Phil Treadwell, an Industry icon, influencer, podcaster, and fantastic guest, is on The Loan Officer Wealth Podcast this week!
You don’t want to miss this one!
During this incredibly valuable conversation, you will learn:
✅His #1 success tip for navigating tough times and making the most out of all the opportunities that you currently have.
✅The importance of creating opportunities that open the door for meaningful conversations with potential customers and referral partners.
✅Phil also explains how to have more in-depth conversations with your potential customers to learn more about their long-term goals to build stronger long-term relationships.
The Loan Officer Wealth Podcast | EP. 42 🎙
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Listen to the Podcast Below
Phil Treadwell, An Industry Icon, Influencer, Podcaster, And Fantastic Guest Is On The Loan Officer Wealth Podcast This Week!
I have an incredible offer for you. What we’ve done is we’ve taken the ten most profitable methods to grow your mortgage business that we have learned from interviewing the producers on this show, many of whom are doing over $100 million in volume per year. We’ve packaged them together into a condensed 45-minute training where you get to learn the ten most successful and profitable activities that you should be running in your mortgage business.
We then show you how to automate those processes with people and systems so that they run and continue to produce loan applications and new partners that want to send you business pre-booked into your calendar without you having to do any cold calls, chasing, or any work. It’s a blueprint for you to be able to produce more in your business while working less. You can go get that training today for free at ChrisWebinar.com. Make sure you head over there, grab that training for free and make sure that you watch it because the sooner you get started on implementing these strategies, the sooner you can see results and continue to grow your mortgage business. Thank you again for being here with us for this episode, and enjoy another one on the show.
We have Phil Treadwell with us. Phil, thank you so much for being on the show.
Chris, I appreciate you having me and what you’re doing both for the industry and loan officers.
That’s amazing. I don’t want to brag too much, but I do have a little bit of an intro here. Phil was named 1 of the 40 Most Influential Mortgage Professionals Under 40 and was also recognized as the Most Connected Mortgage Professional by National Mortgage Professional Magazine. Also, listed as one of the Top 20 Mortgage Professionals in 2020 by Yahoo Finance and holds the record from my favorite episode with Gary Vee. We’ve got all of that together in one episode here, and I’m thrilled to have you on the show, Phil.
I appreciate all that. It’s humbling to hear it for sure.
Let’s get right into it. If you wouldn’t mind, for the audience that may not have heard of you, can you give us a little bit about your background, how you got into the mortgage industry, and what your journey has been like so far?
The short version is I grew up in Missouri. After I graduated high school, I went to the University of Arkansas in Fayetteville. From there, I did a couple of odd jobs, different sales jobs and management jobs. I got in the industry because I was working for my dad. He’s a builder. I had considered taking over his company, and he said, “You need to think long and hard before you want to do this for 30 or 40 years because you saw the ’90s of the good part. You don’t remember quite the ’70s and the ’80s when things were tough.”
I thought if I tried out a couple of more jobs, I would circle back. This dates me a little bit and this was back in 2003 and 2004. I saw a newspaper ad and they were looking for someone with sales and management experience, of which I had both. It turned out to be a mortgage company. It was a little mortgage banker that did a lot of conventional FHA, VA, and USDA loans. This was the heyday of the subprime year get-a-loan type of stuff. I was very fortunate to get to work for a company that taught the fundamentals of how to be a successful loan officer.
I did pretty well and eventually ran a branch. I started a net branch and a little franchise. I opened up my broker shop company around 2006, which in retrospect, was not the perfect timing to go out on your own in a financial services industry. Fortunately, Wells Fargo approached me several times and bought out my company so that I would go to work for them. I was a top producer in 2008 and 2009 for them in several states.
I didn’t love the big bank model. It didn’t fit what I wanted to do, and I found a home in mid-size mortgage bankers and smaller companies. It’s advanced in the area and regional roles. I came to the company I’m with now, Thrive Mortgage, a couple of years ago as a national director, doing sales innovation strategy, town attraction, and things of that nature. My wife was also working for our company and was a licensed loan officer. I realized I still had a lot of productive years left. I loved what I was doing and our company, but I really missed sales and being on the ground.
