Financial education is not a strength in the US educational system. While this leads to many people not understanding how to create a system that puts them ahead in life, it gives you the opportunity to get a step in front of everyone by simply doing the right thing.

Adam Schroeder and Zach Lemaster are joined by Mike Cavaggioni, founder of Average Joe Finances, and talk about what people do wrong, what they can change about their habits, and how to create a life that ends up with YOU in charge.

Mike Cavaggioni is the Founder of Average Joe Finances. Originally from Long Island, New York, and now Living in Ewa Beach, Hawaii, he has served in the Navy since 2002. Parallel to his Navy career, he’s a licensed REALTOR ASSOCIATE®, real estate investor, and in-demand financial coach. He is the host of the Average Joe Finances® Podcast, which discusses how to create passive income from real estate.

Learn more about Mike and his company, Average Joe Finances HERE

Watch the Video Version by CLICKING HERE

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Transcript:

Adam
Hey, Rent To Retires, it’s Adam Schroeder here with another episode and I am once again joined by Zach Lemaster, the CEO and founder of Rent To Retirement. And we are pleased to be joined today by Mike Cavaggioni, the founder of Average Joe Finances. The website is averagejoefinances.com. And we’re going to talk about well, financial literacy and a lot today in his real estate journey. So, Mike, why don’t you just start by telling people a little bit about yourself kind of who you are, what you do, and how you became an average Joe, I guess.

Mike
Sure, thanks! Thanks so much. I think you know, for the most part, you know, most most middle class Americans can consider themselves an average Joe or average Jane, right. But I’m originally from Long Island, New York. I currently live in ever Beach, Hawaii. I served in the United States Navy for over 20 years, just retired recently. still technically in but, you know, retired nonetheless. I’m a licensed Realtor, associate, financial coach, real estate investor. And I also host my own podcast, which you mentioned earlier, the average Joe finances podcast. things for me kind of started way back in the day, before I joined the Navy. My uncle who worked for the state of New York, was investing in real estate, right. And he kind of put this bug in my ear a long time ago, his goal was to retire from being a corrections officer, right, and just drive around and collect rent. And that’s, you know, what he wanted his retirement to be? Which guess what, he did that. And that’s what he does now in retirement. And it always fascinated me and it you know, it had always been in the back of my head. So, when I was 23 years old, I went and purchased my first home, and in 2007, so yes, think about that year, real quick. 2007 I bought my first home. And it was when I was on recruiting duty in Charlottesville, Virginia. And the the house was in Waynesboro, Virginia, which is a small kind of little country town, about 45 minutes away, really not that much around there? Well, now there is, but back then, not much, not a good place to rent the property. And at the time, you know, it was like, you know, whatever, we’re gonna live here, we’re fine. I got orders to go back to Norfolk, Virginia, we wound up, you know, trying to sell the house didn’t work out, because obviously, you know, at that time, it was 2009. And things were a little bit crazy. So couldn’t sell the house, and we wound up renting it out. So I said, Okay, I got my first taste of being a landlord, I was losing three, almost $400 a month, just paying my mortgage versus what I was able to rent it for. So that kind of stung. But it let me hold on to the the house for a little bit longer. Anyway, fast forward a little bit, I had to short sell the home. And at the time, I thought I completely lost my VA benefit. Because I purchased the home with a VA loan. Well, you know, the preface to average Joe finances was this kind of put me in a financial extra mess, right? Where, you know, I was racking up credit cards, because I was paying my mortgage and paying for rent in Virginia Beach so I can keep my family together. And at the same time, you know, just trying to keep the house. So by doing this, we racked up all of our credit cards, which we had recently paid off, which we were so proud of. But we ran we maxed them all back out. And I said something’s gotta give and we went up short selling the home. So then I’m like, Okay, we need to figure out how to get rid of this debt. Again, because we’re at a, we’re at a point in our lives where we’re living in this apartment. We’re paying rent. And we’re going absolutely nowhere besides the little bit that’s getting put away into my thrift savings plan, which, which really wasn’t much, right. So we came up with a plan to eliminate all of our debt at the time, I was getting ready to deploy to Iraq. And I kind of knew I wanted to go to Hawaii next. And I said, Hey, if we go to Hawaii, I want to buy a house. We have to get rid of all this debt, we have to have money saved up. We need to make this happen. So we really, like knuckle down and my wife was really good about all this but we wound up doing the envelope system. And we followed Dave Ramsey’s baby steps one through three, completely paid off all of our consumer debt. In a two year period, we paid off over $20,000 of credit card debt, multiple personal loans, which I don’t even know what the amounts were. I should go back and look that up just you know, just to make sure but it was ridiculous.

