I Just Purchased Umbrella Insurance – Should You?

Disclaimer: I am neither an insurance professional nor an insurance expert. Please seek one out before you pay for a policy. I do not get paid to mention any companies listed in this article.

Photo courtesy of Tingey Injury Law Firm via unsplash.com

Experienced real estate investors always say it’s not a matter of if you get sued, but when. Whenever I hear this on a podcast I get slightly terrified for a few minutes. I’ve always had the mindset: “I’m just a small-time landlord with only a few properties – why would someone sue me? Plus, I’m military! Who would sue a military landlord?” I’ve always had liability insurance on my rentals that would cover anywhere from $300,000-$500,000 depending on the policy. That should be enough right? Nope. The unfortunate reality is that some people make a living suing property owners and people with money. These folks will go after your insurance company, and once they have collected all the money covered by your policy, they will come after your personal assets. Scary, right?

However, there is a great way to add a layer of protection to your personal portfolio: umbrella insurance! I’m getting an umbrella policy through USAA right now, and here’s what I’ve learned so far.

What Is Umbrella Insurance?

From USAA.com: “An umbrella insurance policy gives extra protection if you’re sued for the things you own, as well as your savings, investments, and in some states, your future wages. It can also help pay for legal defense costs.”

It’s important to understand that before you get an umbrella policy, you need to have a landlord home insurance policy on each of your properties. You can’t just have an umbrella policy to cover everything and be good to go. USAA requires me to have liability coverage of at least $300,000 for each property before they would let me purchase the policy. This means that if I get sued, the individual home policy will cover up to $300,000 to whoever sues me, and if the amount goes above that amount that’s when the umbrella policy will kick in and cover up to $2 million.

The policy covers more than just tenants suing my wife and I though. If I rear-end a 2001 Lamborghini Diablo and get sued for the value of the car (call it $250,000) and the owner’s medical bills (call it $500,000) the liability portion of my auto insurance will pay out first, and the umbrella insurance will pay the remainder up to the total amount of the policy. Thanks to the umbrella policy, the owner will get paid from my insurance, and won’t go after my TSP, Roth IRA, or my investment properties. Pretty awesome, huh?

Photo by cottonbro on Pexels.com

How Much Does It Cost?

Not as much as you would think. For $2 million dollars of coverage, USAA quoted me $381.16 for the year. That’s less than $32 per month! I don’t have any of the properties in an LLC (Limited Liability Company) so in my opinion, having this umbrella policy is a must to protect our assets. I will probably move our assets into an LLC eventually to add another layer of protection, but I don’t think we’re there just yet.

I did have to raise the liability coverage for my car insurance but that amounted to only a few extra dollars per month. Also, my Pensacola house didn’t have liability coverage for $300,000 so I’m in the process of raising that with my Pensacola insurance broker. She assured me it would only increase my premium by $20 per year to hit the $300,000 minimum required by USAA for the umbrella policy. Money well spent in my opinion.

For a relatively low monthly payment, we were able to significantly reduce our exposure to litigation, protecting the following assets:

  • Three single family rental properties (Pensacola, and two in Milwaukee)
  • Personal checking and savings accounts
  • Retirement accounts (Roth IRA’s, TSP’s)

I’ve always thought the “peace of mind” argument in the context of insurance is just a fear-based sales tactic designed to make people buy more insurance. However, I think umbrella insurance is a good value, and I truly will sleep better at night knowing I have this extra layer of protection over our personal assets.

Send me an email to chat more about umbrella insurance or any personal finance/real estate topics that interest you. Make sure you tell a friend and follow me @honorandequity on Instagram!

My First Investment Property – Pensacola, Florida

My first home purchase – Pensacola, FL

Many people have horror stories about their first investment properties, but fortunately my first property has performed really well so far. I’ve made money from the home via Airbnb (short term rental) and renting to tenants via a 1-year lease (long term rental). I thought I would talk about how I acquired the property, how it has performed so far, and lessons I have learned.

Moving to Pensacola

I moved from Tokyo, Japan to Pensacola, Florida in September of 2015 on three-year orders to be a flight instructor. I didn’t know very much about real estate at the time, but I knew I wanted to live in a particular neighborhood called East Hill. It was (and still is) a great neighborhood, and I had a number of friends living there. There weren’t many homes for rent, so I started calling real estate agents that had homes for sale in the area asking if the owners would be willing to rent. This worked pretty well, and I found a place to rent for $1,500 per month. Over the next 8 months I listened to the Bigger Pockets podcast, learned more about real estate, and learned more about my neighborhood. I realized that I could purchase a comparable home to the home I was renting and pay much less per month!

