What to Invest in When You’re NOT Buying Real Estate

Dave:
If you listen to this show regularly, you probably wouldn’t be surprised if I told you that. A lot of investors are wondering whether they should be buying as much real estate as they were a couple of years ago. Or maybe if you’re brand new, you’re wondering if you have only a certain amount of capital to invest in something. Is real estate the right place to place your capital? That’s just the reality of this market. It forces us all to get a little bit creative about how we allocate our money to invest. Should we be investing in real estate or should we be considering other things like stock market or cryptocurrency? And I know that this is a real estate podcast. We obviously mostly talk about real estate, but I think today, given where we are in the market and the economy, we are gonna take a look at should you be spending your money in real estate? If not, where would you put your money? And in sort of a more holistic sense, how do you allocate resources to different types of assets over the course of your investing career?
Hey everyone, it’s Dave Meyer here with this week’s Deep Dish episode. And today to talk about this resource allocation question, I’m gonna bring on two other primarily real estate investors, but other people who I at least think invest in a lot of different types of business. It is Mindy Jensen from the BiggerPockets Money podcast. You’ve probably heard of her. She’s been around the BP universe for a very long time. And Brian Burke, who you’ve also probably heard, he’s been through so many different real estate cycles. He’s a big multifamily operator. He is been a developer, he is been a flipper, he’s done all these things. But they are also really wise, just generally about money and how they allocate their capital to different types of investments, either outside of real estate or how they create diversification within their real estate portfolio. So I’m super excited to have them on to talk about how much of their portfolios and net worth are in real estate.
You know, just to begin with how much they put in other investments like the stock market. We’re also gonna talk about how they’ve taken a lot of the lessons that they’ve learned primarily as real estate investors and applied them to other types of investments, other industries and other opportunities. And I’m also gonna talk to them about whether or not they get excited when they hear about new flashy opportunities to make tons of money, or if they are better at sort of staying disciplined and staying in their own lane. And spoiler, one of them just started investing in a coworking space and a rock climbing gym. So we’re gonna have a really interesting conversation about what people are investing in these days. And before we get started, I just want to make a little disclaimer that we’re not here to tell you which stocks to buy or anything like that. I think the point here is if you’re frustrated that analysis keeps telling you not to buy real estate, maybe in your market or in your niche, I think this conversation will at least help you think about how you can continue working towards your long-term financial goals, even if some of your real estate deals aren’t penciling out right now. So let’s get into it. Mindy Jensen, welcome to the BiggerPockets podcast. Thanks for being here,

Mindy:
Dave Meyer, I’m so excited to join you today. Thank you for having me.

Dave:
I know we work at the same company and somehow we’re like never on the same podcast even though we are both podcasters for this company. So this is a treat.

Mindy:
It’s a treat. I’m so excited to talk to you today.

Dave:
Alright, well thank you. I, I am excited to have you and Brian Burke, thank you for joining us as well. Thanks for having me back, Dave. Good to see you again. Good to see you. Well we have a pretty cool show today. I guess we’re, we’re sort of talking about real estate, but we’re also gonna be talking about alternatives to real estate investing. And if in this economy or just generally speaking, you only invest in real estate or other asset classes or do you create diversification within your, your real estate portfolio. So Mindy, let me just start with you. How do you think about diversification? Like in the grand scheme, do you put almost or all of your money in real estate or do you spread it among different asset classes?

Mindy:
I am probably the worst real estate investor who works at BiggerPockets. Uh, my real estate is about 26% of my holdings. I am mainly a stock market person.

Dave:
Spoken like a true personal finance expert knows exactly that. It’s 26%, not, not a quarter. We have to be very precise here. <laugh>, I

Mindy:
Did prepare

Dave:
Well. Okay. Well thank you. Okay, that’s good to hear because now we can at least have a conversation about more things than just real estate. I asked this question on our sister podcast on the market, and everyone was like, I invest 99% in real estate <laugh>. I was like, I guess we’re canceling this podcast ’cause we have nothing to talk about. <laugh>, what about you, Brian? Are you mostly in real estate?

Brian:
No. And that might surprise you because as a professional real estate investor who’s been doing this for, I don’t know, 34 years now, you would think that real estate would be about the only thing I invest in. But I think I’m more in Mindy’s camp where I don’t know if it’s, I, I can’t say it’s 26% because I didn’t prepare for this show as well as she did <laugh>. I, you know, you know me, I tend to go a little bit more off the cuff. Uh, but it’s certainly somewhere under 50% I would say. Uh, total asset allocate.

