00:00 - 05:00

David:

What's up military millionaires. I'm your host, David Pere. And I have Attila the co host as I mean Alex and his puppy dog back there.

Today we have an exciting episode. This is Eric Alvarez. So probably about a month and a half ago I posted saying, Hey, we want some people who are either just starting real estate or looking to get into real estate who are interested in coming on the show, we can talk through some some coaching stuff and really just help with entry level guidance and get pointed in the right direction. Have some fun, right? Because anyone can come on here and say I bought a house but that's not the hard part. The hard part is getting there.

And I basically said you need to impress Alex and a couple people commented on it. And there were like two people who directly messaged Alex, and there was one who then screenshotted and sent me what he said Alex, as well as bio on himself. And that's Eric and Eric sent me this and I was like, Wow, that looks good. And then Alex messaged me like 30 minutes later was like, hey, this guy needs to be on the show. And I was like, Alright, cool. So I'm gonna read that as his intro real quick, cuz I think this is pretty cool.

So he said, my name is Eric Alvarez, active duty Navy overseas in Japan. 21 years old zero properties. Zero real estate deals currently in search for first rental property. Reads books, watches, podcasts, real estate and YouTube every day. passions include investing trading, Personal Fitness, Personal Finance training for marathon events, frugal saver and investor net worth 150 $255,000. Over $120,000 invested in stocks ETFs and liquid cash, crushing college credits track on track to get bachelor's in the next year at 23 years old while active duty no girlfriend because it's too fucking expensive. Zero debt next duty station Pearl Harbor in six months. Definitely going to healthtech goals before the summer 200k net worth before leaving Japan. First out of state rental property before leaving Japan racing a marathon sub three hours. And then in all caps, wanting to buy real estate for almost a year, I think I'm ready. I want to buy real estate again. And somewhere in there. I said, reach out to Alex and then Alex reached out to me before. Yeah.

So anyway.

Eric:

Awesome.

David:

I thought that was awesome. Ah, and that I don't know that I can give you a better BIOS, I'm just gonna say welcome to the show, brother.

Intro:

Welcome to the military millionaire podcast where we teach service members, veterans and their families how to build wealth through personal finance, entrepreneurship and real estate investing. I'm your host, David Pere. And together with my co host, Alex Felice. We're here to be your no BS guys, along the most important mission, you'll ever embark on your finances.

Roger Vic one Oscar Mike.

Eric:

Really excited to be here. It's awesome, really looking forward to this.

David:

So I don't know where Alex wants to start off with this. But the first thing I want to ask is how the hell you got 150-155k net worth as a frickin young sailor?

Eric:

So pretty much just started. As soon as I joined the Navy, I immediately identified this as an area of opportunity, you know, save money, zero debt zero, like fixed expenses, like I have a mortgage or have kids, you know, no vehicle or things like that. So I immediately took action, you know, started putting tsp got that dialed in, I was like, first few months, I believe everyone should get that done first, like, you know, six months in login, you know, get your funds in, and then pretty much set and forget easy.

Um, and then I just pretty much started putting money into a CD. I started with that because I want to lock in my money there somewhere safe while I learn about you know, investing in stock market real estate. So while my money's in there, then I could deploy it, you know, once it gets out, there's about like, a year and a half CD.

So about two years in or you had like over $50,000 from also just from side hustles selling things online, on site, all kinds of stuff like that. And yeah, and I immediately started investing in the stock market, started trading, started just trial and error, like day trading all that stuff. And then I really got into options trading and then I try to keep as much money in savings right now because I feel like as a military active duty we don't really need, we have the luxury where we're going to get paid every two weeks no matter what. So we have the opportunity to take risks and also invest everything we got and ever since then, you know, I've been very frugal and just saving investing everything and yeah, I set goals like every year I want to reach this net worth this net worth and then I'm ready to get in real estate now what I'm going to start on first, like you know, get knowledgeable, see the different periods of opportunity I can use and yes, pretty much been going on from there.

05:00 - 10:00

Alex:

Did your all enthusiasm, but no fun at all. Your peers don't have any money at all, nevermind 50,000 to spend so congratulations. Also, there's something in there. I like that you took the money and put it into a CD, which is actually, as you probably know, now allows the investment, but is mega safe.

So it's like, okay, you said, Okay, I gotta start something. So let me start with something that I can't really lose at while I learn. So I really like that mentality.

Most people, most people are like lottery winners, they have no plan at all, then the money all hits them at once, then they still don't learn, then in three years, they're broke. You were like, let me save it first, then I'll slowly figure out what to do. Then I'll double down.

Eric:

It’s like pretty much coming up with a plan and just getting them something where I could balance risk tolerance, and then balance with something I know what I'm doing with.

Alex:

I love how you go from bonds or CDs, no risk to options, probably the riskiest thing you can do in stocks.

Eric:

Right.

Alex:

Yeah, that's the 21 year old right there, there he is.

Eric:

Because once I develop a strategy and develop and you know, identified the areas of risk I have, then I know how to deploy my money effectively, where I'm not going to go into something where I could lose it all and just something where I determined like, you know, the risk I'm willing to take.

David:

Alright.

Before I jump into my next point here, I am going to say this for anyone who's listening to this on audio only the chirps and somebody is going to be the jerk who comments on it. The man is living in the barracks, that's your government tax dollars at work all right, there ain't no fix it so deal with it.

But what I was gonna say is, I think so while I completely agree with Alex, that option is the riskiest or one of the riskiest things you can do in the stock market. I don't know that there's a better position to be in than 21 years old. And with like, if you're going to do options, right? Like, you're going to assume risk and investing, like being young, and having money saved in a CD where, like, it's depending on, I mean, I wouldn't put 100% of your net worth and options. But if you're putting a small piece of it in there, and you're taking a little bit of risk there, but you kind of learn as you go, like, I mean, I'd rather be 21 years old and doing that, then, I mean, what when I was 21 years old in Japan, the money you're spending on options went to beer. So you know, I mean, arguably..

Eric:

The stocks I currently have right now what I do I still cover calls, so you know I have 100 shares and this 100 shares in that and then every week I sell covered calls on it. So it's pretty much just putting your shares for sale. So receiving a premium every week and I just do that every week every two weeks.

