Investing Strategies for Navigating Market Uncertainty

Dan Austin: [0:00] Hey there. Welcome back to another episode of the collecting keys real estate investing podcast. This is the podcast for operators by operators. We love to talk about off market real estate, how we operate our business, and just the day to day shenanigans. Got me today as your host, Dan Austin. This is a Friday episode, so you know, it's solo, and I have a topic that I hope intrigues your interest. I just got done recording with Dylan, Just him and I, Mike Mike's out of town this week, and got me thinking about really this topic of uncertainty in the market. And so our next episode that you'll you'll be listening to this that drops next week, is Dylan and I kind of talking about some of the most recent data drops on the the GDP which contracted I think to like a a negative point three percent, but the job job market still hasn't broke. There were some construction jobs that, you know, were lost, but gains in others other areas. So the net gain was like a 177,000 jobs, which was above the forecast. Got me to thinking, and what I wanted to share is today, just in this short little episode, is kind of my thoughts on this idea of uncertainty into what's going on in the market, and then how I briefly just kind of go over some of my investment strategies or my investment thoughts. So if you're out there thinking like, what are other people doing? How are other people interpreting this? And I know you're laying in bed at night, god, I wonder how Dan is investing his time and his money in this market. So guess what?

Dan Austin: [1:31] You ask and you shall receive. So let's start with just this idea of uncertainty. If you're looking at the news and the headlines, uncertainty is really what the root of all this stuff is. And then there's a bunch of politics. So you have to get rid of the politics. You have to try to look through that whether you're extreme right, extreme left. You have to understand that there's some truth in the middle. And honestly, depending on your media outlet, you might not be getting the full truth or the truth at all. What I like to do is I like to listen to multiple different media outlets and really just kinda get the opposing viewpoints on things and then just pick where I think the truth lies, and that's all you can really do in this day and age. It's kinda crazy actually, all the propaganda out there. But, I digress. What the real root of this all seems to be for me is like this idea of uncertainty. But uncertainty doesn't just happen like when the market's bad. Many of you probably can recall a conversation that you've had over the last several years when the market was doing fantastic and people were like, I'm pulling back, man. This can't last forever. This can't last forever, which means there's uncertainty. Right? They're uncertain what tomorrow looks like, what next week looks like, what six months looks like. You have the other extreme at the top of the market where people are like, I'll never die. This is gonna be awesome.

Dan Austin: [2:46] The market will never go down. And those are the people that usually kinda, you know, wipe out, right, crash and burn at some point. Maybe not completely, but, you know, that's when, you know, money starts getting lost. And and I think that if you're not losing a little bit of money when the market breaks, you probably weren't pushing hard enough, you probably had a little bit left in the gas tank. But my point being is is that there's uncertainty when the market's going awesome. Nobody knows where the top of the market's at, and so they're uncertain like, do I am I cresting this? Are we at the bottom of the climb up? And the same thing goes is when the market's on a downhill slide is you're like, I I'm uncertain. When does the bottom where where where are we at in the bottom? And the argument is is like, are we even in a downhill slide? If we are, how steep is it? I would argue right now that if next quarter, q two of twenty twenty five, is negative GDP, that we're going to be technically, as everybody says, in a recession. And I'm going to forecast that if that's the case, it probably doesn't feel as bad for most of us as the media might say a recession should feel. Because a recession doesn't necessarily have a definition on who gets hurt, how many people get hurt. Sure.

Dan Austin: [3:53] There's gonna be some sectors that are getting hurt. Is it gonna be real estate? Maybe at some level, but what parts of real estate? Real estate's a pretty broad business, and it supports a lot of the economy, which is why when real estate doesn't do well because rates are high, generally speaking, the economy doesn't feel as productive in in the other areas because you have all the construction jobs, all all the jobs that, like the people that it feeds just in transacting real estate, let alone the money that people are able to sell when they sell the real estate, they take that money and invest in other parts of the economy or spend it which goes to the gross domestic product. So real estate's a big piece of that. But back to my main point is with this with uncertainty, the uncertainty is not is it's like where does it end? And if that if that can happen at the top and it happens at the bottom, people are still operating in both markets and there's still money to be made. Now there might be a time where you need to transition and start operating differently or investing differently. But for the most part, if you're in this business, if you're a real estate off market operator, a real estate investor of some sort, what are you doing in uncertain times? Are you just stopping?

