Why Everyone’s Swearing Off Real Estate for Passive Income — And What’s Secretly Taking Over?

Dave:
Is real estate really the best path to passive income? We say it all the time, but today’s guest has a different perspective and today we’re going to debate it so strap it. Hey everyone, I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Our guest today is Ryan Sterling. Ryan is the CEO of NerdWallet Wealth Partners and he’s been a financial advisor for more than 20 years. So on this episode, we’re getting an unbiased outside perspective. If you think I only talk about real estate because I’m a real estate investor myself, Ryan is a neutral party whose only incentive is to help his clients build as much wealth as possible, including some who want to replace their income and retire early. Ryan’s take is that you may not actually need passive income in the way you think and I’m excited to hear him out and not afraid to debate him on some of these points so let’s get into it.
Ryan, welcome to the BiggerPockets Podcast. Thanks for being here.

Ryan:
Yeah, thanks for having me. Excited to join.

Dave:
This should be a lot of fun. We’re going to dig into a topic we don’t always talk that much about, which is equities in the stock market and hopefully we can compare and contrast it a little bit to real estate. Help our audience understand when and where they should be putting their time and attention based on their own individual goals. Ryan, maybe just start. Tell us a little bit about your own background in investing and finance.

Ryan:
Yeah, so I’ve been in the wealth management business now for over 20 years. Bulk of my time spent working at some of the larger investment firms, worked at Lyons Bernstein, Goldman Sachs Capital Group, and 2019 I left to start my own wealth management firm. One thing I think we all have in common here is that I always say that financial independence is mandatory. So our job is to solve for what is our client’s financial independence number. Even if they don’t think they can reach it for the next 20, 25 years, we still want to know what that number is and carve out a path to get there. And I think about what was my wealth building journey. My wealth building journey was saving, investing in the stock market, having the benefit of compounding, but then also starting a business. And ultimately I sold the business in 2025 and now I’m the CEO of NerdWallet Wealth Partners where it’s very much an extension of what I built at the predecessor firm.
We’re just doing it now with a bigger team and we’re really excited to continue to grow this business.

Dave:
Well, I love what you said there, Ryan, about financial independence or financial freedom being mandatory. I don’t really see another objective in a professional sense that’s worth pursuing more than financial independence. I just think not that many Americans think of it that way and don’t have that critical number that you’re talking about of just an idea of where they need to get to. So maybe if you can do it briefly, tell us how people can go about figuring out what that big picture long-term goal should look like.

Ryan:
The general rule of thumb, and I know the BiggerPockets audience is probably very familiar with, is the general rule of thumb is like the 4% rule. So if you’re a family who’s spending $200,000 a year and that’s kind of your baseline, that’s what you want to maintain, you’re going to need an investment base that can sustain spending $200,000 a year into perpetuity. As it relates to liquid portfolios, that means you’re going to want to have a stock portfolio of roughly speaking $5 million. In terms of the value of a real estate portfolio, it’s probably pretty similar to that, but that’s more focused on what’s the income that is coming from the real estate assets. But generally speaking, again, when we are building plans for our clients, and again, let’s say it’s hypothetically it’s 200,000 is the number that they need to reach on an annual basis, we’re targeting a net worth of outside of their personal residence in the five million range.

Dave:
It’s funny you say that. I think of it very similarly for real estate and I talk to investors every day all the time and I present this idea to them that you need to back into the total value of your portfolio. For us as real estate investors, I think about it as the total equity value and that’s how you should be thinking about growth rather than what is my cash flow this month. Don’t focus on, “Hey, I went from 500 to 600 bucks a month in cash flow.” The big picture, the hard thing is building up that three, four, $5 million in equity. As a real estate investor, once you got that, it’s kind of easy, right? You could just go out and buy stuff for cash. You don’t even need a mortgage. If you got five million in equity, go buy a bunch of properties free and clear and you’ll have your number.
Don’t focus on getting from 200 to 300 to 400. So I really like that. Ryan, I debate this all the time with people about having this number because I think it’s hugely important. I wrote a whole book called Start with Strategy. The whole idea is starting with your personal values, what your big picture goal is. Once you set that goal, can it change? What’s your take on that?

