Episode 53 - Stop Playing It Safe: The Mindset Shift That Changes Everything with Elsie Wu
What if the real breakthrough you’re waiting for is already inside you — but your mindset keeps getting in the way? In this episode, Stephen has a raw and eye-opening conversation about breaking mental barriers, realigning with your purpose, and building momentum when life feels stuck. Together they unpack what it really takes to move forward, why so many people stay trapped in cycles of doubt, and how to step into alignment with who you’re meant to be.
Stephen and Elsie talked about:
00:00 Introduction
03:25 Diving into Real Estate Investing
06:16 Lessons from the 2008 Market Crash
08:44 Challenges in Commercial Real Estate
10:43 Balancing Cash Flow and Appreciation
14:10 The Importance of Long-Term Planning
28:28 Tax Strategies and 1031 Exchanges
32:26 Discussing Career Transitions
33:50 Navigating Market Shifts
39:10 Trust and Verification in Real Estate
45:31 Balancing Work and Life
46:56 Building Sustainable Systems
52:51 Final Thoughts and Contact Information
TRANSCRIPT
∎ Teaser / Highlighted Clip
[Stephen Husted] (0:00 - 0:05)
I think what people got to understand is when you get into real estate investing, it is a journey.
[ELSIE WU] (0:05 - 0:06)
It is a journey.
[Stephen Husted] (0:06 - 0:06)
I know.
[ELSIE WU] (0:07 - 0:28)
I think you have to have that momentum. Also, you were talking about that earlier, your first property was in Detroit, right? You need a way to start that momentum.
If you don't start, it's going to be hard for you to... You need that traction and you need to build on that traction. Yes.
You have to start somewhere and you need to find reasons to start as opposed to reasons to hold back.
∎ Podcast Intro:
[Stephen Husted] (0:29 - 2:44)
Brace yourself for a wild ride into the unexpected. This ain't your typical success show. I'm here talking to real folks who've been through it all, skipping the fancy business talk for authentic stories.
We're diving into childhood dreams, teenage escapades, and everything in between. No scripts, just the stories that truly mold success. Each episode takes you on a journey through those breakthrough moments that paved their way.
No fluff, just genuine stories. So whether you're chasing dreams or just love a good story, buckle up for wisdom, laughs, and the unexpected. This is The Breakthrough Podcast, where success is a journey, not just some fancy destination.
Don't miss out. Hit the subscribe button now and join our breakthrough crew. I got some incredible stories to share and you won't want to miss a single one.
∎ Guest Introduction:
Joining me today is Elsie. If you've ever wondered what you're doing with your life while still trying to hold everything together for everyone else, this episode is for you. Elsie is a mom, business owner, and creator who understands what it means to rebuild yourself while life keeps moving.
This conversation was simply two people being real about the pressure, the fear, and the stretching moments, yet still choosing to keep showing up. We talk about what it feels like to lose ourselves, rediscover who we are, and move through the in-between without letting everything fall apart. It's gentle yet powerful, filled with moments that will land exactly where they need to. Let's jump right in.
∎ Podcast Proper:
Hi, how are you? Good.
How are you, Stephen? I'm doing good. I'm glad you could jump on.
I was excited to talk to you, especially after our very first conversation. In my head, I was going, okay, you know what? I need to have on the podcast, so I'm glad you were able to make it
I would love to get into what we had talked about a couple months back because we were initially starting to speak on basically financing and getting private money for a project, but then it really turned into understanding a little bit of your background. You were investing out in the Midwest and then did that for a while, but then came back into California to bring all the investments this way. Is that correct
[ELSIE WU] (2:44 - 2:44)
Yes.
[Stephen Husted] (2:46 - 2:48)
Let's hear about this.
[ELSIE WU] (2:48 - 5:09)
We started actively investing in real estate in 2004. At that time, it was right after the dot-com bubble burst, and a lot of people in Silicon Valley were worried about their jobs going to Asia. I was in tech.
My husband was in tech. We were worried about what's going to happen to our tech jobs because almost everyone in the family was in tech. Then we learned about Robert Kiyosaki, rich dad, poor dad.
We learned about passive income. We decided that I would be the first one to take the plunge and do active real estate investing. We bought everything that we wanted to buy while I still had a W-2 paycheck.
