Justin Dixon is a real estate investor who shares his journey and insights into the world of investing. In this episode, he dives into his experience finding deals that make financial sense and how he believes the current market presents great investment opportunities. He discusses the impact of interest rates and the parallel between the residential and commercial markets. Justin also shares his story of how he got started in real estate investing, from stumbling upon the book "Rich Dad, Poor Dad" to making strategic decisions to build wealth.
Throughout the conversation, Justin offers practical advice and tips for both passive and active investors. He emphasizes the importance of education and finding trustworthy individuals in the industry. Plus, he brings up various options for retirement savings and the benefits of investing in tangible assets like real estate.
But that's not all! Justin shares his thoughts on diversification, exploring short-term rentals, and his insights on the future of office spaces. He also opens up about making the decision to downsize their lifestyle and the challenges they faced among friends who followed a different path.
- 00:03:18 Shifted mindset towards real estate investing and entrepreneurship.
- 00:10:58 Downgraded lifestyle, started own business, invested in real estate.
- 00:17:50 Investors seek experienced, profitable and informative opportunities. Additionally, self-directed IRAs and various retirement options exist. Sacrificing now for future benefits is wise.
- 00:20:25 Moving against the grain, investing in real estate.
- 00:24:50 2020 rough, stable salary sacrificed, wife's job saved.
- 00:29:09 Start investing in real estate, get educated.
- 00:32:42 Opportunity to invest, rates present advantage.
- 00:36:31 Don't expect a flood of distressed deals.
- 00:40:56 Invest in short-term, less risky assets like T bills for returns. Also consider debt funds for cash flow. Diversify before returning to multifamily investing. Office space may be converted into condos.
- 00:45:54 Diversify portfolio, short-term rentals, multifamily investment
- 00:47:56 Short-term rentals offer crazy cash flow but have risks
Episode Table of Contents
- Growing Up, Career Transition, and Investing in Real Estate
- Benefits and Considerations of Investing in Real Estate
- Importance of Education and Networking in Investing in Real Estate
- Transition to Short-Term Rentals
- Balancing Risk and Return in Investing in Real Estate
Growing Up, Career Transition, and Investing in Real Estate
Early Life in Rural Pennsylvania
Justin Dixon grew up in a very small town in central Pennsylvania. He came from a rural area and lived on a small farm. Justin had no exposure to entrepreneurialism or real estate investing growing up. The financial guidance he received was to get a stable job at a large company, invest in a 401k, and work for 30-40 years in hopes of having enough money saved to comfortably retire.
Recruiting Career Begins in Philadelphia
After graduating from college, Justin fell into a career in the recruiting industry, which he had no prior knowledge of before entering it. He moved to Philadelphia around the time of the 2008-2009 financial crisis and pursued a typical W-2 employee lifestyle. Justin was focused on working hard and slowly building his retirement savings through his 401k.
Mindset Shift After Reading "Rich Dad, Poor Dad"
While living and working in Philadelphia, Justin was walking to work one day listening to podcasts and audiobooks. He stumbled upon the book "Rich Dad Poor Dad" by Robert Kiyosaki and became engrossed in it. After finishing this book, Justin experienced a sudden shift in mindset. He realized there was another path besides simply working for a big corporation for 30-40 years. Justin became inspired to start focusing on real estate investing as a vehicle for building wealth more quickly. His wife Allison felt the same way after reading the book, and they decided to march down this new entrepreneurial path together.
Real Estate Investing: "I kept coming back to the syndication world because one, it sounded really cool to be able to own 100 and 5200 unit apartment complex, or at least a sliver of ownership."— Justin Dixon
Benefits and Considerations of Investing in Real Estate
The Appeal of Investing in Real Estate over Stock Market
Justin Dixon discusses some of the benefits he sees in real estate investing compared to more traditional investments like the stock market. He notes that for him, real estate has offered the potential for better returns than he was seeing by having money in the stock market. With real estate syndications, Justin also highlights the ability to know and directly contact the operators managing the deals as an advantage. He adds that being an investor in a few syndication deals allowed him to receive regular reporting and gain a deeper understanding of the economics at work in multifamily real estate.
