BiggerPockets Podcast 466: Buying “Lottery Ticket” Investment Properties with Alan Corey

BiggerPockets Podcast 466: Buying “Lottery Ticket” Investment Properties with Alan Corey

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Alan Corey has had an interesting career to say the least. He’s been an IT worker, a comedian, an author, a real estate investor, and even a reality TV star. Alan has always been fascinated with making passive income in a frugal, but very intelligent way. He’s so frugal in fact, that he made up a crazy story to be on the Jerry Springer show, just to get a free trip to Chicago out of it. Talk about being committed!

Alan’s real estate story starts off with buying a 1 bedroom apartment in Brooklyn, New York, hanging up a curtain in the living room, and house hacking. He then repeated this strategy over and over again, becoming a millionaire before 30 years old, with a lot of property and “good debt”. Alan is part of the FIRE (financial independence retire early) community, but instead of investing mainly in stocks, he does so in real estate.

His strategy is simple: buy a rental property for every bill you have, then start inventing “fun bills” as excuses to buy more rental property. Whether you’re looking to pay off your phone bill every month, or finance your brand new Tesla, this strategy will work for you. Alan also “hides money from himself” so he can be better off in the future. Right now he’s sitting on around $8,000,000 of real estate solely from his own investments.

His new book House FIRE teaches you everything you need to know about retiring early with real estate!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Brandon:
This is the BiggerPockets Podcast show 466.

Alan Corey:
It helps with analysis paralysis because I’ve got a lot of clients and friends who sort of just freeze. And it’s easier when you’re like, “Hey, what bill do you want to pay? Okay. You found a house that cash flows you $200 that’s going to cover your phone and your water bill or whatever it is? Then yeah, pull the trigger, make the offer. Make the criteria that much easier. And just go through your next bill. Like okay, this one pays for your electric bill and the next one’s going to pay for your water bill. But hey, we mad progress. And let’s just keep the ball rolling and the momentum going.” The flywheel just sort feeds upon itself after a while.

Speaker 3:
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Brandon:
What’s going on everyone? It’s Brandon Turner, host of the BiggerPockets Podcast here with my cohost, Mr. David Greene. David Greene, I’ve got no good nickname for you today. What’s up man? How are you doing?

David:
There is no better nickname than your best friend and your cohost. I love this job.

Brandon:
Okay. My bestie, best friend in the entire world, David Greene here on the podcast again. Man, it has been a crazy few weeks I know for you on closings and me I’m closing like next week on my condo here. So real estate’s rocking right now, huh?

David:
I closed on two condos in Hawaii. I’m closing tomorrow on a retail center in Minnesota. I am hiring an office manager for my real estate team. I’ve got like 10 agents that are all ready to crush it and we just need someone with a little bit of experience to help train them. The loan business is going well. It’s frankly just a good time to work in real estate. You’ve got to make hay when the sun shines because it won’t always be that way forever.

Brandon:
Let me ask you a question though completely unrelated, then we’ll get into today’s show which was phenomenal by the way. I can’t wait to bring you guys this show. But what do you think of crypto right now? It’s crazy. It’s all over the news. It’s all everyone’s talking about is crypto. What’s your crypto thoughts in 30 seconds or less? Go.

David:
My thoughts are they have more with the way that the government’s just creating stimulus. They’re not printing dollar bills but they’re buying bonds and it’s pushing money in the economy and it’s like pushing water under the surface of the earth and it has to bubble up somewhere. So people are losing confidence in the dollar and you’re seeing asset based inflation is kind of running rampant. So real estate obviously is going up in value. But you also see NFTs, crypto, baseball cards, kind of weird stuff you wouldn’t normally expect to see this being influenced by this water as it bubbles up and it has to find somewhere to go. So I think that as long as there’s a scare of the overall strength of the dollar, things like crypto are going to do really well and if that shifts you’ll see that stop really fast.

Brandon:
Are you buying any?

David:
No. Because I only invest in things I understand.

Brandon:
Very smart. Very smart. I did buy $5,000 worth of bitcoin back when it was much lower and now it’s worth, I don’t know, like 20,000 or something like that. But I literally bought it as a lottery ticket. Like I was like, this is fun money, this is like play money. I might lose the whole thing. It might go to zero. But it might go to a million so it was an … What’s the word? Asymmetric bet. It was kind of like it could go really significantly higher or not. That said, speaking of lottery tickets, today’s show … Our guest today is Alan Corey. And Alan brought up a really great term in today’s show. I want you guys to listen for it when we get to that point, where he talks about the imaginary lottery ticket I think is what he called it. Is that right? And that whole concept was so good. We talk a lot about that. We talk a lot about risk. We talk about paying off debt. Should you pay off credit card debt, student loan debt before investing? We talk about that. We talk about, should you become a real estate agent to get started? We have a lot of good stuff there.

Brandon:
He made a million dollars on one … Actually, I think he told me three times in his life and we cover two of those stories today, where he made over a million dollars on one deal. So you’re going to learn about a couple of those today. And they’re not that crazy. It’s stuff that anybody here could probably pull off. That and more to come. But first, let’s get today’s quick tip.

Brandon:
Today’s quick tip is nice and simple. I put together a … I don’t have a title for it yet. We’ll have one here shortly. But I put together an interview with a CPA who specializes in taxes for real estate investors and an attorney who specializes in asset protection for real estate investors. And I put together this a little over an hour long … It’s like an hour and 15 minute sit down and we cover everything on this video. That is a new BiggerPockets Pro perk. So if you are an existing Pro member, make sure you go into your Pro membership. I think it’s like go to your picture on the corner, drop down and you’ll find all your Pro perks in there. That’s a perk in there and also if you become a BiggerPockets Pro member in the future, you’ll get that video as well. So that’s your quick tip. Check it out.

Brandon:
And remember if you’re watching this video on YouTube right now, don’t forget to like this video. Hit the little thumbs up button. Subscribe to the Bigger Pockets Channel and leave a comment below. If you have questions for us or the guest specifically, Alan Corey, ask him down below in the comment section. We love to see the YouTube channel growing so if you’re watching this here, let us know. All right, with that said, I think it’s time to get into today’s show. Anything you want to add before I introduce the man, the myth, the legend, Alan Corey? Anything?

David:
No, but this was a good one. I had a lot of fun with this recording. I think we got into a lot of life stuff. Not just real estate but the real estate stuff we talked about absolutely applies to the life stuff we talked about. I thought this came out great.

Brandon:
Yeah. Agreed. Without further ado, let’s get into the interview with Alan Corey.

Brandon:
All right, so today’s show we have Alan Corey. Alan was a huge inspiration in my life for real estate investing. I read one of his books early on and that really spurred me on toward the financial independence. And in fact, the book was called A Million Bucks By 30. I was like all right, that’s a good goal. So I set a goal of a million bucks by 30 and at 30 years old I crossed the million dollar mark. So that was cool. Interesting enough, he has been on I think six reality TV shows. We’ll probably talk about that today. Including Queer Eye for the Straight Guy. He was one of the people being looked over there. Longtime investor, real estate agent, started in Brooklyn, over 100 deals, once had dreadlocks and a lot more. So you’re going to hear more about Alan today. But that said, let’s bring him in. Alan Corey, it is an honor and a long time coming. Welcome to the show.

Alan Corey:
Hey thanks. I appreciate it. This has been a goal of mine is to be on your show. So I feel like I’ve achieved something. It’s like buying a new house. Also I told way too many people that I was the best guest you’ve ever had. I really kind of 10Xed my appearance today so I’ve got to live up to that. Yeah.

Brandon:
This is great. I like your prophesying. You just know it’s going to amazing so we got this. We got this. All right. So I want to start with the most important question of all. Really like get to the heart of who you are. Reality TV. What the heck was that about? You did Jerry Springer, Queer Eye for the Straight Guy. Where did this stuff come from? Like where’d that life come from?

Alan Corey:
I moved to New York right after college. This was 20 years ago. A different lifetime ago. I don’t even really recognize that person that I saw on TV. But I wanted to be a standup comic and that’s sort of like when reality TV was sort of a new thing. And so they go cast real people is what they call it. But really they just cast comedians to be on the show if you’re a male and then if you’re a female they’ll go to the modeling agencies and cast from there. That’s sort of my way onto TV. And I got to tell you, I make way more money real estate investing than I did as a reality TV show guest. Yeah.

Brandon:
Yeah. I can definitely see that. So if you guys want to see Alan with dreadlocks and we got him on Jerry Springer and all this stuff, go check out … We’ll actually put a link in the show notes at biggerpockets.com/show466. So check it out there. We’ll put a link. Also you can just go to YouTube and search Alan Corey. But it’s pretty amazing man.

Alan Corey:
That was fun. Yeah. One of the times they filmed two shows. I was on The Restaurant with Rocco DiSpirito as a waiter, immediately followed by being made over on Queer Eye for the Straight Guy as a real estate investor. So I got a lot of hate mail when they had two shows back to back.

