Busting The Real Estate Investing Lies – Bonus Episode

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[00:01] Welcome to the Prosperity Podcast. On today’s episode of the Prosperity Podcast, we’re going to be talking about Kim Butler’s newest book called Busting the Real Estate Investing Lies. Let’s jump right into it and help listeners understand why this is such a big deal. Hey, Spencer. So glad to join you on this and I’m so grateful that this book is finally getting out there. We’ve been working on it a while and there are no two more similar assets than real estate and life insurance. That’s so true. But there’s vast differences in these assets. And we’re going to cover that today because these differences are all that makes or breaks it in your financial world. Correct? Yes, absolutely. Just jumping right in, life insurance is liquid and life insurance.

[00:58] We’re talking whole life insurance, the kind from a mutual company that pays dividends or maybe it doesn’t pay dividends. That’s even secondary. But just to get clear that we’re talking about whole life insurance, not any other kind of life insurance, it’s liquid. And as our listeners know, we don’t let it be called an investment. So that’s a critical difference between real estate. Now, of course, we’re not talking about people’s homes here. We’re talking investing in real estate or investment real estate. Real estate is an investment and it should be called one, looked as one, moderated as one, researched as one, etc. Whole life insurance is not investment. It shouldn’t be called one. It shouldn’t be researched as one.

[01:44] It shouldn’t be analyzed as one. Whole life insurance is the place that you store liquidity. And Spencer, you’re a real estate investor. What is one of the main things that all real estate investors must have? Well, for us, it depends on if you’re in the smart world or the unsavvy world. But I’m always focused on cash flow. And when I’m also purchased, I like to purchase with instant equity if I possibly can. Absolutely. So you want cash flow and you also want cash. You want to have a corresponding amount of liquid money so that you can take advantage of opportunities that present themselves in the form of real estate, but also so that you can solve problems because whether you’ve got equity or not, the bank will

[02:35] not always let you have access to that equity. And so you absolutely want to have corresponding liquidity to the amount of investment real estate that you have so that not only could you buy more if, say, you found a great area for apartment buildings and the apartment building next door came on sale, you’d maybe want to buy that, but also to solve problems like leaky roofs and tenant mishaps and new parking lots and etc., etc. Absolutely. And, you know, we think about this and most real estate investors, they often, I should say this, a lot of real estate investors that are getting in speculation, they’re getting in too late. They’re not understand why they’re doing it because they’re trying to play catch up.

[03:19] And one of the things I love in your book, and it’s this little phrase that says the best investors on the planet know the secret to growing money is not making huge gains. It’s making sure to never take a loss. And that backs up what I was saying again, because you can solve real estate loss potential problems with cash. Like if you have a property and it’s not cooperating and you think, oh, my gosh, I’m going to lose money on this. If you have cash, you can solve those problems. And it might be just sustaining yourself through a downturn or it might be not having to sell right away because you have cash to go to other things with, or it might be sustaining not having a renter or a tenant for a while and

[04:02] just holding on to that property until you can get a renter or a tenant. And so our often stated mantra of Don’t Lose Principle and that addition that you just gave me of the importance of just being able to hang in there and work on slow steady gains is so valuable. So it’s interesting, you know, the real estate investor that is successful is getting consistent cash flow. They’re not getting a one hit wonder. They’re not getting a high rent property. That’s awesome. They’re not and they may be, but that’s not the bulk of their portfolio. They’re getting the workhorse. They’re getting not the A class property. That’s a shiny diamond. They’re getting the B or C class property that just does the job.

[04:56] Yeah, you know, that’s a good point. And, you know, one thing for our listeners to realize and a part inside the book, one of the lies that you’re busting is about flipping properties. And oftentimes we get excited seeing these TV shows on HGTV here, TLC about someone finding this diamond in the rough and turning a hundred to three hundred thousand dollar profit. What they’re not seeing is the full picture. They’re not seeing this lifetime value and this cash flow. And I think oftentimes people even they may flip a property, but they don’t realize the tax implications that they’re going to have on top of that. Absolutely. And a property flipper is now back in the employment game. You have to go find another property.

[05:45] And as an opposition to that, a cash flowing investor is always employed. They always have property working for them. And it’s interesting in the book, we make an important distinction between the income that you get needing to pay all your bills and provide your entire lifestyle, plus vacation money, et cetera, et cetera, which, yeah, that would be awesome. But that’s a huge step for real estate investors to make instead. It’s so much more important to just go after maybe first get your car payment made and then you get a couple more properties and you get maybe two car payments made and then you get a couple more properties and you get your life insurance premium payment made and a few more properties.

