So You Want to Be a Real Estate Mogul?

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If Money Were Easy

Hosted by Mary Beth Storjohann and Neela Hummel

So You Want to Be a Real Estate Mogul?

If Money Were Easy
If Money Were Easy
So You Want to Be a Real Estate Mogul?

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Episode Summary

On this episode of If Money Were Easy, Mary Beth Storjohann and Neela Hummel dive into the world of real estate and explore what it takes to become a real estate mogul. They share insight into the role real estate can play in a financial plan and how to maximize it. They address common myths about real estate investing, the benefits and risks of having real estate as part of your portfolio, the potential tax advantages, and how it can be leveraged to create generational wealth. They also explore the many misconceptions surrounding rental real estate, including that it’s all passive income, and share why diversification is just as critical as weighing the pros and cons before taking the real estate leap. Whether you’re a seasoned investor or just starting out, join in for valuable insights on how to navigate the mutli-faceted world of real estate investing!

What You’ll Learn in this Episode:

  • How the “American Dream” looks on social media
  • Some realities of getting into the real estate market 
  • The truths and myths around real estate as passive income
  • Why you should consider diversifying your portfolio
  • What to consider if you’re thinking about getting into real estate
  • Websites people rely too heavily on when assessing property value
  • Costs that can turn a positive cash flow into a negative
  • How Mary Beth and Neela talk with their clients about real estate and portfolios
  • Tips for making a strategic, informed investment decision 
  • Alternate investments if you want real estate in your portfolio
  • Why it’s important to go into real estate with a short- and long-term plan

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Transcript of the Episode

Neela [00:00:14]:

Hey there. Welcome to the If Money Were Easy podcast, the show where we teach you how to expand what’s possible with your money. We’re your hosts, Neela Hummel –

Mary Beth [00:00:23]:

And Mary Beth Storjohann – 

Neela [00:00:25]:

Certified financial planners and Co-CEOs of Abacus Wealth Partners. Today on the show, we’re going to talk about, “So you want to be a real estate mogul?” But before we jump in, a brief disclosure from our compliance department. This podcast is for educational purposes and is not intended as investment, legal, or tax advice. Any opinion shared is not the opinion of Abacus Wealth Partners. All right, Mary Beth, this is a fun conversation. 

Mary Beth [00:00:53]:

This is so exciting for me because back in the day, I guess, when I was actively advising clients on an ongoing, everyday kind of basis, real estate came up maybe once a week in terms of how to leverage it, buying a property, buying more properties, scaling more. How about you? 

Neela [00:01:14]:

Yeah, it comes up so much. We’ve got this idea of the American Dream and people wanting to buy homes. And then you also hear with social media and all these different home renovation shows, you’re seeing all of the ways that real estate is showing up in people’s lives. And so people have a lot of questions on it. It is a very different kind of investment. And so I think it’s very intriguing and people love to talk about it. So I think we end up fielding a lot of questions on what role does real estate play in my financial plan and how do I really take advantage of it? 

Mary Beth [00:01:49]:

Yeah, agreed. And I think there are so many angles that we can hit to talk about this. I mean, the American Dream is one thing. Just breaking that down to what it looks like today, the idea of owning real estate as a passive income source and is real estate rental income or commercial? Is that really truly passive income? And what does it look like, the concentration risk involved there, et cetera. So we’ll try to cover it all today, give you some CFP knowledge of how we approach it with our clients and how we look at it and break it down. So let’s go. 

Neela [00:02:21]:

Let’s do it. All right, so first: myth or fact? People say homes. I’m going to buy my home. My home is the best investment I can possibly make. Mary Beth true or false? 

Mary Beth [00:02:33]:

Maybe. It’s a ‘depends.’ 

Neela [00:02:39]:

Talk us through it. 

Mary Beth [00:02:41]:

I go with ‘it depends.’ And I think this is up for negotiation. It depends on if your real estate home is a buy and hold strategy. So obviously, we have no idea where the market is going. Real estate trends upwards over time. It depends on where you’re purchasing, the market you’re purchasing in, where interest rates are at the time in terms of your mortgage. But I would say potentially – wait, sorry, go back. You said the best investment you’ll ever make? 

