# The dead simple way to build a rental portfolio that actually retires you

https://www.youtube.com/watch?v=TM1p6CJuYjA

[00:00] If you go a little too tall on just one asset class, you will find yourself out of luck eventually.
[00:06] There were some Seattle investors that were crushing it.
[00:08] Some people are doing super good in San Francisco.
[00:10] Miami, hottest market I've ever seen.
[00:12] Almost everyone of those markets is plummeting.
[00:15] Having optionality with your portfolio is like the strongest concept you could carry into this world of real estate.
[00:19] This idea of portfolio architecture is to cover your when these things go wrong.
[00:24] David Green, welcome back to the podcast.
[00:27] It's been a while.
[00:31] Today we're talking about portfolio architecture, a very important topic that I don't think it's covered all that much.
[00:37] And uh today we want to talk about that specifically because I think a lot of people get into the world of real estate and they don't really have an exit strategy or a retirement plan or any kind of semblance of what they're doing and they buy, buy, they keep purchasing and then eventually, 10 years later, you have this portfolio that's been kind of cobbled together and it's kind of a pain in the ass and it's kind of just like you want.
[01:00] To get rid of everything.
[01:02] And a lot of this could be avoided if you started with the end in mind.
[01:05] So, David, portfolio architecture and this strategy, it's kind of your thing.
[01:08] So, break down what that means and then let's dive into the four or five pillars that compose the idea of portfolio architecture.
[01:15] I came up with this idea to help people understand you kind of want to balance what you're building here, etc.
[01:21] So, the idea here is you have to be strategic.
[01:23] You have to think about what do I want in retirement?
[01:25] How quickly do I want to get out of work?
[01:27] How much risk am I willing to take on?
[01:29] Do I do this cuz I want to get out of my job or am I going to keep my job so that I've got so many reserves which allows me to be a little more aggressive with what I'm building.
[01:38] I think before this we kind of outlined four pillars of portfolio architecture.
[01:43] There's plenty more that we could think of, but I think for people getting started today in 2026, these are the four that we want to get top of mind.
[01:50] So, let's start with number one and that's going to be equity versus cash flow.
[01:54] Define equity for anyone at home that really doesn't understand that term.
[01:58] I want to really break this down.
[02:00] As simply as possible.
[02:01] Equity is the difference between what you could get if you sold that property today and how much you owe other people that you borrowed to buy the property.
[02:10] It's the spread.
[02:10] It's the spread between what you owe and what you can get.
[02:13] Is that like the simple way to put it?
[02:15] Okay.
[02:15] Yeah, and it's a form of wealth.
[02:16] It's like that spread can be converted into dollars once you sell and move the equity out of the house and into your bank account.
[02:25] Now, just suppose that with the idea of cash flow for anyone at home that doesn't know what cash flow is, that's what you make net profit after all expenses, after your mortgage, insurance, principal, interest, and all of your maintenance, like literally everything.
[02:40] That final dollar amount that hits your bank account, that is your cash flow.
[02:43] So, these are two very different vehicles within the world of real estate, specifically because that's why I've always said this from the beginning.
[02:52] Cash flow makes you rich.
[02:53] Equity makes you wealthy.
[02:54] They're two very different things when building your portfolio.
[02:56] They each serve a purpose.
[02:58] I find that
[03:00] Most people who get into real estate are really only focused on the cash flow and like the equity they kind of don't care about until one day they realize they have it and they're like, "Oh my gosh."
[03:10] Like, I'm a millionaire.
[03:12] You know, I think a lot of people have probably had that revelation 10, 15 years down the line of real estate investing.
[03:16] So, when someone is building out this idea of portfolio architecture, how should they be approaching this?
[03:22] Obviously, we all want the cash flow, but how does one even consider equity in all of this?
[03:28] Because when you buy a house, you have zero equity.
[03:30] So, I think that's I think that's the instant gratification that generally turns people off.
[03:34] Well, let's break that down.
[03:36] So, when you buy a house, if you are paying fair market value and you're putting $50,000 as a down payment, you would have roughly $50,000 of equity.
[03:45] Now, you actually have a little bit less because you're going to have closing costs when you go to sell that house, so you're going to lose some of that $50,000 in like true equity.
[03:53] But you're converting the cash that was in your bank account into equity that is stored in that house.
[03:57] Now, if you paid
[04:01] Less for the house than it was worth, then it's what I call buying equity.
[04:05] And then if you fixed up the house to make it worth more, that's what I call forcing equity.
[04:08] So, you have the 50 grand that you put into the house plus maybe you bought $25,000 of equity and maybe you forced $25,000 of equity.
[04:18] So, you could end up theoretically with $100,000 of equity when you only put 50,000 in.
[04:21] That doubled your investment.
[04:24] We would look at that in most real estate deals or most financial deals as a good opportunity.
[04:28] That was a wise financial decision.
[04:30] That's one way that you build wealth with real estate.
[04:33] The other one is like you mentioned, it's cash flow.
[04:36] So, the equity has to do with if I sold that property, what would someone pay me for it?
[04:40] And then cash flow has to do with how much is a tenant paying me in rent versus all the expenses that I have to manage the asset.
[04:48] Cash flow is traditionally more attractive.
[04:51] You can pull more people into real estate investing because cash flow can replace income and income is what everybody hates.
[04:57] They hate their job, they hate working.
[04:59] They just have.
[05:01] This idea that if they buy some houses, then they won't have to work anymore.
[05:04] Hey, really fast.
[05:04] One of the biggest mindset shifts I've had as my portfolio has grown is realizing that rentals should support your life, not consume it.
[05:11] Because once you've got multiple properties, different LLCs, money moving everywhere, different expenses hitting different cards, the financial side can become a full-time job if you don't have proper systems in place.
[05:20] Which is exactly why I use Baselane.
[05:22] Baselane is a banking and bookkeeping platform built specifically for real estate investors like me, and honestly, it's become the financial operating system for my portfolio.
[05:31] Every property has its own accounts and debit cards, rental income comes in, expenses go out, transactions get categorized automatically, and everything just runs quietly in the background.
[05:41] Which is huge for me because I travel all the time, I'm constantly at job sites, filming videos, touring properties, and I don't want to spend all my free time keeping track of my portfolio on random spreadsheets.
