Podcast 152. The Power of a 30 Year Mortgage with Adiel Gorel

Average Joe Finances:
0:00

Hey, welcome back to the Average Joe Finances podcast. I'm your host, Mike Cavaggioni, and today's guest is Adiel Gorel. So Adiel, I am super excited to have this conversation with you today. Thank you so much for joining me.

Adiel Gorel:
0:12

Thank you for having me.

Average Joe Finances:
0:14

Yeah, absolutely. Hey, I wanna start this off the same way I start every podcast episode, and we wanna know more about you. So if you could share a little bit about yourself, share your story, who is Adiel?

Adiel Gorel:
0:25

Okay, I actually chose to travel the world for a few years. In my twenties, before I started all my schooling, I had a notion that if I don't do my heavy world to travel years at the time, money or no money, I didn't have any money. In my twenties, it wouldn't happen. Who knows, my thirties, whatever. So after doing all of that, I started getting my degrees in high tech. Electrical engineering and computer science. I came to the Bay Area, the San Francisco Bay area, to go to graduate school at Stanford University in EE and CS. They saw that I love to teach, they asked me to teach some courses in CS. I enjoyed it greatly. Then I got my first real job, at Hewlett Packard Labs in Palo Alto I was living, maybe a mile and a half away from the Stanford campus. Now, two things happened when I got that first job at HP Labs, number one, they were paying me so much more than Stanford. It wasn't even funny. I was a young man and I thought I was paid enormously high. Very nice. Then I looked at my colleagues and at HP Labs you have some people. Researchers who are in their fifties and sixties, and I thought, my God, they've been making this enormous salary for 30 years. They must be super rich. But when I got to know my colleagues, I realized, Not at all. They basically owned their own home in a 401k. That was it. So I said, there is no way that I'm gonna work here for 20 or 30 years and I'm gonna look like this. Now, I grew up in a family of real estate developers, and as a little child, I didn't care about what, my parents and my grandparents did. But I couldn't help but be exposed to the power of owning homes and apartments and all of that stuff. And so I said, okay, here I am, a young man, single, living in Palo Alto, getting paid very well. My credit is perfect. I'm gonna start buying rental homes right here in Silicon Valley. And the reason that took place is I started, get this, 39 years ago. So no, I didn't start when I was one year old, but I started 39 years ago. So that was in the 1980. In the 1980s there was an informal rule that said only invest within 30 minutes drive from where you live, never more so I did that. I was living in Palo Alto. I bought a house in Sunnyvale, which is in Silicon Valley. I bought a couple of places in San Jose, which is in Silicon Valley, and I very quickly realized if I wanted to build an empire, really built something, I couldn't do it in the Bay Area because even in the 1980, the rents were too low relative to the prices. So I said, who made up this rule about the 30 minutes? Why do I need to be within 30 minutes? Do I kiss the house goodnight? And by the way, if you wanted to kiss your house goodnight, you'll be encroaching on Lieutenant cr. It's not even legal. So why? I said, no way. I'm going to break the stupid rule. I'm going to go over it. Makes sense. In the 1980s I didn't have the web and Sergey Brin and Larry Page were in kindergarten. but I still had a lot of research I was doing at Stanford, so they had something called the ARPAnet. The first iteration of what later became the internet, A little research, and I saw if I went and I flew about an hour and a half from San Francisco, I will get to a smaller city. They called it by the name Las Vegas was the name of that city. And I realized if I go to Vegas, I could buy homes for a quarter of the price of the Silicon Valley homes, but the rent was more like half the rent of Silicon Valley. That was so much better. So I started flying to Vegas every weekend. It took me some time to get going. I was a young guy. I always looked younger than my age. Back then I looked like a boy. They were very skeptical. After a few months, I found a property management firm that I felt comfortable with. Obviously I needed one cause I was living in Palo Alto, California, and then a broker who was willing to work with this fresh-faced kid even though they were all quite skeptical. And I started buying with great gusto. I was always an aggressive guy. So in my first year, I ended up, 22 homes. Now before you get impressed by that number, and if you promise not to laugh, I'll tell you that the average home I bought in Vegas during that period cost $39,000. That's for the house.

