Axel Meierhoefer ON: Is Owning a House Worth It? Pros and Cons of Homeownership vs. Renting (#118) — Transcript
Updated: Oct 26
THE PICTURE OF WEALTH · EPISODE 118
Axel Meierhoefer joins Dustin Serviss to debate owning versus renting, real estate investing and the trade-offs between a home, cash flow and financial freedom.
Listen to the episode
This transcript was generated from the episode audio and lightly edited for readability. It may contain transcription or speaker-attribution errors. Refer to the recording for exact wording.
Chapters
[00:00:00] Owning versus renting: the central question
[00:04:28] Tesla and technology-driven change
[00:08:01] Energy and environmental consciousness
[00:11:45] Why residential real estate?
[00:16:10] Appreciation and leverage
[00:20:25] Researching an investment market
[00:23:52] Homeownership through an investing lens
[00:27:51] Rental growth and the time freedom goal
[00:31:57] Real estate deal stories
[00:38:44] The mentoring program
Guest & resources
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Transcript
[00:00:00] Axel Meierhoefer: I wouldn't wanna own a house there unless you already gotten beyond your time freedom point. We're already making your ten grand or twelve grand or so forth in passive income because you're basically making somebody else who owns this house the money rather than for yourself. So in that scenario, and I've said this for a long time, is unless there are some certain circumstances, I would recommend to be a tenant rather than an owner. Now here comes the reason why. When you look at it through the investing lens, there are things that can help make it a little easier. And one of the things that I found to be one of the best
[00:00:35] Axel Meierhoefer: very quick identifiers is what's called the one percent rule.
[00:00:41] Dustin Serviss: Welcome to the picture of wealth or TPAW as we call it. I am your host Dustin Servais. I'm excited to have Axel Mierhofer on the show today. Axel, thanks a lot for being on the show. I've been on your show recently, and we had some good debates. Now you are, an ex US air force officer, freelance business consultant, full time family man, but, really, what we're talking about today is your experience with twenty years plus in real estate and real estate investing, which is, you know, in our minds, part of a proper wealth and a balanced, you know, wealth plan. And, I'm eager to learn what you're teaching people about investing in real estate
[00:01:28] Dustin Serviss: and using that as a tool to live, you know, you call it ideal wealth growers is your brand online. So thanks a lot for being on the show, Axel.
[00:01:37] Axel Meierhoefer: Yeah. Thank you, Dustin, for having me.
[00:01:39] Dustin Serviss: So, Axel, I wanna start, very open and honest about something I said on your podcast. This is off real estate topic, but about Tesla and the brand. And we're comparing it to, you know, more secure businesses that have big profit and all that stuff. And I did say that Tesla is not very profitable. Well, I went and did a little research. They actually... Now I know that numbers can be cooked, and they can move stuff around and make it, but it is not nothing. It is actually something. And I have spent a lot of time actually since we visited listening to Elon on Joe Rogan's podcast and a couple other podcasts.
[00:02:14] Dustin Serviss: Just about the vision is way bigger than the car. So this is a major side tangent, which I didn't have in my notes. But can you give me why you sort of believe in sort of Tesla and that sort of model? And then we'll get through that state. I know, but I had to ask.
[00:02:28] Axel Meierhoefer: See, I mean, you mentioned it in... When we talked in my my show and also before. I'm originally from Germany. And when I came over to the United States, I would say at that time, Germany was probably further advanced or further ahead if you want to in things that had to do with sustainability and environmental consciousness and stuff like that. But there were other than, you know, companies that make solar panels or stuff like that, there wasn't really anybody that I was aware of who was really pushing in that direction. And when I kinda, in a sense, discovered Tesla way too late, I wish I would have discovered it, like, two thousand ten
[00:03:07] Axel Meierhoefer: or something like that. That was when Masterpartu was just coming out, and I looked at it. I'm I'm somebody who likes to research stuff. And it basically said the whole purpose of the company is to help humanity to basically have a sustainable future. And then underneath that is electrification of transport, right, and using sustainable sources for energy. And so the whole thing about Tesla is you... I always... Have always said for me, they basically are a technology company, which one of their first products is a computer on four wheels. Right? And which is also the huge distinction between their product and
[00:03:52] Axel Meierhoefer: pretty much everything else that's out on the market. And even to this day, I mean, you have to keep in mind they're approaching rapidly their twentieth anniversary. Right? Their their first product, I think, came out, like, two thousand eight or something like that. It's pretty close to the iPhone. To this day, there is no company in the automobile industry that can send a software update to their product. I give you a little example how far this can go. NHTSA is the US oversight organization for safety in transport, not just cars, also trucks and all this other stuff. And they had gotten some complaints that people were afraid to get their
[00:04:28] Axel Meierhoefer: fingers stuck when you hold out your hand and then you push the button to raise your window. Tesla sent an over the air update that increased the sensitivity for the sensor to not close the window when it meets even the slightest resistance. And everybody else, if you wanted to do that, they would say you have to come into the dealership and get your windows fixed or your... Whatever. Right? And not even talking about the battery management. But that's why I'm saying it's basically a computer on four wheels. Anybody who dives a little deeper has probably by now seen they sell solar
[00:05:02] Axel Meierhoefer: panels, but not just for the sake of solar panels, they put solar panels next to charging stations. They're the only car company, if you wanna go with that name, that also has its own charging network to the order of forty five thousand gas station pumps, basically. Forty five thousand across the world by now and growing rapidly. They basically not just giving you the computer and wheels. They also give you basically, like any other computer, the little black box, which helps you to charge the battery of your laptop, right, like, of your computer. But then they also go and say, well, how about for companies that are larger scale?