Ryan:
Oh, absolutely. We tell people all the time. The analogy I use for a financial plan is I’m based in New York City. Imagine you’re on a road trip from New York City to Los Angeles. You can put on ways right now and say, “Okay, I know the exact route to take, the most efficient route that’s going to get you to Los Angeles, and I know exactly how much time it’s going to take.” There’s no way that right now leaving New York City that I’m going to know that when I get to Oklahoma City, there’s going to be a traffic jam

Dave:
That’s

Ryan:
Going

Dave:
To

Ryan:
Delay me for two hours. And by the way, I might get to Oklahoma City and decide, “You know what? I actually don’t want to go to LA. I’d rather go to Denver.” And you have to completely recalibrate the route. That happens all the time with the wealth building journey. And I always joke that when we build out financial plans and we go through the Monte Carlo simulation and go through the modeling, I always tell clients that, “Hey, here’s the one thing that we know for sure. The one thing we know for sure is that this is going to change. It’s not going to happen this way.” But this is the guide that this is the best that we have today, but we’re going to update and we’re going to recalibrate so many times over, but you still need to have that direction. You still need to have that intention because once you have that, once you have the blueprint that makes updating it and again, some of these audibles, it makes it easier than to execute.

Dave:
Absolutely. There’s this quote, I think Zig Ziglar said, “If you aim at nothing, you’ll hit it every time.” 100%. I just think about that all the time. It’s like doesn’t mean you can’t change, but you have to be aiming at something. You have to. Otherwise, you’re just completely adrift and whether you’re buying stocks or going out and buying real estate, that is not a strategy. That is just guessing and hoping that you’re going to profit. But there’s clearly a better way to do this. And starting with that number or a goal of lifestyles, what your values are, what you want is such an important thing for an entrepreneur who’s pursuing real estate or for someone who’s just buying equities.

Ryan:
I mean, I love the saying where focus goes, energy flows. And it’s so true is that you’ve got to have to focus and you have to know where you’re putting in your energy. And I’ll say the mistake that I see people make is that their energy is divided up into way too many areas and they’re doing everything kind of 40 to 50% of the way there. And that really doesn’t work very well.

Dave:
But that kind of goes against the idea of diversification, right? Or maybe are you just saying you have to have the big goal and then once you have that, you can diversify assets and put attention differently? Or do you really just recommend people focus on one asset class, one kind of investing?

Ryan:
Well, I think it depends. We’re a huge proponent of diversification, but what I caution against is if somebody is… Let’s think of a fact pattern of you have a married couple with a couple of kids, working professionals, big jobs, W2 income, and they’re diligently putting money away in the stock markets and they say, “Hey, you know what? I heard I can get passive income through real estate and it sounds really easy, so I want to buy a rental property.” To me, what I always tell clients is, “Hey, if you want to get in the game, let’s put it through the plan and let’s get in the game.”

Dave:
But

Ryan:
You have to want to be in the game. You have to want to see it as a side business. That’s why I always say with the passive piece, and this is for me, nails on the chalkboard, I always say, you got to take a big black marker and cross out passive because I don’t believe that it’s passive income. I feel like it really is more of a side job. A side job that can be very lucrative, very rewarding. It’s not going to take up as much time as your day job, but it’s still a job. So I like to remind people of, “Hey, if we’re building through the stock markets and you want to diversify and you want to build a rental portfolio, let’s build a rental portfolio, but you have to know what you’re getting into. And if you’re going in thinking it’s going to be easy, you’re going to be disappointed because the first hiccup’s going to happen and you’re going to bail on it.
”

Dave:
Totally. Yeah. And that’s the way to lose money in real estate. If you stay in it, you’ll make money. If you bail early, that’s the big risk, at least in my opinion.

Ryan:
I mean, that’s how I lost in it. I mean, look, like I said, I’ve built my wealth through investing my excess cash in the stock market and then started a business and had a liquidity event, but I did dabble in real estate and I had a rental property with some people in Florida and a hurricane came through and completely disrupted our plans. We did not have that in the model and tenants had to move out. We had to do the whole cleanup thing. Insurance company wasn’t being very helpful and I bailed on it. And I think that’s the lesson that I learned personally is that, hey, you know what, this isn’t the game that I want to be playing because my time and attention got too divided and I know for myself that my time and attention, there are higher value uses personally for my time and attention.
Now, other people in that group, they went full on into it and they’ve done very well with it. So that’s where it’s like, know who you are, know who you’re not.

