Episode 17 - Unlocking Financial Freedom with Brian Tibbs
Can you truly achieve financial freedom by shifting your mindset? Guest Brian Tibbs, a seasoned real estate investor and author of The HACKER Method, believes you can. Brian shares how the allure of consumerism often leads people astray and how his experiences living overseas offered him a fresh perspective on achieving genuine wealth. In this episode, Deb and Brian unpack the vital differences between consumer and investor mindsets and why the latter is crucial for building long-term financial stability.
Have you heard of the 50-40-10 budgeting strategy? By allocating 50% of your income to essential and enjoyable expenses, 40% to investments, and 10% to charitable giving, this strategy aims to foster financial independence and nurture a sense of social responsibility. We delve into how this budget can help parents like you eliminate large debts, reinvest profits, and positively impact the world.
Taking risks in investing can be daunting, but Brian explains how measured risks in stocks and real estate can lead to substantial long-term gains. Tune in to learn how these actionable steps can help you rethink your financial choices and pave the way toward financial freedom.
Episode Highlights
(00:03) Transforming Financial Mindsets for Wealth
(09:09) The 50-40-10 Budget Strategy
(16:25) Building Wealth Through Measured Risk
(22:33) House Hacking for Real Estate Investing
Connect with Brian Tibbs
Buy Brian’s book, The HACKER Method
Connect with Deb Meyer
Website: WorthyNest.com/podcast
Full transcript
Deb Meyer (00:01.757)
You are in for a treat today. I'm excited to welcome Brian Tibbs to the show. He's a successful real estate investor, former missionary, and author of The HACKER Method.
Brian, many of us aspire towards the American dream, but believing it's attainable and thinking that enough hard work and determination or grit, as Angela Duckworth would say, is easily within reach. But I know you've expressed a little bit different viewpoint in your book. What do you think is the single biggest factor in achieving the American dream and why?
Brian Tibbs (00:36.27)
Yeah, thank you so much, Deb. It's such an honor to be here with you today. Thanks for the opportunity to sit down with you and talk about these things that really are really important for everybody, really. So the American dream, I think a lot of people have a conception of the American dream, and they try to go after that American dream and actually end up getting stuck. And it turns into an American nightmare. And that's something that I talk about in my book, where they're just
like they're acquiring all these things that we think is part of the American dream. We've got a new car, we've got a new house, we've got a fancy education that was paid for on debt and we go on vacations and we put that on our credit cards. And we get to this point to where almost like no matter how hard we work, we just feel like we're just constantly, you know, three feet away from financial disaster or we can't even make our payments. We can't, we can't meet all these obligations. And this dream turns into kind of this nightmare.
And so I think that the secret to the success of really obtaining the American dream is not buying into that cultural pressure. And it is cultural pressure for us to have the car just as nice as our neighbors and have a house that's just a little bit bigger than one of our family members or something like that. And I think that the key is to convert ourselves from being consumers (to consume our way into the American dream) and become investors. And begin to invest our money in things that will one, go up in value and two, pay us a salary whether we're at work or not. I think that's the key and it's just a subtle thing, it's a small thing but it's a big mind shift for most people.
Deb Meyer (02:20.157)
Yeah, I like that idea of shifting it from the consumer nature over to an investor. So when people are thinking about that, and again, most people are just kind of, “hey, day to day, I got to pay the bills and look at what's in front of me.” They're not necessarily thinking five or 10 years in the future. So how does someone change from that kind of consumeristic mindset of trying to keep up with the Joneses to “hey, let's actually become an investor and build wealth through the investments that we're making”?
Brian Tibbs (02:53.966)
Yeah, that's a great question. And I hope everybody asks, anybody who relates to what we just talked about, about like, I feel like I'm just struggling all the time just to meet my obligations. I hope everybody would ask themselves that question. And in my opinion, what we need to do is stop trying to appear that we're wealthy. And to appear that we're wealthy would be to have a brand new car.
to have a house that's just a little bit bigger than the last one, to have a boat and a jet ski. You know, you could just go down the list, whatever your toys are that you want to have. And instead of trying to appear that you're wealthy, make the decision, I'm actually going to be wealthy. And in order to be wealthy, I need to stop pretending that I am and buying things that I can only afford because I have this much money coming into my bank account every month. And on payments, I can afford all this stuff.
Deb Meyer (03:28.861)
Mm -hmm.