Dave:
Well, I’m glad to, again, I’m glad to hear this because we were, we came up with this idea for a show and we were considering which people in the BiggerPockets universe to recruit to come out and talk about it. And we probably didn’t really ask, but we just suspected that you two might be people who invested outside of real estate and we were Correct. Could that be, ’cause all I’ve done is trash real estate on your show for the last two years, <laugh> that, I mean, that was definitely part of it. You’ve been, you’ve been talking a lot of shit about real estate for a while. Not, not residential real estate. To be clear, you’ve been talking a lot of negativity about commercial real estate with good reason. You’ve been very correct about that. Uh, and while we’re just, uh, coming clean about how much we invest in real estate, I’d say I’m probably like 40, 45% real estate.
So I might have the highest percentage, but I think it’s a little bit less than 50% in my, uh, portfolio. But I actually aspire to make it a little bit higher, which we can get into it. Uh, so Mindy, tell me how you think about resource allocation, because I think that that’s sort of the big theme here. It’s like you have X amount of dollars, you have XY amount of time. And so how at the highest level do you think about which buckets, whether it’s the stock market, crypto bonds, small businesses, real estate, like how do you decide how much money to put into each bucket?

Mindy:
Well, I am currently 0% crypto and <laugh> for probably the rest of my life that won’t change. Um, and the reason that I don’t invest in crypto is because I don’t understand it and I don’t wanna do the research that may sound a little bit lazy, which is kind of the driving factor of my investments. I don’t want to have all of this in my head space all the time. So I have pulled back from real estate. I, which is, it sounds kind of funny that I’m lazy because we live in flip and we do all the work ourselves, so it’s not lazy. It’s like I’m getting tired. <laugh>.

Dave:
Well, yeah, you’re not lazy. It’s like you can’t be an expert in everything. So I mean, there’s so many different things to learn. You can’t be an expert in the stock market and real estate and cryptocurrency. Something has to give. And so you’ve chosen real estate, but also you said earlier that you’re a stock investor too.

Mindy:
Yes. So I just added up my stock market. Uh, investments is about 60% of my asset allocation. Uh, shout out to Brian for that awesome word that I completely forgot when I was saying it earlier. <laugh>. Um, I am currently 16% in index funds and about 44% in individual stocks, which I do not recommend to anybody. You should always do index funds, but individual stocks, uh, we have made some good bets and they have gone up and it doesn’t, we still believe in the viability of those individual companies. So I say we, it’s my husband and I, we’re a partnership team. Um, we still believe in the financial viability of those companies. We think they’ve got a lot more to grow. So why would we sell them, uh, when we believe in them?

Dave:
So you’re clearly not lazy if you’re doing the work to research individual stocks. That’s a ton of work. So you’re, you, you’re doing a lot there. And uh, I understand that learning a whole new asset class like crypto would be a lot do. Brian, what about you? How do you think about resource allocation?

Brian:
Well, you know, I’ve only actually begun thinking about this more recently because, uh, I’d say four or five years ago I would’ve been almost entirely all in, in real estate, started diversification. Uh, when I saw challenges coming ahead in the real estate market, coupled with the fact that I had an exit from a company and had a lot more assets to have to allocate, you have to really start thinking about asset allocation. Uh, so, you know, I think I’m more in your camp Dave, in that maybe 40 to 45% kind of range on the real estate side. But outside of real estate, uh, I have real estate debt, which I don’t really count as real estate even though it’s somewhat real estate related. It’s more like bonds. Uh, and then the rest is in, uh, early stage companies, startup companies, uh, and individual stocks. Uh, we do have some in, um, like aggressive growth mutual funds and, and just a little bit in mutual funds.
But I think in terms of like public equities, I’d say at least three quarters of that allocation is, um, is in individual stocks. And then I have quite a percentage, I’d say maybe at least 20 to 30% just in money market. ’cause right now you’re getting 5% with taking zero risk. And, and I also feel like there’s opportunities coming, whether that’s real estate or otherwise, and I like to have dry powder available to be able to capitalize on those opportunities. And, you know, that’s also kind of part of the public equity strategy too. In individual stocks, they’re fairly liquid. I can harvest gains at any point, uh, and reallocate, redeploy those assets when real estate comes back, for example. Or if I see some other real interesting opportunity that I want to move into.

Dave:
That makes total sense. And let just clarify for people, if a couple terms here, when we talk about money market accounts, uh, Mindy you should probably tell me exactly what a money market account is, but it’s basically, uh, similar to a high yield savings account. They pay, I think right now, four, 4.5% since the rate cut. Uh, but they’re highly liquid ways to keep your, uh, your cash. Uh, and so you can earn a solid return, uh, and still can sell them quickly and go buy real estate and take advantage of things. For Brian’s point, I guess I should ask both of you like Mindy, is the reason you pick those buckets mostly due to risk? Like are you trying to balance the riskiness and the risk reward profile of different assets?

