Welcome to Passive Real Estate Investing. I’m your host Marco Santarelli. Well, we’re gonna talk a little bit about building wealth today, and I have a great guest to help me with a conversation about the wealth that she has created and some of the takeaways and lessons that she’s learned. You know, one of my favorite quotes comes from a comedian, George Carlin. His content is just amazing. It’s hilarious. But I remember him saying that most people work just hard enough not to get fired and get paid just enough money not to quit their job. So it kind of becomes a bit of a trap. So the message I think from that is that if you’re continually trading your time for money with the wrong assets or with no leverage, and you don’t have anything that you build, you’ll make it virtually impossible for you to build wealth.
So you need to focus on accumulating assets, ideally income producing assets, and not worry about the lifestyle. Other people are leading and just focus on the goals that you have in the lifestyle you want to create by accumulating those assets that are wealth creators, as well as hedges against inflation. And obviously to most, if not all of you real estate happens to be a perfect fit for that. So with that, I want to bring on our guests today and we are gonna talk about building wealth with Wendy Papasan.
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Well, it’s my pleasure to welcome Wendy Papasan to the show. Wendy leads real estate teams in Austin and Houston, Texas, as well as Minneapolis in Minnesota. She in 2009 had a team that to date has sold more than 1,250 homes totaling more than 475 million, which is a lot of volume for a real estate brokerage. In addition to her real estate business, Wendy is a sought after real estate speaker and coach. She is passionate about seeing women succeed in business and helping everyone grow their wealth. She has a goal to help her clients become millionaires and she co-founded her best life.com, which I’m sure she’s going to talk a little bit about today as a community activist and philanthropist. Wendy is the chairman of the board at KW. Kids can a nonprofit that helps young adults think bigger and find their mission. She and her husband Jay have helped raise more than $1 million for children with cancer. She’s also involved with fundraising for community first village, a master plan community that provides affordable permanent housing and community for the chronically homeless in central Texas, which is amazing. She’s married to New York times bestselling author and Keller Williams, Vice President of learning Jay Pesan. So with that, with all of that, Wendy, welcome to the show.
Thank you. Thank you so much for having me today.
I tried to read that fast cuz it was a lot to go through.
<Laugh> I know it’s a lot. I know it’s always awkward too. When, when you’re just like listening to somebody, read your bio. Yeah.
Yeah , but for sure. Well, I’m excited to have you on the show. I mean, I know a little bit about you, but I know more about your husband, Jay, and you know, maybe one day we’ll have Jay on as well. And we could talk about some of the books so that he’s written, but you have an interesting past, I know a little bit about your story, about getting it to real estate investing and your work with Jay and your guys’ work with Gary Keller who started Keller Williams and now is like a very successful business person, entrepreneur. And I’m sure all that feeds into your story. So with that, let’s just kind of start with you, tell us about yourself and maybe if you wanna sprinkle it in a little bit about your working relationship with Jay.
Sure. Yeah. Well, so, you know, Jay’s been at Keller Williams for 22 years and that really started because we moved to Austin from New York city in 2000 and Jay was was a, was gonna be a freelance writer. His background’s actually in book publishing and he decided he wanted to become a freelancer and I would come home and he would be on the computer basically playing video games. So I said, listen, your freelancing days are over. You need to get a quote unquote real job. And so he ended up applying at several places and getting a job at Keller Williams. Back when it was a really, it was a small company 22 years ago, I think at the time there was about 6,000 agents in the company and now there’s over 180,000 agents. So it’s been a rocket ship for growth in terms of, of Jay’s career and trajectory.
And you know, I’ve benefited from being in Gary Keller’s orbit as well. So, you know, we’ve just been blessed to, to have been both been mentored by someone who’s a billionaire now successful business person, also great husband, great father. And now he’s a great grandfather, one incredible real estate investor. And so yeah, so that’s just been a, a great gift. So, so Jay was in Keller Williams for about 10 years before. Well actually Jay wrote the Millionaire Real Estate Investor in 2005. Yeah, really good book. And it was our first foray into sort of the real estate investing world. And I got the investing bug. So I actually did that for quite a few years while my kids were young before I got my real estate license. So that’s always been my passion mm-hmm <affirmative> is, is real estate investing. And and now that I’ve sort of built my real estate team up and it’s, it’s fairly self-sufficient, you know, I’m, I’m getting back and doing more real estate investing, which is fun for me.