The Future of Real Estate: "I think right now it's a diversification wins the day in preparation to go back into multifamily investing. In my mind, or there's other asset classes that I'm starting to look at outside of multifamily, but definitely won't look at office."— Justin Dixon
Using Retirement Funds Through Self-Directed IRAs
Justin brings up self-directed IRAs as a valuable vehicle he discovered to invest retirement funds in real estate. Many people have old 401Ks or funds sitting in IRAs that may just be invested in the stock market. Justin explains how he was able to transfer retirement money into a self-directed IRA and then use it to invest in real estate syndication deals as a passive investor. He sees this as a flexible option that gave him access to multifamily investing and helped him learn more about the asset class from the investor side.
Importance of Education and Networking in Investing in Real Estate
Justin Advises Education Through Conferences and Podcasts
Justin Dixon believes it is important for new real estate investors to pursue education through attending conferences and listening to podcasts. He cautions that while social media provides some exposure to investing, it can present an overly optimistic picture. Justin recommends newcomers take time to learn the fundamentals of underwriting deals in order to evaluate opportunities knowledgeably. Gathering information from multiple sources such as conferences and podcasts can provide a more balanced perspective.
Finding Trustworthy Individuals Is Key in Investing in Real Estate
When getting started in real estate investing, Justin emphasizes the value of connecting with trustworthy and experienced individuals. He advises being selective about who to learn from, rather than just looking to social media, which presents everyone as successful. Justin encourages developing relationships with credible people who have an established track record. Their experience can help newcomers avoid common mistakes and accelerate their learning curve.
Investing in Real Estate: "The downside or the negative of just kind of looking on social media, everybody looks like a rock star on social media. And you have to be able to find people that you know, like and trust."— Justin Dixon
Understand Underwriting and Asset Classes in Investing in Real Estate
Justin points out the importance of having a basic grasp of underwriting principles and knowledge of the specific real estate asset class one wants to invest in. This will equip new investors to analyze deals intelligently and determine if an opportunity makes sense. Justin recommends having enough proficiency to spot potential weaknesses in an investment proposal in order to ask the right due diligence questions. Taking time upfront to learn about underwriting and asset classes will lead to better investment decisions.
Transition to Short-Term Rentals
Potentially Lucrative, High-Cash-Flow Investment
Justin Dixon is starting to look at short-term rentals for a number of reasons. He had avoided them previously because of concerns around regulation, where local governments or HOAs could restrict short-term rentals after purchase. However, after speaking with people in the industry, Justin sees short-term rentals as a potentially lucrative, high-cash-flow investment.
With multifamily providing less cash flow currently than a year or two ago, Justin wants to diversify his real estate portfolio with assets that can generate more passive income per deal. Short-term rentals typically provide substantial cash flow, though less appreciation over the long term compared to multifamily. Justin plans to balance both short-term rentals for cash flow and multifamily for appreciation as he expands his investments.
Investing in Real Estate, Targeting Luxury Properties
Justin is specifically targeting more upscale, luxury short-term rentals for his initial investments in this space. This includes looking at $1-2 million vacation homes in premier destinations like Aspen. The high-end travelers that would rent luxury properties are less likely to pull back spending during an economic downturn. They may opt for domestic trips over international travel. So luxury short-term rentals should prove resilient even in a potential recession. This is a safer approach in Justin's view than lower price point Airbnbs, where there is more competition for budget-conscious guests.
The Potential of Investment Deals in the Current Market: "Yeah, I wish I could find a deal that could make financial sense right now to invest in, because I think if you can invest in a deal today, it should be a great deal for the hold period, however long you're going to hold it."— Justin Dixon
Balancing Risk and Return in Investing in Real Estate
Long-Term Appreciation Play
Justin Dixon is exploring short-term rentals as a new investment strategy, drawn to the high cash flow potential compared to multifamily properties. While short-term rentals can provide strong monthly income, appreciation may vary depending on the duration of holding the property. Justin notes that there may be less appreciation over time with short-term rentals versus other investment types.
On the other hand, Justin views multifamily properties as more of a long-term appreciation play, where the goal is to hold the asset for around five years and then sell for hopefully double the original investment amount. He sees multifamily real estate investing as focused on the backend profit when selling, rather than ongoing cash flow.
Despite his growing interest in short-term rentals for their cash flow, Justin emphasizes that he will maintain a mix of both short-term and multifamily investment strategies. He indicates he won't shift all of his real estate investments away from the multifamily sector and into short-term rentals. Justin aims to balance the cash flow benefits of short-term rentals with the appreciation upside of multifamily to create a diversified real estate portfolio.