In this episode of the Moneyball Real Estate Show, Kevin Clayson and Steve Earl discuss the importance of mindset in real estate investing. They explore how viewing expenses as investments can change the perception of real estate ownership. The conversation emphasizes the long-term benefits of real estate, comparing it to traditional investment vehicles like 401ks, and highlights the contributions of tenants, the market, and government incentives to the investor's financial success. The hosts encourage listeners to find joy in their real estate journey and to adopt a positive outlook on their investments.
What if we told you that real estate might just be the only investment where you don’t actually pay for it yourself?
Sounds too good to be true—but in this episode, Kevin and Steve break down why that bold claim isn’t only true, but why it’s the exact mindset shift most investors need.
Here’s what you’ll discover in this episode:
If you’ve ever looked at your property and thought, “This thing is costing me too much,” this episode will flip that thinking upside down and show you why, in reality, real estate costs you nothing.
Takeaways
Chapters
Kevin Clayson (00:02.898)
All right, well, welcome to the Moneyball Real Estate Show with Kevin and what's up, buddy? You know what? It was awesome. Weekends now include football. And so that makes weekends better. I'll just say that. My son, he plays football now and then, know, NFL preseason is going on. So I get to, I got to watch the 49ers.
Steve Earl (00:07.502)
Steve, how's it going, Kev? How's your weekend?
Kevin Clayson (00:28.873)
and then my kid plays football. it's really does, and if I was going to high school games, I'd be going to, it's it's football time. So that's a good time of the year, Steve.
Steve Earl (00:38.222)
Yeah, I know it's a good time of the year for you, Seth. That's awesome. I'm glad to hear it.
Kevin Clayson (00:41.77)
It's probably how you feel when hockey season's getting close.
Steve Earl (00:45.774)
Yeah, yeah, life just gets better, you know, when, uh, when you can, you know, kick back and watch a game and enjoy some, you know, some incredible competition.
Kevin Clayson (00:56.789)
By the way, have you seen, side note, then we'll get into the substance of the episode, everybody. Have you seen what they are doing with the Delta Center to prepare for the Utah Mammoth? How they are engineering this place so that it works for NBA and hockey? Okay, let me just, anybody out there, go Google what is the Delta Center doing to prepare for the Utah Mammoth and the Utah Jazz? It is,
Steve Earl (01:13.09)
I haven't looked now.
Kevin Clayson (01:24.479)
absolutely phenomenal. They are devising a way to raise the entire floor, to remove sections of seat so that the sight lines and the capacity is at a maximum. there's always usually stadiums are built for hockey and then adapted to NBA. So since this was built for NBA to adapt for hockey has been this engineering feat. It's going to be unlike anything that anybody's ever done. It's pretty dang cool. So let's go.
Steve Earl (01:49.836)
That's awesome. I will look it up.
Kevin Clayson (01:51.927)
Let me tell you what's even cooler than that. You wonder what's even cooler than that? Real estate. Real estate. So I gotta tell you, so this whole episode, my friends, thank you for listening. Thank you for tuning in to the Moneyball Real Estate Show. It's been so good since we've been redoing shows and getting this back up and going, seeing the numbers come in. And thank you everybody for watching, or for listening, rather. And if you have not gone on to Apple Podcasts to rate and review the show,
Steve Earl (01:55.47)
I do. Yeah, I can't disagree with that.
Kevin Clayson (02:21.417)
If you like the show and you think we do a good job, please go give us a five star rating. If you don't like the show, I just got word from Apple, the reviews aren't working. But if you do like the show, they are, which is great. But as I was prepping over the last couple weeks, a few things that I've been putting together for clients, now that I'm spending a lot more time with clients, I have been thinking on something that I shared with you this morning that we wanna talk about in this episode.