Dan Austin: [5:02] Are you not gonna do anything? Are you in a position to pause? Are you gonna look back in three, five years from now and say, man, if I would've just got off my ass and made a decision, I would be just as wealthy because what'll happen in this inevitably happens is in the in the future, there's going to be a person out there and they're going to have figured something out during this period of time and you're gonna be like, how the hell did you make $30,000,000 over the last five years? And like, well, you know, I just kinda I just kinda acted and I just kinda did stuff. The same thing goes for, you know, in 2020 when Mike and I partnered up and we didn't really know or asked for an elbow and we just decided we're gonna go for it. There were active operators in the real estate industry that decided to pull back and sit on the sidelines, pool, sell properties, all this sort of stuff, pull cash out, and just kinda sit there because they're nervous, which rightfully so. There's a black swan event. COVID, they didn't know what was gonna happen. Had they not done that, they would have been a lot more well off, and Mike and I and our local market may not have been able to do so well because we were just kind of operating in a vacuum. You can still do that now.

Dan Austin: [6:01] Right? Like, there's people pulling back actively. I can tell you that just looking at the scale community that we that we operate and the people that, you know, the lack, I guess, I'll say the the lack of new people applying for it. We still have people applying, we're still signing people up, it's still growing. But I think on net, there's just less opportunity in that space. There's many many reasons for that, but it's because other people are like, you know, maybe I'm gonna pull back or maybe I'm not gonna try to grow so much, I'm not gonna press so much, maybe I'm gonna I'm gonna peel it back a little bit because they're uncertain, they're unsure. And now I'm not saying you need to put the gas, you know, put your foot on the gas and just go, you know, balls to the wall, certainly do it, you know, there's there's upside into that if you feel comfortable with that level of risk. But what I'm saying is you can't just peel back and say, man, the world's coming to an end. For whatever reason, I think the tariffs are gonna kill the economy and America's gonna just burn and die. We're we're done. You know, the democracy's over, America's over, it's China's turn. Like, you could think that I guess, but what are you gonna do in the meantime until that happens? I correlate it to all the people that, you know, these cults that you hear that pop up every once in while and they have this like end of the world theory, like the world's going to end. So we have to drink the Kool Aid and all die before the world ends. But you get to that day and the world doesn't end, like what do you do then?

Dan Austin: [7:16] You just wasted all this time building this cult and building this community and now like the world's not coming to an end, what were you doing? You gave up everything and sacrificed everything And so the same thing goes for your business, like don't give up and sacrifice everything. Be tactical, be thoughtful, and maybe make some decisions that you feel uncomfortable with because you have some uncertainty. But keep in mind, when the market's doing good, it's human nature to be like this can't last forever. And so, okay, I bring all that up in the last few minutes here and I'll I'll keep this one short. Like, how do I think about this and how do I invest right now? I'm not gonna give you the details and like I'm not a financial advisor so I can't like tell you how to invest, and I don't think it's gonna be right for everybody. But I'll try to give you guys kind of a thought process. I'm I'm a little bit more of a well balanced person. I do have some money in the stock market, mostly all stocks, I don't have any any bonds or anything like that, I'm not sophisticated at all, I'm a large industry guy right now because most of my focus is in real estate, but I do have a chunk of my net worth out there, probably I would say, you know, I don't know, 20% of of my net worth is out in equities in the market.

Dan Austin: [8:25] Maybe not even that much, maybe I'll give it like 15%. The vast majority of it is in real estate and real estate equity. So say another, I don't know, 7075, probably 75% is in my real estate holdings. And then the rest of that is in cash and debt funds. So mostly so the way I look at it is is my equities. I think it's an opportunity and that's why right now I'm I'm in cautious buy mode. I'm not going out and yoloing and pushing all my money into it, but I am taking excess cash. I'm shifting over there. I'm not actively growing my real estate portfolio. Not that I don't think it's a good idea, it's just not where I want to be right now. And so but my portfolio does have a lot of equity in. I'm actually selling continuously. Every year, Mike and I, over last two years, have sold a few properties here and there, Just kinda getting rid of ones that aren't performing well and really bringing that down tight to the ones that perform well that are like those legacy assets. And then the cash from that and where I'm shifting that is I'm shifting it more towards a cash position, more towards the debt fund because Mike and I do have our private lending business, and I call it a debt fund. We don't actually operate a fund fund, but I'm able to take my money and lend it out at a percentage and earn really good cash flow off of that, and I can compound that every single year.

Dan Austin: [9:44] And that's also somewhat liquid for me, and it's less risky for me as opposed to somebody else out there because I know how to underwrite deals. I know how to underwrite borrowers. I have a really good skill set in in understanding if a deal is like, what risk bucket it falls into from a lending standpoint. And I don't go all high risk all all the time. Right? I'm I'm going kind of middle of the road with my money. But it's somewhat liquid for me, I I bring that whole risk up is because I'm not foreclosing on these assets. The people are paying me back, generally speaking, is six months, eight months. And so I'm able to deploy that capital in a short term, and then if an opportunity comes my way I can't resist, I'm going to either sell that instrument, my promissory note, deed of trust to somebody, or I can wait for it to cash out and then reinvest my money and kinda shift it around. So all that to be said is you can look at it as real estate's kind of my core and what got me to where I'm at and it's going to maintain like that pillar. But as time goes on in the next few years, my stock portfolio as I continue to invest over there, I'm expecting that to grow to a higher than 15% of my net worth because I do think that over the next few years there's gonna be some great opportunity in stocks for growth if you pick the right ones. Even if you're in the large indices, I think you're going to do well over the next few years. And then on the debt fund and the cash side, that's really to help continue to build liquidity so that I can find other opportunities, whether that's in real estate or some sort of private equity play or maybe even a syndication that's a little more passive for from a real estate standpoint. Those are the three areas. And the debt fund is able to provide me with really good cash flow or the the debt investment is able to because that's a monthly payment.

