Big Changes I’m Making to My Portfolio This Year (That Will Make Me Richer)

Dave:A history professor making $60,000 a year is now a real estate millionaire thanks to a few American history lessons and he did it with fewer rentals than you might think. Joseph Moore survived the 2008 crash, but during that time he saw his friends lose their jobs and their houses even though they did everything right. As a historian, he thought, “What lessons are in the history of money that could stop me from getting wiped out in a similar way?” The answer was real estate. Using a tactic Joseph calls the Johnny Appleseed strategy, he built a seven figure net worth without ever earning six figures as a professor. The strategy is pretty simple, buy where the demographics are pointing to. But what came next no one would’ve expected. We got FBI raids at rental properties, underground crime rings, and some serious lessons learned from a first time landlord.But now, even after all that madness, Joseph has a seven-figure real estate portfolio with enough cashflow to fund his comfortable middle-class lifestyle, all from following five financial lessons from history he’s going to share with us on the show today. These lessons have made Americans wealthy for hundreds of years. It’s just that 99% of people aren’t listening.Hey everyone. I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Today on the show we have Joseph Moore. Joseph is a history professor and a real estate investor and he’s here to share his own investing experiences and what he’s learned from writing a new book about the history of personal finance. Let’s bring on Joseph. Joseph, welcome to the BiggerPockets Podcast. How you doing?

Joseph:I’m doing great, Dave. How are you?

Dave:I’m well. Thank you so much for being here. I’m excited to hear a little bit about your story. So maybe just tell us a little bit about your background in real estate.

Joseph:Yeah. So I have no business being in real estate business or any such thing. I’m an academic, right? I’m a historian and I was getting a PhD in history on very non-financial topics in 2005 and everybody said when we were graduate students, that the lesson of history was very clear renting was throwing your money away. I don’t know if you’ve ever heard that, but people used to say that a lot. Oh, I’ve heard it. So I nodded my head and we got in no income, no verification, mortgage, all the things from all the TV shows and movies. And it’s three years go along and a friend at church offered a financial class. I think it was like a Dave Ramsey class or something. I told him, I was like, “I don’t need to go. I’m pretty smart. I know what I’m doing.” He said, “Would you come just as a favor?I’m scared that it’ll be an empty room. It’ll be awkward. We go. They make us do a budget. We go home. My wife falls asleep. I did not sleep at all. I just paced the house. I’m just like, who gave us a mortgage? And what idiot signed that mortgage? Oh, right. I’m the idiot that signed that mortgage.” And so I get frantic about it and my wife and I put our house in the market.

Dave:That was it for you? You did this session, you’re like, “We’re selling?” I

Joseph:Was like, “We’re selling. I have no business owning a home. We have no money. We were graduate students.” By definition, we’re not staying.You’re going to go somewhere else. Oh,

Dave:That’s a good point.

Joseph:Yeah. And so it was like, what are we doing here? And so all this to say, we put our house in the market. It sells in a bidding war on a Saturday. The following Saturday, my neighbor put her house on the market. It was too late. 2008 had come.

Dave:Whoa. Was it actually 2008?

Joseph:2008. So this is like, we are the last two people off the Titanic.

Dave:Oh, wow. Lucky.

Joseph:And I’m looking at the economy sink into the ocean. I’m watching friends lose their jobs. I’m watching foreclosures and all these. And I’m like, I just got saved by sheer luck. I wasn’t so smart. I would love to say it was because I was brilliant. No, no, no. I had no idea what I was doing. And so I just became fascinated by what Americans have been told to do with their money and why we believe it. And so the historian in me came out and I started researching the history of financial advice and trying to, as best I could, learn from those lessons and then apply those lessons in the present. And I basically decided anything I found people in the past doing within reason I would do and within reason was set by my wife saying, under no circumstances, are we doing that? And so I came up with what I call the Johnny Appleseed strategy.So there’s this myth in history that Johnny Appleseed is this weird weirdo wanderer who kind of like goes through the West in Ohio and teaches children about eating healthy apples and that’s utterly not what he’s doing. Johnny Appleseed is functionally the first American flipper at scale. He knows all these immigrants are coming. He goes out ahead of everybody, does all the work for everybody. When people show up, he’s already cleared the land and planted the trees. And so he’s able to sell this at a profit. And so this idea of going out where people are wanting to be, making something nicer and better and then selling when they get there was the first financial strategy we really tried in real estate. That was probably about 2013 when I came back into the real estate market and said, okay, I’ve read a lot now. I think I know what I’m doing.I’ve read the books. I don’t know if it’ll actually work. And so we start buying and kind of live in flips. We’re going to buy it, fix it up. In about two years, it’s tax-free money, sell it, do it again. And so that’s frankly how we started in real estate around 2013.

