What DOGE means for Real Estate Investors

Mike Hambright (00:01.55)
Hey everybody, welcome to the show. Today we’re going to talk about what DOGE means for real estate investors. And I have a great friend, an amazing guy, a guy that’s got a lot of wisdom that not just me, but a lot of people in our industry listen to, Mr. David Phelps. Dr. David Phelps, how are you, David? Doing very well. Glad to be here. Yeah, always good to see you. And it’s kind of funny because we’re in the same market. We live in different parts of town. it’s rare that I see you. This is first time you’ve been to my office, right?

We meet for lunch every once in a while. But usually, I see you or guys like Eddie Speed or other people at an event somewhere that we all fly to. We’ll fly hundreds of thousands of miles to see each other in the same community. Isn’t that ironic? And then every time, we’re like, why don’t we see each other more often? So anyway, let’s make a commitment to see each other again in the DFW market. I’m good for that. Yeah, for sure. So how have you been? Doing well. Thank you. Yeah. I’m excited to have you here. You’re one of those folks that I look up to.

And a lot of people do, because you got a lot of wisdom. got, as I like to say, you’ve got more than me. You’ve more arrow wounds in your back than me, so a little bit more wisdom there. Well, that just ages me right there, We’re both real young. mean, let’s just be clear. Well, that’s what I feel. I feel like I’m not my actual chronological age, but that’s just in the mind, right? But yeah, there are some decades that have rolled by. When you look back in your life, when we were growing up, when you’re in your teens or your 20s, you think,

you know 50 60 70 that’s really really old i’m thinking that’s really young yeah there’s there’s a more to go with life so but yeah uh thanks for the uh the call out there yeah but you know um one of things that we’re talking about today is a lot about kind of what’s going on in the i know you’re very attuned to this what’s going on in the marketplace what’s going on with the economy like what’s going on with all the doge stuff what’s going on with the changes this administration’s making and how and what is the impact on the real estate market or really kind of the overall business

market right and so I know you talk a lot about that and I know you study it a lot and so excited to kind of share your hear your thoughts on that I guess so like we’re you know I think one of the things that you and I agree with is

Mike Hambright (02:11.116)
this country’s been printing money for decades and a long, long time, right? And so for people to say like, well, this administration has been in office for one month. Why isn’t everything fixed? It’s like, this has been decades in the making, right? So let’s talk a little about kind of where we’ve been in the context of where we’re going, I guess. Yeah, I think we could use an analogy and just say like, you know, if you’ve really not looked at your health for long time, you just take it for granted and you don’t exercise and you’ve just been eating a lot of really crap food and

You’re just going see the midriff build out and you go to the doctor and goes your triglycerides are sky high, you have hypertension.

doctor says to patient, you need to do something or you’re going to be in here getting surgery and bypass. And if you really want to deal with it, you have to change, change your habits, right? Same thing with what we’ve realized in our country with our representatives who want to maintain tenure in office, because let’s face it, they make a lot of money with the grift and the graft that we’ve been exposed really a lot in the last few weeks with Doge, the Department of Governmental Efficiency, which has become a byword for

Let’s find the waste and find what’s been building up for years and years years. So yeah, when you’re going change your habits of any kind, it’s not an overnight thing. Well, I guess you can take Ozempic. But again, I don’t know that that’s the way to go. Take some kind of poison pill to fix a problem. So same thing with the economy. know, Trump had four probably, well, he’s had four very long years between 2020 and 2024 to think about what he

couldn’t accomplish in the first four years because well it was a new game. mean politics I don’t know how you wrestle that beast. and mixed in COVID which was. Yeah and COVID so there’s always elements in our lives and certainly

Mike Hambright (04:02.478)
politics and government have to deal with it as well, but how well do they deal with it and really where’s their focus? So back to the volatility and the doge and what that’s creating, it’s creating a lot of disruption because Trump realizes he’s got one term, he can’t be reelected again, so he doesn’t have to play politics per se. He’s never played politics like all the other incumbents who are many of them are bought and paid for, we know that. So like him or not, I think he really is taking this very seriously. If you look at other

new administrations, I think we could go all the way back to Ronald Reagan. And I was much younger, obviously, when Reagan came in office. But I remember how much there was so much excitement and exuberance about Reagan coming in after we’d had Nixon to Gerald Ford to Carter and the stagnant economy, but high inflation. And there was just a big mess. And Reagan came in, you know,

literally riding a horse, right? And saying, hey, we’re going to change things up. Now, what happened in…

with all that exuberance and excitement of Reagan, we went to back-to-back recessions, 1980, 81, 82, back-to-back recessions. Well, to deal with the inflation of the 70s, Paul Volcker came in and really had a political mandate to do what he did, and he took the federal funds rate, which today is the short-term overnight bank funding, which today is about four and a quarter, went five and a half, you know, a year ago, and they brought it down a few basis points in the last few months. He took it up to 20%.