Then I quit, partly for real estate, but also mostly to take care of my family. My grandfather was 90-some years old then, and he needed more care. We got into real estate heavy in 2005, 2006.
We were in seven different states. We had multifamily, we had strip centers, we had single family, and we had a bunch of development projects. Our colleagues from the tech and some of our family and friends, they were intrigued by what I was doing, so they actually wanted to follow me.
Then when the market crashed, we lost a lot of our own money, and then a lot of our real estate investor family and friends. Luckily, my husband kept his tech job, so we were able to continue with his income. Now, we used up all of our savings, including some of our 401k.
We lost some of that, but we were able to continue pushing forward managing those projects that either we couldn't finish or the market just wasn't right anymore. Because of that, today I actually have a lot more investors than we did before the crash, before the dot-com crash. That was a blessing in disguise that we had.
We were young enough when the market crashed, and we had the opportunity to recover. Because we stuck through it, our investors appreciated our integrity, our persistence, and continued to invest with us. We actually have a much bigger and much better portfolio now than we ever did before.
[Stephen Husted] (5:09 - 5:48)
What was your biggest takeaway from that particular crash in 2008, and how did that make you a better investor? Do you have an air of caution now on markets every year? How are you evaluating it?
Because I went through 2008. That's when I got my real estate license. I didn't have investment properties then, but it just seemed like everything was crashing on all aspects then.
I wish I would have known then what I do now, because that was the greatest opportunity as an investor, too. What did it do to you as far as an investor?
[ELSIE WU] (5:49 - 6:57)
When we were in tech, money was easy in the sense that the W2 Patriot just came in every two weeks. It was easy, it was steady, and we didn't have exposure to the rest of the world. After the fact, we realized that, hey, we need to do our own due diligence.
Trust, but verify is very important. We thought we were following the right people, but the right people didn't have much more experience than we did. Now, for sure, we ask people, hey, what are your battle scars?
Have you learned from those battle scars so that we can tell if they are the right people, if they have the right experience to complement our skills and our lack of knowledge? We didn't have that, and we didn't even know to ask those questions. Today, we're much more prudent in forming new partnerships.
We're much more prudent in recommending investments to our friends and family. We always make sure that we have plan A, plan B, plan C, and we're ready to execute on all of those plans as needed.
[Stephen Husted] (6:59 - 7:20)
That was put into place based on your experiences. That's really what it always comes down to. I think you go through the issues, and you don't know what you don't know until you find out.
Then you're in panic mode, and you have to work through it. Then it's like, okay, I'm not going to make that mistake again, hopefully.
[ELSIE WU] (7:21 - 7:35)
Right. I don't think that anybody had bad intentions, but we didn't know what we didn't know. Other people didn't know what they didn't know.
There was not enough experience to weather downturns among the people that I knew.
[Stephen Husted] (7:36 - 7:48)
What do you think? Back then, when you were losing money, was it all based on financing and the type of debt you were putting on these projects? Is that what was really the key factor?
[ELSIE WU] (7:48 - 8:17)
The market changed. For example, most of our loss came from development projects. I had no business doing development projects.
I didn't know what I was doing. These development projects were mostly housing, mostly condos, townhomes, and single-family homes. One of our projects that we still hold today was to build 360 units of condos and townhomes in New Mexico.
That market just evaporated.
[Stephen Husted] (8:18 - 8:18)
It was gone.
[ELSIE WU] (8:20 - 9:08)
Even now, we haven't been able to complete that project because we know so much more. We don't feel comfortable doing the projects ourselves. The seasoned investors are not ready to invest in a project of that size.
We're having to repurpose that property. I think the key thing we learned from that experience is that we cannot just look at the next few years. The last few years and the next few years, we need to take a longer-term horizon and always budget extra holding time.
Luckily for us, most of those projects we had holding power, except for two, and we lost those to banks. But at the end of the day, the investors saw that we were really trying hard to make everything work, and they appreciated that.
[Stephen Husted] (9:09 - 9:12)
You're still holding this project to this day. When did you purchase it
[ELSIE WU] (9:13 - 9:14)
2004, 2005.
[Stephen Husted] (9:15 - 9:20)
You have partners from that period of time still with you in this project?
[ELSIE WU] (9:21 - 9:24)
Right. We're all going for a tax write-offs now.
[Stephen Husted] (9:29 - 9:35)
It's offsetting other parts of the portfolio of whatever partnerships you have going within it.