[00:05:38] Axel Meierhoefer: They build something now called big... Mega packs, where each of those things can basically power, like, hundreds of houses if there's a power outage. And large utility companies are now getting mega packs instead of fired power plants because a battery... It's basically the battery the size of a shipping container. It's like instantaneous. When the power goes a little bit down, the battery immediately kicks in. You don't have to start a power plant, and you don't have to burn gas or coal or oil or anything like that. And, I mean, anybody who is a little bit into it, like, I am... You know, they have full self driving. That's basically...
[00:06:14] Axel Meierhoefer: And I know Elon Musk has promised it for years and years and years. But sooner or later, they're gonna figure out between AI and the computer system in the car that the thing can drive itself. Right? And so that's... All of that is computer technology and software technology, and the ultimate thing that is probably five years away from us is Optimus, right, which is also a Tesla product where they're saying there are so many boring and dangerous jobs in all kinds of manufacturing and mining and stuff like that. Imagine you could build a robot that can do these jobs. And then go from there and say, okay.
[00:06:46] Axel Meierhoefer: Well, you're gonna also want somebody for your wife to clean the dishes and the floors and stuff like that. Right? So that's maybe end of the decade. But all these kind of things, if you really bring them back and say, well, everybody says this is a car company and that's what all the news says, that's why I'm saying to me this is basically, you can say, an I... AI or high-tech company that just happens to develop product after product after product that is basically sustainable, you know, environmentally conscious and friendly, and it advances humanity to a cleaner future, but not a worse future, not this doom and gloom stuff. Right?
[00:07:25] Axel Meierhoefer: And so with all of that being said, and anybody is more than welcome to dig a little deeper like you seem to have been inspired to do, It's pretty amazing what they're doing, and that's why I'm saying this is the only stock that I have. Everything else is pretty much real estate and gold and crypto and so forth.
[00:07:41] Dustin Serviss: The Tesla products are always so good. I... I'm looking at the Tesla website for the solar panels. Yeah. And as you're talking, I'm envisioning, like, an apple. Like, the product... Like, solar panels can be kinda ugly depending on what application they're... But these look pretty slick. So would they be expensive? Of course, they would. Would they be efficient? Yes. But at the same time, it's just a matter of time before it gets
[00:08:01] Axel Meierhoefer: Yeah. What what Tesla actually does, and you're right. You're hitting on a on a great point is when I call something environmental consciousness, it is really enveloping your life. So Tesla solar roof, for example, if you put that in the search engine for anybody listening to us, you will see that for a new built house or a house that needs a new roof anyway, it is actually equivalent in price if you had to replace your roof, your standard roof plus solar panels, or you take the Tesla solar roof. The difference is the solar roof is fully integrated. Now that would be just saying, okay. So now I have solar on my roof.
[00:08:38] Axel Meierhoefer: But when you buy that from Tesla, you also get something called the power wall, which is basically the battery that the solar panels are filling the electricity in. And that makes you independent whether you have hurricanes or thunderstorms or wildfires. That power wall is able to power your house for about three to five days. Now the other thing is with that solar roof, you can also charge your Tesla. People always say, well, I wouldn't buy an electric car because there aren't enough charging stations. I'm always saying, since when did you have ever in your life a car where the gas tank was full every time you get up in the morning?
[00:09:16] Axel Meierhoefer: Well, that's the reality of an electric car. Like, you you can either charge overnight from the electricity grid at the lowest rates or you let it sit there during the day or after work or whatever, depending on time of year, and you charge it from your solar roof. Either way, it's a tiny, tiny fraction on what a gallon of gas cost you. But it's always full in the morning or in the evening, but depending on when you charge or at work. Right? So anybody who says, okay. I need more charging stations. My question is, how many days do you go more than three hundred miles? Nobody does other than you're going on vacation or something. Right?