[05:51] With Baseline, I don't have to do that because my back end is clean and it's simple.
[05:58] So, if you want your rentals to feel more like a system and less like chaos,
[06:02] Check out Baseline using the link in the description down below.
[06:03] Legend has it that that little link will get you a little cash bonus when you use it and a little hug for me, maybe.
[06:08] No promises, but you never know.
[06:10] All right, back to the pod.
[06:13] The problem with it is you don't build it as fast as you could build equity.
[06:17] You have more levers to pull on when it comes to equity.
[06:19] You like I mentioned two of them just a little while ago.
[06:22] Then as the government prints money, your house tends to go up in value and it usually happens at a faster rate than rents can go up.
[06:29] I call that natural equity.
[06:30] And then if you pick the right market, you buy somewhere where it's more likely to go up than other places.
[06:36] There's a scarcity of housing, people are moving into that area.
[06:38] Now you have market appreciation equity.
[06:41] Well, your cash flow is just your cash flow.
[06:43] It's whatever your lease was and you hope that the tenant pays it.
[06:47] And this applies to portfolio architecture because when you go to retire, you may have a different goal than when you first bought the property.
[06:55] You may end up with a whole bunch of cash flowing duplexes that were really easy to acquire.
[07:02] And you weren't able to build a lot of equity in them because it's hard to force equity or it's hard to buy equity.
[07:07] But hey, they cash flowed right out the bat.
[07:08] You made a 9 10% cash on cash return.
[07:11] 30 years later, maybe you're getting a 20% cash on cash return.
[07:16] But it's not enough to really get you through retirement.
[07:18] Versus had you bought some single family homes in in demand areas and got them at great prices and fixed them up, now maybe you've got a lot of equity.
[07:26] So, what I recommend people do is they sort of blend these two strategies together.
[07:32] For every little bit of cash flow that you can accumulate, you should be thinking, "Okay, in the short term, this is a benefit to me."
[07:38] I'm going to get $400 every month.
[07:40] But 20 years from now, 30 years from now, I might have $500,000 of equity if I buy the right property in the right place.
[07:47] Do both.
[07:48] Have some stuff that's kind of your sunset deal that you're going to build equity for retirement that you can sell the houses or pay them off or put the money in a stock account or bonds or whatever you want to do.
[07:58] And then have some stuff right now that provides cash flow in case you lose your job or in.
[08:02] Case you need to help with your expenses.
[08:04] Yeah, so all right, let's go back a little bit because I want to I want to break down equity maybe some misconceptions that people had.
[08:11] So, if you buy a property, let's say you put 20% down on a $500,000 house.
[08:16] That's $100,000.
[08:19] You even though you paid that $100,000 to buy the house, you would still have I guess effectively $100,000 of equity, but it doesn't mean that that's your profit.
[08:29] Mhm.
[08:29] That's just you know, the recoup you could get if you were to turn around and sell it that day.
[08:34] Right.
[08:35] However, when you say buying equity, cuz I think this is an interesting strategy that that people don't consider, does that mean that you're going out and you're buying a property like, you know, if the property is worth half a million, it's been on the market for 60 days, and you make a lowball offer for $400,000, you snap it up, and theoretically, if it actually was worth half a million, it was just a weird market, interest rates were high, whatever this maybe some random um repair, deferred maintenance turned people off, you would
[09:03] Be walking into a deal in that instance where you actually have a profit in that house where you were to sell, you know, fix it up, sell it, and all that stuff.
[09:11] That's exactly right.
[09:11] You paid less than it was worth.
[09:13] And I've done this in my career where I just found a property with horrible photos.
[09:17] The realtor skimped on the photos, or maybe they had tenants in the house, so they didn't get any pictures of the inside.
[09:24] Have you ever seen those houses on the MLS?
[09:26] It's like three, four pictures of the outside, that's all.
[09:28] That usually means it's occupied, and the tenants wouldn't let the photographer.
[09:33] Yeah.
[09:33] Yeah.
[09:33] So, you you buy the house, then you get the tenants out, cash for keys or whatever you do.
[09:37] Now you go in there and you get new pictures and you put it right back and you could sell it for its fair market value.
[09:44] Great.
[09:44] So, then you talked about forced equity.
[09:47] This is another important way because these are all parts of your your In my opinion, these are parts of the strategy that you can employ because the thing with portfolio architecture is you don't you don't have to build your portfolio overnight.
[09:56] Like I think you could buy a property today.
[10:00] Mhm.
[10:01] With the intent of in your in your um.
[10:05] Kind of idea here of forcing equity where we let's say convert a garage, we add an ADU, we add square footage, we renovate it.
[10:12] Like there's a lot of different ways to force equity and get the value up.
[10:15] You don't have to do that day one.
[10:17] I think part of this is going back to last week's episode and if you haven't seen last week's episode about when we talked about cash flow is dead, I highly recommend catching that after this episode, but putting on your real estate goggles seeing what houses can be versus seeing what they aren't out the gate and then just planning for that in the future.
[10:35] Like you don't have to you know, if you need $100,000 to add square footage or renovate it, it's not like you have to do that today.
[10:42] That's exactly right.
[10:42] You don't have to do it today, but you have that option.
[10:45] And I like to buy stuff that has some meat on the bone.
[10:47] That if I go take advantage of it, I could make it bigger, I could make it better, I could do something to improve it to force equity with an investment later.
[10:56] Lastly, on the equity note that I think is probably equally important to say, um equity is kind of like your wealth somewhat in limbo in that like you don't.
[11:07] Necessarily get to capture your you can't just sell your house necessarily.
[11:12] So, equity is an important stat for your wealth, no doubt.
[11:15] But just understand that you know, you may not be able to sell your house pending the market.
[11:20] Like we've had our house we we've now obviously re-planned a lot of what we were going to do, but we listed our our property in Arizona didn't sell.
[11:26] Um so, we've renovated it, completely redesigned it, and now we're changing the strategy there.
[11:31] That's an example where you may not be able to sell your property.
[11:35] So, portfolio architecture is also about understanding like it takes time to actually capture the wealth that you've built.
[11:43] That's why I like this idea that money is energy because energy stored as equity is unstable.
[11:48] In some markets, boom, you get it out right away.
[11:51] In some markets, it goes up a lot.
[11:52] In other markets, it could go down for a while.
