Investing in real estate, as in any asset class, carries an amount of risk. Managing that risk while focusing on scalability is one of the pieces that contribute to success in the space. In this episode, Sam Wilson discusses risk and scalability with the VP of Growth & Innovation at The Investor’s Podcast Network, Robert Leonard. Robert, a real estate investor in his own right, discusses how he got into real estate and how he minimizes risk while investing, while leaving room to scale. Tune in and learn more real estate investing tips from some of the top people in the space.
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One Way To Manage Risk With Robert Leonard
Robert is the VP of Growth & Innovation at The Investor’s Podcast Network, the podcast host of Real Estate 101 and Millennial Investing, an ex-W2 Accounting and Finance professional, as well as a stock and real estate investor. He earned an MBA in Accounting and Finance, a BSBA in Finance and Economics, and is a Certified Management Accountant. Robert, welcome to the show.
Thanks so much for having me.
The pleasure is mine. That’s a string of credentials behind your name. Can you briefly tell us where did you start, where are you now, and how did you get there?
It’s a bit of a story and I’ll make it quick. I go all the way back to when I was four years old. I started racing ATV Motocross. I raced for about ten years. Long story short, I was the number two prospect in the world for my age group to go into the professional ranks like you would in a major league sport. Unfortunately, when I was about a year out from turning pro, I had to stop racing. My dad forced me to stop racing. That dream was dashed. I had no plans. I was pretty much a shoo-in to go pro.
I had no plans to go college, go into business or anything like that. My plan was always to become a professional motocross racer and that ended up not happening. I had to figure something out. I ended up going to college doing everything that we’re told we’re supposed to do. I ended up stumbling into real estate investing by mistake, simply because I didn’t want to pay my dad rent. I ended up accidentally becoming a real estate investor. That has led me to all the different things that I’m doing whether it’s the podcast or my real estate portfolio.
Can you give us some color on what The Investor’s Podcast Network is and why did you found it?
We are a media company. I technically didn’t found the company. It was founded by Preston and Stig back in 2014, 2015. They started a show called We Study Billionaires and it’s all about stock investing. It became the number one stock investing podcast in the world. Those guys decided, “Why don’t we have a well-known brand? Why don’t we leverage that brand to launch additional shows?” That’s where I came in. We ended up partnering together to launch additional shows outside of just We Study Billionaires. That’s where my two podcasts, Millennial Investing and Real Estate 101 came in. We have a multitude of shows. We have YouTube courses. We do all kinds of stuff. We’re a full-blown media company.
Podcasting is tough. A lot of people ask about that. They ask me, “How did you get started? What’s the time commitment like?” How did you end up launching two shows?
I started launching two shows because when I reached out to them to partner to launch the first show, I wanted a real estate show. They were looking for a host for a real estate show. I reached out and I got denied. They said no because I was too young. I’m not the person that takes no for an answer a lot of times. When somebody tells me I can’t do something, I’m more fired up to do it. I tried to find ways that I could work with them. I ended up working on a couple of small projects with them and they ended up liking the work I did, specifically Stig.
If you don’t have enough money to invest, you need to be able to make more money. Side hustles can help you make more money.
He said, “I want to give you a show to host but not the real estate show. Why don’t we instead take We Study Billionaires? Do a similar topic but make it tailored towards Millennials because We Study Billionaires has typically a little bit older demographic. Let’s take the same concept and tailor it to younger people.” I was torn. I almost said no. It wasn’t what I wanted. I wanted the real estate show, but I said yes anyway thinking maybe this will end up leading to the real estate show. Sure enough, it did. We started with Millennial Investing. It’s done well. Six months later, Stig came to me and said, “Are you still interested in that real estate show?” I said yes. That’s why I have both shows. That’s how it got started.
What does Millennial Investing focus on?
