Show notes
They were very well employed in the tech industry. She worked at Amazon. He worked at eBay. But they felt their jobs were not just high tech but high stress, to the point of being "soul-crushing." That's when they decided that something had to change, and started investigating real estate and the single-family rental business. Lily and Shane Yong timed it right, during the housing crisis. They'd buy a home and then turn it into a rental when they upgraded. One thing led to another, including some RealWealth networking, and they were soon investing their money out-of-state. The portfolio they've built has made it possible to get out of the rat race, and "live life on their own terms." In this episode, they share their Real Wealth Story with both Kathy and Rich Fettke. That includes how they got started in California and expanded elsewhere, how long it took them to be able to quit their jobs, their decision-making process, their first 1031 exchange, and challenges they have faced and overcome. If you'd like to "live life on your own terms," Join RealWealth today at www.realwealthshow.com. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you! Go to www.RealWealthShow.com for the full transcript or to listen to past episodes. TRANSCRIPT [music] Rich: You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors' resource. Kathy: Welcome back to the Real Wealth Show, we're going to do another Real Wealth story with Rich Fettke- Rich: -and Shane and Lily. Kathy: Who have been Real Wealth members but they started their journey years ago on their own and have both been able to quit their high-tech jobs that they say were soul-crushing. We're going to find out why and how they've been able to achieve that. Shane and Lilly, thank you so much for being on the Real Wealth Show today. Shane: Oh, you're welcome. Thank you for inviting us. Rich: We're excited to hear your story. We know a little bit about it, very inspiring. Going from the tech industry and corporate to being financially independent on your own now, so I can't wait to hear about this. Kathy: I want to jump in and say, when you're starting out in life, getting a job at a big tech firm, that's a really big deal and people are generally pretty excited. Then that starts to wane and I'm wondering why? Why did it suddenly become more of a soul-crushing experience? Shane: It depends on the company. Some companies, of course, they treat their employees like they're dispensable. [unintelligible 00:01:20] names here. It can be tough. I started on engineering, but then I moved to management. I had to move up the ladder of management. Over time, I don't know if you have experience in corporate management, it becomes pretty soul-crushing. I remember-- [chuckles] Rich: Got it. Kathy: Demanding your heart and soul, but maybe not giving it back. Shane: I'll give you an anecdote. I was given the task of laying off a third of my team. They gave me a spreadsheet, and I couldn't talk to anybody. [crosstalk] Rich: That is soul-crushing. Shane: It's hard. I lost sleep [00:02:00] for days because I was making decisions with people's lives. I just had to go by gut and based on historical data and all that stuff, I couldn't talk to anybody. Rich: Why did you guys choose real estate? It seems that there's so many people that put their focus on investing in stocks, or you get your 401k with a company. Why real estate? Shane: A lot of the real estate stuff was her influence. Our first investment actually was the property in North Carolina, where she was going to seminars, and she heard about this one provider. We got hooked up with the provider. We said, "Oh, okay, let's try it." We purchased our first rental, actually the first rental out of state. Rich: Out of state, got it. Didn't you sell the residence and then move to a new one and turn the old one into a rental in California? Shane: Yes, we did that 14 years ago. Lily: I bought my first place and then you bought your first place. Then later on, I moved into your place and so that we sold that place, and then-- Oh, what do we do with the money? I use it to buy another rental. We bought that one and then we bought that other state property. Then later on, we moved from the place that we lived together that we changed that into another rental. Shane: Then we had kids. That put a damper on things for a while because babies, man, they're a lot of work. [laughter] Rich: They're a lot of work. Puts a damper on something, but also highlights others. Shane: I was in Vegas. On the way back to the airport, there was a taxi guy who was driving, and he was striking up a conversation with me. I was of telling him different things. Then he brought up what he claimed was the fact that he told me never invest in real estate because you will always lose money. Because during- Rich: The genius taxi driver. [laughter] Shane: I came home and I told her, [00:04:00] "Lily, we have to buy more properties because the taxi guy just told me not to do it." Rich: Oh, good. [laughs] Shane: You know it's the best time to invest when taxi guys and grandmas tell you not to go invest. Rich: Oh, that's so funny. I love that. Shane: That's when actually we started to look for more investment properties. During that time, it was difficult because with two babies. I remember we were driving to properties. I would sit in the car with the babies and Lily would run in and look at the house and then she'll come back out and then go, "Your turn." I'll run inside while she deals with the babies. It was tough. Eventually, we looked for help. That's when we found a six-unit property in Hayward. Kathy: Oh, wow. Rich: Nice. Shane: That was our first and only foray into commercial properties which brought in a whole new set of challenges. I'm sure- Kathy: Like what? Shane: Commercial properties the loan process is- Kathy: I was going to ask about the loan