero. And the difference, Katelyn, I traded 130 houses. Again, I'm down to 19. In the place of those, I now have a Starbucks, a Denny's, a retail building, my two national credit tenants, a cell phone tower. AT&T is one of the tenants. Got a 63 unit property in the mountains of northern Arizona. A 96 unit condo complex surrounding as apartments in norththeast Georgia. We've got a golf course and in all of that and Katelyn, we're going to have the next five years you and I might end up owning 10 golf courses. It's crazy. We love the business. But it all changed because the way the conversations you and I started having, right? And in the next five years, we're going to look at today and go, "Oh my gosh, what were we even doing five years ago? It's so crazy, right?" Like, and it's so small relative to where we're going. And I I you know, I see so many books that teach people how to think big and they ask me, "How do you think big

6:16or differently?" It's getting around people that are actually doing it. And there was two ideas because I I made a call to my mentor, my coach Gary Keller, and this was five years ago. And I'm like, "Hey, did I miss the part of your book where you take the four houses and trade it into your hotel?" And he said, "You did. You did." He pulled out the Millionaire Real Estate Investor, which I've got sitting somewhere here. I was going to pull it out right now. That' been really cool. But I know it's right over there. But in that book, he literally pulls out the page and it showed a thing called management units. So he had two things. He said two things you need to understand. BR management unit. Every house is a management unit. If you took five houses and traded them in one hotel, you trade five management units for one management unit. Okay, that's different. Uh second thing he talked about was return on equity. Not cash on cash returns, but the equity trapped in these assets over time as appreciation, you know, grows massively, which is what we want. We've got more and more equity in there. It's going to lower our return on equity if rental rates aren't climbing equal to

7:20appreciation, which sadly they don't. And so what I want everyone on this episode is to understand the exact journey I went on. Katelyn, we're not saying everyone's going to go buy a golf course. That's not what this is about. What we're saying is a lot of our listeners and we talked to them aren't making the money they thought they would make in their single family rentals. And today there's an opportunity in today's market to change that drastically and move into better assets that are more passive, have less soft cost, better returns, and to get them to their goals much faster. And so for you and I, we want to break that down from the exact journey that I went on step by step and how I did it because everyone could apply the same thing. There's nothing special about me in any way. In fact, there's I mean there's every reason I should never be successful. Very few reasons I should have other than I got around the right people with the right strategy and put in the right work, measured it over time and got what I wanted. And so Katelyn, here's what my 130 doors looked like. I had about 30 [0:08:21] units until 2019. Okay, that's 30 addresses when I say units. 30 addresses. Uh and then in 2019, I bought about 30 homes. So, I doubled what I had in my whole time. So, that was that was a very specific thing. Uh, I went to Huntsville, Alabama because Mazda Toyota was putting a factory in there. And you know the story, but I'll make it really short. I was giving a presentation for a buddy of mine, Kent Clothier, who's a really cool dude. He's got a great mastermind. Cool dude. And I was giving a presentation there. I sit down in the hot tub. guy and his wife gets in the hot tub and he's like, "Hey, I loved your presentation. Uh, I just I'm moving back to San Diego. I just left uh I believe it was Greensville, South Carolina where the BMW plant went in." And he's like, "The plant was going in. I knew the jobs it would create. I actually applied for a job so I could see, you know, what it paid. And then I looked at that income. I figured out the debt to income ratios and what homes

9:24those factory workers and managers of that factory could afford. Then I drove the neighborhoods and picked the best ones and bought up all the homes. And he's like, and I bought I can't remember the numbers, a couple hundred homes that we bought. And he sold them all. He made like $15 million and we moved back to San Diego. So imagine me killing I'm in a hot tub going, "Dude, you liked my presentation. I'm about to hear yours in the hot tub for the next hour and a half. Let's spin up a round of drinks and I'm gonna ask you a thousand questions. I asked him what markets he was looking at in Huntsville, Alabama. His whole idea was you found smaller markets where large jobs were being created. He chased US manufacturing. And so when Mazda Toyota goes into Huntsville, Alabama, and they say they're going to put in 5,000 jobs, it's not 5,000. All the parts suppliers come in. You've got the competitors come in. Everybody goes in there and you've got all of these jobs coming in. So it creates five to 10 times the jobs they quoted. So they quoted 5,000 Katelyn, but it really created, you know, 25,000 to 50,000 job in a small market. It's crazy. Well, it's obvious that house

10:27prices are going to skyrocket. It was obvious to me. Now when I flew out there, Katelyn, everyone I talked to told me I was an idiot that Brett, this home, when I started buying out there, I was buying houses for $30 to $50,000. And they're like, "These homes have been $30 to $50,000 forever." You know, Brett, in 2005 when Phoenix did this, you know what we did in Huntsville? We do this. You know, 2008, 910 when Phoenix did this. Huntsville, we do this. Just a straight line. I said, "Yeah, but you don't understand these jobs are going to do." So, I go out there and this came. I literally went and when I say knock doors on banks, I needed to find a local bank that wanted to lend me money because I didn't live there. But anyway,
it was very difficult. I weren't there with you. They wouldn't talk to you.
And they're like, they didn't understand the concept at all.
I made a lot of money and they're like, "You're not in our footprint." Well, finally, I found the bank that wanted to work with me. We did a ton of deals together. We're still doing deals with them. Wonderful.
Great bank out there. And it it it was critical to figuring that out. But I

11:29knew, Katelyn, it would change everything. So the next year, 2020, I bought about 24 more houses.
And in 2021, I bought a home nearly every week. bought up 50. Not all in Huntsville, you know, everywhere from Indiana to Abilene, Texas to Louisville to Kingman, Arizona to Kasakra, everywhere. About 50 houses. Again, I was living my plan. I'm trying to get to a thousand, not doors. I want to get to my thousand so I can get to the island, right? I want to get there as we covered last episode as fast as possible. And when I discovered, K, that the management units were just caught. I wasn't decreasing my management units. I was adding complexity every time I bought. And we've got property managers as you're aware of, and then we've got people on our team in our family office like manage the managers. And I still because any decision, you know, over five grand, I like to take a look at it. You know, we had three last week on the ones we own, right? Two AC units and a roof. Thank goodness. Last week, it just happens, right? Roofs go out. So again, every house you have, Katelyn,

12:33everyone's got a roof. Everyone's got a hot water heater, maybe two. It's got an HVAC. It's got a sewer line. It's got windows, right? It's got a tenant. It's got a lease. It's got renewals. It's got the insurance policy of the tax bill. It's going to have the same appeal. It's gonna We all know all this, but it 20 houses is 20 management units. Katelyn, you cannot change the math. It just is. And so they don't scale. They just stack. And at some point, right, your returns go down because as you layer in more people on your team, right, the money never came. I kept believing if I build it, they'll come. I was field of dreaming it came. I was Kevin Cosner. I was like, listen, if I build it, they'll come. And
one of my favorite actors, terrible business idea.
Terrible business idea. You can't field the dreams. You Yellowstone's the greatest series ever. However, you cannot field the dreams your investment. And
for those who don't know, Kevin Cosner and I have the same birthday. We're basically twins. Huge Kevin Cosner fan. I think that needed to know that, Brett.