Nice. So you clearly had the spark and inspiration to be a real estate investor. Did any of that or some of that, or much of that come from Gary Keller or was that just something that you knew about and wanted to do?
Yeah, well, I think the first spark really came from actually Mo Anderson, who was the then CEO of Keller Williams at the time. And everybody at Keller Williams was required to attend a class on how to read a balance sheet. Okay. So that’s good. Keller Williams says, has always gifted its employees with teaching them how to start a business. So there have been many businesses that have sprung up inside of KW affiliated with Keller Williams, not affiliated with Keller Williams, just it’s, it it’s always been very entrepreneurial like that. And so as luck would have it, everyone was supposed to attend this class with Mo and Jay was the only one that showed up <laugh> there was, I think maybe like 25, 30 employees there. So I guess everybody else, you know, was smart enough to, to come up with an excuse, not to attend this class. And the gift of that was Mo Anderson taught the class anyway, and she said, guess what? It’s gonna be you and me that we’re gonna sit down. And that conversation turned into a conversation about moving from a business balance sheet to a personal balance sheet. And that’s when we discovered that we really needed to start to track our net worth.
And so Jay came home that day and, you know, basically told me what happened. And of course I, you know, I was a journalism major. I didn’t know. I didn’t know what that meant, you know? Right. So he explained it to me and we set some pretty big goals at that, you know, not, not that day, but it really launched a discussion with us cuz we figured out that our net worth was about $2,200 at the time, which was good. I mean, we weren’t negative. But you know, we weren’t young either. We were both about 30. Right. And it was kind of discouraging to be, to think like, gosh, here, here we have collectively worked over 20 years and we only have about 2000 bucks to show for it. And I think a lot of people end up that way, you know, they end up at the end of their life and they don’t really have anything to show for their work because they haven’t made any investments. Mm-Hmm
<Affirmative> so was that the starting point?
That was the gift. That was the gift. Yeah. So that was the spark and shortly there afterwards we bought our first house.
So my takeaway from what you just said is that everybody should be tracking their net worth. They should be, they should have a personal balance sheet, maybe a personal profit or loss {inaudible}.
Mm-Hmm <affirmative> yeah. Yeah. Well, and for those of you listening that don’t know you, you have a smart group, but your net worth is everything you own. So all of your assets, if you’ve got real estate investments, your car, your 401k, all of your, all of your investments, your cash minus all of everything you own are everything you owe. Right? So everything you own minus everything you owe, so all your assets minus your debts. And then you have that number. Right. Which is really when, when you’re thinking about the world’s richest people, that’s the number that they’re looking at. You know, when you’re looking at the Forbes 500 richest people, you’re not looking at the, the richest doctor or lawyer or, you know, all those people own assets and it’s mainly real estate and businesses, honestly, that’s where the majority of wealth lies.
So was that what turned you onto real estate or did you already have it in your mind? And that just kind of
That’s what turned us on. So that’s, that’s, that was the impetus for us to purchase our first home which several years later actually became our first investment property. So we bought our first house in 2001 and three years later, I, I was pregnant. We needed a bigger house and we decided that in order to grow our net worth, we would keep our first house as an investment property and purchase a second one. And so our second house was, you know, we could have jumped up a lot, but it was more of like a lateral move for us. And what I remember from that is when I was talking to the, our first renters in that first house, I thought it was so interesting because they made more money than we did. When you looked at their income, it was significantly more than ours.
And they pulled up in their Mercedes, you know, a depreciating asset into this house of ours that they were renting. And I thought, wow, it’s so ironic. You know, here we are, we we’ve got the assets. You, you guys, aren’t making the smart financial decisions. And that was just a big aha for me. And what’s incredible about that property Marco is that we bought that property in Austin for $175,000 because it was our first home. We, we put three and a half percent down, which was about, you know, seven, 7,000 bucks is what we spent for that house. Mm. And that house has appreciated in value. It’s worth close to a million dollars right now.
Wow. That’s over how many years?
Years. So we turned that it’s over, it’s 20 years now. It’s over 20 years.
That’s amazing.