[06:32] And maybe now your mortgage payment is made and you just go after Jimmy Vreeland, my co-author, calls it a strike number. You just go after a smaller, more reasonable amount of cash flow. And that way, you get these small wins and successes that can then benefit you for the rest of your life. It’s not that you might not sell them at some point in the future. And yet, at the same time, if you can just go after small cash flow deal, after small cash flow deal, then the work that you do to get that cash flowing deal is there and will sustain you for a period of time. Why sell it and go do all the work again? Totally agree. And I think that that is the, at least for me as a real estate investor,

[07:17] and I’ve done this for quite a while, that’s the game changing mentality to have. When you look at the property and you say, OK, this is going to take care of X expense. And oftentimes I see people either it’s usually because they feel like they’re behind. And so they’re trying to make so much to catch up. And trust me, that just rarely ever works. But if you look at your properties and you say, OK, well, if I find a property that’s going to have the right strike price that I want, strike number, and it’s going to take care of this expense and this expense and maybe down the road, if you want to own apartment buildings, well, then you can make the decision. And you’ve now got some training. You’ve got some work underneath your your history.

[08:05] And then on top of it, if you decide to sell those long term properties and then go for something bigger, you can. But often hitting that home run out of the gate the first time is just danger land to me. It really is. And it’s so scary to realize the impact that that thought process has on the work that you’re doing. So as we all know, as you go into anything, your mindset or your thought process is really, really critical. And if you go on these big elephant hunts, you may find such a thing. But how much better to go after a, I don’t know, a fox or a wolf deer, something to tell. I don’t hunt, but I think that’s a relative analogy, though. You know, go go after something that’s more reasonable for you to gain.

[08:57] And then down the road, we do have a strategy. If you are in your 70s and 80s and 90 year old and you say, OK, I am done with these real estate deals that I’ve now maybe owned for 20 or 30 or 40 or 50 years. And I do want to sell. We have a sneak peek at a fabulous presentation that my husband, Todd Langford, did on a charitable remainder trust. And so people that go to the books website, which will list that here at the end of our time today, we’ll be able to sign up and get a video as well as a white paper and a downloadable truth concepts file even to take a look at a strategy that we speak about in the video around how to sell your properties without paying that capital gains tax that you mentioned.

[09:51] And what’s interesting is that you can use that particular tax code to exchange into the charitable remainder trust. You can also use it to exchange into oil and gas from an investment standpoint. So a lot of people are thinking, OK, I want to do the exchange, but I’m not ready to do a charitable remainder trust. Well, maybe do the exchange into oil and gas and keep investing. And then you can even exchange back like if you do the oil and gas for a few years and you decide you want to go back into real estate, you can. So those are some of the more advanced strategies that we speak about just briefly in the book. And then, as I said, there’s another source for video and a white paper about it.

[10:37] Well, we’ll make sure to put that in the show notes. And for all of our listeners, this is definitely a book you’ll want to take a look at. You know, for me, as a seasoned investor who’s owned a lot of properties, I gleaned a lot of things. And for any type of investor, meaning if you haven’t done it yet, you’re speculating, thinking well, now you’re going to see some of the big lies that you can avoid. For example, oftentimes people feel like they have to get into a real estate market that’s always appreciating, a.k.a. speculation. Never do that. Don’t do it. But what it is is this strategies that are taught inside of the book doesn’t matter about the appreciation. Notice we never talked about that in this entire conversation.

[11:25] That’s right. It’s wonderful. And the other piece is figuring out where the whole life insurance comes into play with real estate. And we weren’t able to dive into all those things, but guess what it does in the book. And that’s why they need to read it, because they’re going to love it. In fact, because they’re podcast listeners, I should probably say that’s why you might want to listen to the book, right? Absolutely. So we’ve got an audio version available. And myself and Jimmy Vreeland, our co-author, read it for you. So you’ll enjoy hearing the back and forth between the two of us. You know, it’s really funny, Spencer, when we were recording it, it’s a little inside track for our listeners today.

[12:09] Jimmy and I did not make any game plan around who was going to record what part. We just started recording and it fell together so perfectly. Just a natural, his part, which was his story, then to my part, which was my story, then back to his part, back to my part. And it was awesome. It just totally came together where it was totally logical manner. And we didn’t have to change it up or strategize around it or anything. It just came together so well. And I always love it when something like that happens. It just makes you kind of lift your face to the sky and say thank you. And then just be grateful that it’s a wonderful experience for the listeners to be able to really hear from the authors,

[12:54] the true experiences that we wrote about in the book. And then they’re, of course, listening to us talk about them. So I’m super grateful for your help in getting the audio version of the book out there. It is my pleasure. And for me, here’s the reward. And for all of our listeners, it’s that now I get something that I get to add to my bank of knowledge. And and I mentioned earlier, even even as a seasoned investor, there’s things that I just pick out and say, OK, this is going to make me sharper at this additional skill set. This is something I should watch for. And this is something that’s going to help my family long term. Because of that, so much value. Oh, thank you. It’s it’s just a great way to capture the learning.

[13:39] Absolutely. So for all of our listeners, we encourage you to check out this latest book. Where’s the best place for them to go and get it on Amazon? It is there as a regular soft bound copy. It is there as a Kindle version and it is there as an audio version. Wonderful. We’ll make sure to put the link inside of the show notes. And we encourage all of you to also give us some feedback. Once you read the book, do us a favor and go inside of Amazon and leave your reviews, let us know what you think and then tell your friends and family as well. So thank you for being a part of this episode with us. Thank you for listening to the Prosperity Podcast to take control of your money and have it work for you.

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