Yeah, it was a bad time. You know, it’s those things you kind of block out and then we wound up saving $40,000 to have in the bank when we moved here. So we knew we were going to use our VA loan again right and When we got here, you know, I had a little bit extra cash that if we want to do any renovations or anything like that make the home hours, we can do that. So we get to Hawaii, and I said, okay, cool, got pre approved for a loan, and start the whole process, we found we found the place that we’re gonna move into, got, you know, we got it under contract, and then the VA comes back and says, Hey, you don’t qualify for a VA loan, because back in, you know, 2012 when you short sold your home, you know, this and that, and whatever you owe us $67,000, before you can get your VA eligibility back, and I said, Whoa, hang on a second. You guys never told me that, you know, I knew that there was going to be some type of ramification to short selling, right. But you guys never told me an amount or anything like that. They said, Well, let’s look a little bit deeper into this. So the VA goes and they start doing their research. And they said, well, the lender that you had back then didn’t file the paperwork until a day after the due date. So this is actually completely null and void. Congratulations, you have your VA loan benefits. So I was like, whoo, somebody’s looking out for me up there, right. So we wound up getting our VA loan, and we closed on our home out here in mid July. And after living here for about a year and a half, that old voice in my head, that bug started coming up again about investing in real estate. And I was like, Oh, I was like, I really feel like I want to do this again. Let me talk to my wife about it, and see what she thinks. And immediately, it’s the conversation went to well remember what happened, you know, in 2000s, between 2007 and 2012, do you remember that? I said oh, well, I remember that. I said our bank accounts remember that, too. So I was like I was like we need to attack this from a different angle and just forget that ever happened, right? So got got together with to two of my friends that I was stationed with the Roosevelt, amazing people, they already had a great portfolio going for them. And they said, Hey, why don’t you come over for lunch? Let’s sit down, you know, pull up a couple of deals that you’re interested in, let’s let’s run some numbers together. And you know, bring your wife over, let’s let’s you know, kind of get her comfortable. I said, Alright, let’s do it. So we go over, I bought them on lunch. And we sat down. And I showed them two deals that I want that I was interested in. Right. And both of them were good. But there was one in particular that they were like, You need to jump on this one. Right. So so we did we bought a duplex in Chesapeake, Virginia, got the wife on board, and we went we went in and did it. Now. We closed on this property in February of 2020. Guess what happened? The next month the world ended, right? So we were like, oh my goodness, Are we destined to just not invest in real estate because that’s what it feels like. So kept getting punched in the face with this stuff. But we made it work out. I had a tenant that couldn’t pay rent. And we we basically got them approved for this this Chesapeake home repayment or rent repayment program, right. And they went back paying all the rent that he owed and late fees. So we wound up cash flowing on that house about $950 a month. And we sold it a year later, which was which for profit, which was pretty nice. So we realized that the headache of trying to invest from Hawaii, back on the mainland was was very difficult if because we didn’t have a good team in place, right? So we said let’s look at something different. And I had been going to real estate meetups at this time, and started looking at multifamily investing. And that’s actually how I got involved in multifamily real estate, I took some of the profits from that. I also took some money out of the Thrift Savings Plan, they allowed us to pull money out without paying the penalty for the COVID relief efforts. So I want to pull money out of that and then invest in a couple syndication. So I’m currently in three of those right now. too long didn’t read. That’s my story of how I got involved in real estate investing.