[11:54] It typically doesn't go down for a long time cuz the government comes in and tinkers with things and it gets going up again.
[12:01] But, you may be in a market like now where you can't sell that property.
[12:05] This actually fits into the idea of portfolio architecture cuz if you've got
[12:09] A lot of your wealth in equity of rentals, you have to have a corresponding amount of reserves in the bank because that equity isn't going to be able to replaster drywall or we had an issue with our hot water heaters in the Scottsdale properties leaking all over the floor and we had to go spend some money to fix it up.
[12:28] You can't use the energy that is held as equity.
[12:30] It has to be reserves of cash.
[12:34] So, understanding this, the more properties you own and the more equity you are building, that is good for the future.
[12:41] But, for today, this needs to be offset with some money that's in the bank or a HELOC that you can pull from or some way that you can get access to funds when you need them.
[12:49] On the flip side, cash flow is also not guaranteed and I think I want to just put that out there, too.
[12:55] Um you know, like you may This is always the Like when I make real estate videos that do well on YouTube, people are always like, "Yeah, well, the one thing he didn't mention is what if a tenant doesn't pay you rent?"
[13:04] I'm like, "Yeah, I mean, okay. Yep, you got me."
[13:09] The premise of real estate is people pay you rent and if you don't pay rent, you lose your house.
[13:12] I mean, that is the risk that you walk into.
[13:14] So, understand a couple of things.
[13:16] Cash flow is not guaranteed.
[13:17] Uh it's something that you can calculate and aim for and like be pretty spot-on with, but a lot of circumstances can wipe out cash flow overnight.
[13:27] CapEx, capital expenditures, uh deferred maintenance, uh a bunch of cancellations on Airbnb for like, you know, I've had instances where someone said I had bed bugs and I didn't, but they shut me down for 6 weeks.
[13:39] It's a common one.
[13:39] I got that one yesterday that the guest didn't get the discount they wanted and then miraculously the next day there was bed bugs that just happened to pop up in the cabin.
[13:48] Yeah.
[13:48] The guest always gets the discount.
[13:49] When they ask for it, they get it somehow.
[13:51] Uh so I yeah, sorry, man.
[13:53] That Well, I like your point about the cash flow there because I got hit by something that I never saw coming.
[13:57] I I was I mean, people have made videos talking bad about me online saying David Green says cash flow doesn't matter.
[14:04] Cash flow is the holy grail of real estate.
[14:05] You can't go wrong with cash flow.
[14:07] But to your point, the hose can.
[14:09] Get pinched in different ways.
[14:11] It's not a guarantee it's coming through.
[14:13] A lot of hardships that I had came from the cities where I bought properties.
[14:17] Multi-million dollar property said, "We don't want to issue the short-term rental permit that you asked for."
[14:23] So we are going to red tag your property and shut it down and we're never letting you out of property permit hell.
[14:28] We're just never going to issue the permits and there's nothing you can do.
[14:30] I could not generate cash flow with those properties.
[14:33] They were cash flowing properties when I bought them.
[14:35] The city went and turned off the spigot.
[14:39] So yeah.
[14:39] If you want to survive that stuff, you've got to have a different place that you can pull cash flow from or a different place you can get equity out of or a different option that you can make money in some way to cover yourself and that's really this idea of portfolio architecture is to cover your bum when these things go wrong.
[14:55] And also just fun side note, the hose can be pinched different ways was actually the memoir you released when you were in prison back in the day, right?
[15:02] I was a different person.
[15:04] I try not to talk about that anymore.
[15:05] No lock doors.
[15:08] All right, so that's like equity versus cash flow.
[15:09] I think moral of the story.
[15:11] Here, they're both awesome.
[15:13] They're both things that, hey, we can plan for.
[15:15] They may not work out always, but the idea is as you build this portfolio, you kind of have some solid front runners that can always provide cash flow for you in the times where, hey, maybe things aren't going well or you have a couple of, you know, awesome properties that appreciate in value that might get you out of a pinch in case things don't go so well on the cash flow.
[15:37] But that's sort of the exit strategy that I'm talking about here is like having optionality with your portfolio is like the strongest concept you could carry into this world of real estate.
[15:47] Yeah, and the first pillar that we're covering now is kind of like the time dimension here.
[15:50] Like you got stuff that works in the short term and then you got stuff that's building good wealth for you in the long term.
[15:56] That equity that you're trying to build over time doesn't do you any good right now cuz, like you said, you might not get it out, but it's going to be really good for you in 30 years.
[16:03] Which means you got to balance that out with cash flow you can get right now to get you through things, but you don't want 75 of these cash flowing condos that you can't get out of or you.
[16:12] Get into big trouble with or they never grow any equity.
[16:15] So now you're in retirement and you can't, you're still just managing properties when you don't want to be, cuz you can't sell them or there's no equity to get out of it.
[16:22] So think about that.
[16:23] As you're building your portfolio, what do I want for right now, but what am I going to want in the future?
[16:27] Yeah, I'll give one final example here.
[16:30] It's not the most relatable example, but it's the last that's the last sale that I did.
[16:35] Caleb always tells me to cut these these little unrelatable moments, but like I had a property in Tennessee that I bought for half a million.
[16:43] Um we it was a whole thing, but basically when I did list it on Airbnb, it was doing about 65K a year.
[16:51] The profit on it was about $20,000.
[16:52] I decided to sell it.
[16:54] And the final profit that I got from it was $430,000.
[16:59] Now, you strip away down payments and some of the investments I made into that property, it was probably closer to like $350,000.
[17:06] But the reason I say that is because I was 8 years into sort of my portfolio and I had this optionality.
[17:11] I was like, do I want to make $20,000 a year for
[17:16] However much longer, or do I want to capture 10 years of profit effectively, or 15 years of profit in one swing, and do something with it, like change my life somehow?
[17:27] Um, and so, that's what I decided to do.
[17:28] I decided to sell it.
[17:29] I'm moving it into other real estate things, some renovations and revamps in the short-term rental portfolio that I own, but that's a really good example of I actually had both.
[17:36] I had equity and cash flow, and I had the optionality to kind of move all of it into something bigger for me.
[17:43] That worked out really good.
[17:44] We, that's a way to be thinking about it, and we got a couple other ways to think about it coming up.
