Episode 30: Big House, Tiny House, Any House: Making Real Estate Part of Your Portfolio

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing how to make real estate part of your portfolio.

John discusses how real estate plays a part in your retirement portfolio and how each generation has used, can use, or will use this type of investment. John shares all on today's podcast. Don't miss this one!

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you. Or, give us a call at (312) 372-5000.

Welcome to the build your life podcast with John Browning. Build your life as a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth, with offices in Hawaii, Colorado and Illinois. John's also the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values. Would you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a free copy mild right to your door. I'm Michael D Lan, your host for the next few minutes as we chat with financial expert, business owner and author John Browning. Well, hello, John Brownie. How are you today, sir? I'm doing fine. About Yourself, you know, tremendous. It's a beautiful day here in Little Rock. How is it in the A lowhaw state? It is fantastic here, as always, the weather is nice. People think it doesn't rain in Hawaii, but it actually rains just about every day, which is absolutely fine because ten minutes from...

...when it was raining it's generally stunny again. Well, there you go. Not Not not a bad deal, not a bad deal at all. We were playing a card game with my family the other day and it's the United States thing and every card has a state in a capital and it's nickname, and Hawaii came up and I'm like, I know a guy there, so have fun to educate my girls a little bit about the a lohaws state. So Hey, the learned. I learned a lot of things playing games with my family and I like to educate people as well. And I was thinking the other day, John, as we've talked because we've known each other quite some time, but there's something about me that you probably don't know that that might tie into what we're talking about today. Is years ago I was in real estate and I was I was a realtor for a number of months, about a year and a half actually, when I met my who's now wife, Jill. I was selling real estate and you probably know this. At most everybody knows in real estate it's all about location, right the phrase is...

...location, location, location, and that was one of the first things I would talk to somebody about when I was entertaining, you know, helping them buy houses. Well, where do you want to buy? And it's all about location. Talk to us today, because real estate to a part of a portfolio can be. And something that's very interesting is how some some real estate location aspects have actually changed over the years for some people. Let's I want to talk about that in baby boomers and where they live and and how that impacts a portfolio on how you design that for them. Okay, can we do that? Absolutely. It's actually usually a big portion of people's portfolio. Yet they don't always realize that it's a big person their portfolio. And when you start opening up that this idea that everything that there they own is a piece of their workfolio, they begin to understand because even the house that you live in, if you own it, that's real estate exposure. That's...

...residential real estate exposure to be very specific. So once you factor that in and you factor in the fact that most people have leverage or mortgage on that, which makes it just a little bit more risky, right, right, then they start to realize, wow, I may be actually overexposed not just real estate but residential real estate. And and what does that mean for my overall portfolio and overall financial plan? Well, and that's a good thing, because what you help people do is look at that overall plan and I know you know, we just today, my we sold my mom's house in Indiana. She's in an assistant living place now and my brother is taking care of all that. So he just sold her house and that's part. You know, all that money is not coming to us and right he's going into her portfolio because she's still living. But years ago, people who wanted the big...

...house in the suburbs, right, and a lot of times I knew people who would retire, they'd buy a bigger house because they wanted their grandkids and things to come, you know, vacation with them or live with them or whatever that seems to be. There seems to be a reversal of that trend now, as I see people downsizing as they get towards retirement and going smaller, going Beach Front in Hawaii or Florida or other places. Talk about that and how what kind of trends are you seeing with, you know, big house of small houses? I saw a documentary the other day on these tiny houses. Yeah, what what do you know about that? Yeah, when we're dealing with a lower income folks, those, those tiny houses are real. They're really actually gaining in popularity because they reduce your not only do they reduce your footprint in terms of esg or environmental, socially and governments in that type of respect. That reduced that foot print. But they also are much...

...more affordable in most cases to own or rent, as the case might be. So they have have certainly gained in popularity and I've seen some of those documentaries as well and I've actually talked to one person in particularly was actually done it and it does give a little for for somebody, for somebody my side. I went in this tiny house and I was like, I don't know this is going to work. I was bigger than the house. You know, that's great. Yeah, I was bumping my head on all sorts of things. But for but for the right person, they're fantastic alternative. So but you're absolutely right, though, that whole idea that it used to be a nice when I say used to be, I'm talking maybe ten years ago where and it's you know, things change so slowly you barely recognize that they're happening. Right. But say ten years ago, Fifteen, twenty years ago, to the idea for most baby boomers, as their dream was to get...

...out into the suburbs and buy the big house with the Nice Yard, maybe a pool, something like that. And then as we saw the millennials come through, and now Milan millennials are not young, you know, all that young anymore. They're they're in there, you know, mid late thirty s. Some of them, I'm they're buying there in the position to buy real estate. But they don't want the maintenance generally speaking. You know, I know we always tend to stereotype right people group switching reach not there. Yeah, but in general millennials don't really want the maintenance cost and and I get it, having owned a house for about thirty years, I get not on the maintenance cost in the maintenance headache and all that. So they would rather have a smaller place, maybe in the city, maybe on beach front or somewhere where they can have the life experience that they're looking for. And now the baby boomers, as they age, they don't want the maintenance expense either.