Zach
Thank you for going through all that. I mean, it’s it’s good to hear some of the obstacles and challenges. I think a lot of people can relate to that, you know, especially as they’re first getting started. But I mean, what with your podcast average Joe, I mean, you guys are talking about just financial literacy and savviness in general, right. So it’s it’s not all real estate, it’s just kind of, you know, a broad spectrum, but I’m just kind of curious with, with the obstacles that you’ve encountered multiple times with real estate, and you’ve come back to real estate, you believe in real estate quite a bit. I mean, what what is it about real estate compared to like, or in addition to some of the other strategies you discussed and teach, and coach people on that? Really, you know, that you see beneficial and that keeps you on this course, even though you’ve experienced the obstacles that you have?

Mike
Yeah, so the the obstacles can be a little off putting, right but I looked at that as lessons learned, right? These were things that helped prepare me for where I’m at today. And there’s so many different ways to invest and put your money to work to the point where it’s actually doing it’s beneficial to you instead of just sitting in a bank account and wasting away and that’s those are some of the things we talked about. It doesn’t necessarily have to Be real estate, right? I have people that come on the show, we talk a lot about, you know, index funds or investing in the stock market. We’ve even had some crypto and NF T folks, come on, I still don’t know enough about that stuff to feel comfortable about talking about it myself. But you know, it’s good to see that perspective and see what other people are doing. And that’s kind of what we do with the podcast. But but me personally, I like to, especially when I’m talking when I’m working with clients and stuff, figure out what’s what they’re comfortable with, right? My main focus as a financial coach is to make sure that they are getting themselves out of debt first. And when I say debt, I mean, like, the bad debt, like credit card debt, stuff that’s not paying you back, you know, there’s a huge difference between bad debt and good debt. And a lot of people don’t know what that is. And that’s kind of what my goal is, as a financial coach is to help educate them on the differences between the two, right? So if you’re sitting here and you’re spending all your money on something, and it’s not paying you back, or it’s not, you know, giving anything in return. That’s bad debt. It’s not doing anything for you. You know, things have changed a bit, right? Like you used to think that buying a vehicle was just completely bad debt. Now, people buy a bunch of vehicles and they rent them out on Turo. And they turn it into a business. Right, and now they have an asset, even though it’s a little bit of a depreciating asset than assets bringing in cash flow. Right. And right now in in the current economy, you know, there’s some turmoil, right? There’s a lot going on, we just hit our second quarter of negative GDP. You know, the textbook definition of that would be that we’re in a recession, but it’s not official that we’re in a recession. Right. But when you when you look at what’s going on right now, and the rise of inflation, cash flow is one of the things that’s the most important thing for people to look at. Not appreciation, not growth, stocks, it’s cashflow, right, because those are the cash flow is going to be the thing that’s going to be a guarantee, right, it’s going to be your hedge against inflation, where, you know, appreciation, that’s a nice to have, and, you know, you know, stock growth, that’s a nice to have, but something that’s paying you right now, and putting money in your pocket right now that you can then reinvest or use for what your needs are, is right now, like in my head where we all as investors need to be focused on.

Zach
Yeah, I like the idea of, you know, when you’re talking about good and bad debt, too, especially in high inflationary environments, having good debt is even more important in during these times, right? I mean, it’s, it’s the inflation that causes the money to be that you’re borrowing to be worth significantly less in the future. And so that’s just a strategic thing you can do now, obviously, you want to borrow strategically. But yeah, having having a lot of leverage that, you know, you’re paying the bank back with future dollars that are worth less, you know, that that’s only expedited in a high inflationary type of environment. So just real quick, for the people that maybe there were in your position, or still are, you know, where you were two years ago? I mean, what are some practical examples you give to people that to get, I guess, get rid of the bad debt? You know, is there I’m sure you go through this, obviously, on a one on one with people, but just I mean, some real world examples of how to reduce your your bad debt?

