Welcome to How to Money. I'm Joel and I am Matt, and today we're talking real estate fire with Alan Corey.
That's right. Yeah, So any longtime listener of the podcast knows that we're fans of investing in real estate. We both have a handful of rentals and a decent bit of our financial success is because of those properties, because of those houses. But we also approach the conversation with a degree of reservation because we don't think it's for everyone, first of all, but also we got into the market at a historically great period of time, and so we're nuanced when we.
Talk about real estate.
But our guest today is not so here to preach the real estate go is Alan Corey, who is all in. He's a realtor, he's author of House Fire, which we'll be discussing today, and of course he is an investor himself. Alan is a self proclaimed real estate maximalist here in our wonderful city of Atlanta, and we're going to talk about all things real estate. I also heard that he wanted to be a stand up comedian in a previous slave show, so maybe we'll talk about that a little bit.
But Ali, we.
Really appreciate you joining us on the podcast today.
Glad to be here. You're right, real estate is not for everyone. It's only for people who want to make a lot of money.
There's the first is the stand up comedian. I can tell Alan the first question we ask everyone who comes on the show. Matt and I. We splurge a lot on craft beer. Even while we're being intentional, we're saving and investing for our futures. What's that for you? What do you like to suplore? John?
You speak craft beer?
And then I turned forty, and then my gut was telling me that I can't have I pas anymore.
And that time I got.
Really into flat caps, which are basically the hats that Sherlock Holmes wears, and the only reason I've it. I'm fighting every urge. But when you hit about forty five, which is my age, now you start turning into your father.
And it's just.
Genetically predisposed that I'm going to wear these hats that he wears. What my grandfather where and my great grandfather. I don't know what it is. I just can't stop buying them, and my wife is going crazy that our closets getting filled with these caps.
I end up buying one a month.
For tweet and stuff. For that, I'm guessing.
You get the plaid, you get the tartan, you get the tweed, you get the Saint Patrick's themed one, you get the you know, there's a new holiday.
I need a new cap.
And you know, my wife's like, you look forty years older when you wear that, and I know I do. It's just I cannot stop myself. I don't know what's going on.
So it's not like I thought the direction you're going with it. I thought you were gonna start talking, You're gonna mention hair loss or something.
Yeah, yeah, yeah, but.
You're saying that just truly it's in your DNA, not that you're going to lose your hair, but that you are turning into your father and your grandfather.
Yeah.
And my dad's really into you know, the ancestry and genealogy. And we're from Ireland and Scotland and England, uh, you know, but we've been in America as far as we can trace it back for over two hundred years. I just can't shake this this flat cap thing. And it's all my ads.
On every social media.
They know that this is my weakness and that all the ad I get, and I just keep buying them.
So I just hope you're sitting on the front porch smoking a pipe on a rocking chair, also telling the kids to get off your lone while you're wearing it.
Yes, then then I've I've metaphorphed into my dad and cycle continues to my son.
I do feel like there's a way you could. You could kind of change the script and what people expect. Alan as long as you're not walking like clasping your hands behind your back while you shuffle down the sidewalk, because if you do that, I don't know, it reinforces the character I have.
You know, perk. I have solved three crimes since this, so you know it comes with some perks.
Matt would be happy to be your doctor, Watson, I'm not gonna handle that.
So even though you're here in the city, we've ever we've never actually met, we've never hung out. This is truly the first time we've ever talked, and so we would love for you to share a bit about your history, like tell us about how you became a super saver, like when you're first starting out, because if I understand you were making something like forty K. You're living in New York, but you were investing a massive chunk of that.
I'm assuming you weren't living large. So I want to kind of hear the I guess the Alan Corey origin story here.
Yeah. Sure.
So I moved to New York with dreams to be a comedy writer. And so to be a comedy writer you basically have to be a stand up comedian and then hopefully you're funny enough that people hire you to write some jokes for them.
So the next Liz Lemon, Yes.
Yes, exactly. And so because in my head, I was like.
Entertainers are rich, and I had no entertaining skills. I'm not an actor or singer or dancer or anything like that. But I was like, well, I was class clown in high school. Maybe I can turn this into a lucrative side gig or a full time gig. And so I moved to New York City. I found a tech support job. And this was the year two thousand. It was the dot com boom and everything right right after that actually, and and I was like, let's live the fire life,
the lean fire. This was before all that existed. But the cheapest place I could find was an illegal sublet in the Spanish Harlem project. So you know, I had a roommate who lived in the projects and he gave me his room for four hundred bucks a month, which was great. And then I just started reducing my expenses everywhere. I'd save on food by going to the bodega in Spanish Harlem and buying ram noodles for thirteen cents each if I bottom in bulk.
That's what I'm talking about.
Yeah, yeah, And.
Then I'd go to the bakery as they were closing and about to throw off away all their fresh break baked stuff for the day and get them at fifty percent off or sometimes free. And I would just try to cut all my expenses. And I even went to my HR person and said, listen, I want you to put fifty percent of my income or whatever my take home pay into this bank account that I use every single day, and the other fifty percent in this one way across town that is really difficult for me to
get to. And this was pre online banking and all that as well. I mean, I'm not that ancient, I'm forty five, but you know, twenty years ago this was.
This was what were the horse and carriages like in New York, exactly, exactly, Well, I pass.
Changed a lot in the past twenty twenty five years, but no, I honestly, just to interrupt those for a second, I love that you set that barrier between you and your money to make it more difficult, because I assume you're socking that money away and hopefully you were planning to do something with it.
Right.
Yeah, Well, so everyone I felt like everyone in New York was wealthy. Like you see the nice restaurants, you'd occasionally see a celebrity, and you see people driving and even taking cabs. I'm like, look at that rich person who can take a cab? And so I was like, how do they do it? And so I went to the library because pre podcast, pre social media, pre YouTube, all that stuff, and I just bought every book I
could on wealth building and stocks and everything. And what I realized is with stocks, like I felt like I was gambling it was like a thirty year horse race. But real estate, I felt like I could control it and that I could, you know, determine what I was going to buy, how much I was going to buy it for, how much was going to put to renovate it, how much I could rent it for what my financing terms are. I felt like I had a little bit more control, a lot more control, actually, and so I
sort of reverse engineered that. You know, I was burning the midnight oil going working my nine to five and then I would go to the comedy club still three o'clock in the morning. And it wasn't sustainable. It was terrible at both my day job and at comedy. But I was like, man, if I could just buy one piece of property a year for five years, then I
could probably replace my day job income. And so that's where I went to that bank account that was collecting fifty percent of my take home bay every single year, and I would just say, whatever's in that, that would be my down payment.