Yeah. I mean, it’s our crazy market at the same time. But, but that is what, you know, it, it’s exactly what you’re talking about. It’s, it’s passive investing over time. You, you put in $7,000, you live in it for three years. It’s complete strangers have paid the debt off for us. And and of course it’s been not totally passive, you know, rental properties. Aren’t really totally passive. It’s not mailbox money. And yet, I don’t know how, in what other way, I could have turned $7,000 into a million dollars in 20 years with its little work as we’ve done.
You may not remember. And I’m just curious, do you remember what that property rented for at the time when it was worth $150,000?
I do. It was worth, I think we, our, the first time we rented, it was about $1,200 a month.
Okay, so that’s not a bad rent to price ratio right there. What about now? It’s worth a million dollars was I would guess
It was terrible.
Before you tell me I’m gonna take a wild guess. I’m guessing it’s take a guess. I wanna say it’s gonna be between $4,000 or $4500 a month.
No, it’s not. It’s a lot less.
You’re kidding.
Yeah. It’s a lot less. Yeah. And our taxes have gone up. So ironically, that property barely cash flows 20 years later, you would imagine it would cash flow. It barely cash flow. It’s a two one, right? It’s a small two. One. Yeah. It’s a two, one, our, our second house that we bought for close to the same price as the first one is a four bedroom. And we just get a lot more rent on that one and that one’s appreciated similarly. And that one rents for $4,500 a month, cuz it’s just bigger. But it’s the dirt there. Yeah. Is really what, where that value is. Yeah.
And so you have a lot of equity in that property. I mean, yeah, obviously yeah. Do you have a strategy for it? Are you gonna keep it or are you gonna 10 31 it into something or do something?
We’d like to, yeah, it’s on our goals to, to take some of this equity and turn it into a commercial property that, that cash flows. But honestly, you know, Marco, we own several businesses too. So the cash flow right now at this point in our life, isn’t really that important to us. Sure. Right. You know, so it’s not like we’re living off of it. Yeah. And honestly, our markets, these past few years, we’ve seen a 52% increase in home prices in the last two years. It’s a crazy, it’s just a, it’s a crazy, it’s a crazy return. At some point we’re gonna look up and just feel like these taxes aren’t worth it. But yeah, right now it’s a break even proposition for us.
So that’s a great story of how you got into it, you know, with the meeting with Mo and learning about balance sheets and all that kind of stuff. So that’s really cool. So I would imagine that a lot of spouses or partners initially may be reluctant where one spouse or partner is saying, Hey, let’s invest in real estate let’s or let’s, you know, do something other than what we’re doing, which is usually close to nothing, but there may be some reluctance or they’re just not on board. How do you deal with a spouse or partner that isn’t on board? At least not yet with investing, because I think that’s a challenge for a lot of people that holds them back and they’re ending up wasting time because months, or maybe even years go by and they’ve lost all that time in, in the market.
Yeah. That’s a fantastic question. And I think Jay and I have been pretty lucky in that we’re both fairly willing to take a risk me so more than him, he’s more he likes to shore everything up <laugh> but we’ve done something that’s been really powerful for us, Marco. We when our kids were small, so probably about 14 years ago, we started going on a couple’s goal setting retreat. And we got a babysitter for our kids. We went away for the weekend one or two nights and we have a structured, we have a structured like format for the weekend that we followed and, and other people have asked us about other couples have asked us about it. So we turned it into a PDF and we’ve given it out over time. And then about five years ago, we decided to open it up to other couples.
So now we have a couple’s goal setting a retreat for a couple, I think last year was maybe a hundred couples. Wow. And then athousand joined us virtually. And it’s a really powerful experience because so often, you know, when you’re busy with work and investing and, and family and kids and all of that, it’s just really challenging to think about taking the time and space to get on the same page. And so this retreat is you could either facilitate it, do the facilitated one it’s in Austin. You can do the you can do the virtual one or there’s we just have the free PDF. You can actually, I think you, if you Google kick guide to couple’s goal setting, it’ll come up and it’s just a really great way for people to share their thoughts, their concerns, their, you know, cuz there is usually one drag along spouse who, who may be coming from a different perspective.
You know, one might think about money as like safety and security. And I need to have a certain amount of money in my bank because of what I, where I grew up. But you know, we share each other’s money stories, right. Everybody has a money story depending on how you grew up. And then we go through this series of questions. So by the end of the weekend, you really learn a lot about their, their partner because ironically you can be married for a long time and never really have a deep conversation about money because everybody brings their own yeah. Issues and everything to the table, you know?