Mindy:
As my wealth has grown, I have been able to take more risks because the higher the risk, the more potential for payoff. Um, the index funds is a way for me to hedge my bets because I think that’s less risky than the individual stocks. Um, we’ve been doing things that sound fun. We have local investments. I own a coworking space in my town that is both a real estate play and it’s actually not really an income play. I think it’s just a real estate and like a small business play. Um, I own, I I have invested in a distillery locally that’s run by a friend. Ooh,

Dave:
What do they make?

Mindy:
Uh, they make everything, and I’ll bring you a sampler pack at

Dave:
Deal

Mindy:
P pecan because

Dave:
Excellent bourbon,

Mindy:
Please. It’s fantastic. <laugh>, uh, their bourbon is a, it’s a whiskey, not bourbon, but it’s delicious.

Dave:
Okay.

Mindy:
Um, everything they make is with like unique products. So it’s the wheat that they use is a wheat that isn’t normally used to make whiskey. So it’s a, a different flavor. Um, and I really like what they’re doing. Uh, Dave, another thing that you will love. I have invested in a local climbing gym.

Dave:
What?

Mindy:
Yeah.

Dave:
Really?

Mindy:
Yeah. You need to come back to Longmont.

Dave:
All right. That’s very cool. So why, why those decisions? Because honestly to me those sound like risky

Mindy:
Decisions. Well, so it’s not a giant part of my portfolio. Um, the coworking space is about 3%. Uh, it sounded like a fun thing to do, and it’s only 3%.

Dave:
Yeah.

Mindy:
Um, the distillery was a friend was raising money and we’re like, yeah, I wanna support because you make a great product. I believe in your, your company. Um, by the way, I’ve had a lot of, a lot more opportunities to invest with friends in their great and maybe not so great ideas. And it, it’s, it’s a little difficult sometimes to be like, uh, I don’t believe in this, so I’m not gonna do it. So I just say I don’t have any money. <laugh>, which is sometimes also true. It’s a fair

Dave:
Cop out. Yeah. Uh, you don’t have many money for this bad investment, but you don’t have to say, you don’t have to say the second part. You could just imply that.

Mindy:
Yeah, I just keep it in the back of my head. But, um, I wanna do more locally. I, I want to see my, my community and my city grow. Uh, I’m currently 0% in bonds. Mm-Hmm. <affirmative>, I think the index fund is kind of my, my hedge.

Dave:
Brian, are you, are you in a similar boat? How have you chosen the ways to allocate cash?

Brian:
Yeah. I actually am in a similar boat and, you know, I used to be, uh, really risk on, on the real estate side and risk off on everything else. Uh, and then when the market was topping out and I started sliding out more of real estate, I, I kind of went risk off in real estate about 10 years ago and focused more on, you know, class A properties and really good locations and that sort of stuff to, you know, kind of de-risk on the real estate side. And then as I’ve gone into more conventional investments and outside of real estate investments, especially since my exit, uh, I have gone more risk on, on, uh, on some of the other stuff. And, but it’s, it, it just kind of similar to Mindy’s approach of where, you know, you do it because you want to see how much you can grow it, but at the same time, I’m also balancing that with, you know, some safety. So in some cases you could say I’m playing to win. And in some cases you could say I’m playing not to lose. I mean, both can be true at the same time.

Dave:
Mm-Hmm.

Brian:
<affirmative>, uh, you know, on the risk on side, I’ve got investments in, uh, pharmaceutical companies coming out with new drugs. I mean, brand new startup pharmaceuticals with new drugs. Uh, I’ve got another one that’s doing a new kind of drug delivery, uh, methodology, which is also a new startup. And these are high risk, you know, it’s a little bit, um, you know, roulette where it’s black or red. I mean, to some extent these will succeed or they’ll fail. But even though they’re sizable investments, they’re small portfolio allocations as a percentage of the total for me. So I have a bucket of risk capital to me it’s no more than 25% of my portfolio. And that risk capital can go into kind of more of these ultra high risk things without me losing a lot of sleep. Now what I wouldn’t do is put all 25% of that risk bucket into one single investment in these things. You want to minimize these single points of failure and spread it across a variety of different things that are more risk on.