For a property.
And every year I would say fifty percent and whatever's in that, you know, let's apply it to That was my get out of like corporate plan in five years. So that first year I had ten thousand dollars saved up. It was right after nine to eleven. Everyone's trying to leave New York. You know, Alan, you're an idiot, You're trying to buy a real estate. You know, everyone's so fearful it's the worst time ever to ever buy a real estate. You know, you don't know what you're doing.
And I found one property that I was one hundred thousand dollars in Brooklyn. I had never been to Brooklyn before, and I went to Brooklyn and homeless people were right outside all this stuff that.
You see in movies.
And I was a naive kid from Georgia. But I was like, I got to buy it. This is the only property I can buy. It's a one bedroom apartment. And you know, if things go bad bad into the projects, like I'm already in the projects, like it can't get any worse. I'm buying living in the projects whatever, right, or I have tremendous upside if I can, if I can make this work, like I thought it was going to work. And what I did is I bought it and it was a big living room and I was like,
I'm not going to have any people over. I don't have any friends, so I.
Uh, I'm working big heavy. Yeah, exactly.
In New York, no one ever goes to your apartment. You meet in a bar or a restaurant or everything.
Like you have no idea what.
People's lifestyle is because they all live in Jersey and Brooklyn and Bronx or whatever. But I just took a big, heavy curtain and sectioned off the living room and I rented that out to a friend of mine, another comedian, And that was like house hacking before else I existed.
And that would pay off my mortgage. Right, So I went from paying four hundred bucks in the projects to paying nothing and I own it, yes, And I was like, Okay, there's something to this, right, And then the next year I was able to save up fifteen thousand dollars on January first, and so then I bought a duplex and then I just you know, saved up some more money.
And my third property, I did a flip, and I didn't have enough money, but I found the deal and I found my next door neighbor was a contractor and he would work for free for equity. And then the only person that I thought was rich or knew was I was dating a girl at her time at the time, and her dad was a lawyer, and I was like, well, he.
Must be rich. He has a job in New York City.
He's a lawyer in New York, so he must be rich, you know, I asked him if he would pay for the down payment and you know, twenty percent down on the renovations here on this deal that I found.
He said sure, and.
We bought this property in Red Hook, Brooklyn, which at the time no one knew anything about, for four hundred thousand dollars. We put two hundred thousand dollars into it, and we sold it for one point one million dollars a year later. I was twenty five years old at that time, and the buyer was Barbara Corcoran from Shark Took and that gave me the boost of confidence, like, wow, okay, I found a deal, I renovated it, and Queen of New York City Real Estate bought it for your own
personal investment. I'm doing things right. And I was like, all right, I don't need to do comedymore. Let me let me lean and do real estate there.
That's cool. Well, yeah, I love that combo of like early sacrifices. There's I think there's a lot of stuff that we can glean from that. The fact that you're kind of divorcing yourself from that money until you're ready to invest it. I love that. Yeah, siphoning it off elsewhere so it's not a temptation for you, and I want to talk a lot more about We want to
talk a lot more about investing on this episode. But you're you're not just an investor, you're also an agent, and so in spring is just the hottest time for the housing market. What are you seeing right now? I'm curious because there's a lot of a lot of our listeners are interested in buying a house. Maybe they've put it off because what's happened over the past couple of
years with rates and prices. Do you are you starting to see things moderate, things chill out a little bit in the housing market or yeah, I'm curious to hear your perspective.
Yeah, so you're not going to like this or your listeners are not going to like this, but it it's hot and everything's a bidding more.
If you have a property that doesn't.
Need any work, it's going to go under contract with multiple offers and there's not going to be comps that support it. That the data just doesn't make sense. But that's what's happening. Why is that happening? We have a housing shortage. Has the housing shortage improved since last year? No, the year before that, No, the year before that. No, we are twenty years behind on building to match the demand that makes prices go up regardless of the interest rates.
People want to wait, and they're going to wait. Oh, let me save up twenty thousand dollars. You know, I don't like the homes that I see right now. If I save another twenty thousand dollars, I can go up a price point. I can move my budget from five hundred thousand to five hundred and fifty thousand dollars. It doesn't work that way with inflation and the housing demand. When you save up twenty thousand dollars, that house you looked at five hundred thousand dollars is now five to fifty.
You're just buying the exact same house a year later for more expensive price, And so you can't outsave inflation. And you know, so you have money in your bank, but inflation is eating away at that and you're trying to outsave it. You're trying to outsave the rising housing market.
It's one of those things where it's never a good time to buy real estate in that if you're waiting for the perfect scenario of interest rates and price point and what you get combined with it's always a good time to buy real estate because tomorrow is always going to be worse than it is today. You know, every real estate investor, everyone who's ever bought a house, they're always like, Wow, I'm glad I bought two years ago. You know, ask them. You know, I've in real estate,
in real estate for twenty five years. Every single person's like, man, I should have bought two year ago. I should have bought two years ago. There's just not enough homes to buy, and so it's it's tough, and so there's two ways to look at real estate. Is whether you're looking as an investment or a primary residence. But a primary it's an emotional decision. Sometimes many times the numbers don't make sense in terms of an investment, but you're buying for
life lifestyle. You want to be close to your work or school district, or you just like the walkability or close to the interstate, whatever it is.
That's fine.
You can pay extra and pay a premium for those things because that's for your lifestyle and that brings you happiness. But you can't always look at your primary resident is going to be the best investment for you, and real estate investors look at property differently. They look at it as a spreadsheet decision, not an investment decision, and so they might like the uglier house or the one that's
in the floodplain. And I always like to say, you want to buy the you want your house to be ugly in the street and sexy in the spreadsheets, and so that's what makes a good investment. And typically the opposite is true for primary where it's sexy in the street but ugly in the spreadsheet.