So I'm not buying option contracts, I'm selling my pretty much earning like interest in my success what I've been doing all the time.

David:

I like it.

Eric:

So yeah, when I say options, that's pretty much probably 90% of what I do just very passive and very, very, like safe to me.

Alex:

So a lot of people buy their first house with a lot less capital, you say you want to buy real estate, what's been your hurdles?

Eric:

So as of right now I'm trying to go out of state overseas and so I identified two ways I could do this. I can either wait so I go to Hawaii so I can house hack over there. I'll be there in about four months, three months. As of right now I've been trying to do it like I said out of state in Florida so like getting a 20% down Commission alone like you're one of those and then um I was what I was gonna do for my stock account, I want to see what you guys think about this. So out of my brokerage account, I wanted to pull out equity borrow equity from that instead of getting the money out taking the cash out and putting it on a down payment and said pretty much getting like the line of credit and then borrowing for that down payment to buy something like in Florida for instance.

And now I was able to get my parents to co borrow like a co borrower signs co borrower to get a better rate and I'm just right now you know, I realized how hot the market is right now and just things are flying off the MLS and then..

Alex:

What are you gonna borrow again?

Eric:

One of my brokerage accounts.

David:

I'm not a fan.

Eric:

It's where I keep all my stocks and then just use that money towards the down payment rather than getting that money and taking it out and then like locking it up into a property.

10:00 - 15:00

Alex:

Um, dude, you know, you said it's so funny you say the markets are so hot, and you're like, let me go get a bunch of debt to buy at the top of the market and stretch. Like, it's exciting right now. It's the same thing as stocks. People are really excited about stocks right now, you know, it basically doesn't look like you can go anything but up.

But it's, you know, when the head I say many seems really obvious in retrospect, but right now it's hard to say, What's prudent investing because like you said, everybody's so excited the markets up, a lot of people make a lot of money. But for me to tell you to go out, and yeah, you're in a position to go out to take a lot of risk right now, that is true. But there are prudent risks. The game is also very long. You know, it sounds like hey, you don't have to take some of those. You don't have to go off and get debt against stocks, which I believe are already overpriced to go off and buy a house that's overpriced.

At the top of the market, when you're, and you're gonna pay over what that you're gonna pay over retail anyway.

Eric:

Yeah, I've been seeing that as like a trend where things are, like always selling above asking price above market, like almost everything right now. And things that are listed above or below market or just yeah, they're like flying off.

Alex:

Yeah.

Eric:

So yeah, we'll try to avoid, you know, overpaying for something. And then with no equity pretty much.

Alex:

Bro you are an investor the whole bit, the whole point is to buy things under priced?

Eric:

Yeah, exactly.

David:

Yeah,

Alex:

The whole point is to buy things at a discount paying over retail.

Now, again, it's one of the things it's like a lot of people are now paying over retail that they want to be in the game. But people wanted to be in the game super bad 2006 as well, until 2007 and bit them. Now I'm not saying that's where we are. I'm just saying, Look, when you're when you're sitting tell him that I'm gonna take out debt to go overpay, I'm gonna take out debt against an asset that's probably overpriced to go put down as a first mortgage, essentially, essentially a second mortgage for another asset that's overpriced.

That’s the advice I can give you and still be a good friend.

David:

I would agree with Alex.

Like, even if you have to pay a little bit of a hit to pull the cash out of the market? I would do that over borrowing against your portfolio. Because yeah, okay. So the gains we've seen over the last year are awesome, right? And so there is definitely the FOMO, the fear of missing outside, where if you, if you pull the loan, and then you have to repay that amount, but the market shoots up, then great.

But what if, right, there's that what if you pull you borrow against your stock portfolio, and we see a 40% drop, and now you're essentially paying yourself back at a loss. It's just not a spot you want to be in. I don't think that's a risk, even even in a market where it looks like the stock market is gonna keep going crazy. That's not a risk I would take, I wouldn't, I wouldn't borrow against it. And I tell people this all the time, people want to take money out of the Thrift Savings Plan and borrow it to buy a property and that's just not something that I, I don’t know wouldn't do it.

Alex:

Like if you have the liquidity stick with the liquidity, make it work for you. Right, don't add debt, because you're free to, you're not even really spending your cash. Right, you're spending stock. So yeah, it's you're putting you put a lot of you putting leverage on it hard.

Eric:

Yeah.

Alex:

So I have the capital. So.

Eric:

Do you think you recommend to like, actually use the money rather than borrow?

David:

Yeah.

Eric:

For a document like..

David:

100%.

Eric:

Like pull out the cash. And then not not really worry about too much of like, you know, tying up the money into the property, you know, radium, whenever it is.

Alex:

In a perfect world, what you do is you'd go find an asset it's under priced. So you wouldn't, you're just talking about buying your equity, right? Like, again, the whole point of investing is to create value, is to create value out of thin air, you say I'm gonna buy this property that's under price, I'm gonna take the risk to put the rehab into it, it's gonna be worth more than I, you know, put into it. And I create value out of thin air. And so like when you don't do that, if you're just paying retail and putting down payment, you're just paying for retail, you're just paying cash for retail price. Um, so in an ideal world, what you do is you go find a, you go find an underpriced asset. And then you might not have come out of you know, if you can do it, right, if you can own the asset at 80% of its value, you don't come out of pocket anything for the loan.

So what you need to do is convert your talent into that 20% instead of just buying it with cash. Does that make sense? If you like, hey, let's just go grind out, go find a better deal. You get some harder private money to bridge loans, rehab it like you would a flip and then put a 20% conventional mortgage on it. Like that's an ideal thing for you to do. And I know, I know, it can be under the market, but I assume, yeah, there's somebody doing that in your market in every market for sure.

15:00 - 20:00

Alex:

So that's you can buy the equity. But again, it's like, dude, the point that we're trying to make here, the point you're making your stock is like, find undervalued assets that you think are gonna go up in value in the future.

