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Building Wealth Through Real Estate with Joe Fang Part III · The Academy Presents podcast

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Did you know that 90 % of the world's millionaires
0:05
invest in real estate? Well, I'm Angel with the
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Academy Presents Real Estate Investing Rocks,
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and I'm here to help you if you want to go for
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your piece of that pie. Are you new? Are you
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new to this and you just don't know where to
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start? It's okay. Are you someone that has invested,
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but you feel stuck, you feel like you've lost
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momentum, you don't know where to really head
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from here? Are you a seasoned real estate investor
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who is doing great but maybe you just want to
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hone a few skills here and there? This is the
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place for you. The Academy Presents Real Estate
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Investing Rocks podcast will connect you with
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industry experts so that you can save time, avoid
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costly mistakes, and begin living the life you've
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dreamed of all through real estate investing.
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You're already taking the first step. just by
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joining us here today. Yeah no absolutely every
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every day that you have cash in the bank is another
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day that you're losing value of your cash especially
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in high inflationary periods and my economist
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flag is going to fly right now because I recently
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read that the goal is two percent inflation.
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Okay the reason why the dollar loses three percent
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value per year is because the natural rate of
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inflation is three percent. Historically, three
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percent on average is what we lose in the value
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of the dollar per year. That means inflation
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is traditionally three percent per year. The
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other thing on this whole jobs count thing, I
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also believe it's cooked that the natural rate
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of unemployment is like five, five and a half
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percent. So anything under that is not natural.
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And when I say natural, I mean, the market is
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going to like converge on this amount. that it
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just, it's what happened. It's what's happened
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historically. It's probably what's gonna happen
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forever unless there's some, there would have
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to be something crazy massive above and beyond
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the pandemic to cause rates to deviate from that
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natural rate in any significant fashion. So five,
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five and a half natural rates, that's what we're
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always gonna have. So to have something less
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than that is unnatural. So regardless of what
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they're saying these goals are, they're unnatural.
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the possibility of them being sustainable is
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very, very low. So just keep that in mind. And
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that's not just Angel Williams talking. Go look
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in your economics books. Look up natural rate
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of unemployment. Look up natural rates of inflation
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or loss of the value of the dollar per year.
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And those are going to be the numbers you find.
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So just putting that out there for you. Sorry
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to hijack what you're talking about, Joe, but
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I just want to put that out there. No, no, no.
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That's something to remember, putting things
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in the right context. Yeah, so you're doing yourself
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storage Mobile home communities multifamily.
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You've got your lofts going Are you still doing
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stocks and bonds and the whole that whole scene
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also? You know, you know what's so funny. Um,
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I so I I traded stocks and bonds and and even
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options, you know for many years and I just stopped
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completely in 2019 and here's why So I follow
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a lot of macro analysts. I find the topic very
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interesting and these mega trends that drive,
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sort of drive the world, the way that the economy
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works, it's really heavily influenced by these
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mega trends, these demographic trends. And so
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I pay a lot of attention to macro stuff. And
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we started to notice in September of 2019, that
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the Fed was injecting a lot of liquidity into
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the overnight repo. I mean, it was like billions.
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And then there would be times where the repo
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rates, and for people who don't know this, it's
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basically the money that the banks charge each
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other just to lend to banks that have excess
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cash. they'll lend them out for the, you know,
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I don't know how long, Angel, if you can help
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me with this, is it for one night or for a few
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days, but it's very short. They're short term.
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It's usually your overnight rates. So a bank
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alone overnight, but it could be a couple of
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days. Basically what it is is banks right now
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have a zero percent, they have a zero percent
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reserve ratio. That means they don't actually
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have to hold anything. when you deposit money
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but if you go to the bank and you need money
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of course they're going to give you money but
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then it sets their books it can mess with their
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books so that they're running a deficit in their
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books and they're going to have to go to the
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fed or go to that overnight market and they're
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going to have to get money from the overnight
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market to get their books covered and whether
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that's one day two days three days i would i
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don't know that much about it after an overnight
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but i would assume that it would go up if it's
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more than one night i don't know that for sure
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because I'm not that I haven't been studying
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all that part for a long time. But it's like
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super technical, but it's just the thing to know
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is that it's it's super short, super low risk.