We built a team, and in 2021, I decided to come back onto the front lines to develop relationships with loan officers and clients. I created Your BREW Team. BREW is an acronym for Build Real Estate Wealth. We realized we were at the phase of life where we wanted to use real estate as a tool. We wanted to help create strategies for our clients and realtors and focus on a different aspect than what I felt a lot of people in the industry were looking at. That’s why I’m a fan of what you’re doing because we’re talking about not just how to grow in this industry for growth’s sake but how you transition and put that into helping our industry not only grow as individuals but what our industry can do for the community and what it can do for other people.
You’ve seen almost every single aspect of the business. That’s incredible.
I’ve worn a lot of hats and done some different things on the sales side of the industry. There’s not a whole lot that I’ve not been exposed to. It’s helped me to really understand the different sides of the business. Whenever you have different positions, you see the why behind a lot of things. Loan officers and people within the branch have a very different perspective than some of the regional or even corporate positions. That’s given me some insights to not only how to be more effective and efficient but realize how all the pieces go together.
I’m very interested because coming up when you did and seeing that old school belly-to-belly sales. Now that everybody is obsessed with TikTok and Instagram and how I generate consumer-direct leads from the internet, there’s been this huge change, and you’ve experienced so much of it. Do you find that the core fundamentals of how to grow a mortgage business have changed? Do you think it’s different now? Do you think that personal relationships are still just as important? Where are you seeing the industry going right now?
The short version of that is business has been done, is being done, and will always be done based on relationships. Social media comes into play so you have an opportunity to reach an exponential number of people that we didn’t have before. I tell the story that when I first got into the business, that first company that hired me, I went through four days of classroom-style training. On the fifth day, which was Friday, I followed my manager at the time around his milk route with all of his realtors and referral partners that he did and saw him interact and hand out some flyers.Business has been done, is being done, and will always be done based upon relationships. Click To Tweet
When I came back that next Monday, he was standing at those big monstrosity of copy machines. We had letterhead at that time, and he whited out the corporate information at the bottom and cut out these flyers that he had printed off on his computer. He put a scotch tape in the middle and started photocopying it 100 at a time. He did this with about ten different flyers. He put those big black binder clips that we used to use back in the day on top of them. He stacked them in this big Xerox box, handed them to me and said, “Go talk to realtors and tell them to send you business.”
I remember I MapQuested from my apartment to all the different offices. I could go and hit all the offices and make it back to my apartment by lunch. I would have lunch and do the same thing again on the same route in the afternoon. I remember all real estate offices have that gatekeeper and this lady asked me. She said, “Don’t you think if you keep coming every morning and afternoon, they’re not going to want to work with you because they don’t think you’re doing any business?”
I looked her straight in the eye and said, “The same realtors here morning and afternoon are not doing any business either.” I grinned and walked right past. I did that every single day for about 2 or 2 and a half weeks before I ever had a substantial conversation. Now, people would say hi and you might chat with somebody for a second but the first realtor that ever stopped and had a conversation or even offered a lead asked me. She said, “Is that your black Jeep out there?”
At that time, I was driving a beat-up black Jeep Grand Cherokee that smoked. When she said, “Is that your black Jeep out there,” I thought I either parked in someone’s parking space or it was not smoking anymore. It was on fire. I got both of these two things. The thought never crossed my mind that she might want to have a conversation. I said, “Yeah.” She said, “With the Razorback on the back of it.” I said, “Yeah.” She said, “Who are you? What are you doing here?”
I was like, “I’m Phil Treadwell with Heartland Fund.” “You’re a lender. Shut up. I get it.” I said, “Yeah.” She said, “Can you do bridge loans?” I remember my boss telling me at that time because they were a full-service lender, “If someone says, can you do X? You say yes because we can do everything,” so I said yes. She’s like, “I have a lead for you.” She writes down a name and an address. It wasn’t even a phone number and I drove 30 minutes from that office.