Eric:

Right, that makes sense. But, um, that’s are the challenges I've been having, like coming across with finding something, maybe off market something, you know, below market value. So, but no, actually, that's something where I should like, put more of my focus towards..

David:

What I would do for that and granted, you're gonna pay a little bit more than you would if you find the deals yourself, which I'm all for finding deals yourself. But that's not always a simple setup to create.

So I would take whatever your market is in Florida, and I would go onto Google and type in, sell my home best, you know, in random things like that, like I need to sell my house, sell my home fast, whatever. And you'll find all the wholesaler websites in the area get on their buyers list. They're not always the best deals in the world, right? So you got to vet them, you got to have a team, but at least it's something other than just the MLS so there's a chance to get a better discount on it. Or if you know that like it, I guess the question is, is the area in Florida you're looking at? Is it somewhere? Where is it where you're from? Is it like do you know people there?

Eric:

So I'm originally from Los Angeles, California, identified Florida to invest in because I didn't meet some realtors there. I didn't meet property management there. Meet some lenders there. So I built some good connections out there. And then also, things such as you know, it's way cheaper from California. Identified as a landlord friendly state.

David:

Yeah.

Eric:

Yeah, it's somewhere where I wouldn't mind relocating to somewhere I wouldn't mind to, you know, visit often.

David:

Well, those are all the right reasons.

Alex:

Real estate is a much less liquid asset class than stocks. So it's going to take you more like for stocks, you can go to your app. And you can, if you think the stocks underpriced as is you can just buy it or like you said, you can do, you know, you can buy calls, and all sorts of other ways. But for the most part, it's highly liquid. So you can get in and out real quick, with real estate highly illiquid. So it takes you a whole bunch of people. And so the value is in the complexity. And so what I think you're probably having this problem, and you're like, well, I'm going around and looking for a property and it's like, yeah, it's hard to find one that's underpriced. And it's like, it's not, it is hard to find it when you're looking at it from across the country. And you know, some people there, but not many. And so what David's telling you is like, Look, start a network with local wholesalers, start going through their deals, betting their deals, build those relationships, it's way harder than buying stocks.

A stock is like walking into the grocery store and being like, there's I want this one right here. houses like do there's no target for houses, like you gotta go. You gotta go kind of. It's a ground game. So I think you definitely have the skills to do it. But that's definitely something that it's easy to go off on MLS buy some for 20% and put it down. But Dude, you're an investor, your job is to go put the sweat equity into finding the value.

Eric:

Right.

David:

Yep.

Eric:

I mean, that makes perfect sense as something I should, like, put my focus more towards.

David:

Yep, finding deals off market, or even with a wholesaler where it's still, you know, off market, there's still a margin. And because a good wholesaler knows that they have to leave you some juice on the deal, otherwise, you're never gonna come back.

So finding those off market deals? I mean, that's a total game changer, even in a hot market. I mean, I'm, you know, I've been able to get into some deals for 50% after repair value all in this year, right? And that's people are saying, oh, we're paying 20 $30,000 over asking price. I'm like, Well, I'm not. So I mean, you know, it's not to say that.

I think I think it kind of depends, right? So if you were to pay full retail on a building, that you were house hacking in the rent covered all of your living expenses, and you were able to live for absolutely free in the house, like there's an argument to be made for that because you're then able to save X amount of dollars a month that you would be spending on housing anyway. And you know, as long as it's in a good neighborhood where it's going to appreciate it's gonna stay rented and you know, you're near whatever, whatever that case may be like, there's an argument for that there's not an argument for buying full retail on a single family house where you have no equity, or very little equity, and you're not even saving on expenses or or whatever you're, you know, and so that's where I kind of get scared see, and some people pay. You know, I've seen some people pay like 40 $50,000 over asking price out here in San Diego for a house that they're gonna rent but they're, you know, losing money on a monthly and hoping it goes up in value. And that's a scary move.

Alex:

The thing that everybody learned from the 2007 clubs, the thing that everybody learned in real estate investing was buy for cash flow. And in the last 24 months, it really seems like people have forgotten other buying for things like David just said, like net worth, return, or the like, well, now I'm saving on rent. So That counts towards, they do funky math to make it sound better.

20:00 - 25:00

Alex:

So deals are definitely harder to find I, you're 100% running into the same problem that everybody else is running, anybody who's getting easy deals these days has either like some super, really good source that they lucked out on, or they don't have good deals. And they just, they're buying stuff up at retail, which is super common. And not to say that it can't work. Because sometimes you just need to deploy capital, but you are not in a position where you have excess capital you need to deploy, like you have the time to take, take your time and like, learn the local market buy right.

Yeah, I think you're doing the right idea, I think, if you run into the opportunity of how to pay for the place, it's like, it's not as hard as you, it's not hard, the idea isn't harder, like create the 20%, instead of paying for it, putting into action is definitely harder.

Eric:

And then you're also just becoming knowledgeable, just with the fundamentals, and the basics, you know, I quickly realize how important that is. And just something where I can never stop doing just, you know, continuously learning and reading more and just, you know, trying to build my knowledge, you know, towards stuff. Pretty much. But um, what do you think is the best way that, you know, in my position right now, like, if I would ask you, Alex, like, if you're in my position right now, like, you know, 21 overseas right now with some capital? What would be the steps that you would take? What would be your things you do today to like, you know, if you want to get into real estate?

Alex:

You're so much farther ahead where I was at 21, I feel like an asshole answering that question.

Eric:

I have to know.

Alex:

So let me say this, like, um, my personality is, and it's been, it's actually this is a harder problem to have for the young people, like, I'm a good daydreamer, and I'm not actually a good, or I'm not a good worker.

So, when I was young, it's hard to monetize that. It gets easier as you get older, but it's hard to monetize that. So I don't know which way you are. But, um, I would, I would have spent more time really looking at what's going to happen in the future. And start getting ahead of those things as much as possible.

So like, I got into real estate because it solved a short term problem, which was important to me, cash flow was a really important problem. But now that I kind of have that, that problem solves. Now I look at it like, I'm gonna live another, at least 30 years. Active, like what's going to be popular in 30 years that I can that other people aren't looking at that I can get ahead. And so I don't, so here's the thing, right? You have a really good base already.