[00:09:51] Axel Meierhoefer: So these are all the kinds of things, and I'm not saying this to form a defensive perspective. It's just a fascination on how somebody can say master plan is to say we want the whole world to develop an economic environmental consciousness, and we want to be the ones that at least make significant strides on getting there.
[00:10:13] Dustin Serviss: That's awesome. Well, you... You're listening to Axel, who is the, the leader of Ideal Wealth Grower. We had a... An awesome discussion about Tesla, but I wanna hear about real estate. So my main question is in your space, help listener understand first off where you are or where some of your properties are or if you've had properties that led to this lifestyle, which I I love, and I think it's why we've connected, is realizing that you're okay sooner in life than, you know, the old work hard, build up, accumulate as much as you can. And then at sixty, that's sort of like the cue to then relax.
[00:10:51] Dustin Serviss: But if you have some tools or some optics on, I am okay now when I'm only thirty eight, or I'm okay now when I'm forty eight. So sooner than what maybe retirement books, the finance industry, whatever says. So help us understand your journey to using real estate as a lifestyle tool to give you the lifestyle that you want sooner than retirement.
[00:11:12] Axel Meierhoefer: Yeah. Absolutely. And thank you for asking that question. Well, for one, I wanted to see... Even though we just spoke about stocks, the one single one that I have. But, fundamentally, I wanted to find out what do people do who actually invest for the long term, and what are they investing in and why. And what I found that a lot of successful people do is invest in real estate. There are many, many different kinds of real estate. I got stuck on Arnold Schwarzenegger because I was curious what he's doing with all the money from the movies when he was, like, the biggest, like, Terminator and so forth.
[00:11:45] Axel Meierhoefer: And he bought residential real estate first, and then added more and more and more became one of the big real estate owners in California, you know, early, early on when he was still in the bodybuilding and and early movie star. And that kinda impressed me, and I started studying it a little more. And there are certain things that I believe are important, and I would love to help your listeners to realize them. Real estate, for example, goes to the fundamental needs, like Maslow's pyramid of needs, which basically said what human beings fundamentally look for is shelter, security, and food. Those three things you kinda have to have. Right?
[00:12:25] Axel Meierhoefer: Shelter being basically another word for real estate. The other part that is the government realizes that it can't provide shelter for everybody, and it's not desirable for government provided shelter anyway. So most of the government shelters called prison. Won't really want that. But then it also realizes, okay. If we don't give an incentive for people to actually provide shelter that they don't use for themselves, so basically investing in real estate so other people can use it, then most likely nobody's gonna do it. So that's why if you go to ideal wealth grower, the word ideal... Yes.
[00:12:59] Axel Meierhoefer: I use ideal because I strongly believe that real estate, especially residential real estate, is almost ideal as an investment, but it's also an abbreviation. The I in ideal stands for the income, meaning, like, the income you're making from rent. The d stands for depreciation, and here's something I don't know how many of your listeners are actually aware of this. The government looks at a single family, three bedroom, two bath house like a machine. If you and I had a business and we're making cars since we have been talking about cars, then the machines to make the cars can be depreciated in different lengths, meaning, like,
[00:13:41] Axel Meierhoefer: a machine that, for example, makes a battery cell, lasts, let's say, on average seven years. And the government would say, okay, if you buy it for seventy thousand dollars, you can depreciate it by ten thousand dollars on your books every year because the thing is just depreciating, and then ultimately, you need to buy a new one. That same thing, strange as it might sound, the government also says for an investment property. So when you buy a house, you have twenty seven and a half years to depreciate. So if we take an example, you were to buy a two hundred seventy five thousand dollar house, every year, you can depreciate
[00:14:20] Axel Meierhoefer: that with ten thousand dollars on your tax return. So you can reduce your income basically by ten thousand dollars of depreciation. So that's the d. Then the e is equity. You buy the house, that two hundred seventy five thousand dollar house, and it's sitting there, and your property management is putting tenants in. This brings in the income, meaning, like, the rent. But at the same time, even if the value... Obviously, the value of the house is not really, in that sense, changing. It's the same house month after month, year after year. But inflation alone. Like, if we have five percent inflation, it would make sense that the house
[00:14:57] Axel Meierhoefer: is gonna get more expensive. Nothing else changes by that amount, by five percent. Most people say when we had very low inflation, real estate was appreciating about three or four percent. Right now, I would say it appreciates probably a little more. But that two hundred seventy five thousand dollar house, if that appreciates, just let's say we are very conservative and say it appreciates four percent. Right? So that's about twelve thousand dollars or something like that. And we only put twenty percent into that house, so which is roughly fifty thousand dollars a little more, and it increased by twelve
[00:15:32] Axel Meierhoefer: thousand dollars, let's say, through twenty twenty three, that's a pretty nice, like, what's that, twenty percent or something like that or a fifteen percent appreciation. This means these twelve thousand dollars that you would have to now put in more to buy the house is the equity that's in the house. So the equity is what's the difference between what you bought it for and what it would be worth, plus what you put in in down payment. So that is the e for the equity. Then the a is the appreciation over time. Right? We just went through one year, but if you average it out over the time that you hold it, it appreciates at a certain rate.