Yeah, you wanted to have that curb appeal something that, Yeah, your family is excited to come home too. But I mean, I totally agree with what you're saying as far as the overall trend of real estate. I mean, it's one of those things that continues. It's almost like the stock market in that way, like, yes, there are little fluctuations here and there, but generally speaking it's up into the right.
But mortgage rates are crazy high compared to where they were years ago, and they have a massive impact on your monthly payment. It has a huge impact on individual's ability to afford a home or not. And so I'm curious, like, I know it depends on from market to market, but how have you seen folks cope with that. And I'll say where we are where we're not down in the city and the small neighborhoods around central Atlanta like you are, but we are seeing things slow down a good bit here.
There is not as much mobility because it seems like a lot of folks are locked in. They've got folks are hanging on to the three percent mortgages because they're seeing what move into something at six and a half and seven percent, what that's going to do to their payment.
Yeah, that's as adding to the housing shortage.
Right.
People don't want to sell because they have a three percent mortgage, or if they do need to move because of a birth in the family or a death, or a marriage or a job transfer, they'll keep that as a rent because the interest rates so low, and so
that adds to the housing shortage. But if you have to move, right, you have to get into the school district, you do get a job transfer, you got married, or whatever it is you have to move, you have like ten choices to choose from within your buybox, whether that's your zip code and your price right, And so then that's where these bidding wars go nuts, because you have to move, you don't have a choice. A real estate
investor doesn't think that way. A real estate investor will buy and get a thirty year fixed and hold it until it's the right time to sell. For instance, I invested all through the real estate the great financial crash, and my property value went down fifty percent, but I wasn't selling. And when people aren't buying homes, that actually
increases the rental demand. There's actually more renters because they're not interested in buying homes because the lenders at the banks aren't giving money or the interest rates are so high, so there's actually more renters. And then even though my
property value went down, I'm not selling. I'm just waiting and renting it out and collecting cash flow month to month until it is a good time to sell back when interest rates are low again or there's you know, high demand, and I can sell it there's been a lot of appreciation on my property, then I sell it. So that's what's great about real estate investing is you don't time the market. You just wait out the market
until you want to sell. And but primary investing is you hear the horror stories and they make the headlines because they're they're just time, you know, independent.
Yeah, yeah, that's a that's really important. Actually, I think your history owning rental real estate through the Great Recession, because yeah, you can write it out if if you have a long long enough time rise, and then if you have enough cash reserves. I want to know too, Like, let's let's pivot, let's specifically talk about real estate investing, Like what's your philosophy there? Do you you think of
it more like buying a small business? Right? And then how do you how do you talk to people who are like I'm interested, I'm curious about real estate investing, but I'm just I'm not sure if it is for me. Maybe I'm not. I'm not quite as gung ho as you are. Alan, Maybe I should keep going with thein k in the roth I rate kind of like Matt and Joel talk about too. Why like what do you tell folks when they're when they're kind of debating the two?
Yeah, So the number one way to get wealthy, like really really wealthy is through leverage. Leverage is borrowing money and making more money with that money. That's what a mortgage does. You can't buy stocks with mortgage. It's very safe. Every investment is a mix of you know, the risk heer it is, the more money you make. But what's great about real estate I think is actually safer than stocks, and you make five times as much money as stocks.
So, for instance, let's say you.
Have one hundred thousand dollars and you buy one hundred thousand dollars in stocks one company and it goes under, you lose one hundred thousand dollars. You can also buy one hundred thousand dollars of a house right by buy one house for one hundred thousand dollars. It can be
out of state or whatnot. A property manager in a rural town where homes may be more affordable than where you live, and you're making one thousand dollars a month an income, and then let's say you take that one hundred thousand dollars, you rent it out for a thousand dollars, and you know, let's assume after all expenses, you're taking home one thousand dollars. Now, if that burns to the ground, okay, well I could still sell the land, right the lot's
probably twenty thousand dollars. You can't do that with stocks. So in some ways, you're a little bit protected. But I like like to take a mutual fund approach to real state. Similar to stocks. You wouldn't put one hundred thousand dollars in stocks. You would probably spread it around in mutual fund, which buys hundreds and a bunch of
different stocks. I do the same thing. Let me take that one hundred thousand dollars and let me put it is five different down payments on five different one hundred thousand dollar homes twenty thousand year, twenty thousand year, twenty twenty twenty. And now I have a mutual fund of houses. So what's great about that is if one burns down to the ground. You know, let's say after mortgage, I'm making two hundred bucks, tw hundreducks, two undreducks to undred,
I'm still making a thousand bucks a month. One burns to the ground. Oh well, I'm making eight hundred bucks a month.
Right in that scenario. Let's hope you have insurance.
Yeah, yeah, yeah, you have insurance.
Yeah. If you have a mortgage, you have to have sure. So let's maybe don't be so drastic. If I have one house, let's say I raise the rent fifty bucks. Great, I'm making a thousand and fifty bucks a month. But if I have five houses and they're all exactly the same, and I raise the rent fifty bucks over time because of inflation or whatever, well now I'm making two hundred and fifty bucks a month. I've scaled my wealth up right.
If I do nothing and I never raise rent and just wait thirty years, if I have one house in thirty years, maybe that one hundred thousand dollars house is one hundred let's let's say one hundred and seventy five thousand dollars house. But if I have five, I have five houses that are paid off that are one hundred and seventy five thousand. So that five x my wealth.
And if five x is my rental income, if I raise rent twenty five thousand, if one goes down, if one is vacant, maybe doesn't burn to the ground, I just can't rent it or whatnot, then the other four booie it like like a mutual fund. And then I say, every house comes with a lottery ticket, hidden lottery ticket.
I was investing in Brooklyn and different neighbors in Brooklyn, and all of a sudden, Brooklyn blew up and became the next hot neighborhood, not because of anything I was doing, not because i'd need foresight or I was smarter trying to time the market. But if I had one property and I kept trying to pay off that mortgage and I wasn't trying to scale and leverage and buy more properties, I wouldn't have gotten quote unquote lucky.