Dave:
I think calling it real estate investing is one of the big misnomers in the industry. It’s entrepreneurship. You are starting a business. This is a small business. You are the bottom line. You are not opening an app and buying a stock. You are not passively investing in anything. For me, it is worth it. Maybe it’s just my personality. I don’t think the stuff you’re describing is that I don’t find it that stressful. Maybe it’s because I’ve done this a while and what I think we recommend to our audience is like, yeah, it is stressful at first the first time that happens. When you have someone who can’t make rent or you have a big repair, it just gets easier over time. You just get better at it. So I don’t personally find it that stressful, but I do think you need to have a higher bar for performance in real estate than you do for a stock.
That’s kind of what I have tried to teach people on this show, or it’s at least my recommendation is like long-term average of the S&P 500s, eight, 9%, 10%, whatever, depending on who you ask if you reinvest. I think you got to get 12 to 15% on a real estate investment all in to make it worth that time. 100%.
Yeah. And if that number is going to be different for different people, but if I’m only making 7% on a rental property, that is not worth it. Do nothing, do nothing. But if you can do 12 to 15%, man, that compounding over 20 years is the difference of potentially millions of dollars. So I’m curious how you think of that and is that a reasonable way to consider the trade-offs?

Ryan:
The building blocks of investing are the first step is you have to price everything relative to a treasury bond. So you can buy a 10-year treasury bond right now and get four and a half percent or so. So any incremental amount of risk, whether it’s risk in the stock market or any sort of sweat equity, you need to get a return in excess of that. And I completely agree with you that if you go through a building blocks approach and say four and a half percent for a 10-year treasury, let’s call it 8% for the S&P 500, which is completely passive. I mean, you

Dave:
Don’t

Ryan:
Have to do anything that if it’s going to require risk, time, attention, you have to command a higher return than 8%.

Dave:
Absolutely. I think this is something a lot of newer investors miss, especially coming off these insane years that we’ve had over the last couple of years in real estate where people are like, “Oh, I’m just going to buy and I’ll hold onto it and I’m going to make a bajillion dollars.” Maybe we’ve probably went through a once in a lifetime event with the appreciation that we saw during COVID and we’re just back to the fundamentals. And I personally think that’s a good thing. 100%. I think that this is what should happen. Real estate should grow a little bit above the pace of inflation. That’s what normally happens. You’re going to have increases in expenses, but if you get fixed rate debt, if you could buy good cash flow, you can get that 12 to 15%, but I don’t see a lot of newer investors thinking that way.
And I think what Ryan said, I hope everyone in the audience is paying attention to like the job of the investor is to think about what is the best use of my time and money today? And if you’re earning in a low appreciation market and getting a 2% cash on cash return, you are better off in a treasury bond. You are better off in the S&P and 500. And I hope from listening to the show, you can buy better deals than what I’m describing there. That’s kind of the goal here, but I think that should always be the framework. And instead of thinking about, how do I just keep buying all the time in real estate? And I recommend that you do. It’s like, how do you keep buying at a level that’s better than the stock market?That’s to me, the framework I use. All right lot of good stuff here from Ryan Sterling.
We got to take a quick break, but we’ll be right back. Stick with us.
Welcome back to the BiggerPockets podcast. Let’s get back into my conversation with Ryan Sterling. Now, Ryan, though, I’m sort of unusual here in the BiggerPockets universe with a lot of our other hosts who have just gone full in on real estate. Every dollar they own is in real estate. I am not that way. I’m closer to fifty fifty, probably 60 / 40 in terms of real estate. How do you advise people who want to take a diversified approach, but they’re in on real estate, right? They’ve embraced it, they like it, they want to do it. How do someone like that diversify? Because I get this question all the time and I’m not a financial advisor, so I’d love your take on this.