[00:16:10] Axel Meierhoefer: This year might be five percent. Next year might be three percent. So that's the appreciation of the value. And then the l is leverage, and I kinda hinted to that already because we always invest in these properties by only putting twenty percent. And in some rare cases, we just had one of our tribe members getting an offer for a hundred percent financing, which was kinda unusual, very rare. Normally, you put twenty percent down and eighty percent from the bank, and I always joke that the beauty is that the government says we value you so much, Dustin O'Exe, for putting the shelter out there for families.
[00:16:43] Axel Meierhoefer: You can keep a hundred percent of the profits. So the bank gives you eighty percent. You put in twenty percent, but if it increases by twelve thousand, you're allowed to keep the whole twelve thousand. Alright. So that's pretty nice. So these are the things where the word idea comes from, where it is what we ultimately wanna grow, obviously. And grower is also an abbreviation that is kind of the methodology that I'm using for the mentoring of our clients. When somebody says, okay. I like what I hear. I wanna invest in residential real estate, but I'm not feeling enough of an expert or knowledgeable enough to do it on my own.
[00:17:17] Axel Meierhoefer: I want somebody who is doing it and has been doing it, who can show me what portfolio he has built, and make all the relationships for lenders, for property providers, and so forth available, which is in a nutshell what I do, then you sign up, and we have mentoring sessions to help you understand and help you invest and so forth. And that, like I said, is also an abbreviation where the g stands for one. The big g is, so to speak, the big, hairy, audacious goal. And then we have little g. Those are kinda sub goals. Right? If you say my big, hairy, audacious goal is in ten years, I wanna have ten thousand dollars passive income.
[00:17:56] Axel Meierhoefer: That's a pretty pretty big goal. But a sub goal might be in the first six months of mentoring, I wanna at least get my first property fairly close to closing. Right? So that will be a sub goal. Or you might have a sub goal to say, my goal is to be able to buy one house at least every year as an investment. So that's the g. Then the r stands for what is your current reality? What is your financial situation? How much money can you currently invest? Are there any things that we need to clean up? So current reality then, we have the o, and the o should actually be two o's, but then it wouldn't make the word grower, so I kept one o.
[00:18:34] Axel Meierhoefer: In that sense, for obstacles and opportunities. Certain people might have other kinds of mistakes, not financial, but other mistakes that they may have made that they see as obstacles they want to overcome. One of the big ones, just to weave that in here, I even went as far as building and writing a mindset manual. I said, I feel these days, and I'm really curious, Dustin, what you think about that. But I feel a lot of people when I ask them, independent of what kind of investing or stuff they wanna do, that the way they talk about themselves, about their life, about their circumstance, oftentimes sounds to me like a a victim.
[00:19:09] Axel Meierhoefer: And so I I wrote a mindset manual that people can download for free, where I'm trying to get people to understand on the scale of how much of a victim are you or how much are you a creator of your own future, Where are you on that scale? And then provide some exercises and stories and encouragement to see how can you get more in the direction of creator of your own future. So that would be basically the tension between obstacle and opportunity. Opportunity, obviously, also goes in the direction to find out what kind of stuff do you like or prefer. Are you okay with renovated properties? Do you rather have new build properties?
[00:19:47] Axel Meierhoefer: Do you wanna do long term rental or rather short term rental or a combination? Kind of figuring out where you are, what you want, and what you wanna start out with. And then the w is standing for what actions will you take. I always say this is kinda like a letter for homework because, obviously, through the mentoring sessions, we discuss things. I'm trying to educate, but then there needs to be action for the next two weeks or so until we meet again to make progress. And then when we meet again, let's say, two weeks later, which is a pretty typical interval, we would go to the e and say, okay. So what was the experience?
