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SHOW NOTES FOR EPISODE 177: THE UNOFFICIAL GUIDE TO REAL ESTATE INVESTING WITH MARTIN STONE
Growing up on welfare in Duluth, Minnesota made a lasting impression on young Marty Stone. It was that experience that motivated him to business success and financial independence. In this episode, Martin Stone, the author of the acclaimed real estate investing “reference bible,” The Unofficial Guide to Real Estate Investing, shares how he fulfilled his childhood dream, became wealthy, obtained financial independence and created a lasting legacy for his family — all through real estate investing.
What You Will Learn
- The value of mentorship to new investors
- The critical success factor of planning
- The six to eight fundamentals every real estate investor must know
- Wealth and the value of knowing what “enough” is
- Little known tricks for getting started with very little money
- “House hacking” to launch your real estate investing business
- What it means when he says, “A rich man is one who knows when he has enough.”
About Our Guest
Martin Stone
Martin Stone (or Marty as he prefers being called), is a founder and one of the owners of Buckingham Investments. He has been a successful real estate broker and investor for over 40 years. Marty was very energetic in his youth so, besides brokering investments, he established management, development, syndication, and finance divisions within the company. At one point, he had 4 brokerage operations, managed over 1000 units, and in the 1980’s, developed over 50 apartment buildings, commercial buildings, and single-family homes. A graduate of USC with a degree in finance, he has also co-authored two highly successful books on real estate investing, Secure Your Financial Future Investing in Real Estate, and The Unofficial Guide to Real Estate Investing. He has a new book which will be out in the middle of 2018 thru Dover Publications called How Real Estate lnvesting Took Me From Welfare to Wealth. Marty and his wife Lori have 3 sons, Aaron, Chris, and Adam and reside in Southern California.
More About Martin
- Grew up in Minnesota (MN)
- Poor family – father was ill, mom worked to support them, on welfare
- As he got older, he knew he wanted to break out of that lifestyle/life cycle
- In Minnesota, possibilities of getting ahead were limited – colleges expensive
- Senior year of high school, went with a bunch of buddies to California to learn how to surf, get suntan
- Had relatives there
- Found out about California Junior Colleges – an inexpensive way to get a college education
- When he returned to MN, he told his mom he was going back to California to go to college
- The whole family decided to move with Marty
- Enrolled at El Camino College
- Mom got job in downtown L.A. sewing factory
- Still received welfare from MN
Move into Real Estate Investing
- Marty met a friend at college – Bob – whose dad was an engineer at Hughes aerospace and who was a successful real estate investor (founder of Buckingham Investments)
- Marty and Bob wanted to get rich through real estate investing too
- Marty and Bob transferred out of Junior College to USC
- When Marty graduated out of USC with a finance degree, he couldn’t find work – collecting unemployment
- Marty and Bob both got a job with Bob’s dad’s real estate investing business (Buckingham Investments)
Marty’s Mentor
- Bob’s dad, Jack Buckingham, mentored Marty.
- Jack retired young from the aerospace industry because of his success in real estate investing. He had a degree in physics, also had worked at McDonald Douglas writing programs to launch and track missiles and satellites
- Jack learned real estate investing from his grandfather, who was a horse trader and real estate speculator in Yakima, Washington
- Jack made significant money buying lots in Venice, California, beachfront, off of the canals
- Retired from aerospace
- Got a real estate license
- Opened an office in El Segundo
- Other engineers and friends started coming to Jack asking for help to become investors, too
- Jack’s intellectual prowess made him really into tracking data, historical trends and education – he applied his analytical approach to real estate
- Launched training courses for his clients
- Taught his clients to educate themselves on:
- What real estate investing is all about
- The market (they drive clients around to see the local market)
- Putting a plan together
- Finding investments that meet your plan
- That’s how Buckingham Investments started and works today
- Jack past away this year at age 86
Buckingham Investments Expands
- Added:
- Property management firm
- Financing entity
- Development/Contracting firm
- Real Estate Education Classes
- Jack started teaching clients in his office with a simple flip chart
- He taught
- Cash Flow principles
- Equity growth from
- Pay-off
- Appreciation
- Tax benefits
- Depreciation
- Tax-deferred exchanges
- Installment sales
- Wrote books:
- The Basic Real Estate Investment Guide
- Real estate Investment Planning Guide
- Real Estate Tax Factors Guide
- Did Seminars
- Property Management for Self-Managers
The Unofficial Guide to Real Estate Investing
- One of the guys who he worked with was writing a book and Marty, offhandedly, suggested they do one on real estate investing
- The publisher asked for a proposal
- He took their company’s basic guides they used with their clients, which were about 30 pages, and he put them together, added a little more meat
- It became the “Unofficial Guide…”
Other Books by Marty Stone
- Marty felt some important information about real estate was missing from the first book, so he wrote: “Secure Your Financial Future.”