Dave:
Okay. And do you think, Brian, most of this decision and this diversification is due to market conditions? And if you haven’t heard, Brian’s been on this show, he comes on on the market, our other show a lot and has been very candid about, although being a multifamily operator and commercial real estate operator for many years, he sold most of his properties, uh, in during the early pandemic years and has been in his terms, sitting on the beach, uh, for a little bit of while. So would you, if market conditions shift and it becomes more favorable, do you think you would pull money out of non-real estate assets and back into real estate?

Brian:
Yeah, and some of that might come from the cash bucket. Some might come from, you know, more liquid investments. Like, you know, I do have some bond ETFs, uh, and you know, things along that side that are lower yielding, but just really are there for the purpose of having liquidity and dry powder for those kinds of things. Now, as a real estate operator, our company is a syndication sponsor. I mean, we raise money from high net worth investors and invest that in real estate. So I can get back into the real estate market without going all in on my own personal cash, but I will be investing in my own investments alongside the investors. Mm-Hmm.

Mindy:
<affirmative>. So

Brian:
I can get back into real estate without having to say, well now I’ve gotta sell all my stocks. I gotta sell all my ETFs, I gotta sell all my other conventional holdings so that I can roll back into real estate. I don’t have to do that.

Dave:
Yeah. And that makes a lot of sense. And it is really interesting how much you have aligned your investing with your time, because that’s not necessarily the case for everyone, right? Like some people choose to invest in industries completely outside of what they do full-time to sort of diversify, right? Like you might say, I, you know, I run this real estate investing business, so with my extra capital I put in the stock market or cryptocurrency or bonds or whatever to like make sure that if my industry has some, you know, something that could be totally outta your control, like what’s going on right now, um, that, that, that could be a good way to sort of hedge your batt. We gotta take a quick break, but if you’re enjoying the show, either on YouTube or on Spotify, we have a question for you. I wanna know the answer. How much of your own personal net worth is invested in real estate? Join the conversation yourself by answering the poll in either Spotify or a YouTube app. And we’ll be back in a few minutes.
Let’s jump back in with Mindy and Brian. So obviously you two have been quite successful in your career and you’re a little bit further along in your career and have the fortunate situation to have enough capital to spread around. Mindy, I’m curious, if you were just getting started, or let’s just say you’re someone with maybe one or two properties in real estate, how would you recommend they think about diversification? Do you think it’s wise for people who maybe let’s say, have a net worth, let’s just come up with a number, a net worth of a hundred thousand dollars. Would you recommend they stake it all in real estate in one asset class? Or would you recommend they spread it among multiple buckets?

Mindy:
Uh, something Brian said a few minutes ago that I wanna circle back to and highlight. He said he has a bucket of risk capital, but it’s no more than 25% of his complete net worth. And he doesn’t put all of it into one investment. And I love that, mainly because he’s thought about it. He’s not just, yeah, I think I’ll take 25%. Brian’s a smart guy, so he has thought about how much am I comfortable? ’cause your bucket of risk capital is the amount of money that you are going to invest in something that could absolutely go to zero. So Brian’s like, I will, for lack of a better word, gamble this 25%, but I’m gonna spread that out a lot. So with somebody who has a net worth of a hundred thousand dollars, they’re just starting investing. I’m gonna wonder what sort of real estate property you could get that isn’t gonna take up most of that amount unless your house hacking or live-in flipping or something where it’s your primary residence and you can get in for a lot less if you’ve got a hundred thousand dollars in net worth and real estate is what you wanna focus on.
Scott Trench is a great example of he didn’t contribute to his 401k, he didn’t contribute to his Roth IRA, he went all in on real estate. He also was 25 at the time. He was house hacking. He was house hacking again. And then after his net worth started to grow, he diversified out. So I think it’s, it’s really gonna depend on where you are in your life and how much risk you can tolerate. There’s a lot of people who don’t wanna tolerate any risk, and that’s not something that I can identify with <laugh>.

Dave:
Yeah, I mean, honestly, if you can’t, if you can’t tolerate risk, you should just put your money in a high yield savings account or in bonds or into a mutual fund if you, if you can even tolerate that risk if you have, I don’t know if we’re making up an arbitrary scale of risk tolerance from zero to 10, 10 being the highest. Like if your risk tolerance is anywhere below like a four, I wouldn’t buy real estate if I were you, but I do think the point is strong is that real estate, let’s just say residential real estate, especially with an owner occupied strategy like house hacking or what Mindy does live in flips is a rel I think is a relatively low risk investment. And so if you’re trying to get into real estate and you’re planning to buy something and live in it and you’re willing to live in it to, for let’s say at least five years, that is a pretty low risk way. And if you wanted to put all of your money into an investment like that when you’re first starting out, I don’t think that’s an irresponsible decision. Do you, Mindy?