Millennial Investing is stock investing for Millennials. That’s anybody from 20 to 40 years old that’s looking to invest in the stock market. I realized that there are more things that go into stock investing than just talking about stock investing. The main premise of the show is how to invest in the stock market. There are two other pillars that we cover. One is personal finance because you need to have a strong personal finance base to be a good stock investor. The other is side hustles, entrepreneurship and things like that. If you don’t have enough money to invest, you need to be able to make more money. Side hustles can help you make more money.
Those two pillars had lead to what we’re mainly focused on which is stock investing. Real Estate 101 is not specifically for Millennials or any age demographic. It’s for anybody that has done a few deals. Somebody who’s done 10, 20, 30-unit deals and things like that are probably not going to find it super useful. It’s for those people that are trying to get their first deal or their next deal if they’ve done just a couple. I’m trying to help people get their real estate careers and journey off the ground.
A lot of things that we run into in the real estate space and I’m certainly guilty of this is that we are either one or the other. We’re either stocks and bonds guys or real estate guys. There are some competitions there between, “My way is right and my way is right.” How do you blend those two? What has been the experience talking to a lot of different people across both disciplines?
I completely agree. That was one of my biggest complaints with real estate podcasts. A lot of them are great in terms of real estate but a lot of times, they poo-poo on stock investing. I don’t think that’s right, personally. A lot of times, I had a hard time connecting with that philosophy, especially because my background is stock investing. What I found interesting is real estate investors are anti-stock market, almost everybody that I talked to.
If you go the other way, stock investors aren’t anti-real estate. A lot of stock investors are into real estate. They may not be as vocal about it but they’re usually not against it like real estate investors are against the stock market. Why that is, I’m not sure. It’s partially because of control. People who own real estate typically like the control. They make the decisions and they are in control of their fate.
When you invest in the stock market, a lot of times, they feel like it’s gambling. You don’t have any control over what you’re investing in. That has been my experience as well. I completely agree. What I’ve done is I spent probably a decade studying Warren Buffet in the stock market before I even got into real estate. What I’ve done is I’ve taken a lot of Warren Buffett’s stock investing, business and life principles, and applied them to real estate. I found that that’s done well for me. I joke that I’m a Warren Buffet-style real estate investor.
Talk to us a little bit about what you mean when you say you’ve taken those business and life principles. What does that mean to you?
He has tons of principles that are applicable across many different domains. Some of them are margins of safety. In the stock market, he doesn’t like to buy something for what it’s worth. He likes to buy something for less than it’s worth. In the real estate world, you could say it’s buying something with equity already built-in and things like that. I take this to heart when I do my underwriting. I don’t underwrite it to a perfect scenario because I understand I need to build in that margin of safety for things that can and will go wrong.
Other than that, he talks a lot about ethics and reputation. Not that there are a lot of people in the real estate world that do it but it’s a good reminder that you need to be ethical and keep in mind your reputation when you’re running your real estate business. It can be easy to not necessarily uphold your own standards when you have rental properties, whether it’d be the quality or fixing problems for tenants because it hurts your profitability. A lot of times, I find myself thinking it’s not always about the profits. It’s more about maintaining my reputation and my ethics, and making sure I’m providing a great place for these people to live.
Let’s talk about your portfolio a little bit. You’ve got real estate, also stocks and bonds. How do you decide when is a good time to bow out of the stock market or to pull back? There are 1,000 things I want to ask about that from your own personal opinion and point of view.
When I was a W2 employee, my portfolio allocation was easy in terms of how I split it. I like to think I’m a relatively simple guy. I like to keep things simple. That comes from Warren Buffet. He’s relatively simple in the way he approaches things. I’ve taken that philosophy as well. When I was a W2 employee, I would match my company’s 401(k) because I didn’t want to leave that free money on the table, and then everything else that I saved would go into real estate.
W2 money would go into retirement accounts, the stock market and things like that. The extra money that I didn’t spend in the month from my paycheck or mostly side hustles and other businesses that I would do on the side would go into real estate. It was pretty clear there. Now that I’m not a W2 employee anymore, I do the podcast full-time and also do some consulting in real estate full-time. It’s not as clear-cut. I haven’t taken anything out of the stock market. I’ve just let everything I had in there run.
