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Have you heard of Hotdogs or Legs? It’s an Instragram hashtag to see if you can tell if a photo is of legs or actually two hotdogs!

I’m in Mexico chilling on a beach, so you are going to have to go without a new article this week.

If you miss me, grab a margarita and try my ‘mexico we go’ Spotify playlist.

Let me also point you toward a couple things you can learn while I’m away killing brain cells with too much mezcal.

Understanding Money

I don’t have an econ background, nor do I think anyone really understands it. I mean no matter how much macroeconomics you know, it isn’t going to make you a great predictor of what is to come.

Yet you don’t have to understand it to benefit. Inflation is what a leveraged rental property investor wants AND it is what the US government wants.

Check out my article digging into the numbers Inflation: The Great Mortgage Destroyer.

Understand how it is measured, so you can decide if the published numbers match your reality:

Understand why governments create inflation:

How will unfunded entitlements be paid? With a dollar that isn’t worth a dollar anymore. With inaccurate CPI adjustments. Who benefits the most? Leveraged rental property investors!

Check out more videos about Inflation and Quantity Theory of Money.

Around the Web

Coach Carson is a real estate pro and great writer. I love his graphics that break down complex numbers into something you can easily visualize.

He wrote a series of articles about different ways you can succeed with rental properties. It isn’t one size fits all. The one that is closest to what I recommend?
The Trade-Up Plan – How to Retire in 8 Years Using Tax-Free Exchanges

Eric Bowlin is another full time investor I met last year at Fincon. I fully expect him in 10 years to be a big baller. He is going places and sharing his knowledge.

The most common excuse of not getting into real estate is no money. Check out How to Raise Cash Like a Champ For Your Real Estate Deal.

Sam at Financial Samurai is already financially set. He wrote an article Focus On Trends: Why I’m Investing In The Heartland Of America. Check it out, it is a great read.

I agree with the premise to invest in heartland real estate, but recommend you go about it a different way. For most people being a direct owner is way better than crowdsourcing like RealtyShares. You want to be financially stable in what you are planning on investing in, especially if you are intending on passing this on to future generations, so you’ll need something like a Trust and Estate Attorney to keep everything in line and legally above board, so be aware and remember to take precautions where needed.

Michael at Financially Alert is one of my best internet friends. Yes, that’s a thing. He has a couple of rental properties that are doing very well. I cannot possibly tell what strategies he uses or how he keeps the property maintained to always make them look lucrative to potential clients. Of course, he must be ensuring the houses are painted, locks changed (he may have to find a local locksmith, for that matter) and pests removes (if any!) in between the moving out and moving in of the two sets of tenants, but to give you a correct estimate, I would have to consult him.

You can check out how he rebounded from a poor start in My First Rental Property was a FAT Failure.

Up Next

I’m going to be sharing the actual numbers of my cash out refinance.

If you haven’t read it yet, start with my article Let’s Double Down! Cash Out Refinance on a Rental Property. This will make sure we all start on the same page for “why” before we get into “how”.

I want to hear your thoughts, just don’t expect a reply until I’m back in San Francisco:

• Do you think there will be much inflation over the next 30 years? Is it under-reported by the government by even 1% a year?
• Do you have any real estate websites you follow that I should check out?
• Is there anything you are specifically interested in learning about my cash out refinance?

Photo: justsayu

Remember the “we are the 99%” slogan? It was everywhere just a few short years ago.

It’s about income inequality. The richest 1% of people, with 25% of the income and 40% of the assets, making decisions through the financial crisis that hurt 99% of the people. A lack of regulation leading to the mess, bailing out banks, quantitative easing, and more.

The Occupy movement peaked in 2011, but Bernie Sanders (and Donald Trump to a lesser extent) showed it is a powerful message that won’t be going away any time soon.

Movements are difficult for me to wrap my head around – What do you think you are accomplishing by living in a tent in the park?

Maybe I’m just too rational, but I do know extreme income inequality is unequivocally bad for the average person. Taken to an extreme, it leads to a class system – haves and have-nots, with little mobility between classes with little or no chance of the average person coming into riches or developing beyond their class.

Things are getting worse. The rich are getting richer.

What if we are responsible? What if the actions of the 99% are the reason the 1% keep getting richer?Tweet this

Voting with Your Money

We have been told our votes put people in charge to act on our behalf. Wouldn’t that be great, but unfortunately it isn’t true.

In today’s world, the economy is king. Every elected official, no matter how powerful, bends to the will of the economy.

Do you think the president is going to make a decision based on your vote or the fact that a bank failure will kill jobs?

Do you think your opinion is more important than the dairy lobby’s opinion, who represent the interests of far more people?

Your real power lies in how you spend your money and your ability to make noise. We have seen a small vocal minority get recognized because of how much noise they make, but I’m not the type to join a movement any time soon.

Let’s take a closer look at voting with your money.