13:35
And he's not a millennial. He is not. He won't even qualify as a millennial. But so Katelyn, we went and put all those numbers together and we filmed an episode, Why are single family rentals are bad investments in 2026? Go back and listen to that if you've got single family rentals. We'll really break down a lot of the data. I'm going to do a little bit of it here, Katelyn, because it sets the stage for why I made this move. Okay, so just some stats, Katelyn, I'm going to read you some data. Insurance. Okay, Arizona landlord premiums have rose about 48% in the last three years. So, we're the third worst state in the country for this. Thank goodness where the bulk of my real estate is. 48% in three years increase. Nationally, insurance has been compounding at roughly 7% per year.
So, think about that. Insurance is outpacing the growth of your residence,
which is a challenge. Second thing, turnover. You know, every time a tenant moves out, you've got to do a make ready, right?

14:36We've got to get everything ready for the next tenant, but that includes all the repairs. That includes a leasing fee, right? So, the industry estimates a turn in 2026, Katelyn, five grand on average. So, hold on. Average rent, right, is around $2,000. Average security deposit at best case is around 2,000. Your turn is 5,000. So, Katelyn, where does the the the difference between two and five I think is three. Where does that money come from? Your cash flow. Okay. Not awesome. The rules changed. You go back in in 2017, zero cities had right to council for tenants, meaning tenants are being represented by like attorneys. Zero. 2017. Today, 28 jurisdictions. 28 jurisdictions. And where do you think that's going to be more or less in five years? So, you're trying to evict a tenant for not paying you per their

15:39lease. And now you've got another side fighting you trying to advocate for them free rent and ext. It's a terrible thing, right? All you're going to do is run out the landlords. And so most of us investors came in the single family world were small. The Census Bureau's rental housing finance survey, 72% of America's single family rental homes are owned by individual investors. It's not Reeds, it's not Wall Street, it's mom and pops like you and me paying retail for every repair on every door. The people in the game agree. Avail's 20 2026 survey of more than 4,000 independent landlords. 74% their own 74% said their ownership costs went up this past year with property taxes insurance leading the way. And the insurance regulator's own data, the NIC, shows the average dwelling fire premium jumped 10 and a half% in a single year from 2021 to 2022. So 130 doors came into my life didn't

16:44become 130 little annuities that were going to take me to the promised land at some point in the future. That wasn't it. That is that did not happen. It's 130 little businesses, each one with its own P&L, its own bank account, its own regulations, its own insurance renewal, and one CEO. You, if you need help in your business right now, you've got a challenge or an opportunity that you really want to hone in and capitalize on it and make a game-changing breakthrough in your business. Come out to our one-day workshop. This is something we've never done before. We're now doing them at the resorts we've bought. So, they could be at Apple Mountain, Georgia. They could be in Northern Arizona. Um, they might even be in Bise in the future. But you get to come to a one day where there I'm not going to present slides. It's literally you and your business and you're going to leave with an action plan you can implement in your business. Go to bewealthypodcast.com and you can click on our upcoming events and see where we'll be and book to come. We have the room is limited. We have no more than 15 people in the room. Go to bewealthypodcast.com and you can book our one-day workshop coming up.
And so what I learned, Katelyn, is you

17:47don't get wealthy owning lots of little small things. You get wealthy by owning larger things, right? Don't put all your eggs. The saying is don't put all your eggs in one basket. I argue the universe. Put all of your eggs in just a few baskets and really watch the baskets. And and that's what we've done. We took lots of little things and put them into bigger things and just pay a lot more attention. Uh and so we're going to prove this Katelyn with all of the closing statements for my personal portfolio. We're going to share all the numbers and we're going to break it down. So remember we talked about return on equity. Katelyn's one of the drivers here. Return on equity. Every rental investor, they know their cash on cash return. They put $40,000 down on the deal and the house nets them five grand a year. They're getting a 12 and a half% cash on cash return. How much do you have invested? What does it net? You divide those numbers, you get everything. That's great. Return on equity tells you how lazy your money is.
Okay. Then some of us get lazy. Present company included. We get lazy with our money. We get comfortable and we quit pushing and we're like, "Ah, it's

18:50working. It makes $500 a month." Yeah, but you need to look at and the formula for return on equity is actually easier than cash on cash, Katelyn. You take your net income divided by the equity in the property. That's it. Not what you put in, it's what's trapped inside of it. So, here's the problem. We talked about it before. What crushes return on equity? Massive appreciation. value skyrockets, right? We've got all this equity now, but our return only went from this to this, right? Only a little bit. So, if you want to look at Phoenix, Katelyn, which we No one burns hotter both in the summer in terms of heat and in terms of appreciation. Nothing burns hotter in Phoenix, Arizona. And from 2011 to 2022, 224% is how much homes appreciate. That's like mindboggling, okay? in an 11-year period of time, 224% appreciation. Now, rents went up a lot, okay? But from 2021, rents have only gone up

19:5331%.
Your costs again radically have gone up way more than 31% in that same period of time. So, the equity balloons, right? We have all this equity. Our income is not increasing at the rate of our expenses, which long term can be a problem. And so the academics have measured this over the long run, came the really smart people. I just read their research and in this paper by Demers and Eisfeldt. They covered the single family real estate market from 1986 to 2014. And I would like you kind of in that period of time, K, we got it all in there, right? We got the late 80s real estate crash. We've got the great financial crisis, you know, we had the stock.com boom which pushed people into real estate. like all of these things this period of time and what they found in that period of time if you took people's returns in single family real estate it was basically half and half of your return came from cash flow about 4.5% on average per year and about 4.4% came

20:57from price appreciation half and half. Now I'm going to tell you I measured the same thing and you can go back and list that episode for the period of time like 2010 to 2026 and it is not half and half. It is more skewed Katelyn towards appreciation versus cash. So since 2022 on income we're going to talk about income. K Sheller has Phoenix down about 5%. Down. I know it's hard. rental rates. Katelyn, I had a property that I rented for less money right now than I did two years ago. I know there are people on the social medias that say rents never go down. And those people, Katelyn, you know what they're called?
Liars.
Liars. Liars. Because, and I don't know if they're intentionally stupid or unintentionally, and it doesn't really matter, but rents can go down. They 100% can go down. It's a
defend. Incentives, right? First month free, guys. That's the rent going down when you annualize it over the term of the year.
Or how about the rent just doesn't go