percent. So people today go, I hate these high interest rates. They’re awful. They’re awful. It’s like, well, just go back to when I bought my first rental property in 1980 and my mortgage rate was 13 and a half. Right. But it still worked. But there was an equilibrium. We don’t have an equilibrium yet. We’re going through this painful time of having to reset the economy and everything Trump’s doing from tariffs to just

Mike Hambright (06:06.882)
dealing with all the wasteful spending and going hard, it creates a lot of uncertainty. And the markets, meaning all of us as investors in the business, the markets don’t like uncertainty. The markets want to feel like, even if it’s a…

a bad model that we’ve had for decades, at least if the markets know that’s what it is, well, the markets will deal with that and you can see things run. eventually, the kicking the can down the road has to stop, and that’s where Trump is today. So I’ll just say we’re in a tumultuous time. It’s a time where I think there’s going to be more discernment on everybody’s part, whether you’re an active business operator or you’re a passive investor or you’re some of both. There’s no more passivity here. It’s all hands on deck.

not to we don’t talk about politics the whole time but it’s obviously impacting our economy here is is Trump doing a good enough job setting the expectations of what’s to come because it feels like it could be a bumpy road for a long time because we have so much garbage to unwind you know yeah and so I guess I’m curious if you know we were talking about this ahead of time like he he’s like

tiptoeing around using the word reception recession, but there’s a lot of pain in the market right now. And you know, and the media will be very quick to throw him under the bus, even though he didn’t create it. He’s trying to unwind it, but it’s easy to make him the bad guy. Yeah. Well, if I were chosen to be his outside PR consultant, I would be advising to do more and actually elaborate, elucidate on having to clean up a mess that he didn’t make that well, he didn’t make. I mean, there’s there’s been bipartisan

So I’m not trying to blame either side. I’m saying this is both sides for sure. But what he should be saying is to clean up the mess, just like my analogy of you’re overweight, you need get back on the treadmill and that kind of thing. It’s going to take some work. There’s pain before there’s gain.

Mike Hambright (08:03.814)
And he wants to grow us out of this, which I’m a fan of growth. know you are too. mean, taking the public sector, the government, with all the fiscal deficit spending, which has really been what’s pumped up and kept our GDP where it’s been, people say, the economy is strong, the economy is strong. It’s like, wait a minute. If you take the fiscal government spending, the largesse, out of the GDP, our GDP wouldn’t be where it is today. And the Atlanta Fed just last week predicted after predicting originally

last couple months, know, about a 2.4 % GDP growth, they brought that in to 1.5%. Their last reading last week was a negative two something.

What we’re looking at is, yeah, through the lens of likely, maybe the real R word, recession. So I think Trump should be saying more about that. Scott Bessett, the Secretary of the Treasury, used the word, well, we have to detox. That’s about as close as they’re coming to say recession. So you want to look at recession as detox, it kind of is, right? So I think we have to be prepared for that going forward. Yeah. So that’s what we’re going to talk about a lot today is like for business owners, like how do we navigate these times?

It’s tough as a real estate guy because I’m like

If you own assets, you benefit from inflation. Sure. Right. But you also know that that can’t that party can’t last forever. It’s a balance. Right. Well, I think a lot of people because we all we all have short term memories. Right. So recency bias. So we think what we’ve seen in the past, let’s just say 15 years, we go all the way back to coming out of 2008, the last major correction. Right. And we saw. So what recession is due is they clean out a lot of the excess and we’re back to fundamentals, you know, and we start the market back up again. I think there’s a lot of recency bias where people

Mike Hambright (09:47.358)
don’t realize that these markets do shift and do change. And I think as far as navigating these, we have to understand, again, as active operators or passive investors,

that it’s not gonna be the same, that the equity play, riding the coattails of equity, which works great when the market’s moving up. And yes, that’s where great growth comes from. That’s where we make a lot of wealth, which is what we want in life. That’s really only worked for like the top 10%. Those who are hardworking, solid wage earners, but don’t own a business or don’t have the capacity to own assets, whether it’s in the financial markets or alternative space,

they’re on a treadmill. And that’s not good. Because it’s easy for some of us to say,