Dave:What was it about live and flip? A lot of good strategies. Things were cheap back then. You could have bought, I don’t know where you were living at the time, Joseph, but most places in the country you could buy cash flow and rentals in 2013. So why live and flip?

Joseph:Because it’s what I could get my wife to agree to. Wait,

Dave:Hold up. That is the opposite of what every other person on this show says. Just so you know, no one’s partner agrees to live in flips. Everyone’s like, “Just go buy a rental property.” So why did your wife want to do that?

Joseph:Well, buying rentals at that point was something that was, it felt like it was a business investment and we were still building our careers. And just felt like it was kind of taking your eye off the ball. And I will tell you, and it’s something I discuss in my book is like one of the biggest lessons of history over and over 300 years, one of the biggest pieces of financial advice is invest in your marriage and have a good one because marriage outperforms a shocking number of things you would throw at it for more important financially. And so I knew I needed her buy-in. And the other thing is she’s really good at the kind of aesthetic stuff so she could have fun kind of, “Oh, I’m going to have this color and I’m going to get this light fixture.” And she was good at that and it was fun.It was something we could do together. And so in 2013 we bought in 2015 when it was after two years, it’s tax-free money we sold. And so it’s around that time that I started laying my PowerPoint presentations for why we should get involved in rental properties. And around my 40th birthday, she came to me and she said, “All right, it’s your 40th birthday.” She said, “Uh, anything you want. ” I was like, “Anything, anything?” And she said, “You took a big rate. She said, anything you want, your 40th birthday, whatever you want to do, we’ll do. ” I said, “All right, I want a three-day budget

Dave:Summit.” You are a real

Joseph:Academic. Telling you, man. And so she was like, “Are you … ” The look of disappointment on this woman’s face, that of all the men she could have picked, she picked this one.

Dave:Yeah. She was like, “Can you just ask for a sports car or

Joseph:Something?” And so we have what I affectionately call the Scantily Clad Budget Summit and we sit the kids away and kind of thing and I laid out for her. I was like, “This is a thing we can do and rental real estate would work if we did it the right way.” And that’s when we pivoted from kind of live-in flips, which we’ve done now multiple times into rentals. And so this is like 2017, 2018. And I get her to agree that I can go to a place called in the Southeast, I won’t name the city, but it’s in the outer burbs of Charlotte, North Carolina, which is no longer where we lived. We were in the Atlanta, Georgia area, but I felt like that area. I knew it. I had family history there and I felt like I could understand it enough to make it work.I went up to meet with a couple of realtors. First I started in different neighborhoods and then I finally found one and long story short, I was going to buy old mill houses that were clearly working class family rentals. And I went to go and she said, “All right, we can buy one and try it out. ” And I came back and I bought one and a fourplex, which was five units. And she was like, “I said you could buy

Dave:One.”

Joseph:It’s

Dave:My 40th birthday.

Joseph:I can

Dave:Do whatever I

Joseph:Want. I was like, “You said anything I want. ” Yeah. So that’s how we kind of jumped in with both feet. And so we finish up the house. It’s like a three bedroom, two bath. I’m very proud of this thing. I’ve made it really nice. It was in rough shape when I bought it. I bought this thing for I think like $50,000. It was an insane … But again, it was rough shape. So we fix it up. I’m in it for like 70 total and I get the perfect tenant. I mean, she’s like, “Hey, I already own a house. It’s on the other side of the city. I’ve been reassigned for work. I now have to be on this side. I just want to have a place I can rent for a year or two while I learn the area. I’ll rent out my … Oh my gosh, this is a dream.” But she worked for a temp agency, which by the way, should have been my red flag.Well, come to find out, temp agencies in that area were helping man the lithium mines in North Carolina with illegal labor. And so we had 20 something illegal immigrants working on rotating shifts. They would have a van that would come up, load them up for work, drop off the last group and they would rotate this. So we had like 20 something guys at a time in the three bedroom house.

Dave:Oh my God.