Ryan:
It’s a good question. I would say that we usually get it through the lens of I feel really comfortable with real estate, the stock market I don’t feel comfortable with. So I think for a lot of those clients, it’s actually educating them on the benefit of diversification in the stock market. And it goes back to risk. I think examples where someone is buying 10 rental properties in one specific location, there’s a lot that can happen in that specific location. The neighborhood could change. It could be in a really good commercial center that for some reason falls out of favor, natural disasters happen. So I mean, when you think about diversification, owning 10 rental properties isn’t actually diversified if they’re all clustered

Dave:
In the

Ryan:
Same area. So again, if someone is comfortable with it, they understand the risk, they’re willing to put in the hard work and the sweat equity all day long I want people to own rental properties. However, when we think about being risk managers, it is important to note that you are taking on a lot of concentration risk. And when we’re talking about the market, we are broadly diversified. Does it mean we’re immune to a 20, 30% pullback? Absolutely not. But the thing that makes me laugh is when people come to me and say, “The real estate, I can see it, I can touch it. ” Where the stock market, I don’t see it and I don’t want it to go to zero. And I always laugh and I’m like, “I hope the stock market goes to zero because I’ll take a dollar and I’ll own all of Apple.
I’ll own all of Microsoft. I’ll own all of Google.” And the reality of it is like that’s not going to happen. So I think as investors in the stock market, I think we need to do a better job connecting people to, you’re not buying dots on a screen, you have ownership in companies and companies that are producing goods and services that are adding tremendous amount of value around the world. So get away from looking at the dot on the screen and what it’s doing day-to-day, that’s largely irrelevant. When we construct our investment portfolios, I really don’t care what’s happening today. We’re looking at how it’s going to help build and compound wealth over decades. And I think about when it comes to building wealth, you can’t do it through earnings alone. You’re one person, it’s impossible to do it. You need to get the benefit of leverage.
Now in real estate, the benefit of leverage that you get is that, look, you can put down a down payment, you can borrow, you can buy an asset bigger than you can afford. And by the way, you can use that leverage to acquire 10 rental properties faster than if you’re doing with cash. That’s a beautiful thing. When I think about the stock market, you’re using leverage in terms of, I’m an owner of Google, I’m an owner of Microsoft, I’m an owner of Apple. I have the smartest people in the world who are building products that we’re all using. I’m an owner of that. They’re working for me. And when I think about my path to building wealth, I can’t do it alone. I need help. And for me, I want to leverage the help of the people at those companies.

Dave:
Yeah, I’m with you. I think it’s just there’s like a dose of humility that’s helpful in diversification and just admitting you don’t really know. I think that that’s just super important where I study the housing market all day. I think I have a pretty good grip on it, but you don’t know what’s going to happen on an individual property, you don’t know what’s going to happen regulation. If you went all in on short-term rentals, I think a lot of people have seen that concentration in short-term rentals was a risky strategy or in recent years, concentration in commercial real estate and multifamily in the Sunbelt. Booming for a while, now it’s really hurting.
Even the smartest people in the world don’t really know why I personally preach diversification. I diversify both in real estate and the stock market, but even within my own real estate, I do a lot of different stuff. I’m invested in different markets and different asset classes across the country, but I have the luxury of that, Ryan. And I think that’s sort of where I think a lot of people have questions is like, I’ve gotten to a point where I have enough capital that I can spread it around and that’s a fortunate place to be. But when you’re starting in real estate, it’s so capital intensive. You kind of have to go all in on it. If you have to save up to put 25% down on a rental property, that could be a hundred grand. It takes people years to get to that. So can you diversify in that scenario or do you just kind of have to take a leap of faith if you’re in real estate and trying to grow a portfolio?

Ryan:
I would say who is the best candidate for going all in on building a rental property portfolio from scratch? It’s someone who’s young
And it’s someone who’s just starting. So it’s like, look, if you can scrap together $40,000 and use leverage and buy the first property, and if you can have that vision to then a year later buy another one and then two turn into four, that turn into eight, et cetera, that is the fastest way to build wealth. I think so. But it takes a lot of direction, it takes a lot of intention, it takes a lot of sacrifice and I’m all for it. So I would say that if there’s someone starting out today and they’re like, “I want to get to financial independence as fast as possible,” I would probably be the first to concede that real estate is probably the best option, building a real estate portfolio. I think the one caveat to that is for people who are in high earning areas, I think about sales, for example.
If you’re a good salesperson, is your time and energy better spent potentially being distracted on real estate deals or making 20 more calls a day
And 20 more calls a day could turn into making this up an extra $200,000 of income. It’s going to be really hard to replicate that in real estate for the short term. I think about our clients who are corporate attorneys or investment bankers, they are working so hard in such long hours and they’re making so much money. Their time is at a premium and it’s kind of what you were saying before is that it does require extra time and effort. If they don’t have it, you’re better off going for the biggest bonus you can get and then diversifying in the stock markets

Dave:
And

Ryan:
Having that be a way to build and compound your wealth. But I would say that if there’s someone who’s starting out and they’re like, “Hey, I’ve got a decent enough job, but there’s some upward mobility but not crazy and I’ve got time on my hands and I’m young and I’m willing to take risk all day long.”That’s

Dave:
A

Ryan:
Perfect profile to start building a diversified rental portfolio.