Mindy:
No. If that is within your risk tolerance, then absolutely. I think that real estate as a wealth generating tool is fabulous.

Dave:
I’ll also say, at least for me, when I started I had a negative net worth. And I basically, it’s true. I had a lot of student loans and I had to borrow money to get started and I rent and managed properties to earn sweat equity in deals. And not everyone has to do that. But I do think there is some element of risk mitigation that I really liked about real estate. Whereas like I was at the property and I had some control over the performance of my asset that made me at least feel better about the risk that was completely misguided because I was the biggest risk to that property by far. <laugh> like my, my maintenance skills definitely added risk to the, to the performance of those deals. But I think that there is something about the personal involvement and if you have time to contribute to these investments, that it does help with risk mitigation.

Brian:
Dave, I think it also has to do a little bit with how old you are. You know, when you’re younger you can take on more risk than when you’re older. It also has to do with how much cash you have because we can talk all we want about net worth, but if that net worth isn’t actually liquid and you have no ability to access it, that changes the whole scheme on how you asset allocate. Because there’s how many, uh, like newer landlords do, you know, that are house rich and cash poor? They’ve got this asset that they bought, they fixed it up, it’s worth more than it was when they bought it. They’ve got a lot of equity, but they’ve got no cash. So I think first thing you have to think about is to have, like Mindy alluded to an emergency fund, you also should have a separate bucket of capital that you’re at least slowly contributing to.
I mean, when I was like 25 years old, I opened up an E-Trade account and was depositing $200 a month into it. And you know, I, I bought $2,000 in Amazon stock in 1999. Well that’s worth a lot of money now. And I never sold it. And it was like dollars a share, you know? So it’s like, these are the kinds of things that over time, if you can at least put a little bit of money away, it doesn’t even have to be a lot. Put a little bit of aside and do some, some of that kind of like longer term, uh, thinking, then that will benefit you in the long run. ’cause especially when you’re younger and you don’t have a lot of cash, it’s really hard to think about diversification, asset allocation. Mm-Hmm. <affirmative> that’s very overwhelming when you don’t feel like you have enough assets to even be meaningful enough to do that with. So I don’t care how small it is, I don’t care if you buy one share of a stock, do something that’s at least providing for those future years on the side that you don’t ever really have to think about again.

Dave:
That’s really good advice. It’s almost like just building the muscle to, to learn how to do it. Even if it’s five bucks a paycheck, 10 bucks a paycheck, just getting used to allocating some amount of money for the future will make it so much easier, hopefully as your income increases and then you can start. It’s, it sort of helps you develop the mindset of how you’re choosing to budget your money, not just with expenses, but making that that line item in your budget for the future. One of the things I, I also like to think about, I’m curious your take on this, Mindy. Uh, when I think about resource allocation is time because it’s, it’s easy to think and I, there have been parts of my real estate investing career, I’m like, I’m gonna be a hundred percent in real estate. That’s super time consuming to do that. You know, like I, I don’t flip houses and I don’t wanna take on multiple renovation projects at the same time. And so I’ve sort of built my resource allocation into buckets of, uh, non-real estate. So a lot. I have like, probably 50% of my money in equities and then I split my real estate between passive and active real estate because I just don’t want to be doing a ton of active real estate all at once. Do you do the same thing, Mindy, or do you do any passive real estate?

Mindy:
I do a lot of passive real estate. My real estate is about 26%, 20 of that is gonna be private loans, which I bucket into real estate because I’m lending to active flippers. Uh, I’ve got a BRRRR on a small hotel

Dave:
Oh, cool. Where,

Mindy:
Uh, Alabama.

Dave:
Oh, all right.

Mindy:
And 5% of my real estate is my medium term rental that is local. I’ve got a little bit in syndications, syndications have, most of my syndications have been selling and I have not been jumping back into syndications because the numbers that I’m being presented are either, uh, not something I wanna put my money in. Like, oh, we’re gonna give you 5% and like, you know, I could get that in a high yield savings account that’s not a real winner of a proposition. Or they’re like, we’re gonna give you 15%. I’m like, there’s no way you’re gonna get that based on the other numbers in your proposal. So I’m still reading proposals, but I’m putting nothing into them.