This guy had a race car engine shop next to his house. Of course, the entire way I’m calling my boss. I’m blowing up his phone because he’s not answering. I was like, “You got to tell me what a bridge loan is. I don’t know what I’m doing.” I drove all the way out there. Long story short, I took my very first application on this anvil vise clamp thing in a race car engine shop and I did it by hand. The reason I tell that story sometimes is not only is the world different. It’s very different.
At the core of it, when people are posting on social media, we’re doing podcasts, or we’re doing any type of marketing, marketing is about getting someone’s attention. Sales is what makes them a customer. People confuse the two. When we’re marketing, all we’re trying to do is get someone’s attention and get them to know who we are. It’s that know, like, and trust, and then we need to have a conversation. Where most people miss the boat is they are so focused on how many views, likes, comments, and what kind of engagement they are getting.Marketing is about getting someone's attention. Sales is what makes them a customer. Click To Tweet
Instead of using that to create more engagement for the purposes of taking those relationships offline, they focus on the views and the likes as the metric of success. I don’t know about you, but someone could give me 1,000 leads, I don’t make any money unless it turns into a closed transaction. The spirit of what people need to understand is you can either use these tools to create conversations and relationships, take them offline and turn them into doing business and deals, or go back to walking around all day, handing out black and white photocopies flyers, and hopefully, someone along the way will give you a lead. One other little tidbit there. The only reason she stopped me was because it turns out her husband was an Arkansas alumnus. She was a Razorback fan and saw that on there. A lot of times, we think we need to be experts or have all this great pitch. At the end of the day, there was something in common that we had, which created an opportunity to have a conversation. That’s what we need to be focusing on social media. Talk about who we are, not just what we do, and create opportunities for people who want to have a conversation with us.
That is so true. I always see people who have been so hesitant to get on social media and then they’ve finally tipped over because they realize it’s not going away. The internet and social are not a fad. It’s here to stay so they begrudgingly come on. Basically, it’s like rate sheets. That’s the extent of their content. People want to do business with people they know, like, and trust. We all know this. Social media is your opportunity to share that other side of your life of who you are so that you can attract like-minded people in your marketplace that want to do business with you. I think that’s often overlooked.
I couldn’t agree more. I listened to an episode on Ed Mylett’s podcast with Rory Vaden. Rory Vaden has a company called the Brand Builders Group. He’s helped build brands like Ed Mylett, Lewis Howes, Jon Gordon, and some big educators and influencers. They were talking about a study they had done and pulled a ton of people about who they wanted to see a personal brand from. Some of the highest percentages were their doctor, attorney, and financial advisor.
What they found in the correlation there was the higher the need for trust, the more people wanted to see a brand from them. Again, when you think about what a personal brand is, it’s not a shtick or a logo. A personal brand is putting out who you are to the know, like, and trust. If people need to trust you or want to trust you to do business with you, before they can get there, they have to know who you are. You think about the menial things that we don’t want to put on social media, like what we do for fun and what we do with our families on the weekends. All of that stuff is the exact thing that people want to see so that they can feel relatable.
If you think about you have to have the services of an attorney, you’re going to a doctor’s office or anything like that, there’s a little bit of anxiety. There are these business professionals, not because of necessarily the people that they are, but because of what their profession represents. Imagine if you’re getting ready to go meet one of those people or do business with some of those people, but you know that they like the same restaurants you do or they saw a movie a couple of weeks ago that you liked as well, all of a sudden, the entire dynamic shifts.
It’s not one of you take their opinion with a grain of salt. It’s like that old adage of, “The more familiar people get with you, the less they respect you.” That’s an old way of doing business. The more people know you, the more reason they have to respect you and trust your advice. It’s a really cool episode. I highly recommend everybody to listen to it. It explains a personal brand, as Gary Vee said, “Come across as a douchey term, it’s digitized reputation.” It’s who you are, what your reputation is, and it’s put online. You have to showcase who you are, not just what you do, as I said a second ago, before people can buy into that.