And so there's all these things that sort of happened.
If you borrow money and you put it to go make more money, and the more properties you buy, the less risky it is, and the luckier get and the more money you're gonna make.
Sure.
So yeah, the mechanics behind it certainly makes sense. But do you think that this is something that everyone out there should consider, Like should everyone out their own rental real estate? Because it's when you are just looking at the numbers, you're like, oh, man, who wouldn't do that with say it was a spare twenty thousand dollars, which I'm not sure I everyone has to spare twenty thousand dollars sitting around, but even.
And I'm not sure houses cost one hundred thousand dollars.
But so I guess with all that in mind, like there's a an element of time that's required to manage these as well. It's got like a part time job element to it. It's not nearly as passive as a lot of real estate influencers want to make it sound. And whether it's managing renovations, showing the property, screening tenants. I guess what would you say to somebody who is assuming that it's going to be a set it and forget it kind of deal.
It wasn't ever a setate forget it until you get to a certain scale.
And when you have, you know, you can.
Get property managers. You can find one hundred thousand dollar properties. I mean, as of four years ago, I was buying properties for thirty thousand dollars just an hour south of Atlanta in a town called Griffin, Georgia, and I recently sold them all for sixty thousand dollars each two years ago, and they're probably eighty one hundred thousand dollars now.
So they exist.
They just might exist in your hometown and you're not looking for them, so you don't really see them because they're not in your neighborhood. But what I would say is, yes, it's going to take a little bit of work. It's leveraged work. Going to have to leverage and build the connections,
build a network. I always say, find a rock star in the town you want to invest in, whether that's a rockstar agent or rockstar property manager, a rockstar lender, because rock stars hang out with other rock stars, and you just leverage their network and say, hey, I want to invest in real estate in this town. You're a rockstar in this town, can you help connect me and to the other players, and you can just leverage their network. It's much easier to do it that way. But if
you have twenty thousand dollars. This is my sort of approach to my book House Fire, where it's should you ask me and should everyone do this? And it's like, well, if you like math, you should do it. If you trust math, you should do it. Because I look at my internet bill and my internet phone bill combined is one hundred and fifty bucks a month. And if I follow typical fire movement, which is fire, you know, financial independence, retire early. I know you've talked about this plenty of
times of your podcast. It says it takes twenty five times or your annual expenses of that bill and as long as you have that in stocks, and you withdraw four percent each year, then you've got that. And so that would be let's see, one hundred and fifty dollars bill would be eighteen hundred dollars a year, forty five
thousand dollars in stocks. As long as I have forty five thousand dollars in stocks, I can pull out four percent of that, which is one hundred and fifty bucks a month, and that internet bill's paid for my life. That sounds crazy to me, Like, yeah, of course, if I do that for every bill in my life, I have to be a millionaire. And that just seems too ambitious. I will never get there, and that then I'm living
on a constrained retirement. So instead, I was like, how can I apply this to real estate, this fire method, because I'm not doing that. I'm done living below my means. I did that in my early twenties. I'm not going to do that anymore. When what I just what I took was half of that, so forty four forty five thousand dollars, half of that's twenty two thousand, five hundred dollars. I went and bought these hundred thousand dollars properties fewer
than one hundred thousand dollar pperties. I built up a portfolio of fifty single family homes, all under one hundred thousand dollars. And what I realized is if I put down twenty percent on one hundred thousand dollars property, and then there was two thousand, five hundred dollars of closing costs,
that was my twenty two thousand, five hundred dollars. I could cash flow after expenses, property manager vacancies, capex repairs like a big roof, and things like that, I could cash flow one hundred and fifty bucks.
So all of a sudden, I have right away.
I don't have to wait until I save forty five thousand dollars and withdraw four percent. I took twenty two thousand, five hundred dollars, put it in the market, and it would kick off one hundred fifty dollars to pay my internet phone bill. And I was like, Aha, that's my AHA moment. And so then I went down to my next bill. Wow, if I collect all my utility bills, my gas and electric, you know, that's probably one hundred
and fifty bucks there. Okay, I just need to save another twenty two thousand, five hundred dollars and then that's going to pay off my bill. And then I just started matching my houses for each bill, and then that's my house fire method, and I would just this house for that bill, that bill, that bill, and that is my retirement plan. And what was great now is that I live larger and larger each year in my retirement.
Because rent goes up, you charge a little bit more in rent, my mortgage payments go down a little bit. I still get great tax breaks, and the properties are appreciating more and more. So I'm not pulling four percent from my stock, keeping that at a artificially low level, because as you withdraw money from your stocks, you can't appreciate as much. I'm not pulling any money for my
real estate except for the cash flow. And so this is the retirement plan that took half the time, half the money, and I get to live larger and larger each time in retirement. It just makes sense to me. So yes, I think everyone should do it if you like math, if you're willing to put some upfront work. It really only takes five properties over five years, and that's better than working at your day job for another fifteen twenty years to retire.
I love how well you said you have to like math. Then you really wait a second, No, no, you have to trust mathing because I don't really like math, but I trust math, and so there's a difference there for me, and I think maybe for a lot of people out there who are like, yeah, now, algebra wasn't really my thing, but I trust the math. I trust the way some of the basic numbers work, and so I too can
get behind the idea of investing in real estate. But we've got more questions to get to you with you, Alan, specifically about your house fire method, how it works. There's a lot of details we want to unearth. We'll get to those questions right after this.
All right, we are back from the break talking with Alan Corey about investing in real estate, specifically real estate fire,
achieving a sense of financial independence via real estate. And now I'm having a hard time, I guess, getting past the just where mortgage interest rates are right now, and given the fact that they are higher and that most folks are likely looking to the banks in order to finance their properties, how are you approaching that, I guess, because obviously, when you're paying three and a half percent.
Your numbers look one way, but better you're paying six and a half to seven and a half percent on an investment property, it's going to have an impact on the numbers. You know you're mentioning the math right before the break, talk to us about the math behind where rates are right now, and specifically from an investor's standpoint.
So, as an investor, I completely don't care about interest rates. Let me explain that, because you're gonna be scratching your head.
Here's what matter.