When I have a dollar to invest, it typically goes more into real estate than anything. That’s not because I believe in one asset class more than the other, but more so because of what I’m looking for that dollar to do for me. The way I think about it is if I have a dollar and I want it to appreciate it as much as possible, I’m probably going to put that in the stock market. If I want it to come back every month with more dollars and cashflow, then I’m going to put it in real estate. I’m more focused on increasing my cashflow than I am on the appreciation of that dollar. I’m putting most of the money that I save and invest into real estate.
I love that delineation there. I haven’t probably heard it quite said so clearly as to how you think through what it is that you’re doing with your dollars when they come in. What are you investing in on the real estate side?
Historically, I’ve done two things. I’ve done long-distance single-family rentals and house hacking. I’ve house hacked three times and then I have 4 or 5 single-family, long-distance rentals. We’re talking about an interesting possibly inflection point in my real estate business. I’ve been underwriting some 14 to 25-unit apartment buildings. I almost took one down. I am trying to get into a little bit larger deals, not quite like 50 or 100-unit apartment buildings, but still bigger than your small multifamily stuff. I’m getting into that and I’m trying to decide whether I want to go into that, keep my single-family rentals or if I want to sell those all and go completely into apartment buildings.
People who own real estate typically like the control. They make the decisions and they’re in control of their fate.
The other piece that I started that’s pretty interesting is I got into RV rentals. It’s not necessarily real estate per se but I had a successful real estate investor on my podcast that also got into RV rentals. I consider it part of real estate because it’s a rental business. Also, I do a little bit of Airbnb with it and house hacking. There are lots of things that I consider as real estate. Other than that, my other focus is I’m interested in getting my first Airbnb property. That’s historically where I’ve been and that’s where I’m looking to go.
The sharing economy is brilliant. We’ve seen this across practically every discipline. Airbnb was the forerunner in the space but then we’ve seen it in Turo doing cars and RV rentals. I haven’t seen a dominant player in the RV rental space. Maybe you can speak to that. It’s interesting. Who knows what’s next in the sharing economy? Pretty soon I could imagine sharing things like lawn care equipment.
You can, already. You can share everything. I talked to somebody. Her husband likes surfboards and he has a bunch of them. There’s a service where you can share surfboards. There’s another company that’s super popular apparently. I don’t know a ton of the details but I heard it got a ridiculous valuation. What they do is they allow you to share swimming pools. If you have a pool at your house, you allow people to come over and swim in your pool for a fee because maybe they don’t own their own pool. It’s a total sharing economy.
I’ve got more crap in my garage that I would love to get rid of. I see all my neighbors out here. I’ve got a guy that cuts the grass but it’s still my equipment. Every house down the street has its own lawn, mower, weeder, blower and all this stuff. I’m like, “This is such a duplication for a piece of equipment that gets used for an hour once every week and a half. This is dumb.” I love that that’s even possible. I didn’t know that that had already been taken care of. Let’s talk about the RV rental business because that is fascinating. I don’t think I’ve talked to anybody on this podcast about RV rentals. Tell us what you’re thinking about that. Explain to us how it works. How do you plan on scaling a business like that?
I didn’t plan on scaling at first and I do now. I want to go through that progression. It’s a little interesting. I used to race motocross. I took twelve years off. I didn’t ride anything from when I stopped until I was about 25, 26. I bought my first bike again in March 2021. I started riding again. When you go to races, a lot of people go in RVs or motor homes. You’ve got to stay overnight and it works well. I went to a couple of races in my pickup truck and my trailer. I knew I needed an RV because that’s what I used to go in when my dad and I were traveling the country going to all these national races. We used to go in an RV so I had a ton of experience in it.