[00:20:25] Axel Meierhoefer: Like, let's say, you said to me, I would really love to invest in Charlotte, North Carolina. And then the homework is to say, okay. Well, then go and see what you can find on Redfin and Zillow and so forth. What kind of opportunities that you think would be suitable for you can you find and run them through tools like DealCheck or, Rentometer or stuff like that. And then, basically, we discussed two weeks later, did you find any? How did it go? Was it confusing and so forth? And did this activity generate any results? It might be, hey. I looked at it, and I found out I can find properties, but nobody wants to pay the rent that I want.
[00:21:06] Axel Meierhoefer: Or I found a house that looks pretty interesting, and I think I could get the rent. And then we look at it together, and we find out, yeah, after you put another hundred thousand renovation in there. Or it might be the perfect place. Right? So that would be the results. And in a sense, this is a cyclical thing because the question at the end of discussing the results is always, do these results change any of the goals, especially the subgoals that we identified under the g? Now the big goal, if you say I wanna make ten grand passive income in ten or twelve years, probably doesn't change.
[00:21:40] Axel Meierhoefer: But you might say, I thought Charlotte was a great place. Maybe we wanna look somewhere else. And this is just an example. Charlotte is definitely a great place for anybody from Charlotte.
[00:21:50] Dustin Serviss: Yeah. Yeah. No. Well, I I think you kinda, like, send my brain into, again, uncharted waters for some of the questions I had for you. But in Western Canada, right now... So it would be great if we could have bought real estate twenty years ago or been, like, all old and bought.
[00:22:04] Axel Meierhoefer: Vancouver. Yeah. Yeah. Absolutely.
[00:22:06] Dustin Serviss: Yeah. Vancouver, you know, whatever, even five years ago. But now you have a scenario, like, I just... I was pulling up Rentometer while you were explaining that just to see if we could figure this out. But you might be able to help listener and myself understand. So Kelowna is the town that I live in. It's about two hundred and forty thousand people. The average house price is about a million and fifty average. So, yeah, you have some monsters and then you have whatever. But let's use a house that say, like, eight hundred thousand, which is a common family, two kids, husband and a wife, two cars kind of house by a school.
[00:22:38] Dustin Serviss: So eight hundred, that's not fancy. That's just a nice house, in a decent area. And you might be able to rent that for, say, thirty five hundred. So it's called forty thousand a year in gross revenue. You pay eight hundred for it, and you got a mortgage. Like, how do you quickly vet things? And I'm having trouble vetting things quickly to see that things are actually a reasonable deal here. And so does that mean my brain needs to get out of this this zone, or is the price appreciation more appealing here because this is a desirable California of Canada place to be?
[00:23:17] Axel Meierhoefer: Yes and no is the answer, literally, for those two questions. The first thing, if that were the scenario and you were my coaching client or mentoring client, I would say, okay. Dustin, I hope you're renting. Because if it's thirty five hundred for an eight hundred thousand dollar house, it's probably not much more than four thousand for a million dollar house. Now the question ultimately is always in that kind of scenario, is the eight hundred thousand or million dollar house really that nice a house? Because, I mean, if I say, okay. Let's look at that house in your area versus a house, some
[00:23:52] Axel Meierhoefer: other little more remote place in Canada, you might get a massive mansion for a million or something like that. Right? So but, fundamentally, my first reaction would be, I wouldn't wanna own a house there unless you already gotten beyond your time freedom point. We're already making your ten grand or twelve grand or so forth in passive income because you're basically making somebody else who owns this house the money rather than for yourself. So in that scenario, and I've said this for a long time, is unless there are some certain circumstances, I would recommend to be a tenant rather than an owner. Now here comes the reason why.
[00:24:29] Axel Meierhoefer: When you look at it through the investing lens, there are things that can help make it a little easier. And one of the things that I found to be one of the best very quick identifiers is what's called the one percent rule. So a good performing property in your area, and I realize that's not possible. It's the same like when I'm in San Diego or certain places in other places in the world. There are just certain areas where it's normal to have an eight hundred, nine hundred, million dollar house, and it's also normal to get between three and four thousand rand. Now what a good performing area for investing purposes purposes is
[00:25:06] Axel Meierhoefer: when the ratio between the price of the house and the rent is close to one percent. When we go back to what I said earlier about that two hundred seventy five thousand dollar house, if you can get about twenty five hundred dollars in rent, you're pretty close. Right? Or if you find a two hundred thousand dollar house that pays eighteen hundred, nineteen hundred in rent and stuff like that. Now there's also the other point is... Say again?
[00:25:27] Dustin Serviss: That's... Oh, the rent. Yeah. One percent. Okay. One percent rule.
[00:25:30] Axel Meierhoefer: You know, the the rent is one percent of the purchase price.