Neela [00:03:03]:


Mary Beth [00:03:04]:

No. Oh gosh, I don’t know. 1960, you bought a house in San Diego maybe, right?

Neela [00:03:12]:

It’s so hard. I mean…

Mary Beth [00:03:14]:

I think I’m not doing great here. I don’t know, I’m at a maybe, y’all, I’m at a maybe. But I want you to know the risks going into it. It’s a potential, but know if you’re going into it. 

Neela [00:03:23]:

Yeah, I think that’s exactly right. It can be and it also can’t be. I think there’s a lot of things that go into making real estate a good investment and I think there’s also a lot of ideas that people think that it is better than it is. 

Mary Beth [00:03:36]:


Neela [00:03:36]:

Once you examine all the costs associated with it. 

Mary Beth [00:03:39]:

Yeah, I think if you’re talking about your home, because we’re looking at your home, just appreciation, not generating income off your home. So the perspective of the investment in your home being the best investment you’ll ever make, I think that depends on your hold strategy. How long are you staying in the home, the market that you’re buying in, what interest rates look like when you do buy, and what the mortgage payments look like for you. But it really depends on if it’s the best investment you’ll ever make. You will have to cash in on that at some point in time. I think the hold strategy for that is the big question. The ownership part of it, the American dream and the owning something and having ownership over something that you can control and all of the maintenance and things that come with all of that. I think that’s like that dream side. But it really depends on where the market is at that point in time and what your life plans out to be as to whether or not that truly will be the best investment you make in your life. Obviously, the market returns are pretty competitive. 

Neela [00:04:31]:

So when we think about, “Do you want to be a real estate mogul?” We have people who come in who own 100% of their net worth in real estate. They have their personal residence and then they own one or more rental properties and are interested in owning more. What else do you see with people that are very interested in real estate?

Mary Beth [00:04:50]:

So with people who are really interested in real estate, sometimes I see a mistrust of the market, of the stock market. Right. And they view the rental real estate, they view the real estate empire as a way to create that steady stream of income. The misperception that I also see, though, is that I think it’s a branding issue that real estate investments have that it’s passive income. And that’s always been the interesting thing that I’ve seen over the past few decades. Real estate investing is very trendy. There are so many blogs and just other sub brands dedicated to real estate investing. And the idea that this is a passive income when people are spending so much time invested in learning about it and then actually maintaining or outsourcing the maintenance and then flipping and then trying to get new renters in there and managing those processes. I think that’s the interesting thing is the mindset around it. Some people are all in on real estate, some people are all in on the stock market or on public markets. I think that’s the interesting psychology thing that I see a bit, and a lot of my work ends up being trying to get people to allocate some of that real estate money into the market to diversify because of concentration risk. I don’t know if that’s what you’ve seen, too, but the concentration risk has always been an interesting avenue to hit on. And it really depends on where those people are in their careers or the fields that they’re in and why they’re so passionate about it. It’s almost as if somebody’s fully invested in their employer stock plan and you’re trying to get them to diversify out of it. 

Neela [00:06:11]:

Yeah, I totally agree that you end up seeing people who are very comfortable with real estate and so they are all about real estate. But there is an underbelly. It is very hard to own a bunch of properties and be a very passive owner unless you are paying for management companies and then that kind of eats into your return. So when you think about the real estate strategy, what is an individual’s goal? Is it that they want to own all of these different real estate buildings, et cetera? Or are they looking for income replacement? What do you think? 

Mary Beth [00:06:42]:

I think that is the exact question. This is personal finance depending on if it’s a business that owns the real estate, if it’s you personally in your own financial plan and your financial portfolio. But what is the goal with real estate is always the question that I start out with. If somebody’s coming to me and they want to invest in rental properties and they want to pursue that as a strategy, I ask what the goal is. Is it about diversification? Is it about income replacement? Is it about ego? Because sometimes real estate ownership is about ego and so really understanding the risk tolerance involved, but understanding the individual client and what their goal is for the real estate, then we can advise around it because we’re always going to advise some sort of diversification strategy. So depending, even with real estate, the markets that you’re buying in, if it’s commercial versus residential, the types of homes in order to diversify a real estate portfolio. And if you’re buying individual units, you do have to go quite big and broad in order to have that diversification. And sometimes it’s not even enough. Especially if all of your eggs are in just the real estate basket. 