I couldn’t agree more. As a double-edged sword, nobody wants to go to the dentist who spends his time as a taxidermist in the background.
True story. You do have to take it with a grain of salt. I wouldn’t advise that you take pictures of your food. That was Instagram 8 or 9 years ago, 5 years ago or whatever. In context, I went to a coffee shop I’d never been to before that was close to my office. I met a friend there. It was a neat coffee shop, and I can see it becoming one of my favorites. I took a picture of the front of it and put, “I went here for a coffee appointment. This is a cool place. You should check it out.”
Within an hour, I had 3 or 4 people message me and ask where it was or what it was about. One of them was a realtor that I didn’t even know was following me on social media, but it created an opportunity to chat and be like, “I need to buy you a cup there sometime. That had this cool upstairs area.” I didn’t say, “I’m a lender. Do you want to do business?” No. I took a second to be human.
The one thing I’ll also say on that is we inherently trust people that we have things in common with. If you think about it on a very basic level, when you’re at the grocery store or the DMV and you speak to someone, you always talk about the weather first. That’s always a stereotype of, “We’re going to talk about the weather.” The reason we do that is because that’s the one thing we for sure have in common with that person at that time. If you’re in the same place, the weather’s going to be the same, then you find out your cousin went to school with their uncle or whatever, and it starts a conversation. Social media has limitless opportunities for you to put something out there that someone else may have in common, and then it creates the conversation.
I have a feeling that most of the people tuning in to this episode or anybody that follows either one of us on social media who’s in a business of any type if they had an opportunity to have 6, 8, or 10 conversations a day, they would find ways to take turn those conversations into opportunities to do business. Instead of worrying about leads and how many likes and follows you get, how many conversations did you start? How many opportunities did you have to showcase, “I’m a real human being that’s just like you and has things in common?” To your point, we do business with people we like.
This goes down a completely different pathway into how technology is enabling us to connect with these people. As you put that content out, social networks are getting smarter and smarter at connecting you with the people that you want to be connected with. Dollar A Day in advertising can put you in front of a highly targeted local marketplace. It doesn’t have to be a mortgage ad. It can be that brand-building content. We had a guest on the show and his name is Dennis Yu. He’s a ninja marketing guy.
Dennis was on my podcast several years ago. BlitzMetrics if I remember correctly. That’s the name of his company. He was speaking at a conference, and I was doing some podcasting there and pulled him aside. At that time, they had spent more money on Facebook ads than any other company out there at all. I’m curious to hear what he had to say because he’s a genius.
He’s big on TikTok right now. He released a brand new book about TikTok. He told me that the TikTok algorithm is one of the only algorithms in social media that is geographically based. If you go on the coffee shop that you were at and you turn on TikTok, you shoot a quick little reel, or you do a little bit of content in front of that building, TikTok has the technology to recognize the building, know where it is, and know where you were located. For the next 48 hours, it will show your content to people that have been in the same location.
If you think about it from being the mayor of your local community and your digital community, we know for a fact that Facebook and all of these other networks are trying to take that similar technology and apply it. Think about your YouTube videos, Facebook, and Instagram. If you’re being yourself but also layering in that knowledge base of how you help people, it can be transformational for high-quality leads.
I’m not talking about running Facebook and Instagram ads because we did a ton of that in the past. We’re not recommending Facebook and Instagram ads for people in the mortgage industry anymore because the quality of a lead that comes in off a mortgage ad isn’t high enough to make the return on investment and good enough to make it worthwhile. Being the mayor of your own digital community is the future of where marketing is going.
Off on a little rabbit hole there, I’m interested in how you are coming back to direct lending. How are you looking at your marketing and advertising approach now? What’s your plan for building relationships with realtors going consumer-direct? I would love to hear what your plan is if you’re willing to share what that is.
Absolutely. I’ve had a few conversations on podcasts about it before. The first piece of it was setting up the difficulty that it posed because almost all of my content from the proceeding 5 or 6 years was all business to business. It was geared toward other mortgage professionals and real estate professionals. Going to a direct-to-consumer model was a shift because consumers don’t care about the same things that business people are paying attention to per se for the same purpose. The first thing we had to recognize is we have a different audience.