We’ve done really well because we worked to get there. I’m not taking anything away from anybody who has assets. You had to work to get there. You had to make it happen. But some of it’s timing. Some of it’s timing. I can look back in my life, Mike, and say, you know, notwithstanding the higher rates of 1980 when I was just getting started as young guy, I had no clue. I had no idea those were high rates. I didn’t even know what was going on. But we had these tailwinds going back to 80 where interest rates went from that 20 % all the way down to a low of essentially zero federal funds rate in 2020.

we’re back up. Now it’s not going to go to 20. It can’t. This country will just explode. it’s not going go back up 20, but it’s not how high it goes. It’s the relative speed of increase. so we saw a huge increase, really the fastest in history of the rate of the rise of the interest rates from zero to five and half as of last September, I think. again, people say, well, it looks like we got through that. It looks like we’re OK. Well, again, because we have the reserve currency of the

Mike Hambright (11:37.12)
world, the dollar, we have the ability to, as you said earlier, print. And print we do. I mean, can you keep up with the deck clock today? I mean, it spins so fast if you look at it. don’t even look anymore. Yeah, you can’t even look at it because it’s, people just don’t even pay attention. You know, we went, I can’t forget the numbers, but when we had $10 trillion in 2008, we’re at 36 going around 37, we’re gonna hit 40.

Trump, to his credit, he’s trying to reel that back, but then you’ve got politicians, both sides, who are like, well, they’ll talk the talk. At least one side talks the talk, the other side’s just like, can we just keep the grift and graft going because we pocket a lot of money?

I don’t think they’re going to play ball. So Trump is just going hardcore. He’s doing everything he can. mean, he’s causing a lot of discontent and disruption in the public sector. People are getting laid off left and right. And of course, people squeal about that.

I’m sorry. mean, there’s pain to be paid here and we have to get through it. So I don’t know I answered your question about what do we do with that. I kind of laid out what I think are the features of what dealing with. Do you me to go further down the line or you want step in a little bit? Let’s talk a little bit about some of the things that are happening now. And again, we’re going to tie all this back to real estate here soon because it impacts, that’s probably the largest asset class in the country. But just the impact of tariffs and taxes

and stuff like that, which is, you know, a lot of people, it’s like all of sudden everybody’s an expert on tariffs, right? Nobody really quite understands how that’s going to impact things. I know it’s all, well, we could go off on a whole tangent here and talk about eliminating the IRS and just using the tariffs as a consumption tax. won’t go down that, maybe we’ll go down that path. I don’t know. But high level kind of tariffs. And obviously, I think he will probably be reducing taxes for a lot of us, right? Or for everybody, right?

Mike Hambright (13:35.764)
What are the impact that that’s having on our economy right now? And I guess what’s the kind of process here for that to become a little bit more tolerable?

Well, I think it comes back to the uncertainty, Mike. It’s just nobody knows. mean, and we know that Trump, you know, are the deal. His style in negotiating is to go hard, right, to to shoot for the moon, to lay things out there. We’ve seen it in his dealings with Zelensky, you know, just in the last week, right, where where he just basically, you know, handed him the fist and said, out of here, pal, you got no cards. Some of those. that’s that’s not diplomatic. It’s like, well, you have to understand.

negotiating when you’re negotiating for the stakes are high you do what works for you. Now some people are more diplomatic but it’s the uncertainty. I’m not an expert on tariffs either so obviously using tariffs to have more reshoring of bringing productivity back to the US which we’ve outsourced that going back 20 years we outsourced and it was great because it kept the inflation rate down right. We outsourced cheap labor cheap products and we’re just this big importer we don’t have to produce that stuff but

But now we’re in a place where we’re becoming more of a…

multipolar globe. We used to be unipolar. Where it was basically the US just controlled everything, controlled the seas, controlled all the now Trump’s saying no more of that. These other countries that we’ve been paying for and protecting the seas and everything is saying you gotta pay your own way now. Well that’s very disruptive. Governments are trying around the world are trying to figure this out on the fly. And so I don’t think anybody can say well where’s this plane gonna land yet. All I can say is it’s just gonna be disruptive. I can’t crystal ball anything.

Mike Hambright (15:19.3)
is saying taxes, yeah, think Trump for sure, he’s a big fan of long taxes. think anybody who’s a capitalist understands that if you start to suck too much from the private sector away from the productivity, then you can’t expand and grow. And he believes, and I believe too, that if we’re gonna get a handle on the deficit spending and the debt, which we have to at some point, we have to, we gotta grow. But growth is gonna actually add to inflation, Inflation is gonna cause the long-term treasury possibly to

back up again, which is where we peg our financing, our long-term mortgages and things. So there’s no quick easy answer is the point. I think we have to be prepared for still a lot of disruption of volatility, which doesn’t give an easy answer to anybody. Well, go do this, go do that. I think we’ve got to be flexible, adaptable.

be able pivot, I think that means in your business and your investing and your burn rate, you gotta have margin today. More margin. You can’t be leveraged up to the hilt and go, I can just move through this because when the market’s going up, you can. But when the market’s disruptive and sometimes turning the other way, that’s when people fall off the ship and it’s like, what happened? You gotta have some cushion, right? You gotta have cushion. What’s interesting, I just had somebody else on the show that is an import. They import 100 containers of fluorine last year.