I hired a real estate agent to help me find a home. My budget was right around $200,000 which would mean a mortgage payment of around $1100 per month – just under O-3 BAH (Base Allowance for Housing) for Pensacola. I did not use my VA home loan since the price of the home was relatively low and I had enough to put 20% down on a conventional home loan. I figured at the time that I would save my VA loan to purchase a home in the future in a more expensive area.

The Deal

We found a home that was newer, larger, and more updated than the home I was renting with a listing price of $208,000. The inspection revealed that the home would need a new roof within a few years so we got $10,000 knocked off the purchase price and closed at $198,000.

Purchase Price: $198,000

Bedrooms/Bathrooms: 3/2

Square Footage: 2,134

Interest rate: 3.625% (conventional)

Down Payment: $45,902

I put 20% down ($45,902 total with closing costs) and lived in the home for about a year and a half before I started doing Airbnb.

Short Term Rental – Airbnb

My girlfriend at the time (now wife), and I wanted to live together and we decided her condo in Pensacola was a better option than my house. The problem is, I would now have this large home going unused. Thanks to my budding real estate knowledge, I had the idea to offer up my home on Airbnb starting in the spring of 2018. This was very successful and I quickly became a “superhost”. I used a local house cleaning company to turn the home over between stays and profited roughly $1,500 per month over that summer, which more than paid for the mortgage and other expenses. I enjoyed managing the short-term stays via Airbnb, but summer was ending soon and I was moving to San Diego in the fall. I toyed with the idea of continuing to rent the home via Airbnb, but ultimately decided stop renting it on Airbnb. The summertime demand for Airbnb’s in Pensacola is strong, but I was concerned the demand would decrease at the end of summer. So I decided to find long-term tenants for the home.

Renting to Flight Students

Roughly 6-8 weeks prior to my move-out date of the house, I put up the Zillow ad to test the rental-price waters. I listed the home for rent for $1950, not thinking it would rent for that much, and I would have to drop the price until someone agreed on the price. To my surprise, I received a lot of interest in the property within a few days, and two flight students agreed to rent the property for $1950! I used Cozy.com to run a background and credit check on both tenants. Then I used a simple lease template that I got from a buddy of mine, and we signed the lease in person.

My mortgage at the time had decreased to about $1,050 due to lowered property taxes, so I would make roughly $900 a month before non-mortgage related expenses! I decided to self-manage the property so I saved a lot of money there. They ended up being great tenants and stayed for an entire year.

Those tenants had each of their girlfriends living with them, and both couples wanted their own place so they didn’t renew the lease. I reactivated the same Zillow ad with the home listed at $1950 again, but I didn’t get many responses for some reason. So I dropped the price to $1850 and got a response within 24 hours. Flight students again! They were about to head down to Pensacola to start flight school and wanted to live in East Hill. I went through the same process to ensure they had the necessary credit, and got them to digitally sign the lease since I was in San Diego at the time. These tenants should be staying through December of 2020.

For the 2019 tax year, my total profit on the Pensacola house was about $9,200 which makes for a 20% cash on cash return! Also, the value of the home (using the Zestimate on Zillow.com) has increased by 50% in 4 years to over $300,000! Needless to say, this home has been fantastic as a rental. The cash flow numbers are high, it attracts great tenants, and it has seen enormous appreciation well above the national average.

The maintenance and repair expenses have been minimal and my vacancy has been 0% since I started renting to long-term tenants.

Photo courtesy of Morning Brew via unsplash.com

What Have I Learned?

  1. I should have used my VA loan. This would have preserved more capital for future investments, and I would have gotten a lower interest rate. Hindsight is 20/20 though, and I don’t really regret using the conventional loan. I’m still hitting great metrics on this house even with the conventional.
  2. Home warranties are not worth the cost! I used a home warranty for the first couple of years, and it just wasn’t worth it. You have to pay a flat yearly rate (which was around $500 for this house) plus $75 every time someone comes out to repair something. This home is in great shape and I’ve saved money by cancelling the home warranty.
  3. Sometimes it’s better to be lucky than good! My real estate knowledge was limited when I purchased this home. However, I knew that I would be able to rent the home for at least $400 more than the mortgage, so I’m glad I pulled the trigger and bought the home. I could not have anticipated that it would rent for almost double my mortgage payment, nor could I have anticipated that the home would go up in value by 50% in only 4 years! Sometimes you just get lucky with the timing.

Hopefully this article inspires you to take action and buy your first rental property. There are so many ways to acquire your first property, and it can be done no matter your experience level, net worth, credit score, or personal background. You just need a positive attitude and a desire to get that first property no matter what! I’d love to chat more about your real estate journey. Send me an email at doug@honorandequity.com or send me a message on Instagram!

I hope you enjoyed this article about my real estate journey. Please share with a friend and follow @honorandequity on Instagram!