[17:47] So, stay tuned.
[17:48] Don't go anywhere.
[17:50] Uh, number two, the pyramid.
[17:52] Uh, starting wide.
[17:56] Also, you're...
[17:57] That wasn't that year.
[17:58] I, I knew you were going there.
[18:01] We're going to leave some people wondering why you were starting to make that joke, and others unfortunately are going to ignore exactly...
[18:08] Uh, it's the fall of them all.
[18:11] Okay.
[18:15] Start.
[18:16] Starting wide, what does that mean?
[18:20] This is probably the most important pillar.
[18:22] So, the first one we talked about is like a time horizon understanding, and this is a risk horizon understanding.
[18:28] A lot of people will say, "Should I get into small multi-family?
[18:30] Should I get into single-family?
[18:33] Should I do short-term rental?
[18:34] Should I do medium-term rental?
[18:35] Should I do schmedium-term rental?"
[18:37] Do we ever start calling it that when you kind of mix the two together?
[18:40] We should have started the schmedium-term rental strategy.
[18:41] It was staring us in the face, man.
[18:43] How did we not figure that out, right?
[18:48] Schmedium-term rental.
[18:49] That was also my size at at Gap back in high school.
[18:52] Mhm.
[18:52] Yeah, for all of For those of you that don't know, Rob was actually a star football player when he was in junior high.
[18:57] So, this idea that when you're trying to decide, "Should I do this or that?"
[19:02] There's always a way to argue against whatever you pick.
[19:04] Why do you want to do those small little houses?
[19:06] They're not going to build any wealth.
[19:07] Why do you want to do a sober living house?
[19:09] It's going to be non-stop, you know, worrying about what's going on.
[19:13] Why do you want to do a short-term rental?
[19:15] You're never going to get away from your phone.
[19:17] There's always a reason to say don't do it, and then people get stuck.
[19:20] So, what I came up with was this idea that you can do the fun, sexy, risky stuff, like our Scott Stouffer house, if you have a very solid foundation to build it on.
[19:31] So, if you say, "Hey, what I'd really love to have is a $4 million short-term rental mansion."
[19:34] That's so fun, and I got all these ideas, and I'm going to put cold plunges and hot tubs and saunas and all these cool ideas, but man, I'm just scared of what could go wrong.
[19:46] Okay, we'll start with having 20 duplexes.
[19:50] And when you get 20 duplexes that are cash flowing pretty strong, now maybe go buy eight to 10 single-family homes in a solid market.
[19:57] And we're not talking super expensive stuff.
[19:59] Just go to the Midwest, buy some cheaper things.
[20:03] Then maybe you get like an apartment complex, like a 12- or a 15-unit.
[20:08] Now you've got a lot of stability, a little more cash flow, but a little more risk, and then medium-term risk, and at the very top you put the crown.
[20:17] jewel of that short-term rental that
[20:19] you've always wanted to have, or that
[20:21] thing that you know is risky. And what
[20:23] happens is if it goes wrong, it's
[20:25] supported by the wider base.
[20:27] So, you kind of treat yourself, so to
[20:30] speak, by I won't let myself get that
[20:32] thing I really want until I earn the
[20:34] right to do it by having a lot of money
[20:36] in reserves, and having a whole bunch of
[20:38] equity in these other things that I
[20:40] could pull it out if I needed, and a
[20:41] bunch of cash flow coming from this
[20:42] other stuff. And you let that cherry on
[20:44] the top of your sundae that you really
[20:46] want be the motivation to do the work to
[20:48] get the boring stuff, so that you're
[20:50] kind of safe no matter which way the
[20:51] wind blows.
[20:52] For sure. Yeah, so we call this building
[20:53] the pyramid, cuz that's effectively
[20:55] starting wide, and then every layer gets
[20:56] smaller.
[20:57] Mhm.
[20:57] Think of it like the Yeah, the real
[20:58] estate pyramid. You know, like the food
[21:00] pyramid, but for real estate. I think
[21:02] that generally speaking, and it it's
[21:04] going to depend on the asset class that
[21:05] you're in,
[21:07] But, usually people want that sexy deal
[21:09] out the gate. Um and they kind of want
[21:11] to start with that risky deal that
[21:14] That's exactly right.
[21:15] You know, that thing at the very
[21:16] beginning. Um which hey, look,
[21:18] if it works out, you know, you're a
[21:20] genius.
[21:21] But, if it doesn't work out,
[21:23] you know,
[21:24] Yeah.
[21:24] you don't look so great. And so, I think
[21:25] a lot of people sort of This was me,
[21:28] too, by the way. I'm not even going to
[21:28] say this wasn't me. But, like a lot of
[21:30] people poopoo like long-term uh rentals
[21:33] or long-distance long-term rentals just
[21:36] because it's like, "Yeah, why do I want
[21:37] to make $200 of cash flow every month? I
[21:39] want to go make $4,000 a month with a
[21:41] short-term rental. I want to make $2,000
[21:43] with a mid-term rental."
[21:44] And again, if that works out, you're a
[21:47] very smart person. But, it doesn't
[21:49] always. And so, there's nothing wrong
[21:51] with starting with a base hit. I think
[21:53] that's the moral of the story. People
[21:54] want the home run, they want the grand
[21:56] slam today.
[21:57] But,
[21:58] base hits are you How you become a
[22:00] millionaire. Like, load the bases.
[22:02] Eventually, you're going to get that
[22:03] grand slam. But, I think it's all about
[22:06] taking it little by little. And I call
[22:08] this scaling accordingly. Just because
[22:09] you can scale does not mean that you
[22:11] should scale.
[22:12] You should scale based on
[22:15] access to capital. But, more so Even
[22:17] more important than that,
[22:19] access to your own knowledge Like, you
[22:20] have to be smart enough to scale. Like,
[22:21] I think a lot of people like scale way
[22:23] too big, way too fast. And then, they
[22:25] find themselves in a bit of a lurch when
[22:27] everything is going wrong. And right
[22:29] now, dude, like
[22:31] this year feels like everything went
[22:33] wrong for me.
[22:35] And I'm okay. You know, like it Yeah, I
[22:37] have a lot
[22:37] and I have talked about that, too, Rob.
[22:39] You have a pretty good pyramid base.
[22:42] You got multiple streams of income.