process. Shane: -very intrusive. I wasn't used to it. The types of things that they want and need is very different. After that, we maybe bought one more property in the Bay Area. That's when Lily went to more- Lily: More meetups- Shane: -meetups and things. Lily: -to learn more about how other people's strategies are. I came across your community. Shane: RWN. [laughter] Rich: Excellent. Shane: Real estate was something that we already had some-- we dabbled in it already and we felt like we saw some benefits, like tax benefits that you don't get with the other equities, for example. Lily: Also, we saw different characteristics. We do still have our stock investment. I feel like the volatility is different, and it is something that I can work on and it's something in our control. Rich: That's a really good point. [00:06:00] I know a lot of our members like the whole having a hard asset too, it's going to be there, it doesn't vaporize. That's great for you. Shane: Managing rentals is work. A lot of times people will say, "Oh, you're doing rentals so you sit around doing nothing, right?" You got to manage the property managers too. A lot of times they send questions and/or they don't do something. We had experiences with bad property managers. We have all kinds of horror stories. Lily: Even sometimes with a good property manager, they can only do so much. There's still things that you need to manage. Rich: Absolutely. Kathy: Got to buy, right? Rich: Yes, because all of a sudden you're dealing with sometimes the city can be a challenge. Sometimes it's the permitting process. Then let's continue on your journey here. Now you've got your multifamily that was at how many units in that? The ones in Hayward? Lily: Six. Rich: Six in that. Okay. That's when you went out of state? Shane: Yes, we already had one out of state at that point, the one in North Carolina. Lily then decided to quit and my deal with her was that okay, since you're quitting, you're going to have a little bit more time besides dealing with children, which, again, that's a lot. Don't get me wrong, that part is a huge part right now. She was able to spend more time doing more research and she came across RWN. That's when she attended more seminars, and we started to purchase our properties through your help. You guys can agree on that. Rich: You went to a Real Wealth live event? Is that what you did? Lily: One of the event, yes, probably. One of the-- in there. Before, our approach was ad hoc. What we have then, maybe we'll turn into rental and stuff. I guess at that point, we're thinking we should have a more holistic view of our portfolio and see does this number really work better? Is there a really better number, a better appreciation over time? We did some calculation. We also want to diversify not just between different asset class, but also location only where we want. [00:08:00] Not just everything in the Bay Area, or not everything in one state. We went to one of the events that you guys usually host in San Mateo. I was going to your events for quite a while before we're able to talk to people. I think what I like about it-- it's like besides just how you guys seem to be so on top of it, and due diligence and have a great team. Also, there's a community so you were able to kind of bounce off idea and see what you're doing. Sometimes, if you just do it by yourself and other people don't really know what you're doing, is you by yourself, too. It's nice to be able to have people to talk to. Rich: That's important. Shane: At the end of the day, we trust you guys. It's the biggest factor for us to work with you. Of course, we trust that you and your team to help us navigate and connecting us to the right set of folks who hopefully will help us with not just buying but also managing the property. That's actually a bigger thing than buying it. I can go and buy, no problem, is the dealing with all the stuff for years later. Rich: Learn the lessons. Lily: It's the decision point. Each time we work with a team like you guys specifically, on some [unintelligible 00:09:23] or with the provider that you guys have vetted for, each decision point and I can see something may be more risky and then would that be a good thing for the investor? I really appreciate that a lot. Some people may ask us, so we already have a property out of state in North Carolina that we work with some other team. The experience with that was also very just transactional. We buy and then-- Shane: You're on your own. [laughs] Lily: Yes.I don't feel like we got a lot of support afterwards but with RWN, [00:10:00] I feel like we have this ongoing relationship. I feel like at the long term, it's something that we can work together. Rich: Where are you now? Do you have a good amount of out-of-state properties? Shane: Yes. Well, the majority of our properties are for sure. Out-of-state. Lily: In terms of units. Shane: Yes, in terms of units. Katy: Yes, and what states? Lily: Florida. Ohio, Michigan, Alabama, Shane: Yes. Kathy: Wow. Shane: Now we just added the couple in Nevada. Lily: Yes and north-- Shane: We are buying another one in North Carolina. Kathy: You have a pretty good portfolio when you can't remember what state they're in [laughs]. Rich: I know. That's happened to us too. Shane: When you have to do all the state taxes and one is different and crazy. Kathy: That's fun too. Rich: That's how you remember the filing system. Kathy: That's when you get the CPA to handle all that. Rich: What's the future goal and plans for you guys? Shane: We're going to keep expanding our portfolio. The whole point is to get cash flow so that we can continue supporting our lifestyle. Rich: Okay. Shane: Going back to that journey, when Lily starts searching for more properties to buy, the goal was to eventually help get me out of my soul-crushing job too and so the good news is about a couple