And he’s like, the tariffs now are there at like 40 % because there were tariffs previous to this. By the way, imports are from China. So he said it’s at 40 % now and expected in the next couple of months to get to 60%. But the manufacturer that he works with just started moving their operations to Vietnam. There’s a 5 % there. And so people are going to move manufacturing into the US, which probably will be more expensive to manufacture here. But I think entrepreneurs

are just smart. just figure out like, okay, well, you know, my cousin runs a factory in Vietnam or whatever, like, let’s move it there. And they just like entrepreneurs kind of solve a lot of these problems. yeah, that’s the nature of entrepreneurs. I mean, that’s what I love about, you know, talking about entrepreneurs or being with entrepreneurs is right. There’s never a problem that you can’t solve somehow. Now, sometimes in the deepest, darkest hole that we get ourselves into, it feels very lonely. But but there there’s ways to solve problems. You know, even my darkest times in my life when

Mike Hambright (17:34.944)
and I felt like, my gosh, how did this happen?

there’s a way out. know, if God gives you the ability to get up the next day and breathe, there’s a way out. Sometimes I don’t feel that way, but you’re right. Flexibility of entrepreneurs. And so these markets are just going through this disruptive change. while things are moving and changing, that again causes disruption in the markets, financial markets feel it first. I mean, we’ve seen it this week. It’s like when there’s uncertainty, you see it there. In our asset classes, which we’re going to obviously talk more about real estate, the good news is there’s more time because the inefficiency of that market doesn’t allow it to flip on a dime.

Right. the financial markets are largely… It’s all sentiment. It’s all psychological behavior, what people think. What they think might happen. Yeah, and I don’t know… That’s great for traders. If you’re a good trader, you like the volatility because that’s how you make money. I’m not a trader. I’m a long-term, let’s just call it a buy and hold. mean, seek the best investments, right? But I pretty much stay the course until it’s time to iterate. And there’s always time to iterate, but I’m not daily looking at the markets and going on flipping properties or taking…

work that way. Right. So let’s talk about the impact these things will have on the real estate market or maybe are having or have had or whatever. So obviously and then let’s break it apart by asset class a little bit like the single family era. It’s been a it’s been a rough couple of years. I mean I think it’s either restrained inventory for a couple of years and now the inventory is coming back but interest rates are keeping the market down. So let’s talk about single family like the impact that all this stuff is having right now on single family. Single family really comes down to affordability right. I you’re to sell a house or

or if you’re going to buy one as an investor, what are the rents? Which is, an affordability factor. You can’t just raise interest rates and raise the cost of ownership or raise the rent just to fix your higher interest rate and higher property tax and insurance rates, which that’s all coming to play to increase the cost of living in any kind of domicile, whether you’re a renter or an owner. So again, we have to hit an equilibrium. Now, there was a lot of stimulus money that, I mean, trillions of dollars, we know, that came out after COVID.

Mike Hambright (19:38.848)
I think most of that has been weaned out of the market, but when there’s a lot of money floating around, then people can stay the course for a while. Free money, yeah, I can make things happen. But I think we’re seeing that standoff where inventory is starting to increase in general markets around the country. And so there’s got to be an equilibrium somewhere. Either long-term rates have to come down to some degree, and prices have to come down, or something in between. It can’t stay in a standstill because eventually people have to move. They may stay as long they

can and keep those long-term short lower interest rates in place which I would do if I had one and I need I didn’t need to move but things happen to people’s lives so eventually something starts to move at the margin yeah the margin is what controls the prices right so it’s not not what you say it is today what Zillow says is but like as soon as things start to sell off at the margin at a lower price point that’s gonna start to drive things I think the good news is overall because housing

is such a big part of our economy. If the government was going to save anything besides the stock market, which I don’t think it’s to save this time, I think it would it freefall a little bit, but you’ve got to keep housing to some extent in place. If you let housing crater,

It’s not good. So it’ll be interesting to see what Trump does with that. But I think coming back to as an investor in single family, it’s what are you doing with the asset, right? We’ve got our fix and flippers who understand that model and they’re good with that. But again, they’re looking at tighter margins. And again, on the exit, well, who am I exiting to? Is the affordability still there? are my values coming down to where it’s like, well, my margins are so tight, I can’t do that. Something has to give. I’m a buy and hold guy, so I need to look at where are the rents, what are my costs there?