[ELSIE WU] (9:36 - 9:53)
The other thing that we learned is that it is good to have cashflow properties. If the properties are cashflowing, they will hold. But the problem is a lot of those cashflow properties don't have the appreciation that we need to live in the Bay Area.
[Stephen Husted] (9:55 - 10:21)
Let's break this down. This is a big topic that is definitely put out on social media, is the cashflow versus appreciation. You hear people in California or let's say Washington, like Seattle, you're banking on appreciation.
You're not getting the cashflow, per se, depending on your strategy, where in the Midwest, it's all about the cashflow, but the appreciation is pretty low. How did you balance all that out?
[ELSIE WU] (10:22 - 11:42)
Well, we didn't. We didn't know enough to balance that out. Because we read the Robert Kiyosaki cashflow books and we played the games, we did have cashflow properties.
And the cashflow properties we had, they were all, well, for the most part, they were cashflow neutral or slightly positive. So they were forced savings plan. The residential properties did just fine.
We had a pharmacy anchored strip center. That was supposed to be a really good cashflow. But the pharmacy moved immediately across the street right before our balloon payment was due.
And this is one of the things that commercial real estate brokers don't tell you. They tell you that, hey, these are the best cashflow you can have. National credit, triple net, anchor tenants, new construction.
So we thought we were sitting pretty, but when they moved across the street right before the balloon payment was due, there's no way to salvage it unless you find another national credit tenant moving in, paying the same rent. Otherwise you won't be able to refinance. And commercial real estate loans usually have a balloon payment due in three years, five years, or three, five, seven, or 10 years
So if the timing doesn't work, you could lose your shirt.
[Stephen Husted] (11:42 - 12:08)
And these are things too, I think one thing that I've learned in real estate over the years is that you can do as much due diligence as you want and talk to as many experts, but there's just things that come up, unforeseen things that come up that are somewhat out of your control and you can mitigate it the best you can, but there's always risk. There's nothing really guaranteed in real estate. Would you say that?
Would you agree with that?
[ELSIE WU] (12:08 - 12:33)
I think there are better, safer assets, better, safer cashflow. Multifamily, I think you will always, as long as you maintain the property, you will always be able to generate rental income. Generally, you can get good multifamily loan with no balloon payment.
So you don't have that ticking time bomb of a commercial real estate loan that has that balloon payment.
[Stephen Husted] (12:34 - 12:35)
Yeah, that's something to factor in.
[ELSIE WU] (12:35 - 12:40)
No. Okay. So if you lose, you have 20 units, you lose four tenants.
[Stephen Husted] (12:41 - 12:41)
No big deal.
[ELSIE WU] (12:41 - 13:01)
You still have 16 units occupied. That should be enough to feed your cashflow for a few months. Hopefully you'll be able to re-rent it very quickly, but you cannot say that for commercial properties.
Knowing what I know now, I would advise new investors to stay away from commercial unless they really understand what's going on and they have holding power.
[Stephen Husted] (13:03 - 13:04)
They can weather the storm.
[ELSIE WU] (13:05 - 13:50)
They can weather the storm and the storm may lap. They need to weather the storm. For example, when we had that pharmacy moving out of our strip center, we needed to reconfigure the unit.
The floor plan, because that pharmacy is wide and deep. And if we try to lease it out individually, we would have really long corridors for each one of these new commercial tenants. So where was the money coming from to do that reconfiguration for the commercial?
You have to have money. You have to have money to reconfigure, to renovate. Whether that's multifamily, single family home, or commercial, you have to have the money to renovate on a regular basis.
Even Starbucks, they renovate themselves every five to eight years.
[Stephen Husted] (13:51 - 13:56)
Yes. So how much did you have in reserve sitting on the sidelines for this?
[ELSIE WU] (13:56 - 13:57)
We didn't have any.
[Stephen Husted] (13:58 - 14:00)
No. So you didn't even know at that point when you were getting into it.
[ELSIE WU] (14:01 - 15:14)
No, no. So when it happened, we exhausted our 401k plan. We left tech.
I was able to move my 401k to self-directed IRA, and we exhausted that. But luckily, we were able to sell that property to a local grocery store and recover. And since then, I've gotten smarter about managing my cash flow.