Brian Tibbs (03:51.886)
And instead of doing that, take the money you would spend on stuff that number one is going to go down in value the minute you take it off the showroom floor. And number two is costing you money every month because you have to pay the interest payments. You have to pay the principal payments. And instead of buying that kind of stuff, buy stuff, invest in things that are going to increase in value instead of go down in value and that are going to pay you some sort of a payment, whether that's rent from a tenant or dividends from a stock or some other form where you're going to get paid by owning that asset. And what happens is it doesn't, unfortunately, investing, you know, from one day to the next, you don't feel anything.
In fact, let's say you've been investing for a year and then you look at your dividends, you're like $200 in dividends, I'm never going to get anywhere with this. That's how it feels. But if you are dedicated to this over the long term, that $200 turns into thousands and then thousands turns into 10 ,000s, tens of thousands and then into hundreds of thousands.
Brian Tibbs (04:50.382)
And if you keep up the timeframe on that, it turns into millions. And then you will actually be wealthy. And instead of going to the showroom and saying, what's my payment, you're going to be dealing with cash and you're going to get a better price because you're able to plunk down cash and that's what everybody wants. So then you'll actually be wealthy instead of pretending to be wealthy.
Deb Meyer (05:12.189)
I love that. Actually be wealthy instead of pretending to be wealthy. I see it a lot, to be honest. It's very prevalent in our society. Right? Yeah.
Brian Tibbs (05:16.654)
And that's the mindset that everybody has to make.
I'm just as guilty as anyone of doing that in the past, right? I mean, I don't want anybody to feel bad. We are pressured into that in our society. So you just have to push back against that pressure and make the decision, I'm not gonna be poor, I'm going to be wealthy and it's gonna take time.
Deb Meyer (05:40.861)
Yeah, so I know you have an interesting background and you lived overseas with your family for quite a while. Share a little bit more about that experience and how that kind of shaped you and opened your eyes maybe to the idea that, okay, this American culture really is saturated with the, hey, I want to live larger and accumulate more stuff that maybe I don't need. And I guess I'd just be curious to hear how living overseas with your family really did shape some of the choices you made in your adult life.
Brian Tibbs (06:12.846)
Yeah, that's a great question as well. And actually, and it has had a profound impact on me. So just for people who don't know me, my wife and I, we moved to Guatemala in 2006 or 2005. And we ended up, we were going to go for two years and see how it went. We were volunteers in a faith-based nonprofit. After one year, we decided to start our own nonprofit, moved to Argentina, and then ended up moving to five other countries over 16 years and and working in the nonprofit world. And you know, you don't make a lot of money in a nonprofit. One time I actually calculated it out … if you took the total amount of money we made as employees of the nonprofit and divided it into the hours that my wife and I worked we made nine dollars and 20 cents an hour average.
When we're in that process, we know we're not going to get wealthy doing this for sure. And there is no retirement at the end of this. There's no, there's no golden parachute. Like if you're running a company and building value, because we don't own any shares in a nonprofit. And so we knew that we had to get super creative and super disciplined in order to not retire and just be dependent on the government or family or whatever that where we could have something at the end of the line.
Brian Tibbs (07:32.878)
And so we decided to start investing 40 % of our very meager salary going forward. That's what we did. How did living overseas shape us? So I think the biggest thing that I realized living overseas, and we lived in Latin America, and so they're developing countries. They are not first world like the United States or in Europe. And what we noticed was there is an absolute abundance in the United States. There are opportunities everywhere, versus Latin America where it's not abundant. It's scarce. Everything is scarce. Everybody is fighting to survive. Opportunities are like traps because the government, I'm not saying, I'm not making any political statement here at all, but the governments there are really not in favor of entrepreneurs or investors. And so it's extremely difficult to find an opportunity where you can actually make a profit in those cultures.
And so I compare that to what we see in the United States. You know, I come back to the U .S. There are opportunities everywhere because the system is set up for us to be successful. And so I think that that was the biggest thing for me. And Americans make a lot of money. Even if you make minimum wage in the United States starting today and minimum wage goes up by the rate of inflation and you work from the age of 20 to 65, you will generate over $2 million in salaries. And that is just super unique to America. There's no other country that I'm aware of where that is a reality. And if we can generate $2 million, why do we retire broke? Well, it's because instead of looking for opportunities where we can get ahead, we're just consuming our way through our lives. If I make 100 ,000 bucks, I spend 100 ,000 bucks.