Yeah. I think the conversation around finance and money doesn’t happen all that often in households and families, it’s really unfortunate because kids grow up, you know, learning and absorbing a lot of what happens around the dining room table. Yeah. You know, the kitchen table. And if there were more conversations about money and finance kids would be better educated when it comes to finance. So these people like you, me and other podcasters and educators that have to, you know, help out there and pick up the slack and get the information out in front of them.
Yeah. For sure.
Yeah. So what was that? The Kick Ass Guide to Couples Goal Setting
Yeah. You got it. So that’s the PDF and then you can go to, so one of my husband’s businesses has to do with his book called The One Thing.
That’s a great book.
I’m sure. Yeah. It’s a good book. And so if you go to hopefully I get this right. The1thing.com and click on events. You can get more information about the, the couple’s retreat.
Okay. I’ll have my assistant put the links for all those resources in there.
Yeah. And I can I can send you the PDF too, if you want.
Yeah. I mean, if, yeah, if you’ve got my email address, shoot it over mm-hmm <affirmative> but I’ll I’ll make sure that we link up to all that stuff. So people, you know, they’re driving and listening to this in a place where they can’t access it, they can get to it. Okay. So I love this whole topic of building wealth and creating wealth. Let’s go back to properties here. Do you, or you and your husband have certain types of properties that you prefer to invest in? Wanna invest in, have a lot of success investing in and built around that. Do you have a criteria? Are there certain things you want or look for in terms of locations or bedroom, bathroom, configurations, whatever.
So I would say we do now. One thing I would tell your listeners is, is when we started, we just really didn’t. That sounds terrible. But I just think you kind of can learn as you go in this business. And the criteria that we had was proximity to our own home. You know, at the time we started real estate investing, my kids were little, they were one and two. I was a stay at home. Mom. I wasn’t working. My kids were in daycare part-time. And so, you know, I was the land lady, you know, I was the land lady back then and, and I did everything I had learned about leverage back then. So I would drag my kids with me and we would go, we would go do a, make ready on a property. You know, I would scrub the floors. I would take out the garbage, I would, you know, do all the, I would do all the handyman work that I could being somewhat of a handy person. And I, and I’ve learned, you know, since then that, that probably wasn’t the best use of my time. But I, you know, I had a lot of time in my hands and was something that often I could do with my kids. And so those first investment properties that we bought were, were just close. They were with it a few miles of our house. And it’s funny because one of our first properties we bought, this is long before I had my real estate license was we found it on Craigslist.
Oh really? Wow.
Craigslist back in the old days. Craigslist. Yeah. And we found this property on Craigslist and it was tiny. It was 670 square feet, two bedroom, one bath. One of the bedrooms didn’t even have a closet in it. I just didn’t know. I didn’t know what I didn’t know. And what’s great about it is we bought it for $125,000 I think, or something like that. No realtors involved, even though my husband worked for Keller Williams, I don’t know. It’s so weird. You just make, you just do things. And and so what’s great about that is we’ve held onto it for so long. And then during the pandemic, we decided we wanted to turn it into an office for our real estate team. So we doubled it in size and you know, that property has also probably quadrupled in value over time and complete strangers have continued to pay the debt down. So same story. You know, now we have a more specific criteria. We want a three bedroom, two bath brick, exterior, you know, ideally we don’t wanna put more than 30% down and have it cash flow. So
It’s harder to do that in Austin. Now it’s getting really hard.
Would you say that you are at this point in the game market agnostic, you, you’re not married to a, your local market or a specific market.
I’m not market agnostic, but I am very open to the idea of investing in other places. You know, I I’m just familiar with some of the Texas stuff. So investing in Texas makes me feel really comfortable. Just with some of the landlord rules and regulations, you know, we manage all of our properties ourselves still, but I have talked to many clients, who’ve come to Austin. The numbers don’t work here for them. And I pointed them in multiple places around the country because there are still so many markets where you can buy great cash flow properties, you know?
Yep. Yeah. And that’s exactly what I built this business model around, I know, 18 years ago and we’re in 25 markets now. And the whole idea about being market agnostic doesn’t mean that you’re disconnected or don’t care or that you don’t know anything about where you’re investing. You actually do and you have to. Yeah.