The second thing that we realized was that audience is bombarded with a ton more content. It’s not even that you’re competing with another Reel, TikTok, or YouTube video. You’re competing with Hulu, Netflix, and all of these other content platforms. What we realized was that for the purposes of creating relationships with people that we could refer business or that could refer business to us in real estate professionals or creating relationships with clients, we had to have a reason. If you want to do more business and want to make more money, you need to solve more problems, and show people how you can solve their problems.If you want to do more business and make more money, you need to solve more problems and show people how you can solve their problems. Click To Tweet
It was a two-pronged approach that we took. One, what is the number one problem that most real estate professionals have? It’s doing more business. They want to find more buyers and sellers. I realized we were in a unique position with the podcast. Having collaborated and done a lot of things in the content space, we were going to take the approach of, “We’d like to create some content with you. We’ll either record a podcast-style interview and chop it up into some videos, show you how to do that, or talk about a potential brand strategy.”
For those people that are ho-humming and talking to realtors is probably now more than ever. Have I heard people, “I don’t like to work with realtors?” I understand why. We don’t need to get to go down that specific side of the conversation. What I will say is that one of the things that you can do in talking to any realtor is I don’t care if they have a preferred lender or they’re lender is their spouse, which you say, “We’re not trying to infringe on that relationship. You can keep doing everything you’re doing right there. However, what if we could create some additional business over here? What if you and I can have a conversation about adding to what you’re already doing?”
I don’t know of anyone that’s going to turn down additional business or at least a conversation about additional business. The short version of that is we’ve decided to take the approach of, “We want to come alongside you and create additional business.” We want to create content and help you, as you said, be the mayor of your own community. What does that look like? The basic marketing formula that everyone can use for themselves or can use when talking to other professionals is understanding who your audience is.
What is the audience you want to reach for the piece of content or social? The second is, what value or message is it you’re trying to deliver to that audience? The last thing is, what is the most effective medium to deliver that message in value to that audience? For a lot of people, they don’t stop and think about that. They think, “I need to start a YouTube channel because I heard someone got a lot of leads from YouTube.” Not understanding that their particular audience may not be consuming a lot of YouTube videos or their audience may or may not be on TikTok.
I say that we understood that with real estate professionals, we needed to have a conversation about where their audience is and what type of niche they are trying to build. That might be helping them start a podcast, do short-form content, or all of the above. On the consumer side, the biggest problem that most consumers have, especially in an economy like this, is how do you make more money. How do you bridge the gap from increasing prices to what they make if inflation is outpacing their income or if one of their industries is getting beat up because of the economy?
The main problem people have is money. We understand that real estate is uniquely positioned to not only be a hedge against inflation, you can create net worth with it, but you can also create passive income with it. I don’t know anybody between the ages of 20 and 65 that haven’t thought about selling everything and getting into a VW bus or an RV and traveling the world. We need passive income to do that. Maybe you’re passionate about what you do and you love what you do, but you want to increase your net worth for retirement, for financial legacy or whatever else.
What we did is we decided we were going to focus on a strategy. We were going to start having conversations. Initially, an understanding, when someone calls us, they’re going to talk about rate because our industry has had a very poor history of not giving them anything else to talk about. They don’t know what else to talk about. I ask this a lot when someone is in the industry, how many times have you gone to a kid’s sporting event, a cocktail party or a place where you didn’t know a lot of people? They say, “What do you do?” “I’m in the mortgage business.”
What’s the first question they ask? What are rates doing right now? Ninety-nine percent of the time. That’s because we’ve sucked for so long as an industry and giving them something else to talk about. What we do is when we have that initial client conversation, we ask them, “What is significant about this home purchase?” We find out the why. Sometimes, you have to ask a couple of times. I’m speaking at Sales Mastery with Todd Duncan. The conversation we’re going to have is around the concept of a lady, quick example. She called to ask about some of the bond down payment assistance programs that we have here in Texas.