Adam
Hope people filed at the wrong day, right? It’s a good way to get rid of that. [laughs]

Zach
You lucked out on that one

Mike
[laughs] Yeah. So one of the things that I like to talk about, and that has worked for me in the past is I’m very fond of the envelope method, right, but I like to do it, you know, instead of using envelopes, I like to use bank accounts, right? And do something called sinking funds. And what sinking funds is, is basically, you know, when you get paid, your money hits your account, and then you take that money, and you split it into several other accounts, that are dedicated for certain certain specific things, right. So you have an account that is made for paying off debt, you have an account that is made for expenses that are coming up that you know, that are coming, like if you have a pet, I mean, I have a pet slash vet account, right? That’s what we call it. We have an account for our vehicles, for maintenance, gas, everything comes out of that account. We have a fun, fun money account, right? This is for family activities and things like that. So you want to split your money into these different accounts. And then what you do is, you know, you’re paying off these chunks of debt as you’re paying it off. And of course, what’s very popular and I like to use this method too is the Debt Snowball, right? So as you’re you’re taking this chunk of money that’s dedicated for debt, you’re dumping it into the highest interest, right? Credit card or loan that you have, and you’re paying that down as fast as possible while making the minimum payments to everything else. Right. Once you pay that down, you celebrate that little victory, go out to dinner, have a good time, right, because you just did something significant. And I think that’s important that people actually celebrate these these small wins each time, because it helps motivate you to go to the next one. So What you do is after that, that you paid off that big chunk, then you go and do that to the next one, and so on and so forth. And you know, we call it the Debt Snowball. I like to say that the snowball gets out of control and turns into an avalanche. Right? And then you before you know it, you’ve limited your limited your debt, and now you have this money that you used to put into debt. And you’re like, I don’t know what to do with this. Well, guess what? Now time, you need to start looking at investing that money into different alternative ways to make money for yourself, whether that’s in real estate, whether that’s an index funds, it all depends on the comfort level of whoever we’re working with. Right?

Adam
You talked about kind of creating your network at the beginning, you had your your friends who you went to who evaluated deals, you know, they they looked at it, they talked with you, they talked with your wife, make sure everybody was comfortable with it. You know, obviously, people could include you in their network with the podcasts and with your coaching. But how did you know that they were the right people to go to in order to get their advice? Because I mean, you weren’t, you know, if you took their advice, and they gave bad advice based on what you were saying, You were out of luck, it sounds like so how did you know? These are the people I want in my network?

Mike
Yeah, that’s a great question. And, you know, for me, they were close friends. I had known them for a while, and I had been seeing what they were doing. I saw how they were investing. And I saw what was doing for them. And when I when I got to picking their brain and asking them about how they got to where they are, what they were doing it just everything made sense, right? Because they weren’t sitting here saying Oh, no, you know, you know, let’s go ahead and, you know, we’ll get you set up and everything and you pay us and we’ll get you taken care of there was none of that, right? It was just genuine conversation about how they did what they did. They showed me their portfolio, they showed me their rent rolls, right, they were showing me exactly what they were doing, which made me more comfortable and made my wife more comfortable when we decided to, to go in and go down this route. So I think one of the things that that people need to do when they want to learn about this stuff is gauge the person who you’re getting the information from and kind of vet them, you know, and just make sure that you know, they’re not just spitting out some information because it sounds good, because there’s a lot of fluff out there all over the internet, you see it everywhere, people will sit here and show off their cars or whatever. And oh, look at my, you know, MTV Cribs house type deal. But, you know, it’s it’s about the somebody being genuine, to me is what turns me on to wanting to listen to what they have to say. So going to different real estate meetups and learning from people has been super huge for me, going to conferences and learning from people that have done it, and are now sharing what they’ve done. Because it works. That makes sense to me, right? But then as you’re building your network, you’re gonna meet people that want to invest with you that want to partner with you. And you’ll meet really genuine people. And I would say, and I say this on my podcast all the time that 97% of the people that I’ve met in the real estate investing community are just genuinely good people, I would say probably about 3% out there are scumbags and you got to watch out for them. But usually, you can kind of smell them from a mile away. Because they, you can just tell. Right, you start to get that sixth sense. But networking is huge, right? Getting comfortable with the people that you’re around is huge. And make sure you vet whoever you’re talking to just don’t don’t just take information because it’s free. Right? And don’t just take information because it sounds good. There’s a lot of stuff that sounds good. So just be careful, you know how you’re consuming information.

