"How to Use Real Estate to Pursue Your Life's Passions"
Real Estate Investing Expert
Episode 24: "Best Deals"
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On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith welcomes Jacob Ayers. Jacob is only 28, but has already made his first successful real estate investment. If you’re new to the game, or waiting until everything is perfect to get started, or just uncertain where to begin, Jacob has tips for you. He believes there’s a step that anyone can take in the direction of becoming a real estate investor. His own story is a great example of not letting anything, whether it be lack of experience or capital, get in the way of pursuing real estate dreams. Tune in to hear Scott and Jacob’s full conversation.
Jacob Ayers’ Life and Business Philosophy: Striking a Balance Between Security and Freedom
Jacob Ayers joins Scott to discuss his background, as well as how he balances his day job with his investing career to reap the rewards of both.
[1:00] Jacob is only 28, but began investing at age 25. He shares about the expectations placed upon him by society and his family, which he ultimately found unfulfilling. He graduated from college, joined Corporate America, and knew he wanted something more. He developed an interest in personal finance and investing around age 23, and gave himself an education.
[4:00] After educating himself with the many free resources available online and getting some money together from his day job, it was clear to Jacob what he had to do next: “I bought my first rental property, and here we are today.” Scott points out that it’s possible there are personality types that want the safety and security of a “normal” job, while others are driven to strike out as entrepreneurs and do something different. The two investors speculate whether this is a matter of personality, fundamental values, or something else.
[5:30] Jacob believes “you’ve got to be a little bit crazy to go down this path.” He considers real estate investing his side hustle and works full-time as an engineer. In this way, he’s struck a balance between security and freedom. Scott acknowledges the wisdom in this: “There’s a middle ground, and you have to consider your worst case scenario. For you, that’s ‘I still go to work on Monday, build up more capital, and try again.’”
[7:20] Scott points out that Jacob has built up a community around his philosophy towards work and real estate balance, especially as a young person. Many people approach Jacob with their fears around real estate investing, and that drove him to start his podcast to share his knowledge and experience.
[8:15] Jacob digs deeper into what drives him and his investing: “I think people have a duty to themselves to chase their passions, and real estate investing is a vehicle that allows you to do that.” Even if investing itself isn’t your passion, it can give you the opportunity to pursue the things that you do what truly moves and inspires you. Scott agrees: “Money can’t get you anything. It can only motivate you to pursue another passion.”
Jacob Ayers’ Best Deal: A $25,000 House With a $140 Mortage
Jacob shares the details of his first real estate investment, an almost unbelievably cheap property in his hometown. Yet it has maintained steady cashflow, and perhaps more importantly, taught him many investing lessons.
[9:30] Jacob’s best deal began when he was around 23 or 24, having just spent a year researching opportunities, listening to podcasts, going to meetups, and otherwise getting his free real estate education. He bought a rent-ready property in his hometown in Oklahoma for $25,000.
[10:20] Jacob bought the house with traditional financing for $5,000 down and rented it out immediately. He knew the worst-case scenario was a loss he could afford, as his mortgage is only $140–comparable to Scott’s cell phone bill.
[11:15] Jacob went into his first deal with the commitment to treat it as a learning experience: “I treated the whole thing as kind of an experiment…When I got that first rent check, it was my proof of concept moment.” He resolved to rinse, repeat, and expand.
[12:00] Scott asks Jacob whether he’s ever had a bad deal. He tells a cautionary tale about his first tenants, whom he didn’t screen at all. They bailed from the house after six months and trashed the place. But Jacob says this taught him to screen tenants, rather than taking the first qualified people to offer. He has learned to treat these mistakes as lessons in becoming a better landlord.
[13:45] Jacob discusses how he’s a details guy who wants to know all of the numbers and have his spreadsheets perfectly laid out, but ultimately he has to take the plunge sometimes. He acknowledges a truth about investing: “You don’t know what you don’t know.”
[14:30] But all the reading in the world couldn’t prepare him for the lessons that just doing deals and managing property has taught him.
[15:55] Scott notes Jacob’s natural entrepreneurialism: “You probably learned more in a year of dealing with that property than you could have in a year of listening to podcasts and reading books.” Jacob agrees: “You can only learn so much by paper, and the rest is just by doing.”