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And because the pledge is, you know, some type
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of blue chip collateral like U .S. treasuries
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or something. Right. And so the point is, is
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that the rate should be really low. Right. And
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the, but I think if I remember correctly, the
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rates went up to as much as 10%. And that's basically
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saying like, something's wrong, you know, the,
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is the financial system broken again, or is,
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because, because when you have overnight borrowing
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rates at that rate, at that 10%, it's like, everybody's
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holding cash or something, somebody's insolvent,
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you know, and there were a lot of rumors at the
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time. And so because of that, I decided to pull
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all my money out of stocks. I just, you know,
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I don't, I just didn't want to have my money
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and it just feels so out of control, right? And
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it's like, the more that I'm becoming full -time
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professional real estate investor, the more you
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kind of have control over you have influence
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on the asset, right? And instead of just letting
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somebody decide on a whim, like what something
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should be worth, you know, it's nothing scarier
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than seeing your stocks get cut in half, you
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know, down 30 % because of animal spirits, you
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know, it's like, wow, how did the world change
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so much that my stock is down 30, 40 % in, you
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know, or... you know, just in a short amount
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of time. I mean, even like when you invest in
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the syndication, even though you're giving up
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control to the operator, the operator still can
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make things happen on the property. They can
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still drive rents, they can cut expenses, they
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can optimize for occupancy, they can overcome
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obstacles, right? But I just feel like when you
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own stocks, it's like... You know, I can't tell
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Jamie Diamond what to do. He's not going to listen
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to me. You don't get to drive that car. So I
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just lost trust. I lost trust in the markets
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and just decided, you know, from then on, you
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know, pull all of my money out. And, you know,
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what happened a few months later, right? We had
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COVID and the market, the markets crashed in
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March of 2020. You know, I mean, I'm not saying
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that I saw that coming. But there were problems
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already. There was certainly some kind of liquidity
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crunch happening where the Fed had to print or
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had to inject billions and billions every night.
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Yeah, no, I agree. It's one of the reasons why
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I've been trying so hard for years now. Every
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time Parker and I are talking, Parker Purcell
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from EQRP, every time he and I are talking, I
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am whining and crying about the fact that I want
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my TRS money. So what is TRS money? That's the
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Texas Teacher Retirement System of Texas. I don't
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teach for a Texas, I don't teach for a Texas
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institution anymore. Every now and then I'll
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go, I'll go do a dual credit for Vernon College,
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but I'm not doing it right now. But what the
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TRS system says is because Vernon College pays
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into TRS, even though they do not pay into mine,
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I cannot have my money back. It's like, I think
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it's up to 23 ,000. And this is the hilarious
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part. Last year, My $22 ,500 made $500. Now my
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account is worth $23 ,000. And here's the thing
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about being in real estate. I want to put that
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into something self -directed because I know
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that I can double that in five to seven years.
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Let me have my dang money because you're not
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doing anything good with it. And I'm sorry that
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once we reach our age plus our years of experience
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equals 85, you have to pay us a pension. But
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I didn't set up those rules. I'm not working
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for you anymore. Give me my money because I know
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I can do smarter things with it. And that is
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so risky. And that is why people will leave their
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money in pensions that is earning peanuts because
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they're scared to take control of it because
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they're not educated yet. But once you get educated
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and once you see what's going on once you can
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like once you see what those hard assets can
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do and Once you realize that you are driving
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that car even if you are an LP in a deal You
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are hoping that the operating team you've chose
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to invest with is also riding the LP side Because
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if they're riding the GP side and the LP side
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they feel the same pain you do as an LP And so
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you are kind of getting to drive that car because
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they're driving the same car. And so you're all
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in the same race and you're all hoping to cross
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the same finish line with the same outcome with
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the same, you know, advancement with that 2X
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or 1 .5X or 2 .5X, whatever it is, you still
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hope to be better off at the end than you were
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at the beginning. And so you're all in the same
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race. and you do have control and you have control
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over your education you're here today and you're
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here tomorrow and the next day or these three
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days you're here to get the education because
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as anyone will say my friend Vlad has said it
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too other people said it the more educated you
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become the less risky it seems the rest risky
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it is the less risky it feels because you have
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enough education that you feel like you can make
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an educated choice. And it's a logical choice,
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because when we start talking about logic, now
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my logic is different than Joe's logic. It doesn't
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make my logic better than his or his logic better
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than mine. It just means we have different logic,
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but we are always going to be making logical
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answer or logical decisions because we're basing
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our decisions on all the available information
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to us at that point in time. And with the education
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I have garnered over the last three and a half
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years doing podcasts, doing these summits and
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talking to people in the space, I feel pretty
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darn educated and I feel pretty dang secure that
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I can do a heck of a lot more with my money than
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the account that it's sitting in right now. And
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that is why I want to self -direct it and do
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more with it. And Joe, I think that's kind of
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what you're saying too. In stocks, you couldn't
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drive that car. You had pretty much zero control
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over what was going on in that company and where
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that stock was going. So you were able to remove
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that disconnect and put it into something where
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you could control what was happening. You could
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drive that car. You could drive the outcome.