Brandon:
That’s funny. Oh yeah.

Alan Corey:
Yeah. Working for pennies and the other where I was making some dough flipping homes.

Brandon:
Are you saying that TV is not 100% accurate Alan? Don’t burst my bubble here.

Alan Corey:
All I got to say is when I was doing this 20 years ago I was playing a part in some ways. Yeah.

Brandon:
I hear you. All right.

Alan Corey:
It might have changed.

Brandon:
So how did that lead into … For those who haven’t read A Million Bucks By 30 or the new book which is … I got it right here. House Fire, So You Can Achieve Financial Independence and Retire Early, which is phenomenal. Like how did you get into real estate? Why real estate? What was your first entrance?

Alan Corey:
Yeah. I was in the clubs performing every single night from about midnight to 3 a.m. And then during the day I was working as a tech support guy, nine to five. And I was just wasn’t sleeping. I was just always working, either at my day job or in the clubs. I was like, I’ve got to focus on comedy full-time. I just … I’ll never be able to live this dream. And so I bought every single book that I could on financial independence and retiring early and wealth creation and working for yourself. And I just gravitated to the real estate books and just kept reading those. And like oh, this makes sense. If I buy a couple properties … If I’m a landlord I’ll have some cashflow and then I can quit my day job and then I can focus on comedy full-time. By then end of the hour here you’ll understand why my comedy career didn’t work out as you get to know me. But I fell in love with real estate more than comedy so I kept my day job and then I started doing real estate at nights and the weekends and eventually made the switch to doing that full-time after acquiring a few properties and haven’t looked back.

Brandon:
Yeah. So what was the very first deal that you did?

Alan Corey:
The very first one, I bought a property in Brooklyn, New York for $99,000. I was living in Spanish Harlem at the time. I had never been to Brooklyn. I had $10,000 in my account and I was like there’s a 10% down payment. I need to buy something for $100,000. And there was zero apartments for $100,000 even back in 2001, 2002 when I was looking. But there was one property for $110,000 and I said, “You know what, I got to get them down to $100,000 or below and I’m buying this property.” I go over there. I show up for the first time, get off the subway. There’s a guy sleeping on the doorstep asking me for money, telling me some story about he just got out of jail. Most people would be like, maybe this is not the best primary residence or the best neighborhood. But to me I’m like, “Hey, this is all I can afford. I’m buying it.” And it was a one bedroom apartment. I hung up a very heavy curtain in the living room and I called that a second bedroom. Got a roommate and house hacked my first apartment. And then I started house hacking every 12 months after that and bought a duplex down the street. Eventually after that.

Alan Corey:
I had a goal. I was going to buy one property every 12 months. I did that for five straight years and now I try to buy multiple properties every 12 months.

Brandon:
All right. All right. So let’s dig in. A Million Bucks by 30. So how did you get … We’ll start with that one. It’s your much older book now. But how did you become a millionaire at 30?

Alan Corey:
It was a combination. It was really before the FIRE movement, but it was really the lean FIRE principles. Which FIRE stands for financial independence retire early. I lived on 39% of my $50,000 salary and I invested the rest. I did 401K matches, the IRAs contributions. But really saving up for down payments. And the big catalyst was my second purchase, that duplex which was also in Brooklyn. And three bedrooms on each side. I rented it out to five comedians. So I lived there and I had five comedians each paying 600 to 750 bucks a month. We called it the house of clowns. And I was … Once that … That second property … I had all my mortgage covered and I was profiting $2,000 a month in cash flow. And that was more than my day job so that allowed me to quit my day job just after my second house hack.

Brandon:
That actually just speaks to the value of house hacking. David, you and I talk a lot about this. And Alan, your book talks a lot about just the idea of you don’t need 500 properties to be able to quit your job and retire early. If you do it right, if you live inexpensively and you buy a house hack, you could potentially do it right away, right?

Alan Corey:
Yeah. And that’s what my newest book … And as a realtor and my clients, I outlay just one rental property can really change your life. But if you want to do two or three … A lot of people get scared because they’re like, “I don’t want to be a real estate mogul. I’m not trying to be monopoly man.” And I’m like, “You don’t need to. Just buy a couple. Just start with one and you’re going to see how it changes your life and your finances. And you’re going to get the bug like the rest of us.” Everyone who listens to the podcast probably knows what that feeling is and then they just grow from there and it just becomes a passion.

David:
Something I really like, Alan, about what you talk about is sort of making a connection between a practical thing in your life like a bill, a mortgage, an internet bill, a car payment and investing. And you’ve really created this cool reward system where you tie the hard work that goes into saving for a property, going through the process of finding it, closing on it and having cash flow with rewarding yourself that you’ve now eliminated a bill for the rest of your life because you tied that cash flow to that bill. Can you expand a little bit on how that works and how you found success helping create that link in people’s minds?

Alan Corey:
Yeah, sure. So the FIRE method is you want to save up 25 years of whatever expenses are in your life. So say you have $150 internet bill. Multiply that by 12, that’s $1,800 a year. The FIRE method and rules are … And the 4% rule is, hey, take 25 years of that which is $45,000. And if you just put that in stocks and do a safe withdrawal rate of 4% every single year, you’ll have that internet bill covered for the rest of your year. And you do that for every single bill in your life. I take the real estate approach and I say, wait a minute. I don’t want to save up $45,000 before I retire. How about I take $25,000 and go buy $100,000 property that cash flows me $150 a month? So once I do that, I tie every single cash flow … Oh, this house goes to this bill. $150, I’ve got free internet in life. And then when this house is paid off, then I can reallocate that $150, which will probably be more like $600 now because I don’t have a mortgage, to other bills in my life.

Alan Corey:
So I did that recently for a car. If I wanted to go buy a Tesla, that’s $40,000. Rather than saving up $40,000 and buying a Tesla in all cash, I look online and say, “Okay, wait a minute. This is going to be a $500 mortgage payment. Why don’t I take $40,000 and go buy a house in all cash or leverage a house. Buy a $250,000 house for that $40,000 payment that cash flows me $500.” And pretty much that’s House FIRE, my new book where it’s just every bill in your life, let’s go buy a property and pay that for the rest of my life. What’s great about it is the older I get … And I’m not living on a budget. Every other retirement plan has you living on a budget. This one, my budget gets bigger every year because properties go down. I’m paying off the principle every year. My rent that I charge goes up every year. And they appreciate in value. And instead of giving $40,000 to a car company I’m giving $40,000 to myself in terms of equity in a home. It’s just recycling the money and it’s, like you said, a mindset where any toy I want in my life, any expense in my life, I get a house to pay for it.

David:
Here’s a few points I love about what you’re saying. First off, if you’re bad at saving, this is even better for you. Because if you’re not going at saving and you force yourself to buy real estate, especially if it’s cash flowing real estate, you’re never going to run out of money. You literally can’t go spend the 40 grand that you put down on that property because it’s tucked away in something that’s getting you a return. Second thing is that you can’t run out of money like this. Because as long as the property’s cash flowing when you buy that car … It’s not like you decided do I want a house or a car. You got both. You got a house that paid for a car. When that car is paid off you can go buy another car. You will always have a car for the rest of your life. Another thing is that certain things that we like to spend money on there’s this trade off between what I want and what I know is best. It’s the whole broccoli or ice cream thing. Typically, a really nice car, nice clothes, a vacation feels a little bit like ice cream. Investing in bonds or real estate feels like broccoli.

David:
Well, when you’re buying depreciating assets like a car or clothes or whatever with real estate, it limits the damage it can do to you because your initial investment continues to appreciate while the stuff that you bought with it can go down. And then last that I love is that when rates are really low like this … I think a guy on my team just bought himself … He’s been a loan officer with me for six months or so and he’s doing really well. He just bought himself a Tesla S. Is that the expensive one, Brandon?

Brandon:
Yeah. The X is probably more, right?

David:
Okay. Maybe it was the X. His car payment’s 850 bucks a month. It’s a lot for a young person. However, the price of the car versus the actual payment is really not as bad as what I was expecting when I heard how much the car was. So when rates are low like this and you’re borrowing money book buy something that typically we wouldn’t advise you to, like an expensive car, you’re getting more car for the money is basically what I’m getting at. And every year what you’re getting in cash flow theoretically is going up so that even if the car is going down in value you’re still not losing money. So there’s a ton of ways that what you’re talking about makes so much sense and I wish every young person would hear this. Is you start off buying all these assets. Your assets fund the fun stuff you want. Brandon, do have anything to add there?