[16:00] He acknowledges that cheap properties like his aren’t everywhere, and encourages investors to investigate affordable properties.
[17:00] Jacob talks about how he talks investors through examining markets. This is something he does often with friends who live in expensive, hot markets like Austin and Houston, TX.
[18:00] Scott drops his own bit of advice, explaining why he’s a big believer Jacob agrees: “Partnering as early on as possible is a really good idea. At least having a coach or a mentor to informally look over your shoulder and be a sounding board, voice of reason, and somebody who’s done what you’re doing.” The two investors share their methods for getting expertise. Scott likes to throw small amounts of money at consultants for their expertise. He puts his money where his mouth is, and encourages investors to use and abuse his own law firm, Royal Legal Solutions, in this way.
The Takeaway: Take Action Today to Succeed Tomorrow
The two investors wrap up their discussion by sharing their takeaways. Both Scott and Jacob agree that if you want to succeed in investing, you have to just get out there and try.
[20:00] Jacob’s advice to new investors is to just get in the game: “To get started, you have to take that first step. It can be big, or little. It can be picking up a book or going to a MeetUp. It can be anything, just take the first step.” He encourages investors to get out there, take action, make mistakes, and keep going.
[21:00] Scott agrees, and points out that Jacob’s spirit of not letting fear win the day has contributed to his success. Not allowing “no” to be an option and finding a way to get in the game is essential. Scott offers words of encouragement to those hesitating to get started: “If you keep trying, you never lose. Otherwise, it’s just learning. You only lose when you quit.”
Connect with Jacob Ayers
Connect with Jacob through his website, www.JacobAyers.com. His web site includes many resources, including his podcast The Real Estate Way to Wealth and Freedom. You can also reach him by email at email@example.com, and he’s happy to talk with you.
Thank you for joining us on today’s episode of the Real Estate Nerds Podcast.
For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.
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Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at firstname.lastname@example.org.
When making business decisions that affect your long-term goals, like what types of investments to make with your retirement dollars and which vehicles to use, it really is best to be aware of all of your options. We frequently talk about the Solo 401(k) and Self-Directed IRA as tools for funding your retirement. But what about life insurance? And what about the stock market? What if we told you there is a tool that allows to to reap some benefits of both? It’s called Indexed Universal Life Insurance–and some investors have found it a useful addition to their retirement plans.
What Is Indexed Universal Life Insurance?
Indexed Universal Life Insurance (IUL) plans are a variety of permanent life insurance plan that features a cash-building element. One primary benefit of these plans is that the policy holder gets some of the gains of being associated with the stock market without all of the risk Wall Street is famous for. This is in no small part because of how these policies are designed. IULs earn in part because they are directly linked to a market index, such as the Dow or the S&P 500. Any gains remain within the policy, albeit a cap rate will limit how much you can make. However, you are protected during a particularly bad year for your index with an IUL. The worst case scenario with these plans is that you make nothing, but you never actually lose money no matter how poorly your index performs. The protection of your principal is actually derived in part from the same cap rate that limits your gains.
How much money do policyholders stand to make? Historically, returns run between 5-9%. The S&P Index has actually returned at 9-11%, but the upside limit on UILs stems from the account’s cap rate. For this reason, many advisors argue that the UIL can make a wise addition to a retirement or estate plan once more traditional and self-directed accounts are maxed out.
Tax Benefits of Indexed Universal Life Insurance (IUL) Plans
There are three key tax benefits of IULs. First, you may pay into the policy with pre-tax or after-tax funds. Withdrawals from the policy may be made tax-free if you are under 59 1/2. Such withdrawals are regarded as loans, with your death benefit serving as collateral. Any funds paid out to the beneficiary are also tax-free, including normal benefits upon your passing. This is true regardless of their value.
Ask the Experts at Royal Legal Solutions About Your Retirement Planning Options
Regardless of where you are in the retirement planning process, Royal Legal Solutions an assist you. We have extensive experience educating investors about self-directed investment options. Many of our investor-clients love our Solo 401k information, product, and compliance services. Our Self-Directed IRA services can also be helpful for retirement planning, as the SDIRA is yet another vehicle that allows you to diversify and take total control of your investments. To determine which of the available retirement planning strategies are best for you, consult with one of our experts at Royal Legal Solutions. You may also contact us with any questions you may have about your options.