I've found great real estate deals that would be great to even good with twenty percent interest rates. I found terrible real estate deals that would be terrible even with zero percent interest rates. It's just a variable. You plug it into a formula. It's a variable. It doesn't it doesn't. It's just like the purchase price. I look at it this way. If with today's rates, let's say it's a seven percent eight percent, or if I'm doing hard money, I got to do ten fifteen percent.
Whatever it is.
You put in your spreadsheet and you look at the numbers, and if it's cash flowing, this is I've got three things that are going to happen, Like I only get fixed debt. You won't get in trouble with fixed rate debt, meaning thirty years fixed. And every time there's a crash the commercial people right now offices, it's because they have adjustable rate mortgages back in the actually two thousand and
eight is because of adjustable rate mortgages. If you have thirty year fixes, your golden and you you'll just get rich by longevity. And so the three things that are going to happen are this, I lock in a ten percent interest rate. In ten years, twenty years, thirty years, interest rates stay the same and it never moves off ten percent. That's fine. I'm still cash flowing. I'm making money each month. This is a little ATM machine for me.
So I'm glad I bought and that I didn't wait for interest rates to change or interest rates go up. And you know, the day after I close, interest rates go up to twelve percent and forever and they never go back down to ten percent. Well, that's fine, I've locked into ten percent. I'm glad I bought. Third thing, interest rates go down, Well, I'm making money right now. If interest rates go down to eight or seven, then
I refinance. I'm glad I bought. So that's how real say investors look at it is they're not going to make They're not going to buy anything that's not making money into day's environment, in today's prices and today's interest rates. But if you buy a residential property which is four units or fewer with a thirty year fixed loan, you and you can find a way to cash flow it today with the numbers. I don't care about interest rates. I can either stay locked in or I refinance if
they get better. Like I'm just glad I bought because I'm trying to buy a property to pay my bills that one hundred and fifty dollars here, two hundred bucks here, trying to buy the car, pay off my car note, my student loan debt. That's what I'm using my real estate for. I'm not trying to flip it. I'm not trying to sell it. So that's why I say that's irrelevant what the interest rates are.
Okay, talk to me about how you determine what's a good deal and what's worth investing in, because it can't just be oh, it's cash flowing two bucks a month, because then you're like, eeah, it's not worth my time right. So like your philosophy is always be buying, but you also you don't seem to put as much emphasis on finding the property with the absolute best returns. And my thought is fewer better properties maybe means less hassle with
the same amount of income. But I'm curious to hear your philosophy.
Yeah, this is where everyone freezes analysis paralysis. They they'll create their bybox. You have to create a bybox because what happens is someone's going to say, well, I found this airbnb in Florida, I found this duplex in my hometown, and then I've found this single family home in my neighborhood, and they'll come to me and say which one should
I BUYO. I'll typically say, well, if you found the best duplex in your in your old hometown, and you found the best single family and you bought the best you know, short term rental because you've been looking.
There, then buy them all. You can't really.
Compare and contrast. And what I say is you don't have a buy box that's strict enough. It's much easier to narrow that bybox and only look at the duplexes from your own old hometown.
Why is that, because.
Then you could become an expert and you're gonna get the word out there that hey, Alan buys duplexes in his own hotown, and then everyone knows to call you if there's a duplex and you just buy duplex, duplex, and all of a sudden, you are a market expert. You know what a duplex rents for, how much is cost to renovate, what the property texes are going to be,
the insurance. And so if you sort of concentrate and become an expert in one niche, rather than trying to diversify off the gate, you were going to go much further and you're gonna learn more.
And that's exactly what you did with quadplexies, right like you were the quadplex guy.
Yeah, I'd learned this. There wasn't any foresight. I just bought one and then I bought another one, and then the neighbors come and like, hey, you bought two in the street, you want to buy this one, And all of a sudden, I became the duplex guy. It's just
your reputation becomes a lead magnet and I become an expert. Obviously, I'm not going to make a ton that first I'm gonna learn a lot of lessons on that first one, but then then I can apply it to the second one and third one, and then you become an expert in that niche So if you want to hone the skill set without buying anything. I realized I was doing
this when I lived in Brooklyn. I went to every single open house on my block, and I would just track every sale on my block, and then I would predict what I think it would sell for and whatnot. And then I would predict what I think it should list for. And I tracked my block and once I sort of was like within five percent of getting it.
Right every single time.
Then I went to my street, and then I went to my zip code, and then I went to the school district or whatever. You just widen it, and I just started tracking numbers and data. It's fun for me. And I was just looking at it on Zillo like everyone looks at Zillo.
I hate math.
I'm not a big math guy, but real estate math is just addition and subtraction. It's not anything to you know, you don't have to have a degree in. It's great if you have a passion and you can hear my passion. People call me after this podcast, Alan, let's buy real estate together?
Can you help me?
Like, you just got to get your word out and share your passion and it'll change your life.
I like what you were talking about there with kind of zeroing down into street level, and that's kind of where I started to It's like investing all inside of a neighborhood. And then I was like, wait a second, I can invest in the neighborhood over and maybe the neighborhood over from that, But it was all kind of within this limited sphere, all within kind of driving distance and my ability to thoroughly understand the market. You've now
invested in a bunch of different markets. You've invested in New York, you invested Atlanta, You've invested in South Georgia, evest in different kinds of properties too. How do you think is that just like do you grow that over time? And how importance is it maybe to start off with a like a niche inside of a particular neighborhood or small geographic location, so you can kind of become an expert before you expand.
Do as I say, not as I do. Definitely you want that niche. The reason I sort of kind of go all over is twofold one one of ADHD. But I'm a realtor and people are you know, will come to me and say, hey, I want to buy a short ter mental. Hey, Alan, I want to buy a duplex. I want to buy an apartment building. And I don't feel comfortable giving advice unless I'm doing that too. But like, like, who am I to give you advice on short of mental unless I'm doing it. So I'm going to go
buy it shorter mental. I'm going to learn the ropes so that I can teach those to my clients. I also teach real say investing as well, and written books and stuff. So I whatever people want to buy, I want to go buy it along with them or before them, so that I can be a better guide to.
Them on their investment. It's all sort of fun to me.