Brandon:
Well, I was going to point out that that’s what I did with my Tesla model X. The payment was going to be like $900 a month. And so for years I wanted one. For several years I was like, “Oh, I want a Tesla.” But I told myself, I refuse … Maybe I could have afforded the payment but I just refused to buy it until I had an asset buy it for me. So then I went and bought this triplex here in Maui back a year and a half ago. And the thing produced like $2,000 a month in cash flow. I was like all right, there we go. So then I bought the Tesla. And then I flipped a house and I made 45 grand. So I went and bought a Tesla Model 3 just in cash for my wife. And so both of those were assets or business or whatever. So I didn’t get sucked into that lifestyle. And this goes back to the whole FIRE thing. I want to dig into this a little bit more Alan. Is like if I … Early on in my career, similar to you, I said I need to get 3,000 a month to be able to quit my job. That was my number. It wasn’t a lot. And I lived in a small town and I was super conservative and cheap. And so I needed three grand.

Brandon:
So I was like, “Okay, what do I need then? Well, if my average house is making me 100 bucks a month in profit or average unit, I need to see 30 units.” And I just went on a quest to go buy 30 units. And I just bought 30 units and I quit my job after that. It’s not a super complicated thing.

Alan Corey:
It helps with analysis paralysis because I’ve got a lot of clients and friends who sort of just freeze. And it’s easier when you’re like, “Hey, what bill do you want to pay? Okay. You found a house that cash flows you $200 that’s going to cover your phone and your water bill or whatever it is? Then yeah, pull the trigger, make the offer. Make the criteria that much easier. And just go through your next bill. Like okay, this one pays for your electric bill and the next one’s going to pay for your water bill. But hey, we mad progress. And let’s just keep the ball rolling and the momentum going.” The flywheel just sort feeds upon itself after a while and it becomes fun. And once you run out of bills you have to invent bills like Tesla payments.

Brandon:
Exactly. Then you just got to buy more … Yeah. Do more and more. Which again goes back to your point is that’s great if you can start from this position of low expenses. You start there, then you bring the asset up to that level, then you can rise the two together for indefinitely. And then you can move to Hawaii and have a $2 million house and two Teslas and all this cool stuff. When people see that of my life today, I look like just the typical rich guy. But the reason I’m here is because I lived in an alleyway in a duplex that I house hacked and I lived for free. And then as I made more and more money over the last 10, 15 years, I’ve been able to rise to that. And so I think people see the outcome, they see the social media and they see the fancy cars and houses but then they try and go get that lifestyle before they have the asset to pay for it and that traps them to a job that they don’t like for the rest of their life.

Alan Corey:
For those in that position right now, you might have student loan debt, you might have a car note. I’m anti paying those off. I’m like, you can save up the $25,000, $50,000 to pay off your student loans, go save it up and buy a house that covers that student loan payment. Because what’s going to happen? In 10 years you’re going to have that loan paid off and have that house that’s one third paid off or you can just pay it off and then you’re starting from zero, saving money again and it’s going to be another 10 years before you save enough to go buy a house. So just sort of get off the sidelines, go buy a house to pay off whatever debts you have right now rather than paying off the debts, then go buy a house.

David:
And I’ll say this is something every single wealthy person at least that I’ve come across in my life, they all have it in common. It’s literally just they spent their money on assets. Now sometimes it’s a business. Here it’s often real estate. There’s other people that understand different asset classes than us. Some of them even do it well with stocks. But that’s what they did. And it creates this incentive structure in your brain. That’s what I do. I basically look at all the money I make goes into real estate. What comes out of real estate typically goes back into another form of real estate. So I make money and I put it into flipping houses or buying short term rentals, then I take the cash flow from those things and put it into longterm safer stuff. What comes out of the end of that funnel is all that David actually makes to live off of. That’s how I look at it. That’s my real income that’s coming in. And I don’t even think about the active income that I’m earning. So I think just like you do Alan, if I want that thing I’ve got to get at the end of my funnel enough coming out. And it forces you to be disciplined, it forces you to be creative, if forces you to have a vision for how you’re going to make all these pieces work together. But that’s all healthy stuff.

David:
Isn’t that what every great mind that we look at has found a way, like how do I get from where I am to where I want? You want to become a great standup comedian, you want to be great at fitness, you want to get a great degree from a great school, it’s a similar mindset people have. And so I love that you’re sharing this message of be disciplined early, buy assets, let assets appreciate and let them fund the lifestyle you want.

Alan Corey:
It’s really the best way to get in the property ladder. And then another step I’ll take that to if you’re thinking about the wealthy mindset, it’s really using leverage and mortgages. A lot of people are scared to buy homes and they want to pay them off as soon as possible. Pay them in all cash. And the way I look at it is, you’re buying a house that you think is going to go up in value possibly or you think it’s a good buy for whatever criteria you evaluated it. Let’s assume you bought $100,000 house in all cash. Well, if you think that’s good, why don’t you buy four of them? Why don’t you go buy four homes with $25,000 each? It’s the same $100,000. And if you spread it across four homes you’re actually spreading out risk. You’re not creating risk for yourself because you’re getting the home appraised when you buy it with a mortgage. You have a real estate agent typically involved holding your hand. The bank is the most conservative partner you can have. And if they are going to approve it, one, they think that house is worth the value that you’re buying it, two, they think you can afford that house. Because they’re not going to give you a mortgage if you can’t afford that house.

Alan Corey:
And then what happens is 10 years, if the property goes up $10,000 or 10% instead of making $10,000 on your $100,000 house you made $40,000 because you have four $100,000 houses. If the rent goes up 100 bucks instead of making $1,100 a month, you’re making $1,400 a month or whatever. You’re scaling your whatever interest is. Whatever your property is. You’re scaling your wealth. I look at it as you’re reducing risk while you’re scaling your wealth, which why wouldn’t you do it?

David:
Yeah. And it works in reverse too. When the property loses value, if you put 20,000 into it and it drops 20,000 in value, you’ve lost 100% technically of your investment. What makes real estate different is typically your cash flow doesn’t change when the property loses value. I have a bee in my bonnet over this issue because I hear a lot of equity traders bring up the same fact and they’re like, “Oh, real estate appreciates 3% a year but I can get you 8% in the stock market.” And it’s very misleading because you can’t take out a mortgage to buy stocks and stocks don’t give you cash flow. They’re only looking at an aspect of how real estate builds you wealth. Isolating just the appreciation that you see. Ignoring the stuff you’re saying. Like the super charged leverage that you’re getting a better return and the safety that comes from it. You also mentioned another hot button topic I’d like to get into. It’s this debate right now that, should you pay off all of your debt because there’s a crash coming or should you take on more debt because rates are really low and inflation is coming?

David:
And I kind of wanted to throw that question to both you Alan and Brandon. Where you stand on this controversial topic.

Alan Corey:
It’s not controversial to me. I’m leveraging. I’m trying to get as much longterm debt as possible. I tell everyone, stop making the extra 25 bucks, 30 bucks payments on your mortgage payments. Don’t round them up. Don’t do the biweekly payment program. That just is insane to me. And the way I explain it is, when I walk into an antique store and I see a sign that says like ice cream for a nickel. When was ice cream a nickel? Apparently that day existed. And due to inflation, ice cream’s $3 now. So that $3 ice cream cone in 30 years is going to $9. So your money has the most purchasing power right now, so you want to have as much of it as you can in your pocket, not making extra payments on this debt, so that you can accumulate as much money to go buy more debt. Buy more assets that have debt. And then what happens is if you have $1,000 mortgage payment over 30 years, it actually gets cheaper over time. Instead of paying $3 for an ice cream cone now, pay $9 of mortgage with the same dollar 30 years from now and you’re actually saving money in some regards by spending it in tomorrow’s dollars. Money’s always going to be worth more today than it is in the future.

David:
So then that ice cream never becomes more expensive for you because you’re paying it with rent that appreciated over time. I like that.

Brandon:
I generally agree. My own personal philosophy, I agree with exactly that. I like leverage. I like debt. I think when you can get debt locked in at 2% or 3%, 4%, 5% … If you can make more than that … It’s a math thing. But I’ve talked about it on the show before. One of the concepts that changed my thinking a little bit on this is there’s a book called Lifeonaire. It’s one of my favorite books. Like millionaire with the word life. And they make this concept in there, this idea where the goal of the game should determine how you play the game. So if the goal is to quit your job, have financial independence as quick as possible, to become wealthy, which is a lot of people’s goals, if that’s the goal then there are certain rules you play by. Like leverage will get you there faster. I think we all believe that if you leverage real estate, you’re going to get wealthy faster. If your goal is to reduce all risk in your life and to live the safest life possible and to have minimal chance of ever having a heartache or any risk, then maybe the Dave Ramsey model is better for you.

Alan Corey:
To me that’s risky. The Dave Ramsey method is risky. Because if I have four homes for that same $100,000, if there’s a vacancy, then I’m still getting some cash flow. If I have one house then there’s a vacancy, I’m getting zero. How is that not riskier? And also, every property I buy, I say it comes with an imaginary lottery ticket. And that is appreciation that I don’t have control of. And I’ve hit the lottery three times on these properties and made a million dollars off three different properties because I leveraged my money and I just started buying everywhere and spreading out and getting more of these imaginary lottery tickets. I never bought a property because I thought it was going to appreciate. I bought it because it paid a bill. And then if the neighborhood changes, there’s a new park going in, some new development that I had no insight on, then my wealth tremendously explodes and that was no … I can’t do that if I’m buying one house and two and having to pay it off. Why don’t I turn that into 10 or 20 and have those imaginary lottery tickets?