Dan Austin: [11:23] Where my portfolio right now, because rents are depressed a little bit, my cash flow isn't growing or I would say even keeping up with inflation. So I'm not really looking at that as a as a growth area for my cash flow where I can with the debt instruments because, you know, I can go on, you know, say, put a $100,000 into some debt and that's going to pay me 12% interest, you know, annually or higher depending on what I'm doing. But generally speaking, that's where I'm gonna be at in that 12%. And so as that continues to kick off cash flow, I can compound that. I can continue to grow that. My cash flow will grow that way. Like I said on the portfolio, it doesn't. And then within the stocks, like, there's no cash flow. I'm not doing like a dividend. I'm not investing for dividends or cash flow or anything like that. The other stuff's my cash flow play. My portfolio kinda is just locked in with the cash flow I get from it. I'm not expecting anything for any growth there. But the moral of the story of how I'm investing is I'm looking at it as, oh, I do have a small percentage, like not even maybe 1% is in Bitcoin now because old Dilpill got me excited about it. I missed the bandwagon.

Dan Austin: [12:22] I assure you I'll probably lose money, but I'm actually up right now a little bit because I started buying it when it was in like the the mid eighties, and it's back in the mid nineties, low nineties again. So I do have 1%. That's like my speculative play. Everything else is pretty secure, pretty well balanced, but what I'm looking at is not really any near term growth. I'm not trying to buy any value add assets because it's just really hard and grindy right now. If one falls in my lap, absolutely, I'm gonna take it. If property falls in my lap and it's a great equity play, I'm gonna take it. But what I'm doing is I'm taking these uncertain times, and I'm putting money where I believe that the economy is gonna go next, and I am trying to position myself with liquidity to take advantage of those opportunities. So if I see something that's opportunistic, I have the debt fund cash reserves over here, I can shift over there. So as I grow those, and I have been trying to grow those over the last year or so, maybe even two years, then I have more more dry powder to play with. I'm not going all powder. I'm not selling my portfolio. I'm not trying to get all cash. I don't think it's the end of the world. I think that you can lose out on some equity with the selling cost, and just selling right now isn't the most ideal time for most of our properties.

Dan Austin: [13:26] So I don't think you I personally I know Mike is different. He is trying to sell off all of his personal portfolio. He'll still maintain a portion of our portfolio that him and I own together. But for the most part, he's really trying to go dry powder and some other investments. That's just not my strategy, we all have our own strategy. I have a pretty bullish outlook on America, but more so bullish outlook on humankind, like the end of the world is not here yet. We got a lot of runway. We got a lot of runway as an American economy to keep going. I mean, you look at all the crap we went through, the world isn't all in that greatest position financially, but America's not doing that bad. Go look at the GDP. Go go look at the jobs market. Why is it still so strong? And despite all the chaos Trump has thrown out there with these freaking tariffs, the stock market is still kinda back to normal. We're a little bit down, but we're not as bad as people make it seem. So think about that. We are in uncertain times. How do you act and react in uncertain times? How do you invest in uncertain times? And the last point I'll leave you with before I tell you to have a good weekend is don't forget to invest in yourself. So a lot of the cash flow that I'm kicking off on my businesses is actually not just going into one of those invest those three investment buckets.

Dan Austin: [14:35] A good chunk of that's going into investing in myself. So I'm reinvesting. Like like I've talked about before on the podcast, Mike and I have, we are growing our private lending business. So some of the profit from that business is going back into it. We are still growing and flipping our business, and we're we're investing in ourselves there. So we're not just scraping all the profits that we can and just and scrolling it away. It's like some reinvestment in ourselves. Buying some education, learning how to do things, and going to the next level in in an area of our professional growth. That investment in yourself is what's going to pay off in that three to five year range is a 100% my belief. So that's my spiel on where I'm at. If you have any questions on any of this stuff, as always, hit me up on Instagram at investor man dan. That's probably the quickest way for me to respond to you, and I respond to everybody I think for the most part. So yeah, if you if you hated that and you think I'm an idiot, please let me know. If you know something more than me, I would always be open to advice on this stuff, but I'm pretty locked in for now otherwise. So have a fantastic weekend and I will catch you all next week.