Average Joe Finances:
5:17

Wow.

Adiel Gorel:
5:17

Not only that.

Average Joe Finances:
5:18

I'm not laughing. I'm impressed.

Adiel Gorel:
5:20

Okay. That was a long time ago. Not only that, but Fannie Mae back in the day. Didn't limit you to only 10 loans, and investors could buy homes with 10% down with PMI. And there were many circumstances where you could buy homes by assuming an existing VA or FHA Loan, putting literally just 3% down or 5% down, even as an investor. So now you can see buying 22 homes doesn't look very financially daunting. But I still did it. It was very different than many of my friends in Silicon Valley who were going to seminars and boot camps, and they never did anything. So at least I bought my 22 homes during that year. My Silicon Valley friends were laughing at me mercilessly, what are you doing? You're an idiot. Nobody buys far from home, especially in another state. Nobody has ever done it. You're crazy. You'll fail. You'll this. Okay. But after a year when they saw me with my 20 something homes, the logic of those engineers from Silicon Valley prevailed and they started saying, we like what you're doing. We wanna do it too. I said, you should go do it. Do it. It's a good thing. They said, you're already there with your managers and your 20 plus homes. How about you lead us? I said, oh, alright. So I led the group of about 20 engineers and together over maybe three and a half years, we bought roughly 250 homes in Vegas, not as a group. She bought six homes. He bought four homes. I bought two more. But we discovered something very trivial and yet useful. Even the engineer who was very timid, very conservative, bought just one little home as a test, enjoyed the clout, the power of 250 homes, because the service providers, the managers, the broker, knew that he was, if he was not happy, he would come to me and complain and I wouldn't be happy and every other manager in Vegas was calling me all the time. Come to us. We are cheaper, we are better, we are pretty, we are nicer. Who doesn't wanna manage 250 homes? So now you jump into the present time. That's way over 35 years later, and we are doing basically the same thing except on a larger scale. My investors bought more than 10,000 homes in about 30 markets. And out of the 10,000, about two thousands were bought by foreigners who live across the ocean and are really not expected to hop on a plane to fix the leaky faucet. So we have markets where we bought 2000 homes. Now I wanna explain what does it mean when I say we bought these homes? I discovered something back in the day that completely blew my mind. And to tell you, even though it's almost 40 years, I've not recovered from that piece of information yet. I'm still in shock. I discovered, and by the way, you realize that I speak with an accent, right? Sometimes when you speak with an accent, it's good because you were born, you came from another country. So you look at what goes on in this country with a fresh eye, whereas people who are in this. Look at stuff as if it's, of course. That's how it is.

Average Joe Finances:
8:35

It's always been that way. It's always been there.