David:
Yeah. There’s another component to this that never gets brought up. And it’s the assumption that when you pay off your mortgage you own it free and clear. But the mortgage is one chunk of the whole pie of what you pay when you own a property and it’s often not even the biggest piece.

Brandon:
And it’s not the biggest. Yeah. It’s not the biggest.

David:
And that’s what’s annoying is they’re like, “Oh, once your property off you have no expenses.” No. Not true. You have tax, you have insurance, you have property management. And your freaking expenses and cap ex and maintenance are so much bigger than your mortgage anyway. Go ahead Brandon.

Brandon:
I don’t want to just rip on David Ramsey. I actually like Dave Ramsey for a lot of reasons but Dave Ramsey’s Instagram the other day had this quote that said, “100% of all foreclosures were with people with mortgages.” And I was like … That’s not … I get what he’s saying. But I go to the comments and everyone calls him out for it too. What about tax foreclosures? What about all the other reasons you could lose your property? Primarily taxes or … You don’t have insurance on the property. There’s a lot of things that go into that.

David:
100% of bank foreclosures you could say well, 100% of foreclosures were from home owners. You can’t have a foreclosure unless you have a mortgage to have a bank foreclosure.

Alan Corey:
If you’re buying old rentals and the market goes down $10,000 … I bought $100,00 house, it’s worth $75,000 now. I don’t care. My rent doesn’t go down 75%. There’s a 12 month lease so there’s always a 12 month lag on my leases based on property values. But maybe my lease stays the same. If there’s a market crash you actually have more renters because people are losing their homes or people aren’t moving or they can’t afford a home. And so it creates more renters and more demand. I like to spread out my risk and you do that by buying more properties.

David:
It’s like a belay. When you’re climbing a mountain and you slip, you’ll fall a little bit but it will catch you. You won’t fall all the way to the bottom. That’s what cash flowing real estate does. In the stock market, in securities, in equities, there is no belay. If you’re at $80 a share and it drops to $20 a share in a day or two, there was nothing you could do to stop that, as opposed to real estate, I don’t care what it drops to. Even if we have the scenario that hasn’t happened in my lifetime where rent was 1,200 and it drops 30% all the way down to 900. Maybe I went from cash flowing 200 bucks a month to negative 100 bucks a month. I can probably swing $100 a month. This doesn’t get brought up enough when people are comparing these investment vehicles so I really appreciate you doing that here.

Alan Corey:
And that tenant … If you’re losing $100 a month, the tenant’s probably paying $150 in your principle pay down. So some ways you’re not losing money, it’s just not cash flow. It’s future money. You’re paying yourself in the future.

Brandon:
Let me dive into this topic a little bit deeper that we’ve been talking about. The debt versus investing. Clearly I think all three of us, we utilize leverage and debt. And when it comes to 5% student loan debt, 3% student loan debt, mortgages at 3% or 4%, this all makes sense. What about credit cards? What would be … I want to ask each of you guys this. You got $25,000 in credit card debt right now. You’re paying 25% interest on this money. Do you pay that off first or do you go invest in real estate with it? What do you guys think? Alan?

Alan Corey:
I think credit card is the one thing, the consumer debt, that you’ve got to pay off first. Only because that’s going to allow you to get better terms on a mortgage. And that can spiral out of control and Dave Ramsey calls that playing with snakes. That is the one debt I would say focus on your credit cards and then everything else buy an asset to pay for it.

David:
Especially … I would second that because credit card debt’s typically ridiculously high. You can’t have this one sized fits all solution that most people find comfort in in life. Well, should I just pay off all my debt? Well, all your debt could be a 1.5% interest rate on student loan, versus an 18% interest rate on your credit card. So I think there’s some common sense that should go into it. Alan, you made a great point. There’s a passive investment to paying off credit card debt because it will help you get a mortgage, it will improve your DTI and your credit score, which allows you to go buy real estate. And the last little cherry I’ll throw on the top of this is, when you house hack, which all of us here are huge disciples of house hacking, you’re also getting rid of something … You’re getting rid of your rent that you’re going to have if you’re not owning real estate and saving a $1,000 on what you would have made towards a house payment. You’re not getting taxed on money you save. It’s almost the equivalent of getting 1,300 or 1,400 in cash flow after you [inaudible 00:32:13] a lot of the taxes.

Brandon:
If I could add one more piece to the credit card thing. If it was just about the money, I would actually be different than both what you guys said and I would say I’d rather have somebody go invest in real estate than pay off 25,000. But before people take that and run with it, the reason I say that is because the knowledge gained from actually taking action to invest in real estate is going to benefit you way more than 25 grand in your life. The reason though … But I would still side with you guys on this point. And I think we all would agree to this. Is like when you have $25,000 in credit card debt or 50,000, that is a symptom of a greater problem most of the time. And everyone here that has that is yelling at the car stereo right now saying that’s not true. I had this unique experience or I had this medical bill. I had something. But there’s usually still something in your life that made that happen that I think most people need to fix. Again, there is the rare, like you had a crazy medical thing that just had a crazy medical thing that just had to go on a credit card. But I know for me, there was a point where I was like $50,000 or $60,000 in credit card debt. Maybe even more at one point.

Brandon:
And some of that was house flip stuff but some of that was because I was spending a $1,000 more every single month than I was making. So by paying off credit card debt you change your identity from one who is living in the moment and living for your wants and your desires, to somebody who lives with intention and with purpose and with goals in mind. And so it makes you a different type of person which will then benefit you on real estate. Anyway, just some thoughts there. Anything you want to add on that?

Alan Corey:
I think that’s like the training course to handling money and understanding leverage. If you have the willpower to pay off your credit card bills regardless of the amount, you’re going to have the will power … It’s that exact same will power to be successful in real estate investing. It’s the same mindset, really.

David:
Somebody put it a different way. Like I’ve often heard the phrase and I love this, is if you can’t tithe or charity or whatever 10% of your income when you’re making two grand a month, you won’t do it when you’re making $20,000 a month or $200,000 a month. I would say that same principle applies. If you can’t live within your means at $3,000 a month, you’re not living within your means at $30,000 a month either. Because it is a mental thing, not a math thing.

Alan Corey:
And I think the thing with credit cards is like most other debt, student loans, car notes, you’re paying some of the principle. But the credit cards make it really easy to just pay the interest so you’re never getting ahead. If you wanted to take my house FIRE approach, go buy a house, but make sure that cashflow pays more than the minimum, more than the interest payment, that you’re actually paying down the principle. Otherwise you’re never going to get out of the credit card debt. You’re just on a treadmill.

David:
There’s a lot of variable to this. There’s also the side of, well, if you pay off your credit card are you just going to go run up the debt again once it’s been paid off because you can’t be trusted with credit cards?

Brandon:
You don’t know how many times that … I worked at a bank for a year, year and a half back in the day. I was a banker. I gave people credit cards and opened checking accounts and all that. And numerous times I would find a way to use home equity. Like I’d get a home equity line of credit and we’d pay off their credit cards. I was a good banker. So I’d work with them. I had all these ideas on how I could help them. And then three months later they’d come in and they’re like, “Well, what else can you do for me now? I’m back to my $35,000 in credit card debt again.” And I’m like we just did a refi on your house to pay it off. What are you doing? It sucks. It just goes back to that debt is often a mental thing. Especially consumer debt. It’s a mental game. It’s a mental sickness and illness for many people. You got any advice, Alan, on … And I want to go back to your story here in a second. But any advice on people getting into that mentality where they can sacrifice more now, where they can live more within their means. The people who are struggling with that right now, what do you got to say to them?

Alan Corey:
I always trick my brain. I’m like, “Hey Alan, why don’t I give myself a gift in 10 years. What would that gift be?” And it’s like oh wow, maybe it’s no credit card debt. Okay, let’s pay future Alan. Present Alan’s got to work to gift future Alan that credit card debt. Okay. Let’s make up a plan. $200 a month go here and go there. I would go to my … When I had a day job I had the HR take 25% of my income and automatically deposit it to one bank. And then 50% it would go to another bank across town that I didn’t have access to. And the other 25% would go to retirement accounts. It wasn’t in my account. It wasn’t in my daily accounts. If 50% of my paycheck was just going to this bank on the other side of Manhattan and it was a pain in the butt for me to go to, and I didn’t want to create an online login, didn’t want to have the debit card so I actually had to go there in person. And then all I did was I gave my gift to myself every January 1st. Well, whenever the bank would open. January 2nd or 3rd. I would walk over there, say, “How much do I have in my account? Because I need to go buy a house with it.” That’s what I did for …

Alan Corey:
My first one was here’s $10,000. Okay. My budget is $10,000. That’s 10% of $100,000. The next year it was $25,000. Okay. Let me go buy a house with that. I would just play these games and be like, “Hey, good looking out for you Alan. Thanks for doing that.” I knew if it was in my account I would go spend it. I’d do something dumb. I’d go drink with my buddies. But if I’m like, “Hey guys, sorry, I only got 20 bucks tonight but I’ll go out.” It was fun. I didn’t feel like I missed out on anything. I didn’t feel like I was living in poverty. And then those beers and those happy hours, like, “How are you doing this Alan? How are you buying these houses?” And it’s like, “Oh, well I hide the money from myself and pull it out once a year.”