Zach
Yeah, there’s definitely a lot out there. And I love the point about networking. I mean, that’s your your network is your net worth, we always talked about how really, I mean, what’s going to allow you I think, at least in my opinion, to be significantly more successful in real estate is is the people you surround yourself with more so than any any particular deal. So, I mean, this is something like in the coaching space, and this is one of the areas where yeah, sometimes you get some bad players and some, I mean, there’s all sorts of court coaching you can pay for, right? But coding that allows you to take your investing to the next level pays for itself. You know, I’ve hired coaches in early early on and still to this day for different aspects. And but yeah, being seeing people in networking with the people that are in the place that you want to be, and that are actually doing it. I mean, that’s very important to me. Gonna I just want to make one more comment too about your your debt analysis. I think, you know, that’s very creative. We’re talking about with like allocating expenses, and one way that at least we’ve like been able to pay off debt significantly quicker is just by, you know, having more income, right, having more side hustles or different ways to actually earn income to then pay off that debt. I was speaking with one of our family member the other day was talking like a younger cousin of ours that is looking to like, okay, they kind of get their first paycheck and it’s like, oh, well, I needed a nice car, you know, and I need this and I need this And we can have the conversation about buying assets to support your liabilities. And if you can connect with people early on, where they can see that, oh, I can cashflow I can use that same amount of money and say buy an asset like a house, that then we’ll pay that $300 A month or whatever we’ll pay for the vehicle. And then when it’s all said and done, you have an asset that’s growing your net worth. Unfortunately, a lot of people do that backwards. And I have a history in the Air Force, we see a lot of like the guys right coming in, and they just get their first paycheck and just goes, you know, it’s happening and, you know, lifestyle creep, and they just keep paying it off, or as if they would have, you know, bought the assets to support the liability, you know, just would have set them up for success at an earlier time. But it’s never never too late to start.

Mike
Yeah, Zach, I’m glad you said that. Because that’s huge. You know, especially you mentioned what you’ve seen in the air force, I’m telling you right now it’s the same thing in the Navy. It’s the same in every branch of military that I’ve talked to you see the guys that just joined, they go and they buy the new car, because this is the most money they’ve ever made before, you know, since working at McDonald’s, or wherever they were at before. And now they’re like, oh, man, I’m getting like $500 a paycheck? You know, actually, that’s more than what I was getting as a paycheck when I joined. Is it you one, but I think that’s what they get nowadays, right? And they’re like, oh, you know, I can afford to because I’m getting paid twice a month, I can afford a $500 car payment, and then I still got $500 left over. That’s like home, you know, and then they’re not taking into account car insurance or anything, gas, anything else that comes with that, right? And look at gas prices nowadays, right? You go get a you making $1,000 a month as a as an E one, and you’re paying $500 A month car payment, and then you’re paying for gas? I mean, what are you gonna eat? It Yeah, stuff like that is is. That’s the whole point of why I do what I do. And I think it’s super important to get it out there. Just to get financial literacy out there in front of people, there needs to be more and more avenues of this. And there needs to be, you know, more financial literacy and education in school and entering the military. I feel like, you know, we do ourselves a disservice by by, you know, saying, Okay, you take one course, and then that’s it. I was very fortunate at one point, I was doing a resiliency retreat before I deployed to Iraq. And they had a guy that came in, and it was a whole financial literacy course on the Thrift Savings Plan and how to, you know, leverage it and everything else. And then I learned how to invest into my traditional plan to lower my income to pay less to get lowered back down to the next lower tax bracket. I was like, Whoa, this is super cool. I know, I can do that. And now, there’s so many different ways that I’ve learned how to get down to the lower tax bracket, right. And these are the things that people need to learn, because it’s going to be the things that save you more money, but there was also something that you that you said to that is huge that I also talked about a lot is side hustles, right. Because besides putting your money into something to make you more money, there’s also a way to increase your income, so you have more money to invest. So that’s also huge as well, you know, don’t tie yourself down, and think that you only have to work your nine to five, and then you get to work that for the rest of your life. You know, you can turn your side hustle into your main hustle, which which I kind of did with with getting out of the Navy and and now doing this full time as a as a podcast host and a real estate agent.