Joseph:So what the paperwork would’ve told me to do was simply file an eviction, but something was wrong and we knew something was wrong. So we went to the police, the police went to the FBI and the next thing you know, I’m on a conference call with the FBI and they’re saying- What? This is a human trafficking ring. We would like you to, if you’re willing to not evict the people and can we just sit on the house and stake it out? And so I grip my teeth. I’m like, “Yep, that sounds like the right thing to do. ” And this was all an experiment anyway, because I’m an academic. I’m just trying to learn here. So for two months, almost two months, they stake the house out, right? You’re

Dave:Getting paid, right?

Joseph:Oh, she paid on top.

Dave:Yeah. Okay.

Joseph:I will tell you, here’s one of the lessons that I picked up in my adventures in all this was that drug dealers and human traffickers always pay on time because they do not want any trouble.

Dave:But they got it.

Joseph:Finally, the police swarmed the house, but by this time they had pieced together all the other houses that they were following the vans around and then they swarmed the other house. By the time they got to my house, I had a guy who did a lot of construction work for us was basically sitting there that day and he watched it. They came flying up in a van. All these guys, 20 something illegal immigrants rush into this van and take off. And like five minutes later, here come the police. So I finally show up, I walk this … It is destroyed. It is destroyed. And I’m like, what was I thinking?

Dave:Well, I mean, I have to say, a lot of people come on the show, they say I did my first one. It was a disaster. It’s not like that. So most people are like, “Oh, I didn’t have a tenant pay for two months.” That is one of the wildest stories I’ve heard on this show. I’m sorry to hear that. I mean, it stinks obviously terrible for the people involved in this, right? It’s awful situation, but wow, that’s a crazy story.

Joseph:Yeah. It’s one of those, it’s like as bad as it was for me, it was worse for literally everyone else involved. Of course.

Dave:Yeah. It’s terrible.

Joseph:So yeah, things were going really, really bad. And what I should have done is said, this was a mistake. I don’t know what I’m doing. I am not a real estate professional. I do not have a real estate license. I have no investment experience. Let’s just move on with my life. Instead, I thought, “Huh, I wonder how high this thing can go. ” I think to some extent I was like, “Okay, I’ve seen the worst at this point.”

Dave:You got to get better from here.

Joseph:It’s got to get better from here. And I knew a lot of people by this point that I’d interviewed, whether from my research on my book or just people I’d gotten to know doing real estate who had succeeded. They had always told me something will go wrong. I just didn’t expect it all to go wrong at first. And so I was like, okay, how do you make money in capitalism? You solve somebody else’s problems. I think there’s this illusion that the way you make money is investments, which is some vague word to mean I don’t do anything, but money comes to me. But most of the money in the American economy is made actively and you make it by solving somebody else’s problems. It’s like, okay, these landlords have problems they can’t get rid of. These tenants have houses they don’t want to live in and the market will reward me if I can figure out how to solve for that problem.And so we just began buying everything we could. I mean, at one point I bought 11 houses in one day, like almost like half of a city street was mine.

Dave:But how are you affording this?

Joseph:So I’m a history professor at this point, by the way. So I’m making like 60K a year, so I’m not like rolling in dough.

Dave:I didn’t

Joseph:Want to

Dave:Call that out,

Joseph:But I

Dave:Was wondering academia notably the highest salaries.

Joseph:So at this point I’ve learned partially from reading all the 1980s literature on how many people were buying houses with little money down that there were methods to get around traditional financing. Secondly, I realized these slumlords themselves couldn’t sell so they would often be willing to finance to me. And so I could do kind of seller financing and invented financing because they didn’t really have another buyer at this point. And here’s one of the takeaways from all of this real estate is really a relational business in a way that not all businesses are

Dave:100%.

Joseph:And it’s a lot of different relationships. You’ve got tenant relationships, you’ve got lending relationships, you’ve got buyer seller relationships, you’ve got real estate agent relationships. And I just started managing the relationships. And so it just so happens I got in good with a couple of realtors and we would hang out every time I was there doing anything on a property and we’d have coffee. I was just in a coffee shop. When another guy comes in, two realtors start talking. He’s like, “Yeah, that guy’s trying to sell. I don’t think he’s going to get what he wants. I don’t know who’s going to buy it. ” And I’m just listening. I was like, “What is it? ” And they were like, “Oh, it’s like half of a city street and this guy was a slumlord forever and the properties just went to trash and was like, really?How much does he want for it? ” And I was like, “Can I talk?” And I literally followed the other … I came in with, it’s almost like I went on a date and then I came and then I leave with another- You left

Dave:With someone else.