Dave:
Yeah, I think that makes a lot of sense. When I was started, I was 22, 23, I was like, I had nothing to lose. There was nothing in my bank account. So I just figured I could try and hustle and was so into it that I could pay such close attention to every deal that I did that I thought I had a higher probability of success. And I think that’s true.

Ryan:
By the way though too, a really important point is like we’ve been talking a lot about risk and I think look, everything needs to be through the lens of risk first, but risk is a very fascinating concept. And I would actually argue that someone who doesn’t have anything to lose at 22, 23, who’s taking a swing at real estate, guess what? If you don’t take that swing at 22, 23 and you decide to stay in a safe, stable job, that might not be around in 10 years from now.

Dave:
I totally agree. Yeah.

Ryan:
So you’re taking concentration risk on your job. So that’s where I would actually argue that if you’re 22, 23, taking a swing at some investments, that’s actually potentially the least risky thing you could be doing.

Dave:
Yeah, diversification. Yeah, exactly. Because especially that early in your career, at least speaking for myself, I don’t know where I was going to wind up. I didn’t know what I wanted my career to be and you sort of putting a couple irons in the fire so to speak to see what works out for you. Yeah, I totally agree with you. You’re young, go out, house hack, hustle, do those things that we talk about all the time on the show. It really just works. There’s still risk. You got to mitigate that risk, but it really can work.

Ryan:
It’s all risk. It’s all risk.

Dave:
The other, I think, big group of BiggerPockets listeners and people who I talk to all the time are people with jobs that they like that they’re not intending to go full-time into real estate and they want to diversify or they want access capital and income in a way that they at least, I’ll ask you about this, don’t feel that the stock market provides. So of course there are dividend stocks, but they feel the cash return on real estate is better and worth the time. So again, this is the idea of worth the time. How should someone like that think about diversification? Because a lot of these folks, maybe they have a 401k if they’re fortunate through work, they’ve been investing in the stock market for a while, but now they say, “Okay, I want some of that real estate action.” How should they think about balancing and what capital to put where?

Ryan:
That is kind of what we see more often is that you have people who are in their late 30s, early 40s, they’re still very much in the wealth building stage, they’re established in their job, they have a family, they have responsibilities, et cetera. And that’s where it comes back to what we were talking about at the very beginning of the episode is having that plan in place, having that direction and intention and putting real estate into that. So it goes back to if someone’s like, “I want to buy one rental property and that’s it, run the numbers and I think you’d probably agree with it. It’s probably not worth the headache.

Dave:
Just a single one? Yeah, no.

Ryan:
Yeah. I mean, it’s not going to be worth it. You really have to have the mindset that we’re going to start to acquire a rental portfolio over the next five to 10 years and let’s put that in a plan and let’s see what it looks like. ” Now, of course, it all starts with one. So action produces information. So of course buy that first rental property and let’s see how it goes, but go in with the mindset that this is going to be part of our portfolio of building wealth. Just know that’s what you’re doing.

Dave:
All right, everyone, we need to take one more quick break, but we’ll be back shortly. Stick with us. Welcome back to the BiggerPockets Podcast. I’m here speaking with the CEO of NerdWallet Wealth, Ryan Sterling. Let’s get back to our conversation. And there’s risk everywhere, including the stock market. So I’m curious your read on the situation right now. We’re hovering around all time highs. Obviously, I’m asking you to pull out a crystal ball that you don’t have, but just give us your sense of how the stock market is performing and where it might go from here.