Neela [00:07:40]:

Absolutely. And when we talk about diversification, we’re not saying two properties. We’re thinking about there’s a lot of different types of real estate. There’s personal real estate, like homes, single family real estate. There’s multifamily apartment buildings, there’s commercial real estate. And then you also have types of markets. Is it a core market? Is it more of a fringe market? What is the geography, what are the risks associated with that geography? I live in Los Angeles. Me having seven properties in Los Angeles. That’s one type of diversification. But I’ve got a lot of Los Angeles exposure risk. And so making sure that you’re, like you said, really taking into account, “How do we diversify, what does diversification mean? And do I have the capital to properly diversify my real estate investments?” 

Mary Beth [00:08:26]:

Exactly with all of that, the diversification strategy. And then you’re at the will of interest rates. So where interest rates are right now in terms of impacting the financing that you can obtain if you’re needing to continue to build on this strategy, the way the debt is costing, and if you’re trying to pursue this on an ongoing basis, what’s happening to markets now versus what was happening back in 2020, very different. So understanding that cost of capital and the impact or wrench that interest rates can throw into your strategy.

Neela [00:08:54]:

100%. And when you’re thinking about it from a cash flow standpoint, we also have to be prepared when things don’t go our way. So I know of clients who had a number of different real estate holdings and then the pandemic hit and nobody was paying rent. And so you think about the kind of cash flow buffer that you might need the more in the real estate game you are. You’ve got to be able to weather some big bumps just in case, because like you said, you are in one sector and so there’s a lot of things that can be thrown at you. You’ve got to be able to weather some of those risks. 

Mary Beth [00:09:28]:

Yeah, so let’s do pros and cons. Let’s hit the benefits of real estate in a portfolio and then also on the other side, let’s hit some of the risks. So long-term appreciation. Talk to me about that.

Neela [00:09:42]:

Yeah, I think it is an important asset class. It is part of a diversification strategy and that real estate prices tend to go up over time. Now, unfortunately, with real estate, you don’t see a stock ticker on your front yard and so you don’t often see the same kind of volatility that real estate really has. So I feel like that’s often compared to the stock market of, well, real estate is not as volatile. 

Mary Beth [00:10:05]:


Neela [00:10:06]:

Well, it is. You just don’t really see it because you don’t have that ticker right in your face. But the reality is that in most cases, real estate does appreciate over time knowing that there are peaks and valleys to the housing economic cycle. 

Mary Beth [00:10:18]:

Agree. One of the things I’d say I know that happens in our household, and it happens with clients, is going to every real estate website, Zillow, Redfin, all of the websites, and then taking the average of those and assuming that is what your house is worth. So that’s what happens quite a bit. Not necessarily true. And so I think that’s the biggest thing too is understanding the individual markets that you’re in. So where we are, for example, we’re in San Diego County. We’re not in San Diego City though, and we know that when we bought into the community that we bought into, we are one of the first communities to get hit when prices go down. When the market downturn happens, our community is going to go down before the rest of San Diego goes down. That’s just the nature of the community that we’ve seen the trends over time and we knew coming into this that when everything started to pause or slow down, we get hit first and we’re seeing it now. So I think that’s understanding the markets that you’re buying in and the trends that happen over time, there could be a steady increase. But are you buying in a market that is likely to be hit first or is there some sort of stability there? So that knowledge is important to have. 

Neela [00:11:16]:

Which then, as we talk about buy and hold as a great strategy, generally, the longer you hold something, you will get some sort of an appreciation from it. The question is, will it be enough compared to what you could have gotten in other markets? 

Mary Beth [00:11:27]:

Exactly, yeah, it’s a paper gain at the end of the day until you lock it in. The other pro, obviously we talked about rental income. You’re going to generate some sort of rental income. You’ll have a steady cash flow. That is where a lot of people – they call it passive income. What we just talked about is really truly passive and so that rental income is a great boost to your own cash flow, assuming you need to make sure that you’re netting positive on the other side of the mortgage payments, property, additional expenses, management companies for managing those properties. So the passive income comes from that net positive cash flow that you are hopefully getting from that rental income. 