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And I just think that's really important for
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everyone to listen and hear because I have plenty
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of friends that are doing real estate and they're
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still doing stocks, bonds. They're still in that
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arena too. And if that's what you want to do,
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okay. My father -in -law who I have the utmost
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respect for, um he was able to do some stocks
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and bonds he did real estate they had some oil
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and gas and when he passed away it was like i
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got to see a little bit about the magic that
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he was making happen and it's you know joe it's
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really funny that you were talking about life
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sciences my father -in -law had his degree in
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biology and then he had his degree in mammology
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and then he had his phd in museum studies and
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the one of the cool things was when he was getting
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his phd he was like the foremost expert in the
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u .s and some of the subjects So he got to teach
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some of his own PhD coursework. So that was kind
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of cool, but it's like he came from that life
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science arena and then he was basically self
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-taught on the real estate and the stocks and
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the bonds and those paper assets. And he was
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so successful at it. And I would sit there some
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nights and we would talk. And I was always impressed
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because I'm like, I have a degree in business.
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I've got a BBA. I've got a master's in economics.
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I've run businesses. And your knowledge level
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is so much greater than my own. And it wasn't
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necessarily a time thing because he got he got
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started in the real estate piece later in life.
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Now, I had grown up with my grandparents being
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in real estate, so I had been in it my whole
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life and he was still making decisions that had
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so much wisdom in them. And so it felt so much
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less risky to him. And now that he has passed
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away and the family trust has passed or the family
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it's a limited partnership has passed on his
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sisters don't have the same knowledge base that
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he had. And so they see real estate as a riskier
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investment. And so they don't understand this.
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What we're talking about here about being able
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to drive that car. And so I think maybe I may
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be forwarding this to them because I think that's
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just a really important distinction to make that.
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you don't get to control what's going on in stocks
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and bonds. And even if you're pulling S &P, you're
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still just hoping that the market does what it's
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always done. You still don't have that control
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factor. That volatility, not only is it scary
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for people, but it's also on. It might make you...
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sort of make bad decisions, right? You know,
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we human beings, we cycle between greed and fear,
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right? Like people have a tendency to want to
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chase something when it's going up and they want
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to dump something when it's going down. It's
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usually the opposite, right? You kind of want
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to do the opposite, right? I mean, Warren Buffett
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always says, you know, you want to buy when others
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are, sorry, when others are fearful and you want
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to sell when others are greedy, right? So you're
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supposed to do the opposite, but our intuition
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wants us to do, you know, we want to chase that,
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whether it's rising or we want to get rid of
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something because it's going down and it's causing
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a lot of pain. And so that will screw with your
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emotions. And then you might actually end up
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making that decision because you're not thinking
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right. And so when your portfolio is going down,
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people might just want to sell it and cut their
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losses, right? And that's probably not the right
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thing to do. And what I was like, real estate,
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because it's more illiquid, you almost have to
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sit on your hands and you just have to write
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it out. Like what we talked about earlier, that
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when you're going through tough times, going
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through the great financial crisis, for example,
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as long as you have the reserves and as long
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as you, you know, manage properly, you're gonna
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end up okay, right? I mean, it wasn't like I,
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you know, I couldn't even sell the real estate
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if I wanted to, right? Because the prices were
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down, right? Yeah, but you were able to salvage
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where a lot of people wouldn't have been able
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to salvage. You know, I just number one, I want
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to thank you for coming on here today and just
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giving us basically a play by play of how things
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happen for you from 03 to current. And really,
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I think the other thing you've done is really
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supported the idea that in real estate, there's
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going to be ups and downs, but there is an overall
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upward trend and there is safety in that overall
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upward trend. I'm not saying recession proof
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and I'm not saying risk free. but there is an
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overall upward trend and so I would just say
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you know before you make any decisions one way
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or the other take the time to research it take
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the time to educate yourself and take your time
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to become friends with people like Joe here that
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have been through it they've got a lot of experience
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and a lot of knowledge that you can gain from
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without having to go through it yourself. So,
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you know, Joe, again, just thank you for being
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here and thank you for just sharing so openly
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with the audience. And man, that's just thank
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you. And guys, like I said before, there's tons
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of info over here. We'd love to have you on the
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live side. And until next time.