What’s my buying criteria today? It’s way different than it was a year ago, two years ago, four years ago, five years six years ago. It’s changed immensely, right? So just being in tune with what your model looks like so you can get that flexibility is key. It’s dicey right now. Investor fuel, I know that’s a big part of the conversations is navigating this market and keeping your eyes really on the ball. You can’t just go by what the trends were last year and what was working last year. It’s like, what’s going to work this year? How do I keep that

Mike Hambright (21:56.192)
margin that cushion in place so I can live to fight another day. Yeah, yeah. How about on the multifamily side? Obviously, I know you’re an investor in a lot of multifamily. am now, too. It’s interest rates are. Yeah.

probably more directly have a much bigger impact than they do on single family even. Well, evaluations and opportunity and stuff like that. Yeah, I think the big difference there, as you said, with interest rates and the fact that with housing, know, 30 year fixed rate is standard. Right. So in commercial, that’s not standard. You you’re looking at something you can look at, know, bridge construction, floating rates that are, you know, tied to SOFR. And that could be, you know, three years and then you’ve got to refire. You buy rate caps or

Maybe you get something in five or seven years or you can go to GSE if you can get those. I even heard something today that the agency, know, with Fannie and Freddie, the agency, that that could be…

an area that the Trump administration may take that away from multifamily. Now again, it’s just one of those flyers out there. Well, they talked about privatizing it too. I don’t think that’s going to happen. See, that’s where I think we come back to, Mike, supporting the housing industry. Because if you take that away, that’s going to float interest rates back up to the private market.

the GSEs subsidize support, lower interest rates to keep housing up. I don’t think that’s gonna happen, but yes, they’ve talked about that, but they’ve also talked about maybe taking that away from multifamily. So if they do that, that could be serious, more so than today. yeah, the problem is with higher interest rates, you’re looking at NOIs and valuations, you’re looking at people who bought multifamilies thinking that rates would stay low back in 2021, and they had floating rate debt.

Mike Hambright (23:37.902)
The only thing that’s saved a lot of them, and not everybody’s being saved today, I mean, there’s people that are giving up the ship and going through tough times. Not necessarily their fault, right? mean, you do what you can do or what you have to do to try to get through. mean, even good operators, it just got caught in a model that didn’t work. But what was I going say about that? Just coming full circle back on the interest rates. Oh, I know what I was going say.

The banks have not been aggressively taking back the property like they did back in the 2008 downturn. They are forbearing, making modifications where they can’t, the banks being the bondholders.

don’t want the property. That’s a last recourse. So when does that start to happen? Is Trump and the administration going to come in and put more audit on the banks? mean, these are all questions we all have. And there’s no known answers yet. It’s still going to be there, but we’ll have to see what happens. I think there is a fair bit of this kind of shadow inventory out there that they just have been hesitant to do anything with that’s going to shake loose. I mean, maybe when Elon goes and checks out a little bit more.

side note here, what can entrepreneurs learn from Doge in their business? mean, we all have excess and some junk in the trunk, if you will. Maybe you share your thoughts on what entrepreneurs can do with a little more Doge in their life. Yeah, well, this is something I didn’t learn until later in my life. I ran a dental practice alongside my real estate investing operations side by side for many years.

Even though I’ve always been prudent about managing cash flow and balance sheets to the extent that I had the capacity, I didn’t realize how important it was in my early years to really know your numbers, not to get something investor fuel. mean, that’s just like first out of the gate, know your numbers. But how do you know your numbers? As an entrepreneur, I appreciate detail. I appreciate knowing what I should know, but I’m not the guy that wants to go dig it out. So my point is, who do you have that’s your controller, CPA, bookkeeper?

Mike Hambright (25:43.296)
CFO, fractional CFO, Chief Financial Officer I’m speaking of, whatever level you are, you need that person to provide you the metrics, the KPIs in a dashboard, not just here’s your monthly P &L, well here’s your balance sheet.