Zach
That’s excellent. You talked a little bit about your one of your first investments, doing it at a distance. I’m especially being you know, I think you were in Hawaii at the time. Right? So this is quite a bit at a distance. Can we talk a little bit about that. I mean, that’s really what our business is, you know, the one of the big values is being able to have that already established team and system and identify the market of based on select criteria and systematic approach to investing in some of the different locations throughout the US regardless of where you’re actually living. But let’s talk a little bit about just, you know, the obstacles and kind of the mindset of investing out of state.

Mike
Yeah, sure. You know, and I’ll preface this with you know, I thought I had a team built right, I had a property manager, I had a general contractor, I thought I was good to go. What I didn’t realize is my general contractor was very busy with multiple other properties that he was working on at the same time. Same thing with my property manager, right. And when I only have one property with them, and there’s somebody else that has like 28 with them, guess who’s the lower priority? The guy with one property, right? So, you know that that became a little bit painful. And the fact that I did everything sight unseen, because when I when I purchased the property, I never went out there to go look at it. I did everything via pictures and videos that were sent to me by somebody else going to look at it for me. And I was paying people to go look at these properties and send me pictures, right? And I’m like, okay, you know, I think this is good to go. And you know, when there’s something about not having that, that real boots on ground, that made it very much less tangible for me. And, you know, it’s one of those things that I’ve learned. Again, it’s an expensive plus, it’s one of those expensive education’s that we pay for with these lessons learned But yeah, I think that’s huge to have a team on station to to make it happen for you, excuse me, is something that would alleviate a lot of that pain that I had to go through. You know, and sure you lose a little bit more cash flow, by doing it that way. But at the same time you’ve get you get that security, you get the fact that, you know, actually, I wouldn’t say you lose more cash flow, because the stuff that I wound up having to repair and fix and re-fix and re-fix and refix. Because I didn’t have a team established, I probably would have saved a lot more money if I would have had that established team. From the get go, you know, I’m saying?

Adam
Yeah, it’s amazing to me to hear going back to the previous answer that 20 year olds don’t make the best money decisions. [laughs]

Zach
You did, right? Adam? In your 20s? [laughs]

Adam
I was brilliant at 20. You don’t even know. So when it when you kind of started the financial literacy, what are some of the places you went? What are some of the either books you read or courses you took, that kind of helped you really get started that, you know, kind of click the light bulb? I mean, it sounds like maybe like a Dave Ramsey type program just to kind of get out of the debt that you were in. But then you know, not only just what you were learning to get out of the debt, but then to actively get into asset acquisition.

Mike
Yeah, absolutely. Great question, Adam. So, you know, yes, I did start off with the whole Dave Ramsey method and following the baby steps and quickly learned that once I got out of debt that this program was no longer something I was interested in. Of course, I read the purple Bible, Rich Dad, Poor Dad. And that kind of like lit a fire under me that I was like, I have to do this, like I need to make this happen. And after that, I read Richest Man in Babylon, which is actually my favorite personal finance book, like that you could ever possibly read. For some people, it’s hard to digest, because of the way it’s written. Again, it was written, excuse me, it was written in 1926. But at the same time, you know, the basic principles and foundations that it gives you is better than anything else I think I’ve ever read, right? Just when it comes to something foundational. So building upon that, you know, you know, learning that I needed to start investing in assets that were going to pay me instead of just putting my money in savings, right? Where it’s like a point zero 5% interest rate, and my money is basically just withering away. Inflation is chopping at it, like an axe, you know, taking down the rainforests, right? So there’s little things that you can do to get past that. So one of the things I’ve learned to do is actually start to leverage my debt. Right. So there was something that Zack said earlier, which, which is huge. And that is, you know, basically, you’re borrowing yesterday’s dollars, which is worth more than today’s dollars, right. And you get to leverage that. So I have a mortgage on my home right now a 2.25% interest rate, that I’m paying on a loan from 2018, where the money back then was worth more than what it is today. So my mortgage payment today is a lot less than what it was four years ago, right. And, you know, I look at that, and I look at also different ways to leverage my debt. So I have a HELOC on my home. And I do something called Velocity banking, which is something completely different. A lot of people, you know, sometimes makes their head spin when you try to explain it to them. But basically, I’ve turned my home into a checking account, and I get to pull equity out and use it, you know, it’s tax free money that I get to use to buy other assets that that cash flow. And that’s one things that I’ve been doing, I’ve actually used the money to actually invest in a syndication and I’ve almost paid it all the way back. And what I do is I take all my cash flow, my my paycheck from the Navy, soon to be my retirement check. And I take my investments, all my real estate commissions as a realtor, everything I make in my business, and I dump it back into the HELOC and pay it down as fast as possible. And then what I’m going to do in a couple months is I’m going to go back to the bank and say, Hey, because at the same time I’m chunking down my mortgage, right? I’m gonna go back to the bank and say, Hey, I’d like to apply for a new HELOC. You know, because as you can see, I pay down $100,000 on my mortgage, and I increase my line of credit. And they’ll say, oh, yeah, Mr. Kevin, Johnny, we can see that you you paid this down. Great job. Yeah, let’s go ahead and increase your line of credit another 100k. And then boom, I’ve got another 100k that I have to play with. That’s liquid on top of what I’ve already had that are already paid down. Right. So that’s kind of like the quick down and dirty of that. But that’s one of the things one of the tactics I like to use personally, to leverage debt in my favor.