I always say, there's million ways to make real estate, a million ways to make a million dollars in real estate. Just pick one, like you can be the only by condos, or only by townhouses, or only by single families.
But you want to accelerate.
Your path to expertise, and if you just rinse and repeat and get those reps in. That's how you become it. Don't get distracted by all the noise, the new shiny thing. Like obviously, when I started Airbnb didn't even exist, and so that's a new product. I don't know there'll be you know, there's pad split out there right now where you can rent by the room a single family house, but you're renting by the room instead of renting it out. Like there's always going to be new products. I don't
care which one you choose, pick one. I just highly recommend that you stay at four units or fewer that small multi family because you can get that thirty year fix, which I love. And if you can buy a duplex, triplex or quad, I love that much more better than buying four single family homes because then I only have one roof to worry about instead of four roofs. I only have one property tax build instead of four. I
only have one pest control bill instead of four. You can scale down all your expenses if you can kind of condense it in that small multi family.
That's true.
Yeah, Okay, So speaking of we're gonna take a break here in a minute, and I think we're going to get to maybe maybe like a bunch more rapid fire style questions with you Alan about real estate. But I'm curious I want to follow up about the houses that you mentioned down in Griffin. You said that you actually sold those properties. It sounded like you held onto those
for a couple of years. The way I approach the properties I own, I'm planning to keep them forever, and so for you when it does come time to sell, what's the trigger? What is it that makes you say, all right, it's time to list these properties?
Well, it's just what I just explained why I had fifty pest control bills. I had fifty, you know, fifty of everything.
Too many?
And so yeah, yeah, yeah, too many?
Okay it And in two and a half so I bought the entire portfolio, roughly each house with thirty thousand dollars each. And I know, whatever you're visioning in your mind, what a thirty thousand dollars house bought you five years ago? Our south of Atlanta, like people were paying six hundred and seve hundred bucks. And then they're very livable properties. These were fine and mostly Section eight so where they're
guaranteed income, the government's going to pay for it. Tenants that have been there for twenty or thirty years, and so if I've lost you when you say you know sure you bought a one point five million dollar portfolio. I didn't have money to buy this property, but the seller was a retired real state investor. His kids didn't want these properties, and he was having trouble selling them because at the time, there wasn't a ton of loan products for large single family portfolios like there is now.
And so I went to them and said, hey, I want to buy this and I'll buy them all, but I can't get a loan for it. But no one can get a loan for this because who's going to get fifty different mortgages, Like, it's just not going to make sense. So we agreed on a seller financing deal, which means he was mortgagee. He had all these properties paid off, so I only had to put one hundred
thousand dollars down. Again, I got another partner. I put in fifty thousand, My partner put in fifty thousand, and we got a fifteen year mortgage at seven and a half percent interest rate. You know, five years ago that was crazy because everything everyone was getting two and three percent interest rates. But I only have to put ten percent down on a fifty home portfolio, and it cash
flowed even at a fifteen year note. It covered all that, and on top of that was making it would kick off about eight to ten thousand dollars a month, and we just took that money and put it back into the properties, fix them up. There's a lot of deferred maintenance. We didn't pull any of that money out. And then eventually I bought my partner out because he wanted to go do other investments in real estate wasn't his thing.
And then I ended up selling that property two and a half later as a whole portfolio for two and a half million dollars. So with I turned one hundred thousand dollars and two and a half years into a million dollar profit. And so that was one of those things where I wanted to, you know, turn that into apartment building. It makes much more sense to take that those fifty single family homes and buy a twenty unit apartment building because then I only have to go to
one address instead of fifty. It's much easier to property manage, you know, allthough, you just it's so much easier to manage when it's all under one roof, sure, rather than spread across an entire zip going.
May not want to start that. Might know, your first purchase is the twenty unit apartment complex, but you scaled up.
You commercial residential may not be the first thing that somebody wants to dip their toes in the water.
So we gain the skills, and you'd also gain the financial ability based on appreciation of your other properties and the smart moves you've made to then take go into that endeavor.
Yeah. Well, and you what you laid out here, Alan is a perfect example of I love how what you said. You said it kind of quickly, but at the time the rate that you're paying to this owner was ludicrous, so much higher than what anybody else out there was paying.
But for you, you were again you crunched the numbers and you were able to see, well, man, we're making money, but times fifty were really making money, and for you it made a ton of sense and ended up working out for not only you, but you and your partner. But you know, just a second ago you also mentioned Airbnb, how that's it's a new product, and how that has an impact on real estate. So we've got a few more questions about that, plus more. We'll get to all of that right after this.
All right, we're back. If you're still listening to real estate fire conversation with Alan Corey about investing in real estate to boost your ability to retire early to reach financial independence, and Alan man, I so appreciate all the great information you've brought already, Let's get it to a bunch of like quicker questions because there's just so much warm wun to cover and we just don't have forever. But like one of the things I want to talk about,
you're against paying off mortgages. You say, you call it the dumbest thing a person can possibly do, But that is that flies in the face of so much traditional personal finance advice. Why are you a fan of people holding onto their mortgages as long as possible?
Okay, I'll try to make this short.
Imagine you found a dollar in the parking lot and in the gas station parking lot. You have two choices. You can go mail that dollar into your mortgage note, pay off a dollar of your principle, where you can walk into the gas station and buy a one dollar Snickers bar. You have that life decision. A lot of people who have extra money, they're going to throw it
to their principal mortgage and pay it off. Now, let's say you left that dollar there and you came back fifteen years later and that dollar was still there, and you're like, fine, no one's gonna pick this up. I want to pick it up. Then what's going to happen is you have two choices. You're going to have that same dilemma. I can either mail it into my mortgage lender and get another dollar off my principal payment, like
you could have done fifteen years earlier. Or you can walk into the gas station and try to buy a Snickers bar and guess what your Snickers bar is now three dollars thanks to inflation.
So what does that tell you, Well, that tells.
You that everything around you is going to get more and more expensive over time except your mortgage. Your mortgage is the only thing that's going to stay the same or feel like it's getting cheaper.
So why do you.