So, though, they're both competing for this new location in the smaller apartment, Condo, Brownstone type of type of space, and those prices are increasing. But then those those real estate holdings of those suburbs with the big house and big yard, high maintenance costs, sometimes high taxes. Those are actually starting to decrease in value in many areas of the countries. So that location, location, location, in the idea that real estate always goes up may not be always the case. That's fascinating. You know, when I was selling real estate, I was working with some local real estate investors and they would buy property for rental properties and their thing was they always wanted to buy a three bedroom, two bath house and they said that is the prime for rental properties. They wouldn't buy the big mansions and they wouldn't buy the little tiny houses right because they said most people can afford it. That's what most people want. And as you're talking there, it's interesting because that's that's...

...not a tiny house, but that I could see somebody moving into a three bedroom, two bath and getting rid of the seven bedroom, fourteen bath, you know, eight car garage one that is maybe going down in value because of what you're just saying. It's that localization in a sense either to downtown, I see a lot more condos popping up in condominium communities. You drive in their gated communities and you drive in there and they're all retired people because they don't want the maintenance and those things. Those things aren't cheap. So to your point, to your point. So how does that plane? If somebody has either their own property, obviously, or if they have some some investment property, what's your kind of counsel to them as far as besides, you know, pick up a phone called John. That's that's number one. That obvious. But otherwise, as a look at their portfolio, should they be thinking about downsizing? Because obviously if they're selling that that real estate, there are some tax applications and thanks. So it all plays into that portfolio,...

...right. That's right, it all does. And you know, I mentioned before where a lot of people don't realize how over exposed they are the real estate. Well, what's very popular around our location here in Hawaii is that we see people that have bought the CONDOS, bought the air be and bees maybe, or rental property, something like that. And the property values in might come as no surprice to you here in the Hawaii, are very high. Right. Yeah, now again, especially with the pandemic right now, and people are beginning to have a little bit of trouble, just starting really having trouble paying their rent. So these and nobody really talks about the landlords because, guess what, they still have the mortgage to pay, the taxes, to pay the maintenance, to take care of I. But yeah, they're not allowed to do anything about the renters who are unable to pay. In a lot of cases these are hard working people that it's not their fault they can't pay. It's Raci to the economy has been shut down. So it's a very it's a really tough situation right now and like we had...

...a gentleman just three weeks ago that we were talking to and his plan was to retire next year. He came to talk to us about that and when we looked at things, we realized he was really the state rich but cash poor, and he was in a position where to he had several rental, rental properties in two of the folks were unable to pay their rent during the coronavirus, so he was having to make that up in addition to the fact that he was going to try and retire. Well, he thought, well, I'm frankly, he was. He's pretty well off. Yeah, but he was not financially flexible enough to really get that done by next year when we really took a look at it. We're in the simulations, did all the calculations that we do and looked at the whole picture. We had to have that conversation with them. Listen, I think maybe you need to put this off at least for another year and make some plans to get some more...

...financial flexibility in your life and get less exposed to residential real estate. And we showed them how you can actually keep some of that it real estate exposure without overexposure yourself, without all the maintenance cost and the headache of actually managing those rental properties that he was he was somewhat amazed because he's just grown up with and been used to you. You Own Property and you rented out and that's that's a great way to make money, and it is for the for the right person. Yeah, and and somebody who maybe that doesn't need the financial flexibility or maybe who really really enjoys the maintenance aspect and keeping up and running that type of business, because it is a business. It is you do that. Yeah, I've got a neighbor who does that. He's got many rental properties and things and he's always running around, but the dude can do anything. You know, he's one of those guys. He can fix anything. I love having him as my neighbor. It would drive me Baddie.

If nothing else, he's got the tool that you need right so every time now and he's and he's happy to lend them to me. So that's really cool. So that's really cool. You mentioned something that I want to talk about in an upcoming episode and I'm not even really sure how to how to put it into perspective, but it's I have a home, I've lived in it for twenty years. I have equity in my home, but that money's not doing me much good in an investment aspect. It's there. I want to have an episode where we talk about that. Are there are some smart ways to leverage that, or what are some things that a homeowner could do? To say, if you have a lot of equity in your home, are there some some ways to use that as part of your portfolio, or is that kind of a taboo? No, No, Pay Your House off. I want to dive into that in an upcoming at you episode because that's really just very interesting to me, and I think it will be to a lot of people, of what you do with at home. Equity because...

...it's there, but if your house drop plummets and value it disappears. So it are there ways to leverage that with the portfolio? I assume there will be, right and there are again it to so the answer that is it depends, but we'll get into that in one of the next episodes. Right right. I love that answer, John, because that's a cliffhanger and if you want the answer to that you're going to have to come back for an upcoming episode of John's podcast talking to a John Browning, financial expert, Amazon Number One best selling author and Guru with Guardian Rock. Well, so if you if you have any questions around financial planning retirement, even even if you're younger than if you're an early baby boomer or the next generation down, which I'm not sure what that would be called. I don't keep up on all the names, but you know who you are. If you need some financial health and guidance or or just have a question, reach out to John. You can go to his website, give him a call, sent them an email and just chat with them and see how he can give you some guidance.

And if you need a copy of his book, just asked because he's got a copy that he will be sure to send you. So, John, thanks for taking some time on today's episode of Your podcast talking really about real estate and how that plays into a portfolio, whether you have the big house in the in the country or you have a normal house, where you have the tiny house that John doesn't fit into. So that was funny. I appreciate that. We'll talk to you on an upcoming episode. Buddy, take care of yourself all right, Youtube bute. Bye Myself. Thanks for listening to the building your life podcast was John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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