And that's what's keeping us from being able to realize the amazing opportunities that exist in the United States.
Deb Meyer (09:33.245)
Wow. Thank you for sharing that. I'm sure it's eye-opening, especially going from one country to the next, just seeing some of the extreme poverty that you're surrounded by and then coming back to the US … seeing the level of abundance that's possible. But it is, it's a disheartening dichotomy there: we have the earnings potential and corporate America opportunity to earn wages but also invest those wages. And some people just continue spending, spending, spending. It's really a tough, tough situation.
Brian Tibbs (10:14.51)
Yeah, for sure.
Deb Meyer (10:16.509)
So I am curious, I know in the book you talked a little bit about the structure of 50, 40, 10, and that's very different from the structure I'm typically used to when you think about budgeting of 50 % fixed expenses, 30 % variable expenses, and then 20 % in savings. So could you describe your structure a little bit and what those different guidelines entail?
Brian Tibbs (10:37.038)
Mm -hmm.
Brian Tibbs (10:42.606)
Yeah, for sure. So the 50, 40, 10 budget and the 50 is the same, well, similar, very similar. The 40 is different from, well, yours is 50, 30 and the 30 % is variable and the 20 % is for like savings investing. Is that right? Okay. So in my formula and where did I come from? Where did I get my formula? It's literally just what we did on a really basic salary over...
Deb Meyer (10:56.957)
Yes.
Brian Tibbs (11:09.198)
basically our professional lives, right? And that has gotten us to a multimillion dollar net worth. And so I just took what I knew and I put it in the book. And in fact, when I wrote my book, I wasn't familiar with the 50, 30, 20 budget. And after I was already writing it, I stumbled upon it and I was like, Oh, well, that sounds really similar to what I'm doing. But I just went ahead and did it anyway. So what I, what I try to outline in the hacker method, which is the title of my book and is, and is the 50, 40, 10 budget, right?
Deb Meyer (11:21.245)
Mm -hmm.
Brian Tibbs (11:39.182)
is we have to, especially if when we're constrained on a limited income, we have to get extremely creative and we have to really fight all of the pressures that our consumer culture pushes on us. And then we've been talking about this already. And one of the things that's the key to the 50 -40 -10 budget working is number one, we have to hack away from...
these big line items and they're the parts of the budget we don't like to pay anybody who likes to pay a mortgage, who likes to pay a car payment, who likes to pay credit card interest. So the 50 -40 -10 budget is all designed, well, the lifestyle hacks are all designed to get us to where we are only spending 50 % of our income and we're not spending any money on car payments. We're not spending any money on a home loan and we're not spending any money on, you know, the revolving debt on a credit card or a furniture loan or anything like that.
And if we can accomplish that, we actually can increase the fun side of our budget, food, clothing, dining out, vacations, entertainment. We can actually increase those categories and still be within the 50 % of our budget. Then the 40 % is you take 40 % of all your income in your home and you invest it. You can invest it in whatever asset class that floats your boat. I'm a real estate investor, so I feel more comfortable in that realm. We talk about that in the book.
Deb Meyer (12:51.293)
Mm -hmm.
Brian Tibbs (13:05.23)
but you can invest in stocks, you can invest in anything that you feel like is gonna go up in value or pay you some form of income. And as you're investing, I still encourage you, let's say for example, you bought a rental house and you held it for five years and at the end of the five years, you sold it and let's say you made $100 ,000 profit. The 50, 40, 10 budget encourages you to take 50 % of that exit event, that profit, and put it into your spending bucket.
and then take 40 % of that profit, reinvest it, take all the capital, reinvest it, and 10 % give it away to make the world a better place, which I'll get to that in a second. But the idea is that if you're gonna begin to invest and you're gonna start generating profits from your investments, take your portion of the spending, the 50 % out of that profit, so that you can get to that point to where you're no longer dependent on a W -2 job at all, right?
Deb Meyer (13:59.773)
Mm.
Brian Tibbs (14:00.014)
Once your investments get big enough and your profit exit events are frequent enough, you'll have enough money coming into your spending account that you can just say, take this job and shove it. If you don't like your job, some people love their job, but if you don't want your job, that's the idea, right? And as long as you keep up that process, that's how it can unfold. That's how it unfolded for us. So for us, when I was 44 years old, our investments had grown to the point to where they were more than double, even triple what my...