And I also realized that I'm a really good saver. I don't need a forced savings plan by doing these cash flow investments. So what we did was we sold all of our remaining cash flowing properties and brought the money back to California.
And that's a quiet movement that people don't talk about. We often hear about people investing out of state. What we don't hear, and it's also happening quite a bit, is that people who invested out of state moved their money back to California once they have accumulated enough equity to buy something in California.
And once we have done that with our own multifamily and residential portfolio, we're actually getting more cash flow and more appreciation on the California properties than we ever did on the multifamily out of state.
[Stephen Husted] (15:15 - 16:16)
But it was a stepping stone. It was a stepping stone. And I think that's a big part.
I think that when we first started investing in California, the market was just flying off the and it just priced us out. And when I started and moved out into the Midwest, everybody was like, don't do it. Don't do it.
Don't do it. But it was the smartest decision that I ever did was to invest out there. Because what it did is I invested out in Detroit.
It was one of my first properties. I paid 30 grand for it. Then I got into Kansas City.
But it was all the learning lessons and learning creative financing and going through all those motions got me to the point now where I can build houses. So there's always a starting point. And I think people sometimes, everybody's doing one type of strategy or another.
And sometimes people don't know really where to start. They say, oh, I want to start here. I want apartment complex.
I want Airbnb. I want to do short term. You know what I mean?
They say a bunch of things. It's good to just start simple and go down your journey.
[ELSIE WU] (16:16 - 17:40)
Yeah. So I wonder, looking back, when we started investing, our first property was a 36-unit apartment building in Albuquerque. We partnered with friends and family to buy that property.
Looking back, I wonder if we would have done better if we had partnered with the same people and bought homes in California. If we had the strength of the partner for the diversification and for the cash flow maintenance, would we have done better in California? And this is what I encourage young people today to think about.
It's interesting for me. I get a lot of phone calls from people who don't own their home in California where they work, and they want to start by investing. But they would miss out on that nice $250,000 tax-free exclusion on the primary residence, and they would miss out on some of the other tax write-offs by investing out of state rather than investing in California where they live and work.
So what I encourage young people to do is to think about whether they can buy properties together with their trusted friends, family, so that they can enjoy the appreciation and then the tax exclusions from their primary residence. I recommend that they do that before they start venturing out of state for insufficient cash flow.
[Stephen Husted] (17:42 - 18:01)
Because that cash flow can get gobbled up on one issue. One issue, it's gone. Out in the Midwest, I just call those property.
They're basically getting principal pay down from having the tenants in there, and it's all the tax benefits. It's really what it is. And you're right on one thing.
It is a forced savings account too.
[ELSIE WU] (18:02 - 18:21)
So we had one property that we held for 14 years, and we sold it during COVID. After 14 years, we made $3,000. Yeah, that's crazy.
So yeah, we paid mortgage, but we also paid mortgage out of pocket. It wasn't enough to pay all the mortgage, and $3,000 is not enough.
[Stephen Husted] (18:22 - 18:34)
Yeah, I broke even on that Detroit property, the first one. I finally sold it. It was such a headache.
I always say that one property was the starting point. I wouldn't have taken a loss on it for what it did
[ELSIE WU] (18:34 - 18:35)
Yeah. Yeah.
[Stephen Husted] (18:35 - 18:41)
You know what I mean? When you were bringing up investing here locally with your partners, but what year was that?
[ELSIE WU] (18:41 - 18:45)
We started investing 2004, actively investing 2004.
[Stephen Husted] (18:45 - 19:00)
Do you think you could have ran into another problem just because of the way that financing was put out there during that time period into 2007? You know what I mean? People were banking on everything to be, it's appreciation, it's appreciation, it's going up, but then all of a sudden, it was over.
[ELSIE WU] (19:01 - 19:35)
Right. But we were never looking for appreciation back then. Back then, we were looking for cash flow.
Having said that, we also did development projects, which is all about appreciation, right? But I think we were conservative enough that we would not have gotten into any of those crazy financing. Everything would have been 30-year fixed rate.
I think we would have been fine. Looking back, the properties that we sold in California, so we sold our home in California, moved that money as investment out of state, that property has since doubled, more than doubled.
[Stephen Husted] (19:35 - 19:35)
Oh, for sure.
[ELSIE WU] (19:35 - 19:36)
For sure, right?