Adiel Gorel:
8:37

I tell you, the sky's blue. Tell me something I don't know. Stuff like that. There is something that blew my mind entirely, and it only exists to the best of my knowledge in one country, in the world. That country, the one country is called the United States of America. And that's something, which to me is miraculous, illogical, non-linear, and maybe the biggest financial gift in the world needs to be utilized. And it's a future changer now because I've been doing it for 39 years. The results are in thousands of people retired powerfully, many became wealthy, send their kids to the best school, thanks to this one. That exists only in this one country. And when I tell you what it is, you'll say, tell me something. I don't know. It's the 30 year fixed rate loan. So let me just, illustrate how special it is by saying what happens when I get invited to speak in Europe. So here I am speaking to the Europeans and I tell them, My American investors can get a loan called 30 years Fixed and they say what does it mean? I said, what? Like the name implies the monthly payment principle and interest will never ever change, ever. It doesn't keep up with inflation. It doesn't keep up with the cost of living. It is fixed, even though if everything in the US economy keeps changing with inflation, this is one thing, the principle fixed. That's not the end of the story. Your loan balance, which goes down with principle payments on amortization, also doesn't keep up. The Europeans give me a very rough reception for this. They say, excuse me, sir. With all due respect, you don't know what you're talking about. It's not possible. I can't believe I drove a hundred kilometers. To hear you speak. This is complete nonsense, and we are gonna prove to you that it's complete nonsense. Just by logic. You have inflation in the US, right? Always. Sometimes it's slow, sometimes it's high. Always. 30 years ago you went to the movies in New York City for two bucks. Now it's 16 bucks. 30 years ago we bought a postage stamp for 4 cents. Now it's 56 cent. If you go to Whole Foods right now and you bought an Organica avocado, a nice looking one, it's gonna cost you now $2 and a quarter. We know everyone you know, in 10 years it's probably gonna be $4. Everything in the US economy constantly becomes, needs more dollars to buy, rises in price due to inflation. The cost you wanna tell us that there is a crazy entity bank person that in the midst of all this onslaught of inflation that never stops is gonna lend you money where you debt will never change with the cost of living. If that were. Inflation would become your best friend. It would actually erode your loan day after day, night after night. When you sleep, when you travel, it's relentless. It would be the biggest financial gift in the universe. Then they check on their phone, oh my God, you actually have a loan like this in the United States. The next question is always the same. If the Americans get this unbelievable. Why don't they all drop everything they're doing every moment and run and get as many of those as they can? My answer is always the same. I don't know, but I sure did.

Average Joe Finances:
12:16

Yeah. Adiel, I just wanna jump in on that because, I've talked about this a couple times on this show with other guests and everything, and one of the things that I love about when, cause a lot of people are like, oh, the mortgages and this and that with these interest rates and blah, blah, blah. And they don't realize the power of borrowing that money on yesterday's dollars now, when you were talking about buying those properties in Vegas. And I said I was impressed. They're $34,000, of course.$34,000 back in the eighties. 39,000, but back in the eighties, today is like buying that property for 150,000 plus, right? Probably more.

Adiel Gorel:
12:53

Yeah.

Average Joe Finances:
12:53

Yeah, probably more. I'm just doing quick math. And now. What, 30 something years now? That's a lot but if you took out a mortgage on that, let's say you took out that mortgage 30 years ago on a property that was, $40,000 we'll say. And you paid it off over that time period, right? Yeah. And at a 90% right. You only had to put 10% down, that rate that you were paying and that mortgage payment was the same, where at, your 25 year mark where somebody was gonna go buy that same property, they would be paying triple, quadruple the price on that monthly payment. as well as the actual price of the home. So when you think about it, you're still paying on yesterday's dollars. So when you have these 30 year fixed rate mortgages, it's one of the best hedges against inflation that you could possibly get and that's why when you had mentioned that inflation can be your best friend it can be if you own enough of these a hundred percent.

Adiel Gorel:
13:44

I think it's not just a hedge against inflation buying a house, buying real estate in general. Is already a hedge against inflation, right? Buying a house and getting the incomprehensible 30 year fixed rate loan is, goes beyond being a hedge against inflation. Inflation now goes to work all the time. Let me give you an example. The country that I'm from, about 35 years ago, they used to have a mortgage. That was 20 years fixed, just like then they had one year of a hundred percent inflation followed by the next year, 140% inflation. These mortgages disappeared in a couple of years basically, they went down to close to zero. Needless to say, they don't give these mortgages anymore, but this is what's happening here, except slower. It's unbelievable. Let me give you an example of what it looks like. The story I'm gonna tell you now, I have thousands of these stories. Thousands, so here's a typical story, root true story. I get a call from one of my investors, he's an engineer in Silicon Valley. He says, hi. I started buying with you guys in my forties and I started by buying just one home to see if it works. Cause I'm a busy guy in Silicon Valley. Wanted to see whether the management is doing it. So bought one, I put the minimum down, huh? Back there. Back when he was buying, you could still put a 10% down, with PMI. I saw it worked. Okay. I bought another one. I get paid well. I bought 19 homes. Again, not very daunting. I think at the time he was buying it in his forties. There were brand new homes in good areas, but he bought for about 150 or 160, putting only 10% down. He bought 19, he said last year I was 55 years old. I looked at my 19 homes and they all still had 17 years left. On the 30 year term, not even halfway, but I noticed my average loan balance was only 26% of the value of the house, even though I started with the 90% loan, that's what inflation does to the fixed rate loan. In this example, in 13 years, the mortgage balance shrunk to 26%. Then he says, when I saw that all my 19 homes are pretty much like that, I sold four of them, paid capital gains, used the proceeds to pay off the little tiny remaining 15 loans, and with 15 free and clear homes, retired from my Silicon Valley job at 55. I have thousands of stories like this, so this is a long term investment, but the minute you buy a house and you get a 30 year fixed rate, You get it rented out. Your job then becomes to do the hardest action that a human being can do. Nothing very hard. You just, nothing, sit there.