Yeah. But it means that you’re not married to your backyard and have to feel that the so-called gurus out there who suggest you invest like within a one hour or two hour drive of where you live, right. Is where you have to invest because that doesn’t work typically for buy and hold. It works great for flipping because you need to be going back and forth and be hands on. So my philosophy is put your money to work in the best markets and the best places and the best locations and the best properties that are gonna work the hardest for your hard earned capital. And that’s how I look at being market agnostic.
Well, and you were, you were doing that before it was cool
Or is that right?
Yeah, yeah, yeah. Yeah. Well, I feel like a lot more people aren’t comfortable with that. I don’t know, bigger pockets or whatever has made people more comfortable with investing out of state, but gosh, 18 years ago, that was pretty revolutionary.
Yeah. You know, BP has been and still continues to be somewhat biased less so now than the past. I remember when Josh started the site from scratch and he asked me to be like a regular contributing author to it. And I said, okay, but I wanted to keep the content. And he had a problem with that. He said, no, it’s only mine. And my exclusive use. And I said, well, let me think about it. Oh, so I passed it up. <Laugh>
But yeah, that’s fine.
So we’re talking about building wealth and whatnot. Let’s kind of shift to daily habits or personal habits. I assume you maybe even Jay, but you guys have some daily habits that you follow that have helped contribute to your success or maybe your investing or your wealth creation. What might those be if you have any?
Yeah, well, I’d say our number one wealth building habit is probably tracking our net worth. So it’s the spark was really you know with Mo in that conversation, huh? About our personal balance sheet. And so Jay and I track our net worth every month and we’ve always done that, you know, back in the old days when you know, you still had dial-up computer, you know, and you had to log on and check your, check your mortgage statement, or make a phone call and go through the phone tree and kind of figure out what it was. And then we’d enter in our little, our little numbers and our spreadsheet that’s and yeah. And we still do it. And what we’ve actually done in order to help us stay accountable to that is cuz you get to a certain amount of wealth and, and it’s almost like you sort of feel like you don’t have, I don’t wanna say you don’t have to pay attention to it, but it’s not like at the beginning where you’re, you know, looking at all your pennies all the time.
And so we’ve started well, about five years ago, we decided that we wanted to help other people become wealthy. We wanted to help people become net worth millionaires. And so one of the ways that we thought we could do that is we thought we could start our net worth club. And so our net worth club was just for our team. So it was my real estate team. And then anybody on Jay’s team at Keller Williams and we’d meet once a month, we’d have a potluck and we’d share our net worth and we continue to do that. And that’s been really powerful because right now the average net worth of our teams combined is about 1.6 million. So we have a lot of net worth millionaires on our teams.
That’s an average. You mean across your…
That’s an average yeah. With us taken out. That’s awesome. We’re not in there. Yeah. Yeah, yeah. I’m very proud of it.
You should be. So you mentioned tracking your net worth like two, three, maybe four times now. And, and I think if there’s one and only one takeaway from this interview that I think I would personally like people to walk away with is the fact that if you’re, you know, if you’re constantly looking at your net worth, whether it’s monthly or weekly, but on a regular basis, I think it’s always on your mind, maybe the back of your mind or maybe at the front of your mind, and you’re gonna focus on things that are gonna help you to improve your net worth.
Absolutely.
And you know, there’s a saying, I, I think, I can’t remember if it was who’s the author of the book. There’s a saying that you can’t manage what you don’t measure. Mm-Hmm <affirmative>. And so if you’re measuring your net worth on a regular basis, even monthly or more frequently, you might be forced into acting upon it and managing that in some way and it’ll probably inspire you or push you towards taking action. So I love that. I love that you should.
Well, It’ll help you in two ways, one expense management, right? So if you’re thinking like, gosh, I really wanna buy a new car. Right. But you know that the second you drive off the lot, your car is gonna go down 10% in value. You’ve actually bought an asset. That’s gonna go down in value. The second you drive it off the lot you might think, gee, maybe I’ll wait another year to buy a car or maybe I’ll buy a used car that won’t go down in value quite so quickly. And then the other thing that it’s gonna do is gonna push you to, to grow. So everybody on in our net worth club has a one year and a five year net worth goal. So if your net worth is at $10,000, maybe your net worth goal is to be at $25,000. Then you’re asking yourself, well, how can I get from 10,000 to, to $25,000 in the next, you know, 6, 7, 8 months.