Joseph:Yeah, left with somebody. I came in with one realtor and left with the other one, went back to his office and I would say within a week we had struck a deal.

Dave:Wow, that’s awesome.

Joseph:And so that’s another lesson about real estate is like kind of you have to be where all the activity is and then the opportunity starts showing up. If you just sit there forever and say, “Well, eventually one day Zillow will pop up with the perfect property.” Well, guess what? Everybody else will buy it before you can get there. But if you’re where all the activity is and that’s where I just planted myself where the activity was.

Dave:Well, Joseph, I love the hustle attitude just going out there, recognizing something that I think takes a lot of investors a long time, which is how important relationships is and leveraging that to your best of your ability, even though you weren’t coming from a position of huge financial strength at that time. We do have to take a quick break, but I got to hear the full circle here and where you’ve wound up with your portfolio in the last 10 years since you started doing this, we’ll be right back Welcome back to the BiggerPockets podcast. I’m here with professor, historian and real estate investor, Joseph Moore, talking about how he sort of stumbled his way into real estate. No offense, Joseph,

Joseph:But

Dave:Took a couple years figuring out how to grow. It seems like about the mid 2010s, you kind of hit your stride, figured out what you were good at, what you liked, what the market was giving and what opportunities existed. So where have you gone from then, 2015, 2016 up until today? What’s your portfolio like?

Joseph:Yeah. So I think the core lessons that I had taken away from starting at the very worst end of the experience and then moving my way into the middle and hopefully to good things was that I’m solving somebody else’s problems. This is a relational business. And really what I came to realize I could specialize in was buying with tenants in place who were problem tenants. Sometimes they weren’t paying, sometimes they were drug dealers sometimes. But I also realized that you don’t have to be at the lowest end of the price spectrum to meet those problems or solve those problems. At the end of the day, I mean, I think at the height of the working class houses that I had, I had probably 20 something rental units and I’m pulling like 15K, 16K a month. And I’m like, “This is a lot of work over a lot of units when I could deploy this capital, solve the same problems on les properties and get more money.” And so eventually I started selling off these properties, which were all in North Carolina and buying more broadly in the Southeast, especially around Atlanta.And I just realized there were properties that still had problems that the former landlords wanted solved and they would give me a discounted price to solve them, but you can make a lot more money solving a $500,000 house’s problems and you can’t buying $50,000 houses problems, right? At the end of the day, the top end of a trailer is the top end of a trailer. It’s not going to go anywhere else. And so I started buying rental properties around Atlanta in the nicer suburbs, especially in good school districts that had problem tenants in place and solving them one relationship at a time like, “Let me go in and sit down. Why are you behind?” Or, “Hey, I hate to tell you this, you can’t deal drugs out of this house.” What is it we’re going to do that’s going to solve this problem?

Dave:Fair point.

Joseph:Yeah. And so now I think I own see four single family rentals, on Airbnb style kind of and then doing yet again, one more live-in flip. So we’ve just kind of kept all of those going but on much higher price points.

Dave:And are you still buying right now? I think the question I think a lot of people have is, yeah, buying in 2013 or

Joseph:2015,

Dave:Pretty different than buying today. So are you doing deals and what do they look like if you are?

Joseph:The Airbnb I bought six months ago, which is kind of more of a vacation rental. I’m convinced that the place to buy deals right now is where the quality is. I’m

Dave:With you on that.

Joseph:I will take a lower profit on a better property in a better school district that I know that no matter what goes wrong, I can always find a tenant who just desperately happy to be where that house is. Now I’m much more happy taking a more modest return on a better property that’s going to last.

Dave:I think that’s the exact right approach to what we talk about on the show a lot is that the rising tide in the 2010s was very forgiving. You could, and in retrospect, you could say you should have just bought anything, right? Not just anything, but you could buy most things and be okay. Now the game has gotten harder, but also less competitive. There are pros and cons to this kind of market, but I 100% agree with you. The advice I’ve tried and give on the show recently is just great quality assets and great locations. Those things, regardless of all this noise out there about a crash or some of the realities about demographics that are coming, if you buy quality, a lot of those fears or a lot of those risks are less. There’s always risks, don’t get me wrong, but they do get lower.And with these kinds of deals that you’re doing today, are you at least able to cash flow them? Are you floating them?