21:59for 13.95. It goes for $12.95. Katelyn, $12.95 is less than 13.95. That's what I've learned. And that's called rents going down. And so when you think about return on equity, Katelyn, I got a couple properties we'll run through over on Delcoa Drive in the magic zip code. You know, it's over there, North Phoenix. Okay. I bought it in 2012. paid 116 grand.
Today, it's worth about 435,000 bucks.
So, it did its thing. I didn't do anything to it. I literally bought it the way it is. It's the exact same condition in every way today. Like, I didn't go remodel it or do anything. It nets, Katelyn. I get about $22,000 a year in net income after all expenses. Okay. Boom. On on my $116,000 investment. Getting $22,000 a year. K. That's awesome, right? I'm crushing it. Now, the equity sitting in the house because I paid this thing off and I've got a line of credit on it. I've got of the equity I've got 5.1% as my return on equity today. The extra actually sitting

23:03there. 5.1%. That's my best one, Katelyn. I just gave you I led with the best. Okay. I got another one out over here in San Tan Valley. Uh oh, and I bought it for 159,000 today in 2016. Today, 10 years later, it's worth 364. Little more than double. How cool is this, Katelyn? It nets $6,700 a year. That's a $1.8% return on equity. So, if I sold that, Katelyn, and again, it's owned free and clear, so I'm just using free and clear on free and clear. I would make more money to own treasury bills than I do on that home today. I don't have to do any tenant management. I don't have to do anything else. Now, there's lots of arguments for real estate ownership. I'm not anti. We just have to compare. The best things we could all do with our real estate investment is to compare that to something else, right? What could we get by doing something different? Okay, I got one more I'll give you over here. It's in Tucson. bought it in 2019 for 132. It's worth 276 today. Doubled it.

24:07Net income $9,300 a year. 3.4%. Katelyn return on equity, right? No, it's not all that way. I've got ones where the return on equity is crazy. So, I've got one down in Sierra Vista, which is basically one of the most majestic places in Arizona. I don't want to mislead you. And I bought it for $80,000 in 2019. Okay. There was a time I refinanced it in 2022 when interest rates hit three and a half% for 30-year fix for investors. Well, spoiler alert, Katelyn, I took the I I took all the money out. So, it debts 15 grand a year. I've got a three and a half% mortgage fixed for 30 years. I'm probably going to keep that one because I don't have that much lazy equity in the deal, right? It's overperforming from a financial perspective. So, some of the houses, if you've got 30-year fixed mortgages and the underlying economics and it's in a good area and it's making you the right rates of return, Kitler, we might keep those. So, I'm not telling every one of our listeners today that your single family

25:09rentals are crap. What I'm saying is until you know the math, the return on equity, your actual returns, you're looking at a rental tracker, you're doing all the things we teach to be wealthy, you can't make the decision that you want to keep them, Katelyn, you can't because you don't actually know what you have. I just had the coolest call last week and I didn't even get to share it with you, but it was this couple that I met uh about 30 days ago and they have, you know, they're a young couple, young family, and they have these three rental properties and they said, you know, we we're not sure what we should do. They've been listening to our podcast. What do we do? The they're going great. We have low debt on them and uh we've got our wealth plan. Should we keep these? Should we sell them? What should it look like? Right? So they put the So I gave them obviously our format to fill this out on our rental tracker and they filled everything in, right? And it all autopop populates in the end with what their ROI analysis is, right? And we're going to look at everything from cap rate off purchase to cap rate off of today's value and look at the

26:12entire thing. And I started the conversation with them with our favorite Sam quote, right? which is for every day you choose to retain an asset or to keep it on your balance sheet, you are choosing to buy it at that value yet again today. That rate of return. So if I asked you, you know, would you purchase that Tucson property again today knowing you were only going to get a 3.4% rate of return? You'd say, Katelyn, no. I I probably wouldn't. However, so so my point in this was I went through it with them. So I said, "Let's look at it that way. If these were the economics today, I get that you guys fell in love with these duplexes and I love it. If these were the economics today and I was your realtor and I brought you this investment opportunity, would you say, "Katelyn, we're hiring you. You just got us the greatest investment opportunity ever." Or would you say, "This isn't the right option for us. We need to look at a different way." Okay. So, I said before we open this up, then I said, "Let's open it up and take a look." Here was

27:14the cool part. Two of the properties had totally lazy equity and rates of return, their cash wasn't working for them, right? We always talk about investments. That's your your money should be working for you to create passive cash flow. If it's not and it's lazy, you got to fire that asset just like you would a person in your business who's not working hard for you, right? So, they made the decision they needed to fire two of their assets, take that equity position, and go put it in something that's going to work hard enough for them, right? But one of their deals was exactly like what you just talked about down at Sierra Vista. They had done a cash out refi. They had created an opportunity at a 3% interest rate and now the property was working. They didn't have lazy cash. And I just thought that was so fun and so cool to see. And their faces were like, "What?" It was it was so much fun. So immediately connected them to to figure out how to do a 1031 exchange to help them move that money over and then connected them with cost segregation so that we could go ahead and do a study on the one that they're going to keep and

28:16get a tax advantage. It was so much fun. I had a total blast. They'll be at our mastermind in November but or October, excuse me. But it's you got to look at the numbers because the numbers aren't going to lie. And putting it out in a data tape allowing you to analyze it takes all of the emotion out of the deal and really lets you look at it. So, this is one of my favorite things that I got to see you go through and now I get to help our clients with. So, I love it. If anyone wants I that's my favorite call to do, book a call for it. It's my favorite thing to do with our our clients and our listeners. Let us take a look alongside you.
So, go to bewealthypodcast.com. If that's you and you're like, I don't even know what to do. Go to bewealthypodcast.com. Book a call. We'll give you the tool. We do have two seats for our upcoming mastermind that Katelyn referenced. It's available for you to come shadow it at no risk to you. If you do not absolutely love it, we give you your money back. You could say any reason and Katelyn knows. I tell people if you walk up to me and say, "Brett, I don't like black shirts." And spoiler alert, I will be wearing a black t-shirt at the event. Uh you can say, "I don't like black