Average Joe Finances:
16:34

Set it, and forget it. Just hold it.

Adiel Gorel:
16:36

Recession, boom, bust nothing. Just sit there and then you're gonna retire. Not next. In 10 years, 12, 13, 14 years. I also talk about people sending their kids to college. I say, look, you have a small kid. You buy one of these homes. You got a 30 year fixed rate loan. You don't even have to pay it off in 15 or 16 or 17 years. Inflation will make it like a joke. Then your kid gets to college age, refinance, or sell the house, pay the taxes, it'll send the kid to college. Then I make the stupid job. And if you wanna send them to Harvard with a Porsche, buy two houses and everybody laughs at my stupid job. Not you, but every No I'm kidding.

Average Joe Finances:
17:15

I'm laughing, but I'm on mute.

Adiel Gorel:
17:17

No, you're laughing on the inside. Turns out I was wrong. I have an 18 year old senior in high school. He wants to go to Stanford like his dad. He's a good student and I'm an alum. He might be accepted. I can tell you they're not gonna gimme any, One of my homes, not two. One will send him to four years at Stanford room, board, and tuition and leave a hundred thousand. Not that I'm buying him Porsche. That'll make me a bad father. I bought him a used 2008 Toyota Camry, but it's powerful. It's future changing, but not tomorrow. Not next year. If you give it a decade, 12 years, 14. It will change your life. So that's pretty strong stuff.

Average Joe Finances:
18:00

Yeah. Adiel. So another thing that I've talked about several times on this show about the real estate game itself is not a get rich quick thing. It is a build wealth over time thing. We're talking, you should be looking 5, 10, 15 years down the road, right? Because like you said, if you have a 30 year fixed rate mortgage and then 15 years later you take a look at how much of that balance compared to the actual value of your home. It's probably gonna be down in the high twenties, right? High 20%. And the other thing about the the inflation piece, like if we're sitting here having 7, 8, 9 percent inflation every year, and my mortgage is 2.25% right now that I have on my current home, I'm making five, six, 7% a year just because I'm holding this loan and people are like, oh, you're still paying 2.25% in interest. No, I'm making 5, 6, 7% off of inflation. So that's the way I look at it.