Deb Meyer (14:14.557)
Mm -hmm.
Brian Tibbs (14:28.43)
W -2 salary was and we're like, okay, we're done. We're gonna continue to harvest 50 % but we're gonna keep reinvesting and keep growing this thing. And so that's where we're at. Then the final piece that's different from most is 10%, give away 10 % to make the world a better place. I just think if all we ever do is focus on building wealth and we don't share that wealth with people, even people we don't know, but if we don't use that to leave the world in a better condition than we found it,
I feel like that we're missing out on something that's fundamental to the human condition. I know people who are extremely wealthy that their favorite category is their giving category because they've found a cause that breaks their heart and they know that they've been blessed with resources and that if they're generous with their resources, they can actually make a dent in this world. And that gives them much more joy than buying another boat or buying another this, you know?
Deb Meyer (15:07.709)
Mm -hmm.
Deb Meyer (15:23.453)
Mm -hmm.
Brian Tibbs (15:24.174)
And so I really encourage people who maybe are unfamiliar with the concept of giving a significant portion of their income to really contemplate the idea of giving away 10%. I just think it's such an important thing for our soul.
Deb Meyer (15:39.229)
Mm -hmm. I'm glad you brought that up because I think a lot of people do focus on the wealth accumulation and just building up their own financial net worth, but like you, I'm Christian and I more specifically am Catholic. I have a lot of listeners that are in that same boat, but even if you're not a religious affiliation, just the idea of giving to a cause that's important because you do want to leave this world better than you came into it. I think that's a great message and
Brian Tibbs (15:51.534)
Mm -hmm.
Brian Tibbs (16:00.238)
Oh yeah.
Brian Tibbs (16:05.006)
Absolutely.
Deb Meyer (16:07.965)
It's one that challenges me to to not even think about just the income side But perhaps even the net worth side as you start to grow the net worth because you're putting these principles in place You know, maybe there's an opportunity to increase your generosity even more beyond the 10 % What are your thoughts on that of? Beyond the 10 % Do you think it's ever appropriate to go to a higher number or maybe sacrifice the amount that you're reinvesting into?
the investing bucket.
Brian Tibbs (16:40.142)
Yeah, absolutely. So the short answer to that is yes. The long answer to that is not at the beginning. And for the only reason of every dollar that you take, so let's say you adopt the 50 -40 -10 structure. So if you go bigger than 10, are you going to shrink your investing portion or are you going to shrink your spending portion? 50 % is already really constrained. And I don't encourage anybody to try to go lower than that.
Deb Meyer (16:43.805)
Mm -hmm.
Deb Meyer (17:02.877)
Mm -hmm.
Brian Tibbs (17:08.302)
You need to be able to live your life. It's a marathon. It's not a sprint. And so I wouldn't shrink that anymore. It's already really constrained. And the 40%, if you shrink the 40%, that's going to extend the timeframe to which you can get to that financial independence. And so I suggest people, when you're first getting started, commit to the 10%, embrace the 10%, find a cause that breaks your heart. Maybe it's child trafficking, right? I mean, imagine if just your financial resources could save...
Deb Meyer (17:31.741)
Mm -hmm.
Brian Tibbs (17:35.854)
one kid a week or something like that. And if you would listen to the stories of what they go through, I mean, oh my gosh, how could you not, how could you not embrace that? So, so commit to that 10%. Now I would say once you've gotten to that point to where your investments have grown to the point to where it's providing the 50 % to you and that's more than you need, then yeah, expand that. You know, there's the billionaires, the big billionaires out there like Warren Buffett and Bill Gates, they're committing to giving away 50 % or a hundred percent.
Deb Meyer (17:54.077)
Mm -hmm.
Brian Tibbs (18:04.43)
of their net worth before they die. And I think that that's a noble thing. Now, none of them are worried about where their next meal is coming from. So, you know, I think that it's great that they're being generous, but it's not like that they're suffering at all. And that's kind of my point is get to that point to where your strategy or whatever you're trying to accomplish has been accomplished. And then you can up that number. And I would fully encourage that, of course.
Deb Meyer (18:06.813)
Mm -hmm.
Deb Meyer (18:30.205)
Thanks. So let's talk about the importance of taking measured risks and investing. I know for a lot of people, if they've been burned in the past through investing, let's say they got into the market at a not so great time right before, let's just say they invested in 1999 and then saw the tech bubble burst or right before 2008, you know, just, and that was their first
Brian Tibbs (18:47.694)
Sure.