[Stephen Husted] (19:36 - 19:38)
Where was it located? Was it in Sunnyvale?
[ELSIE WU] (19:38 - 19:38)
Yeah.
[Stephen Husted] (19:39 - 19:39)
Union City?
[ELSIE WU] (19:39 - 19:48)
Yeah. So our very first home, we sold that and put the money investment projects out of state. Wasn't necessarily the best thing to do.
We know better.
[Stephen Husted] (19:49 - 20:05)
But all that led up to everything today. Yes. Yes.
So if you look at it, with all the highs and lows, and let's just say the lost appreciation, like just the whole big picture, you still came out ahead?
[ELSIE WU] (20:06 - 20:35)
Definitely. I came out ahead because I was young enough to be able to recover. I was in my mid-30s when I started this journey.
So when the market crashed, I was in my early 40s. We still have our health so we could recover, but I would not recommend that for people who are closer to retirement age because that almost wiped us out. We exhausted all of their savings, all of our 401k just to keep the projects afloat.
[Stephen Husted] (20:35 - 20:36)
Pretty stressful time.
[ELSIE WU] (20:37 - 21:38)
Yep. And we thought we had to do that to honor our investors. We had to do that to protect our credit scores.
A lot of people walked away. We didn't walk away, but we lost all of our savings. Now, because we protected our credit scores, we were able to buy in California and in other locations and continue moving forward.
But still, I don't know that everyone can withstand that type of storm. So don't do it closer to your retirement. And I say this because I also get phone calls from people who are at retirement or near retirement.
They're asking how do we invest for cash flow for the very first time in their life? And they don't have enough savings. They haven't mapped out their retirement plan.
And when I get phone calls like that, because these people watched things on YouTube, social media, and they get excited. And I'm thinking, no, this is not a good time for you to invest. It's not for everybody.
It is risky if you don't know how to manage it.
[Stephen Husted] (21:39 - 21:53)
Yeah. There's a lot to manage. And it's also real estate is a kind of a get rich slow scenario.
You need like a 10 year cycle to see the outcome of what you've been doing.
[ELSIE WU] (21:54 - 21:54)
Yeah.
[Stephen Husted] (21:54 - 22:34)
It doesn't happen overnight. Yes. Could you have gotten lucky during buying something in 2018, 19, and then rode the way through COVID?
Sure. Of course. There's outliers to all of that.
It's funny. We're doing a lot of development out in Seattle and we just got into contracting two new projects. And I was like, oh, you know what?
Maybe we should sell a couple of properties off in Kansas city. And maybe that would get us liquid about a hundred K and that could help for some other things. So we started running numbers on them.
It's like, I'm breaking even and I'm selling that. Like, no, it's sitting pretty. We're going to take the principal pay down and the tax benefits and just keep on trucking.
[ELSIE WU] (22:34 - 22:39)
Yeah. This is the time to start getting your cash ready for the next project.
[Stephen Husted] (22:40 - 22:41)
Yeah.
[ELSIE WU] (22:41 - 22:50)
I do think there's going to be an overcorrection of the market. I don't know where it's going to be. I don't know when it's going to be, but I do believe now is the time to start looking again.
[Stephen Husted] (22:52 - 22:57)
Right during this period right now? Yeah. All through California?
[ELSIE WU] (22:58 - 23:16)
Other States too. I hear that there is correction in other States. So this is the time to figure out where you want to be, where you want to invest, see the corrections so that corrections are possible and you know how to weather the corrections.
But yeah, I think there's opportunities out there now.
[Stephen Husted] (23:17 - 24:25)
Yeah, definitely. Well, I think that just everything combined with the higher rates and I think buyers were just done with the market. But I was watching this gentleman on TikTok who is from the Silicon Valley, works in tech, base salary, $350 plus RSUs.
A girlfriend is a dentist making $150. And he makes videos on the reason why he's not buying a home, that it doesn't make financial sense. And he had a very strict plan of how he saves and how he maxes out his 401ks.
He broke down their whole lifestyle, where they spend their money. And he's like, look, I pay $4,500 for rent right now and I'm in a beautiful place. If I go buy a house at one five, I'm living in something worse than this and I'm paying $11,000 a month.
He's like, why am I going to do that? And that was crazy because this guy, they're making almost $550 a year. A lot of money.
And he feels it. And he feels it. And I felt like he was justified the way he was talking.