My Favorite Podcasts

Podcasts are my second favorite way to consume information (behind books, of course!). I absolutely love how there are so many available with hosts who just want to provide value to others. And they’re all free! I listen to A LOT of podcasts and have for years. I mostly listen to podcasts that focus on personal finance, personal development, and real estate, and these are my favorites.

Personal Development

Image courtesy of dailystoic.com

The Daily Stoic

Ryan Holiday is the host of The Daily Stoic, in which he talks about life in the context of Stoicism – an ancient philosophy that focuses on self-improvement in all areas of our lives. I like the format of this one: they do a few short, 2-5 minute podcasts during the week, and a longer 45-60-minute episode on the weekend. Ryan is highly intelligent and it’s immediately apparent. He discusses the various weaknesses inherent to humans and how we can strive to overcome and improve on a daily basis. He also ties in current events and problems and how the advice of the Stoic philosophers (Marcus Aurelius, Seneca, and others) are still relevant 2,000 years later.

Image courtesy of podcasts.apple.com

Filling the Storehouse

Stu Grazier and David Gutierrez are experienced real estate investors – but real estate isn’t the main focus of this show. Rather, they focus on “Faith, Family, and Financial Freedom”. Stu and David were roommates back at the United States Naval Academy and have been bro’s ever since. It really shows on the podcast, as they are always making jokes and laughing at each other. They bring on awesome guests to discuss topics such as leadership, giving, gratitude, finding your why, and having the right mindset. I always feel motivated after listening to this one!

Investing

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Investing for Freedom with Mike Ayala

This podcast is relatively new, but you won’t be able to tell by listening to it. Mike Ayala is a successful entrepreneur and business owner who genuinely wants to help others achieve their investing goals. He provides motivating advice and engaging interviews with other interesting, successful people. He’s a member of Gobundance (a mastermind for healthy, wealthy, well-rounded men) and anyone in Gobundance is worth following closely. Mike had his wife, Kara, as a guest a couple of times, and they offered up some great relationship advice as well. This is one of few podcasts that I listen to pretty much immediately after they are released on iTunes.

Image courtesy of affordanything.com

Afford Anything with Paula Pant

Paula is an excellent host and interviewer with a wealth (pun intended) of knowledge about personal finance, investing, and real estate. She meticulously researches topics and guests and produces an extremely professional and informative podcast. She asks fantastic questions to her guests and provides a lot of value to the listener. I have learned so much about personal finance from her podcast. I wish she would talk more about real estate because she knows a lot about it (only about 30% of the show is RE focused), but I understand that she wants to keep the show more broadly focused on personal finance as a whole. She is a mainstay of the F.I.R.E. (financial independence, retire early) community, so when she interviewed Suze Orman – an outspoken F.I.R.E. hater – I knew it would be a great episode. Suze roasts the community, but Paula maintains her professionalism and waits until a follow up episode to “address” Suze’s scathing opinions on the concept of early retirement. It’s a must-listen!

Real Estate

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The Bigger Pockets Real Estate Podcast

This is the podcast that got me into real estate. A friend told me about it 5 years ago, and I’ve been a regular listener ever since. They cover a wide spectrum of real estate topics from beginners getting started to interviews with massively successful tycoons. When it began, it was hosted by Josh Dorkin and Brandon Turner, but Josh has since left the podcast and was replaced by David Greene. Brandon and David are extremely knowledgeable about real estate and have helped many people get started and succeed in real estate. Bigger Pockets has published many great books on the subject as well, and http://www.biggerpockets.com is another valuable resource for those interested in learning more.   

Image courtesy of realestateguysradio.com

The Real Estate Guys

This one is hosted by Robert Helms Jr and Russell Gray. They have been doing a real estate radio show since long before podcasts existed, and they are buddies with Robert Kiyosaki and many other hugely successful people. What I like about this show is that they frequently talk about real estate on a macro level and have topics you don’t hear about on other shows. For example, they just interviewed PhD economist Richard Duncan who works for the IMF (International Monetary Fund) who talked about the long term economic impacts of COVID-19. It’s episode #2,028 (yeah, they have a lot of episodes!).

Image courtesy of coachcarson.com

Real Estate and Financial Independence Podcast

Chad Carson is the man! He wrote my favorite book about getting started in real estate (Retire Early with Real Estate – a must read) and his podcast provides a lot of fantastic info as well. Chad is an excellent teacher. His simple but effective methods are ideal for the novice investor. He recently started interviewing real estate investors that only have a few deals under their belts, but are making money and learning a lot along the way. I like this because it shows the listener that anyone can be successful in real estate no matter your income level or background. A must-listen for beginners!