The Hypocritical Environmentalist

“I care about global warming, I am an environmentalist! I can’t believe the government isn’t doing something about this! Rabble, rabble, rabble!”

But what about:

• Amazon Prime delivering you packages multiple times per week in unnecessarily huge boxes?
• Flying your family somewhere for a long weekend?
• Eating red meat often enough to average over an ounce a day?

It is easy to have a disconnect between your view of yourself and your actions.

No judging, me too. It is natural to not dwell on the actions that contradict your view of yourself. If it does pop into our heads, we brush it off with ease. It’s called cognitive dissonance.

Perhaps your indignation about the lack of government action should be directed towards your locus of control. What changes can you make to your life, and how can your actions influence others around you to do the same?

Do you think there will continue to be hourly flights to Cancun if they are only half full? Nope. It is a business, they won’t lose money just for fun.

You are one small part of the economic system that is causing the issue.

Tiny Impact, Why Bother?

Small changes in behavior don’t have much impact on their own. So why bother?

You have more impact on your close friends and family than you think. Simply talking about your change in action (without forcing your beliefs on them like a teenage vegan) has the potential to change their behavior.

That’s where the multiplier comes in. Now your neighbor Carl is a disciple spreading the gospel of your cause. He knows other people, has a different family, and impacts those around him.

With any luck, the impact becomes exponential.

Back To the Rich Getting Richer

We took a detour looking at hypocritical environmentalist, but let’s look at something causing the rich to get richer.

We complain about Wall Street, we complain about corruption, we complain about CEO pay. Yet there is a mental disconnect with our actions.

Wall Street has that power because of the money. Why do they have so much money?

First, they are huge companies with huge revenues. You can switch from Walmart to your local grocer, paying a little bit more, but circulating more money in your town rather than the pocket of a CEO. That is a tough action to take as you are often sacrificing something (like paying higher prices or less selection). I want to explore another area that is win-win.

You are an investor in Wall Street. You are propping up stock prices with your retirement savings.

We all do it actually. Somehow it became the default way to save for retirement. “We have this mutual fund – give us your money and we will take care of the rest. Perfectly safe, nothing to see here.”

Some of us do index funds, but it is all the same. There is a fund fee, transaction fees, high frequency traders get their cut, and the money that actually makes it through that fee funnel boosts the power of the corporation. Empowering Wall Street every step of the way.

Why do we all do this? We believe it is in our own best interest and don’t know about any alternatives.

Some of it is effective marketing: telling us we can expect solid returns. Some of it is corporate trickery: 401k plans at work with limited options. Some of it is government intervention: tax breaks that influence our behavior.

But what options do we have?

Controlling Your Own Investments

An investment is giving money or other assets to earn a greater amount in the future.

This fundamental concept is obfuscated in the stock market. We don’t know why we get a greater return, we just hope it does. And it usually works out. Sounds a little like gambling – but that’s why we do index funds, to remove some of the risk.

What if you didn’t shotgun your money around Wall Street, and actually took your money to Main Street?Tweet this

What would that look like? Peer to peer investing, investing in local businesses, starting your own business.

Wait a minute – starting your own business is investing? Yes – you are investing both your money and your effort.

If you are willing to put your own effort in, whether identifying a non-default investment or creating your own, you have the potential for greater returns. If you do the same as everyone else, you can expect the same result as everyone else.

Of course, starting your own business isn’t easy but there are so many resources out there willing to help. If you are planning to start your own business, there are a few elements you need to consider. There will be a lot of paperwork involved, from any licenses or permits that may be needed to staffing capabilities and even finding appropriate premises. Not to mention, you’ll need various marketing campaigns and a well-designed website which is easy for visitors to use. However, resources like those on https://victoriousseo.com/services/off-page-seo/ will prove very useful when it comes to being visible online and reaching the desired target market. With their advanced SEO tactics, the webpage would be visible in no time. Plus, bringing on board other professional gives you the time to focus on what’s important for the business and push it into the direction you want, rather than taking on a workload that is too big.

Does that sound too difficult? What would you even do and is it worth it?

The Easiest Local Business

Investing in rental properties is the easiest way to become a local business person.

Just about everything involved with the rental is local – the tenant, the property manager, the handyman, the taxes, and more. Sometimes the mortgage and insurance too. I would always recommend using local businesses if you want to get into property. I spent ages looking at local property management companies and finally found the perfect one. The same applies to local electricians and insurers.

What makes rental properties an easy business? Everyone understands it and as long as people are living, they need a place to live. There is cashflow along the way, not just a black box of asset appreciation. It is a proven model.

There are an incredible number of ways you can be a rental property investor. You can invest a lot of your effort-asset, or practically zero.

Me? I pay for someone else to do most the work and consider my rental portfolio fairly passive (1-2 hours a month). And my properties aren’t even local – they are on the other side of the country. I believe I can earn a 20% yearly return, and I’m well ahead of pace so far.

