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I think that I love the journey and the game of entrepreneurship so much that I have subconsciously sabotaged my financial upside to make sure I can play this a little longer because I fear if the numbers keep getting too big eventually it will take the fun out of it Tom very assaulted Gary B's attack on the real estate industry and Gary Vee made a response video well now we're going to respond to that to point out why Gary's real estate advice is actually pretty damaging to especially entrepreneurs the group of people he tries to target let's get into it and stay tuned to the end for my challenge for Gary Vee so here's a little background as far as what's been going on in January Gary hosted a real estate event that is an event dedicated towards real estate agents then essentially right after that went on a podcaster had a podcast guest where he slammed home ownership and said that he would never own a house again that he would rent in perpetuity well that left the real estate industry quite upset and wondering wait a minute Gary what exactly is going on here that's also when I came out with a response video towards some of the statements Gary made in this podcast which Gary has since responded to but now we're gonna take apart some of Gary's responses because I finally figured out why Gary is wrong on real estate you're gonna see exactly why people buy homes people buy fancy cars they buy and they go to college for one reason for significance here's the thing real quick let me tell you the difference between a Lambo and owning your own home I'm looking at some people here we're all looking at each other right you just don't know if you own the home or not like you don't have to know like I know you're driving a [ __ ] Lambo I see it but you live in a home I actually have no [ __ ] clue how much mortgage you have on that home do you rent it right I'm telling you this thing and by light this is my thesis to why it will fall I'm not saying fashion will fall fashion will never fall I got to show you that I'm wearing fly [ __ ] clouds and dirt or a Gucci bag or [ __ ] or an Under Armour's like that's we express this is where dairy makes his first fatal mistake he equates real estate to owning status symbol items like glam bows and watches and shoes are going to Coachella but that is the first mistake that I teach people about in the real estate investing course that real estate should be a matter of understanding the difference between guns and butter see Gary takes the butter approach and says hey if you want a fancy house a fancy status symbol then you should wait until you're 39 to 42 I believe that a lot of entrepreneurial on the offense 20 to 35 year olds should not put down payments on homes use that capital to build wealth and then buy their home at 39 42 44 because I have a funny feeling that home will look different seriously come on it's a kid at right Gary it's about the intention of buying a house you go into buying a house for an investment and you're gonna move around and acquire more property you're not trying to buy some fancy house so you can show it off like that social status symbol you think it is come on Gary there's another way here so let's clarify the difference a little bit of guns and butter or at least the theory of guns and butter the guns are things like stocks machinery and real estate things that can either go up in value or produce value somehow now of course it's important not to confuse assets with liabilities here there's a lot of the whole Rich Dad Poor Dad talk that houses or liabilities but it's very important to remember that assets things that produce value can have liabilities against them that is debt against them much like jewelry could have credit card debt against it and that's exactly what butter is butter is going to be that unnecessary expense those unnecessary pleasantries like those fancy shoes or fancy trips that you can't afford which again you can get dead on but aren't necessary because they're not producing you value much like the car that new car you'll really have that loot Jeep Wrangler that I really want as soon as I drive it off a lot it's going down in value that I want because I want it not because the producers value it's a butter item so it's kind of like things that go down in value are bad to spend money on and it happens to be that real estate over the long run tends to go up in value sure their ups and downs but you know real estate is an investment and people are always like I don't want to get tied down by the 30-year mortgage yeah but you got an asset that goes up in value so why paying off some debt big deal it's different kind of debt so let's top gun' house this verse butter houses well Gunn houses are those kind of houses that you can buy where your total payment after you buy it including money for repairs and fix up is less than what you would otherwise be paying in rent now all the sudden you've got a forced savings account and a property that can go up in value gun houses are also those kind of properties that you could buy in the wedge that is the day you close escrow with let's say your 20 grand downpayment you're already up 20 or 40 grand in equity that's buying in the wedge or you get into a such a good deal that you can rent out rooms and cover all of your payment's and house hack and basically live for free by owning and controlling real estate these methods or methods we talked about all of the tim and these are really good ideas for helping especially young people build wealth right away and over time this is in contrast to butter houses modern houses are those kind of houses in contrast to the gun houses the investment house where butter houses don't make mathematical sense the payment is way higher than what the rent would be they wouldn't make good rental properties because I have liabilities like pools spas or a lot of maintenance is going to be required for these houses and this is usually going to be your larger and fancier house that doesn't make sense for a long-term tenant anyway because they probably need buying they're usually those houses with excessive upgrades as well like that maple flooring that's super fancy and expensive or $30,000 in imported marble and all this junk that really doesn't matter when you consider a gun verse butter so that's Gary's first fatal mistake is he combines and lumps together butter houses with houses that could be gun houses or really good investment decisions that's also what brings up Gary's second fatal flaw that is using money that you could spend on a house in a business but Gary forgets that you can actually combine owning real estate as a tool to help you build your business faster and better 20 to 35 year olds should not put down payments on homes use that capital to build wealth and then buy their home at 39 42 44 because I have a funny feeling that home will look different and will take them out of the game of opportunities very homeownership is like the American citizens number one way towards passive income historically people want passive income while we kind of all want passive income yet the house has been the easiest way to produce that your payment stays like this and prices go up over time and Rebs go up over time