Image courtesy of stitcher.com

The Real Estate Syndication Show with Whitney Sewell

Whitney is a fellow military bro who got into real estate syndication a few years ago. A syndication is when a group of investors pool their money to purchase assets they would not be able to purchase alone. Whitney is somehow able to produce a new show daily, and he has a different guest each episode who shares their journey in real estate. Even if you’re not interested in syndication right now, this show is definitely worth listening to. Whitney and his guests have insightful discussions about all aspects of real estate. He’s all about helping people as well, and will respond if you reach out to him!

I hope you liked this article. Please share with a friend and follow @honorandequity on Instagram. I love connecting with people and chatting about personal finance and real estate!

How to Earn More and Save More While Active Duty

Photo credit: Diego Gonzalez via Unsplash.com

Military members have unique opportunities to both earn and save more money while still active duty or in the reserves. You might be familiar with some of these, but it’s easy to forget about them if it’s not built into your habit pattern. Let’s get after it!

Travel and Per Diem

I travel a lot for in my current billet (1-2 weeks per month) and I get per diem for every day I’m away from home. The amount varies depending on location and whether there is a base galley nearby or not, but you’re going to get some money no matter where you go. So travel on as many work trips as you can, be frugal while on those trips, and you’ll have extra cash hitting your bank account a week after you get back.

Shop at the Commissary

This is a no-brainer. Food is the third highest expense for most households (after housing and vehicles) so you can save a ton of money by shopping at the commissary. I do most of my shopping there and the prices simply can’t be beat by local grocery stores, especially here in San Diego. The U.S. government spends an enormous amount of money subsidizing commissaries for military members, so take advantage of this one. Also, make sure you make a list and don’t go hungry!

Bonus Tip: Always refuel your vehicles on base. It’s cheaper.

Ask for Military Discounts

You already know about this one, but how often do you take advantage of it? Most companies have military discounts, but they don’t advertise it, so make sure you ask whenever you’re shopping. Retailers with military discounts include Lululemon, Lowe’s, Patagonia, North Face, Mountain Hardwear, and many many more. Also, if your credit card has an annual fee, give them a call and they will likely remove it.

Don’t Buy that New Car

This isn’t unique to military but it’s so important and service members make this mistake all the time! Don’t buy new cars and don’t buy cars you can’t afford! Vehicles are depreciating asset, which means their value tends to decrease with time. So that sick $45,000 Mustang GT you bought two years ago with a 18% interest rate is probably worth $25,000 today. Wouldn’t you rather spend $45,000 on something that will increase in value – or even better – pay you every month! This is why you need to put money into passive income streams. (Check out my article about Turnkey Real Estate Properties to learn more)

Deployments

You can make a LOT of money while deployed. Obviously this one depends on your branch of service, your military occupation, and many other factors, but it’s worth thinking about. Extra pay while deployed can include: imminent danger pay, combat pay, hazardous duty pay, sea pay, and Family Separation Allowance. These, like your BAH and BAS, are not subject to federal or state taxes as well – that’s a big win! And if you deploy to a combat zone like Iraq or Afghanistan, your base pay will not be taxed either! This can be substantial depending on your pay grade and time in service. Also, if you’re in a combat zone you can participate in the Savings Deposit Program which enables you to earn 10% interest on up to $10,000.

Additionally, your expenses generally decrease significantly while deployed. You’re probably not going out to eat or traveling while deployed, so you can cut expenses while increasing your income.

Most civilians don’t think of military service as the type of occupation that leads to wealth building. This is an over-generalization. Remember, wealth is not determined by how much money you make, its determined by how much money you save and what you do with that excess. It’s very possible to build wealth while in the military, you just have to create the right habits and plan ahead for many years from now. If you only plan two weeks ahead to your next paycheck (like most Americans do), you will never become wealthy.

Thanks for reading! If you enjoyed this article, please share with a friend and follow Honor and Equity on Instagram @honorandequity.

My Favorite Real Estate Books

Reading is my favorite way to learn about anything, especially real estate. There are hundreds – if not thousands – of real estate books out there, so deciding on which books are worth your time can be difficult. All three of these books have made a significant impact in my real estate journey, and I hope they do the same for you.

Photo courtesy of coachcarson.com

“Retire Early with Real Estate” by Chad Carson

This is the first book I recommend to friends who want to learn more about real estate. Chad clearly put a lot of time and thought into this book and it shows – it’s fantastic for beginners! Like most real estate books, this one starts with a “Why Real Estate” chapter, then describes different strategies new investors can use to get started.

One unique aspect of this book I really enjoy are the “Profiles of a Real Estate Early Retiree” in which Chad provides examples of people that have retired early with real estate and how they did it. These are interspersed throughout the book and are relevant to the chapter in which they are included.

Since its designed for novices, this book doesn’t go super into depth on the “how” and it doesn’t get into the weeds with financial numbers, which I think is actually ideal for a beginner book. Chad Carson’s podcast is fantastic as well – definitely check it out.