[00:25:33] Dustin Serviss: A monthly rent?
[00:25:34] Axel Meierhoefer: Monthly rent. Yeah. Exactly. Close to to... Or as close as possible to... Now if you have new build houses, you know, brand new properties, it's more likely or it's still a good deal if you can get it above point eight percent. But you shouldn't look for anything worse than that. Anywhere between point eight and and one percent is a good deal. And the reason for that is even more so right now with the high interest rates on the mortgages is that you have to basically consider what do I actually pay as the owner, and what can I get back in when we go back to that income letter in Ideal Wealth Grower?
[00:26:09] Axel Meierhoefer: So if you buy the property, let's say, for two hundred thousand and you get close to two thousand dollars in rent, you probably, with these high interest rates, pay about a thousand dollars or so for the mortgage itself, insurance, and property tax. So now you have a thousand dollars left. You basically pay typically eight to ten percent on property management because you obviously can't find a two hundred thousand dollar house in your area, hundred thousand dollar house in your area, so you have to buy it somewhere where those houses exist. So you need property management to help you out with that. So let's say that's ten percent.
[00:26:41] Axel Meierhoefer: So now you have another two hundred dollars into that. That's down to eight hundred dollars. Then you want to have a little bit of money put aside for anything like repairs and those kind of thing reserves, and it can be vacant, you know, when one tenant moves out and another tenant moves in. So I typically advise to use at least ten percent. Some people say fifteen percent. So that would be another two hundred dollars. So then with all of that being said, you're basically down to four to five hundred dollars that is actually the real pure cash flow that comes out of that house.
[00:27:14] Axel Meierhoefer: And that is really the measure because when we say our goal is to generate ten thousand dollars a month in passive income in the next ten years, it is a matter of... Let's just for easy calculation, say we have five hundred dollars cash flow left. Now you need, basically, to get to ten thousand dollars, you need twenty houses, just on the very simplest calculation. Now if we, on the other hand, say ten year time horizon, this is a very important point. I want your audience to listen to this. If we say today, we can get five hundred dollars, and I always use the example, let's say, Dustin and Axel are the friendliest landlords in the world.
[00:27:51] Axel Meierhoefer: I'd say only increase the rent by fifty dollars a year, even though it starts at around two thousand. But we are super friendly. We don't increase it more than fifty dollars a year. So on that first house, over the ten years until we wanna reach our goal, it will increase by five hundred dollars. That means your cash flow now is a thousand dollars on that house. If you do this for all the other houses, then you don't need twenty. You basically need ten or probably somewhere in the area of twelve to get an initial idea on how many properties are we looking at, and that helps a little bit also to say, if you wanna make twenty k in passive
[00:28:28] Axel Meierhoefer: income, but you can only buy one house a year, then your time frame is gonna be longer. You can buy two houses a year, then you can maybe get there in ten or twelve years. So the point, on the other hand, to your original question why I said it's yes and no, you can't make it work in corona because the ratio between how much do houses cost and how much rent can you get is just not good. It's just not performing well.
[00:28:53] Dustin Serviss: If you did find one that said we could have five thousand a month in rent and the house was still eight hundred, that's... You know, for listener, when you're trying to vet things... And, again, lots of people scroll the apps, look at the listings. You know, there's a few good realtors out there that are still pushing, you know, different ideas, new ideas, but most of people are looking themselves then going and approaching somebody to go see it. But you wanna be able to quickly vet things because new listings come up, you get excited. Oh, this is the one. But you wanna be able to go, okay. How much rent? How much do I pay? Not good. K?
[00:29:26] Dustin Serviss: Just forget about it.
[00:29:27] Axel Meierhoefer: The name for the strategy when people say, what's the name or is there any strategy? I always call it the out of state turnkey investing strategy. And it comes from the original idea that I... When I first started investing, I only invested in renovated properties. So how does does this work? A turnkey company, by definition, if I were to describe it, and some people have actually adopted my description, turnkey company goes out and says, let me find the ugliest duckling in a nice neighborhood. Let's see if we can convince the owner to sell it to us for a ridiculously low price.
[00:30:04] Axel Meierhoefer: So let's say this two hundred thousand dollar house was the ugly duckling in the neighborhood, and they bought it for, let's say, a hundred. They know they have to put fifty or sixty thousand in to bring it up to snuff, new kitchen, new bathroom, you know, renovate everything that needs to be renovated. And in the process, they find, oh, shit. It's actually ten more, so we put in seventy. Then they say to Dustin and Axel, well, we have a house for you for two hundred. Right? Because they wanna make some profit on finding it, renovating it, selling it to someone. But the important thing, and at least for the ones that we work with,
[00:30:39] Axel Meierhoefer: is that they are also going to be the ones that manage it for us. That's why it's called turnkey. It's not a flipper who just says I find a property, flip it, and sell it to you, and then you're on your own. And this is a psychological thing. If you renovated it and you know three months later, I also have to manage it for the rest of its life, well, then I better renovate it a little better. Otherwise, I'm the one who's constantly going out there and fixing all my flaws from my renovation. And, obviously, as the owner, you and I would say, if you can't renovate, you have to pay for all the stuff that didn't work out. Right?