Brian Tibbs (18:55.79)
Yeah.
Deb Meyer (19:00.061)
first experience with investing. How do you get people out of that mindset that like, okay, it's too risky. I don't want to risk it in any way, shape or form. I'm just going to keep it in cash or put it under the mattress and save it for a rainy day.
Brian Tibbs (19:11.566)
Yep. Yeah.
Well, what I would say first of all, so why take measured risk? The answer to that is so that you can build wealth because you've got to have strong return on investment in order to build wealth, even if you're investing 40 % of your income. So I use an analogy in the book comparing investing or saving and investing to bodybuilding. If you want to be a bodybuilder,
going for a walk in the park is not going to do it. Going for a walk in the park is good for you, but you're not going to become a bodybuilder. In the investing world, putting money in a savings account, it's good for you, but it's not going to make you wealthy. And the number one reason for that is inflation. So average inflation over the last, I don't know, 70 or 80 years is three and a half percent, which is right where we're sitting right now, three and a half percent. If you're...
earning anything less than three and a half percent, your spending power is going down. And every time you're making a deposit into that savings account, yes, your balance is growing. But as soon as that the clock starts ticking with that amount is getting, it's able to buy less and less and less, right? If you're, if you're in a normal savings account, a 0 .5 % interest and inflation is three and a half, you're losing 3 % purchasing power every single year. So in order to
Deb Meyer (20:16.093)
Mm -hmm.
Brian Tibbs (20:38.926)
beat inflation and actually grow wealth, your return has to be better than inflation and it needs to be quite a bit better than inflation. Now, for addressing the issue of timing the market, whether it's stocks in the dot -com bust or real estate in the 08 crash, I have people who went through the 08 crash and I feel so bad for them and they have PTSD and it's a real thing and...
Deb Meyer (20:47.517)
Mm -hmm.
Brian Tibbs (21:04.59)
They lost everything. They short sold their home and they were like, I'm never buying real estate again. Well, what is real estate two or three times higher than it was at the peak in 2006? I mean, so if you're playing the short game, it can be really scary whether you're in the stock market or you're in in real estate, the stock market. If you go from the panic of 1929 to today, the S and P 500 has gone up by 9 .7 % average.
per year. Okay. So 9 .7 % is better than three and a half percent inflation and it's better than a 1 % savings rate. Right. And so if you were to invest in the stock market, we have no way to know what for sure what's going to happen in the future in the stock market. But if history is our guide, if you just stay put and you, you know, buy the index, the S and P 500 index, it's probably going to go up by about nine or 10 % average over the, over time.
Deb Meyer (21:36.669)
annually.
Deb Meyer (21:43.901)
Mm -hmm.
Brian Tibbs (22:05.038)
If you're investing horizon is a year or two or three, you could get really burned. But if your investing horizon is a decade or two, you're probably gonna come out with about a 10 % return. Real estate. The United States started tracking median home sale prices in the 1940 census. And then every decade after that, they recorded the new median home sale price.
Deb Meyer (22:05.565)
Mm -hmm.
Deb Meyer (22:11.677)
share.
Deb Meyer (22:28.829)
Mm -hmm.
Brian Tibbs (22:34.446)
There wasn't a single decade from 1940 which what was happening in 1940 World War two the Great Depression So from 1940 to 1950 60 70 all the way to 2020 there wasn't a single decade where real estate in America on average didn't go up by less than 40 % in a 10 -year span that includes the Great Recession the Great Depression the Great Recession World War two there's like nine recessions in that period and
Not a single decade didn't have an economic disaster of some level. And yet every single decade, it went up between 40 % and 100, I think 160 % was the biggest gain in a 10 year period. And so same thing as the stock market. If you're a long -term investor, chances are your real estate is going to perform over time. So it's interesting that from 2000 to 2010 with the 08 crash,
We still had a 46 % gain in real estate prices from 2000 to 2010, and that's with a massive markdown in values in 2008, nine, and 10. So my answer to that is yes, take measured risk, take a long -term approach to your investing, and as long as you're not making really foolish moves, chances are you're gonna do really well. Way better than buying a car on payments, for example.
Deb Meyer (23:54.909)
Right. A car that you know is going to depreciate or go down in value the minute you drive it off the lot.