29:18t-shirts." We will refund a 100% of your money. Our requirement is you do have to do the call because we want to make sure you're the right fit for the room and we're the right room for you. You can do that at bewealthypodcast.com. Katelyn, I was I did a few 1031 exchanges and the key there is to figure out how they actually work and I think most of our people listening to this Katelyn believe there's one type of 1031 exchange. That's what I believed. And then I got around Michael Velasco with exchangeable and he really educated me that like Brett there's lots of different types of exchanges. I can't I don't even know how many there are but you've got to get with someone like him because studying the 34 kinds doesn't really help. What you need to do is get an expert like him and tell him like, "Hey, dude. Here's my situation. This is the mountain I'm climbing. This is where I want to go. How do I take these units, right? And how do I move them there?" Because sometimes, Katelyn, like if you and I own something together, we could do what's known as a drop and swap, meaning we drop like we both own 50/50. We drop down to our individual entities. You choose to go on

30:21your own and exchange or not exchange and I choose to exchange
or I could exchange.
Not just a cool dance move, guys.
Not just a cool dance move. The drop is
not just a cool move. The drop is
also attack strategy.
Stop 1031 exchange.
But like I didn't know that I could buy a fire damaged building, Katelyn, and do a construction exchange. So there's so many options there that we got to remember there's other ways to do it. you get around smart people. And so if you're thinking about doing a 1031, I the advice we give everyone, Katelyn, you cannot start early enough. You cannot start early enough. So, um, I practiced that. I figured it out. I stopped buying single family rentals at scale. Again, I bought 50 in 2021. I stopped borrowing in 2022 at scale. We'll still buy one here and there, Katelyn, but not a lot. So, I stopped buying my first really big 1031. And we covered an episode back in a while back. You can search for the episode. It's how I bought a Starbucks from a deal gone wrong. We'll link that in the show

31:23notes. But Katelyn, you know the story. I bought a I did a hard money loan for a guy and it failed. I did a lease option back with him. Failed on that. And so turned around, I did a loan, made a lot of money, and then I ended up taking the asset back through foreclosure, flipped it, and then made because I had as a rental property after I foreclose, I could do a 1031. So I made $266,000 there. Okay. Took that and a bunch of other rentals. I'm trying to get the exact number for you here. Let me see. Do I have all this? I want to be uh I'll find that answer here in a minute. But I took basically, Hold on. one, two, three, four, five. We're going to call it fiveish houses. I'll have the exact number here in a minute. And rolled it into a Starbucks. Okay. So, I had number one a rental that that that Sedona rental we sold for like a million11. We looked at the long-term rental, Katelyn, and it was like 3500 bucks a month. Well, that's an awful return on a $1.1 million asset. Instead, I bought the Starbucks for just uh for

32:291.95 million. So, just shy of two million bucks. Starbucks is paying $86,000 a year in rent and it's triple neted Katelyn. So I gross a net beautiful same number. Uh 86817 is what I get. Then I've got another tenant in there. They pay 64,000. So net income for that property is 151 grand. I'm going to tell you the rentals I traded in there. Okay, spoiler alert, we're not doing that. So I bought it at almost an eight cap. It was offm market. You know, I worked the thing. I had a a broker that brought it to me off market and Starbucks has options, Katelyn, to be there until 2048. And my guess is in the year 2048, they will still be there,
right? If they're
What's that?
Like people don't like people don't think about this. So like they have the option to be there that whole time. And we just talked about with your single family residential properties, we're going to assume that's a 12-month lease at best, right? You're at a 12-month lease. But the really crazy part is that your expenses, like we just talked about

33:32insurance, your expenses on your your single family residential, like your insurance is going to go up, right? And you may not be able to increase your rent on your single family residential at the same degree. We just spent time talking about that.
Your Starbucks, well, your Starbucks, we had an increase in the insurance for the building, right? So, what happened? Our team sent over the notification to Starbucks and said, "Guess what? Complete pass through. They have to increase the amount they're paying every month to cover that insurance change." There was no change to your net income when the economy as a whole made an expense increase. Does that make sense?
Oh, and rate of return is virtually guaranteed.
Uh, it it's virtually guaranteed. It's even better. It goes up by 10% every five years. fact
must per the lease. So, I don't pay property taxes. The property tax bill just skyrocketed there, right? It went up like I'm gonna call it I'm going to call it 10%. Okay.

34:34Went up crazy. Guess what? Not my problem. The roof, not my problem. The HVAC, I don't get the calls. I don't even get calls. So, again, a flipped house, I'm sorry, there was three rentals in that. I I had three rentals in that deal that I exchanged. One big one, right? And then
the the Sedona one. So three went in there. So I had three management units to one. But the economics, Katelyn, were so different. So different. I had to change my I had 130 rental properties and I realized in my life I was climbing the wrong mountain. If you've got single family rentals and they're not cash flowing the way you want, you want to move into commercial real estate and you don't know the steps, come join us in a one-day workshop at one of our resorts where we moved my single family rentals and I can show you exactly how I changed my cash flow dramatically and tripled it through commercial real estate. Go to bewealthypodcast.com, click events, and you can see where we will be at one of our resorts and show you how you can do it, too.
So, Katelyn, the next exchange, 21 houses. I exchanged 21

35:40into AT&T, a cell phone tower, a we've got a billboard, we got another national credit tenant. 21 of my house. Now, Katelyn, I own 45 in Huntsville. I own 45. 21 the worst 21 because I used our rental tracker. I knew which the worst 21 were. I sold those in bulk to one investor and I bought a property for 2.5 million. Again, these Alabama houses were, you know, I bought them for 30 or 50 and then I sold them for like 150.
And so the craziest part, 21 management units, Katelyn to one management unit for that complex
all triple netted. I had 21 roofs I was responsible for. Now I'm responsible for zero roofs. I mean, I own the roof. I don't care what happens on it. All the repairs go to them. So you look at that, Katelyn, it's a totally different world, right? I my economics my cash flow nearly doubled. So I went all and by the way my cash flow went from a theory in single family

36:43rentals like I hope I make money I hope they're at repairs to a fact meaning to your point earlier you made like they pay all the expenses and so it is a completely different world then we talk about it all the time and I look back literally when I look back to five years ago I'm like what what was I doing right but I was so like I was like an ostrich just head in the sand just I'm just going to keep my head down and go get a thousand these single family rentals rather than running the math. So, I don't regret owning the single family rentals. It was a great starting point. I will still buy them, but we've always got to be running the math and seeing could be traded out for something better. And so, that was really
The thing I see you do, the thing I see you do, and I want to make sure people hear this, you really do mean that though. You would go buy a single family residential property and invest in it if it made sense today. But what you hold your equity to, no matter what asset it's in, I want to make sure that I say this, what you hold your equity to is a