Dave:
Well, on that topic, if you wanna listen to more about syndications, uh, Brian Mindy’s co-host on the Money Show, Scott Trench and I had a great conversation about syndications on the on the market podcast. Uh, you can head over to that feed and check that out if you wanna learn more about that time for a quick break. But we’ll be back soon with more conversation about risk allocation and diversification. Thanks for sticking with us. We’re back on the BiggerPockets Real Estate Podcast. Brian, I’m curious about you, you know, we’ve been talking about diversification mostly today between asset classes, but what about within real estate? You’re, you know, a multifamily operator, but do you diversify within the broad bucket of real

Brian:
Estate? To an extent, yes. Um, you know, I started out in this business as a house flipper. I like to say I’m a recovering house flipper. Uh, so, you know, I I’ve got a lot of single family experience and I still have a lot of small, like single family and duplex fourplex type investments that, you know, were BRRRRs Before BRRRR was BRRRR. I mean, it was like, I’ve owned them since before the term was even ever even heard. Uh, which, you know, I financed ’em on 15 year loans, so they don’t really cash flow, but in about five more years, they’re all gonna be paid off. And that’s just retirement money. It’s almost like a pension. Yep. And so, you know, that’s just one way of diversifying and ensuring that there’s future income and equity. Uh, I’ve done everything there is to do in real estate.
I’ve developed, I’ve done self storage, I’ve done commercial, I’ve done residential, vacant land, uh, you know, you name it, I’ve done it. I’ve built a, a hotel. I, I’ve, I’ve done everything and I don’t like most of it because I’ve kind of figured out what I’m better at and I’ve also figured out how I wanna spend my time. And you talked earlier about, you know, how do you allocate time and Yeah. When you’re building things, that’s very time consuming. And when you’re flipping things, it’s very time consuming. So I think a lot about how I, you know, slice up my time. So even though I am a sponsor of passive real estate investments, I also invest coincidentally in passive real estate investments. Not, not only my own, but those from others. And I think that’s important too because, uh, it gives me additional portfolio exposure without the time exposure and that, that may seem strange to people, but, uh, it’s just part of the natural process of, you know, managing your time.
I do spend a lot of time though on other investments. So I mentioned I invest in individual stocks. That’s a time consuming process to research that and come up with the right ideas and figure out when you want to sell. But what I’ve also found is, you know, I spend a lot of time looking through economic reports, news, current events, what’s happening out there because it’s, it’s important to stock investing, but that translates to your real estate investing and it helps you become a better investor all the way around and rounds out your portfolio as well as rounding out your knowledge and just kind of your awareness of what’s going on out there.

Dave:
Well, thank you for the advertisement for our sister podcast, uh, on the market. ’cause that’s what we’re trying to do is help, uh, bring data and economics and news in the context of real estate investing, uh, to help investors apply those lessons to their portfolio. Um, yeah, I’ll just, while we’re, while we’re sharing, I’ll just share how I think about diversification, at least within real estate. I think, you know, I have this privileged position of being a podcast host where every week, five times a week, I hear people come on the show and tell me cooler things that they’re doing than I’m doing. And so I’m always like, oh, I want to do all of these really cool ideas that everyone’s talking about, but I, realistically, I’m not good at value add. I’m not good at construction. I have a short term rental. I’m gonna be honest, I don’t really like owning it, but they’re great asset classes and there are people who like doing those things and who are good at them and who want to put time into them.
And so I have sort of started to split my real estate investing, like pretty much 50 50, like I said, between passive and active. But I, it’s not just the management style, it’s also the asset class and the business model. So I personally focus my active investing on long-term rentals in really good markets. They don’t have to produce amazing cash flow, but those to me are like my retirement, which to me will hopefully be like 10 or 15 years from now. And I’m trying to buy assets that I think are gonna be great 10 to 15 years. Now they’re in good shape, they’re in great neighborhoods, and they’re gonna be low headache for me while I’m still working in my full-time career. The other half are, I’d say, uh, not all high risk. Some of them are higher risk syndications where they’re doing heavy value add buying, you know, distressed multifamily properties and completely renovating them.
Those are risky. They can be hugely beneficial and very profitable. So I do some of those, but some of my passive investing is also relatively low risk, like debt funds or, uh, investing in storage facilities. I, I actually don’t do storage facilities, but there are some people who do those as, as lower risk investments. And so I personally try and think about the skills I have and do that actively and the skills I absolutely don’t have and do that passively because as Brian will tell you, and Mindy will tell you, investing passively is really about finding a great operator. And so if you can find someone who has the skills to do all the things in real estate you wish you could do, to me that’s, that’s sort of like a win-win situation.

Brian:
That’s a really good example to the reasons why I’ve invested in, like, say startup pharmaceutical companies. What do I know about pharmaceuticals?