[00:31:12] Axel Meierhoefer: So we also look, obviously, for warranties to cover those things that were touched during renovation. But the long story short, the main thing is a good turnkey provider allows you to invest in a property thousands of miles away from home and... Or, like, if you live in Canada like you do and you wanna invest in the US, you can do that. And property management is basically doing all the things after the purchase. They find you the tenant. They collect the rent. If their tenant calls and said, hey. I thought this faucet was renovated, but it's leaking. Well, then they gotta go and fix it. Stuff like that.
[00:31:45] Axel Meierhoefer: They send you the rent minus their property management fee, and, you know, the only thing you have to do yourself is pay the mortgage.
[00:31:52] Dustin Serviss: Axel, as a closing story, do you have any sort of, like,
[00:31:56] Axel Meierhoefer: I don't
[00:31:57] Dustin Serviss: know the right word is, like, janky kind of, like, weird deals that took some heavy lifting, with your mind to get done? And I think listener... And and, again, for me, I like listening to stories of real estate investors where, you know, they had to use some sort of creative things and it worked out, whether you took a risk or whether it was a hostile tenant situation. What stories come to mind when I ask the question?
[00:32:20] Axel Meierhoefer: Well, I I don't wanna make it overly dramatic, but one story that comes to mind that is probably a little bit of an unusual thing is you mentioned at the very beginning that I also... Still doing a little bit, but I used to do mainly consulting for large corporations. And there was a time around, two thousand ten, we were living in California, but for some strange reason, all my clients were on the East Coast. You know, like, Merck and Pfizer and all these kinda now well known names on the COVID times. Nobody knew them that much before, but I worked in that industry a lot, and I constantly had to fly over there.
[00:32:56] Axel Meierhoefer: And then we lived in the Santa Barbara area, which is very nice, but it's not a connect airport wise. So we said, okay. Can we go further to the east, but not too far for... Since we still wanted nice weather and stuff like that? So we discovered Santa Fe in New Mexico, fifty miles from the Albuquerque International Airport. Very nice town, awesome food, good weather most of the time, great community. So we decided, okay. We buy a house there and move there. We did that in two thousand eleven, and I think the universe wanted to show me the middle finger, right, and said, okay. Renewal of your consulting contract is coming up.
[00:33:37] Axel Meierhoefer: Let's just give you all new clients in San Francisco. So, literally, we were barely moved in, and all my East Coast clients switched to a whole list of really big clients in the San Francisco Bay Area to the extent that I actually rented an apartment there. So we did that for a while, and I flew, like, every other week to visit my wife, basically, for the weekend. And she ultimately said, you know, I didn't really sign up for this, and the winters are freaking cold at seven thousand feet elevation. I want the sun and the beach and stuff. Yeah. So I said, okay. I hear you. That makes sense. Let's go back to California.
[00:34:15] Axel Meierhoefer: So in twenty sixteen, after trying this for four and a half years, we moved back to California. But the question was, what do we do with the house? It was a nice three bedroom, two bath house. I asked the real estate agent, and she said, well, you can sell it. You get maybe slightly more than what you bought it for, but that's all I can kind of promise. I said, well, I know you guys are also doing property management because NFA has a lot of people that own a second home there. She said, yeah. We could do that for you. I said, okay. Well, then let's do that. We buy the house in California, and and we keep this one as an investment property.
[00:34:53] Axel Meierhoefer: Not anywhere close to where we normally invest. Performance was not quite as good as I would have wanted to see, but still, it made tiny, like, a hundred dollars cash flow per month. Right? So it didn't cost us anything. Okay. So that worked out well. And then suddenly, I get a call from that agent, and she says, hey. How much would you be interested in selling this house? And I'm saying, you told me it's
[00:35:19] Dustin Serviss: it's not that much worse. You know? So why are you calling? She said, you
[00:35:23] Axel Meierhoefer: remember, when you come into Santa Fe, you always needed to kinda crawl your way through the city if you wanted to get anywhere. And a lot of people that worked in these bigger companies or Los Alamos laboratories and stuff like that, they needed to go from somewhere close to the... Santa Fe has kinda like a four lane interstate like business circle around it. So everybody that worked in these bigger places wanted to live there. I said, yeah. That's a great story. Why are you telling me this? She said, yeah. You know the street that goes by right that neighborhood where the... Your house is?