Now really, I could position this entire episode as investor mindset, but I don't want anybody to tune out because this is not investor mindset just like, let's talk about how to have a positive mental attitude. What we're gonna share with you here today, and positive mental attitude is critically important, but what we're gonna share with you here today is a way to view everything you do in real estate through maybe an even slightly different lens than
It's similar to what we've described, but let me tell you where I got to this. I was putting together this document for our clients. Once they complete a purchase, we have a transition call with our clients and we talk to them a little bit about the transition from moving, you know, from a buyer to an owner and then kind of what to expect. What does the game plan look like moving forward? What sort of resources and help does DfY provide? And I found myself playing around with this idea and I'm gonna launch this grenade, Steve.
and I'm gonna let it sit in the air and then we're gonna make this thing explode, okay? And we're gonna share this with everybody. This is the thought that I had as I was putting together some of these pages and this is what I wanna share with everybody, okay? Real estate is a bold claim and there may be some of you who disagree with it, that's fine. This is what we're gonna talk to you today, but here we go. Real estate is the only investment class I'm aware of where you earn all the benefit
and you don't have to pay any money.
Kevin Clayson (04:23.702)
Okay, so I'm just letting that float and we're gonna back this thing out and share it with you, okay? Real estate is the only investment class that I know of where you gain all the benefit, but you don't have to invest any money. You don't have to pay any money into the investment. Now, look, your first thought is gonna be like, okay, great, Kevin's on crazy pills. While I would not disagree with you, I will also say that yes, you have to come up with money in order to get into real estate.
But I want you to really think about how we ought to be viewing our real estate. And Steve, we're gonna talk all about this. When you invest in real estate, you come up with the initial down payment, closing cost expenses, all of that stuff up front, right? So the average right now is around $85,000 or up, okay? You do have to have that money from somewhere to be able to invest in real estate. But then as you own real estate, let's think about everything that happens.
Are you paying down your principal, paying your interest, paying your taxes and paying your insurance? Well, if you get the right property in the right location with the right set of conditions and you've got a tenant that's in that property, no, you are not paying the principal interest tax and insurance. Your tenant is paying that, meaning your tenant's paying down your principal. They are donating dollars to your future investment fund. Every single month they pay their rent. Your tenant is paying the insurance expenses.
Your tenant is paying the interest expense on the money that the bank let you borrow. Just think of that. The bank gave you hundreds of thousands of dollars and you don't even have to pay the bank interest. Why? Because your tenant's paying it, okay? This is coming from rent. If you have a property that rents at least at a minimum at what your principal interest tax and insurance payment is, maybe you have a little positive cash flow, maybe you're right.
borderline, you make zero dollars in cash flow, the tenant is still paying your interest, putting money into your investment account every month by paying down your principal, paying all of your insurance expenses, they're paying the insurance company for you, and they're paying the state all of the taxes. How cool is that? Now know what you're thinking. You're thinking, okay, well fine, Kev, I get that. But then what else? Well, the market over time with appreciation,
Kevin Clayson (06:50.81)
is paying you growth. The market pays you growth, the tenant pays for all of your expenses and your principal, they fund your investment account and pay your expenses, the market gives you growth. And then that's not all because the government pays you as well. We talk about tax benefits, Steve, but I want you to weigh in here because at the end of the day, all we're talking about with tax benefits and real estate is the government is compensating you for buying real estate. Am I wrong?
Steve Earl (07:19.532)
No, you're exactly right. are, I mean, so what I love about what you're sharing here right now is that you're looking at all of these different aspects of investing in real estate simply from a different perspective. nothing changes. You still gotta pay the mortgage. You you still gotta pay for any expenses and repairs. You still are paying for closing costs, all those different things, right? Including,
Kevin Clayson (07:37.341)
That's all it is.
Steve Earl (07:52.077)
like just everything, like the interest, the property management fees, all of that stuff. what's really amazing to me is that all we're really doing is we're lending ourselves the money to go and purchase this real estate because it all comes back to us. When you think about like a partnership, if you have like a
a partner who's putting in all of the money for the real estate. the end of the day, they're gonna get back all of that before you split any of the profits. And so it's kind of like they're just, they're fronting that money, they're loaning that money to the partnership and then they're gonna get it all back and they're gonna get it all back with, call it interest on top of that. So, you I love this perspective of, you know, it's this whole idea.