So your safety net is like, is really strong. What you said earlier about, hey, the army lets me like perfectly. I can live off this and it's risk free. This is Nassim Taleb's barbell strategy to a tee. He goes, you can live on the low risk lifestyle, right? You live minimalist, you live with a low cost, and it's risk free. And then everything else you make small bets for unlimited upside but high risk and see like I only need a few of these to pay off to really go big. And so I would think about that. As a life strategy, really good life strategy, like live light. Learn how to live on a low risk return, like a bond, if you can live on a bond on a 2% bond. It's risk free, if you can live on the cash flow of a 2% bond, everything else invested into the unlimited upside.

So like, I don't know what your tech background is, but blockchain, Bitcoin, and that kind of stuff are going to do well, technology like AI. And those things are going to do well. I don't know how much you know if you're in those fields. Or if you just want to invest in those fields.

One of the biggest things that I recommend people to do is to start building content, content content content, video, writing podcasts, at least one of them if not two. That's one of the things where it's like Dude, that's people are actually sleeping on content, even though everybody makes bullshit, ticktock and Instagram stories and nonsense. Like their David's been really good about doing it. His content is terrible, but his marketing strategy is sick. Right?

David:

I think I appreciate that.

Alex:

Yeah, so my point is, my point is in the future, you're gonna need both you need to get a marketing strategy, but you need to develop an online brand and print and that means online personality. And so for you, I would focus on, I would really look at the future way more than your peers are looking like what's gonna happen in 30 years for you? Like, what's your life gonna be like, you don't really know what's gonna be popular and like, try to weed out what you know, the nonsense of what people think is, like really trying to think clearly about what's gonna happen in 30 years, right? Like realistically if you extrapolate, okay, so, that and then content. Those are the two things that I would... That's how I would look at it. I don't know if it's helpful, maybe a little.

25:00 - 30:00

David:

So that was a very long answer for saying, I've got nothing. No, just kidding.

There was a lot of actually really good advice in there that I would never have thought of at that age for sure. So definitely looking towards the future is a big one. And I'm doing the same. I mean, Alex just talked about it. But like, I have two or three little tiny portfolios that aren't real estate that I just gamble 100-200 bucks, that every paycheck on something, and I'm like, I'm gonna leave, leave that in there. And we'll see what happens over the long haul. And just, you know, if one or two of them pay off, it'll be very worth my time. And if they don't like 100-200 bucks here and there. So I like that.

As far as actually getting into the real estate game, right. I think you're very on the right track with the fact that you've found people in Florida, right, you've found an area that you might want to live, that fits your goals. That seems like a good area, you found an agent and found lenders you found. You mentioned someone else I can't…

Eric:

Property manager.

David:

There you go property managers. So you're freaking on a roll as like that is more than a lot of people, people get stuck on choosing a market a ton. So it's clear that you're an action taker, it's clear that you've thought a lot of this through, I would figure out two things probably for that market. One, I would find every wholesaler I possibly can and get on their buyers list so that when they send a deal, you see it so you can compare that to the MLS.

Eric:

That is something I haven't done at all. So.

David:

Yeah, absolutely that too, I would find every investor meetup that you can find because for one thing, most of them are meeting online right now. So you can sit in on their zoom calls or whatever. And for two, they're going to have some deals pop up. They're going to have some polls on the market, right? You're going to be able to hear through those calls. Are these guys saying wow, there's all these upgrade opportunities as part of town is growing like this. It's going this way, like whatever, or they're saying, oh, man, I'm gonna sit out for a little while because these prices have gone berserk. And it's too much for me, right?

Because the reality is the markets very hot all across the nation. But in some places, it probably seems ridiculous. And in other places, it's like, oh, okay, cool. Like this totally make, like in San Diego County is crazy as San Diego County is right now.

The reason it's so hot is because there is one month's inventory and they normally run like a five to six month inventory in San Diego County, there were less than 600 homes on the market for under a million dollars, like this week, right. That is fewer homes than in my market of 150,000. Normally, and this is the entire county of San Diego.

So I think it's reasonable to say okay, yeah, San Diego is crazy right now. But there's still a ton of leg room to run. So I would figure out like, get your pulse on the market specific what the investor sentiment is, is the market overpriced? Is the market growing? Like, why is it crazy, and I would get all get a hold of all those wholesalers and I would get in that groove and around those investors and you never know, just getting to know those people, there's a good chance that there will be some opportunities for you to invest with some of those people that just come out of that organically.

So that's what I would be doing, I would be just building those relationships even more and focusing on learning the market and where it's at. And finding those people who find deals. Maybe they find one or they just don't have the time to take it down. And they like I literally bought a house for $12,000 last week. And the lady like, this is how I got across it. I got a hold of a guy asking him if he wanted to sell a house. And he was like, No, I don't wanna sell that house. He was Oh, but my friend has a house that she was going to sell me for 12 grand, and it's a heck of a deal. But I just got another project going and I just don't want two projects and like literally sold me. I was like, Oh, can I get her number called her. She's like, yeah, I'll sell to you for 12,000. And I gave it to someone for 35-24 hours after I bought it. And it was literally the guy was just like, I don't have time. It was a, it was a steal of a deal.

So you never know. If you build those relationships and you get in someone's mind as someone that they think of who's looking for a deal. People will give you a good deal. If they know you and people genuinely want to help you out or you know, you'll find some opportunity so anyway that that'd be what I would do.

Eric:

So that's another thing like once I get back to the States, or just even Hawaii I'm really excited to be able to meet you know, people in person, you know, like you said, attend those meetups network with people. That's like, like something Alex said in the last podcast with the Farmer. I saw that one the other day where it's what Alex says was like the hardest..

Alex:

Something brilliant, obviously.

Eric:

Yes, like the hardest thing to do at work right now is to where I'm not really surrounded around like minded people. Sounds like one of like, you know, the challenges and that's one thing where I'm really excited to once I get to Hawaii, you know, it's consider United States, you know, it's I'm going to be able to, like network with people, like I said, and, um, you know, attend as many meetups as I could, and that's what I plan on doing. Like, also if I do decide to get out of the Navy. You know, just build my network. You know, as time goes.