Brandon:
Dude, I play that exact same game in so many areas of my life. Like money … The same thing. If I set it aside … The government does it too, right? Government takes the tax money from your paycheck first because they know that then you’re not going to spend it. So I do the same thing. I have so many random accounts. In fact, true story … This is going to be like a weird flex. The other day my finance guy, Micah, says … He helps with all of my finance stuff. He gets a letter from the bank. Bank of Hawaii and they say, “Your account is going to start charging you $10 a month if you don’t use it. You haven’t used it in a year. They’re going to charge you $10 a month.” Or whatever. He’s like, “Hey Brandon, what do you want to do with this account? I don’t even know what account it is. It must be your personal one there.” And I said, “I don’t have a personal account at Bank of Hawaii.” He’s like, “Well, you got this letter.” So I was like, “Well, you look into it.” So he calls up his banker friend that we have at the branch. Finds out there’s $25,000 sitting in this thing that’s been there for at least three years. Because they said I opened it over on Oahu.

Brandon:
I have no memory of this at all. I know I lived in the town where that was at. I must have gotten money from something. I sold something and I opened a bank account and was like hey, this will be for my future and then totally forgot about it. It’s like finding 20 bucks in your jeans pocket.

David:
That’s what I was just going to say. It’s like putting money in your jacket pocket and leaving it there all winter and then you get back out. I’m so glad I’m not the only one that does this. This happens to me all the time. I feel so good. You probably took out a loan at Bank of Hawaii and funded it with some money and then sold the property that the loan was attached to.

Brandon:
Probably. Yeah. But the point being, I hide money sometimes like that. Maybe a little too well. So that I won’t spend it. I’ve used this analogy before but I’ll say it real quick. There’s a movie called Fantastic Beats and Where to Find Them. It’s a Harry Potter spin off. In there there’s this creature called the Occamy or … I don’t know if I’m saying it right. That expands to whatever size you can put it into. So you put it into a big room, it expands to the size of the room. But you can put it in a teacup and it shrinks to the size of a teacup. And I always say our budgets are like that. Like our finances. If you have $2,000 in your checking account, you’re going to spend $2,000 in your checking account. We all just do it. So the government’s like, well I’m going to take that out first. So by limiting the size of your container then that little Occamy of your spending will just fit inside that and you won’t even notice it. So taking that $200, $300 a month and setting it aside, you won’t notice it. Maybe the first month you’ll be like, that’s a little weird but you just don’t notice it when you set it aside. So anyway.

Brandon:
By the way, that also works with time. It’s like Parkinson’s Law. If you had a whole day to finish some project, you’re going to take a day to do it.

Alan Corey:
Oh, true.

Brandon:
But if you give yourself, no, I’ve got one hour to finish this thing or if you say I’m going to buy a real estate deal this year in 2021, yeah, you might do it by the end of the year. But if you said I’m going to buy property in the next 30 days, I’d love to see the action you take in 30 days because you gave yourself a smaller container. You play tricks with yourself. It works.

Alan Corey:
Oh yeah. Totally. I always give myself constraints and deadlines. I find myself getting way more creative and way more productive. Because I can hem and haw for 90 days on a property. But that’s what’s great about 1031 exchanges. You have a time limit. So then you make a decisions. So if you just do that, pretend like everything’s a 1031 exchange and I got 30 days to invest this or, hey, whatever I have in this account on January 1st, I got to buy a house in January. Because the faster I buy a house, the faster I can start saving for the second house. Those sort of timeframes.

David:
I love this. Tell us a little bit more about the subsequent houses that you bought using these little mental hacks that you’re playing with yourself.

Alan Corey:
Well, personally, I’ve grown my portfolio. I’ve been doing this for 20 years. I had to do research before I came on here because it changes every week because I’m buying and selling things. But currently I have about 69 units personally for about a total of eight million. 48 single family homes, 21 units or duplexes, triplexes and quads. And then with some partners I’ve got another $20 million worth of property. 94 units. Mostly commercial. Ranging from 12 to 28 units and some storefronts. And Dave, you might know this as a realtor. Opportunity starts presenting itself. I’ve always been an opportunity buyer. I’ve had clients find a deal. When I first starting out, I didn’t have money, but I could find a deal and then I’d go find people with money. Now I’m on the other side of the coins. Some of my clients and friends, they find the deal and they come to me with money.

Alan Corey:
And I’m like the other side of, “Oh, okay. Let’s buy these deals together.” And sometimes I take clients and I’m like, “Hey guys, this is the house you want to buy. I know it’s not the perfect kitchen, it’s not the perfect bathroom, but you’re on a double lot and it comes with this lot that’s landlocked and because of that you can do X, Y, Z. You can build a pool and it doesn’t go against your far. You can build a second story here where all the other homes can’t. This is not imaginary lottery ticket. This is real life lottery ticket right here that no one else is seeing the value. You need to buy it.” And a lot of times they can’t pull the trigger and so I say, “Sleep on it. If you still don’t want it tomorrow, I’m going to buy it.”

Alan Corey:
And that’s sort of what happens is I wasn’t looking for that property, I wasn’t looking for that goldmine, but because I’m out hitting the road, taking clients out, looking for myself, I find these things and I’m like, “You should buy it. Okay, I’m going to buy it.” And that’s what I love about real estate investing is really finding those opportunities to maximize value. And it’s not always just a fix up the kitchen kind of thing.

Brandon:
Explain where are you buying today? You’re not in New York City anymore right? You moved down to Atlanta. Is that right?

Alan Corey:
Yeah. I’m in Atlanta. I was born and raised in Atlanta and after spending 13 years in Brooklyn came back to Atlanta. I just sort of 1031ed all my portfolio eventually to Atlanta and started continuing to invest in and around Atlanta. The winters don’t freeze my pipes here. That’s what I’ve learned. We’ve got termites here, which New York didn’t have a problem with, but our winters do not freeze pipes so that’s been sort of a relief. And I did recently venture out about an hour outside of Atlanta. And this goes hand in hand with one of my clients. He found these properties that were individually listed on our MLS. It’s really hard to sell a single family portfolio, at least in our MLS. It’s either a single family or you can sell a commercial property. But if you’ve got a package of 30, 40 homes, you either sell one house and have to give it a really crazy value and everyone ignores it, or you have to list them all individually.

Alan Corey:
So I had a client come to me. I’d been showing him investment properties. We lost some bids. It didn’t work out. And he came to me and he said, “Alan, there’s this town. It’s an hour south from here. And they’re selling the homes for $30,000 each.” So he would look at it and, “No, I’m not looking at $30,000 homes.” But in the realtor notes it said, “Must buy 40 of these. Here are the other MLS numbers.” And so these had just been sitting on the market for a year because everyone with a $30,000 budget shows up but no one has a million dollar budget who’s looking at these properties. So this turned out into a really good deal in that it’s really difficult to finance a property that’s below $50,000. There’s a federal law that closing costs and attorney fees can’t be a certain percentage of a property value. Usually $50,000 is that threshold for a mortgage company to give you loans. So we tried to get a loan.

Alan Corey:
I said, “Okay, I’ll partner with you.” And no one’s lending on it. So we went to the seller and said, “Only way you’re going to sell these is seller financing.” He understood that. He’s been in the business. It was a guy who was retiring. Accumulated 40 homes. And he’d give us 15 year seller note with 10% down payment at 7% interest. And it was still cash flowing after that. And it was just a no brainer. So the total package was $1.3 million at the end. So we had to come up with $130,000, which is great to buy a $1.3 million portfolio that was seller financed and it was cash flowing on day one. And now, two years later, it’s worth $2.5 million. But what happened was because my name as a realtor showed up on 30 listings in this small town, every single wholesaler in that town, every single real estate agent in that town, whenever they had a listing they’re like, “Alan, you’ve had a buyer for the last 40 properties in this town. Would your buyer be interested in this? Would your buyer be interested in that?”

Alan Corey:
And I bought another 10, 15 properties off market that way just because they’re like, “Whoever Alan is representing, they’re buying these properties.”

Brandon:
Yeah. This guy’s a shark. This is great.

Alan Corey:
Yeah.