37:46standard. So you established in your wealth plan that you wanted to be a net worth of X amount by when, right? You set that up and then you said, so every year I have to hold my equity on my balance sheet. no matter what asset it's in, I have to hold that to a specific rate of return and I have to make my money work for my plan. And so then you go and measure, is this asset making the actual wealth plan come true? And am I ahead of goal or behind goal? And that's the reason you're trading out assets. It's not just because you're a you don't even have AT&T phone service. I do, but you don't, right? You're a Verizon guy, right? So, you didn't buy that building because you loved that tenant. You didn't say, "Oh my gosh, I love Starbucks." You know, we do have Sabrina on our team who cannot get enough Starbucks in her life.
She like in her she couldn't she could

38:48not love it anymore. She potentially would have bought a Starbucks just for it to be a Starbucks. It had nothing to do with it a Starbucks. It had to do with the quality of the tenant, the structure of the lease, meaning that it was a triple net, and the rate of return upon which you would get. And so the whole thing is I look at leverage in our lives, whether it's people or money, and you must get the right rates of return from your leverage, right? If you had an assistant who wasn't working very hard and you weren't getting any results from them, you would fire your assistant. So why would you hang on to a single family property that isn't getting you the right rates of return just because you like them? You wouldn't hold on to the assistant that way. Why would you hold on to the property that way? So I think for people it's it's look at it and say, is my asset getting me the right rates of return to achieve my goals? They got to have the plan to get it started.
So Katelyn, I I'm curious. I have my

39:51answer. I'm curious yours. Why do you think, you know, we're going to put this out there and originally in the mastermind is very controversial, but today the math's easier to follow, right? I mean, we in that that episode we filmed on why your single family rentals may not be the greatest investment in 2026. Go back and list that episode, but why do you think people don't make this change faster? What do you think the reason is?
I've got my answer. What do you think it is?
So, I think there's different cases, and I'll tell you what I think they are. Number one, they don't know the real math. And what I mean by that is they may not take in like a lot of times I look at the sheet with people and we're looking at the rental tracker and they don't calculate anything in for property management because they say something like, "Katelyn, I just manage it myself so there's no expense." Perfect. But when you have 150 doors, do you think we'll have to hire somebody? So, we need to back into those economics today to make sure as it scales that it's going to work financially, right? You dummy proof our calculators. You won't even

40:52let us choose. We man mandatory have to have one month of vacancy and the property management in and one month's worth of rent for uh repairs, right?
And we even moved that to one and a half. You got to do go to one and a half on repairs. The old rule we did one and you can't do it. It will not the economics are they're lies. If you do one, you could do that eight years ago. You cannot do that today. To your point, we have we lock in what Katelyn say. We take this calculator, we give it to our our members of our BD mastermind. I don't even allow them to change the economics because they know their facts, right? Because they'll change it. Like, well, I don't have management and I don't have vacancy ever. It's never going to be vacant ever. And I'm never going to have a repair. I'm like, what rental are you?
What is this magic? What is this magical property you speak of? And can we find
Can I Buy it? i will buy all of them you can ever find. I will buy all of them. So that's number one, right? I don't think they know the numbers because sometimes we don't want to know the numbers, right? We put our heads.
That's my reason. You just hit my reason that that they don't do it because they they don't if you don't know the math, you know, it's the age old Amway slogan,

41:54right? If the dreams are big enough, the facts don't matter.
That's the old SL. So it's just like the dreams are big enough on your single family rentals, the facts don't matter.
I think there's a few other reasons though if I'm being honest. Like
I think that's true for most. I think another one is we get lazy and I think we'd rather go figure out how to get one more listing or redo a buyer's presentation than what we believe will be difficult in figuring out do we sell the property and what does it go to. I I think there's a point of laziness that we all can naturally have. It's difficult.
Uh that's how they view it. And the fact of the matter is what's more difficult is all of the listings you're going to have to take for the rest of your life because your property isn't making any money, right? Which choose your hard, figure it out. The last one I'll tell you, which I think is really real and I think it's that people are scared. I think they look at it and you know, a lot of our clients started in their careers in in residential real estate. They may have changed over time. Um, you

42:58know, we've got lenders in our room. We have real estate uh a retail real estate agents that work with buyers and sellers in our rooms and we have investors and wholesalers in our rooms. We have Everybody though knows and understands because they typically live in one single family residential investments and it's not scary. In fact, you can watch HGTV and become an expert, right? It's not scary. We all get it. But for some reason, when we change that from one door to now it's a Starbucks, everyone loses their mind and says, "I don't know how to underwrite it. It's scary for me. It doesn't make sense. I'm going to make a huge mistake." And so, they're scared. And so, you have to just get the education, the reps, and the practice in order to feel comfortable moving forward. No one's going to throw you off the bridge to do it. But you could start practicing and learning to understand it just like you would anything else. And so I think those are your three big reasons. Number one, they don't know the numbers or want

44:00to know the numbers. Number two, I think it's work, right? We get a little lazy. And then I think number three, people don't seek out the education in order to do the right thing for their family and for their wealth plan.
Yeah. And I would say number two, you could say lazy or you could just say you're comfortable. Right. One of the most dangerous places to be in your life, in my opinion, is comfortable. Uh, and the reason I believe that, Katelyn, is I believe you're either growing or dying. In life, you're growing or dying. It's just one of the two. Uh, there is no stagnant in the world. The world's moving too fast today. So, you're either moving backwards or are you moving forward. You know, in fact, you and I have an hour meeting at the end of this podcast to go over how we're moving forward on one of our assets. And it's like,
yep,
we've got some big revenue goals. Like, hey, we've stabilized. It's time to now establish goals which are usually a measurement of increase of something that is very specific and then you and I play this fun dance which we always do which I ask you what the number should be. You tell me what you think it should be and then I take usually double that number and then I hold you accountable
and you get it.