30:00 - 35:00

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David:

They got all kinds of connections in Hawaii.

Alex:

People are really good investments. So once you get around people that keep you motivated, keep you accountable, be inspired, and then you know, they have all the money and all the deals and all the you know, they have all that too. So you can, people are really good investments. So I love that.

And you can do a lot of it online. But I think it'll be a long time before virtual conversations replace human real human and right I think for a long time. Yeah, humans in person really makes a difference. So that's smart. I mean, it's such that you're overseas in that way. But three months. Yeah, you'd be in the zone.

Eric:

That'd be it soon.

David:

All right, I'm gonna pivot, because Alex likes a word I was saying I shift, but Alex prefers pivot.

Right before we started recording, you were asking also about you're moving to Hawaii thinking about buying there. And obviously, you're in kind of a weird spot, because you don't have BAH yet. And we just didn't...

You listen to Paul Farmer. So it is possible to buy a house without BAH. However, Hawaii markets a little bit different than a Kansas City Market or a Kansas market. If you're talking price point, without having a housing allowance. However, you had some very good questions about the VA loan and what you need to be looking for. And I thought we would just have that conversation on this. So it would help other people as well. So fire away.

Eric:

Yeah, so it's pretty much um, ways I could add on top of my income were to have me qualify for more house. So pretty much like my Navy pay. And other ways I can, you know, add on top of that, that will help me qualify, because, um, I asked if I could co borrow, but they told me that it would have to be with a veteran, no words put zero to get to 0% down. And, you know, I was told to, you know, use zero down, you know, try not to put any money like, you know, get like, like a 10% mortgage or something like that. So, yeah, just different ways I could add on top of my interview, were also like, if it feels like a duplex if I could use the rent from the other unit as income to help qualify, like, if that would be possible.

David:

Yes.

Alex:

You probably can't use the income from the other side at the time of purchase.

Can you David?

David:

Yeah, yeah. So you can use 75% of the gross rental income from the...

Alex:

What if, if you have no income before now?

David:

Yeah. I gotta remember the exact wording but the VA guidelines are actually pretty vague. The VA guidelines are very vague in a lot of areas. But in essence, you have to be like, I can't remember the exact word but like, high likelihood of success as a landlord is, I think, how it's worded. And so there's two things right, depending on the bank, you go through some banks will say that they want you to hire a property manager so that you can utilize their experience in order to qualify with 75% down, or 75% of the gross rental income. But some banks don't care as long as you seem like a competent human being. And I know this just because my roommates VA lender out here in California, and I've seen him use the income from other units for people who've never owned a home before successfully a few different times.

So it depends on the lender you're going through, they may have their own overlays, but for the VA guidelines, it doesn't matter. It's and if it is one of those lenders who have a problem, your reach out is probably just say, Hey, I'm gonna hire this property manager, and they have experience. So.

Alex:

Also, I would, again, you're focused on like, how you can maximize the amount of debt you can get, rather than, like, dude, you have cash you're making, you're good at making cash. Like I would not be so afraid to spend a little bit you know, if you have to go then FHA loan and for a century and a half percent, you're fine.

35:00 - 40:00

Alex:

The VA loan is good, but don't, you're like how can I stretch my income to buy more houses and then what and then by 0%, so I have no equity. All right, it's your taking, I think you're stretching to take unnecessary risk.

Eric:

Right. That makes sense.

You know. So like, let's say, so my plan was to, let's say, I get the house, let's say I get a property in Hawaii. And now I'm going to be there for two years. And then what I was thinking I can do is, you know, after owning that property for a year, you know, owner occupied can be in it. If I could pull out equity from that property, you know, let's say it goes up 2% 3% on a Hawaiian property, you guys feel like that will be, you know, enough for another downpayment. Want to see what you guys think about that?

David:

No, because zero down.

Alex:

Yeah.

So again, you're, you're like, here's what you're saying, I'm gonna buy this property at 100% of its value. And then in a year, I'm going to take money out, but if you take money out, even if they do another 0% loan, like yeah, you're gonna have to go up. Even 10%, because it's gonna cost you money for each loan. So that thing's gonna go up 10% a year to make it worth it. Will it go up 10%? Maybe. But again, now you're doing the exact same thing where you're like, how can I stretch out this equity at the top in this hot market? How can I stretch this equity out to its absolute limit? Just to go buy something else? All debt? Or pretty close, right?

I mean, I think, dude, you're young, you're super ambitious, obviously, you're mega enthusiastic, which I love. But you're not patient. And you're not the only 21 year old who is not patient and I get it. But debt is like, you're seeing only the upsides and you're not feeling the pain of downsides. You don't respect the pain. And you're like, well, I'm young, so I can lose it. It's like, Yeah, but also you don't fucking have to lose it like you could, you know, wait a year, make some cash and spend your cash, you don't mean it'd be a little prudent like there's a mix here between going off and stretching to spend all debt at all possible costs. And hey, just take it might take a year longer than you think, make some cash.

David:

There's absolutely an argument to be made for super high leverage, because leverage can absolutely help you build wealth. However, the downside this people seem to be forgetting these days is right, you never want to take the risk of ruin. So the last thing you want is to buy a freaking house and then get a foreclosure. And then now you can't get a loan for the next seven years, right? Because no lender is going to touch you. So that's not worth it. Then you got to buy houses cash, right?

So yeah, 0% down on the VA loan is incredible. And there are some instances where it is phenomenal. But the thing is, you don't have to key hold that, right. The reason the 0% down is a thing is that a lot of veterans don't have the money and it was designed to help service members when they came back from World War II, get into a home so they could compete with the civilian counterparts who'd been at home working, saving money, whatever they could come in. And even if they didn't save money while they're serving, they could buy a house right? So the VA loan is great for getting you in the door. But if you have the money, there's nothing wrong with putting money into a house right? I just paid 15% down on a house six months ago, it was a great deal I could have gone lower and I just whatever, like if the market drops I now have an even bigger equity cushion. So A my cash flow is a little bit higher and be if the market goes down, I'm still underwater so there's there's upsides and downsides to everything right and everybody in their mother is screaming online about how incredibly low interest rates are right now and how you have to go zero down and leverage it and I agree to an extent but if you go 80% loan to value and you still get that incredible interest rate, you're still getting all those benefits but you also have a cushion in case things turn so what Alex is saying essentially is Yeah, take some risks but just don't don't push it so far that you're taking one home and maxing it out to max out another home to max out another home and then if you fail to make this mortgage payment now you're trying to you don't want to create some kind of you just don't want to create a house of cards that won't stand if that makes sense.