Brian Tibbs (24:00.014)
Yeah, it dropped 10 % the day you drove it off a lot. Yep. Terrible deal. Terrible deal. Now, I will say once you've got to that point to where your 50 -40 -10 budget is kicking off more income than you need, go buy a new car. It doesn't matter. You can lose $10 ,000 driving off the lot. It doesn't matter. But when you're first getting started, it's a killer. It'll keep you poor forever.
Deb Meyer (24:20.893)
Well, I do want to dig into the real estate investing a little bit because I know you're obviously very experienced in it. For someone who's never invested in real estate, and I first want to make sure it's an appropriate investment for people. Generally speaking, as a financial advisor, I actually don't suggest real estate investing as much because I'm worried about the diversification or lack thereof. So if someone just has money to put it towards one rental property, and they really want to be hands off with it, not help be there to manage it if things go awry. I personally feel like that's a larger level of risk than I want to advise and say, yeah, go ahead and invest in one rental property. But a lot of your real estate investing focuses on more multifamily units or getting multiple units in different locations so that you are diversified.
Can you talk about some of the principles for someone who's new to real estate investing that's interested in exploring it?
Brian Tibbs (25:23.918)
Yeah, I think so. Actually in The HACKER Method, I actually suggest people start with stocks for the exact reason that you're talking about. You can especially with fractional share investing now where you can buy you can buy $10 of a stock if you want. Right. Even if it costs $200 for a share, you can buy a tiny little sliver or you can buy an index fund. If you buy the S &P 500 index, you're buying a tiny little slice of the 500 largest companies in the United States and that's a way to be very, very diversified. And so I do support that. I do however recommend people get into real estate. And my suggestion was somebody who, especially if they're a little bit timid, a little bit intimidated by the idea of investing in real estate, start with what's called a house hack. I'm assuming you're familiar with that concept.
So now maybe some of your listeners. Okay, okay. So a house hack. So I bought my first house hack in 1996. That was my first real estate purchase. I was 19 years old. I was in college and I didn't want to pay for the dorms. I didn't want to pay rent and I didn't have enough money to pay my own mortgage. So I bought a duplex. It's two units that have one common wall and I lived in one side and I rented out the other. We didn't have a fancy term of house hack. At the time it was live in one side, rent out the other. So somewhere along the line, I think it was Brandon Turner actually that came up with the concept, or the term of house hacking. Now I've actually studied this a lot and I've discovered 19 different ways that you can house hack. And I encourage everybody as your first entrance into real estate is to house hack. And that is just turning your primary residence into something that will generate revenue.
So you're actually really mitigating your risk because you live in the property, right? And so what's a classic, the classic house hack is you buy a duplex, you live in one side, you rent out the other or a fourplex. You live in one, you rent out the other three. Actually, there's ways that you can live in one unit, rent out the other three and a fourplex and actually put cash in your pocket rather than paying a mortgage if you buy it right. There are other ways to do house hacking too.
You can have an ADU in your backyard where you rent out a separate unit that's detached from your house. And if you really want privacy, just put a fence to where you can't even see each other, you know, over the fence, because it's a separate house on your property. You can do, you can partition off a part of your house. Let's say you have like a, here in Arizona, we have what's called Arizona rooms. It's like a covered patio where there's an exterior entrance and you can wall it off and make it a bedroom and put a bathroom and it's attached to your house, but it's got a separate entrance and somebody can rent that.
But you can also do things like put a RV gate on the side of your house and let somebody pay you a hundred or $200 a month to store their RV on your property. So there's nobody living on your property. They're just storing something in a part of your yard that you don't even use. And you get 200 bucks and you apply that towards your mortgage. You can rent out a garage bay. You can do lots of things. There's actually kind of a new movement of renting out your swimming pool. If you have a swimming pool.
Swimpley.com is a website where you can rent out your swimming pool. And I actually reached out to a lady that's doing that. She made $10,000 in one summer, renting out her swimming pool. And she only takes like little kids birthday parties and she loves it. She loves little kids. And so she matched her desire to host and be hospitable to hosting these little kid birthday parties. And she put 10,000 bucks in her pocket. So there's lots of different ways that you can.
Brian Tibbs (29:03.662)
convert your primary residence, which is your biggest expense, into an income generator. And a lot of people will say, oh yeah, I don't want the inconvenience of that. And I totally get that. But if you think this through, if you were able to house hack and cover your entire mortgage, let's say you had an average, the average mortgage in the United States is 1 ,700 bucks. If you were able to cover your entire mortgage, which by the way, now you're a real estate investor, but you live in your real estate, so the risk is really pretty small.
