59-year-old\u2019s side hustle brings in $1.3 million a year\u2014he only works 1 hour a day: This \u2018math formula\u2019 makes it work<\/a><\/p>\n(If you click the link it will open in a new tab\/window.)<\/em><\/p>\nUnfortunately, of course, there is a catch. We haven\u2019t found the solution to everyone\u2019s money problems, as the article implies. Let\u2019s dig in.<\/p>\n
Buying a Real Estate Empire<\/h3>\n
The 59-year-old is Steve Barsh. Here\u2019s how the side hustle works:<\/p>\n
\n\u201d [Steve Barsh] owns and runs property management company Parker Chase Properties, which brought in $1.27 million in revenue from bookings on VRBO, Airbnb, and travel software platform Hospitable last year, according to documents reviewed by CNBC Make It. (Barsh is an investor in Hospitable, according to the company.)\u201d
\u2026
Parker Chase manages five condo rentals, including four that Barsh and his wife own. They spent a total of roughly $6 million to buy three of them in 2019, with $100,000 down payments for each, funding the purchases largely through money his wife took home from a biotechnology company acquisition, Barsh says. They bought the fourth after selling their original condo in 2023, he adds.<\/p>\n<\/blockquote>\n
A few things from there stand out:<\/p>\n
Extreme Leverage<\/h3>\n
Putting $300,000 (total) down for $6M in real estate is only 5%. Most people couldn\u2019t get away with putting down $100,000 for a $2M home. The mortgage lender would need to see that you have a very high income. You certainly couldn\u2019t say, \u201cWell, this is going to be my side hustle. I\u2019m only going
to work an hour on it.\u201d<\/p>\n
Extreme Income<\/h3>\n
Perhaps it is easier to convince the mortgage lender to give you that kind of leverage if your wife recently sold her biotechnology company. Even though it says they were funded from his wife\u2019s sale, he has a not-so-regular job:<\/p>\n
\n \u201cHe\u2019s a startup investor by day: a venture partner at nonprofit accelerator Inception Studio, and an advisor to organizations and CEOs ranging from SeatGeek to NASA, he says.\u201d<\/p>\n<\/blockquote>\n
Extreme Timing<\/h3>\n
He bought a lot of real estate in 2019 with low interest rates before COVID. Either his crystal ball is better than mine, or his rabbit\u2019s foot is more effective. I\u2019m not sure which, but probably a bit of both. If you want to do that today, you\u2019ll need to acquire $12 million worth of real estate and own at least half of the equity in it.<\/p>\n
Extreme Fine Print<\/h3>\n
You\u2019ll notice that the properties bring in 1.27M in revenue. However, I couldn\u2019t find a detailed analysis of the expenses. Presumably, they are paying the mortgages. Also, \u201cBarsh manages the properties, along with a housekeeper and a backup manager who steps in when he\u2019s out of the country.\u201d Maybe the backup manager isn\u2019t too expensive, but a housekeeper for several AirBNBs isn\u2019t going to be cheap. That\u2019s a full-time job.<\/p>\n
You can make a lot of revenue by selling $5 bills for $1. However, that would be a terrible business.<\/p>\n
So, how much is Parker Chase Properties\u2019 actual profit? It\u2019s not clear, but maybe it is still more than a million a year.<\/p>\n
Three Big Questions<\/h2>\n
While I was reading the article, I had had three big questions:<\/p>\n
1. Can you do this, too?<\/h3>\n
In the article, they ask Steve Barsh if his formula can be duplicated. Amazingly, he says it can be.<\/p>\n
However, he seems to say that there are a lot of people who are real estate investors. That is less shocking. We\u2019ve owned real estate as part of our retirement plan for almost 20 years now. It\u2019s on a much smaller scale.<\/p>\n
2. Is this amount of huge leverage safe?<\/h3>\n
I\u2019m reminded of the story of Casey Serin<\/a>. He became famous in 2006 after buying eight homes with no money down by simply stating his income. Unfortunately, it was the worst time to make the worst real estate bet. The sub-prime crisis caused real estate everywhere to soon crash.<\/p>\nCasey Serin would have needed perhaps ideal conditions for his plan to work out. He would have needed the kind of real estate market that Steve Barsh had. Steve Barsh had great income sources, so he didn\u2019t need the perfect real estate environment even though he got it.<\/p>\n
3. Why not invest the money in the stock market instead?<\/h3>\n
This \u201cside hustle\u201d begs the question, \u201cWhat about just investing the money in the stock market?\u201d It\u2019s a little harder to get that kind of leverage with the stock market. However, you can always buy on margin.<\/p>\n
Real estate did really well from 2019-2022 or so, but prices have mostly stopped going up. The S&P500 has gone up more than 4.5 times since 2011. Since 2023, the S&P500 has gone up 50%.<\/p>\n
As someone who is invested in both real estate and stocks, I can tell you that my stock investments have blown past my real estate investments.<\/p>\n
My current thinking is that real estate when it\u2019s priced reasonably, can provide an initial cash\/equity boost due to leverage. However, over time, that advantage tends to fade away as stocks have historically had larger returns. To get the best of both worlds, it may be best to cash out of the real estate after 8-10 years and invest in stocks. Another thought is to use a 1031 exchange to split the equity in one appreciated property into two properties. You have to be careful with this strategy so you don\u2019t end up over-leveraged.<\/p>\n
Final Thoughts<\/h2>\n
Usually, I don\u2019t write about such obvious clickbait. To be completely honest, my article for reviewing January\u2019s financials won\u2019t be ready until later this week or next week. Also, it is too early to write about the tariffs that started to flood the news last night. I\u2019ve been negative enough about the policies of this administration. I\u2019m taking a more wait-and-see attitude.<\/p>\n
Related<\/em><\/h3>\n<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"
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