So there's a I'm all for and and and take all this with a grain of salt my first like 15 units I didn't pay more than 6% down I was as low income low leverage or high leverage low down percent down payment as humanly possible. But I had a negative net worth I had no fucking money so there was no way I was putting 20% it was either buy this house as is for as you know, whatever or not and I don't see anything wrong with putting a down payment into a property because would you don't people think of it as you're losing the money. But the reality is you're just putting it into equity. It's basically just another way of saving money. And arguably if appreciation stays pace, it's a better way to save money than then to put it into a savings account. So anyway.

Eric:

Yeah, so David in my position right now, we think would be the best approach to like, you know, begin this like to continue looking back in the States, or to just wait until I get to Hawaii. So I could do like, you know, house hack or, you know, if opportunity comes shows itself in, you know, let's say Florida and jump on it, what do you think would be the best like approach? Like, put my focus towards? Try just to wait and so I get to Hawaii or..

40:00 - 45:00

David:

I don't think you have to pick one. I don't I don't think there's anything wrong with looking at both and seeing what option keeps your options open. I think if Florida is what you're thinking for a long term market, then focus on those relationships and building that network and building into that being a long term play. And then I think if Hawaii comes along with a good deal, awesome, and if not, I mean, if you're living in the barracks in Hawaii, right, your downside is absolutely nothing. But if you're, if you come across a solid deal, right, and you could be out there, I mean, you could potentially depending on what you're looking for, or you could do the whole duplex thing if you can get in for the purchase price. But I mean, if you're young, you want to enjoy life a little bit like there's nothing that says you can't buy a condo, you find one that's Airbnb approved in Waikiki. And then you can Airbnb a bedroom to help offset or you good even if you're, you know, not to say that you should buy in, I'm not telling you. I mean, you could if you found a place that worked in Hawaii, where you could buy and just Airbnb the entire thing, as long as it's zoned correctly, like there's opportunities in both areas, I think the the main thing I would be focusing on would be the relationships and the network and the marketing in Florida, which is your ideal long term play that you're already starting to foster. And then I would just keep my eyes open if something comes along like I would, I mean, you know, Keno, so I would say like, hey, these are like the three or four things that I'm really looking for in Hawaii. And if that happens to cross your plate, awesome, if it's within your strike zone, you know, move on it. But it's not the end of the world if you don't buy in Hawaii, because you've got no downside living in the barracks, like nothing, you're not even gonna be paying rent. So it's, it's, you know, there's, there's no downside, if you don't find a deal there. There's no downside anyway, if you don't find a deal, but I'd be focusing on the Florida market, if that's your long term angle. Personally.

Eric:

Got it.

Yeah, just one thing that I keep thinking about is, um, you know, like you said, like, I lack patience, and like, I'm pretty, like aware of that. But, um, the reason I want to get started as soon as possible is just because I know the first one, it might not be the best one, it might not be the perfect one. Also, you know, just don't get caught up in trying to find the perfect freakin deal. But then I feel like the first one is going to be you know, the one word I get guided through, and I'm gonna learn the most from getting super familiar, you're gonna see how it goes, like each step. And then I feel like from there, then I'll just like, pick up just how this works, what I can do, like on the next one, what I can do better what what I messed up on and then just things that I can just like improve on and then maybe things I could do faster, like, close out a house faster and just, you know, also get familiar with other markets, and things like that. That's why I really want to get started, you know, like as soon as possible. So, you know, just to like, kind of like, you know, set off and just, you know, take it from there.

Alex:

Yeah, it's just kind of that blend of like, hey, I want to start right now and also like, okay, but you don't want to be you want to be prudent.

Eric:

Yeah.

Alex:

you don't want to throw money around and you're not even throwing money around see this is the problem with debt is it's too easy to blind yourself to debt. I think yeah, dude, you're on the right track. You're like I want to get started ahead of the head of the game. You're ahead of the game you win. You win, you're doing fantastic. Yeah, I know it doesn't feel that way. It never does.

You're gonna have 10 properties before you know and you're like Dude, I'm still behind the game.

Eric:

Yeah, you know, my goal was get one before 2021 but um you know realizing how like you know competitive is right now and then I'm here you know overseas you know trying to pick up something in Florida against investors over there that are you know, know the market the back of their hand and I'm just like brand new. It's something trial and error just something that you know, you learn along the way.

Alex:

When do you move to Hawaii?

Eric:

In June the beginning of June so once from now.

Alex:

You're right though network like once you know the market like the back of your hand as soon as you know the market like the back of your hand, you can make decisions about how to deploy capital fast.

So once you have the money lined up and you have the, you know, the information, then the only thing is that then you just have a decision making problem, which is not not so hard. So yeah, learn that market. You'll be alright. You'll figure it out pretty quick. Actually. My guess is you'll probably do well there. I live in the barracks. I wouldn't buy a house in Hawaii.

Not unless you have, unless you have, unless you have more cash and you want to know what to do with that's a good time to buy. When you're like right now you're like I'm gonna take out debt so I don't have to spend any cash like once your I cuz I know a lot of that's in your equities but like say you're sitting here next year and you have $40,000 in cash. That's the time you're like, Okay, now buy a house in Hawaii because I think it's gonna go up in value? I have to stack the cash somewhere, I can get some of this equity but dude while you live in the barracks Jesus come on that's free money.

45:00 - 50:00

Eric:

Yeah.