I said, “I need to buy an RV.” By happenstance, I ended up talking to this guy and he was telling me about the RV rental business. I said, “Why don’t I combine house hacking, the sharing economy, with an RV? I’ll use the RV whenever I need it and then I’ll rent it out when I don’t. It’ll probably pay for itself, if not profit a little bit.” That was my only plan. I was going to buy it, use it for myself, rent it a little bit and that was going to be it.
What happened was when I was looking to buy one, I ended up going to this little dealership near where I lived. When I got there, I was going to look at something to buy. When I got there, this little old lady came out and was talking to me. It just so happens she was the owner of the dealership. She had owned it. She’s been in the RV rental business for 36 years. She had purely done only rentals for 34 years. She had only started selling them over the last two years.
As soon as I heard that, I was like, “This rental business is a sustainable thing.” It’s not like it just came up over the last couple of years. It’s not a trend or a fad because of COVID or whatever the case is. She’s been doing this for 34 years. She had probably 75-plus different RVs there to rent. I ended up talking to her for 2 to 3 hours about her whole business. She gave me her whole playbook. She ended up leaving me with this packet that I could take home. She told me a ton of stuff.
Being the entrepreneur that I am, I was like, “This is scalable.” From there, I’ve decided that I do want to scale. I still need to figure out the logistics and exactly what that’s going to look like. We’re heading into winter here in New Hampshire where I live and that’s not the greatest time for RV rentals. I have a little bit of time to figure it out. Come springtime when the weather starts to get warmer, I wouldn’t be surprised if I ended up buying 5, 10 of these and start to scale it into a full rental business.
I love the vision and the forward-thinking on that. Maybe your next step would be to go buy the whole dealership from the lady and say, “If you want to cash out, now’s the time.” Let’s talk a little bit about RV deliveries, metrics, year-over-year change. Have you done any research on that through the pandemic and afterward?
Not much. Honestly, I didn’t put as much research into the model of RV rentals before I did it because I was doing it for myself at first. I wanted one that I could take on the weekends when I needed it. That was it. From there, I’ve done a little bit more research. I learned a lot from this lady. Seeing that she’s been in business as a small business, doing this for 34 years where I live was enough for me. I could get into more data, details and things like that but that spoke volumes to me.
I ended up zooming out from there. I hadn’t even thought of it but there’s Cruise America and all these other massive publicly traded companies that do hundreds of millions of dollars a year in revenue for RV rentals. I was like, “I can spend time researching this if I want and find the data of growth of this and that, but that’s enough of a validation for me.”
It’s not a new model by any stretch but I love that you can start small and keep tacking them on.
With $0 down too, that’s what’s crazy. That’s what I like about it. It’s $0 down to buy a $70,000 RV.
You’re assuming you can rent it out and cover the payment. You’re cashflow positive from day one.
The payment is $440 a month. It’s one rental a weekend. A two-day rental covers the mortgage payment or rental loan payment for the month.
Those are compelling numbers. I know this show is about you but one of the things that we’re investing in is boat and RV storage. To give you a little color and more fuel on your fire, RV deliveries are up 30%, 20/20 over 2019 and the same numbers again, 21/20. The demand is skyrocketing for things where people can travel by themselves, not on an airplane, with other people where they can go stay in the country and not worry about passports or flying. There’s so much activity in that space that you’re only going to see increased demand.
Your first real estate deal doesn’t have to be a home run. You’re not going to get rich off your first deal.
I’ve thought the same thing. I’ve looked into self-storage before as an asset class. There’s some big massive storage, almost like warehouses or metal buildings that store boats, RVs, special cars and things like that. I’m like, “I could do so much with this.” I can buy a building like that and do RV storage, boat storage, and run my own RV rental business out of it. I could buy a self-storage lot, have self-storage, and have another part of it that stores boats, RVs and things like that. Once I started thinking about scaling, there are many opportunities and the wheels have been turning in my head.
I love the creativity and the willingness to go do and explore those things. What are some of the things that help you get off the fence? You’ve probably interviewed and talked to a lot of people in your Real Estate 101 podcast where people have trouble getting started or taking that first step. What are some things that have helped you do that?