I said, “Before we get into that, I’d love to know more about you and what you’ve got going on. What’s significant about this home purchase?” She said, “I want to own property.” I said, “That’s awesome. That’s part of the American dream. Everybody should want to do that, but what’s significant about owning property for you?” She was middle-aged. She said, “I have a long-time boyfriend and he owns a house. I want to own a house so that if, in a couple of years, we get married, we could buy a house together and keep these two houses. We would have a couple of rental properties.”
I said, “That’s awesome. Now we’re talking about investing in real estate and creating some income. For you, what’s significant about having some investment properties and whatnot?” It took three times before it came out. She said, “My grandparents had a pretty tough go of it in life, but they made something to themselves. They had property and passed it down to my parents, aunts and uncles, but they didn’t do a very good job of being a good steward of that. They lost it, squandered it, and whatever. My generation and my cousins feel like it’s our responsibility to change our family tree.”
I said, “Now we’re talking about generational wealth.” Two things happened in this conversation. One, she called to talk about bond and down payment assistance money. We got to her real why, which is about generational wealth. In between there is not only a potential relationship as a lender with this client and we talking about this initial purchase, but we’re talking about a purchase if she gets married and other potential investment properties down the road.
We understood when we started having this conversation about putting a team together if we can figure out a way to create strategies, very simple ones that they can buy into and understand how we’re going to help them achieve their short and long-term financial goals through real estate and using a mortgage and be a debt advisor. Everyone has an attorney and a CPA. A mortgage professional is a unique position to be a debt advisor and be part of that financial services list that most people have.
We could not only create long-term relationships, but throughout the mortgage transaction, you need someone to get a piece of documentation. We’ve all had those buyers that need a little motivation to do what you’re asking them to do for their own good. What happens is we have a why to filter it through. If they need a little nudging, it’s as simple as, “I know that you’ve got big plans for purchasing other homes. Go ahead and get these couple of documents for me because once we get this closed, we can then start talking about these next things.” I very gently put their why back in front of them, and all of a sudden, they realize this isn’t this frustrating mortgage process that they feel like they’re going through at times. They realize this is all for a purpose.
Having a short conversation on the front end can completely change the dynamic. In the first 20 or 30 minutes, we never talk about rates and loan products. We don’t have to because we’re talking about them, and all of a sudden, the walls come down. You find commonalities of, “You’re from an area where I have someone in my family that lives.” Again, we find those commonalities where when you ask them about an application or explain your lock strategy, they don’t have any reason to question it. You’re not someone who’s selling something. You’re this person they got to know that they have something in common with.
The last thing I’ll say on that is from the initial lead, we have all of our referral partner. Anybody who refers us, whether it’s a realtor or a mutual friend, we always have them do a three-way introduction, whether via text or email. Chris, if I made an introduction to let’s say I knew Joe Rogan. If I said, “Chris, meet Joe. Joe, meet Chris, whatever,” and then you respond to that three-way text message, “Joe, it’s so nice to meet you. I’m so glad Phil made the intro.”
Joe now has some friendly pressure to respond because two people in that conversation have done it where if I give you a number to text Joe, you’re the only one who knows whether he texts back or not. He doesn’t know you, so he doesn’t owe you anything. The first step is to always have that three-way intro. From that three-way intro, we get about a 90% to 95% conversion into an initial consult. From that initial consult, over 3/4 of those are converting into applications. This initial part of the funnel is where people lose opportunities and leads.
Once they talk to the lead, they either don’t get them to do an application, or someone say, “Send me some numbers first.” There are about 26 different things that go into quoting an interest rate. Because we have this strategy we’re trying to get, let’s do this application so that I can give you good, accurate information, and we’re not trying to build a plan or strategy on assumptions. All of a sudden, you’re aligning your interests. You’re not just asking them to do something you want to do. You’re explaining why it’s important for them to want to do it.