Right. I know the stock market is gonna probably appreciate by eight to 10%. Right. But that’s not gonna get me all the way to 250. So what can I do? What do I need to do in order to make that happen? So that dual kind of, you know, it’s almost like the devil and the angel right on each shoulder, right. Where you’ve got expense management and then you’ve got this other kind of, I guess, angel on your shoulder, that’s telling you, you need to think about growing your wealth, right. What am I gonna do to grow my wealth this year? Am I gonna buy a property out of state? What am I gonna do? And that will actually doing that once a month with your spouse, right. With your spouse, right. You guys are together in on it. Because a lot of people are in a relationship where one, person’s a spender one, person’s a saver. And there’s a lot of conflict around that, you know, cause the number one cause of divorce is is finances. And so that one habit has helped us more really than anything.
Shifting over to Gary Keller for a moment. And how he affected you. Were there any wealth building lessons that you learned from or took from Gary back in the day?
Yeah, I think you know, Gary’s done a good job of modeling thrift for us. <Laugh> and I’m kind of a naturally thrifty person, but I can remember when he first started Keller Williams, you know, he would greet potential franchise owner and his, you know, I can’t remember what was Pontiac lesabre or something like that. Nice. And eventually the company had to buy him a new car because who wants to grow up and own a franchise and drive a Pontiac, nobody, but he was unwilling to spend money as far as that goes. And then just watching his wealth build over 20 years, you know, what he is done with Keller Williams. And then just understanding, like, I think about our wealth now, you know, for, you know, if you look at a chart of our wealth, we are in what I would consider a hockey stick with our wealth, but for, you know, 10, 15 years, it’s, it’s basically flat.
It’s pretty flat. And we felt poor. You know, we felt poor, then we weren’t poor. We, we, we were net worth millionaires at that point, but we still felt poor because we weren’t spending money on the fancy car and we still don’t, you know, we still don’t, we, we just remodeled our house, we paid cash for it. And so I think Gary has modeled that very well in addition to kind of that work life balance, you know, maintaining a strong relationship with your spouse and being a good dad. And now he’s a great grandad and you know, so I, I, I don’t think you can do it all, but I, I think you can have it all, if you, if you learn how to master leverage, you know, you can have a big business and a big life,
Right. So you mentioned hockey stick growth on your net worth. Was that caused by increased activity and action on your part? Or was that just because you had time working for you and things were appreciating faster as time went on or was it something else?
I think it’s both, I’ve had this real estate business for 13 years. Okay. Right. So there’s just a certain amount there, you know, Jay’s had is one thing business for six or seven years. It’s really, I think mainly it’s time, honestly, you know, it mainly the compounding of time and money and all of that stuff. We’re pretty diversified about 50% of our wealth is in real estate a little bit more if you count our house and you know, but we’re invested in stock market. We do a little angel investing. We have multiple businesses, you know, we dabble in a bunch of stuff, which I think is good. Yeah. I think it’s good to be invested, but yeah, all of that, you know, 10% that we socked away for our 401k for 20 years, all of a sudden you look up and you’re like, wow. Yeah, it really makes a difference.
I’ve always looked at real estate as a get rich, slow investment. And yes, it, it definitely is.
That’s what I say too. Yeah. It’s a get rich slow scheme.
It absolutely is. It’s the most historically proven asset class to preserve and create wealth. But knowing that real estate is a get rich slow investment, what advice would you give to people to build wealth in real estate as quickly as possible? Do you have any advice that you would share?
It’s kind of a, so I think a loaded question in the sense that I threw in building wealth as quickly as possible, even though I said, it’s a get rich, slow investment
<Laugh> well, I think people, they struggle with getting enough to buy their first property, you know? So I think it’s kind of like what you said, don’t be tied to just the property that’s around you. Right. If you live in an expensive market, I think you called Austin is the, what, what did you say? What did you say where we were
It’s mini, California. Cause so many Californians
In California. Oh my gosh. No, that’s terrible. <Laugh> but, but it’s true. We’re very expensive. Now our average, what I started in real estate 12 years ago the average home price was about 175,000. And now it’s well over 600,000. So it’s, it’s, it’s gone up dramatically. So just not getting tied up with that. And then the fastest way to save money for your first investment property is to you know, the average American spends about 50% of their income on their housing and their commute. That’s huge chunk. That’s a huge chunk of their budget. So if you wanna save up for your first investment, look at your housing costs, right? That’s one way you can dramatically, like if you’re renting and you wanna buy a house in a, you wanna buy an investment property in another place, like, let me tell you a story.