[22:44] You've got uh really solid deals. You've
[22:46] got equity in different properties. You
[22:48] survived this massive tidal wave because
[22:50] you had the Pyramid of Giza in your
[22:53] portfolio. I don't know that you planned
[22:55] it that way. Maybe you did. I have no
[22:56] idea. But, like it it's proof that this
[22:58] works, whether you did it on purpose or
[23:00] it just worked out that way. That's why
[23:02] we're talking about this because a lot
[23:03] of people listening got wiped out. And
[23:05] what they're thinking is, "Oh, well,
[23:07] real estate sucks." But they built a
[23:09] skyscraper. They didn't have a base.
[23:10] They just went up as fast as they could
[23:12] go without a very deep foundation. And
[23:14] then when it got really windy, that
[23:15] thing went toppling down.
[23:17] Yeah, pretty much. I mean, like like I
[23:19] said, I was okay. I I have adjusted my
[23:22] portfolio architecture.
[23:24] I have adjusted so many aspects of my
[23:27] portfolio on the back end to match where
[23:29] I'm trying to go now. I have pruned so
[23:32] many aspects of my portfolio. I have
[23:34] sold
[23:35] a bunch of properties.
[23:36] I have sold a bunch of properties that
[23:38] didn't make me as much as I wanted to
[23:40] make. And I readjusted my buy box. And
[23:42] so for me, I was like, "Hey, if my
[23:44] properties don't make X amount every
[23:46] single month, I don't want it." Um and
[23:48] so I've retroactively done it. So all to
[23:51] say, it's not like I had some genius
[23:52] plan to do it. I've had to pivot and
[23:54] adjust. And now, for the first time
[23:56] ever, like I'm coming out the other side
[23:58] and I'm I'm going to be all right. Like
[24:00] and much better than all right. This is
[24:02] going to be my best year in real estate.
[24:05] But it was not without its bumps and
[24:07] bruises. That is for dang sure.
[24:09] Well, if you were a medium-term rental
[24:10] savant, you just went and got I got 80
[24:13] medium-term rentals. I'm the medium-term
[24:15] rental mister on Instagram and I know
[24:17] everything about these.
[24:18] And you went really heavy on traveling
[24:20] nurses and you were on all the podcasts
[24:22] talking about traveling nurses and
[24:23] you're crushing it. Everyone hears you.
[24:25] And I want to do that. That sounds way
[24:26] better than a short-term rental. I did I
[24:28] never have to talk to the guest. I have
[24:30] these really good tenants that are
[24:31] coming in. Yeah, I'm going to buy a
[24:32] bunch I'm going to borrow money and I'm
[24:33] going to buy all these things. And then
[24:35] COVID kind of goes away and the need for
[24:37] traveling nurses goes away. You could
[24:40] just lose it all.
[24:41] Your architecture was bad. It's not that
[24:43] real estate was bad. It's not that
[24:45] medium-term rentals don't work. You
[24:47] didn't plan for more than one type of
[24:49] market environment, one type of weather.
[24:51] And that's what we're talking about.
[24:52] It's we need to stop saying this or
[24:54] that. Uh Uh, is that the good one or is
[24:56] this the good one? A lots of them are
[24:58] good. Just like lots of players on a
[24:59] baseball team, or a basketball team, or
[25:01] a football team are good. But, you need
[25:03] complimentary skill sets. You need
[25:04] chemistry between them.
[25:06] By the way, I think that argument works
[25:07] for literally every niche. Like,
[25:10] doubling down on short-term rentals, and
[25:12] then you have 80, and you realize that
[25:14] it wasn't that scalable. You have 400
[25:16] vendors between all of your cleaners,
[25:19] handymen, pest control, landscapers.
[25:21] Like,
[25:22] that to me is like where a lot of people
[25:24] find themselves as they have this this
[25:26] beast that they
[25:28] that they're basically Yeah, like
[25:30] they're just they're they're
[25:32] beholden to their beast. Same thing with
[25:34] mid-term rentals. Like, everybody buys
[25:36] them thinking, "Hey, it's a beautiful
[25:37] strategy." Until you realize it's really
[25:39] hard to get a mid-term rental contract.
[25:41] Like,
[25:42] you know, it's a very viable strategy,
[25:45] but it's hard to do. Like, I only know a
[25:47] few people that kill it at the top top
[25:49] top. And everyone else does well, but
[25:51] it's not it's not as easy as like, "I'm
[25:53] going to do a mid-term rental." It's
[25:54] like, no, you got to really work to make
[25:57] calls and and get those contracts.
[25:59] Long-term rentals, you have 80 of them,
[26:01] and you're dealing with
[26:02] leaky toilets, the the
[26:04] you know, the stereotype there. But,
[26:06] like, you're you're dealing with all of
[26:07] these maintenance issues on properties
[26:09] that make 200 bucks a month, and then
[26:11] all of a sudden now you have no cash
[26:13] flow. And so, like,
[26:15] and then with flips, well, I'll put that
[26:16] in there, too. You have 80 flips going
[26:18] on, and the market turns, interest rates
[26:19] go up, you can't get refinancing, no one
[26:21] buys your properties. So, it's like,
[26:23] every single thing if you go a little
[26:26] too tall on just one asset class, you
[26:28] will find yourself out of luck
[26:31] eventually.
[26:32] At some point. It doesn't mean that you
[26:33] can't overcome it. But, at some point,
[26:36] you will hurt.
[26:37] Which is why the architecture itself is
[26:39] what matters so much, right? We build
[26:41] houses that are supposed to be able to
[26:43] be safe if there's a fire, hold their
[26:45] ground if there is an earthquake. If
[26:48] tornadoes come, you've got a tornado
[26:50] shelter. Like, if the soil shifts in
[26:52] this area, well we have different
[26:54] foundation types. Like the idea of
[26:56] constructing the architecture of a home
[26:58] is to make it safe based on all of the
[27:00] different things that could go wrong.
[27:01] So, we just want to apply that to
[27:03] building a portfolio so that you don't
[27:04] have a lot of bitter Betties running
[27:06] around saying that real estate sucks.
[27:08] I'm going to do crypto.