That’s so powerful. That three-way introduction, we make phone calls to pass customers to generate referrals, and that strategy right in there is absolutely something that we need to get worked into that process. That’s incredibly valuable, Phil. One quick question. Do you have a coach?
I have lots of coaches. I have done paid coaching in the past with people. I’ve coached with Tim Braheem and Scott Bertone at Leadership360. I’ve had different paid coaching throughout, but I do have a coach. Right now, my two coaches or mentors are Todd Duncan and Rene Rodriguez. I talk to them actively. Rene has become a very good friend and mentor through me over the years. Todd has as well. Obviously, Barry Habib has been a huge influence. He was our very first podcast guest and has done a lot for my business over the years.
Those are three people who have had huge impacts. Not to leave anyone out, but there’s been a lot of others. I can say I’m not only a huge advocate for coaching and mentorship, but I’ll also go as far as to say probably every success or win I’ve had in business has been directly related to a coach or mentor that’s taken their experience and imparted it to me in wisdom. I still make a ton of mistakes, don’t get me wrong, but the clarifying thought process of someone who has done what you want to do, be where you want to be, or even have a different perspective is invaluable.
That’s super valuable and incredible knowledge. Thank you for sharing. A little bit of a coaching session here. We’ll take a little bit of a different path. Hence the name of the show is the Loan Officer Wealth Show. In the initial genesis of the show, I wanted to bring financial tools to loan officers. You have a career and you’re making all this income, but what do you do with it? How do you truly become wealthy as a result of being in the mortgage industry? I’m opening that up. From a generation of wealth and a wealth creation passive income conversation, what are you seeing working well right now? What are you advising your clients on?
To set that up, when you talk about generations, our parents and grandparents had different views of not only how to create wealth but how to maintain wealth. I use a wealth of any type of financial asset, whether it’s cash or whatever. A lot of theirs was in the markets, whether that was stocks, bonds, mutual funds, IRAs, 401(k)s, and things of that nature. The preface is I’m not saying those aren’t good vehicles. I’m saying the opinion of most people out there is a crapshoot that the institutional investors, it’s all skewed their way and that the little guy can’t get ahead.
I don’t think that most people right now love having conversations about those types of things. My original degree was in Financial Management and Investing. I finished with a different degree, but the path I was going to go down was one of a financial advisor. I did a ton of stock portfolios and made a lot of money on paper through those. I thought to myself, “This is easy. I did this mock stock portfolio in college and I made a ton of money. I can do this.” It was the ’90s and 2000s, and anybody that picked any stock out of the paper was making money at that time.
My skill and talent that I thought I had, I realized, weren’t there. I say that right now, you also have to look if the institutional investors or the ones that are winning and what they are purchasing. A single-family home in the State of Texas, 1 of every 3 was by an institutional investor, whether it was a hedge fund, a property management company, private equity, or whatever. That number is as high as 1 and 4 on average across the country. People are buying up real estate in droves, which has contributed to some of the supply issues and some of those things. Another statistic that’s important to understand is between 2010 and 2019, there were only 5.6 million homes built in that ten-year time period. The prior six ten-year time periods were somewhere between 15 and 25 million homes per year.
When you combine the fact that we stopped building homes almost entirely for a decade because of the financial crash and you tie that too, we all know Millennials are now the driving force in home buying, the largest generation ever, and supply and demand is a huge issue. There are numbers everywhere to support that. Whenever you think about the fact that institutional investors are playing a role in a game that already has short supply, you have to ask yourself why. What is the opportunity there?
Investing in real estate, especially over the next 5 and 10 years, is probably the best investment anyone can make, whether you’re in the industry or out of the industry. I know it sounds self-serving, but there are a dozen different metrics that we could talk about. We won’t get into all the granular details here, but the short version is homes are still going to appreciate and cashflow. Another quick example is people are hesitant to buy investment properties right now. They’re saying interest rates and prices have gone up.Investing in real estate, especially over the next five and ten years, is probably the best investment that anyone can make. Click To Tweet
If you go back to 2019 or 2020 and look at the home price, which on average and which you could rent that home out on average, that margin cashflow is less than it is right now. Even with higher interest rates and higher home prices, rents have outpaced both of them to where your cashflow and margin on investment property is higher. The argument can be made that it’s a better time to buy investment properties and rentals than it was a couple of years ago. You also throw in short-term rentals. There’s a ton of opportunity in real estate.