Defining the risk is what has worked well for me. That’s where a lot of people are hesitant because they’re worried about the downside and how bad things could potentially go. What I do and has worked well for me in any new venture I’d go in, whether it’s real estate, RVs, a podcast or anything I do, I think what is the downside. I define it and I try to minimize it as much as I can.
With the RV, we’ve been talking about that so let’s take that as an example. I could have made it riskier by getting a shorter term on the loan and that’s probably better financially. If you’re purely looking at it from a monetary or financial perspective, that’s probably better but this is brand new to me. I wanted it to be super low-risk. I went with a super long-term. The interest rate is pretty low. It’s like 5% so it’s not bad and the payment is $440 a month.
I said, “What is my complete downside here?” It’s $440 a month. I can swallow that if I need to. I can cover that for as long as I need to and I can deal with that risk. It was the same thing when I got into actual rental properties. When I bought my first one, I was nervous like anybody is. I said, “How can I make this as low-risk as I can?” My opinion of risk is your potential for loss of the property as a whole. The way you lose the property is if you don’t make your mortgage payment. I said, “Let’s make my mortgage payment as low as possible.”
My first rental was $450, $500 a month for the entire mortgage payment, taxes, insurance and everything. At the time I had a W2 job, I can cover that $400 or $500 a month until I can sell the property or whatever the case is if I’m an absolute horrible landlord. I saw my risk as super low. If you don’t go in, do that exercise and do that definition of what is risk and what could go wrong in every deal, then it’s going to seem scarier than it is. Define that for yourself and it’ll be helpful to help you move forward.
It’s a lot like kids who are worried about ghosts under the bed, “What’s under the bed?” It’s like, “Let’s put a flashlight on that. What do you see down here?” “Nothing.” “Good. Let’s move forward.” That’s fantastic. Robert, I’ve enjoyed this. This has been great. You’ve shared a lot of good nuggets here with our guests, broken it down the way you think, and given us some good take-home action items. I love to see entrepreneurs in action. I appreciate you coming on. I’ve got the final four questions here. The first question is this. If I gave you $20,000 to invest in real estate with no previous real estate investing experience, what would you do with it and why?
I would house hack 100% without questions. That’s simple. It’s the most powerful strategy there is.
Question number two is if you could help our readers avoid one mistake in real estate, what would it be and how would you avoid it?
The biggest mistake is not getting started. To avoid that is to get your first deal. I wish I could give them credit for this but somebody said they never see people only do one real estate deal. Typically, if you do one deal, you do more. You do multiple. Your first deal doesn’t have to be a home run. You’re not going to get rich off your first deal. Get your first deal done. That’s the way to get over that.
When it comes to investing in the world, what’s one thing you’re doing to make the world a better place?
I try to give back as much as I can, both to people in the investing and finance world but also everyday people. I launched my own nonprofit that we’re trying to get off the ground.
Robert, if our readers want to get in touch with you, what is the best way to do that?
The two best places are Instagram or Twitter. My username is @TheRobertLeonard. I’m super active there. I’d be happy to answer any questions and chat with anybody if they have anything they want to talk about.
Robert, thank you so much for your time. I do appreciate it.
Thanks so much for having me.
Important Links:
- The Investor’s Podcast Network
- Real Estate 101
- Millennial Investing
- We Study Billionaires
- YouTube – The Investor’s Podcast Network channel
- Twitter – Robert Leonard
- @TheRobertLeonard – Instagram
About Robert Leonard
Robert is the VP of Growth & Innovation at The Investor’s Podcast Network, Podcast Host of ‘Real Estate 101’ and ‘Millennial Investing’, ex-W2 Accounting and Finance professional, as well as a stock and real estate investor. He earned an MBA in Accounting and Finance, a BSBA in Finance and Economics, and is a Certified Management Accountant (CMA).