Kevin Clayson (08:28.98)
you
Steve Earl (08:51.756)
that sometimes people, they get in a different mindset, they're not in the investor mindset and they're like, man, this property is this money pit, I keep putting money into it. Like it's barely, it's not even cash flowing positive. It's like, well, wait a minute, what are you talking about? Cash flowing positive. Like this is an investment and every dollar, every cent that you put into it, you are going to get back out of it with time. that's the great,
Kevin Clayson (09:17.942)
With time.
Steve Earl (09:21.666)
thing about real estate is you're really, it's all about time. And I love Kevin, maybe you could share this. Like I love the way that you frame real estate as it compares to like a 401k.
Kevin Clayson (09:32.947)
Yeah, no, 100 % because this is another thing I think about, right? So look, the first point that I want to just double down on that you said is for some reason as real estate investors, we have a tendency to talk about our expenses, our costs, okay? Oh, I had to get this thing fixed. I have this property management expense. I had this, that, or the other thing. I had to pay a month of lost rent and all of it
is couched in this language of this capital that exits from your life never to return. That's what an expense is, right? I pay my expenses. I pay that money to somebody else, don't get it back. That is not what's happening in real estate. Okay, and look, even if it were, why don't we talk about our 401ks that way? Because, let's move them side by side. Okay, fine.
My 401k, I don't cash flow a 401k. Is anybody out there cash flow a 401k? No, but we don't call it an expense, do we? We say I invest in my 401k. Well, is it money leaving your ability to spend and going somewhere else where you don't have access to it? See, in real estate, if we have to pay for a month of lost rent, if we have to buy something for the property, there's some sort of expense that comes up, some sort of maintenance expense.
We look at all of that and we call it an expense and we feel like, well, I had to pay for this thing and it's never gonna come back. We don't say that with our 401k, but it's the same exact environment. Money leaves our ability to spend it today. It leaves us and it goes into an investment and in that investment over time, it comes back with interest, with growth. You look at a 401k, I'm expending, it's an expense, right? But we call it an investment. I don't know why we do that.
I have to spend money into my 401k for my employer to give me a match, right? So we do it. So we say, okay, well, I guess I'm willing to make the investment because my employer's gonna pay me some in return. How is that different than real estate? You're spending money into your real estate so that your tenant can contribute to your retirement account. It's the same thing. Money's going somewhere, you're investing it, and then it's gonna come back eventually.
Kevin Clayson (11:54.917)
But for some reason, every time, because we talk to a lot of clients, anytime there's an expense that comes up, anytime there's some maintenance that comes up, it can cause some heartburn. And I mean, I get it, right? It's like you buy this piece of property, you're expecting it to cash flow, you want all the good things to happen. And when unexpected expenses come up, well, you feel like, well, I've got to take this money and I've got to go spend it to do the maintenance on the property. Well, listen.
That is why from the get go, we don't ever want it to feel like that, which is why you should set up a sleep well at night account, which is why you should have a reserve account, which is why you shouldn't really be spending the little bit of cashflow that's being generated from your property, at least not initially, right? Now you can decide in the future how you wanna spend that cashflow, but if you are in the acquisition phase of your real estate portfolio, these shouldn't feel like expenses and they should feel like investments. Because if over time, to your point, Steve,
If it takes 10 years, okay, with our 401k, we don't look at it in 10 year timeframes, do we? We say 20 years, 30 years, but for some reason, when it comes to real estate, what, can't look at it in a 10 or 20 year time frame? I don't understand. But if we were to just go apples to apples, over a 10 year time frame, I spend money, quote unquote, into my 401k to get a contributor match. Fine, I spend money, an expense, if you will, into my real estate in order to get a match or in excess,
because remember, it's not just your tenant that's paying into your investment retirement account. The tenant's paying into it, the bank is allowing you to use money that you're not even having to pay the interest on because your tenant's paying it, the government is giving you additional benefits, and the market is also allowing your investment to grow. So you have all of these sources that are paying into your future, so when you do make an investment into your real estate and expense, maintenance, whatever it is,
that's coming back over a 10 year timeframe, if you sell that property over 10 years, you're getting that down payment money back. you buy the right property in the right market with the right set of conditions, and you do it the money ball way, and you're doing a safe investment type of real estate, as safe as we can get it, then you're seeing all of your down payment come back. All of your quote unquote expenses are coming back to you, but also so is all of this growth, as well as the benefit that you've got along the way. But for some reason, Steve,
Kevin Clayson (14:15.658)
We don't look at a 401k in the same way that we look at real estate. Real estate, it's a bunch of expenses and frustrations. But in a 401k, we're willing to just cut checks all day, every day for the hope that the market will benefit us and the hope that the employer is going to match us. When in real estate, you have a far surer thing, I would say, more often than not, if you're hang on to the real estate long enough, but we look at it as expenses and it's negative. This is why we're saying it's an investor mindset. Somebody else is contributing
to your financial well-being, to your future financial picture, and it's the tenant, it's the bank, it's the government, it's the market, and so why are we viewing real estate through the lens of I have all of these expenses and not through the lens of I have all these investments that I'm making?