Cover your entire $1 ,700 mortgage, invest that $1 ,700 over 20 years time, even if you put it in the stock market, you would have a $1 .5 million net worth just by house hacking your first house, never buying a rental property, never buying a fourplex, never buying anything else. Now, my suggestion is that once your net worth starts to grow, once your investing account starts to grow,
The best way to have diversified real estate is to invest in multiple properties. And I think that real estate is proven over the millennia as people always need a place to live. In the stock market, a stock can go from flying high to zero. If they go bankrupt, it can go to zero. I've never seen real estate go to zero. And again, going back to what the United States census tells us that over enough time, real estate is a very stable and reliable asset class. So,
Now you need to know what you're doing. You don't want to invest in markets that are going down. You don't want to invest in a property that's going to be a money pit, but a little bit of experience can help you avoid those follies as well.
Deb Meyer (30:42.429)
Okay. Well, I think for someone that's interested in this more, probably turning to your book is a good resource because it does go into more detail about the calculations and other considerations. If you're just like, okay, that sounds great in general practice, but you're not as keen on real estate specifically, I'd still encourage you to get the book because I still think there's a lot of valuable wisdom in it. But I would suggest just thinking outside of traditional real estate investing. Again, speaking from a personal standpoint and advising other clients, I think also having that illiquidity, having assets that are tied up in physical buildings or land, it does make it a little less difficult if you do fall on a tougher time economically to turn that to cash right away.
Not to say it can't be done. You might have to do it at an inopportune time, right? But I guess you could say the same thing with the stock market. If the real estate market is down, the stock market could be down too. You might be having to sell at a loss in that situation too. So just a little bit difference on the liquidity and the ability to turn it into cash in a relatively quick time span.
Brian Tibbs (31:38.222)
That is correct.
Yeah, you're right. And I wouldn't, I don't put all of my money in real estate. I do hold some in stock for the partially cause I need to show reserves for the bank to get qualified for loans. And so I've got to have a significant amount of cash available and they count stocks. What I would say the justification for investing in real estate, you know, if, if I, if my stock portfolio matches the overall market, the S and P 500 of the NASDAQ index, if it matches it, I'm like, stoked, right?
If I'm getting an average of 10% per year, I'm super happy in my real estate. I've gotten to the point to where I insist on at least 15 or 20 % returns on my real estate. And so yes, you're giving up liquidity. You're maybe taking maybe a higher level of risk, but higher risk, higher reward. And that's, that's what I want to encourage people to seek constantly.
So the fourth step in The HACKER Method in the book is called exponentiality, which I know is not a word, but is the idea of how can we now go from arithmetic in our investments to multiplication in our investments. And leveraging real estate is one of the ways that I see that being possible.
Deb Meyer (33:14.941)
Great. Well, thank you. This has been really a wonderful and enlightening discussion. Where can people best find you if they're looking to learn more?
Brian Tibbs (33:24.046)
Yeah, so you can find me at theunexpected investor.com. That’s my website. But we're also super active on kind of all the social media channels. So the handle is at Unexpected Investor in all of those places. And specifically, if the house hack concept was intriguing to anybody on my website, every month, we do a free class on that, a 75 minute online class, and we go through the 19 ways to house hack. After this course, you will have learned enough to where you can cover at least 30 % of your housing costs in 90 days or less. Now you have to take action after the course, but we show you how you can actually do that using your primary residence. You don't have to go buy another property or anything like that.
Deb Meyer (34:09.373)
Okay, alright, thanks so much Brian. This was wonderful. Any closing thoughts?
Brian Tibbs (34:15.118)
Yeah, the one closing thought I have is people who read the book, sometimes they're reaching out to me saying, “hey, can I get some coaching?” And I don't do coaching, but we've created a community. It's a monthly subscription. And if people want to have some mentorship and be around other people who are going through the hacker method and doing this kind of stuff, that's the best way to do it. And you can find the details at theunexpectedinvestor.com/community. And we'd love to chat with you.
Deb Meyer (34:42.429)
Alright, alright, thanks again. Have a wonderful day.
Brian Tibbs (34:44.718)
Thank you so much, Deb. Appreciate the opportunity to talk with you today.