45:03
For the Yeah. For the listeners, can I explain how this all like so we had some huge goals to stabilize this property and to stabilize this business line and they literally just barely and I mean we're talking within the last 24 hours some of them have occurred and then we have the projections for the rest of them to occur within the next 30 to 45 days. And this psycho Brett, I'm on a plane ride on the way home from finishing this plan and he says, "Hey baller, great idea. Tomorrow, let's get on a call and I'd like to see your 135 of how you're going to grow that business line revenue by 40% next year. Excited for your thoughts. Bullet points are fine." If you don't have someone in your life, well, first of all, and I this is my favorite business that we're running. So, it was very easy for me to say, "Yes, I'm so excited. I actually have some great thoughts around it." But if you don't have someone in your life who's pushing you in those same ways,

46:05who's challenging your rental portfolio, who's looking at where your equity loads are and saying like, "Dude, are you getting the right rate of return? Are we on track for your wealth plan off?" If you're not booking a call with us to say like, "Look at my rental tracker with me, guys. What should I do? Tell me the cold hard truth." If you're not getting those conversations, you're probably too comfortable. I'll tell you guys really clearly. I am not comfortable at the rate upon which my peer group known as Brett and the rest of my peer group push me. Right? We're pushing constantly. So, are you pushing your equity in those same ways or are you entirely comfortable? I just want to make sure everybody knew how crazy that
So, it was a perfect segue, right? because I think our people get comfortable and I a uh I've gotten comfortable in my life, right? That was like prior to us doing what we're doing right now. Like I was comfortable with those rentals. I wasn't happy with them. Uh I didn't like the numbers when I got the math and I dug into it. I didn't like but I was comfortable. I mean 130 rentals I was making a lot of money. The thing is I was like but that's not

47:06what's next. It's not the highest and best use. It's not pushing me. It's not pushing the company forward.
And now we're doing stuff that's changing the game. And so you might look at it this way, Katelyn. My next move actually wasn't to triple net. It's the ultimate triple net thing, which is a royalty. So, I took a round of rentals. I couldn't find the triple net deals that I wanted at the time. Okay? Like, I couldn't find the Starbucks. I couldn't find it in the time frame. And so, I went and traded into natural gas royalties. I took homes, Katelyn, and traded them for mineral rights, oil, and natural gas mineral rights in the ground.
Yes, that is legal. that is deed real estate. You can 1031 exchange any deed real estate into any other deed real estate. You can go a mineral right which is deed into a condo, a condo back to a mineral right to a hotel to a mobile home park any deed real estate. So I did that. I took some of these houses that were loud and annoying and noisy. And Katelyn, I want to tell you in the in the natural gas royalty business, let me walk you through your obligations. Okay.

48:08After you close, you're going to get like this massive um document set. And gosh, I'm gonna forget the name of it because I'm so technical. Uh it's called your Damn it, I wish I could think of that right now. Anyway, you get like this basically it's all the paperwork like here's what you owe. Okay, division order. You get your division order. You take that. You basically go to the operator who they're like drilling for the oil and natural gas. They're like doing stuff and you submit basically like your W9 and what you own because you're like, "Hey, here's my dec." Okay. And then they put you in what's called pay status. Okay. You ready? You're done. That's all you do. Okay. Then every month, it's not mailbox money. It's not that cool. It's a money, which I think is better than mailbox money. Mailbox money. Mailbox money, you got to take the check and go to the bank. AC is every year, every month. Boop. Uh, and then the way we do it, we buy them to where there's white space and then they drill a new well. And you do literally feel like it's the greatest day ever. they drill a new one and then the cash flow gets insane. But there's other options, right? So, if

49:11you're looking at your single family portfolio and said, "Hey, I got to move to Starbucks." Some of these natural gas and oil royalties came I sold a $150,000 house and I moved it to $150,000 royalty. It's like it wasn't millions of dollars in money, but the cash flow was insane. Now, you shouldn't take everything and be in in energy and mineral, right? But as a portion of my portfolio, I want to be in energy, right? Energy is a real thing. We consume it. Katelyn, I don't know if you know this, but it's gonna be really hard for us to get off oil. Natural gas, another tricky one. Like impossible. Uh it like, you know, it's like the heating for the vast majority of the country, right? Natural gas, a real thing. Uh it's not going anywhere. Like, so that's a great option. Most of us make massive investments in our business, and some of those investments don't pay off. So, you could come spend a day with me for $997. You come up to one of our resorts, you're going to spend a day, bring your challenge, bring your opportunities, and let's work through it in a one-on-one coaching session. You're going to be in a room of your peers, no more than 15 people are going to be there, and I'm going to

50:12coach you personally to tackle your challenge and your opportunity. Go to bewealthypodcast.com to see the next dates for our event. My next trade came not that long ago, came a little over a year ago. I took nine houses and I did what's known as the real estate grand slam. And I'm saying that figuratively and literally because I bought a Denny's with it. Uh, again, I'm not I'm not operating the Denny's. I'm just the owner of the people, the tenants that make the Grand Slams. I'm not that cool as making them. I just get to own it and watch them make them. But yeah, I took nine houses, Katelyn, that were not performing awesome. And this is not far from Phoenix. It's down in Casa Grande. Um, but that lease started in 2014. It was a 20-year lease with two five-year options. The current lease runs through 2034. Katelyn, they got the only thing I've done so far.
The only thing I've done so far was a huge move. They had to email us because we had to sign off on they were going to spend a bunch of money on our building. They're doing like that. They're making

51:13like all the the buildings cooler, you know? They're doing like a logo update and all this. So, I had to sign something allowing them to go spend their money
fixing up my building. And so I said, "I don't want to get in anyone's way of a good time. Get in there. Spend as much as you want. Go crazy."
And the red,
oh, go ahead, please.
Gonna get grand slams. Well, we're get we're getting 160 grand a year net income every year.
Crazy.
And in 2029, you ready for this? 175 10% increase.
So, you know what's interesting? you know, as as we're going through this, it wasn't there isn't one formula. Like, I I had the opportunity to to be alongside and to watch you go through this, and it wasn't as though there was one formula that was the only thing that would work. There was a magic one setup of how you should do it, right? You took different single family homes from all over the country and you've exchanged them into a variety of different asset

52:17classes all backed by real estate. So everything from the Denny's to the Starbucks to the cell tower to the billboard to the um you know additional you know we talk about golf courses and we're talking about apartment complexes all these different ways that you can take that equity and make it work. And the one thing you were tied to was not the specific asset necessarily. It was the right rate of return and the right financial structure around it. The right capital stack, the right debt underlay, and then the right management component to that property to give you the right rates of return. It's it's not, oh, Brett Tanner only believes in natural gas royalties are the hottest thing of the moment. It's always the market's going to change. There's going to be different opportunities at different times. And I think that's the really cool part. All of this happened in the last five years, but each of these big exchanges, each of these big things were

53:22about 10 or 12 months apart. And it turned out that there was a different opportunity that was the right one in that moment. So I think the really cool part is our peer group, the people we sit and talk with, we're constantly trying to figure out what is the right asset to move to today with the right track strategy today. That's what I think is so cool is that you're literally giving us five different examples of what everyone could do. It's you have to go out and find the right one for you in the right market today. It's just past has to math.
I mean, it's and Katelyn, it it like I love that you said it changes based on the market. Here's what change. Like, if you just said 10 years ago the asset I wanted to own, I wanted to own a CVS or a Walgreens. Today I wake up and I go, I don't like that business. I don't like those businesses. I don't want to I want I love things that I believe right will last forever. And so my favorite author of the moment, he wrote the psychology of money. He wrote um same as ever and he wrote the art of spending money.