Adiel Gorel:
18:56

And I wanna refine this point. Some people tell me, but I read a book called The Bankers Secret, who tell me the secret. When you get a 30 year loan, you pay hundreds of thousands of extra dollars in interest. What they forget, one little thing called the time value of money. Much of that is money from 28 years into the future. Pennies right now. So I wanna refine the point even a little further. Last year, interest rates for homeowner on 30 year fixed rate loan got down to about 2.7%. Investors is all higher. Got down to about 3.5. If you paid a couple of points, maybe three and a quarter. This year, right now, as we are speaking, homeowners rates have gone up to six and investor rates are closer to seven people think the sky has fallen. Everything has gone to hell in the 39 year I've been doing. Six or 7% is some of the lowest rates in history. Still most of my career, if you told me you're giving me a loan at seven and a half, or I would be dancing for joy and now I wanna refine the point. Remember the homes I bought in Vegas when I started now that was in the 1980s. The interest rates were, and I'm glad you're sitting down 14%, one, four. And I put only 10% down with PMI. You don't have to be a great mathematician to realize every single home I bought my first 30 homes, I think started with the negative cash flow. Negative, but I read in the book Fact and Thin and they said, only cash flow. Really? I knew every home started with a negative. Now I was a single guy, low expenses, highly paid in Silicon Valley. The negatives were nothing to me. I could handle them, but I had a very clear picture in my mind to dates negative tomorrow, which could be a year or two, whatever it is. My mortgage payment is the same. The rent keeps up with inflation, on average, it'll become break. The day after tomorrow, another couple of years. Pro be positive, then more positive. More positive. More positive, exactly what happened. And then I could refinance down to 12% and all the cash flows became, and then came the happy day. All the media was going insane. Single digit. We all ran out breathlessly and refinanced to 9.95, what a day that was, and everything became super positive. So people are crying the blues now that it's 6.75 for investor. Remember, it's a fixed rate loan. The rent keeps go. By the way, rents throughout the country now are rising pretty well in most markets because the media always needs the headlines. So the Ukraine boar the Ukraine War. I said, the Ukraine boar is starting to be a little boring for the media. We need something else. Covid. Oh, so boring already. So now what's the fresh, hot thing to say? The housing market is dying deteriorating. Okay, so they're scaring a lot of would be buyers. So when somebody has been scared to be a buyer of a home, they still need a place to live. Now they wanna rent. So that media scare is now translating into amazing demand for rentals, and the rents are going up nationwide and the vacancies are going close to zero. So rents are going up, mortgage payment will never change when you buy a home like this, a rental. Two forces begin to work. One, we already said inflation relentlessly. The second one, you are not making the payments on this mortgage the tenant is making it. That is such a formula to get wealthy. I'm so frustrated. I read about basketball players who make several million dollars are not the eight year one. They make five, 10 million, 12, then they get poor later on. If they only came to me and invested in 20, 30, 40 homes, they would be in great shape.

Average Joe Finances:
23:01

Yeah.

Adiel Gorel:
23:02

This is very serious. It's not a joke.

Average Joe Finances:
23:04

Yeah. So ca cash in the bank just disappears, if it's just sitting there, it's and the thing is, even if you just let it sit there, it's gonna disappear. Just based off of inflation alone. The interest you're gonna get from letting it sit in a bank account is, 0.01%, right? Versus the 8, 9% that you're losing a year in inflation. So you are effectively losing lots of money every single year if you're just letting it sit in a bank account. Buying these cash flowing assets that are actually putting your dollars to work, that's the most important thing. So actually speaking of that because you made a great point about how when you first started, a lot of the properties you were buying were not cash flowing, most people now, right? Because it is if you're trying to bank on appreciation, it is a gamble right now with the way the market's shifting around. So people wanna focus more on buying cash flowing properties today. So where can, at least from what you've seen, cause you've got a lot of experience with this in several markets, right? Where can people find like these actual cash flowing properties today?

Adiel Gorel:
24:03

Actually, I would like to warn our viewers and listeners about the notion of cash flow.

Average Joe Finances:
24:09

Sure.

Adiel Gorel:
24:09

People read in all these books, tall uncle, short uncle, whatever, they read about cash flow and then they are determined regardless of what goes on in the real market to get cash flow. So I actually. I'll start by, I hope you don't mind sharing my criteria of where I even buy where I think you should, everybody. I've been a student of the demographics in this country for nearly 40 years. To me, I buy the Sunbelt states. That's where the demographic wave is going strongly now and into the future. So these are states like Nevada, Arizona, Texas, Oklahoma, Louisiana, Alabama, Georgia, Florida south. I don't buy in the Northern States. Second, I like to buy in a large metropolitan area for job diversity, industry diversity, and then I always like the suburbs, families, kids stable. The suburbs became the darling of the US economy during Covid because many people could work from home. They saw the lockdowns, they wanted a house with a yard in the suburbs with room for a home office. But they, I like them from the very start.

Average Joe Finances:
25:12

Yeah, we saw a huge migration with the pandemic.