[27:09] Yeah. Well, yeah. That is
[27:13] more common than you think. But,
[27:15] yeah, so let's get into number three
[27:16] here. Um number three is market
[27:18] diversification. I'm going to quickly
[27:20] amend this one to say portfolio. I'm
[27:22] going to do yes yes that plus portfolio
[27:25] diversification meaning, "Hey, look.
[27:27] Just try different things that offset
[27:29] each other." I think that's like worth
[27:30] it as a real estate investor. Heavy up
[27:32] on what you're good at, but try other
[27:34] stuff, too. That That's what I think. I
[27:36] think it's a really good education to
[27:38] get involved in other asset classes.
[27:40] Let's get into what number three really
[27:41] is, and that's market diversification
[27:44] and effectively buying in different
[27:46] markets to hedge your bets a little bit.
[27:48] Yeah. Let's look at all the ways that
[27:50] this is important. There were some
[27:52] Seattle investors that were crushing it
[27:54] 10 years ago. Some people were doing
[27:56] super good in San Francisco. Denver
[27:58] investors were making it hand over fist.
[28:00] A lot of them were on BiggerPockets talk
[28:02] about all the crazy money they made in
[28:04] Denver.
[28:05] Austin guys were bringing it in hand
[28:07] over fist. You You couldn't built fast
[28:08] enough in Austin. Miami, hottest market
[28:10] I've ever seen in my life. People were
[28:13] becoming like almost instant
[28:14] millionaires just buying a condo that
[28:16] was brand new, and it was worth $400,000
[28:18] more than they paid in 6 months.
[28:21] Almost every one of those markets is
[28:23] plummeting right now. There's people in
[28:25] Austin that can't give a house away.
[28:27] Occupancy is way down. People are flying
[28:30] out of Florida because insurance rates
[28:32] went up super high. Seattle's kind of
[28:34] like shot itself in the foot. You got
[28:36] all these problems in markets that were
[28:38] the very best market that everyone was
[28:40] doing well in. Why? Because what made it
[28:43] do really good is also what caused its
[28:45] downfall. It heated up way too quick.
[28:47] Too many people moved there and then
[28:48] they said, "Oh, I don't like it here
[28:49] anymore." and then they all left. It's
[28:51] kind of what's going on in like Austin,
[28:52] for example.
[28:54] You can cry about it or you can say,
[28:57] "Hey, Austin's doing great. I want to
[28:58] buy there." But, you know what? It might
[29:00] not do great later. So, I need three
[29:03] single-family homes in Topeka, Kansas
[29:06] before I go buy that really nice one in
[29:07] Austin that I want. Hey, Miami's
[29:10] crushing it. I got two houses. I'm doing
[29:11] really good. But, what if Miami doesn't
[29:13] do good? Where are they going to move? I
[29:15] bet they go to like Alabama or
[29:16] something. Maybe I go buy a couple
[29:18] uh cheaper single-family really safe
[29:21] properties that aren't very sexy in
[29:22] Alabama. That offsets the risk of what I
[29:25] bought in Miami. When you follow the
[29:27] crowd and you say, "Everybody else is
[29:28] buying here. I want to go but do it,
[29:30] too." Which is kind of the social media
[29:31] YouTube dynamic is your your algorithm
[29:33] floods you with what everyone else is
[29:35] doing and then it gives you this
[29:36] impression that you'd be an idiot if you
[29:38] don't go do it. I don't know about you,
[29:40] Rob, but I remember the NFT thing was
[29:41] like everyone was telling me I need to
[29:43] start an NFT. Like, "Green, you got to
[29:46] have one, a green token." Or uh what was
[29:48] the metaverse? Remember that? When it
[29:50] was like buying real estate in the it
[29:52] did feel like I was dumb
[29:54] because I didn't do it. And in
[29:56] hindsight, I'm like, "I would have been
[29:58] so dumb to do that."
[30:01] trust your feelings.
[30:02] Wait, you didn't spend $120,000 to buy a
[30:05] plot of digital land next to Snoop Dogg?
[30:07] Decentraland or whatever it was. Yeah.
[30:10] That's exactly what I'm getting at.
[30:12] Like, your feelings are going to tell
[30:13] you, "Get in. Get in. Get in. Everyone
[30:15] else is doing it. That guy's doing it.
[30:16] This guy's doing it." All my favorite
[30:17] influencer You know how the podcast
[30:20] route goes? They go on his show and then
[30:21] this guy sees him and then they go on
[30:22] his show and it gives you this
[30:24] impression that you're the only one not
[30:26] doing it.
[30:26] Yeah.
[30:27] To fight that, you have to like, "All
[30:29] right, this stuff's really sexy, but I'm
[30:31] going to go over here where it's a
[30:32] little boring and I'm going to spread
[30:33] this risk around because my goal is to
[30:35] make it to retirement, not to be the
[30:37] next hot shot on the podcast tour."
[30:39] For sure. I mean, that's how I feel
[30:40] about the Smoky Mountains. Like, I think
[30:42] the Smoky Mountains are a great market,
[30:44] genuinely.
[30:45] But, I also think that it got pumped
[30:48] like a lot.
[30:49] Yeah.
[30:50] And I think that that market is not not
[30:53] the place right now.
[30:55] Um I'm selling a property there right
[30:56] now. Well, more so just because of what
[30:58] I said, like I have a
[31:01] cash flow goal per property now, but
[31:02] like I bought that in 20 21 for
[31:06] uh
[31:07] 250k or something like that. So,
[31:10] obviously, times have changed now.
[31:13] Uh and it's it's worth a lot more. So, I
[31:14] can sell it now, but if you were buying
[31:16] in 2024 or 2025,
[31:19] be a little rough out there.
[31:20] Super rough. And that's a great example
[31:22] because that whole market goes up and
[31:25] down together.
[31:26] So, like I think April was the worst
[31:28] month that the Smokies have had in God
[31:30] knows how long. It was down 30%
[31:32] year-over-year from a from 2025.
[31:35] Massacred us, right?
[31:37] Well, that's because gas prices are
[31:39] really high cuz of the conflict in Iran
[31:41] at the same time that the economy is
[31:42] really rough and people aren't saying,
[31:44] "Hey, let's go on vacation to the
[31:45] mountains unless it's a holiday or
[31:47] spring break or a traditional time when
[31:49] people go."
[31:51] At a different times in the market,
[31:52] there's tons of extra money, everybody
[31:54] feels rich, they're like, "I'm bored.