Yeah, especially if I was able to, like if I was in San Diego if I never got stationed in Japan, let's say, you know, anywhere in the States, I would have already been like house hacking already, like, already been trying to do something like that. But um, I'm glad I got stationed here, you know, I saw it as a learning experience, I got deployed a ton of times, I read a lot of books, things like that. And it was like time to just prepare and just time to, like, get knowledge. And then once I'm in the actual area, in the environment where I could actually, you know, invest, and actually, you know, take action, then I'd be ready. And you know, to move forward from there.

David:

Yeah, and don't get it twisted. Neither Alex or I are saying don't, don't invest, right. Like, I don't know. Alex is a little bit more risk averse than I am. But I'm pretty, pretty aggressive for the most part as far as jumping out the window. But just don't get so eager to jump out of the airplane that you forget to grab a parachute, right? Like, you should be running towards the door. But make sure you don't, don't get so impatient that you buy a deal you shouldn't, that's the level there, right? Like push it as fast as you can as hard as you can. And that's I think the key for finding those investors in Florida or in that market is that you can then if you find two or three people that you know in the area and you find a deal, and you think it's the one you can instantly be like, Hey, this is what I'm seeing, am I missing anything huge. And if you get two or three guys who are like active investors in the area, you don't even need and I'm not saying send them like a spreadsheet be like, Hey, can you analyze this, but say, this is what I got. Do you see any major red flags?

And if you got three like solid investors in the area, and all three of them are like, I don't see any major red flags fucking jump, there's your deal.

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David:

And that's what I did, I literally bought my 10 unit building, I had three people who were all super successful investors. I was like, Hey, this is where I'm at. Did I miss anything major? And they looked at it for like two minutes. And they were like, Nah, I don't see any major red flags. I figured, alright, if there was something really big, one of them would have caught it.

Yeah, that's the power of people that know the market.

Alex:

And I am risk averse. That is true, but I'm mostly speaking about debt, you know, risk with your cash. It's like, dude, you should be mega risky with your cash. But with that, you know, maybe 2000 lending. You know, I've seen enough defaults I've seen, you know, I've seen people get sucked back.

So it happens you know, it happens in this market like people right now everybody's winning isn't it looks like you can't lose. But there are people that still you know, missing payments and default and like people are still stretching. So you have the risk to take those, you have the time to take those risks now and make some mistakes. But again, yeah, with the debt, it's like you load up on risk that you can't get out from under and you don't need to. Those are, those are like David said risk of ruin.

Eric:

Makes sense, it makes sense though.

Alex:

Books! Dude, you said books twice. Like that's the most competitive thing you can do.

Eric:

Yeah, so probably my favorite book that really started everything and got me in the right mindset was probably um, it's called the it's by Tony Robbins, Money Master the Game. Also read like all the BiggerPockets books, you know, all those all those are really good. You know, that's probably the one that you know, helped me like to take off and give me the right mindset to like find assets, and then you know, get rid of liabilities right now.

50:00 - 55:00

David:

Right on.

Alright, so, probably gonna wrap this up here in a minute.

There's a couple questions, I always ask people, but you're pretty new to the game. So I'm going to try to frame it a little bit differently.

The first one I normally as well, the second one I normally ask his resources, I think he just mentioned a few. So my first, I guess the question, the way that I would frame it is, you're me, you're 21, you've done very well, as far as saving money investing, you know, what would you tell one of your peers who's looking to just get started in finance? I mean, you've mentioned Money Match the Game. But, you know, what are some other things that you would say like, what are the first two or three things that you think every service member should do or your friends should be doing if that they're not?

Eric:

So I understand that not everyone would be like me, not everyone is the same, not everyone is going to be able to, you know, be willing to take the same risk, same sacrifices, but um, just find that balance, you know, want to go do stuff on the weekends, just some finding, finding the balance, you know, with your, with your paychecks, you know, paying yourself first, you know, before you buy anything, things like that. Having your money into your tsp, having that dialed in, like I said, and just being in the mindset to live like no one right now, to live like no one later. And to just, um, I'm really big on buying your time to, you know, utilize your time, utilize your money right now, to free up time, free up money later.

So, that's something I'm like, I wouldn't definitely, like, good advice to someone were to think about, like, you know, whatever you put your time towards right now, that's gonna free up your time later, if you want to get out of the Navy, you want to get out and just, you know, pursue a career. No, by assets, they're gonna free up your time, once you get out. And then you can pursue whatever career you want to do. And becoming knowledgeable and then finding that career that you want to do and just go all out. And then, you know, just find your passion.

Alex:

Your mindset is so good.

David:

Yeah!

Alex:

It's mostly it's mostly you're repeating mostly somebody else's platitudes, but still good.

Eric:

Yeah.

David:

Are you gonna talk about extinct animals now?

Eric:

To live off from..

David:

Extincting?

Alex:

David, you're so quiet, turn your mic up.

David:

I was just making a bad joke. I said, why you got to talk about extinct animals. Nobody knows what platitudes means on this frickin podcast, they're probably thinking of the stupid platypus.

Eric:

Yeah, that's one of my goals, though, too. So I have two years, about two years, three months left in my contract before I get out, I'll be 23. Um, I'm really undecided on a standard or not, you know, if I, if I do want to stay in, I would love to Commission Marine Corps, and, you know, go to OCS do all that I have my degree doing next year, that's something I've been putting a lot of my time towards, you know, because that's going to be I do you want to get out or want to stay in, you know, getting my degree is going to help go to OCS, it's also going to help if I stay if I want to get out.

David:

Yeah.

Eric:

So I'll be able to, um, you know, work more tours and other things. And yeah, my goal is to get out of the Navy, if I do get out, like I said, is to buy assets, buy real estate, that's going to match my base pay. So then I have my bases covered when I get out. So just living off rental income as like a base in about two and a half years.

Alex:

Nice!

David:

Alright, so I do have one piece of parting advice, and then we'll see if there're any questions we missed here. But people are gonna listen to the show, right? And they're gonna.. People who hear that you have a net worth or or doing all right.

I would like to think that the listeners of this show are not the type. But as with someone who wins the lottery, people will come out of the woodwork with great ideas for your money, whether that's they didn't want to they know you and they want to borrow something or they've got something to sell you or a product you need, whether it's finance or not, or their idea of investing or not.