Adiel Gorel:
25:15

Yes. It took me a few years when I began to realize buy brand new homes. I even wrote an article for Investment magazine, the benefits of buying brand new homes. There are only pluses, no minuses. So to buy brand new homes of quality today in the, in a quality suburb of a good city with the rates the way they are. It all depends on how much down payment you put. You put a higher down payment, you'll have positive cash flow. If you wanna put a minimal down payment today, it'll be either a breakeven ish, slightly positive or slightly negative. But people fall into the following mistake. They say, no, I'm determined to buy for cash flow. So they go to a bad city, a bad area, even crime ridden. And they buy a bad house because on paper it says, I bought the house for $60,000. Yes, I fixed it up and it'll rent for 900, and that's gonna give me cash flow On paper. Life, as you discovered, doesn't happen on paper after the third drug dealer kills the second smuggle. It's not gonna look so pretty and the cash flow is actually gonna be horrible. And I get people crying to me so many times. I wish I never bought it. I can't get rid of it. This junk, people buy junk because of the notion I need cash flow right now. But you don't. If you are a younger person, younger to me, could easily be in your fifties too. Forties. You work, maybe your spouse works. I look at you. And I say something that may sound a little harsh. I don't care about you right now. I care about you in 12 years. That's when I care about you. Right now, you have a job, you have a business, you might be married, your spouse does this or that. That is the cash flow in 12 years, the houses can retire you completly. But right now it's only a notion in your mind, do not fall into the trap of buying junk, because on paper it shows cash flow. I can give you an example that's almost extreme, but it's true. I worked with a couple in Silicon Valley, both in their, early forties. He was a high level manager at Google, making about 750,000 a year. She was a mid-level manager at Facebook making about 400,000 a year before bonuses. Both of these. So together they make a million whatever it comes out to be. 1,000,000, 150 plus bonuses, a million and a quarter. And they're buying house with me and they say if we buy a house in that suburb, it's gonna be $54 a month better on the cash flow, so we should go there even though it's not as good. I said, have I misunderstood? When you told me that you make a million and a quarter per year, do you guys have problem buying food, buying transportation? Do you have any issues that they got? They've already bought about 40 houses and they forgot the stupid notion of cash flow. And by the way, many of the homes that they started buying several years ago started breakeven is cause they put the minimum down. Now are positive. That's a very important lesson by quality. notion of location is important by quality. Buy new regardless of the cash flow initially. So long as you can. If you put a larger down payment, you'll get a better cash flow. But since I've been doing it for so long, I meet you. Let's say you start with us today. You've already started, of course, you are very experienced. But when people meet me, let's say 12 years later, 14, 15 years, they tell me, oh my God, my 16 homes retire me. My 22 homes retire me, my 9 homes retire me. Every single person without fail. Says the same thing always. I wish I'd bought more because later when you look at it, 12 and 14 years, it's a linear equation. If 10 homes make you wealthy, to the tune of x 15 homes is X 0.5, 20 homes is 2 x. It's very harsh. Everybody says I should have bought more. So when people put a bigger down payment. To get a couple of bucks of cash flow, they could have bought two homes instead of one, which later I bought hundreds of homes. I still own well over a hundred homes. I say I should have bought them. I say I shouldn't have sold something always in the future. You always say, I should own more. These things are very serious, so if you work now with a job, that's your cash flow. If the house starts out 200 a month negative. But you and your spouse make 160,000 a year and you, it's meaningless in a couple of years. Maybe even in one year, it's gonna be break even on.. Average Joe Finances: Yeah. As long as you could handle it. That's the important part. That's the key part for those, you listening right now too don't jump into something that's gonna be negative cash flow if it's actually gonna hurt you. That's what Adiel is talking about. So it's what's your comfort level? What are you comfortable with with. The actual cash flow itself. Do you need it to be positive? If you do, then you gotta that, find that right property, but still keep it something that's good. Not, lowering your standards because on paper it's gonna look better. I've seen a lot of that too. People are like, oh I could just, if I go buy over here, it might not be that great, but I'll fix it up and it'll cash flow this much. Yeah, that's fine. Until you have the tenant that decides I'm not gonna pay rent anymore. Now you're evicting and now you're doing all this other stuff. Or, or there's a higher crime rate and people saying. I don't wanna live there. You have that vacancy now and nobody's wanting to move in. So it's tho those, there's always factors that you have to take into consideration, but actually. I have a name for all those people who come crying to me. I call them the cash flow casualties. And by the way, people that's fair carry notions. They carry notions from the 1970s and the 1980s. People call me and says, I heard that I should only buy based on the 1% rule. My rent every month should be 1% of the value of the, Hey. That was true in the 1970s. Maybe the 1980s, it's still in the training materials of people who don't do a whole lot and just train. But if you go to a quality market right now and you buy a brand new, beautiful home for 250 or even $300,000, it's not gonna rent for 3000 a month.