Even though the properties aren’t local to me, I am still investing in small local businesses, not Wall Street. Someone found the deal on the house and referred it to a flipper rehab company. The rehab company used a team of contractors to fix it up. The title company does the transaction. The property management company is anywhere from a 1 to 100 person business. If anything breaks, then an experienced handyman or plumber (for example, Alpharetta plumbers) gets a call immediately. In such instances, they might be able to offer better assistance!

Each step along the way, a local business gets its cut. With index funds, Wall Street gets its cut at every step. Who would you rather support?

In the end, I achieve a much greater return by putting in a little bit of effort.

Is it Worth It?

That is for you to decide. It is hard doing something against the crowd. There are common objections that pop up, like it being too risky.

Is it really riskier? For a comparison you have to understand the risk of the default approach. Everyone with paper assets that can see their value disappear over night. No control in the decisions of the company. Huge exposure to lawsuits that drain profits. Not even producing cashflow, just hoping the stock price goes up. Do we believe there is no risk because everyone is doing it?

Understanding the investment and having complete control keeps the risk in check. Diversification is still important. It is possible with different markets and property types.

Hopefully rental properties can be your gate-way drug into more local business down the line. Maybe you want to take on responsibility and cut costs by managing the rehab yourself. Or starting a small property management company. Or even something outside of real estate entirely!

Start with the easiest business and go from there.

You have the power to stop the rich from getting richer.

I want to hear what you think.

What holds more power – your vote or how you spend your money? Do you agree changing the default way to save for retirement would remove some of the power from Wall Street? Would it halt the rich getting richer?

Do you agree rental properties are an easy local business to invest in? What are your objections? Too risky? Too much work?

I’ve connected with many rental property investors since launching Rental Mindset. Why are so many rental property investors engineers?

As I think about the dozens of rental property investors I’ve met in the last year, I’ve noticed many are engineers.

Examining data, patterns will start to emerge. Are those patterns telling of some information or just random chance?

What does it say about the traits of someone who self-selects those two groups? Are there any conclusions we can make about who will be a successful real estate investor?

Be careful examining two independent variables

Science starts with a simple observation about the world, a hypothesis for why things are the way they are, then trying to design an experiment that isolates just one variable.

It doesn’t stop with a just an observation because …

Correlation does not imply causation

For example, bet you didn’t know the marriage rate in Wyoming moves in step with the domestically produced passenger cars sold in the United States.

It is easy to form a hypothesis about why those independent events are linked: “Well when you get married you start a new life together and will often get new things – a new house, furniture, and even cars. And Wyoming is the most American state, so most the cars they buy are American made.”

Similar stats could also be applicable to other states and cities. People buying a new house or renting one might look for movers mechanicsburg pa, for services such as junk removal, storage facility, or interstate movement. In addition, relocating families may also require lots of new supplies.

Humans are really good at rationalizing. Perhaps we should be more like this guy:

The truth is often somewhere in the middle.

Engineers and Rental Investors

Digging into this, my first thought is to visualize how big each of the Venn diagram circles are. Are there more engineers or rental property owners?

There are a lot of engineers out there. This says 19.6 million in the United States with a bachelors degree in science and engineering.

There are a ton of rental properties in the US. 43 million households rent (source), with 76% of those being 1 to 4 units (source), with 92.5% owned by individual investors (same as last source). This says there are 22.8 million landlords in the United States. (So the average is to own 1.3 units? That doesn’t sound like very many. I’m above average!)

Wow, so those two categories are extremely similar sizes. Roughly 20 million people in the United States, 8% of the adult population.

How Much Overlap?

This is where things get tricky. I don’t know that we are going to come up with an accurate answer, but let’s dig in.

If the two variables (rental investor and engineer) are not related at all, we would expect that 8% of engineers own rental properties and 8% of rental property owners are engineers.

It has to be way more than that.

I would guess 50% of rental investors are engineers. However, since the two groups are the same size, would I state that 50% of engineers own rental properties? No way.

Unfortunately I don’t know if the census data allows for doing an AND on two different variables like this. That would be ideal.

If we really cared, we would poll a statistically significant portion of those groups and extrapolate.

Unfortunately this is as far as we’ll go for now.

Overlap in Traits

My anecdotal evidence talking to dozens of rental property investors points me towards that 50% estimate.

Simply listing the characteristics of an engineer and a rental property investor also point us towards significant overlap. The stereotype of both are nearly identical.

Both are good with numbers, logical, and prefer tangible things they can touch (as compared to options trading or theoretical physics).

How many people are good with numbers? Comfortable with math? I bet shockingly low. That trait alone is likely highly correlated with engineers and rental investors.

What about you?

Help me gather a bit more data.

I know what it is like to be an internet lurker, but this time, actually leave a comment!

Do you have any rental properties? How about an engineering background (even if not employed as an engineer)? What would you estimate is the overlap between rental property investors and engineers?