[31:55] What do you want to do? This will be
[31:56] really fun. Let's drive out there and
[31:58] let's take a trip to Pigeon Forge." If
[32:01] all your eggs are in that basket and you
[32:03] have one of these market cycles like we
[32:05] have right now where gas just went from
[32:07] like 220 a gallon to 420 a gallon,
[32:10] nobody wants to drive.
[32:11] What do you do? Your mortgage is still
[32:13] due, your taxes are still due, you still
[32:14] got to fix that woodpecker problem, you
[32:16] still got dry rot, you still got a well
[32:19] pump that need that broke that needs to
[32:21] be replaced, you got all your normal
[32:23] problems, but there's no income coming
[32:24] in. If you didn't build the architecture
[32:26] right, the weight of that can just crush
[32:28] you.
[32:29] Yeah, man.
[32:30] Uh
[32:31] the Austin thing, by the way, very true.
[32:33] I bought a property out in Austin a few
[32:34] years ago, and the idea was, hey, if I
[32:37] put
[32:38] uh a a hundred thousand dollars into
[32:40] this, I'm going to make a forty thousand
[32:41] dollar profit. It's a quick remodel,
[32:43] blah blah blah. You know how it goes.
[32:45] And so I bought it.
[32:47] Turns out that in the time that I bought
[32:49] it, secured it, kind of like I didn't do
[32:51] it right away because I was like I've
[32:52] got a little bit of time on this. It
[32:54] basically turned
[32:56] not overnight, but Austin took a beating
[32:57] pretty quickly, but it basically went
[32:59] from what I thought into hey, I have to
[33:02] spend a hundred thousand dollars just to
[33:03] break even. And so
[33:05] I was like
[33:05] that sucks.
[33:06] Yeah, and and what if you didn't have
[33:07] that hundred thousand dollars cuz you
[33:08] didn't build your architecture right?
[33:10] You don't have options.
[33:11] I yeah, that's exactly
[33:12] Banks are not known for going you know
[33:14] what Rob, we're in this together. We
[33:16] gave you the money, you bought the
[33:17] property, you're doing all this work of
[33:19] managing it. Let's work together. You
[33:20] can skip your mortgage payment for two
[33:21] months, get yourself back on your feet,
[33:23] we'll pick it up again. They don't do
[33:25] that. You you hit this like tiny little
[33:28] bump when you're going a hundred fifty
[33:30] miles an hour and the car is going to
[33:32] crash. And that is happening to a lot of
[33:33] investors who like I'll say it again,
[33:36] they built the skyscraper model. How
[33:38] fast can I scale? That guy's getting
[33:40] more than I'm getting. I got to keep up
[33:42] versus the pyramid model where they went
[33:44] wide first.
[33:45] Completely agree, man. Well, let's get
[33:46] into the last one.
[33:48] Um
[33:49] this one we don't have to harp on too
[33:50] much, but I do think it's important
[33:52] particularly to the world of short-term
[33:54] rentals.
[33:55] The last pillar here when you're
[33:56] building out your portfolio architecture
[33:59] and you're developing a portfolio that
[34:00] can counterbalance itself, seasonality.
[34:03] Mhm.
[34:03] Um I think seasonality is very, very
[34:05] important and I wanted to add this one
[34:07] in on the short-term rental side
[34:09] specifically because
[34:11] a lot of people buy short-term rentals
[34:13] and don't do proper cash flow
[34:15] management, meaning they buy a
[34:16] short-term rental and they don't really
[34:19] realize that there are months where that
[34:21] short-term rental can lose money. I'll
[34:22] give you a great example of this. If you
[34:24] buy a short-term rental in a beach
[34:26] market,
[34:27] um you will make so much money from May
[34:30] through September and then effectively
[34:32] from September through May,
[34:35] you would be lucky to break even. You'd
[34:37] be lucky to get a mid-term rental
[34:39] snowbird that occupies your property and
[34:41] pays the bill.
[34:42] But generally speaking, on a lot of
[34:44] beach towns, you'll lose money for a
[34:45] majority of the year. And so a lot of
[34:47] people don't plan for that.
[34:48] Mhm.
[34:49] On top of that, when you buy your
[34:51] property is very important. So if you're
[34:53] going to buy a beach property and you
[34:55] close in November, you are not going to
[34:57] be cash flowing for four or five more
[34:59] months. And so it's really important to
[35:01] have your cash reserves ready to rock
[35:03] whenever you're acquiring properties as
[35:05] you build out your portfolio prop
[35:07] architecture. But secondly, you want
[35:10] these properties in your portfolio that
[35:12] can counter bat counter balance the
[35:14] seasonality of it. So if you have a
[35:15] beach property that makes a lot of money
[35:17] in the summer, consider a property that
[35:20] is a good all year round performer as a
[35:23] counter balance to it on your second
[35:25] property. Or something that might be a
[35:28] high season in the winter like a ski
[35:30] town. Um that to me is like a really
[35:33] good way to build out your portfolio
[35:34] architecture and and build try to build
[35:36] out your portfolio in a way that cash
[35:39] flows every month of the year versus
[35:41] hey, from these months to these months I
[35:43] make a lot and then from these months to
[35:45] these months I lose a lot. Not really a
[35:47] safe way to to to live as a real estate
[35:49] investor in my opinion.
[35:50] the the argument I've heard from people
[35:53] that don't believe in the architecture
[35:55] we're describing is they'll say, all
[35:56] right, well, I'm just good with the
[35:57] money. So I'm going to make a lot in the
[35:59] winter months at my Breckenridge ski
[36:02] cabin and I'll just keep it in the bank
[36:04] and it'll cover my mortgages during the
[36:06] slow months and then, you know, I'll
[36:07] make a bunch later, which is not a bad
[36:09] idea until
[36:12] one of your other properties needs a new
[36:13] roof. One of your other properties has a
[36:15] big problem. You get
[36:18] uh a fumigation needs to happen and you
[36:19] got to shut down a different place for a
[36:21] month and then pay all the money for the
[36:22] fumigation.
[36:23] When you have one or two homes, you
[36:26] don't really see stuff go wrong that
[36:27] often. When you get 50 houses, it's
[36:30] every effing month.
[36:31] Yeah, it's what didn't go wrong with
[36:33] your Yeah.