Average Joe Finances:
31:39

Right.

Adiel Gorel:
31:39

Maybe it'll gonna rent for 2200 a month, but the 1% rule has led so many people to buy so much junk that it almost is hurtful these.

Average Joe Finances:
31:49

No, that, that's a great point. That's definitely something to consider. Adiel, I wanna transition this into something that I call the final round where I'm gonna ask you four questions. It's the same four questions that I ask everybody that comes on this show. Because this, you've actually made my job very easy. Like a lot of the stuff I wanted to talk to you about, you just came out with it. As you were going, I was able to get a couple questions in there, but Exactly the type of information I was looking for. But with this, it's the same four questions that I ask everybody that comes on the show. It's more of a, not so much hard hitting questions, but thought provoking and, and what kind of things that you've done when you've been put under pressure. So if you're ready to go, we'll get that party started.

Adiel Gorel:
32:22

Ready to go.

Average Joe Finances:
32:22

All right, let's do it. So the first question in the final round is, what is the biggest mistake you've ever made in real estate investing?

Adiel Gorel:
32:30

My biggest mistake is not learning fast enough, what to do during recessions. So I've been through three of those and it took me some time to learn. Actually, this lesson from here could be useful to our viewers and listeners. So during recessions, let's take the last recession, one of the worst ones, 2008. I'm gonna use a numerical example. Somebody bought a house in Phoenix, Arizona in 2002 for $150,000. Brand new. They put only 10% down with PMI. It was possible in 2002. So they had the loan of 135. Then came the big boom of 2004 through 2006, and the value of the home shot up to $320,000 while the loan was only maybe 131. Then came the recession 2008, and the value plummeted to $100,000. 100, and the loan was maybe 128. So now the house was under. The loan is 128, the house is 100. The solution and what needs to be done at this point is once again, the hardest action for a human being to do nothing. And actually, I discovered through the cycle that I've been through during recessions. Very unintuitively, rents are actually more stable and here's why. Suppose you have a rental home and the family was planning to leave you at the end of the lease and buy their own home. Now there's a recession. The media that they say, honey, we are not gonna buy a home. We're scared. Maybe I'll get laid off. So they stay in rent, multiply this by millions of cases, and actually the rents are very stable during recession. Your job is to do nothing. Some people say, oh my God, I'm underwater. No, no foreclosure. Let it go. Let my credit go. So I got rid of way too many homes during a recession because of those kind of fear, and it took me along. Now let's go back with the same example. So they bought the house for 150. Loan was 135. In 2008, the house was worth a hundred. Loan was 128. If they did, Today that home is worth 550,000. The loan is a tiny fraction, but if they gave it away, so my regret is how I behave during recessions, letting go of things I shouldn't have. And number two, every single property I have sold..

Average Joe Finances:
34:57

Sure. Yeah, absolutely. Okay my next question ties into that, right? And and is probably gonna Pull more of that information out. But what is something that you've learned that you wish you knew when you first started?

Adiel Gorel:
35:08

I would say buying brand new home. I already touched upon it. When I began. I was a cash flow cowboy just like everyone else. Those first dozen or two homes in Vegas were so I still own about seven or eight of them. They've done well, but they would've done a lot better. I discovered brand new homes. I wish I could learn to buy brand new homes in good areas from the getgo.