So I had an agent on my, on my team. She was young, she was in her twenties and she wanted to buy her first home. And she said, I just dunno how I’m gonna save up for Wendy. I just honestly can’t imagine how I’d save up for it. I said, well, let’s look at your budget and let’s look at your expenses. And at the time she was renting a house, no renting a condo in a furnished condo in downtown Austin. And I think she was paying like 20 or she’s paying $1,700 a month. And I said to her, I said, that’s, that’s so much, that’s a huge part of your budget. Can you decrease your housing costs? And she said, well, yeah, but I don’t want to. I’m like, well, sure you don’t, but what, what do you want more? Do you wanna buy, you wanna be able to get into a house or not?
And so she said, okay. So she moved out of her furnished condo into a, a rental house in a arguably worse location, not a bad location, but not downtown Austin. And all of a sudden her, she, her rent went from $1,700 to $600 a month. So I said to her, listen, you’re gonna put away $1,100 every month. And at the end of one year, you’re gonna have the down payment for your first house. And sure enough, at the end of one year she didn’t renew her lease. And she was able to get out of this shared {inaudible} and, and she was more motivated cuz she was in a, in a crappy house that she shared with a couple other people. So that’s the motivation too. And, and so that, that would be my one easy tip for somebody, especially when you’re young. I mean, even if you’re, even if you’re older or honestly, you know, move into an apartment for a year, save up money by an investment property and buy another house or return your first house into an investment property. You know, there’s lots of ways to do that with your housing.
Was that a client or was that a real estate agent?
That was an agent on my team.
You know what blows me away. I’m actually surprised by real estate agents. How many of them that I’ve seen known, talked to and observed in the past don’t own their own home or more surprisingly, don’t try to invest in real estate. Do you, I know do why is that? I don’t get it they’re in the business.
Well, one thing that can be tricky is, well, first of all, we have a 91st 90% fail rate. Yeah. So within the first two years, you’re basically 90% of agents go in and out of the business. So there’s that. So they don’t stick around for a long time. And in those first two years, it’s more challenging to get a loan, a, a traditional loan to buy a house. So if you’re in the business and you’re trying to get a loan, it can be trickier. So that’s part of it. But then as far as investing goes, I think they’re just, they’re nervous. We work with lots of investors here in Austin, about 20% of our clients are actually investors looking to invest in Austin from all over the place. Mm-Hmm <affirmative> and we get leads from other agents in our office because they’re just nervous about it. And they worry that, you know, and a lot of agents don’t like numbers
Maybe they’re in the wrong business if they don’t like numbers <laugh>
Yeah. Maybe, maybe.
Well, as we start to wind this down, I have two last questions for you. We’ve all made mistakes in real estate. I’ve made plenty of mistakes in the early days, investing in real estate, I’ve been taken and ripped off by so many people I’ve been, you know, taken by contractors and tenants and all kinds of stuff has happened. What was one of your biggest real estate investing mistakes that we can kind of take away as learning lesson?
Sure. Well I’m like you made a lot of mistakes and I would say probably the biggest mistake that we made was in 2005, we got invited to invest in a development outside of Austin in a city called marble falls. And a lot of executives at KW were involved. And so we felt like we were a part of this club and honestly, I, I got cold feet about it. I just, there was something that was going on in the way the builder was talking that I didn’t like, I, I got a feeling in the pit of my stomach and I said to Jay, I, I don’t feel good about this. I think we need to not do it. And I told that to the realtor that was helping us, cuz this is before I got my license and he got the builder on the phone and all four of us got on the phone.