Well, for most entrepreneurs, it’s like, yeah, but what is that? What am I reading here? Right. And so you need to have something to read those tea leaves for you and say, here’s what’s important. And then from that. So that’s where I think you use Doge in your business or even your personal finances. Right. To say, where is the excess? How many times is Amazon Prime dropping packages at your house? I want to speak about my house. Yeah, often. I think I think they’re going have a drone dropping stuff in my house. It’s ridiculous. Right. But we do all these things, particularly when when when the market’s good. You know, when the economy’s

good. We all feel pretty good and business is good and your job’s good, your wages are good.

everything stays and we get in this mode of I don’t really have to like look at my numbers. I think today, even if you think you’re good, really good time to be looking at your numbers. Have that person who can give you as the owner, the entrepreneur, the ability to read those numbers and understand what they mean and forecast. know, accountants look, you know, historically and provide you your tax returns and your cost seg and depreciation, all that cool stuff that we like there. But who’s looking forward? Most basic accountants don’t look forward. Right. So you need that person who can look forward for you.

and look at leading and lagging indicators to say, what do these mean? So I can stay ahead of it. If you can’t stay ahead of it, then you get slapped and all of sudden what happened? And we both know that anytime you are growing an enterprise, which we all like growth,

Mike Hambright (27:17.742)
that takes a lot of cash. So do you have that cash? Do you have access to that cash? Do you have that cash margin? Because it starts sucking up to liquidity. Liquidity, think, is more key today than in the last 15 years. You’ve got to have more of that. So how do you grow and still keep a strong liquidity base? That’s what we have to navigate today. Yeah, talk a little bit about, you just talked about kind of having dry powder. One of the things that, if people can afford it today, if they can, is to have some dry powder for

because we’re talking about a lot of disruption in the market, but also there’s an equal amount of opportunity there if you’re watching it, right? So share some of your wisdom there about kind of being ready for opportunities as they come around and.

What readiness means is it just cash is it mindset is it like what what is it? That kind of helps you would help somebody kind of pounce on opportunities when they come because they will come yeah most definitely and this is again a hard thing for us as entrepreneurs to do because we like to We like to leverage Everything I don’t mean just you know leveraging financially, but we would like to make things grow to make things grow you reinvest So keeping a lot of cash on the sidelines is usually not what we do. I certainly didn’t do that my early years I didn’t have any extra cash. I had to make things happen right

But I think today the mindset that you mentioned is, which is hard, can I exude some patience right now?

Can I hold back a little bit? I I’m not against growth or expanding, but be careful about it today. So liquidity, think, means, yeah, to some degree, we have to have some readily available cash. I put money in short-term treasuries, T-bills, and just ladder some of that. It earns four and a quarter. Well, that’s not going to beat inflation today, but it’s OK, because that’s not the purpose of that. I put some money in precious metals. So I think some striations, some variability in what you can see.

Mike Hambright (29:10.488)
or your liquidity, you can still get some returns on that. But it’s not so much about returns, it’s about having the dry powder because we know that as this market cycles, wherever the recession, the correction comes, whether it comes rapidly or maybe it’s slow over time, I don’t know. But there’s gonna be time to take that dry powder, buy back in the assets, the equity points that we deem to be right and ride back up. picking that, so if you don’t have that dry powder, then you can’t buy back in.

I don’t mind that I’m not making a lot of capital returns on my liquidity basis right now I know there’s a chance not a chance. It will be a time to buy back in for sure Just the patience is the mindset. I think you have to have it that way. let’s talk a little bit about Active versus kind of passive income So I know when you’ve been around for a while like you and I have you you you basically Need to make money today to invest for things that are gonna basically pay you for a lifetime Hopefully or more passively, right? So you can’t really have passive investments unless you made active income unless you’re just

inherited a bunch of money. Fund Baby. Trust Fund Baby or something, right? Which I was not. I was not either. Yeah. But, you know, I think one of the things that I know you help a lot with a lot of entrepreneurs, but also obviously focus a lot on Dennis, to help them take some of that active income and plow into things that will help them build kind of wealth over time. And I talked to a lot of investors about that as well.

But just talk about like in the face of this economy, there’s people that are glad they have some passive investments now. Maybe they’re not doing well or maybe they’re like, I’m glad I have that because that’s throwing off income in my active businesses a little slow right now. There’s always a balance there. But just in the face of this economy, what’s going on right now, maybe just share your thoughts on what people should be trying to do if they haven’t already. And maybe some lessons learned from like, if you had to do over again, which you will, what we should do next time.

Yeah, we learn in school to get an education, get skill sets, get training, to go into some kind of career business, something, right? Because why? Well, we need to earn money, active income. That’s what we’re taught in school, to go do that. And that’s transactional. The problem with that mindset, if you leave it just there, is that it’s all on us.