Photo courtesy of biggerpockets.com

Long-Distance Real Estate Investing” by David Greene

David Greene was working as a police officer in San Francisco, and realized he couldn’t afford to invest in the bay area. So he figured out how to invest in more affordable markets with better cash flow, and in his book, he shares everything he learned from that process.

“Long-Distance Real Estate Investing” created an enormous “lightbulb” moment for me: you don’t have to live where you invest. It stressed the importance of having a great team, especially when you are investing long-distance. It was soon after reading this book that I heard about turnkey investing and within a year I had bought two single family rentals in Milwaukee, Wisconsin, without ever setting foot in the state. I still own those properties and they continue to perform well.

David co-hosts the Bigger Pockets podcast with Brandon Turner. He is extremely knowledgeable about real estate and I highly recommend listening to that podcast as well as reading his book.

The Book on Rental Property Investing” by Brandon Turner

This is a modern classic that is a must-read for anyone interested in real estate investing. I have referenced this book multiple times since reading it because it has so much fantastic information.

This is a dense book that covers a wide range of information, but it’s also highly readable and beginner-friendly. Brandon covers the “why” of rental property investing, as well as how to find a great team, different types of properties, what to think about when deciding on a location, how to make offers, how to close, how to manage tenants, and how to handle selling a rental property.

Thanks for reading! Please comment below with your favorite real estate books. Also, I encourage you to send me an email at doug@honorandequity.com if you want to discuss more books. Connect with me on Instagram @honorandequity as well!

Are You Financially Ready for Your First Investment Property?

There are countless stories of individuals buying multiple homes they could not afford in the buildup to the 2008 housing market collapse. Many of these individuals had to file for bankruptcy as a result of their financial decisions. Every day, people buy homes they shouldn’t buy, and this is true for investment properties as well. Just because the bank will give you a loan for a property, doesn’t mean you are financially ready to buy that property. The banks are looking out for their bottom line – not yours.

So what are some things you should think about before you get that first investment property? Let’s dig in.

Get Your Personal Finances in Order

Ideally, you should have no consumer debt with the exception of a mortgage on a primary residence. Consumer debt usually comes with higher-interest rates and includes ‘bad debt’ like car payments, credit card debt, and pay-day loans. Before you buy investment properties, you should aggressively pay down these loans and free yourself from them. Dave Ramsey has a great strategy for helping people become debt-free. Paying these loans off ties into the next step: raise your credit score! Lenders need to see that you are a ‘good borrower’ which means you have steady income and you pay all your bills on time. You should target at least a 700 credit score.

You will also need cash reserves to cover surprise capital expenditures, vacancy costs, and repairs. I set aside $5,000 in a high-yield savings account per property. There are different ideas and techniques for addressing cash reserves, and I’ll admit mine is more conservative than most but it makes me sleep better at night. For example, if Stephen owns three properties, he would need to have $15,000 set aside for cash reserves, and get that number to $20,000 before he buys a fourth. Important disclaimer: These real estate cash reserves are different from your personal ‘emergency fund’ for unexpected personal expenses.  

Ok let’s sum up these up:

  1. No consumer debt.
  2. Raise your credit score to at least 700.
  3. Have sufficient real estate cash reserves.

Make Sure Your Spouse/Partner is 100% on Board

People love surprises – but surprising your husband or wife with an investment property is a terrible idea. It’s a big financial decision, so you should make sure you and your spouse are in agreement. Many times, an individual will have a much higher risk tolerance than their spouse – and this is totally normal. You should sit down and have a serious conversation to determine your shared risk-tolerance, long-term goals, and strategies you are comfortable using to achieve those goals. Maybe your spouse isn’t ok with you doing a long-distance fix-and-flip with someone you met on the Bigger Pockets forum, but they would be ok with investing in an apartment syndication with someone you both know and trust. The bottom line is: you have to communicate with your spouse/partner and ensure you’re both on the same page before you commit to investing in anything – especially real estate.

Educate Yourself about Real Estate

This one may seem obvious, and if you’re reading this article you’re already doing it! You must educate yourself about the type of real estate in which you want to invest. There are so many fantastic and free resources out there. I’ve learned most of my real estate knowledge through podcasts and there are hundreds of different shows to choose from. The Bigger Pockets podcast is a great place to start, and I will probably do another article soon about my favorite real estate and personal finance podcasts so make sure you check back often and follow @honorandequity on Instagram for the latest updates.

My second favorite way to learn about real estate is through books. The real estate book I recommend the most is Chad Carson’s “Retire Early with Real Estate” which is designed for a beginner real estate investor. Chad – who has an excellent podcast as well – does a great job of explaining the basics of real estate investing.

Real estate is a powerful way to build long-term passive income, but it’s a big commitment. You and your family must be financially and mentally prepared before you begin the process. Otherwise, you may find yourself in a terrible financial position.