[36:34] And so I understand the the opposite
[36:37] perspective of what we're describing
[36:39] right now. It's not that big a deal. I
[36:40] promise you, man, when you get more,
[36:42] Murphy's law starts happening all the
[36:44] time. And you're going to want cash flow
[36:47] coming in from other places. Like, even
[36:49] if you are going to be killed in the
[36:51] winter months, what if you die during
[36:53] the spring or the summer? It does You
[36:54] never get to the winter. So, the idea
[36:56] here would be, "Hey, I got a couple in
[36:58] Maui, and they're This is the high
[37:01] season, and then this is my low season.
[37:03] So, I get a couple in this area during
[37:04] the low season."
[37:06] And you spread it around, and I'm not a
[37:08] big fan of the people that say you got
[37:10] to be a local expert in the
[37:11] neighborhood. I just I don't know why. I
[37:13] think that's a realtor slogan that they
[37:14] started using for marketing that's BS.
[37:16] Like,
[37:17] I manage properties all across the
[37:19] country, and it's pretty much the same
[37:20] process. I need a cleaner, I go to
[37:21] Facebook groups, I ask my friends. Uh I
[37:24] find a cleaner in the same places in
[37:26] every single market. The The running of
[37:28] comps works the same whether I'm in
[37:30] Virginia or whether I'm in California.
[37:33] It's all the same thing. So, I like what
[37:35] you're describing, especially if you're
[37:36] going to kind of narrow in on
[37:37] medium-term or short-term rentals, that
[37:40] you sparse them across with seasonality,
[37:42] so that you always have a high season
[37:45] during a low season somewhere else.
[37:46] Yeah, and I mean, you can also pair that
[37:48] with long-term rentals, too. Maybe you
[37:50] have two to five long-term rentals that
[37:53] make it 200 bucks a piece. So, you know,
[37:55] up to $1,000 a month in cash flow that
[37:58] might float some of those down seasons
[38:00] on the short-term rental. Like, I kind
[38:01] of think I There I did used to have a
[38:03] property
[38:04] Um now it's all one short-term rental,
[38:06] but I used to have three units on this
[38:07] property that I rented as a long-term
[38:10] rental, and then another unit was a
[38:12] short-term rental, and another unit was
[38:13] a mid-term rental. It was like the holy
[38:15] grail, the trifecta of rentals. And it
[38:18] was medium and smart, basically,
[38:20] rentals. And dude, it was awesome. It
[38:23] was so great because I always had a bed
[38:25] of cash coming in from my long-term
[38:26] rental and then mid-term rentals don't
[38:29] come all that often but when they came
[38:30] in it was really great profit and then
[38:32] short-term rentals to fill the gaps. So
[38:34] obviously that's not really a strategy
[38:36] that's applicable but for that property
[38:37] for me at that time in my life was huge.
[38:40] So think about that just when you're
[38:42] buying these properties how can they
[38:44] complement each other from a seasonal
[38:46] standpoint from a revenue standpoint and
[38:47] how can they help you keep your
[38:49] financial fortress strong.
[38:51] Yeah I don't know if you meant to do
[38:52] this but what you kind of just did was
[38:53] beautiful. You took several of the
[38:56] pillars and you combined them together
[38:58] into your portfolio. So these are
[39:00] principles we're describing. It's not a
[39:02] blueprint that you just go follow and
[39:03] blindly say okay I just bought one in
[39:05] Maui I have to buy one somewhere else.
[39:07] Right? You kind of described when we
[39:09] were talking about hey the seasonality
[39:12] can screw you up with a short-term
[39:13] rental. Why don't you throw in a couple
[39:15] long-term rentals? That's the pyramid
[39:16] part. And why don't you buy the
[39:18] long-term rentals in a different part of
[39:20] the country than the short-term rentals?
[39:22] That's the geographical pillar right?
[39:24] You move these things around because
[39:26] you're always going to have risk. You're
[39:28] just trying to balance the risk. You're
[39:29] trying to spread the risk. You don't
[39:31] want all the weight on one part of your
[39:33] body at a time cuz that could crush you.
[39:36] If you spread that weight out it's much
[39:38] easier to to carry it. Imagine trying
[39:40] now I thought about this like imagine
[39:41] you went to the gym and you picked up a
[39:43] bar to do bicep curls but like one side
[39:46] was way heavier and another part was
[39:48] really light and then the middle was
[39:50] different like how hard that would be to
[39:51] lift versus when it's just balanced out
[39:53] right?
[39:54] Or when you see a huge jacked guy and
[39:56] he's got little chicken legs and it's
[39:58] like oh yeah that guy really only ever
[39:59] does chest day. Don't be a real estate
[40:01] investor that only does chest day. Work
[40:03] out those legs.
[40:04] That's a good you don't want to be a
[40:05] chicken leg investor right? Because what
[40:08] happens when someone that's smaller than
[40:09] you walks up at the gym and just pushes
[40:11] you a little bit and you're top heavy
[40:12] and
[40:13] the chicken legs fall right over cuz a
[40:15] little bit of the wind the chicken leg
[40:16] model.
[40:17] I think that's
[40:17] going to be the name of a of my first
[40:19] book in real estate. Um
[40:21] Or you see one of those like smaller
[40:23] guys with like humongous thighs and he
[40:25] just has like skinny arms and like no
[40:27] chest at all. That's the person who just
[40:29] went super safe with their whole
[40:30] portfolio. They're bottom heavy. You
[40:32] can't knock them over. But like who
[40:35] That's not fun. You're not going to be
[40:36] making good money. You did all that work
[40:38] and you barely got a return out of it.
[40:39] So this is great. We can probably run
[40:41] with this in all kinds of different
[40:42] ways.
[40:42] Well, look, one of the things that we
[40:43] talked a lot about in this episode was
[40:45] cash flow and uh we are kind of a
[40:47] believer that cash flow as we know it is
[40:50] dead. And we have a whole list of
[40:51] reasons why, but we do actually have
[40:54] advice for how you can make more cash
[40:55] flow in 2026. If you want to watch that
[40:57] video, then I highly recommend you click
[41:00] right here. Of course, after you like
[41:03] and subscribe, but
[41:05] real estate as we know it is over, so go
[41:07] over here to find out why.
[41:09] Talk soon.