Neela [00:12:01]:

Yes, I’d say another piece is taxes. Our tax code favors real estate investing. You can tell that the real estate industry has a very solid lobbying game in Washington because you get all types of deductions when you invest in real estate. You’ve got to keep really good records. And we talk a little bit about are you a passive owner, are you an active owner? That really does influence your tax treatment. But investing in real estate can be a big win from just a pure tax standpoint because of things like depreciation and deducting the costs associated with running the business.

Mary Beth [00:12:38]:

And there are strategies like 1031 exchanges that people deploy to exchange the properties. So I think, yeah, the depreciation, those things. If you’re looking into rental real estate. If you’re looking to become a real estate mogul, really understanding the tax advantages of it is where it’s going to benefit you. You need to make sure you have a very solid CPA on your side. If you’re not looking at the numbers as closely, you want to make sure that there is somebody who is helping you to maximize the strategy there. 

Neela [00:13:03]:


Mary Beth [00:13:04]:

Going in tandem with the rental income is the inflation hedge. Ideally, real estate can act as a hedge against inflation when we’re increasing rents over time. Inflation goes up, interest rates go up, your rental income ideally goes up as well. It doesn’t necessarily happen like that in real time, though. Some people are just happy. I have family members who are like, “I’ve got a tenant in there and I’m keeping them for four years at the same rate.” You’re like, maybe, but you’re right. You run the risk, though, of increasing rent and then those tenants leave and then you have turnover. So understanding what your comfort level is with that. But ideally you get the inflation hedge there with the increase in rental income. 

Neela [00:13:39]:

Yeah, agreed. I’d say the only other one I can think of, and I’m curious if you have others, is the physical nature of real estate for some reason gives people the warm and fuzzies. They’re like, “It’s real estate, you know, they’re not printing any more earth. There’s not going to be any more earth. And I’ve got my land of earth, my land and the fact that it is fixed and that people can see it as an investment, like a physical investment,” people like that. And it is somewhat immune from the day-to-day volatility that you see from a stock market standpoint. It’s there, but you just don’t see it in the same way.

Mary Beth [00:14:17]:

Yeah, I’d say the psychology behind that plot of land, that stability is a big one. I would also say, I don’t know if it’s a hot take, a lot of wealth has been passed down to future generations through real estate. So real estate has been leveraged to create generational wealth in a lot of families, and typically those are white families, if you want to go back into the history of the United States and everything we have going on here. But the generational wealth transfer that happens in real estate is an interesting strategy. Maybe not necessarily the best one, but I know that does happen, especially with older generations. I know that they very much hold on to the family home or hold on to the lake house or the summer house, and that gets passed down. So real estate has been a way for older generations to pass some sort of tangible history down to the next generation. 

Neela [00:15:06]:

Totally. Okay, so there are some pros, and I know you and I could probably spend 75 hours talking about some of the cons and the gotchas just because we want to make sure people have the full scope. So when we think about the cons, what are the big ones that you come up against?

Mary Beth [00:15:22]:

Oh my gosh. I’d say lack of liquidity is a big one, less liquid than other investments. And every time you turn over a property, if you are selling a property, you’re typically going to get hit with those sellers fees off the bat, unless you’re your own real estate agent, too. In which case, again, it’s not passive because you were investing so much of your time in what’s your time worth. So I’d say the lack of liquidity is a big one depending on what your financial planning goals are. But that’s one of the risks. Yeah. How about you? 

Neela [00:15:50]:

I think the idea of being along for the ride for whatever the market’s doing, it is one asset class. So you experience market volatility whether you think it or not. And you mentioned interest rate and how interest rates play into it. But ultimately, you want ultimate flexibility when you invest in real estate, because you don’t want to be in a position where you need to sell, because you’re a distressed seller, because something’s happened in the market or you don’t have liquidity elsewhere, or your tenants aren’t making their rent. And so you are on the market volatility cycle and you’ve got to be prepared to do that and to be on that ride and not kind of get caught in a position where you have to make a move that you might not want to make. 