As Warren Buffett wisely said: “It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes”.

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Should You Join a Mastermind Group?

About one month into my Iraq deployment last year (2019), I got an email from a friend about a real estate-focused mastermind group for military members and veterans. I found this intriguing, as I had recently read the book Tribe of Millionaires by David Osborne and Pat Hiban (of the Gobundance mastermind) which outlines the benefits of a mastermind group via a fictional story. Surrounding myself with like-minded individuals of a similar background for the purpose of self-improvement sounded appealing to me. I’m always interested in bettering myself and learning more, so this seemed like a logical next step in my personal development. I told my friend that I was interested, but I wouldn’t start it until I came back from deployment. Fast forward a few months, and I submitted my application and joined the mastermind.

It’s been roughly 10 weeks since I started, so I thought I would give some insights into what it’s like being in a mastermind group. Members are divided into 5-6 person ‘squads’ who are encouraged to meet weekly to discuss highs and lows of the previous week, long-term goals, and short-term goals for the week ahead. One person gets to deep-dive into what they’re working on and any problems they’re facing. These are usually in the context of real estate and personal finance, but we discuss fitness goals and work problems as well. In addition, there are roughly twice-monthly webinars for the entire mastermind with more experienced speakers from different real estate backgrounds. These provide a tremendous amount of value because you can ask questions and interact with these individuals.  

So What Are the Benefits?

Accountability

This is a huge advantage to being in a mastermind group, and it pays off regularly. Once you are in a squad, you lay out all your goals – short term and long term. My squad helped me realize that I hadn’t set my goals high enough, so I made bigger goals. This reiterates the fact that we are only restricted by the limits we place on ourselves. I couldn’t see this fact myself, but these guys showed me that I could accomplish more.

When you outline your goals for the upcoming week, your squad members will follow up with you during the week and make sure you’re actually doing what you said you would do. Also, the beginning of the weekly meetings involves discussing if you met your goals from the previous week. Some of my past goals have been reading 50-100 pages per week of any book, exercising daily, and reading an article about real estate syndication every day. What good is a goal if there is no follow up to ensure it has been achieved?

Networking

“You are the average of the 5 people you spend the most time with” said Jim Rohn. Networking is probably the most substantial long-term benefit to a mastermind group. Our mastermind in particular has a good mix of beginners and more experienced real estate investors. Some are into lending, some fix-and-flip, some prefer the simple buy and hold strategy, and some do all of those! You also have a wide array of people with experience in different asset classes, such as single family homes, apartment buildings, self-storage, mobile home parks, and more. There seems to be a healthy combination of people looking for deals to invest in, and people with deals that need capital to get started.

Personal Development

Many people join masterminds because they have a good idea of what they need to do to get moving in the right direction, but they just need that bit of encouragement from like-minded individuals. It’s also a fantastic forum in which you can bounce ideas off of others. The group is diverse enough such that whatever problem you’re having, there’s probably someone else that has had a similar experience. Or they’ve read an article/book or listened to a podcast about it.

Is A Mastermind for You?

As with life in general, the more effort and time you put into your mastermind experience, the more you get out of it. Some members are more involved than others, and there is a direct correlation between time spent and value gained. On a similar note, the more you give the more you get. If you are willing to give to others (be it knowledge, time, or money) the universe will pay it back many times over. It’s also inherently rewarding to help others and see them grow. Though it is certainly not for everyone, I have personally enjoyed the mastermind experience so far, and will continue to participate as much as I can in the future.

Have you been in a mastermind group? Tell me your thoughts in the comments section below. Also, the War Room Real Estate Mastermind Group is always looking for military members and veterans who want to learn and grow and help others. Send me an email to learn more.

Creating A Legacy

My mom recently sent me an email about my grandparents and their approach to wealth and saving. She said at one point when her parents had a home and three children and two cars and a comfortable life, they decided they had everything they needed. From then on, all bonuses and extra money went into a savings account and into assets such as stocks and bonds. Christmas was generous but not over the top. They paid cash for all big expenses and lived well below their means. Family vacations were spent traveling to the Carolinas from Texas to visit relatives.

What was their goal? Why did they do this? They could have had much nicer cars and clothes and vacations. Their ability to live below their means and invest money wisely enabled them to pay for their children to attend college and for many of their grandchildren to do so as well. My mom expressed to me how grateful she is for this, despite not fully appreciating it at the time. My grandparents recognized that if they spent money intentionally, they would be able to create a legacy for their children and grandchildren. It’s not just the college tuition they paid for: they created a situation in which their children and grandchildren would not have to go into debt to pay for college, like so many people have today.