Brandon:
Can you explain for those who maybe have never heard the term before who are brand new to this what is seller financing and how does that work? What are the benefits of it? Explain that concept.

Alan Corey:
Yeah, sure. It’s basically a bank and the seller’s going to be your bank. So instead of a bank going through your finances, making sure you’re putting 20% down or 25% down, that you have the debt to income ratio, all the formulas and criteria they use to purchase your home, the seller’s going to say, “Hey, I’m going to lend you the home. Basically, give me 10% and I’m going to be the mortgager. I’m going to give you the 90% in a mortgage and you just pay that over time.” There are some benefits to the seller for doing that. One is he couldn’t sell his property otherwise. But two, he can do installment sales or other sort of rolling in this income. So instead of one big payment, can kind of … I’m not exactly sure the in and outs but there is some sort of benefits for him earning-

Brandon:
Yeah. The taxes are a bit less.

Alan Corey:
Yeah. Over time. And three, honestly, it doesn’t go on my credit score. I bought it in LLC, it’s separated. So when I go get a mortgage somewhere else, it’s not even on the radar for anyone. So what we talked at the beginning of the episode, leveraging your money as much as possible, spreading out risk across 50 homes. If 10 are vacant, I’m still cash flowing kind of thing. If you’re trying to get into real estate and you have no money, that’s your best opportunity. It’s really, really the best. And it’s usually cheaper than a hard money loan as well.

Brandon:
I don’t think people think enough about seller financing. I know I don’t. Because it doesn’t work all the time so people just never bother to ask for it.

Alan Corey:
The seller has to have their house paid off in cash to do seller financing. So you’re going to find these opportunities by retiring investors. Typically guys who have acquired a significant portfolio over time, their kids have no interest in real estate, and they’re willing to offload it to you.

Brandon:
Yeah. And I wrote that book a long time ago, the book on investing in real estate with no and low money down. And when I was writing that, I was doing some research on the seller financing because there’s a whole chapter on that. And what I found at the time … I don’t know if this still holds true, but I bet it does. It was like a third of all homes didn’t have a mortgage. So that was a way bigger number than I imagined. So it’s possible that a third … And I know a lot of people buy houses for cash today. It’s a big thing to buy it for cash. So it’s very possible to still get seller financing. In fact, I was just talking to a buddy last night at my house here and he just got a huge deal locked up here in Maui. And it’s like a $1.3 million property. But the seller offered to carry and he was like he could do seller financing but only up to 800,000 because he had a little bit of a mortgage to pay off. So my buddy’s like, “Okay.” So he’s going to do that, he’s going to get that. And then he brought in a partner to fund the rest.

Brandon:
So the partner’s bringing in like … I don’t know what it is. 400,000 or 500,000. The seller’s carrying the 800,000 or whatever that number is. And then together they’re just going to flip the house. So this guy is going to do it for no money down. This huge million dollar plus deal. So it’s definitely a tool to have in your arsenal and to learn about. Some guys like Gabriel Hamel, who we’ve had on the show here, that’s his entire strategy. That’s all he does is seller financing.

David:
It’s his bread and butter.

Brandon:
He just kills it. Yeah. It’s powerful.

Alan Corey:
And there’s ways to look these up in tax records typically. I know there’s strategies to see who’s owned their home for over 30 years. They’ve probably paid it off. You can search for out of state landlords. Or if their mailing address doesn’t match the property address. There’s all these tools out there if you really want to go knock on some doors or do some direct, but that’s a fast way to get into real estate with no money.

Brandon:
100%. It’s so good.

Brandon:
But all right, so you bought this portfolio of 40 some houses and you made … It sounds like you made over a million dollars. Or you’re selling it now, right? It’s over a million bucks off one-

Alan Corey:
Yeah. I’ve got it under contract. So I’m looking to 1031 it now, which is a tax deferment. If I sold it, I would have to pay capital gains taxes. 1031 allows me to avoid that or defer that and roll into the next property. So what I’ve been really interested in, and I’ve always tried to push myself. I always try to buy something bigger, a product type I’ve never bought before, whenever I do a 1031. So I’m looking into commercial, and specifically something called a net cashflow triple net lease. So triple net is commercial properties that the tenant pays for everything. The improvements, the structure, the roof, any repairs, the rent, the mortgage. If there is a mort … Or sorry, the rent covers the mortgage. And insurance, property taxes. It’s just hands off. I know my expenses are just going to be my mortgage payment. So a zero cashflow triple net basically is exactly what it says. I’m not going to make any profit. The tenant pays the mortgage directly. And also, these exist in triple A bonded tenants. The best of the best. You have your CVS, your Walgreens, Dunkin Donuts, Chase Bank. A corporate entity is signing on the lease and they sign the lease for 20, 25 years.

Alan Corey:
So even if the property goes dark, which means they close it down, they’re still going to pay the 20 year guaranteed lease. So on these triple nets that are zero cashflow, you can get into them with 10% down, 15% down. Which is about half of what you typically need. You usually need 30% to 40% down to buy a triple net property. And the way it works is the tenant pays off the mortgage and I’m not going to make any money for 20 years. It’s a 20 year mortgage, 20 year amortization, 20 year lease. But in 20 years I’m going to have this huge paid off property. I leveraged it. My 1031 proceeds with the 10% down payment. Also during that time period I can write off losses on that property. So as a real estate professional I’m getting other rental income in cashflow. And this property’s going to earn me losses even though it’s not a loss, it’s a loss on paper, that saves me on taxes on my property. And also allows me to do … All these properties have recapture when you purchase, which means if I put more than 10% or 15% down, they instantly give me back that 1031 proceeds back to me cash free, almost like it’s a cash out refi. So I can access my 1031 proceeds without paying taxes on it.

Brandon:
Fascinating. Yeah, this is something I don’t think we’ve actually talked about on the show before, but I’m more and more intrigued by this idea of owning the triple net lease stuff because of the lack of management. It’s a lot easier. Going from 40, 50 houses that you were handling into one of these things, it’s going to be night and day difference for your management I’m assuming.

Alan Corey:
And I’m giving a gift to myself for 20 years. I mean, that’s the way I look at it. I don’t need money now. I don’t need the cashflow now. I’ve got all my other bills still covering the bills in my life. But in 20 years I’m going to have this paid off whatever triple net corporate entity who will probably sign another 20 year lease and that’ll be pure cashflow. Yeah. Why wouldn’t I do that?

David:
There’s some genius here that I want to highlight because you’re looking at this-

Alan Corey:
All of it’s genius David. All of it.

David:
Yes. Absolutely. Well Alan, the minute we brought you on the podcast it was-

Alan Corey:
Yes. Okay. Thank you.

David:
Like a halo just shines out from your entire audio there.

David:
You’re not just looking at cashflow. And that’s what I wanted to get at. Cashflow is what brings a lot of real estate investors into the door because cashflow can replace your job, cashflow can get you out of a bind, cashflow can pay off bills. Everything that we talked about, it’s great. It doesn’t mean that’s where you should stay forever. And cashflow in my opinion is oftentimes like training wheels. It keeps from falling off the bike. It teaches you how to ride it. But it limits how fast you’re ever going to go if all you’re looking at is cashflow. Alan, you’re describing a deal that will net you no cashflow and could save you, theoretically, seven figures in taxes if you’re making it in other areas as a real estate professional. That’s a huge, huge win on a deal that other people might just ignore because they’re not looking at it from your perspective. So I appreciate you sharing this side. I’m going to highlight, we’re not advocating people buy non cash flowing properties if they’re not in a strong financial position. But as you do well with real estate and your financial position becomes stronger, real estate has all these really cool techniques and tricks that you can use to grow the wealth you’ve already created relatively safely.

Brandon:
All right. Two more quick questions before we move on to the deal deep dive. First of all, what’s your management life look like? Did you manage all those 40, 50 houses yourself? All that stuff? Or do you have a management team? Do you hire it out? What’s that look like?

Alan Corey:
I started a property management company and I realized really quickly all my time was to managing the properties and not focusing on finding new deals or figuring out how to do a deal analysis or figuring out how to finance it. So then I grew a property management company and then I slowed it down and offloaded all the properties so I could directly focus more on acquiring new properties. So I’ve outsourced across three different property managers, depending on where my properties are.

Brandon:
Okay. So then do you say the majority of your time these days is spent as an agent? Because the property management is looking after all your stuff.

Alan Corey:
Yeah. I would say, yeah, that’s probably 75% to 85% of my day is real estate agent related. Which I enjoy. It gets me talking to people, buyers, home sellers, and searching for those treasure chests out there that are just waiting to be discovered.

Brandon:
Do you think people should get their real estate license when they’re getting into investing?