Steve Earl (15:05.666)
Yeah. So it's one of the things that I love about what we do, Kev, on a almost a six month basis, we're having conversations with each of our clients. Real estate is, at least the way that we do real estate, it's the long game. It's like that 401k that just pays significantly better and has significantly more benefits along the way. And so because it's more of an active investment,
Kevin Clayson (15:22.064)
.
Steve Earl (15:33.963)
and it's in front of you and you're getting monthly checks and you're paying monthly expenses and occasionally you're speaking with a property management company as opposed to like a 401k, it's automatically taken out of your account. You never see it, you never touch it, you never experience it. Like you get to experience real estate. And so it's just a much more active way of going about building for retirement.
Kevin Clayson (15:50.927)
you
Steve Earl (16:02.902)
And as such, it's front and center more often. And so every once in a while, we need to just kind of step back. And I think that's why we kind of wanted to do this episode is, you know, we're at a position in the real estate cycle, the real estate market cycle, where prices have gone up dramatically, the cost to get in has gone up dramatically, rents have not necessarily scaled with the cost.
Kevin Clayson (16:20.654)
you
Steve Earl (16:31.244)
And so those who have more recently gotten in, they don't have as much cashflow. And a lot of times, because the world around us constantly preaches this whole idea of, what's my real estate done for me lately? It's like, what's my cashflow? Which cashflow, it's a great thing. It can be an important thing, but it's the least of all the benefits. It is beneficial, but at least during the acquisition phase, it's the least of all of the benefits. At a certain point in your
Kevin Clayson (16:53.054)
you
Steve Earl (17:00.814)
investing lifecycle, cash flow will become front and center and it will become the most important thing. Right. And so that's what you're looking at and counting on. But when you're in that growth portion of, of, know, building your portfolio, it's a good thing, but it's the least of all the benefits, but it's something that still gets talked about. It's something that, that you look at on a regular basis. And so that's why it's important to every once in a while kind of
Kevin Clayson (17:14.287)
You
Steve Earl (17:30.713)
push that reset button on our brain and step back and think, all right, what am I doing here? know, sometimes we might start feeling a little bit anxious about things because we've just forked out a bunch of, you know, cash and we're looking at that reserve account. like, man, it it dropped by a thousand dollars. I just had to sink some money into it. And so it's pretty natural to sense that and to feel that.
But when we step back and we remember what we're doing and how we're doing and where we're going and we're looking at that 10 year window, all of a sudden it's like that anxiety can kind of ease and we can think more clearly about what we're doing. it's like, ah, it's not this thought. It's like, I gotta liquidate everything. And so I just think it's important every once in a while to have this kind of a pause in the framing
Kevin Clayson (17:59.462)
you
Steve Earl (18:25.694)
of how we're viewing real estate. So I think that this episode is so critical.