Average Joe Finances:
35:32

Yeah, that's fair. That's fair. Okay okay, so the next question I have is gonna also tie into this, right? So the brand new home thing, right? That's what you one of the things you wish you knew back then, right? So what kind of tips or tricks do you recommend to someone that is just getting started today?

Adiel Gorel:
35:50

By far? The most important rental home you will ever buy is your first one. The first home, encompasses all your question marks. Maybe you're married, your spouse's question mark. Maybe you are young, your parents skepticism. Buy only one home. Focus on the one home. All your question, maybe visit the market. No, look at the market. Get it, one. I get calls from people in Silicon Valley sometimes saying, I just sold the company. I wanna buy a hundred homes. So how about you buy one? One, buy that for when you break the ice, your confidence level rises. Home, number two is just a repetition of the same process. Home number four is downright bore.

Average Joe Finances:
36:34

Awesome. No, that's great. I appreciate that. Okay. The final question of the final round, and I'm gonna preface this with besides your own but do you have a favorite business investing or real estate related book or podcast or both?

Adiel Gorel:
36:47

I have to say I've written several books myself, so very naturally I put the best information I can. The book I put on Amazon last year is up to date and it's called Remote Control Retirement Riches by Adiel Gorel. It unfortunately it got to be an Amazon bestseller and I believe it would be a useful reference. I didn't really use a lot of books in my history. This book came from my practical experience. I'm sure that there are many other great books, out there. I think there is a guy called Nickorson who wrote a book decades ago How I turned a thousand dollars into a Million. I think that those books are good too.

Average Joe Finances:
37:25

That's actually a children's book that I have my kids reading right now. How to Turn a hundred dollars Into a Million Dollars. That's the name of the book yeah, that's, Oh, fantastic. Okay, great. Thank you so much. Alright. Now that's it for the final round Adiel, but I have one more question for you, and it is the most important question of all because people are sitting here listening to you. You and I have this conversation and saying, you know what? I really like what this guy's talking about. I wanna know more about him. So where can people find information about you? Do you have a website you could share with us social media that anybody could follow or anything like that? I know you have a podcast, so please share that. That info with us.

Adiel Gorel:
38:03

My name is fairly unique. It's Adiel Gorel, so just looking me up. You'll find everything. But our website is called ICG. That's the name of my company. ICGRE Real Estate, icgre.com. For more than 30 years, we have a big event on a Saturday, once a quarter. Where I take hundreds of question, I bring the market teams from the markets and I bring experts. Those are usually live events, but from Covid. When Covid started, now it's by Zoom and we shorten them to four hours. They are on the website, so icgre.com. The last event was September 10th, just last Saturday. So under resources, webinars, You can watch it. It was just a few days ago. You can join a list that I have called the Quick list where I sent properties and updates, and I have decided. Look, I started it when I was 29 years old. I'm 68 years old now. Been doing it for 39 years. I could have retired very powerfully at 42. I chose not to. I love what I do, but I have balance in my life. So I make music in my home studio, which by the way, you can find everywhere. Spotify just puts my full name. I have a health and wellness podcast. You know the Adiel Gorel Show where I interview some of the greatest people in the world on that. And I love this what I do. So I will talk to people, I will talk to them one-on-one. I dedicate half my time to these meetings. All you need to do, send us an email info. Info like information info icgre.com and they will set up a meeting with me. I love talking about it. I'm passionate about it, and that's why I'm not retired.

Average Joe Finances:
39:52

Adiel. I greatly appreciate that. Thank you so much for sharing that with us. So for all my listeners, I will make sure that the, those links are in the show notes for you to find. So you can copy and paste and click, just don't do it if you're driving. But Adiel, thank you so much for taking the time to, to chat with me today.

Adiel Gorel:
40:08

Mike, it's been a pleasure. You're a great host. I hope to see you again soon.

Average Joe Finances:
40:12

Thank you. Thank you. And hey, to my listeners, thank you so much for joining me and our special guest, Adiel Gorel on the average Joe Finances Podcast. Go leave us a five star review and tell us what you'd liked about today's episode with Adiel. Aloha from Hawaii and have a great rest of your day.