of years ago I left the industry and I have to tell you a lot of people I worked with were shocked. Rich: Yes. Shane: They thought I was doing relatively well and doing, and they go, "What? You're going to leave this?" Especially, younger folks. You mentioned younger folks, there were engineers who just started and they thought this was it. They go to the tech industry and they die in the tech industry, whatever. When I told them that, actually, a few of them came and talked to me and they told me that I opened their eyes to the fact that there are alternatives, that there are other ways of making a living. [00:12:00] We got there and now we're continuing to expand. We're actually in the middle of a 1031 exchange. This is our first one ever. Rich: Wow. Shane: We learned quite a few things not to do until we did it and a bunch of last-minute things, but we were still going through it and hopefully we can get it all closed in the next couple of months because I'll definitely feel better when we can get there. Rich: 1031 out of California? Is that one of your California properties into something else? Shane: Yes. We, we sold one and we were buying multiple in other states. Rich: Excellent. Lily: I was saying I wasn't in management and it was a different soul-crushing I guess, but I actually still love tech. I feel like now I'm not in the big machinery that it freed me up more time to actually do the tech project or whatever other project that I'm interested in. Kathy: As a freelancer or just for yourself. Lily: Projects or-- yes, I just call them projects for now. Shane: For fun. Kathy: I love that. Shane: She's definitely more techy than I am now. Kathy: You could turn this into what you originally went into your career for, which was your love for technology and that's what more and more people are realizing is that you can become more of a contractor and only take projects that you want and be your own boss. You did all this while living in the San Francisco Bay Area, right? Shane: Yes. Kathy: I'm curious because it's so expensive to live in the San Francisco Bay Area. Even if you have two people working with good salaries, it's so easy and then add two kids right into the mix. It can be very difficult to set aside the money needed to invest. How did you do it? Did you sit down and have a financial plan? Where did you get the money? Shane: [00:14:00] The money came from our jobs and our equity in the companies that we worked at. We worked at relatively large successful companies, so that helped. That is a big part of where it came from but the other magic to this was Lily spreadsheets so she is the magic. She loves spreadsheets. I hate anything that has to do with forms and spreadsheets. I'm so happy that she-- Lily: I think it's the essence that you attach it, what it means to you, right? For me, it's a discovery. I love to remember is what I discover, what I can do, and what the possibilities. Shane: The other part of the deal with her was that she would put everything in the spreadsheets and she'll try to figure out, okay, what are expenses? What are things that we need to plan for? How much money do we need to come in every month before we can get to the point where both of us can do something else. Lily: I think another thing was also that we just started. We started early so that if we were to wait till later, to wait for more down payment, to wait for more then is getting even harder. We started early, then we set money aside to do whatever to, so that then later property increase value. Then we can do that to roll up, to buy other stuff too. Shane: I was not from that Hong Kong mindset. I didn't know anything about real estate. I just go, "Oh, you buy a house and you live in it." I never really thought of it as a real estate investment thing, but look at us now. Kathy: Yes, so you did have a financial plan, then it does help to have someone who understands and loves spreadsheets. Shane: For sure. Kathy: If you don't have someone in the family, you can certainly have your CPA do that with you or even a bookkeeper. All right. I know it's not all easy rainbows and unicorns. What have been some of the challenges along the [00:16:00] way? Shane: Challenges. [chuckles] Shane: The lessons learned for our listeners and viewers. Kathy: Yes, lessons learned. Shane: Some of the bigger challenges I would say is that when you're renting homes out, there's people involved. It's not a computer, it's not a machine. Kathy: It's not all the same algorithm. Shane: Yes, so you can't just write another routine to make it faster or make it smoother. The problem is that when it comes to dealing with people, there's always going to be emotions and people not doing what they're supposed to or what they promised and things. Then you end up having to deal with the consequences. I would say one of the biggest things sometimes is just not to panic because a lot of times I tell my friends who say who are interested, I say, "If you're going to do this make sure that not only you can sleep at night, but your spouse can sleep at night when someone doesn't [unintelligible 00:17:02]." Rich: Yes, good advice. That's really good advice. Shane: If you are perfectly cool, but your wife is losing sleep every night. It's not worth it. Don't do this. Rich: Yes, got to be partners. Shane: Going back to this. There are things like obviously like sometimes people don't pay rent or whatever and you have to go through eviction processes. I'm sure lots of people deal with that already, but there's things happen on your property. We have one where even the police was involved, but we didn't panic. We had a very good property manager who helped us deal with it and it all worked out. We may be lost a little bit of money there, but then we regain it once we got it all fixed up and repaired and rented out. It'll recover, it's just that sometimes