They basically all kind of ganged up on me and convinced me to do it. And then the builder ended up not finishing the development, ended up taking all of our money. And so we were left with a house that was half unfinished. All of our money had been spent from the bank and we needed to take a loan out for, I think $205,000 for this house. And so we did get it finished, which was good. And, and it was far remember how I talked about, I liked having the properties that were close, this was far away and it was so stressful. It was just a totally stressful experience for me. And we ended up selling it when the market was really down like 2009, 2010. And we ended up at, at a loss. We, we ended up losing $150,000 on that house. And luckily the bank allowed us to carry that loan.
You know, they basically gave us an unsecured loan because we were pretty good to the bank was like partially responsible. Right. And we didn’t end up suing the bank, whereas a lot of people in the subdivision did. And so, yeah, so that was the lesson, which is a, it sounded too good to be true. That’s what I didn’t like about it. So if it sounds too good to be true, probably is too good to be true. And then just to listen to your gut, you know, really listen to your gut and if your gut tells you not to do something, don’t do it.
Well, experience is one of the best teachers. And so unfortunately you have to go through those situations from time to time or maybe fall on your face and get yourself back up and learn from, you know, those experiences. I know I’ll never repeat the same mistakes I’ve made in the past. <Laugh> cause I learn from them. Right.
<Laugh> no, exactly. Yes. Yeah.
It’s a great way to learn, you know, it’s and I’m all about knowledge and education. So on that note you know, knowledge and education, can you share a good book or two about money and maybe more specifically about building or creating wealth?
Sure. Well, I am totally biased towards the one thing <laugh> so that’s always an unfair question to ask me. It’s, it’s been very impactful to our life. So if you’re looking for more focus, whether it be wealth building or whatever that’s really great. And then I, I really have enjoyed recently I read the Psychology of Money by Morgan Housel. I dunno if you’ve read that just a bunch of great stories on wealth building that really helps kind of with your mindset and it’s, it’s entertaining and interesting. And so that’s kind of, I read that one recently. I really enjoyed it.
Very cool. Yeah. A good book for sure.
Awesome. Well, Wendy, do you have any final comments or takeaways to leave us with? And then after that we’re gonna let you just tell our listeners how they can follow you and get more information about you.
Yeah. I don’t think so. I mean, I think that, you know, the trick is to just get started, whatever that looks like and you know, you and I are on the same page. Real estate investing is, can be a very passive way to get rich flow. And it’s great to look up and think about, wow, I’ve learned so much over the last 20 years and here I am, real estate has made me pretty wealthy. So that’s pretty exciting.
Good for you. Congratulations on all your successes. So tell our listeners how they can follow you and get more information about what you and Jay are working on.
Sure. Yeah. So Jay and I are both on Instagram. I’m at Wendy Papasan and he’s at Jay Papasan. It’s a, we have kind of a weird last name. It’s like those comfy Papa on chairs, you know, from the nineties <laugh> and so we’re pretty easy to find. And then I did wanna mention, we just started our net worth club, so you can go to networthclub.com and find out a little bit more information about this sort of net worth club that we’ve created for more than just our teams.
Awesome. Okay. We’ll make sure to link to all of that in the show notes as well. Awesome. That has been a fascinating story and journey that you’ve been through and where you’ve come with that meeting with Mo and everything you’ve accomplished since then. I’m impressed. Congratulations.
Aw, thanks Marco. And, and to you too.
I appreciate it. Well, Wendy, thanks for coming on the show. We’ll get this out here in the next few weeks and good luck to everything you’re working on.
Yeah, my pleasure. Thanks so much.
Hope you enjoyed today’s interview. I think Wendy’s been a great guest and I know there was a lot more she could have contributed to just don’t want to keep her longer than the 45 minutes that we recorded. Anyway, with that, remember to download the free report on our website, The Ultimate Guide to Passive Real Estate Investing. I think it is a great primer for you and a refresher for so many concepts. And I’m actually gonna be updating that here in the coming months here. So you might want to keep an eye out for version two of that, download if you are interested in real estate investing, remember we offer free strategy sessions, just a book of time with one of our investment counselors. You could do that off of our websites, either the podcast website passiverealestateinvesting.com or the main website at noradarealestate.com. And I’ll put those in the notes below. If you have a question about real estate investing and just send that off to me from the Passive Real Estate Investing website, remember to subscribe it, it only takes you three seconds to do so. And that is it. For today. We will see you on our next episode. Thanks for listening and have a great week.
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