Ryan:
You just hit the nail right on the head in terms of, look, we’re at all – time highs. The stock market valuations are stretched and are stretched to not the highest we’ve ever seen, but certainly very much on the high uncomfortable side. So valuations are not gravity. So high valuations do not mean that we should expect a correction or bear market in the next 12 months. Markets that are richly valued can be even more richly valued a year from now, two years from now, et cetera. Same thing with markets that are attractively valued. So the high starting valuations do not do a very good job of informing you of what to expect over the next 12 months. However, they do a good job of telling you what to expect over the next decade. And what valuations are telling us right now is we should expect lower returns over the next decade than the previous decade.
How is that going to materialize? We’ll find out. Is it going to be instead of 10% returns, are we going to see 7% returns? Maybe. Is that going to be at a straight 7% clip? Probably not. No. We’re probably going to see markets get up to bubble territories and then have a crashing correction.That’s typically what happens. I would say that 1996 during the dotcom boom, Alan Greenspan, who is the head of the Federal Reserve at the time, gave a speech that he called it irrational exuberance. And he basically was saying the prices of these dotcom stocks are in unsustainable territory. He was right, however, it took four years –

Dave:
It was four years off.

Ryan:
For that bubble to pop. So if you’re sitting there right now and saying, “God, the stock market, it looks too richly valued. I’m going to be on the sidelines.” You might have to have a good amount of patience before the dam ultimately breaks.
The other thing that I think that’s important to note is the mega cap companies right now that make up the US market. So I’m talking about the NVIDIAs, the Apples, the Googles, the Microsofts, the Amazons, Metas, et cetera. These are the greatest companies we’ve ever seen in the history of the world in terms of their scale, in terms of their cashflow, in terms of their capital allocation, in terms of their future growth prospects. So that also has to go into your consideration as a long-term investor in that you are having exposure to, again, the companies that we’ve never seen in the course of human civilization. These are the best companies we’ve ever seen. So how does that populate itself in terms of what we’re advocating for our clients? It goes back to diversification and that we feel very comfortable being invested over the long term.
I always think about, do I think Google’s going to be around 10 years from now or do I think Apple’s going to be around 10 years from now? The answer is yes. Do I think it’s going to be bigger than it is today? The answer is yes. Do I think it’s going to be a straight upward trajectory from now to 10 years from now? Absolutely not. So you have to be able to stand the volatility and the diversification serves to mute the volatility when it presents itself.

Dave:
That’s very well said, Ryan. Thank you. I think that’s a very sober way of looking at it. I just want to provide a little bit of context here too, because I agree. I read a lot about the stock market and you hear this decade of lower returns often. And I think the same thing is true in real estate. I say it on the show all the time, but I want to provide some context that the last decade for equities and for real estate were abnormally good. So some reversion back to lower returns is to be expected and is not necessarily a catastrophe. The second thing is I just think the job of the investors, what do you do with your money today? And I think I see a lot of people get hung up on this on real estate where it’s like, “Oh, I don’t want to get into real estate because the returns won’t be as good as they were in 2022, or I don’t want to be in the stock market because in the next 10 years, they won’t be as good as the last 10 years.
What else are you doing with your money? What’s the other option? I still think you need to be, I’m not just saying throw your money into anything, but saying I’m going to wait till there’s going to be the best decade just makes no sense. You have no idea when it’s going to come. Thinking that you’re going to be able to identify it is the height of arrogance, you’re not going to know. And if you’re going to wait, you’ll probably miss the whole thing. So taking a more pragmatic approach and adjusting your expectations, I feel like is just really important. Don’t do this to get rich overnight, do it to get rich 20 years from now. And if you take that mindset, your chances of success are pretty high, at least I think so. So anyway, I really appreciate that. So Ryan, what is your approach to that?
For people, is just dollar cost averaging kind of the right way into the market? I know it’s boring, but it just works.