Alan Corey:
I do not. I think I side with David on this. There’s no really cost savings. Let me rephrase that. If you are going to be a real estate agent that helps other real estate investors, 100%. And there’s benefits to that. Because what happens is other real estate agents call me and say, “Hey, I’ve got this quadruplex coming on the market. I know you have a lot of quadruplex buyers Alan. Do you want it?” I’ll pass it onto my clients and if they say no, I might buy it. So those opportunities are great because I’m a real estate agent. And I do the same to other real estate agents who I know have buyers and sellers in those markets. But I’ll never call that one off person who’s an investor if he’s not my client. That’s just not the best use of my time. And I find that as a real estate agent if I’m dealing with another real estate investor who’s investing with themselves, it’s a more difficult process. It’s not as easy as they think it is. I have to explain the contract to them over and over again or how things work. And they know a lot about real estate but they don’t know a whole lot about a real estate transaction.

Alan Corey:
And if maybe you’re doing it once or twice a year, you’re not going to get the reps in like a realtor would doing 100 deals a year.

David:
Alan, you just helped me realize why I don’t like this question. It hit me like a lightning bolt right now. Why don’t we say the same thing to every other component of investing? Are you going to get your contractor’s license when you become a real estate investor? Are you going to become a CPA when you become a real estate investor? Are you going to become a full-time property manager? It’s only with being an agent that this question ever comes up and you’re highlighting the exact point is getting the license doesn’t make you good at it. Getting a license that says you know how to be a construction worker, you have a contractor’s license, doesn’t mean you’re skilled at doing the work. It takes reps and most people don’t want to put those in.

Alan Corey:
Yeah. Like you said, when I first got into this, I met every plumber, every electrician, every handyman. Just looked over their shoulder like, “I’m going to learn how to do this.” It always cost me twice as much when I tried to do it myself. Twice as long. What we’re doing is leveraging skillsets. Instead of leveraging money to buy a house, I’m going to leverage other people’s skillsets who do this full-time and they’re going to do a better job than someone who’s doing it part-time or learning as we go.

Brandon:
There we go. Awesome man. Well, love it. Love to hear your story and where you’ve been and what you’re doing, but we’re not don’t with today’s show because first we have to get to the deal deep dive.

Brandon:
Time to dig into one particular deal that you’ve done to find some details on the deal. It’s a question and a half. One and a half. What type of property was it and where was it located?

Alan Corey:
This was in Brooklyn, New York. This was actually five doors down from that duplex that I bought. The house hack. My second one. The house of clowns with comedians.

David:
Okay. And how did you find it? Were you just walking down the street and saw this house five doors down?

Alan Corey:
Yeah. I am the nosiest person ever and I purposely … Every time I walked to the subway I would walk a different direction to the subway just because I wanted to go down different blocks, different streets. And every house that’s under renovation I’d stick my head in, “Hey, what’s going on here guys? Is this going to be a rental? Is this going to be for sale?” I didn’t really have money back … I was 25 years old. I was just curious. Like, “What’s happening? What are you guys doing?” So this was actually the opposite direction of the subway that I would normally walk in, but I walked in there and I saw a contractor fixing it up. So I poked my head in, “Hey, what’s your plans with this?” And real estate investor talking to real investor, I ended up talking to him more and more over time. And he gave me a price and I said, “You know what, I’d be interested. Let me see if I can find a way to buy this.” Because I didn’t have any money, didn’t have any cash to buy it. But built up rapport and this was going to be a finished, renovated duplex. Nicer than the duplex I lived in five doors down.

Brandon:
Question number three. Did you ever consider forming a band called Five Doors Down to compete with Three Doors Down? How much was the property? That was not a real question. How much was the property?

Alan Corey:
The property was … He wanted a million dollars for it and I believe I negotiated him down to 990 on it because it was off market. So I got a $10,000 discount.

Brandon:
I was going to say that’s why they call you Mr. Chris Voss. Like the FBI negotiator right there. That’s amazing.

Alan Corey:
Yeah. Right, right, right.

David:
We’re supposed to ask how you negotiated that price. Is it because it was off market so you said, “Hey, you’re saving money on the realtor fee so give it to me.”?

Alan Corey:
No. This is how it went down. I went back to my wife and I said, “Hey, we’re buying this property. No way we can lose money. We’re buying it for a million dollars.” And she’s like, “We’re not paying a million dollars for that.” And I said, “Well, you go talk to him.” And so she came back and said, “I got him down to 990.”

David:
There we go. Here’s another quick tip for everybody. Something about that million dollar mark is such a big deal in everyone’s head. I cannot tell you how many deals we’ve been trying to get under contract with buyers and the seller … Nobody could get it under contract until I came back and said, “Let’s give them a million dollars but ask for $40,000 credit.” Done. Right off the bat. Something about that just million dollar number. $1 million.

Brandon:
Yeah. People love the million number. All right. How did you fund it? How did you get a million bucks for this thing?

Alan Corey:
I had no cash so what I did is I went and got a HELOC on my duplex. The house of clowns duplex. And it came in at a crazy number. Honestly, way more than I thought it was worth. But I’m not going to complain. I’m going to take their appraisal. And based on that, I got a $300,000 HELOC credit line. So with that, I took $300,000 and for me to be able to buy this, I had to put 30% down. So there goes my entire HELOC. 30% down. And mortgaged the rest. So it was 100% financed duplex. And why I loved it so much was that even with that 100% financing I was going to cashflow $2,000 a month. And it wasn’t the prettiest duplex. It was right underneath the BQE, which was this raised interstate. I lived five doors down so I was used to the noise. It didn’t bother me. It sounded like an ocean after a while. Just the steady white noise. Probably like living in Hawaii I would imagine.

Brandon:
Exactly like that.

David:
Under an interstate.

Alan Corey:
Yeah. Under an interstate. And I can’t believe I paid a million dollars for this duplex. But it just made sense on paper. I was like, “There’s no risk. $2,000 a month. That entire $2,000 I’m not paying myself. I’m going to pay down this HELOC.” Which was a interest only loan that had no principle associated with it. My HELOC payment I want to say was like 600 bucks, 700 bucks. So the other $1,200 was going to work that down. I had a plan that we’re just going to pay this off over time. So it was a free million dollars is the way I look at it.

David:
Okay. Next question, what’d you do with this duplex?

Alan Corey:
I rented it out for four years. I made, like I said, a really good cashflow on it. And then when I moved to Atlanta, I saw what a million dollars could buy in Atlanta. I could actually get more cashflow and I could buy more property. So I decided to sell it so I could do a 1031 exchange. And I sold it. And this is what happens in New York. This happened to me a few times in New York when I sold a property over a million dollars eventually you have celebrities that come buy it. Barbara Corcoran from Shark Tank bought my first million dollar property in Red Hook. She bought that for her investment. And that gave me confidence to know what I’m doing if like, wait a minute, if Barbara’s buying my stuff, should I not be selling or am I doing the right thing by renovating and selling to her? And I sold to some of Spike Lee’s right hand men and guys like that. But this property was sold to Christina Ricci. She’s an actress. Played Wednesday in The Adams Family and usually has sort of a goth character role kind of thing. And I feel like I can say that.

Alan Corey:
I signed a nondisclosure at the time. But that was so she could, immediately the day of the closing, send out a press release about it that she bought it. And who knows if she still owns it now? This was probably 10 years ago. But it was kind of cool to meet her at the closing table. And again, I was like, “Wait. She’s buying it. Am I making the wrong decision? Am I doing the right thing?” But I was able to buy three quadruplexes in Atlanta with that 1031 exchange so it seemed to make sense.

Brandon:
I love how it just demonstrates how one deal can lead into another bigger deal, better deal, which can lead into another bigger better deals, plural. And that’s how you build … I call it the stack in real estate. You start with one, then you stack two, then you stack four, and eight. And you grow exponentially and your cashflow increases with that. And your equity increases. You could take it from one to the next and then you bump it up again because you fix up that property. Just the whole world of real estate’s just so cool because it does that and that was a great story.

Brandon:
So what lessons did you learn from this deal? I should say, what was the outcome? What did you actually totally make on it then and what lessons did you learn?

Alan Corey:
That was the first time I made a million dollars on one property. So that was a pure million dollar 1031 exchange. Money that I was able to put on as down payments for the other properties in Atlanta.

David:
What I love about this is that you didn’t trade a duplex for a million dollars, you traded a duplex for three more properties with a million dollars in equity so you never felt like you were rich. Right? Like we were talking about earlier.

Alan Corey:
Yeah, yeah. I always like playing this game. Ask someone what would you do with a million dollars? And most people, “I’d buy a Ferrari, a Lamborghini. I’d go on this trip.” You ask a real investor and be like, “Oh, I’d buy $4 million worth of property with that. That’s 25% down payment.” I don’t get enjoyment buying myself those things. I’d rather go buy property and then-

David:
Well, then let your property buy those things like we said earlier in the podcast.

Alan Corey:
Yeah, exactly. And it’s worth noting that I had no insight that that four years was going to create a million dollar equity. I bought the property based on the mechanics of a deal. Looking at it on paper, this is going to cashflow me more money than I anticipated. But it was just going to be a profitable venture and I was happy with $2,000 a month. And then the Brooklyn Nets stadium came. The New Jersey Nets became the Brooklyn Nets.