Want to get rid of the best benefit in the world where you've locked in the most expense in your life for thirty year mortgage, whether it's your investment or your primary is probably the most expensive expense you can lock that in for thirty years. Everything else is going to get more expensive. You know, just looked at your grandparents or your parents who bought twenty years ago, thirty years ago, and they have like a thousand dollars mortgage payment and
they look like geniuses. They did nothing except wait and not pay off their mortgage. So it's such a huge benefit. I just don't understand the rush to pay it off.
People will have that emotional psychological aversion to debt. Unfortunately, not all debt is created equal. But Alan, what do you say to folks who are trying to limit the amount of risk when it comes to their different properties. Like we get the question about if folks should incorporate, if each property should be owned by its own LLC. Like that's one path you can go. Or another path is umbrella insurance to cover you as an owner. Where do you come down on that debate?
Yeah, umbrella is great.
I don't think you need an LLC unless you have over ten property or if you get to the point where your debt to income ratio DTI, which is sort of how you get residential mortgages in your name. They look at this formula, how much is your debt to your income. If that's out of whack it's more than fifty percent, you can't getty residential mortgages anymore. Then you got to get an LLC and commercial. But if you're worried about getting sued, guess who gets sued. It's the
people who have a paid off property. Let's say you have a million dollar property that's paid off and someone breaks their foot or whatever. They're going to sue the person as a million dollar asset force you to sell that asset. But if you have a million dollar property with a nine hundred thousand dollars mortgage, the attorney's are like, it's not worth suing them because by the time they sell it with realtor commissions, you're not going to get any money.
So you've got another argument for not paying off the mortgage and keeps that loan around as long as possible.
I've got fifty arguments for that.
Yes, exactly, all right.
You talk to me about hiring a property manager verus self managing. I'm a big fan of at least starting off managing the property yourself so you're learning the ropes, and then maybe down the line, especially as that property becomes more profitable. Maybe you can add that as a lot on them and take that off your plate, especially as you're kind of growing your real estate portfolio. What are your thoughts on that.
Yeah, I tell people to manage your first five. Hopefully they're local and is driveable. If not your town, the numbers just don't make sense for any good investment. Then you know you're going to have to use a property manager. And that's fine. But find a property manager and then invest within their skill set. Well, you know, are they section eight, are they luxuriality and are they a certain
part of the neighborhood. Understand who's going to manage it and make sure that they can keep an eye on it. I try to get rid of the busy work if you find it that has just becomes busy work for you. You know, get a property manager, and you know whether you want to go buy more real estate or look for more deals, or you can now go do a hobby and your real estate's paying for that hobby. Or maybe you can work extra hours in another you know,
side gig or something. That's what the beauty about real estate gives you options.
Okay, talk about vacation rentals, Joel and I are families. We vacation every summer, we go to the beach, and a lot of times when you go to the beach or wherever you you.
Go off to, you start dreaming.
Yeah.
Yeah, you start walking around, You're like, Oh, would be awesome, what if we could just come here every other month, you know, to our own place. But at the same time, I start to think through maybe the pain in the butt that that might be, especially if you're trying to manage a vacation rental. But what are your thoughts on investment properties that are vacation rentals.
Yeah, it's similar to long term rentals. I usually say you don't want to invest in properties that you want to live in, because then you're making your own biases and emotional decisions over a spreadsheet decision. A lot of people want to buy that that that beach house that they go to every single year on fourth of July, and then what they don't realize is fourth of July is when you can make the most money out of it.
So you're you're going to be staying in it and not be able to make the most money out of it. And then when you don't go, that's when no one wants to rent it because in the off season you can't. You know, you're you're renting it for pennies, and then you find.
Yourself you're going to the beach in January.
Now yeah, yeah, exactly, So you're you're now altering your your lifestyle to make sense of this investment. You go in the off season, or you don't go on the best week of the year. So I don't like miss mixing business and pleasure. I do like investing in sort of big cities. I've got some in Atlanta. I like sort of the sub tier touristy markets. So maybe not Disneyland, but maybe, you know, two hours from Disneyland, there's a bunch of beaches in Florida.
You don't have the.
Big corporations that are going to invest there. You don't have the hotel districts fighting you, and then the h you know, the airbnb laws. As much things are much cheaper, people will come and.
Stay for a week.
If it's sort of a destination rather than a weekend pop in kind of thing. And it's probably not something where I would want to go to every single you know, I'll go once to, you know, every now and then, because it's it's smallest beach town or something. But I'm not going there, you know, religiously with the whole family kind of thing.
Sure, talk to us about scaling, because you have scaled, but I think you said you had like three hundred and fifty doors. Is that about where right now?
Yes?
So I've got about twenty doors in my name and then the rest I was through partners.
So I want to know the when you stop, like what makes you quit? Because at what point is it enough? And like our friend Chad Carson talks about basically the small and mighty real estate investor, which is, hey, ten ten paid off units, at some point is going to be able to, you know, fund more than enough for the lifestyle you want. When do you know when do you stop a value of property properties? When do you
stop investing? When do you say enough's enough? I've crushed it and I'm gonna, like, I don't know, be more leisurely.
I've got through to fifty doors. But it's it's fun for me. It doesn't feel like work. I've got a lot of people who want to invest with me, or they find a deal and they say, Alan, how can we get this done?
Achieved? A lot through real estate.
But it's not like, oh, I'm gonna get happier if I have more. If I get happier if I have more. It's just I like treasure hunting. I'm like the guy on the beach with the electrical thing. What's that called the metal detectors. Yeah, like that guy's life going to change it finds a wedding band. No, it's just fun and entertaining for them. And that's me in real estate. It's fun to look at opportunities. Oh, this is an opportunity, guys. Do you guys want to pass around out and get
this done? Or should I buy this myself? Like it's I enjoy it, it's my hobby, you know.
I love it. Obviously.
I think there's a lot of folks who are just like, Man, I've got a job that I took so that I can pay the bills. I don't enjoy my work, but the ability that's something over time that you do want to sit your sights on the kind of work that's going to be fulfilling, the kind of work that's going to be able to allow you to at some point achieve some sense of financial freedom. But I love that and the value that you're able to put out into the world through the work that you do is It's
a huge part of life fulfillment. And I think our opinions of retirement has even changed over the years. Joe and I as as this is something that we've talked about a lot. But you mentioned Airbnb earlier. Alan without being a platform that can change the rules and not only what say Airbnb charges folks what they charge hosts, but even cities and how there's a lot of cities
that are claiming down on short term rentals. How much should investors take that into account as they're looking to buy a property.