Dave:
I’m not taking any drug you make, Brian,

Brian:
Let’s just put it that way. <laugh>, you definitely don’t wanna do that. Who knows what could happen. But I’ve also invested in oil and gas partnerships where they’re drilling for oil. What do I know about drilling for oil and gas? Well, I know enough from what I’ve learned to help me select good operators and find business plans that I think are more palatable than others. But I don’t know enough to start up my own company and do that on my own. So you, you wanna pick a variety of different things. So, you know, now I’m in biotech, I’m in agricultural, uh, and agricultural startup. I’m in oil and gas. I know nothing about those industries beyond just enough to know that I’ve picked good companies that I think have a higher percentage of success than

Dave:
Not. And Brian, do you think you, is that something you’ve learned from being a real estate operator? Because I would imagine that it’s hard to learn all those things. Are these, do you find that having been in real estate for so long has helped you analyze or choose other businesses to invest in?

Brian:
There’s no question. I mean, when I first started investing in real estate and I was buying houses with no money down to flip because, you know, I didn’t know any better. I mean, back in those days, I didn’t have the skills to make any solid decision on any kind of investment or, or business <laugh>. So, you know, throughout business and you know, I think, I think one of the strongest lessons you learn is when you’re losing money and, you know, when you lose money on something, you actually learn a real lesson that you pay attention to. And you get enough of those over time and you get more skilled in evaluating all sorts of opportunities because, you know, in your younger years, everything in investing is candy. And you’re in the candy store, you’re just a kid in the candy store, everything looks great. And you know, there’s that old saying, it’s like when, when you’re a hammer, everything looks like a nail. Mm-Hmm <affirmative>. And that’s exactly what it is. When you’re younger and you’re investing and you aren’t really skilled on what’s going on out there, but you start losing money, you start getting into business for a longer period of time and and have to make difficult decisions. You start seeing investments that don’t pan out the way you thought they would. You learn a lot of things along the way that you can apply towards investment selections that you make when you get to be, you know, in your mid fifties like me.

Dave:
Yeah. It’s, it’s a painful thing. But I’m curious, Brian, do you think that’s better going through this painful essence than sitting on the sideline? Because my observation of the industry right now is that a lot of people are just choosing to do nothing because they, they see a lot of risk in real estate. Uh, do you think that’s wise or do you think people should consider allocating some portion of investment that they’re comfortable with, uh, and they have the capital to take on the risk? Like, do you think it’s worth jumping in even knowing that you could

Brian:
Lose some of that money? I think it’s worth jumping into something. It doesn’t have to be real estate. If real estate isn’t working today, don’t invest in real estate today. Of course. Invest in something else. Start a business, invest in a stock, get into a mutual fund and follow the reports on the companies. Listen to the, um, you know, the earnings calls. Do something yes. Don’t sit back and do absolutely nothing. ’cause you’re not learning anything if you’re not out there doing things. And when you, if I say that you learn a lot when you make mistakes, be willing to make a mistake here and there to learn something, yes, it will cost you, but so does a college education. You had student loans, you know, a loss in an investment is a student loan. You know, you, you, you spent the money to learn a lesson and you’ll have to pay that back. And if you don’t educate yourself, then you’re not learning any lessons that you can apply later on. So yes, absolutely. I think you should do something

Dave:
Earlier in my career, this is not, this is before I worked at BiggerPockets, I had a mentor who is advising me and said, you either need to be earning or learning. And I thought that was a, with any job you have, and I, I simply, it’s stupidly simple, but I think it’s super true if you’re, and and it’s true of investing too. Like I wouldn’t, I wouldn’t invest in something just to learn something. I would hope that I am, uh, earning something as well. But I think there are ways to get into real estate that are relatively low risk and may not be a home run, but you can still learn a ton. Like House Hacking’s a great example. I think of that a lot of times house hacking, you might not be cash flowing a ton, maybe you’re just reducing your living expenses, but that is also earning, but it’s also gonna teach you so much about the business that you’re gonna be able to make better decisions about it in the future.
And also, just wanna reiterate what Brian is saying. We’re talking about real estate, other asset classes. I totally agree. If real estate’s not for you and you don’t, if you think it’s too risky right now, don’t invest in it. Like, ah, that just doesn’t make sense. Don’t do something you’re uncomfortable with. But I would encourage you to find an asset class or some sort of investment that you do think could perform well and that you are interested and committed to learning to, uh, about. Because I mean, that’s the only way to improve your financial position over the long run is to become good, at least at one type of asset in the investing world.