David:
And that was your lottery ticket, like you mentioned, right?

Alan Corey:
That was my lottery ticket. Yeah. I had no insight on this. I’m not some genius. There’s so many dumb idiots running around the real estate world because there’s such a low bar of entry. But I want to be one of those idiots so let’s just get lucky.

David:
That’s exactly right. You assist in tackles you’re going to come up with a fumble if you’re in the right place enough.

Brandon:
I was going to say you can’t win the lottery if you don’t play the lottery. And the great thing about real estate is that you are playing a lottery that pays you money every time you buy a lottery ticket no matter what. And then sometimes that lottery ticket goes to 10X. But most of the time it just pays you a nice monthly income and you’re like, “This is great.” What a great business. I love this game. This is so good.

Brandon:
All right. Moving on. Any last final lessons you can pull out of that deal?

Alan Corey:
Well, I think a lot of real estate investors would say a million dollars is too big. Like that’s scary. I think a lot of real investors would say I don’t have the money and then the deal dies there. So I was like I got to find the money. I tried to find partners and no one was interested in buying a property underneath an interstate. I tried to reach out. I didn’t have a huge network of rich people. I was like 25, 26 years old. I was calling my ex-girlfriend’s father and saying, “Hey, you want to buy this thing?” And I couldn’t get any bites and so I just looked inwards and be like, where can I pull equity out of the properties I do own? And I thought I’d get $100,000 off that HELOC line but I got $300,000 and that’s all I needed to get the deal done. So it’s perseverance really and just not giving up and trying and throwing everything at the wall and see what sticks.

Brandon:
Awesome man. I love it. Well, let’s move on to the last segment of the show. It’s time for our …

Brandon:
(singing)

Brandon:
The famous four is the part of the show where we ask the same four questions every week to every guest and we’re going to throw them at you right now. So first one. Favorite real estate investing book, other than your own of course, which is one of my favorite real estate investing books.

Alan Corey:
Every book you’ve ever mentioned on here I’ve bought and read multiple times. There’s one book maybe I missed, but it’s called Evicted by Matthew Desmond. And what it is, is we’re in a privileged class. If you’re able to afford more than one property, you’ve unlocked an achievement level you should be proud of. And we have tenants and landlords telling about I don’t want to hear your story from the tenants because every tenant has a story. And a lot of times you’re trying to cut through the BS and was that a real story or not? So Evicted is by a New York Times reporter, Matthew Desmond. And he lives with three tenants in Milwaukee. Low income. One’s in a mobile home park, one’s in the inner city, and I forget where the third one is. But follows them around and really gets the truth of their story. So what happens behind the scenes is really, really interesting. To understand what your tenants are going through sometimes. Even though the story they tell you might be different, it’s mostly because they’re embarrassed by the true story. And I just found it very rewarding to understand. We’re all in a ecosystem and our view from landlord to tenant can be muddled. But it was really interesting to see the tenant to landlord view and really understand where they’re coming from.

Alan Corey:
So I’d recommend that read for anyone. I couldn’t put it down.

Brandon:
Awesome man. Yeah. I think that won a Pulitzer Prize. So that was a big book. I haven’t read it though. I’m going to pick it up. Thanks dude. All right. Number two David.

David:
Number two. What’s your favorite business book?

Alan Corey:
Same sort of thing. Business book. I have read them all. Probably E Myth’s my best, but I want to throw out there … It’s sort of a business book. It’s called The Color of Law. And really it’s about housing practices created segregation for different income groups and ethnicities. And we all know housing is a great way to generate wealth, but if the government strips that from you through blocking out from lending certain neighborhoods, rewarding builders to build white neighborhoods, obviously it’s really difficult to get your family on the wealth train of real estate investing. And really it put marginalized groups 30, 50 years behind a lot of other privileged classes. And I recommend The Color of Law by Richard Rothstein as well as a book to read to understand that.

Brandon:
Very cool. Awesome man. Well, thanks for the recommendation. Number three.

David:
Number three. What are some of your hobbies.

Alan Corey:
I was a basketball guy like you David, growing up. So I’m coaching my kid’s basketball. And I got to say I really enjoy it but I’m a terrible coach. I always appreciated those coaches that just had command of practice. And my practices are run with all the kids are pantsing each other and slapping each other and I’m like, “Time to get in the defensive stance.” And you know what, no one learns a damn thing but I think we’re all having fun.

Brandon:
I love it man. All right, last question from me. What do you think separates successful real estate investors from all those who give up, fail, or never get started?

Alan Corey:
Personally, for me, it’s my pain of regret outweighs my pain of failing. I never wanted to be the could have, should have, would have guy. I didn’t want to be like, “Oh man, I wanted to get into real estate. I should have bought that duplex 10 years ago.” I didn’t like those war stories. I didn’t want to be that guy. I wanted to be the guy that said, “Oh, I bought that million dollar duplex and I failed.” I’d rather be that than someone who didn’t try, who didn’t put in the effort, was scared of it. I’d rather try and fail. I believe in myself. And the second reason I think most people don’t get into real estate is Georgia football. And what I mean by that is people are always like, “Hey, let’s talk real estate.” “Okay. Hey, Saturday at noon you want to grab lunch?” “Sorry man, I got a Georgia football game to go to.” “Okay. All right. Well, that’s when I’m free if you want to get into real estate.”

Alan Corey:
And it could be Dallas Cowboys football, it could be whatever, the Brooklyn Nets basketball. It’s prioritizing and it’s really if you really want to be a real estate investor, you’ll put that above the Bachelor or whatever it is on TV. If you really, really want these dreams. Look at yourself. What are you putting in front of your dreams right now? What TV show? It’s always something on Netflix or whatever it is. So those are two things that I sort of approach real estate.

David:
Do you still feel the same about Jerry Springer?

Alan Corey:
Jerry Springer. I don’t even know if that’s on anymore. Definitely didn’t make my parents proud by being on that show, but that was a goal of mine when I was in college and I lived that dream making up a story to be on Jerry Springer because one, it paid for my spring break. They flew me and my friends out to Chicago, paid for our hotels, our food. And everything to me is how can I get this paid for? Back then it wasn’t a house, it was a reality show.

Brandon:
Did they know you made up the story or did they think you were completely legit?

Alan Corey:
They tried to trip us up a lot of times and they threatened us. And they said, “We’re going to sue you for %80,000 if you bust out laughing on the show because it costs $80,000 to produce the show.” Which really honestly scared us. So I went to my best friend and I said, “Listen Jeff, I’m going to punch you in the face because if I don’t punch you in the face we’re going to get sued for $80,000.” He’s like, “Yeah Alan, I know.” So we got in this huge fight. I got to … Well, he dodged my punch. I guess I shouldn’t have told him it was coming. But Steve tackled me, brought me to the ground. But right then and there the producers made us fly home on separate flights so I think they took it seriously. Yeah.

Brandon:
Awesome man. Love it. I’ve been wanting to ask you that question for about 15 years now since I read A Million Bucks By 30. All right. With that said, we’ve got to close up shop. David, why don’t you ask the final question and then get us out of here.

David:
Alan, last question of the day. Where can people find out more about you?

Alan Corey:
Yeah, sure. I have a website and all my social media presence is The House of AC. My initials are AC. My friends call me AC. And if you google The House of AC you’ll learn a lot about air conditioning so apparently that was very bad branding choice on my end.

David:
Terrible idea.

Alan Corey:
But yeah, thehouseofac.com and I’m creating two podcasts. One about House FIRE and one called Agent Upgrade about how to upgrade your real estate agent business.

David:
Cool. And the book is called? House FIRE?

Alan Corey:
The book is called House FIRE. FIRE being financial independence and retire early. How to be a red hot real estate millionaire with a wealth of time and money to burn. That is out right now. Learn how to pay your bills, kill your bills with House FIRE.

Brandon:
Awesome man. Appreciate you. Appreciate you coming on the show. This has been a dream come true so thank you.

Alan Corey:
Well, it’s been my dream as well and thanks for having me. It’s been great and I hope I lived up to my 10X. Maybe that was a 5X effort of guest.

Brandon:
You 20Xed it man. 20Xed it.

Alan Corey:
Awesome. Glad to hear it.

David:
All right. This is David Greene for Brandon, the wisdom of Dave Ramsey and the entertainment value of Jerry Springer, Turner. Signing off.

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In This Episode We Cover:

  • Chasing financial independence and early retirement with real estate
  • Taking on good debt so you can grow you real estate portfolio faster
  • Thinking of each property you buy as a “lottery ticket”
  • Alan’s books: A Million Bucks By 30 and House FIRE
  • The danger of high-interest consumer debt (like credit card debt)
  • Seller financing and zero cash-flow triple net leases
  • And SO much more!

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Books Mentioned in this Show:

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