Yeah, you should take an account and that never buy a vacation rental that won't cash flow as a long term rental. So if the laws change, you can just pivot it into a long term mental and you're still cash flowing. So you run your numbers twice, you run well, run first as a long term rental, and if it makes sense as a long term mental, if that day ever comes, whether it's tomorrow or ten years from now, you've got that's your pivot point. I always love properties
that have pivots. The more pivots you have, the better. And so you can say, well, I'll make four times as much money as a short term mental and if they change the laws on me, I'll make you know, I'll still make money. I'm not losing money as a long term rental. Yeah, that's how you go about it.
I love it.
That's a little more conservative in nature too, just making sure that. Yeah, because that's happened. I had a friend who bought one in Chattanooga, and then Chattanooga it says, wait, wait, no more short term rentals here, at least of the time being, And so he's kind of halted for a minute at least from buying more. He's able to still he's grandfathered in for the one he's got. But that can be a really tough position to find yourself in. But Alan, thank you so much for joining us today
on the show. Where can our listeners find out more about you? More about your house fire method?
Yeah?
Sure, I'm a real estate maximalist, so you can find me on social media real estate MAXI Also I teach real state investing at house Money Media and we have a podcast called the House Money Real Estate Investing Podcast, So all those channels would be great.
Awesome, Alan, Thank you so much for taking the time out of your day to talk with us.
Thanks guys, it's been blast all right, man.
That was a good combo, a lot of interesting information, obviously from someone who's rabbit all in on real estate, and so it's just nice to pick his brains as someone who I think is we like real estate. You kind of like set it up nicely at the beginning of the episode. It's like, we're not Alan Rabbit Dog Corey though. Yeah, but I did his insights. I think there's a lot that some people who are interested in investing in realistic can learn from Alan And from this episode.
What was your big takeaway though from this combo?
I think my big takeaway is being is influenced by the fact that I don't want to alienate alien eight folks who are listening to this, and they're just like, three hundred and fifty doors, what the like, I'm never gonna do that, And so I'm gonna take it back to personal finance and at the beginning, because I think there's a lot of folks who are saying, well, yeah, if I had that much money on hand, sure, if I could go to a hard money lender and drop
one hundred thousand dollars like, there's a lot of if onlys. And the fact is Alan got to that point by working his butt off when he was up in New York and he was socking. He was setting aside fifty percent of his paycheck. Man, wasn't a big paycheck, it wasn't a bunch, but that percentage. Think about what folks could do right now, who are in their twenties if they set aside fifty percent of their pitcheck for a
short period of time. I'm not saying that you have to do this in definitely, but the ability to do that for a short period of time to achieve some very quantifiable, measurable goals, Well, if you want something bad enough, that is what it takes. And by doing that you can achieve something as massive as what Alan has been able to do.
When he was describing that, all I could think was frontloading the sacrifice, which is what Dachi talks about, and that's exactly what he was doing. He was saying, like, listen, I'm going to go the opposite of hog wild right now. I'm going to cut to the bone just for a few years, so that I can build up this nest egg and then boom, I'm gonna make an investment or two, and then eventually I'll be able to inflate my lifestyle. He's not eating ramen every night now he was back then.
The sense of packet, he's about how many fancy tween hats he has Now, I mean, like, come on, he would not have imagined that back then. That's right, but I appreciate that that. It's like, for a period of time, I'm willing to do this in sacrifice, even more than I want to do in the future. But it's because I'm preparing that future for myself, and I think it's
a good way looking at it totally. Yeah, what about you was your big takeaway though, So I like when he said get reps in and you get better with things over time. I remember man being so freaking scared running out my first property, and then the second one. I was still pretty nervous, but not nearly as frightened, and then over time you're like, wait a second, and some of that confidence.
Yeah.
Now, I think part of the reason he's so gung ho on it is because he's been doing it so long. He's been so successful, He's made so many good deals and over time and he's learned from the bad ones too, and so you just kind of then you begin to know what to look out for, the fine print to watch out for, maybe how to screen tenants even better, and it becomes this well oiled machine. But it involves
getting reps. You just don't get better by sitting on the sidelines and consuming information in the same way you do by getting in there and trying the ole man in the arena thing, I guess, right, But yeah, yeah, So it's obviously important to do your due diligence and know the market in and out that you want to invest in, kind of like he was actually talking about too, But then it's important to get in there and actually
do the thing. Start off small, self managed, learn as you're doing, and the more reps you get in, the better you're gonna get at it.
Yeah, I think that's I think that's when he was talking about finding a specialty and focusing like laser focus, because I think that's so important as well, not only getting the reps in massive number of reps, but really narrowing in on what it is that you're going to say specialized in it, but our beer Joel, that you and I enjoyed today was an OOST. I wanted to say that that's that's what it's called o sd oust.
This is another one by High Grain Brewing Company and it was donated by Mike and Christy.
What were your thoughts? Yeah, I like this when it had like caramel vibes some FIGI notes. I thought it was, oh yeah, smooth and warming. Uh, it was definitely warming, So there's no joke. It's a strong strong ale. So this is a ten percenter and you could pick up on some of that peppery nests that came from that basically from the higher gravity, but almost had like a clove like pepperinus too it because of that higher ABV while still.
Maintaining it's like Belgian banana like sweetness that you get from Belgian golden strong ales like this. But is it is it monkey? What's the victory Golden monkey that I feel like had that years me?
Neither.
I think that was my first golden Golden strong as.
Okay, but I mean that was a classic back in the day. But I don't think I've had a victory beer in forever.
It's been a but Mike and Chrissy thank y'all again for sending this one plus the others our way for sure.
All right, let's going to do it for this episode. We'll have links up in the show notes to help you if you're interested in investing in real estate, so please do check those out, but Matt, until next time, Best friends Out, Best Friends Out,