Kevin Clayson (18:30.102)
Well, and so I guess the first invitation we would make everybody, and this is, think language is a really powerful aspect of everything that we do. I think that in many ways we create our realities with the words that we say. And not to get too woo-woo on you, but I would just encourage everybody, as you're investing in real estate,
It's interesting, you invest in real estate, but then as soon as you start investing in real estate, you just think about all the expenses. Well, aren't they all investments? And so when we switch that word from investment to expenses, it tricks our brain, because expenses, generally speaking, are something we're forced to pay, not that we get to pay. And so I think the first invitation I'd make for everybody is any time
you're interacting with your real estate investments and you have something come up where money's gonna leave your life and go elsewhere, tied to the property, what formerly you may call a cost or an expense, I'd encourage you to refer to it as an investment. So let me just give you an example. man, here's the negative side.
Man, I got a call from the dang property manager again, the tenants are complaining about this, that, or the other, and now I've gotta go and fix something else, and I just got a bid, and it's gonna cost me $1,000 that I wasn't expecting in order to make the tenants happy, so they keep paying their freaking rent. Okay? Or, you know what? Last month, I got to make another $1,000 investment into the property, and now the tenants are happy, and they're gonna continue to pay my rent, or pay all of my expenses. It's the same scenario.
It's just, I made a thousand dollar investment into my property last month. Or every month I get to invest in property managers that do so much of the work so I don't have to. That's pretty awesome. And so even just flipping that switch in our brain of it being an expense and it becoming an investment, it causes us to view the real estate through the proper lens, by the way, which should be a long term
Kevin Clayson (20:45.409)
lens. And the other reason Steve that I think sometimes we could get huffy and puffy with our real estate is when we invest in 401ks, we don't really have a single person to like aim our eye or at right. It's like we could look at the president be like, that dang president and his administration, we could do that. But we, we can't pick up the phone and yell at the president, but we can pick up the phone and yell at our property manager.
we could pick up the phone and yell at somebody, whether that was our agent that we worked with, or could be the buyer's agent, could be the seller's agent. It could be done for your real estate. It could be the property manager. It could be the insurance agent. It could be your mortgage broker, or whatever it is. But it's interesting because with real estate, to your point, Steve, you talked about it's so much more active. It's also a lot more personal.
because you're interacting with people and there's humans attached to every aspect of real estate. And I think we're just sort of generally trained that when we get frustrated, we love to find a direction to aim our frustration. And in real estate, it's really easy to aim our frustration in a direction at the tenant, at the property manager, at the lender, at the real estate agent, at DFI, whatever the case may be. And so with that, our brains go, wait a second.
I'm feeling anxiety and anxiety just protects us from the eventuality of something going wrong. We feel that and we go, got to relieve this anxiety. I've got this cortisol in me and I want it to go away. And sometimes we think that the way we relieve that anxiety is we just, you know, word vomit angrily at something or in some direction thinking that that's going to somehow solve it. And with that, that real estate feels personal. We feel like we have an outlet. If I go, you know,
get upset about this, that, or the other, this person or that person. It doesn't always fix the situation necessarily, but it somehow makes us feel better. And I think it's all a part of this. If we could switch in our brain the idea that we are constantly and perpetually investing in real estate that is all going to come back to us, that the bank is paying for the vast majority of our assets.
Kevin Clayson (23:06.133)
that our tenants are paying for the vast majority of the ongoing expenses, that the government is paying and contributing additional positive dollar benefits to our lives so that we have more capital to control to invest elsewhere or to invest in another property. If we could, you know I'm a big guy on gratitude, if we could look at the entire, the whole bouquet and we saw how awesome the investment is and
all of the good that's being poured into the investment, constantly with the thought that it is coming back to us in spades, it would change our interaction with it. It's just not the way that we've generally been trained in the investment arena, especially with real estate. See, with the 401k, we can't aim the anger. We can say, the market, the administration. But we can't really go to, you know, number one Wall Street in New York and call and talk to somebody at a desk and be like, what the heck are you doing? And so it is, it feels
because like you said, the 401k feels hands off or some other investment classes. This feels more active, this feels more hands on. We have somebody that we can target or aim our sort of frustration at, but if we could even just begin to go, what if everything I do with my real estate is an investment? In my future, in my financial piece, in what's coming down the road, that little switch in our brains could make a huge difference.