Mary Beth [00:16:33]:

Yeah, I would say how it’s played out in my experience in working with clients. So I work with typically clients in their 30s, 40s and what I have found with rental real estate – so I have a subset of clients who have been in the military. Based on my husband being former military, we ended up with a lot of military clients. And military, as we know, they get moved around a lot. So going back, we did talk just before we hit record about buying homes. So they’ll buy homes in the city that they’re in and then they’re going to turn that one into a rental property and they’re on their way into the next place. They want to buy a home there, turn them into rental properties. And the fact of the matter is the amount of time involved in them, the number of clients I’ve had to assist in unwinding those rental properties, which means selling them because they’re cash flow negative, it’s never the huge win that people are looking for. Unless you’re looking maybe at the appreciation again over a buy and hold in the value of the home, that could be one thing, but the cash flow, it’s kind of a little bit like dying a slow death. Sometimes you’re nickel-and-dimed into the negative over time, and there are tax benefits. But when you’re looking at the time involved, the tenant turnover, the stress factor of it, that’s been I think the negatives of it is unless you’re really dedicated and doing it well and investing your time in building a thoughtful strategy. And over the long run, if you’re just doing the one, two, three-off different homes, those are the ones when you start to really dig into the numbers with clients. This is your everyday clients, right. Not the ones that are necessarily specializing in it, but wanted to collect a few properties over time. Those are the ones the clients are typically surprised to see that they’re cash flow negative. I don’t know if that’s what you’ve seen or if you’ve had experience. 

Neela [00:18:02]:

Totally. There has been exactly one instance where clients come in and I’m like, “Oh, you’re actually doing great from a cash-on-cash basis.” 

Mary Beth [00:18:10]:

I get so excited when I see those. Like, this is a different message that I typically deliver. 

Neela [00:18:14]:

Yeah, because to your previous point about raising rents is what we typically see is that a client’s held on to a property, maybe it was their first home or something, and they’ve held onto it and they’ve rented it out. What they’re doing is they’re renting it way below market. They’re either paying a property management fee and so they’re cutting into whatever slim profits they already have or they’re finding themselves fixing broken pipes at 10:00PM on a Friday, which is talk about what is your time worth, and then we also have to talk about the opportunity cost of what that money could be invested in. So it’s not just in addition to cash flow. There’s equity in those properties. And is that equity working as hard as it could be? And you made the point on general diversification and lack of liquidity. When you own a rental real estate investment, you’ve got a single family home. When you need cash, you can’t just sell a bathroom. You got to sell the whole darn thing. You can’t be like, “You know what, I’m going to harvest this shower and be able to pay my property tax.” Doesn’t work like that. 

Mary Beth [00:19:14]:

Doesn’t work that way. Exactly. And that’s a really interesting perspective. We take that with when clients want to buy a second home, right? The goal of a second home and what’s the goal behind it? What’s the ‘why’, what’s the opportunity cost of that capital? Versus can you just take a chunk of that money, allow yourself to spend and splurge on a vacation every year, every other year with your family at a destination of choice, and then deploy the capital in a different way where it can leverage and grow for you? Versus again, then you’re dumping it all into this one home, and then you really got to use it, right? And then you feel guilty if you’re not using it or you can VRBO it. There’s that also but that’s that perspective we take, too, with second homes, or I’ve taken before, is again, what’s the why behind it and what need does it fill with your family? And I’m not anti- second homes. I’m not anti- rental real estate. I am pro going in with open eyes in the perspective of what the pros and cons are. Each side is right and making an informed decision. This whole episode is really about the rose-colored glasses with rental real estate and the branding and the messaging and the money that so many TikTok-ers and everybody makes off of just getting to passive real estate. It’s just not that. And so it’s really about making an informed decision for how it best supports your life and needs. 

Neela [00:20:20]:

Definitely. Real estate is often approached as this is how to do it, because this is how to do it. But what I think you’re getting at, too, is what is the ‘why’ behind it? And does that – how does owning a bunch of real estate property, does that actually support your ‘why’? Or is it just kind of another means to the end? Because I feel like the people that I know that really make it as the real estate mogul, as we would say, it is a grind. And they work really hard. Yes, they are tracking their hours and they are tracking their expenses. And I hope they make a lot of money because they are putting so much time and energy into it that I’m like, “You go!” 

