Transcript
the way that my entry happened into real estate and it was a very slow process. So in 2003 I'm running a technology company. We're doing really well. We have a huge number of employees. The company's making a lot of money and the senior partner in the company I'm a junior partner in the company says he gets angry because we had a lot of technology students and they were ruining GM's carpet.
General Motors basically we were we were tenants in their building and he comes to me and says Neal we are not going to be tenants anymore. We are going to build our own campus. We have money. I'm like okay Paul let's let's go do it. And he's like no you do it.
And I'm like Paul no no no you you're an expert in these kinds of things. Why don't you do it now? And he's like no no that's fine. You'll learn. I have this uh this general contractor who's retired.
We'll hire him and he'll give you advice. And I was terrified. I'm like, Paul, I haven't even rehabbed my own home, a campus. You want us to build a campus? I don't know anything about this.
He's like, no, you'll learn. It's, you know, it's like learning anything else. And so, while we're running a company which is growing and we have hundreds of employees, basically, we run the company from 9 to 6 and then we're working on designs. And I have to say Paul was phenomenal. He was a a great mentor.
He knew so much that it was easy to learn from him. We're doing architectural renderings and designs and we're talking to general contractors and it was a surreal experience. It was terrifying and super interesting at the same time. Can you imagine the portion of my math brain that's having a blast because I'm looking at an architectural drawing and all these numbers are in there and I'm like I understand everything right? It was phenomenal to be able to see something that is so mathematically complex and it was very exciting to me.
So we go out and we build this campus and once we're done with this campus I I I had a little piece of that campus and so I started noticing that my um my taxes were going down right I live in taxonia so my you know my I'm paying 50% of my income to the IRS so I'm effectively working for the IRS and I start noticing that as I the more I'm getting into real estate the the less taxes I'm paying because of this wonderful thing called depreciation or paper losses. You know that's how Donald Trump doesn't pay taxes. So I'm over time, my my income is going up and my taxes are going down. And for somebody like me who's math-based, this is incredible. So I'm like, well, how do I 5x this?
How do I 10x this? How do I 100x this? So first, of course, because my income is going up and my taxes are going down, I have more and more money saved away. And then my timing is absolutely incredible because I'm getting to the point where I'm super comfortable with uh real estate in 2008. could not have picked a better time in an entire century for me to have lots of money and confidence in saying real estate is going to be something that I'm going to do.
Now, I'm not thinking about doing real estate for other people. I'm not thinking about doing it as a career. I'm just simply saying I'm going to do more real estate and have all this money stashed away. And it's 2008 and this and and you know and the the the key was everyone in my family that I was talking to thought I was completely insane cuz in 2008 if you said something positive about real estate people looked at you in a in a strange way. But the quant side of my brain is saying I need to gather more data because I have a feeling that this may be the greatest time in history to buy real estate.
Data can tell us a huge amount about real estate investing. A massive amount. And at the surface level, I see people using the information. Somebody's, you know, evaluating a home. They open up an Excel spreadsheet and they look at the rents and they look at the cost of rehab.
I get that. I get that. And that's that's awesome. That's fundamental. But you don't know how this home you are looking to buy as a rental, how it competes with 80 million other homes in the United States.
There's 81 million single family homes in the US. So, you don't know how it competes with that. So, you just simply assume that I'm going to make money. Well, that's enough for most people, but a a person like me, I would be driven mad by that because I'd be like, well, I need a way to compare this to not just the home next to it, but I need to compare it to every other home in the United States because I'm a data scientist and we use big data. And so, you know, we start immediately thinking, hm, where do I get information on 81 million homes?
And what what information matters? What really matters is demographics, right? Job growth, population growth, income growth, home price growth, crime reduction, quality of schools, construction costs, permits, how anti-new construction our cities, all of these affect your profits. And any landlord, none of the no landlord that I've ever met except for the quants that I know have ever actually even thought about these that this is really affecting my destiny. What people think is, well, I bought it at the right time or I bought it at the right place.
But you actually don't know that it's the right time or the right place until you do all of the things that I mentioned and a bunch of other things that we can get into. And so people intuitively credit themselves for it, right? Because real estate does go up over time most of the time. So people basically are like, I picked the right time. I picked the right place.
Actually, statistically, most people don't pick the right time or the right place. It's just the fact that because of inflation, because of the fact that we are printing large amounts of money, real estate tends to go up most of the time and people feel like heroes. My goal was I want to actually functionally look at the United States as an ecosystem of apartments and homes and I want to fully understand why that city in Wyoming is a lot better than this city in Idaho. Right? And then I don't just want to understand if this city is better than this city.
I want to know why this city is better by than this city and by how much. Is it 16% better? Is it 200% better? And how does that translate into pockets uh into my into my pocket, right? How does that translate into profits, right?
And and that became an obsession starting 2008 and sort of started snowballing over time as I started publishing data. I think fundamentally we are creatures of emotion. So just because there's a a side to my brain calculating all the time doesn't mean that I'm any less emotional than other people. And I find that we achieve mostly when we're on a mission, when we feel emotionally tied to what we're doing, connected to what we're doing. And so what I found is when I had this aha moment in 2008 that I was learning something about about American cities and I I was always fascinated with American cities.
So just learning about every state in the union, every city was exciting in an an unusual way. I felt like I was there. I felt like I was in Wyoming or Idaho looking at these places. And that excitement drives you to a completely different level. You suddenly become high functioning.
And for a different person, it could be completely different. So I become better when I'm delving into these sorts of things. And most importantly, I'm sharing it. So I've never ever charged a penny for my data. there's somewhere between 50 and 100,000 people using the data that I publish.
And the most common question I get is why don't you charge for this? And my question is, if I charge for it, then less of you will see it. And that's a problem for me emotionally because my goal is to get the data out there Wikipedia style, right? And and give it to as many people as I possibly can. How can I achieve that goal if I charge for it?
So, I think having an emotional connection to what you do is what makes us high functioning. I think Elon Musk truly wants to save the world. I'm not a particularly fond of his management style. I think he truly believes that having a a a base in Mars fundamentally makes mankind more secure if something happens. And I think that makes him better as a person and better as a as a manager of other people's