So I think the last thing I would say is, stick to your guns on what you know, and what you're investing in. Don't get sucked into someone else's shiny object syndrome with your money. I wouldn't I wouldn't rush into anything you don't understand as an investment. I say that just as a cautionary tale, because I've seen people come in with millions of ideas, especially right now there's a whole world is cryptocurrency Tesla Stock expert person, right?

Eric:

Yeah.

David:

And they're convinced that because they want over the last year, you can only win and it's a scary spot to be in. So just make sure you know who you're taking advice from and what you're getting into and stick to your guns. I think that's, I would say that's for anyone and everyone, but especially because there's a chance that someone was in his podcast and be like, oh, here's a guy who needs something to do with his capital.

Eric:

Exactly.

David:

And hopefully not so if you're listening to the show, and that's huge and unsubscribe, dislike.

55:00 - 1:00:00

Eric:

No, but yeah, totally get it understood. I'm already there.

David:

Did we miss anything? Do you have any last questions before we wrap it up?

Eric:

Just um, I just want to ask you. So what do you think would be the best way to approach if I want to buy in Hawaii in three months? What do you think would be? What should I do right now other than getting in contact with the right people, like you referred to me? What should I be doing right now to get ready to do that?

David:

If you have no debt, then that's a huge piece, right? Because your debt to income ratio can't really, that's the biggest piece to increase in that, I would probably just be saving the money that you can use as reserves and keeping an eye on what the markets are doing, and just stay in touch with exactly what you want to buy.

I mean, there's not so, so you asked earlier about income. But even if you found a side hustle to make extra income every month, a lender is not gonna be able to count it towards your income side, because it wasn't on your tax return last year, and it won't be able to be wrapped into on that side. So while it will help if you earn extra income, because you'll have larger reserves, and won't necessarily help with how much of a loan your credit qualifies before, because there's no way to show that that was stable or going to be something you continue earning.

So I don't know that I would work a million hours a week for extra cash, except for like on the reserve side, I would probably just focus on kind of learning the market and looking through properties and learning what you're looking for. And then setting up a couple automated, you know, like, Hey, this is what I want, can you just send me deals that come across that look like this. And same thing, I'd probably touch basis more so than I got some hit me up after I got some investor group like meetups and stuff that I know out there from when I used to host one is there's some people out there that are really solid investors, I can connect you with that, you know, can kind of give you some pointers, too. But that's probably what I would be doing.

There's not a whole lot of ways you can really jack up your income meaningfully enough that it'll help your debt to income ratio. And if you have no debt, then yeah, so basically just stacking reserves and learning, gaining on the knowledge side is what I'd be focusing on.

Eric:

Got it, so you wouldn't see the BAH like not having BAH right now, you wouldn't see that as like, something out preventing getting into a property in Hawaii, you see that something that would prevent me from doing that, or?

David:

It'll, it will cap out your high end for what you would qualify for. And that's where it'll hurt you. You know, you're not going to qualify for a $2 million dollar loan with not that you would anyway, but it'll limit the income side and limit how much you'll be able to qualify for a loan. But it won't stop you from getting into a property. So because you've got reserves and stuff you'd still be able to buy, you just might not have the same price point that you would have if you were getting the extra 3000 a month and you know, tax and BAH.

Eric:

Understood got it. Sounds good to me.

David:

Where can people get a hold of you if they want to reach out and ask questions. There are a ton of people listening to the show who are nowhere near as far along as you and are like, Oh my god, that Eric that Eric dude is awesome. I want to learn his ways. And so they're gonna reach out.

Eric:

You just look me up on Facebook. Just Eric Alvarez. And then I'm also on Instagram. Let me pull up my username really quick. And those are the two ways people can reach out to me. And so it's Alexander_187. That's pretty much it.

David:

No, another guy who uses Zander.

Eric:

Yeah, that’s my middle name.

Alexander's first name. Alexander Felice.

David:

Yeah, but he uses the Z on something, don't you Alex? I lose my mind. You used to?

Alex:

What?

David:

Nevermind.

Maybe I'm losing my mind. All right.

Alex:

Was your mic too low? I think he is telling you.

David:

I apologize.

Alex:

I'm getting quieter.

David:

I don't understand. I crank the gain. Alright, whatever.

Eric, thank you so much for joining us today. This has been a lot of fun. So this is fun for me. Because it's I mean, it's we hear people talk about what they've done, which is cool. But it's so much more fun to like, have actual questions with someone who's trying to learn and work on their finances. I had a lot of fun doing this. I'm glad this is all Alex's idea. So you can have all the credit for putting out that we should have some newer investors on the show. So just in case his egos hurt, and thank you.

Alex:

Dude this is great. your mindset, your enthusiasm is mega high, which I love. And and that's gotten you basically, it's gotten you quite far, which is impressive. And you don't seem like you don't hang out with knuckleheads, which is really good.

David:

Yeah!

Alex:

And it was great to have somebody who's actually had some success but none in real estate yet. So you're in a really interesting position where you have all the tools to do real estate. Now you're running into.. See I had the opposite problem. When I started. I had no resources but I was willing to put the time in and like to learn the intricacies in the market once you do that, you're gonna be unstoppable. It's just a matter of time. Just take a little bit of time.

1:00:00 - 1:01:00

Eric:

Exactly.

And just once I'm in the right environment, and once I'm, like I said, I'm somewhere where I could take action where I could actually, you know, reach out to people using resources and you know, I'm ready to go. Fine to get out of the Navy. I'm ready to go headfirst in real estate. I’m stokes and I’m excited.

Alex:

You're good. This is done. We're so glad you came on.

David:

No, absolutely. Stay in touch. This is gonna be fun to watch.

Eric:

Hopefully we could do another one in the future.

David:

Like yeah, I gotta get back to work.

No, no, he's got to get back to work.

Eric:

Yeah, I go back to work now, unfortunately.

End:

Thank you for listening to another episode about my journey From military to millionaire. If you liked it, be sure to visit Frommilitarytomillionaire.com/podcast to subscribe to future podcasts. While you're there, we'd love for you to rate the show. Give us a review on iTunes. Now get out there and take action.