it can be a little scary. It's because you're dealing with people and hopefully folks buy properties in all A neighborhoods all the time, but we don't because we're looking for cash flow [00:18:00] but even A neighborhoods have problems too. Kathy: We had a beautiful brand new house, lakefront, that we rented out and they painted it purple inside the whole thing. You do never know but that's why we have contingency plans. You got to have great insurance to cover things and also reserves, I'm sure you put that in your calculations. Shane: Yes, and the big thing that we tend to tell folks is get umbrella insurance. Get as much as you can. Especially, folks who think that they can just put an LLC and they'll protect them, it doesn't. Lily: There's always more money to be made. There's always a better investment, but you never know ahead of time. If I bought more at that time, then I would have a bigger portfolio that is more cash, whatever but there are a lot of things that you don't know ahead of time and as good enough. [laughter] Shane: What's good enough? Like any business there's risks and sometimes, like I said, if you can't sleep because of the risks you're taking, don't do it. It's not for everyone to be honest and it'd be very tough on certain people I know who, fortunately, knowning enough about themselves that they, after I told them this thing, they go, it's not for me. Kathy: It's not me. It's important to know that. Rich: It's very important. Investment means risk right. Investing in anything means risk. Lily: I guess like you said just have a good medication plan. Kathy: I'm curious, Lily when you quit your job and then Shane when you quit yours, but let's start with Lily, did you notice a difference in your income? Because at that point you were probably able to collect even more tax benefits by becoming a real estate professional. Did you experience that, any change in income when you quit? Lily: Well obviously the W-2 is gone [00:20:00] so I've noticed that. [laughter] Tax-wise, there are different kinds of tax write off because with W-2 we're not able to take a lot of deductions, and they all have to be deferred. Rich: Got it and then you turn your trips out to your rental properties as family vacations, right? Didn't you say that? Shane: Yes, part of it was, we wanted to go to some of these places to meet the providers who [unintelligible 00:20:29] a place and yes when my friends were going to Hawaii, whatever, for vacation, we went to Ohio. Rich: I know. [crosstalk] Different vacations [crosstalk] Lily: Interestingly, if we asked our kids what they remember, they remember the swimming pool in the Ohio hotel more than Disney or [crosstalk] Kathy: Isn't that amazing and room service, sometimes it's all our kids wanted was to sit and watch a movie in a hotel and get room service. [laughter] Shane: Disney world was overwhelming but the swimming pool at the Ohio Hotel in the middle of I don't know-- Rich: Oh that's funny. Lily: Have so much screen time. [laughter] Kathy: That is great. Rich: You guys get to do Disney World and right off that trip, right? Shane: Yes, yes when we went to look at properties in Florida, we did go to Disney World, so that was really good, maybe we should buy properties in Hawaii. Rich: There you go. [laughter] Lily: [unintelligible 00:21:29] to oversees [unintelligible 00:21:30] Kathy: I believe and talk to your CPA, but as long as you are looking for property, that might count. All right, or going to an event that's related to real estate. Shane: The other thing that about not having a W-2 is that we can no longer do the type of loans that we could before, which makes things complicated. Actually, we went through the learning process of that-- Kathy: You would have kept your job longer and gotten all the loans before you quit maybe? Shane: Well, two things, one is I wish [00:22:00] we put the properties first all in her name, and then all in my name so that we get 20 because we didn't, we hit the 10-limit already, so even if I kept my job I wouldn't have been able to unless we start selling or whatever but then after not having W-2, we had to do the non-conventional loans and that was a whole lot of beeswax, yes. Lily: I look at my friends who have W-2 their interest rate and that is just high and [unintelligible 00:22:31] Shane: They don't know how good they got it yes. Kathy: Rich, I want to say we but it was really Rich just finished a commercial loan that took him only like three or four months maybe six. Rich: Oh man, we got a bottle of champagne after it was all done. We put it aside and be like when this is done this is getting open. Shane: When I say intrusive, people don't really know what that means sometimes. Lily: [unintelligible 00:22:57] okay I will do it. [laughter] Rich: Well thanks so much for being here you guys, really appreciate it. Kathy: Thank you for sharing your experience and your wisdom and congratulations on continuing to create your dream life, we'll talk to you soon. Lily: Thank you. Kathy: Thank you for joining us here on The Real Wealth Show, it's always good to have you here, Rich. Rich: Good to be here. Kathy: We're going to have to do another interview soon and this interview was so much like your book that is coming out soon. Rich: Very similar, yes. Kathy: I hope we get that published very soon, probably this fall, it's extremely inspiring. For more information, free webinars, and conversations with our investment counselors who all own lots of real estate and more referrals to teams nationwide who can help you find property and manage them, you can go to realwealthshow.com. It's free to join and you'll get access to so much information to help you on your journey. Rich: See you. Kathy: Bye-bye. [music] Rich: The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information go to realwealthshow.com [00:24:10] [END OF AUDIO]