54:26Morgan Housel, right? But his book Same as ever. Um I think about it all the time. And he like it came from a question that someone asked Jeff Bezos. He said, "Hey Jeff, what will be different five years from now?" And he said, "It's a really good question. I get it all the time." He goes, "What I never get is what will be the same?" And what we focus on at Amazon are what will be the same in five years.
Sure.
Are people still going to shop online in five years? Okay, let's improve the customer experience through shopping online, right? So, what's going to be the same as ever? Right. I believe, Katelyn, that 10 years from now, people are drinking coffee. I think it's a real thing. I do. Uh, I think people are going to be eating in Denny's in 10 years from now. I think people are gonna have cell phones, believe it or not, 10 years from now. I think these are a go. I think it's a real thing. And the next one where we're going, people need to live in places. Okay? Until humans don't need to live in houses, you and I are in, you know, multifamily is a thing. And so the next one we took, I took 10 houses. And as I was preparing for this today, Katelyn, I look at these 10 houses

55:29and because our place in Northern Arizona is you're in my baby. It's like I I am obsessed with it. I love it so much. But I look at the 10 houses I traded. I'm not obsessed about any of them. I don't even like any of them, honestly. That I got one in there that was cool that was kind of more of a joke that I did in Huntsville. Like I bought, you know, my 16th chapel. I bought a really nice rental because I was going to buy one nice one in Huntsville. Um, but I look at all them like, uh, I had some stuff in Abilene, the steel in Cardinal, I had this house in Morirana that was at crappy house. And we took all 10 of those and now we've got 63 units that are crushing it. And those 63 units will make over 500 grand a year. Closer to $600,000 a year, Katelyn, we make on this, right? A 12.7% yield on cost, which is insane. And then, Katelyn, it gets even more crazy. We're going to move this over to HUD financing, which I did not even know

56:30this was a thing. AI and my Jarvis helped me figure this out. There's a 35year fixed loan product from the government for multif family. Let's just take all that in for a minute. 10 houses that are barely performing. Trade it into 63 units that crush it and then the debt is better. There is no 35year am 35year fixed and residential. Uh it's lower than investment rates. We got rid of all the management units and we have one management unit and we have an incredible team that we're in business with, right? Like it it's so crazy when I look back at those 10 houses that are that property. And then the last one we did and the last two were both done in a reverse exchange. The last one we did was Apple Mountain that came with 96 units, 40,000 square feet of commercial which we're converting to units. In the end at Apple Mountain, we'll end up with somewhere around 150 units total, largely two bedrooms on nearly all those uh and a golf course. And we've got 120 acres that Katelyn, you and I can just

57:31lose our minds on developing for the next decade. But it all started with single family rentals that made sense at the time. They were a great asset. But individually, the 10 that we traded in for the property northern Arizona didn't make sense. Collectively, those 10 did something incredible. It was gamechanging for your life, your family's life, my family's life. It was gamechanging for us. And so, I think people need to realize that number one, like everything's possible. Number two, you could have a plan. Number three, you got to go do the math. And so, I I do want to tell people, Katelyn, that not all my exchanges went through. I've had some 1031s that blew up. And so, none of them were major, but I had some that I just couldn't. Those windows are tight. And the ones that failed all failed because I did not do a reverse 1031 exchange. And timing it forward, Katelyn, so when you sell a house, you have 45 days to identify what you want to buy and then you've got 180 days to close it. The problem when you're moving into commercial, it's really easy to go

58:33single family to single family. Easy. Single family to commercial. The problem is getting a signed letter of intent and getting a contract signed and through due diligence in 45 days is really hard. It's really hard to get all the way through and if it goes bad, you're out. And you might have three you're doing at the same time, but it it's just the time is hard. Instead of if you buy a reverse, you have 45 days to identify what you want to sell. That's easy because it's the stuff you already own and you got 180 days to close it. Well, that's super easy. And so, K, I look at where I'm at today and my last 19 houses are all going to go to the next round of things. And we're looking at storage. We're looking at car wash. We're looking at more golf courses. You and I are looking more multif family. All of those things is where they're all going to land. Right? Some of these I took 10 houses for one. I took 21 houses and moved to one. Some were as little as three. And some was one, right? But the bottom line is I took I got 50 to 80 management units out of my world and I

59:36and I replaced it with five. My life's gotten easier. It's easier to manage. And can I just think if people understood triple net, right? I always thought I did, but it's like a totally different game. Like it's the difference on when you pay the expenses where someone else pays it. It It's just a totally different deal. It changes everything, right? So, we'll do a full episode, Katelyn, on the on all the ways that you and I underwrite um a a commercial asset. But the big three I just want people to think about today, what we look at, right? There's the big three. We're looking at credit. What is the credit of the tenant who signs the lease? So, if you've got Brett and Katelyn's taco shop that signs your lease, it would be a kick-ass taco shop. However, because it's Brett and Katelyn, I would not want to own that building with Brett and Katelyn. And not that we're not awesome people. I want
We make great tacos. We're big fans of tacos. We're passionate about tacos.
We want tripleB plus like plus ideally

1:00:42like AA credit like we want the Starbucks, huge companies, huge guarantees, publicly traded, AT&T, those kinds of things. So credit is the first thing we look at. What is the what is the likelihood they will fail? Next, you and I are document people. The details live in the documents. We underwrite the leases. We want to know the term, the options, the bumps, the termination rights. Can it be assigned? Right? We want to understand all of that. And lastly, you and I are location, location, location people. The dirt has to make sense. We want to buy things that if Starbucks did go out, it would actually be a great thing because we are below market rent. So yeah, we might be vacant for a year and then we're going to have a massive step up in rent and make even more money. Done right, you can actually radically reduce the risk. And so Katelyn, people are thinking about it. Um they got to realize there are risks in this. Okay, so let's talk about the risk. All right. If you got a single