Zach
I love it. Very strategic. Mike, if you had to give someone advice as well ours that’s, you know, just getting started and learning about being financially literate learning about, you know, real estate investing in general, you know, maybe they have quite a bit of bad debt at this point or or not. I mean, but someone that’s just starting this journey that was in your shoes years ago, you know, can you give them some advice on on things to do to help expedite their success or things to focus on?

Mike
Yeah, absolutely, Zach. So I would say right now I have something called the four pillars of building wealth, right. And the first one is education. So you need to educate yourself, if you’re going to invest in something, invest in yourself first, if you’re going to pay for a coaching program, that’s fine. Do it, if you’re going to pay for some type of courses, that’s fine to do it, if that’s what works for you, if that’s how you learn, right? I myself, even though I’m a financial coach, I also have a coach, right, I have a coach, that helps me with being a realtor, right. And I pay a significant amount of money for that, because I think it’s something that I need help with, to make sure that I’m doing what I need to do to do a good job, right? So it’s about that accountability piece. So education, right. The next thing is mentorship and coaching, which kind of goes hand in hand with that, right? But find yourself a mentor, right, or find yourself a coach. But a mentor is really good as well, there’s a difference between the two. But find somebody that you could look up to, Zack, you had mentioned earlier, too, that the people that you surround yourself with, that will make a difference in how you you know, build your own wealth and how you invest, and just how you are in general, if you’re hanging out with five millionaires, guaranteed in the future, you will become the sixth one, right. So it is important who you’re hanging out with. So get a good mentor or a good coach. Then the next thing is networking and relationships. And networking is huge. Go to local real estate meetups, go meet people, talk to them, get to know them. Don’t just network, but build relationships, stay in touch with people have dinner, have lunch go out, and just really get to know these people. Because that is the whole point about building a relationship, when you build a good relationship. You know, they’re gonna think about new the next time a good deal pops up, and they need a partner. Okay. And then the fourth and final thing is the most important one, that’s action, you need to take action. So if you did the first three, and you’re just kind of sitting around waiting for, you know, the best deal to fall into your lap, it’s never going to happen, right? You need to go out there and take action today and make it happen. So, you know, everybody knows that famous saying that the best time to invest in real estate was 20 years ago, the second best time is today, that still holds true no matter what, no matter how bad the market gets, or how crazy it gets, or how high interest rates go. There’s always deals out there, there’s always a way to make it work and make it happen. You just gotta take the action and move forward.

Adam
How do you say that to people? I mean, right now, like you were just saying, I mean, we’re seeing, you know, prices higher than they were, you know, a year two years ago, you’re seeing interest rates getting higher, you hear people telling you, the sky is collapsing. How do you switch that mindset to say, You know what, I can still find a deal, like how do you? I mean, because you can say take action, but there’s still kind of a switch, you have to flip in your mind. So is there a specific thing you recommend to people to say, hey, you know, you might be scared, but you can still take action today?