Brian:
Well, this is called BiggerPockets, not bigger houses, right? <laugh>. Now if you want bigger pockets, there’s a lot of places that can come from, I get that this is a real estate centric, uh, podcast True and so forth. But there are other places you can make money and you need to think about all of them holistically. And real estate is just a part of what you do, not all of what

Dave:
You do. All right, Mindy, before we get outta here, I’m curious, is there any type of business or asset that you’ve always wanted to invest in but haven’t yet?

Mindy:
Oh, no. I don’t think there is anything. Uh, I have one actually, that’s not true. Okay. So there’s a franchise in the East coast when I first saw it, it’s called My Favorite Muffin. They make amazing muffins that are like this big, and they weren’t in my area. And I thought, oh my goodness, this would be such a great idea. I’m 26, I’m gonna buy a my favorite muffin franchise and bring it to the Midwest. I did a lot of research looking into it, and then I’m like, I don’t actually wanna work at my favorite muffin.

Dave:
Mm-Hmm,

Mindy:
<affirmative>. So I would like to do some sort of franchising investment. I’ve got a couple of friends who are looking into franchises that same, I could be a silent partner in, but I haven’t done it yet just because laziness

Dave:
From a dollars and cents perspective, a lot of franchises make a lot of sense. I’m super interested in the home services franchises. If you see like siding businesses, gutter businesses, house painting businesses, the numbers on those things are crazy. I just don’t believe in myself to be able to operate them, especially working <laugh> full time. What about you, Brian? Is there any asset class that you’re excited about that you’re, you think about going into?

Brian:
I don’t get excited about anything when it comes to investing. It’s <laugh>. It’s, it’s a very, it has to be a very unemotional process. But I think I’m, I’m actually the opposite of Mindy. All of the things that she’s mentioned I have done and wish I hadn’t. So I, I, I built a self storage facility. Gosh, it was one of the, I wish I hadn’t, I built a hotel, you know, I, I thought I’ll get into hospitality. That looks like a great, exciting asset class. I wish I hadn’t. I, uh, I did franchise. I wish I hadn’t. I think the only one that makes money in franchise is the franchisor <laugh>. Now, I wouldn’t mind being a franchisor as opposed to being a franchisee. So, no, you know, I think at this point in my life, I’m kind of done with all of that excitement. I’ve learned way too many lessons to get excited about any investment. Uh, I, I, I think that there’s other things coming down the line that I’ll, uh, that I am excited about. I mean, you know, for the term excitement, however you define that. But what I’ll probably will allocate more assets to in the future is gonna be some of the customizable biotech that’s coming down the line. I mean, I think that there’s, uh, there’s medical breakthroughs that we’re going to see that are gonna create, uh, some extensive longevity, uh, for, for our lives and, and disease control and mitigation that are gonna be earth changing.

Mindy:
Mm-hmm. <affirmative>.

Brian:
Uh, and I want to be invested in those things. Things that, you know, cure cancer, make you live to be 500 years old without being old. I mean, anything like that. That kind of stuff is very interesting to me because I think it has a very long shelf life and will also improve my life and the lives of my family. So that, that kind of stuff interests me. I wouldn’t say I’m excited about to invest in it, but I think it at least interests me.

Dave:
Well, Brian, I can’t wait to interview on episode 50,000 in <laugh> in 2352. Once one of your biotech companies takes off, we’re still gonna be here complaining about contractors 300 years from now. <laugh> <laugh>.

Brian:
I hope to have that conversation with you. It’ll be really interesting to hear about the compounding effect of a hundred dollars after 3000 years.

Dave:
That’s, this is a perfect example of why you should invest. If we’re gonna live to 500, just invest $3 today. And by the time you’re 400, you’re gonna be a multimillionaire. Yeah. And a and a million dollars will buy you a candy bar. Yeah. Yeah. That, that’s true. So it’s not gonna really get you that far. All right. Well, <laugh>, we gotta go that. But thank you both so much for joining us. Uh, if you wanna connect with Mindy, of course, she’s on BiggerPockets and you should listen to her fantastic podcast, the BiggerPockets Money Show. And Brian, uh, we’ll of course put links to his contact information in the show notes. You can always find him on BiggerPockets or many of the episodes that he is a guest on. Thank you all so much for listening, and hopefully this has been helpful to you. I’m curious if you have some time, shoot me a note either on BiggerPockets or on Instagram, uh, about this type of episode because we do focus mostly on real estate. But if you’re curious about other types of asset classes, other types of investments, and want us to talk more about those in the future, let me know. I’m very curious. But thank you all so much for listening to this episode for Bigger Pockets, I’m Dave Meyer and I’ll see you soon.