Joseph:In terms of cash flow, I’m much more prone to equity build is kind of the strategy and the phase of life that I’m in, which I think for professionals is especially important. This is a way to stack an equity build in the background that you don’t have to live on yet and you can always sell it and you can always pivot your debt load so that you could have more cashflow, but why if you don’t need it?

Dave:I personally don’t want to come out of pocket and use my income to pay for my real estate, but I’m okay if they just modestly break even. If it’s, like you’re saying, in a great school district, if it’s something that I’m going to be proud to own 10, 15, 20 years from now, I’m good with that. But they teach their own. It really depends on what your income is. If you like your job, where you are in life, how old you are, all those things matter. But I think this is a really important perspective for people who are comfortably working and aren’t planning to retire in the next 10 years.

Joseph:Yeah. I think there’s these tipping points you reach in an investment career of going through that cycle. One of them is just when you start breaking even and you’re like, “Oh, okay, this thing works.” And the next one is when either you sell or you get that first time that you get a sizable check for whoever you are. For me, it was like the first time I sell six figures in a bank account. I had never seen that in my entire life. And then for me, it was when I realized I had hit a point where if I sold off part of the portfolio and paid off the other part of the portfolio, it would make more money than I made it work. And it was like, okay, well, at this point, it’s all fun and games because I could live my life right now for the rest of my life, but every month I don’t touch it, I get more.It builds bigger. And so for me, it’s just like letting that equity build in the background, it empowers you in some ways to enjoy your job more. Knowing you could walk away tomorrow makes it a whole lot less hard to go to work. You guys better not tick me off three days in a row or I’m gone.

Dave:I know. Honestly, that’s freedom, that ability to work because you want to, that’s where I think everyone’s trying to get to. And it’s awesome that you got that. All right, Joseph, amazing story. Love how you’ve done this. Love the perseverance man and adaptability. I think that’s super cool because as you said, if you adjust, you can figure out the way to make money in almost any market. And you’ve now done it in, I guess at least you would say three different cycles. I don’t know if you’d say you made money in the pre-crash cycle, but you were in it at least, but then you figured it out in sort of the recovery, what we on the show called the Goldilocks era where everything was perfect from 2013 to 2022. But now you’ve also figured it out in what we call the upside era, which is just trying to be a little bit more precise.So really impressive portfolio you’ve built. So Joseph, you’ve written a book. Tell us a little bit about it.

Joseph:Well, this whole adventure that started in 2008 with me trying to understand what people were told to do with their money, what worked, what didn’t, that became my latest book, which is called How to Get Rich in American History, 300 Years of Financial Advice that worked and didn’t. So what were people told to do? How did it change? What actually worked for people? This is a study of what everyday people did with their money and what failed for everyday people and so what to avoid. And I try to kind of walk through all those lessons about stock, market investing, about real estate investing, about personal finance, all these things, and how it’s changed. It’s changed dramatically. And people are responding to the book, really fortunate that it’s a national bestseller, which was certainly not something I thought when I walked away from the 2008 Titanic thinking, “Oh, this great financial crisis is going to be really good for me one day.” So it’s been a lot of fun sharing that with people.Well,

Dave:That’s amazing. Congratulations. We’d love to hear some of your top pieces of advice that our audience should take home with them today. We’re going to get to those, but we got to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor and author Joseph Moore. Joseph recently wrote a book, a bestselling book about the history of financial advice and investing. Joseph, give us your top five pieces of investing advice you think our audience should take away today.

Joseph:It’s very hard when you’re in the middle of the storm to step back and see the whole picture. And that’s one of the things history does. That’s why I love history books for investors because it helps you see other people’s lives in the big picture so you can put your own there. All right. So let’s talk about the big picture for our own lifetime. Demographics is destiny. That’s the first lesson I’d tell people. When populations have declined in history, there is a flight to quality and we are living on the cusp of a population slowdown and eventual decline. Now that’s not a popular thesis. People don’t want to hear that. But when populations were booming, there were many opportunities wherever you went, right on the experts, the periphery. But as the population growth has slowed, go where the people and the quality are going. We don’t have a lot of these experiences in history to look at, but everyone we can shows that people collapse on city center.They go where the quality are because if there’s less people, that means there’s less nurses, there’s less doctors, there’s less restaurants, there’s less everything. So people go wherever the quality is. So demographics is destiny. Now for me, that means you can hedge against demographic slowdown by kind of owning in advance where that demand will never go away. So for me, that’s top school districts in growing Sunbelt cities. The population of children is going down. So if you’re in a top school district in an area where there’s less and less kids, understand that eventually school districts themselves are going to start to struggle as drivers of real estate value. So demographics is destiny. For me in the Southeast where there’s still population growth, you can make really good financial decisions there.