What do you want your legacy to look like? How do you want to be remembered? You don’t need children to inspire a legacy. You don’t need a lot of money either. It can be purely philanthropic, it can be a modest real estate portfolio, it can be art or books or even just journals or letters to friends and family. Your legacy should be authentic and true to who you are.

Something we should all do to build a simple legacy is strive to be a good person every day, treat others the way we want to be treated, and be generous with what time and money we have. These are modest things that can have an enormous impact on people in our lives. You don’t need a lot of money to be generous, to be good, or to treat others with respect.

Personally, I want to be able to spend as much time as possible with my future children and grandchildren, which is why my wife and I are so enthusiastic about acquiring real estate. We recognize this is a great way to build generational wealth. I believe that time is our most valuable commodity, and if we’re able to acquire enough passive income streams, we can spend more time with family and friends than we spend working and achieve this well before traditional retirement age. This takes sacrifice though. We have a high savings rate and forego buying many things others our age buy. We still go out to eat and go on vacations, but we are not impulsive with our money: we try to focus on needs not wants.

Our legacy is about more than real estate and passive income streams, though. We want to be generous with both time and money. My wife and I really enjoy parrots, and there are many of these birds in need of a good home. Some species have a lifespan of up to 80 years, so it’s common for them to have multiple owners during their lives. We have begun the process to start fostering some of these birds while other volunteers search for permanent homes. Also, this blog is a way that I personally try to give back to the military community through articles and discussions on personal finance and real estate. Financially, we donate to charities through the Federal Government’s Combined Federal Campaign (CFC), which is a fantastic way to find a cause that interests you, and be able to donate money automatically out of your paycheck (Federal employees only).

The concept of legacy creation can seem daunting and far-away, but there is no reason to delay. Start with a simple conversation with your spouse, or write your thoughts on your legacy in a journal. Every marathon begins with a single step, and legacy creation is no exception. Take action today. You’ll be glad you did.

Please share your thoughts on legacies in the comments below. Or if you would prefer, send me an email at doug@honorandequity.com and let me know your thoughts. Be sure to follow @honorandequity on Instagram as well.

Why Aren’t You Tracking Your Expenses?

If you want to build wealth and become financially free, there are two levers you must be in control of: money coming in (income) and money going out (expenses). Each of these come more naturally to some than others. Some people are great at earning income, but they may also spend a lot. This is called living “paycheck to paycheck” and though usually associated with low income households, many high-earners live paycheck to paycheck as well. But we are not going to live this way no matter how much we make! We want to spend way less than we earn, take that difference, and invest it into things that generate more income for us (assets), such as stock market investments, real estate, businesses, and invest in ourselves through education, personal development, mastermind groups, and more.

As military members, our ‘money-in’ lever stays fairly stable thanks to the Federal government. Therefore, tracking our expenses and being intentional with how we spend money is a crucial skill to master in order to build wealth. My dad calls this “living below your means.” If we make $4,000 per month but only spend $3,000 per month, we have $1,000 left over – $12,000 per year – to invest in assets, education, and personal growth.

There are many people, companies, and websites trying to get our hard-earned cash. Some of our expenses are necessities like groceries (I hope you shop at the commissary), rent or mortgage, gasoline, clothing, etc., but Americans spend a lot of money on things that aren’t necessities. We must make sure we’re spending only on things we need, and buying things we want only after we have already set money aside for our future. Let’s dig deeper into why you should know where your money is going.

Benefits of Tracking Your Expenses

Hidden Fees – Finance and banking companies make a ton of money from fees. According to chime.com banks in the United States can make $33 billion per year from overdraft fees alone! Other fees include foreign transaction fees, ATM fees, and maintenance fees. Most of these are only a few dollars here and there so we don’t really notice it – unless we are tracking our expenses.

Fraudulent Charges – A few years ago, I had a $250 charge on my credit card from a Yankee Candle store in Oklahoma. Now I like candles, but not that much, and I certainly hadn’t been in Oklahoma recently! So I contacted my credit card company, explained the issue, and they removed the charge and sent me a new card. Thankfully, I track my expenses regularly so I noticed the charge. Many criminals will make a few smaller purchases with your stolen credit card information before making a big purchase, so make sure you’re checking your expenses and contact your bank immediately if you notice a charge you don’t remember making.

Recurring Expenses – One of my recurring expenses is Netflix which is $14.99 per month. My wife and I watch Netflix nearly every night, and we definitely get our money’s worth from this service. It’s easy to forget about small recurring expenses like this, so go through your monthly transactions and get rid of stuff you don’t use anymore!

Budgeting – This is a great strategy to keep your expenses down and could be a whole other topic of discussion. If you create a budget (and I recommend you do), you have to be able to know how much you are spending on each category (groceries, clothing, etc.). It may sound daunting to try and figure out how to track all of this stuff, but don’t worry because its surprisingly easy.