- Real Estate 2.0 – Real Estate, Funding and the New Way to Fund Your Retirement
- Did a second edition of “The Unofficial Guide…”
Emphasis on Planning
- They try to encourage their investor clients to put together a plan outlines what they’re trying to accomplish by investing in real estate – long-term personal goals
- Trying to get away from goals like “I just want to make a lot of money” to things like “I want to replace my salary” to get to financial independence
- Jack always said, “A rich man is a one who knows when he has enough.”
- Most people don’t take the time to figure out what “enough” is
- They have workbooks to help people do that
- They go through an exercise – “If I hit the lottery, what would my life look like?”
Biggest Mistake/Regret
- He wishes he would have figured out what his “enough” was sooner
How the Unofficial Guide Helped Him Through Difficult Times
- His wife got cancer
- Writing the book helped him get through that tough time
- He was confident in his financial situation enough that he could take off all the time he needed to be with his wife, take care of his kids during that trying time
- They had three kids he had to step in and care for
- He had the income from investments to allow him all the time he needed
Biggest Success
- Not getting a (finance) job right out of college
- Had a temporary finance job and he hated it
- This lead him to real estate investing
Advice for Old Dawg’s Looking to Real Estate Investing for Help in Their Retirement Years
- Buy an investment property
- Don’t buy a house or condominium!
- Buy a 2-4 unit property
- If you have a house, move out of it and rent it out
- Live in one of the units of your investment property (also called “house hacking”)
- Get FHA loan – only 3% down and great rates
- Manage it while you live in it. Enjoy free rent as tenants pay you’re your mortgage
- After a few years, sell your old house and take that money, through a 1031 exchange (defer capital gains taxes), and buy another investment property – and generate MORE cash flow
- That may be enough to live a comfortable life in itself
What Are the Key Fundamentals Newbie Investors Need to Know Before You Start Investing
- You need to know the basics of how investment properties operate
- How do you calculate cash flow?
- How do you analyze expenses?
- Know you returns when your tenants pay off your debts
- How do you calculate depreciation? And how does that affect you?
- What are tax-deferred exchanges and installment sales?
- Understanding that you can count on appreciation. There is a myth that you can’t count on appreciation
- Understanding how inflation affects the value of a property as the dollar decreases in value
- Understanding what appreciation is. It offers a big financial benefit to investors that they can count on
- Understand the marketplace
- General rules of thumb
- Higher cash flow = slower appreciation
- Slower cash flow = faster appreciation
- Make a plan!
What’s Ahead for Marty?
- He’s been “semi-retired” for a while
- Comes in the office when he can
- Because of his finances, he can come and go as he pleases from “the office”
- He travels a lot with his wife
- Spends time with his kids and grandkids
- He and his wife do a lot of volunteer work
- His wife is a retired nurse and she and Marty volunteer lots for breast cancer research
Rap-It-Up
- Favorite real estate book: Think and Grow Rich by Napoleon Hill
- Favorite business book: Rich Dad Poor Dad by Robert Kiyosaki
- Most valuable websites for success (other than your own): (see below)*
- Favorite quote: “A rich man is one who knows when he has enough.”
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? If he could qualify for an FHA loan, he would buy a home for $200,000 and only have to pay for ½ % down.
*Marty’s Most Valuable Websites for Success
These 3 calculators can be helpful in studying value increases in given areas. The first link is the simple appreciation rate calculator. If you have a price from 20 years ago and the same property today or a comparable one stick them in the equation and put in the years and it will tell you the rate for the 20 years or whatever time it is.
The second one just add the capability of adding a constant amount to the pot on a regular basis this is the one that bankers and 401K people use.
The 3rd is a very interesting one that we use along with the first program. So, if you have that 20 year old price you put them in this calculator and it will tell you what the property should cost today because of the effects of inflation. If the price today is above that then the overage is because of the higher demand. In lower priced areas this can show a negative demand so the price may be above what it should be because of inflation.
The last one is a program we have on our website that shows people how to calculate the amount of worth you need to replace your salary from work.
http://www.moneychimp.com/calculator/discount_rate_calculator.htm
simple to calculate appreciation rate over time
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
effects of compound interest + adding money on a regular basis
http://www.usinflationcalculator.com/ effect of inflation on value can use to see how much demand effects price
http://buckinghaminvestments.com/content/income-replacement-program
How to Reach Marty
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