Dave:I assume you were talking about maybe Japan, what was going on there, right? Of the better case studies in a limited pool of case studies of what happens with population decline. I think the big picture here for people who are worried about it is nationally could prices suffer? Could home price appreciation be less in the future? I think so, but it’s just regional. To your point, it’s just going to be very specific about the areas, why it’s more and more important that you understand where you’re investing and buying at the right price given where you’re investing, which is something we always talk about on the show, but great advice here, Joseph. All right, what’s investing lesson number

Joseph:Two? It’s the land. That’s the second lesson. It’s the land. And we hear a lot, we have a housing shortage, we have a housing shortage. Okay, true enough, but what we really have is a land shortage, specifically residentially zoned land. And so you will make your greatest returns when you realize that what you’re buying is the zoning and the more exclusive the zoning, the greater the return. That is again, why I go to top ranked school districts. And I’ll tell you a pro tip here. City school districts, especially in the Southeast, tend to be better than county school districts because counties can constantly redraw their lines as their demographics shift. This is again, those things that come in handy when you know the history. When county school districts started to be founded by states, cities were given a chance to opt out and the cities that opted out tend to be very fiercely loyal to their city school district.Interesting. And so those lines aren’t moving. And so you can know if you have a good city school district that the lines are where the lines are going to stay. So yeah, just understanding that what you’re buying is the zoning and it is the zoning that is creating that excess value for you. It’s not you and your brilliance. It’s that the county commission isn’t going to allow them to build more of certain types of structures near where the city is.

Dave:That is fascinating. Did not know that. Great point. Just one question though. How do you think about up zoning trend then? Because we’re seeing a lot of municipalities generally change their zoning in favor of more housing. So do you think this strategy will be as effective in the future if this trend continues? Well,

Joseph:I think you got to keep your eye on it for sure. Now I will put my political cards on the table and say that I am all for upzoning. I am rooting for upzoning. And it would make me poor. In fact, on Substack, I just wrote an essay called Please Make M Poor because I would much … I mean, I’ve got millions of dollars in real estate values, equities. I would much rather own a smaller slice of a growing pie than my particular slice of a pie that no one else can have. And I think we really need as a society to realize we’re undermining the future of people being able to get into real estate and have homeownership and these types of things if they want that or have rentals that they can afford to live in. This is a political problem that could bite real estate investors the other way.I’m much less scared of upzoning than I am of never upzoning and then voters deciding, well, shoot, if I can’t own and I can’t really afford to rent, then let’s take away from these landholders, which by the way, has happened in history.

Dave:Really, really interesting perspective, Joseph. Thank you for sharing that. No, I think it’s a good point. We talk about on the show all the time. I’m a big believer in producing more homes. I think allowing more supply to be built is the only way we get back to a healthy housing market. So I’m with you on that and I understand that for some investors, that might mean individual properties, individual investments, not necessarily going to do bad, but may not have the exclusivity that they once had. But man, I would rather see a predictable, steady market where supply and demand are somewhat in equilibrium than the crazy pendulum back and forth that we’ve seen in the last couple years. At least that’s me. All right, let’s move on to investing lesson number three.