Mary Beth [00:21:00]:

Right? I have so much respect. I have so much respect. I’m like, as long as that is what you are choosing to do, and it makes sense for you and you’re making the money that you feel that you should be making off of it, I am all for that. But knowing again, the balance and the priorities of so many of our clients’ lives that come to us looking for more time or a sense of peace and then they’re like, “Let’s be rental real estate owners.” I’m like, “Remember, you wanted peace in your life. You wanted more time to travel with your family. How do you see that panning out?”

Neela [00:21:33]:

It’s a Venn diagram. And they kind of bump up against each other. We got to kind of pick one.

Mary Beth [00:21:38]:

That’s it. I’m just like, again, going back to those things. Again, opportunity costs, time, money. If that’s something you’re looking for, let’s make it happen. But again, knowing the risks – we hit on the financing, we hit on interest rate risks. So again, if you’re trying to start your real estate mogul strategy today, you might want to wait twelve to 24 months. And then I’d say management and maintenance. There’s just regulatory and legal risks. I think when you’re rental real estate, in terms of what communities you are allowed to do, rental properties in VRBOs, I know there’s lots of zoning laws, tenant rights. What we were just talking about. We’re talking about doing a team retreat and what did you tell me about Palm Springs Neela, that you knew? 

Neela [00:22:14]:

So they have very strict noise ordinances, and they do not mess around with those noise ordinances. So you are outside your house after, like, 9:00pm. Palm Springs is not happy. You are not welcome, which you’re there, and you’re in this magical area, and it’s quiet, and I get it. But take that into consideration, because if you are renting out your property in Palm Springs and you have guests who do not know that, you will know soon because you will be notified. 

Mary Beth [00:22:45]:

Right. So these are things to keep in mind as you are pursuing the strategy, there are risks that can come in and surprise you and cost you. 

Neela [00:22:54]:

Yeah. And I don’t think we can underestimate how important the time piece is. If you own real estate and you are putting your time into it, whether it is Airbnb, you know, a VRBO type situation or you’re actually owning a property, it costs a lot of time. So I want to give a little story about my brief foray into being an Airbnb host.

Mary Beth [00:23:16]:

Do tell.

Neela [00:23:16]:

So when we first bought our house, it was just my husband and me. We had an in-law unit. We were coming from a much smaller apartment, and we were like, “Hey, we can rent this puppy out for extra income.” So we put it on Airbnb, and we started being Airbnb hosts. This is, like, eight years ago. Within a week and a half, I found myself leaving meetings early so that I could go home and scrub a shower. And I’m like, what am I doing? What am I doing? This is insane. Somebody left the air conditioning on, sent our utility bill through the roof. You’re going back and forth with people in terms of, “Hey, where do you recommend we eat around here?” Just punch me in the face. So never again. Never again. I’ve entertained the idea of being an Airbnb hostess for about three weeks, and that was enough, and now I’m done. Never again. Thank you very much.

Mary Beth [00:24:05]:

I love it. So that’s one story. And I’d say conversely, I have a great friend who they just financed. They built an ADU on their property. And so the long run is that the in-laws are able to move in there should they need to in the years ahead. However, as of right now, they’re getting six-month renters in there. And so she’s already run the numbers, crunched the numbers like, “Okay, cash flow at X amount. We’re going to get our financing paid off in seven years. Then it’s going to be cash flow positive after that.” So that is, again, this is a financial planner good friend who did these numbers. So then you’re making a strategic, informed investment decision about the ROI of like, “Okay, I’m going to cash flow it and running the numbers,” and she’s got the break even. And even what the costs were, the estimated one cost for the build. And obviously once you get into the projects, they cost a little bit more. But keeping track of that over time and knowing the break even and when you’ll start to cash flow positive on it, those are the important things when you’re looking to get into real estate. It is a hobby and an investment and so making sure you’re in those numbers. And again, going back to what is your time worth because it’s not just the scrubbing the toilets, it’s also hearing about all of the locks that have been changed and all of the upkeep and getting the house ready. So your time worth there and your time worth for the adjustments along the way and the stress of additional debt sometimes too, in some cases, to pay off. Hello. I’m just maybe a little debt averse. 