My wife and I are focusing on the meat of our investment and wealth-creation activities are. I think other people should as well. The last thing I’ll say is Dan Fleyshman is someone I recently saw at Neel Dhingra’s Forward Conference. Dan Fleyshman is connected with everyone. He’s in a lot of mastermind groups and is a venture capital guy. He has the record for being the youngest CEO of a publicly traded company. One of the companies he invested in and he was a CEO went public. He’s a very unassuming guy. He was on stage in a flannel shirt and vintage Nikes.
He laid out a cool investment strategy that I want to share because I think it’s valuable for people. He calls it the 40/40/20. He said you need to have 40% of your investments in what he calls boring lower-yield returns. Those are in inflation hedges. That’s where you’re talking about currencies, stocks and bonds potentially, and things that are going to grow, give you return, and are going to be a hedge against inflation. The next 40% is your medium risk but higher yield. Real estate fits in that category and businesses that have established cashflows for twelve months that are doing a couple of million a year, and things of that nature.
He said the other 20% is where you can be a little more risky, whether you’re talking crypto, NFTs, or if someone’s doing a startup company or something of that nature. He said the reason why is if you look over this, that first 40% is your base. You’re not going to lose any money on that. You’re a hedge against inflation makes a little bit. That middle 40% is where you’re going to create long-term returns. It’s still pretty safe, but you can get some bigger returns, maybe some smaller, but it averages out.
In the 20%, you may lose more than you win, but when you win, a lot of times you win big. I thought that that was an interesting way to look at it. There are some examples that he talks about. If you go check out his content, he talks about this everywhere. I think that’s the new way we need to look at our investments and how we create wealth long-term. We got to have a base that we can draw from. We got to take some risks that are consistent moneymaking investments, and then there are some ones that we need to take some higher risks, and take a shot every once in a while, and feel comfortable about it because of the way that we have the rest of our portfolio set up.
For us, that middle 40% is probably a little bit bigger because it’s got a lot of real estate. I don’t put a lot of stuff in cash-in-cash equivalents because we put those into our businesses as well. We do take a few risks on some things. Crypto is something that’s extremely interesting. I know that gets a lot of press. I will say, for those that are either excited about crypto or even down on crypto, you need to remember the entire crypto market combined is still smaller than the market cap of Apple just by itself. We’re in the infancy of this.
That’s why I think people need to pay attention to it and participate because I have a feeling it’s going to get a lot bigger than the market cap of a company the size of Apple. You want to be positioned where you don’t look back and be like, “I should have bought Microsoft in the ’80s when it’s the middle of 2000s.”
I could not agree more. Phil, thank you so much for being on this show and sharing your knowledge and wisdom with us. We could talk for hours. If we get the opportunity to have you back on the show, I would love to have you back and continue the conversation. Tell us about the podcast. Where can people reach you out? How do people get ahold of you?
The podcast is Mortgage Marketing Expert. You can find it pretty much where all fine podcasts are sold. We push that out about everywhere online. If you go to MMEPodcast.com, you’ll see a link tree that has quick links to subscribe to the main platforms. We’ve got some cool guests coming up. We started a local realtor series that we’ve gotten some good feedback on. We’re talking to local realtors throughout the country. We started with a few here in DFW, getting their perspective and not a high-level view some people that are in it. I had a cool opportunity to do a recording with Brad Lea. That episode is going to be coming out very soon as well.
I will certainly be listening to that one. That’s fantastic. Again, thank you for being so generous with your time. For all our readers, don’t forget to like and subscribe, and make sure you head on over and give Phil some love for being on the show. Have a great day, everybody. Thanks again, Phil.
Thanks. I appreciate it.