Steve Earl (24:32.3)
Yeah. Love it, Kev. I just think it's important that every once in a while you have that kind of a, that reset, that reframing. And especially if you're in the real estate investment game, if you're in business, if you're like anything like that, where there's, where there's the ups and then the downs and the cycles and that kind of a thing, super critical, super important. It's part of, it's part of the real estate game. It's part of being in real estate to do that. It's like, it's like anything in life.
you know, just stepping back and reframing every once in a while. think you did a great job doing that today, Kev.
Kevin Clayson (25:04.949)
Well, and the last little thought here, guys, is I just started a new book. It's one that I've been wanting to read for a long time. It's phenomenal. It's called The Happiness Advantage. I don't know if anybody of you have heard of it. It's written by guy named Sean Anker. Really cool. He's a Harvard professor, and he has studied positive psychology. And one of the main points that he makes in the book is something I've known for a long time. It's something that I'd offer to all of you listening in this context. We often believe
that success will come by some level of achievement or, excuse me, rather that happiness will come as a result of success. So we feel like if we achieve something, if we accomplish something, then we'll be happy. But what all of the psychology shows, every single study imaginable shows that success comes after we're first happy, okay? We have to choose to be happy and success follows. As opposed to,
having to achieve success and then happiness following. And the reason why I feel like that is really important for real estate is if we can look at what we're doing as investors and realize that we are getting all of this incredible financial benefit from this real estate, we're providing a home for somebody and that somebody in exchange is paying our principal, our interest, our tax and insurance.
and maybe a little extra money every month that we can utilize as further investment in the property in the future in the event that something comes up that we've got to fix or we've got to do some maintenance on. We've got the government that is positively contributing to our financial lives every year. That is so cool. We've got the market that without doing anything, the market is giving us tens of thousands or more of dollars of financial benefit. And we're buying this real estate, investing in this real estate.
with dollars that may be subjected to inflation in the future, but we're getting the full value of the dollar today, even though those dollars in the future will buy less. Like we're hedging inflation because we're in real estate. So we have all of this amazing stuff that's coming into our world by owning and investing real estate. If we can just be satisfied and realize, my goodness, the things I'm doing for my family, the things I'm doing for my kids.
Kevin Clayson (27:26.247)
the things I'm doing for my future, I am part of the minority. And shouldn't you find joy in realizing what it is you're doing that is so different than the average American? And if you could find joy in that now, when the maintenance request comes in, when something goes wrong with the tenant or property management, all of a sudden, it's not an instant anger trigger, it's an opportunity to continue to invest in the most incredible investment
on the planet that is largely paid for by everybody but you, but that you get to gain all of this financial benefit from. So our hope is that you'll switch that mindset just a little bit and to have that kind of reset and just take a second, listen to this episode and just spend some time with this in your mind, with your spouse, with your family, as you think about the incredible things that you are doing. And if you're not yet investing in real estate,
start realizing that this type of mentality, building this type of mentality will make you a far more successful investor than one that only believes happiness will come once you're successful at investing. Generate this mindset and it will make you a successful investor. That's all I got, Steve. Any final words from you, man of wisdom?
Steve Earl (28:44.226)
I think you nailed it. Thanks, Kev.
Kevin Clayson (28:45.993)
All right, everybody, thanks so much for tuning into the episode. We are, make sure that you are checking your inbox, because this is coming out every week with the newsletter, with a property. Let us know, you know what, in those emails, I'm sending you those emails. If there's something that you'd like to hear us talk about on the podcast, just hit reply to that email. It'll come right to my inbox, and it may give us some great ammunition for future episodes. So if there's something you're wondering about, something that you have a question on,
Send them into us. They could be a part of a future episode and we'll give you credit for it. Remember to go rate and review the podcast if you like it. And if you don't like the podcast, the reviews are closed. And thank you everybody for being a part of this family. We appreciate you. This has been the Moneyball Real Estate Show and we'll see you next week.
Steve Earl (29:29.902)
Thanks for listening.