Mike Hambright (31:22.658)
When can you ever build something that can give you that time off, which is what we really want in life. It’s not that we need more wealth or net worth or more money per se. That’s always the goal. But what do we want that for? To have the discretionary time to have that we don’t have when we’re young and having to get it going. So yeah, when you’re young, everything’s transactional. I think the key thing there is any young person or even wherever you are in the spectrum today is how much are you taking off the table from your transactional income?

whether you’re flipping houses or you’re drilling teeth as a dentist. No difference. How much are you taking off the table and where are you putting that savings, where are you putting it to work? That’s the key today. Most people, number one, unfortunately, and usually the higher income, the worse it is, honestly. The higher income, the less there is savings or discipline, right? But getting that money working so you start to build up passive income. You and I and probably everybody we’re talking to today are big fans of tangible assets.

anything wrong with the financial markets. If you want to some money there, do it. But I love tangible assets because to me there’s just a lot more I can control in tangible assets. So tangible assets that produce replacement income.

And certainly the right time assets will will protect provide a hedge against inflation. But that replacement income, we have replacement income coming in from the assets you choose to put that savings in. Now you’re building up that optionality stream so that when something does happen or you just are ready to back off of your transactional income, you’ve got those options. I just tell you a quick side story. What are our docs back during COVID? So we’re going back what five years ago because 2020 is when COVID really hit. And a lot of businesses, as we know,

Can you believe that by the way? It’s five years already. I saw a you know Facebook they show you memories I had a host that I was joking around with like

Mike Hambright (33:17.836)
right when they kind of announced COVID. literally is almost, I mean, as I was recording this, almost to the week, like when all that stuff that the had five years was like March 16th. Remember? Yeah. Where are we today? The 12th? Yeah. We’re like four days off from five years ago. So yeah, five years ago is when it really hit. It’s like, this is a thing, right? Yeah. And very quickly, the governments, many of them, shut down small businesses. They let the big businesses go. I wonder how that happened. But churches couldn’t be open and your small mom and pops couldn’t be open because

I guess the viruses was worse there for some reason. doctors were also affected as everything was. And so my, my, a of my dentists were shut down from anywhere from eight to 12 weeks, depending upon where they were. Well, one of my docs made the comment, you know, within that period of time said, I’m so glad I invested in the assets that we as a group invested in that produced that income that didn’t stop.

And again, I think that’s what we’re playing for now. You want to get to a certain point where again, can retire. If you want to retire, I’m not going to retire, but it gives you the optionality to do that. It gives you, I call it a plan B, which is what I used when my daughter was very sick some over 20 years ago. And I sold my practice knowing I had enough income coming from my assets that I could turn the equity from my practice back into more of those assets because I learned how to do it. I had the confidence to do that. And I thought, well, that’s enough to buy me time for a certain period of time. And it did.

did just that. So I’m a huge fan of trying to show anybody who wants to have this be a part of their plan, there’s ways to do it. Yeah. Yeah. I think the, the biggest regret that most people have is they didn’t start it sooner. Like you hear that all the time, right? Like I wish I’d kept more as rent for me rentals. and I wish I had started sooner. Like those are the two biggest, those are my two biggest regrets. I think that’s always it. But,

you have to just say, what can I do today going forward? We always regret. But for folks that are listening to this now that do it now, like stop. Yeah, yeah. It’s never too late. I mean, until it’s too late, I guess I should say, right? I don’t like to it’s still too late. Oh, that’s a good one to put down, right? Great quote from David Phelps. Don’t put that one down. But yes, yes, you can make changes today. And also, we all care about our kids or grandkids wherever you are, Well, what can we do to also inject

Mike Hambright (35:41.12)
this kind of a mindset for them because I’m just gonna say it’s it’s I think it’s tougher for the generations coming up behind me that it was for me.

the environment we’re in today, it’s tougher, I think, overall. And I’m not trying to make excuses for anybody today. I think we all have to work hard, but it can be done. It’s just not the way you’re taught in school to do it, right? For sure. Yeah. So let’s talk about kind of the power of community. mean, obviously you run a community for dentists and you help them achieve freedom through investing in other assets and more passive income, right? Right. And obviously I run a community, Investor Fuel, where we’re trying to teach people to achieve financial freedom, time freedom, things like that. So I think in

times like this, this uncertainty, like I have a podcast here, get to have my buddy David Phelps come and hang out and talk and we share stories and stuff on the podcast and before and after. But just talk about the power and the importance of during these uncertain times and really kind of during all times of just having a tribe of people that you can get together and talk about what’s going on because well, I have plenty of opinions on that and I know you do too, but just your thoughts on the value and importance of that. Yeah, it was something that I didn’t

or even value early in my early decades. Didn’t know something existed where you could actually find or even form, as you have done and as I’ve done, a community for the purpose of the synergy of or the collective mindset that varied people that are, you know, a certain caliber, you you need to find a community or find a facilitator, a leader that sets a caliber base, whatever level.

can be found anywhere, wherever you are in life right now. That community is probably the biggest insurance policy I have today. And I buy a lot of insurance for other purposes. Hopefully I never have to use it. But the community, my network, has solved more problems, has created more opportunities for me than anything else. All my academic training in life, all of the theory and studies that we all do, it’s all important. But it’s who you know.