Mike
Yeah, absolutely. Actually, I’ll give you a perfect real world example of a client that I’m working with right now. Okay, not going to name any names to protect the unidentified. Right. But so I, I was doing some cold calls as as a real estate agent, right? Just going through some old leads, right? This one was about two years old. And I call this guy and I’m talking to him. And he was looking at buying places two years ago. And it just, he’s like, Oh, with the way the economy’s been and interest rates. He’s like, I’ll never be able to afford it. So we just kind of chat and I said, what’s your budget? What are you looking for? And he’s like, Oh, I think I can afford this amount. So I went and pulled it up in a calculator and said, you know, what, what is the ideal monthly payment you were looking for? And he’s like, oh, about, you know, between 2000. And, excuse me, between 2020 400. I said, Okay, well, you know, at the amount that you thought you were going to be good for you’re actually be paying close to 3500. So that’s not really going to work. But I said, Here’s let’s look at something that’s more realistic for you, okay? And I said, Why don’t you instead of looking at these larger single family homes, start looking at some of these condos out here that are doing quite well. And also appreciating in value that way you can you got something to step your foot into and take a look at it’s a call, you know, I never really thought about that. He’s like, you know, but let’s, let’s go out and take a look. So I start pulling up some stuff. And I showed them hey, look, this is available. This is available, this is available, you know, it’s just you and your significant other. So, you know, it’s not like you need a four bedroom house or anything like that. So we start looking start crunching numbers. He’s like, I had no idea that this was even an option for me in the past. So the point of that is if you take a little bit of time to sit down in this, this became that education and mentorship piece right there right? So I sat down and I went over everything with him, I kind of, you know, I educated him on what was out there and give them a little mentorship on what he can do. Because I told him, I said, Look, you know, there’s not that many buyers out there right now, because interest rates went up, the competition has gone down, as like, so you know, you get and you buy this place. Now, when interest rates start to go back down, which actually they did recently, they dropped down pretty nice chunk, right? I said, the people that are buying right now you know what they’re gonna do, they’re gonna go refinance in six months. But guess what they did six months earlier, they bought the place that you didn’t want to look at, because interest rates are too high. So you know, that’s, that’s kind of the thing is, you got to get over that fear. And you got to get over that, well, I’m just going to wait it out until it gets better. Look, things may or may not get better, right. But if you get in now, and especially out here, and so I’ll give you an example, or just for food for thought our context here is that Hawaii is an appreciation market. So if you’re going to live in the asset, you’re going to live in the property, it’s great, it’s not a great place to buy a property to rent out, right. So he was looking for a place to live in. And he wanted something that would you know, eventually he’d be able to sell in the future, and maybe move into something bigger. So out here in Hawaii, you know, the average price of a home almost doubles every 10 years. So and that’s that’s pre COVID. Right? That’s pre the craziness that we just saw for the past two years. So it’s it’s a smart move to get yourself into something that instead of, you know, throwing your money away in rent, because when he was telling me what he paid for rent, and he’d be paying the, you know, the same price as a mortgage. I said, Look, man, I was like, in a couple years, you’ll have you know, maybe 30 $40,000 of equity, that you know, that you now have, you know that to add to your net worth, right, that you didn’t have just living in a rental property and just throwing your money away. So it’s it’s overcoming that fear of the unknown is the biggest thing I think people need to get over.

Adam
All right, well, that was Mike Cavaggioni. He is the founder of Average Joe Finances, you can find his website at averagejoefinances.com. Really appreciate you joining us here today. Again, it’s average Joe finances.com. And you can find us at renttoretirement.com. You can see the assets we have there that can make sense and get your cash flow in day one. Again, that’s rent to retirement.com. Don’t forget to head on over to your podcast platform and leave us a review. We greatly appreciate all of you who have and if you have any questions, email podcasts@renttoretirement. That’s podcast@renttoretirement, and we’ll talk to you on the next episode.