1:01:43tenant building with Starbucks, Katelyn, if Starbucks goes out, yeah, your income does go to zero for a minute. That's possible. But in the cases you're buying with with 10 years left on the lease, Starbucks literally has to go out of business or file bankruptcy and try to restructure. Crazy things has to happen, right? You're you're looking for there could be clauses in leases that allow them out. Well, you're going to want to read that and make sure. Um, rollover when if you've got a multi-tenant building and something goes vacant, Katelyn, you vacancy is real. It is going to be longer in commercial than in residential. But how do you offset that, Katelyn? We're signing 10-year leases and sometimes 20-year leases. So, I might not have a vacancy for 20 years. The way I think about that is I think about the McDonald's in the town where I grew up in Cortez, Colorado. That McDonald's, Katelyn, is still there 45 years later. Same one. the guy or gal that owns that if they owned it all the way through absolutely crushed it. Right? So you've got now your the other thing we got to think about loans. Loans

1:02:45are not fixed unless you go to the HUD loan or some of the government loans. Most of our loans came on the commercial side fiveyear. You might get a 10year but it's got the option to adjust in five, right? Fixed for five. It'll have an adjustment and it's automatically fixed for another five. But usually right around five years is what you're getting today. And so you've got to think of those factors, but there's ways to offset all of that risk. Last thing I want to talk about, Katelyn, is soft costs. And I came up with this idea around soft costs. We all have them. They're all the costs that we can't put in a spreadsheet. You can't put it in cell E5, Katelyn. But what soft car costs are when you're in the shower and you're scrubbing yourself down and you're like thinking about the rental property. You're thinking about the insurance, right? You're spending your time driving out there to do that turn yourself, Katelyn, because you're self-managing. That's going to save money, but you're not calculating the value of your time in. And so soft costs are all the things that go into it that

1:03:49don't land on a spreadsheet that at scale we will have all of these things. And we just got to think about it. And so, you know, I owned 130 of these and the soft costs were insane. And there there's like real research around soft cause. So in this 2017 study proceedings of the National Academy of Sciences, okay, found that people who spend money to buy time report higher life satisfaction. I always say one of the greatest investments that you can make with your money is how you buy your time back, right? And then provided you allocate that time correctly. We think about soft costs. We're we're not correctly allocating our time. So only 28, here's the kicker, only about 28% of people actually do it, spend their money to save time. 28%. Even when they can afford it. And they ran a real life experiment. Hand handworking adults $40 to spend on something that saves them time. And they are measurably happier and less time stressed in a day than

1:04:51when they haven't spent a thing. The American Psychological Association stress in America survey found that has found money to be the number one source of stress for Americans every year. Right? That's been since 27 since 2007 when they started. Not once every year. The number one stress people have money.
For the last 20 years straight,
19 to be exact. It is the number one on the American Psychology Association's stress in America survey. While equities have had the greatest 20-year run of all time, money is still
throwing this problem, Katelyn.
Why is this though? Because it's management units, right?
It's we are more we're and it's it's all of that, right? So, we've got decisions. How you make 130 decisions? It's harder. It's easier to make one.
Attention. Our attention is fractured and spread over lots of things or our attention is focused on a few things that we can control. emotional energy. Talk about the emotional energy on single family rentals, Katelyn, it's

1:05:53exhausting. Like every it's it is an you have 130, you're getting hit five, eight times a day every single day and your time away because you have these soft costs of the people you're doing it for. And so for me, Katelyn, this happening, I I get this opportunity to coach the top agents and entrepreneurs. I've said this forever. I learn way more from them than they do from me because there's two ways you can learn in life, Katelyn. could have a life experience and you have to endure and learn from every experience that comes to you. That's one way to do it. The other way you could broaden your horizons and hang out with really smart people and you could learn from all of them. Well, one way is going to take forever and one way you could take what could take 10 years and you could literally do it in five or three, right? That Starbucks came from a loan from someone the people in our mastermind knew. I ended up doing a loan, right? Loan failed. Disaster. make a quarter million dollars, roll into a lifetime legacy asset that we'll have in our family forever. And so it it's so funny, Katelyn, that one of the biggest

1:06:55studies out there is peer effects on financial decisions. We go back to that episode you and I filmed uh a week ago. We talked about the mountains people climb. And one of them is we do things for other people's approval and and for just whether that's your community, your parents, we do things for the perception of how others will look at us, right? I'm moving my life and making decisions. I want people to look at it. So I love this study 2014 published in Echo. I can't even say it. Econometrica. I got it. Econometrica.
Econometrica.
Econometrica. Uh but here's what they found that when an investor learned a friend bought an asset. So your friend buys a single family house, their own purchase rate goes from 42% to 71%. So your friend doing it the right thing. So you got to be careful who you hang out with. Katelyn, if they're buying crap coins like in the crypto world and they're buying a bunch of crap coins, have you ever thought, gosh, I wonder if

1:07:57I should get some crap coins to go along with it? Right? It's very possible. So, you got to be careful what room you're in. But 42% verse 71% just because they're friended.
Here's another cool study in the Quarterly Journal of Economics. They paid a handful of employees $20 to attend a benefits fair and attendance among the unpaid workers tripled. Think about this, Katelyn. They pay people to go to like a like you're going to learn about all the benefits you could get from work from HR. Okay? No one wants to go. No one cares. They pay a handful of employees 20 bucks. The people that heard about that, the attendance tripled. They didn't even get paid because my friends are going, "Well, I got to go." So, we have to understand that we humans, we are emotional animals, right? We have we we make emotional decisions and then we're going to back it up with logic. And so, we've got to be careful what room we're in. But your friend and peer group, right, matter. And what is so unique about our room, right? And I didn't pull the studies to do it, but it makes the

1:08:59point. If you're in the right room with a collective group of humans that are 100 plus people that are all on the same journey, is it likely, Katelyn, that you end up owning a Starbucks or something like that? It's totally real. So, here's everyone's homework. Number one, we're going to create an exercise. You're going to fill out your information. We're going to email you the actual video and the spreadsheet for you to go complete your rental tracker. Go do it. And then if you want to book a call and have myself, Katelyn, or one of our team go do it with you, we will do that for you and talk to you about our mastermind. We're talking about that. Again, there's no obligation to join. We give you back 100% of your money if you don't love it. There's two things I want you to understand. Number one, your return on equity. That'll be one of the things in the spreadsheet and this exercise will do for you. Two, you got to look at your management account. Forget doors. That's stupid. How many addresses do you have, right? How many management units? And then we're going to look at the cap rate off purchase. to cap rate off today's value and we're going to see will the math that you have on your spreadsheet get you to the life that you want. Katelyn, we've got to make different decisions if we want to

1:10:02have change. Change isn't I'm not saying it's easy, but you're going to have to make different decisions and I hope to see each and every one of you at our mastermind. That's Katelyn Mitchell. I'm Brett Tanner. This is another episode of the Be Wealthy Podcast. Go out there, be wealthy. We'll see you back here really, really