Joseph:Yeah. Number three from history is monetize your space. In every housing shortage we’ve ever had in American history, and by the way, this is neither the first nor the worst. In the 1940s, it was statistically two times larger than today’s shortage. Wow. A young World War II veteran ran for Congress when he got back from World War II explicitly, his number one campaign platform, affordable housing. His name was John F. Kennedy. So we have had housing shortages before. What Americans always did to navigate them was monetize their space. What BiggerPockets coined is the phrase house hacking is actually an old 19th century strategy. It was the most common way families paid off their mortgages. They would rent out the extra rooms in their house. They would save up, get a house, rent to borders and this was how they would pay off the house. And it was, I mean, so common.So in fact, the kind of do- it-yourself real estate investment world that kind of kicked off in the 60s and 70s, part of it was kicked off by a woman named Doreen Breyerberr, Beyerbear. I can’t remember how to pronounce her name. And she was a secretary in Washington DC who just kept renting out her house to other single ladies and then eventually realized, “Well, I’ll just rent my room and then go buy another house.” And she did this in the 60s and 70s and she ended up owning five nice suburban homes and she wrote a bestselling book about it. And that really was what got the self do Do it yourself real estate movement. She’s one of the two origin points. Oh, that’s awesome. Yeah. So there’s two books that really start the You can Invest in Real Estate Yourself Movement and she’s one of them.So monetize your space when there’s a housing shortage because look, I don’t like that there’s a shortage, but you got to pick which side of it you’re going to be on.

Dave:Yeah. Well said again. All right. Well, house hacking, we’re big fans of here, whatever you call it, borders, rooming, whatever. It’s a good strategy. It just works. It’s apparently worked for a lot longer than I even knew for 80 years or something, whatever it is. Awesome. All right. What’s number four?

Joseph:Always remember that real estate is optionality. That is really the financial move that you’re making is you’re buying an option. Real estate is a put option on the dollar. It’s a call option on housing combined with an income annuity and a tax haven. It’s four different benefits all at once. You are buying everything’s upside and protecting against everything’s downside. So it is the most broadly powerful investment class for everyday investors in the history of the world. So buy the options that if they pop to the upside, they’re going to offer the biggest payouts, which is again, back to what we were talking about earlier. If you buy a tiny trailer in rural America, that’s fine, but understand that its upside is pretty limited. You want to buy where you’ve got the option that if it pops to the upside, you get all of that gain.So real estate is optionality. Never forget that that’s what you’re getting into. I

Dave:Love that. I’ve got a friend who’s often on the show. His name’s James Dayner. He’s a house flipper, very successful. He just calls it the juice. So every house has got to have a little bit of juice in it. You could buy something for cheap, but there’s no juice. It’s not exciting. I completely agree with that. And it sort of goes along with the time in the market thing. Because we don’t know when these big pops in real home price growth are going to happen, inflation adjusted home price growth. But if you’re in the market and you have property with a little bit of juice, you’re going to look like a genius.

Joseph:That’s

Dave:Why everyone listening, we call this era of real estate the upside era is because you have to position yourself for that upside that will come. We don’t know exactly when, we don’t know exactly how, but it will come. That’s what you have to position yourself for. So Joseph, we’re on the same page about a lot of this stuff. So let’s see if you can get me to disagree. What’s number five?

Joseph:All right. Lesson from history number five. Marry your spouse, not your house. So first and foremost, understand that marriage is actually a superpower because capitalism is a team sport. So you definitely want to keep your family on the same page on this real estate investment journey. However, the larger point here, if you really buy at a great price, if you really kind of quote unquote steal the property, you kind of made all your money on day one. And so now don’t get married to the idea of the property because actually statistically speaking over time, your return on investment is going to slowly degrade. And so once you realize you’ve made your money, and this was a hard lesson for me, because when I first started in rentals, I was like, “I’m going to own this forever. I’m going to retire with these houses.” And then I realized these houses have all kinds of problems that I’m going to not want to deal with when I’m 70.So at some point when you realize you’ve made your money and your equity is where it needs to be, go ahead and move that on to the next property and the opportunity. So marry your spouse, don’t marry the house.

Dave:I love it. I mean, that’s what I’m doing right now with my portfolio. I’ve been doing this 15 years. I got a lot of properties built and then I got properties built in the 1800s. I’m trying to sell those. I don’t want to be dealing with that 10 years from now, 15 years from now and trading out. And to your point mathematically speaking, your ROE, your return on equity often peaks three, five, seven years into a deal. And it’s not to say you have to sell it, but if you care about efficiency and how effectively you’re deploying capital, like selling, trading out, trading up really matters. I thought you were going to say to sell your primary residence though, which maybe you should as well, but I thought that was where you were going with Mary, the spouse and to keep moving, which is kind of the live and flip strategy.But you have one more for us, right?