So How Should We Track Our Expenses?

Thankfully there are free resources that can help us out. The two most common ones are Mint and Personal Capital. I have used both and prefer Personal Capital, but I have heard Mint has updated its user interface in recent years so you should check out both before deciding on one. Did I mention these are both free?!

Once your Mint or Personal Capital account is set up, the next steps are simple:

  1. Add all your financial accounts including checking/savings, credit cards, mortgages, Venmo, everything!
  2. Go through your transactions and make sure everything is in the correct category. For example, sometimes a gasoline charge will auto-categorize as ‘groceries’, so you just need to make sure it’s all accurate. This is important!
  3. Do regular assessments of your income and expenses to have greater situational awareness of how you spend your money. I recommend doing this at least once per month. Set a reminder on your phone, or add this task to a habit you already do once per month, like paying rent and other bills.

Tracking your expenses is a simple way to start taking control of your money and build wealth. It only takes a few minutes to get started and you’ll be amazed to find where your money is actually going. Once this becomes a habit, it will help you be more intentional with how you spend money.

Take action today!

Do you know of other good reasons to track your expenses? Comment below! You can also send me an email directly at doug@honorandequity.com

Make sure you follow me on Instagram! @honorandequity

First Real Estate Syndication – Mobile Home Park in Colorado

A lot of people would think I’m crazy to invest $50,000 in a mobile home park I’ve never been to, located over 1,000 miles away from where I live, with a team of people I’ve never met in person, at the height of the COVID-19 pandemic.

And they might be right.

More Than Money

However, I think I will look back on this decision and see it as an excellent one that greatly contributed to wealth generation for my wife and I. But that is just one way in which it will benefit us. This is my first foray into the real estate syndication world, and thus far, I have a seemingly insatiable desire to learn as much as I can about the process. In the real estate context, a syndication is a method of investing in which multiple investors pool money together to purchase an asset. This is commonly used for assets like apartment complexes, self-storage facilities, and mobile home parks. I’m listening to syndication podcasts and reading articles every day. I’m having conversations with individuals in my mastermind about it and consuming as much as I can on the topic. So even if the deal doesn’t work out as well as I think it will, I am GUARANTEED to learn a great deal from the process.  

I had a conversation a few weeks ago with a gentleman in my mastermind group who has much more syndication experience than I do – which isn’t saying much! He said the sponsors (the team of individuals who are doing the actual work in the syndication) will send out quarterly statements with information on how the property is performing. He said that just by reading this information, I will be ahead of most investors. Apparently, not only do most investors not read these documents, most don’t even open this email. This is baffling to me. Wouldn’t you want to know how your investment is performing? Then again, people throw lots of money at the stock market and have no idea about the companies or funds in which they invest.

Invest in People, Not Deals

One thing I’ve learned so far is when you invest in a syndication, you’re not investing in the deal, you’re investing in the people doing the deal. The numbers make sense, and I wouldn’t do it if they didn’t, but the team and their actions and character will likely determine the success or failure of the venture. I found out about the opportunity through Stu. I have purchased two turnkey properties through his company and both have been great experiences. I trust Stu and David (his business partner) completely, so when Stu sent me an email about the mobile home park, I knew this would be a good opportunity even before I read the specifics. Literally the day before I received his email, I was reflecting on how much money I had saved during deployment and wondered “what am I going to do with all this cash?” Stu’s email seems serendipitous in retrospect.

Stu and David are only two of the people on the syndication’s team though. I asked Stu how he knew the others on the team and if he trusts them. He said he has known the lead sponsor – Byron – for over 3 years and trusts him completely. If Stu trusts him then I do too, but I still felt like I had more work to do before I wired the money.

Due Diligence

As part of my personal due diligence process, I reached out to Byron – the “Chief Vision Officer” who is overseeing the syndication. I had a number of questions for him, and not only did he respond within a few hours, the responses were excellent and significantly increased my confidence. I also read his bio which mentions his experience as an attorney, business owner, and the work he has done in other real estate syndications. A key element of his bio that jumped out at me was his 24 years of service as an Army officer. Though this alone is not indicative of someone who will manage a syndication well, it does indicate to me that he can be trusted, he has integrity, and he will work hard to accomplish a task. Prior military service – especially over two decades worth – speaks a lot about someone’s character, in my opinion. After reviewing his biography and reading his thorough email response, I decided I would wire the $50,000 and commit to the deal as an investor.

These early steps and due diligence just reinforce what I have heard about the importance of relationships and networking. Your net worth is determined by your network. I feel thankful I have developed such a network around me to help me as I begin this journey, and I will continue to grow my network regularly – to help myself and to help others.

Look out for my quarterly updates on my first syndication deal. Thanks for reading and please let me know your thoughts in the comments section below.