[00:35:58] Axel Meierhoefer: There was, like, a half a mile missing to connect to this kind of business loop, and guess what? They just connected it. I'm like, okay. That's great for the people that wanna cut off the business. She said, no. You don't get it. Your house just jumped a hundred thousand dollars in value. I'm like, you've gotta be kidding me. Right? Like, I couldn't believe it and said, so what you're really saying is what used to be two hundred k is now suddenly three hundred k. She said, yeah. Exactly.
[00:36:27] Dustin Serviss: So, well, you could have opened with that one.
[00:36:31] Axel Meierhoefer: So, yeah, totally unexpected. And this is actually for... You have to keep in mind, I'm normally the person who tells everybody, all my clients, and so we buy something. We keep it until we go six feet under. But sometimes the deal is just too good.
[00:36:44] Dustin Serviss: Yeah. Well, that's a good story, and it does kind of, like, highlight something we talk about in retirement plans is there's... You know, you can map out the best plan, but in life, there's a lot of changes that happen. And you don't... Some good, some bad, You get inheritance. You don't. There's so many things that, you know, often we get very, linear and get very closed in and, like, this is how it's gonna be. But I think being able to be open to that and say, you know, okay. Hey. This is a big boost. This is not normal for just in this shorter period of time. Okay. Let's take the sale.
[00:37:18] Dustin Serviss: I I have to remember as being a twenty year old, one of my father's, you know, wealthy friends. I said to him, what what would you do different? He said, I would have never sold any piece of real estate I ever owned.
[00:37:27] Axel Meierhoefer: Yeah. You're absolutely right. Although there is another saying that is also not really wrong, and that is nobody's ever gone broke making a profit. Right?
[00:37:34] Dustin Serviss: Yeah. Hundred percent.
[00:37:35] Axel Meierhoefer: So... And I mean, from my thinking, it was immediately okay. We made unexpectedly overnight, basically, a hundred k. That means I can buy two more properties. That cash flow way better than this one. Right? So, I mean, that was very unexpected, kinda quirky. I never really even realized because I worked from home or I flew into to the airport. So I never even realized that that half my connection to the business loop was missing and that it made such a difference, but, yeah, ended up being a pretty good deal.
[00:38:04] Dustin Serviss: Well, Axel, where... If the center wants to learn more about what you do, how you could maybe help them, where could people find you online?
[00:38:11] Axel Meierhoefer: Well, if you go to idea wealth grower dot com, that is kinda like the best starting point. If you over and look around the website a little bit, it's offering you a complimentary strategy call where we can really go for an hour into depth, get to know each other, and see if I can help you. It's also offering you to sign up for our newsletter. And if you wanna really see a little bit on what is really included in in the mentoring, it's a very long list of different aspects that go into this. It's not just buying and helping you to buy real estate. I advise to click on that little navigation point that says shop,
[00:38:44] Axel Meierhoefer: and then just scroll down the list. And we made a little table that shows all the different things that happen throughout the mentoring program over time. And then I have to say when I saw it recently, it has actually grown into quite a list because what I really want to get people to ultimately get to is that you build basically what I call your empire, kinda like a family trust where all your liability protection, all those kind of things. It's not just the real estate by itself. So, yeah, if you click on shop and then just scroll down, you can see how it goes. And I would be happy to have a conversation with people and see, you
[00:39:24] Axel Meierhoefer: know, if we can help you out.
[00:39:26] Dustin Serviss: What was the website one more time?
[00:39:27] Axel Meierhoefer: Idea by grower dot com. Awesome.
[00:39:29] Dustin Serviss: Thanks a lot, Axel, for being on the show today.
[00:39:31] Axel Meierhoefer: Awesome. Thank you, Dustin.
[00:39:34] Dustin Serviss: Thank you for tuning into this episode. If you enjoyed the show, please like and rate the show. Share with a friend or use your new knowledge in your next conversation. If during the show something gave you a pang of inspiration, motivation, or sense of uncertainty, act on it now. Get the clarity you're looking for. Find the permission you seek. Go to servicewealth dot com to discover how others are learning how to take Fridays off or buying a recreation property or spending more money. If you're an organizer of an event where you believe my philosophy of finance lifestyle design would be applicable, go to servicewealth dot com and book me
[00:40:05] Dustin Serviss: as a speaker at your next event. If you want a copy of our new book coming out soon, send me a message on Instagram or Facebook and we will be sure to get you a first copy.