I mean the difference is passive income and then one day it's paid off and it's all pacified and how else to explain this then to talk about my own example because I'm sick of hypothetical crap on YouTube let's give you a real example here at 18 years old I got my real estate license which what is real estate but a sales career and building a brand around your name and your reputation so on one hand I was starting a business you know on the other hand I was thinking well I should probably buy real estate as well so Lauren my wife and I we bought a house at 19 years old that was a complete fixer-upper needed to be gutted and well actually the kitchen wasn't even there so it was already partially gutted and we bought this house with just three and a half percent down that same 16 to 20 grand that Gary talks about starting with so her one hundred thousand dollar home ten years later I'm fascinated by what happens if she pays rent instead and has that 16,000 to go to work that's all and we took that money bought a really good deal of wedge deal house we didn't over and proved it we didn't overspend on it and all of a sudden a year after that we were able to tap into $150,000 positive net worth in the property through a home equity line of credit now let's explain that a little bit see I mean it's really like Gary is kind of saying if you want to be an entrepreneur you shouldn't own a house you should just go one way when in reality you could kind of do both like let's talk about debt I see business debt is really expensive you have three real options when it comes to business debt you have credit cards which we all know those are high fees high interest I mean you're talking 15 to 25 percent then you can get what are called business loans but those kind of sucked too I mean those are usually 9 to 15% I know because I've used all three types of business debt before then you have business lines of credit which the bummer about business lines of credit is they usually only let you go up to about 10 percent of whatever your gross revenue is so it's really hard when you're starting out to get a business line of credit and guess what those rates are like 6 to 10% so flip that to when we used our house to expand my business when I was 20 years old we look at any we go what making a home equity line of credit for 4 to 6 percent cheaper money safe for money than business line of credit debt because the terms are much safer much more beneficial and now what can I do I could spend on expanding the business I had already started growing the business I started growing at 19 with virtually no money what did I do door knocking open houses and spending time rather than money at first which really all entrepreneurs should start with this is why I call this a fatal flaw of Gary's he suggests no no don't buy real estate don't buy real estate where my quote is always buy real estate and then wait he's saying wait to buy real estate until you're 39 42 because then you can get that fancier house but I don't want that fancier house I want to control investment properties I want to build net worth I want to have tax benefits especially as an entrepreneur on the offense I want the access to cheap debt I want depreciation and and cash flow from rental properties to grow over time people think oh yeah real estate investing I'll just wait until I'm 40 to invest in real estate no start now so you can get on the ride of appreciation and start building that net worth and having that access to cheaper capital I think Gary confuses that significantly which is well it's kind of offensive to younger entrepreneurs because it'd be a great opportunity to build money and wealth over time and I'm not just saying that as a real estate agent because guess what the third fatal flaw is the third fatal flaw is forgetting that real estate enables you to save money in a manner that is basically forced when you pay off your loan every month you're forced into what's called principle pay down that's kind of like having a forced savings account and what is calm ferry tell us tom ferry tells us that people who save money over time have a significantly greater net worth gary encourages saving as well an amazing piece of advice for a lot of kids 50-year old Horace listening right now is accepting money is a good strategy right that's it the title is Gary v hey its passive income in real estate why because you passively saved when you own real estate and as soon as you convert it into a rental property what happens the tenant passively generates income for you by paying off your debt and your expenses on the property that is passive income at its best especially when you have a manager covering everything dealing with everything for you it's totally hands-off properties going up in value and the tenants cover your expenses that is passive income Gary Vee it's not recognizing that the biggest fad of the 2019 world is passive income and real estate is the easiest way to get passive income but the bottom line is people who don't own houses tend not to save money tend to grow money and spend it and that's a little bit of a problem now Gary also suggests that oh well you know I don't want people to think that people shouldn't buy a house because that's gonna hurt real estate agents sales or whatever and I get that I mean look I'm not trying to encourage you to buy houses to sell you a house just like I tell all the people in the real estate investment course don't sell your real estate keep your real estate why would you pay so many fees to sell one rather you could keep a property live in a house keep it living it meagerly use the property move keep that first property as a rental do it again and again and again so Gary here's my challenge to you how about we combined an entrepreneurial vision of gaining net worth and building a business with the same vision in real estate which can not only insulate business risk by owning safe real estate assets and investing in a correct way in the ways that I outlined in the real estate investing course but also using less expensive debt to finance business projects when we need to now the sudden building business net worth and building real estate net worth via rental properties and home ownership together at the same time thereby we can skip the kicks and instead buy real estate hey now if you've made it this far please leave me a comment below I really really want to know your opinion on sort of my public commentary on Geary B I really like Araby I support Gary Vee I just think he is missing the real estate investor perspective when he talks about real estate advice this isn't to say that he's a bad person for giving his opinion or me disagreeing with him and I don't think you're a bad person if you disagree with me but I would love to hear your comments because I think my channel is all about fostering debate and coming up with different perspectives so that we can as a society end up wealthier and better off together hit that like button smash subscribe and be part of the hundred thousand crowd before well we hit a hundred thousand because now we're at eighty nine point four according to the counter that's over there it used to be over there but now Chuckie is there yeah thanks
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