Neela [00:25:19]:

If somebody hypothetically was debt averse. 

Mary Beth [00:25:22]:

Yes, somebody hypothetically. But I am, for me, I very much respect all of my clients and I encourage them to do what works and makes sense for their financial plan. But I think that’s true. And this friend of mine as well, understanding even if you’re not debt averse, when you end up in more debt than you expect to be in some cases, it’s still like an impact, right? And you still get a little stressed and you’re like, “Okay, I’m going to take this debt on.” But then you have the debt and then it’s still a little stressful. One way or another. I’m actually okay getting the debt and then I get it. And then I’m like, “Oh, uncomfortable now, still here, now I see it.” So I think that’s the thing. And then is real estate something you enjoy? 

Neela [00:25:58]:

Yeah. Do you enjoy it? 

Mary Beth [00:26:00]:

And I can’t help but go back to I was sitting with my almost 94 year-old grandmother. Is she 94? 93, at breakfast three months ago. And we were talking about hobbies and ways she’s spending her time. And I was trying to encourage her to go out to lunch with some of the friends she’s making in the community she’s living in. And she said, “I don’t want to go out to lunch when they feed me here. Why would I go out to lunch and spend money on lunch? They feed me perfectly well right here.” I was like, “Well, you should probably get out. What brings you joy? What brings you joy in your life?” She said, “You really want to know what brings me joy? Real estate. Real estate brings me joy.” And I was like, “Yeah, I can see that. I get that about you.” So 93. She’s like, “Hey, I respect that, this is it.” And real estate was her answer. And I was like, I got respect. And it is, it brings her joy. And who am I to tell her otherwise? 

Neela [00:26:54]:

I’m going to go on record and say that real estate brings me marginal joy. Mostly just the real estate that I live in. I like that piece of it and I never want to be on the hook for somebody else’s toilet ever. 

Mary Beth [00:27:07]:

Agreed, agreed. We’ve talked about with clients, and then personally for us, more maintenance. It’s more and more maintenance and you just have to be okay with that. And a lot of people are. And I think that’s great if you are. But again, going into it with knowledge, understanding the risks and the potential benefits of rental real estate and knowing we’re never going to recommend that you have a full portfolio of rental real estate. And we’ll recommend diversification, I think across the board for clients in general. 

Neela [00:27:36]:

Absolutely, yeah. I think that the clients that have had the most success are the ones who have kept it to well below 50% of their overall net worth. And that is also spread out across a lot of different types of real estate. Generally they have professional management, but then they have a big other chunk of their net worth that is diversified a little bit more liquid and they get that exposure. Because we do believe that real estate is an important part of your investment plan.

Mary Beth [00:28:03]:


Neela [00:28:04]:

But also don’t get so caught up in the, like you said, the rose-colored glasses because while people say, “Hey, real estate, it is the best investment my parents ever made,” chances are it was the only investment that parent made. Because in essence, real estate is a forced savings mechanism because you make principal payments and so it acts as this kind of forced savings mechanism that might often make people think that it’s a better deal than it is. 

Mary Beth [00:28:34]:

Right. I would say just in closing, the thing to keep in mind is, yes, real estate is an important part of your portfolio. Your home is one portion of that. You don’t need to own additional properties outright in order to have real estate as that portion of your portfolio. There are funds and there are ways to invest to supplement the real estate, the fixed asset portion of your financial portfolio. So make sure you’re talking with your advisor about what that looks like. If you’re not sure if you are invested in real estate in your portfolio, you very likely could be. It’s a question to ask. So if you’re looking to get that real estate exposure, you don’t necessarily have to go out and buy homes or commercial properties in order to make that happen. 

Neela [00:29:10]:

Absolutely. So that’s it. In the sake of closing, we end with should I own real estate? Should I be a real estate mogul? And the answer is, it depends. 

Mary Beth [00:29:20]:

Maybe, talk to you next time. 

Neela [00:29:22]:


Mary Beth [00:29:24]:

Thanks for tuning in to today’s episode of If Money Were Easy. If this is the year that you want to expand what’s possible with your money and you can use some professional guidance along the way, head over to and schedule your free consultation.

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