Joseph:Yeah. We

Dave:Asked for five, but I think you got six. Oh,

Joseph:Okay. All right. Give us the bonus. Bonus round us. We got a bonus. A bonus history lesson. So get started and get practice. I think if you’re a real estate investor, I know you guys call it, what is it? Analysis paralysis. Isn’t that one of the words you guys like to use? Believe it or not, I followed BiggerPockets a lot when I was starting this journey, so I’m pretty familiar. Good.

Dave:Thank you.

Joseph:Yeah, no, it helped a lot. There were a lot of times it’s like, I don’t really know what this rule is. Maybe somebody on BiggerPockets knows. But I really encourage people, if you’re going to get into real estate investing, then just get involved in real estate investing. You just need reps. You need to get out there and try it. And so one of the things as I look back that went right for me was that I tried on properties that didn’t go particularly well, but I could manage it. And even though a lot of times I made money, sometimes I lost money, but I got experience and I got good at something. And if you’re going to get good at something, you need to practice. And so I encourage people staying on the sidelines for a certain amount of time is okay. You’re watching, you’re learning, but at some point you just got to get out there and start so that you learn what it’s like to actually manage real estate.

Dave:100%. You learn by doing. It’s a hard thing to do though because you don’t want to go in blind. So

Joseph:What do

Dave:You think the sweet spot is? How much time do you have to spend learning before you go out there and just do something?

Joseph:Definitely do more than read one book. But I will say, you’d be shocked that throughout American history how many people who are really, really smart will wait way too long and how many people will kind of almost blindly and almost foolishly rush out and make it work. And so a whole lot of capitalism is people who kind of lean out a little before they’re ready and they take the initiative. Now I’m not. Please don’t hear me tell people like, if you’ve never read a book, you’ve never studied under somebody, you’ve never … One thing I’d tell young people to do, especially go meet with somebody who’s done it and not somebody who’s selling you something. Not somebody who’s selling you a class, not somebody who’s doing a seminar and wants you to sign up for their 995 thing in the back of the hotel room.Okay. Not those people. America has 360 something million people and a ton of them are real estate investors. Find one in your community who’s done it, who succeeded, who will tell you the truth, buy their coffee. They’ll probably buy yours anyway because they’ll probably take sympathy on you. Sit down with somebody and say, “You did this. I want to learn how.” And do that with a few people. And I’ll tell you one thing I did when I made the transition to being nicer houses and bigger properties, I went and met with a guy and I just rode around with him all day and he was super … Again, it’s about relationships. I just asked him questions all day. We drove around to his properties and he showed me stuff. And I learned more from that one day about what it was like to invest in that area and the things I had to watch out for than I could have reading all the books and all the things.And so I would encourage people, you do need to educate yourself. It’s probably best to do it relationally, but you got to get started at some point.

Dave:Learn enough to not make a catastrophic mistake. I think that’s the thing and real estate relatively forgiving. So it’s pretty easy to not make a catastrophic mistake. Learn the basics, get in there and do it. And I love what you said about the relationship thing. I would encourage people to still do that. Actually, in the last two weeks, I host this podcast. I’ve been doing this for 16 years. I’ve done exactly what you just said. I’ve driven around with two different investors. I moved to a new city about a year ago. I’m still trying to learn and I just reach out to people, ask them what they’re working on. I went and looked at six different properties, learned about it, made some friends, made some connections.That’s the fun part of real estate. You should always be doing this and trying to learn from one another.That’s basically the basis of BiggerPockets in the first place. It’s to help people connect and learn from one another. So absolutely love that last advice, Joseph. Man, thanks for being here. This was super fun, super interesting perspective on real estate. I learned a lot. Really appreciate your time.

Joseph:Hey, man, thank you so much. The BiggerCockets community has done a lot of great things for a lot of people and I’m one of them. So thanks for all y’all are doing.

Dave:Absolutely. And tell us, what’s the name of the book and where can people find it?

Joseph:How to Get Rich in American History, 300 Years of Financial Advice that worked and didn’t. It’s from Harper Collins. It’s available everywhere they sell books, although for a brief time in our launch week, we were sold out, which was a good problem to have. That’s awesome. It’s still a problem so we’re back in stock and it is a national bestseller. I hope people will go out and learn because history’s great, but it’s even better if you can learn from it and apply it to your life. And I specifically wrote this book for investors like us who want to take the past and learn from it and apply it to the real world today.

Dave:Awesome. Thanks again, Joseph, for being here. And thank you all for listening to this episode of the BiggerPockets Podcast. We’ll see you next time.