Mike Hambright (37:44.332)
no question that’s the most important. Find those people, find that tribe, or in our case, I think we both formed and built the community that we wish was there. That’s kind of what I think I did. It’s like, well there’s nothing that serves the way I see it needs to be served, so I just wanted to build something. But I’m also part of other communities with you.

also serve a different purpose, right? It’s that collective people that, who do I need to know? mean, even this morning, just giving an example, I’m call his name out, because he’s a good guy in our network, David Remy. He and I were on a thread a few weeks ago, and I got him on a call with my tech team today to do something that David’s really good at doing. And it’s like, in 15 minutes, boom, just took something and took it to the next level.

I couldn’t have done that, or we could have done that without probably plowing through a lot of friction, a lot of garbage, a lot of expenditure, wasted a lot of time, and yet one person’s like, here’s how you do it, or I know the person you need to talk to. That is more powerful than all the net worth and money and financial leverage you can find. Do that. And I think just having a community, we’re generally the type of people that are like, we wake up in the morning and we’re going to take over the world, and by lunchtime we want to burn it all down.

having those people around you, can kind commiserate a little bit and just say, hey, pull you off the ledge. We all need people to pull us off the ledge because we operate on the ledge. We’re really pushing that gray area constantly, right? Of trying to push forward, push forward, push forward. Unless you’re around other people that are like that, it’s easy to just spin your wheels or stay mediocre or… Or even give up. Just give up your dreams. I mean give up in life, but just give up your dreams and go, this is too tough. Or think there’s something wrong with me. Right.

Sometimes we have those thoughts even for a little bit and go, how did that happen? Why did I screw that up? How could I have made that poor decision? It’s not you or us or our audience. As entrepreneurs, we’ve got to test. That’s who we are. You’ve to test. You’ve got to work through it. And when somebody doesn’t work, that’s just the next iteration. But yes, you need to support people around to commiserate with to say, hey, pick it back up. You’re good. Go out there and do it. So where do you think we’re going here, David?

Mike Hambright (39:59.014)
a bumpy road, plenty of opportunity ahead for people that are watching it. Where do you see, let’s just talk about for real estate investors, where do we go from here? I think the focus has got to be more on fundamentals. In past years, you could leverage up high, you could even buy into assets or create a business that was…

had small margins because the cheap cost of capital, which was kept so low for many, years, allowed the turning of assets without having to be really great operators, decent operators could make it work.

No more. You’ve got to be a really refined operator. So fundamentals, knowing the fundamentals of your business model is gonna be key. And really having discipline. I talk to, as you do, talk to business operators in real estate all the time. Because I connect with them, right? They’re part of my environment.

And just understanding that the good ones, in my opinion, are being more discerning about how many quote deals they’re trying to get done in certain time frame. know, two or three, four years ago, it’s like pile them on, baby, go, because there’s no end, because you really could almost. Today, it’s like you better slow it down, because wherever you’re borrowing capital, whether it’s institutional or private, you have to pay them back. And the model has changed from the quick turn, which was a great model.

because you go in, take an asset out for 18 to 36 months, flip it, make money for your investors, make money on the back end, and let’s go do it again. Change, least for now. For now. I think you’ve got to look at an operator who can hold their positions and be a good operator much longer than we did in the past. Yeah, awesome. Well, if folks want to learn more about you, David, and all the great things you work on, where can they go? Yeah, well, my basic website is freedombounders.com.

Mike Hambright (41:58.134)
I’ve got a number of books on finance, mindset, real estate, on Amazon. You can just look me up there if you want any good books there. I’ve got a YouTube channel which is basically Dr. Phelps and I do a podcast every week that is the Freedom Founders podcast. Those are the main areas where people can connect and yeah, love to talk to people. I love like you do to just take experiences that we have, real life experiences and share those with the world, hopefully to give some value.

to people who are also aspiring to create a better life, more abundance, more prosperity, and really a servant attitude. Yeah, awesome. Thanks, David. Thanks for spending some time with us today. My pleasure. Always good to see you. I always enjoy it. We’ll do it again. Yeah. Everybody, hope you got some good value from today. I think we all need a little more, maybe a little more doge in our life. Need to get around people that kind of know how to navigate these waters. So if you’re feeling a little bit unsteady or whatever, you can get around folks that can pull you off the ledge as well. So hope you got some great value from today. We appreciate you a bunch.

and we’ll see you on the next show.