Ryan:
And by the way, the boring is really effective. We always say what we do is simple but not easy. Having people stick with the plan over the long term, it’s actually a lot harder than it sounds. There’s a saying that we overestimate what we can do in a year and underestimate what we can do in a decade. And that is so true as it relates to building wealth and that if you think starting from zero that you’re going to reach financial independence in a year, that’s just arrogant. It’s likely not going to happen. But the progress you can make over a decade, it’s substantial if you stick with the course. Now to your point, what do you do if valuations across the board and asset classes are high? Good luck being in cash and picking the
Best opportunity to deploy your cash. It’s likely not going to happen. I can tell you in the stock markets, tell me when a 10% decline turns into 20% decline, when a 20% decline turns into 30, when a 30 turns into a 40. Look, we’ve had some air pockets of volatility in the last couple of years and I know people who have been in cash and they still have the bat on their shoulder, even though there have been multiple opportunities to deploy cash down 20% because they thought it was going to be down 40%. So you have to get timing right, which is impossible. So the dollar cost averaging piece, I think as it relates to real estate, it’s the same principle that if you have a plan and a direction and intention to own 20 rental properties and in this year in the plan, you’re going to acquire two rental properties, acquire two rental properties.
Obviously, don’t force yourself to do it. You have to do the research, you have to do the diligence, you have to make sure that you’re underwriting the deal in a way that makes sense for you, but don’t get too cute and say, “Let’s wait for things to correct and I’m just going to be out of the game and I’ll get back into it in four years from now.” That’s going to derail you over time.

Dave:
I completely agree. Just sticking with the plan. It’s easier said than done, but it is absolutely the right approach. One more question for you here, Ryan, before we get out of here and that’s about finding and working with a financial advisor. Most real estate investors I know do not do that. I personally have one when my wife and I, we’ve been together for 13 years, but we finally got married three years ago and I was like, “Man, I got to get a financial advisor because I don’t want to be wrong.” And I just want someone else to gut check because I had been doing it by myself for 10 years. It was super hard to find a financial advisor that knew anything about real estate. I think I probably, I’m not exaggerating, probably interviewed eight or nine before I found one. And I was specifically talking to people who said they understood real estate.
Why is that? And do you have any tips for people on working if they want to be in real estate, presuming that they are all in, either all in or doing this at diversification, but they want to build a portfolio. How do you best work with a financial advisor?

Ryan:
Unfortunately in this industry that financial advisors oftentimes, the vast majority of their job is to be a salesperson and they’re sales people first, practitioners, second. So I think it’s important to find an advisor and find a firm that considers themselves practitioners first before anything else. There’s of course certain clues like people who have their CFPs, et cetera. But unfortunately, I do think it does take some work and it does take some interviewing and I think it’s important to articulate what your values are. And for people listening to this podcast, real estate is probably a deep value in terms of it’s going to be a part of your plan. I would only work with an advisor who understands you and understands what you’re trying to build. It doesn’t mean that they’re going to underwrite everything. It doesn’t mean that they’re going to sign off on everything.
It doesn’t mean that they’re going to agree with everything you say. However, they understand with the spirit of what you’re trying to accomplish and really take financial planning in a holistic sense, not just try to gather your assets and invest it in a stock portfolio. Again, there’s a place for that. Investing’s one of our core tenants, but it comes with financial planning and coaching. And one thing I loved what you said because I say this all the time, building wealth is like building a reputation. Warren Buffett has that famous quote of a reputation takes you decades to build and only seconds to destroy. Wealth is the same thing. Wealth can take two to three decades to build and one to two bad decisions can completely erode the process. So a big part of our job as financial advisors is also making sure our clients aren’t making the big mistake.
But unfortunately in this industry, there are a lot of people that are going to try to sell you product that are going to try to sell you on just their investment portfolio. And again, while there’s a place for that, you really have to interview people and to feel like they understand you, understand your values and ultimately what you’re trying to accomplish.

Dave:
Awesome. Well, thank you so much, Ryan, for being here for all of your insight. We really appreciate it.

Ryan:
Yeah, absolutely. And we’ll say just kind of quick plug. Yeah. We are starting a podcast. It is called Your Next Dollar. Andrew Giancola is our host, and I know he’s been on this show before. Yeah.

Dave:
Andrew’s awesome.

Ryan:
Yeah,

Dave:
Andrew’s

Ryan:
Great. We’re super excited for Andrew to launch this and I will be a recurring guest. So if you enjoyed

Dave:
This,

Ryan:
Make sure to tune in.

Dave:
Awesome. Well, good for you. That’s awesome. We’ll definitely check it out. Andrew’s great. Was on the show just a couple of weeks ago. So good. And obviously, hopefully we’ve got some good practice for you being a guest.

Ryan:
Good. Yeah. Well, thank you. This is a good warmup.

Dave:
Well, thanks again, Ryan, and thank you all so much for watching this episode of the BiggerPockets Podcast. We’ll see you all next time.