I was like, you know what? More power to him. He invests in other things.
[ELSIE WU] (24:26 - 25:06)
Right. So I hear that a lot. You do?
Yeah. I want to try this on you. So give me a reaction on this.
I think people should buy real estate when they're young so that when they're older, these properties are paid off and they have rental property to feed their retirement expenses. And I'll give you an example. So my parents moved in with us two, three years ago.
They both had dementia and you already used up all of their cash for caregiving expenses. Caregiving expenses right now, I think it easily run 12 to 14,000 a month.
[Stephen Husted] (25:06 - 25:07)
Wow.
[ELSIE WU] (25:07 - 26:19)
Yeah. And we're lucky that they lived with us so they don't have any housing expenses. And we hire caregivers to take care of two people at the same time.
So the cost is shared by the two of them. So it's not 20,000 a month, but it's 14,000 a month. But we were running out of cash.
Luckily, my parents had a home in the Bay Area that we could sell. And it was generating rental income for a couple of years. And then we ran out of money.
So we sold the property to take care of my parents. If it weren't for that property, I don't know how we would be able to afford their care. So the reason to own real estate, I believe, the reason to buy is so that you can build up these little portfolio properties that you can sell.
You can invest tax efficiently as it grows, right? You're not paying capital gains taxes every year as you trade. You're keeping the properties.
And if you do trade, you have 1031 exchange. So you're building your assets tax efficiently. And eventually when you need it, you sell one property at a time to pay for the care.
And hopefully you'll have rental income to feed your retirement lifestyle as well.
[Stephen Husted] (26:21 - 26:24)
Yeah. And I think this gentleman was in his early 30s.
[ELSIE WU] (26:25 - 26:28)
Yeah. So, you know, 30-year mortgage.
[Stephen Husted] (26:31 - 26:49)
He would have another savings account right then and there. I don't know if people were bringing up, I don't recall in other videos if he was going to do investment properties. That I don't recall.
I just know he wasn't going to buy a primary residence because he just felt like it didn't make financial sense for them.
[ELSIE WU] (26:49 - 27:13)
The 500,000 tax exclusion for a primary residence for a couple, that's important. People who don't have kids, who are not tied to a particular property, they would actually trade to a different home every two to three years. It's a lot of hassle, but $500,000 tax exclusion, that adds up really quickly.
[Stephen Husted] (27:15 - 27:19)
Yeah. And there's just a lot of planning involved too.
[ELSIE WU] (27:19 - 27:20)
Yes, there is.
[Stephen Husted] (27:20 - 27:39)
I think that's another big part of this investment journey is you really do over time learn a lot and have a lot of different strategies. You just brought up a 1031 exchange. I don't think a lot of people know what that actually is.
Can you do a breakdown of what a 1031 is?
[ELSIE WU] (27:40 - 30:01)
Right. So for people who own rental properties, they can take all their gains from that property plus their original equity and completely tax deferred into the next property. So for example, if you have bought a home, auto stay, let's say in Arizona, and you bought it when it was 200,000, for simple math, let's say you had $100,000 down payment, and now it's worth 300,000, you can do a 1031 exchange of that $300,000 home into a property in California.
For example, that may be a million dollars, and you can use that entire $300,000. Well, if you still have a $100,000 mortgage, you can use that $200,000, $100,000 gain plus $100,000 of your original down payment into a property, into another investment property in California or any other state and defer 100% of that tax. So if it had been in that simple example, if you had sold the property without doing a 1031 exchange, you would be taxed about 35% on the $100,000 gain.
And then you would still have to pay depreciation recapture, which is taxed at your ordinary income level, which could also be another 35%. So by doing a 1031 exchange, you defer all those taxes until you sell the property without an exchange. Or for a lot of people, for a lot of real estate investors, they just keep on trading until they die, and then they pass the estate into their family, or they trade into what's called Delaware Statutory Trust, where someone else is managing the bigger portfolio of properties for them using the sales proceed from their rental properties.
So it's a tax efficient way of growing your portfolio. And I don't think that exists for stocks and brokerage accounts, right? There isn't a tax-deferred way of trading stocks, whereas there is tax-deferred, well-known, honored, time-honored ways of doing tax-efficient, tax-deferred gains of real estate trades, rental property trades.
[Stephen Husted] (30:02 - 30:13)
Yeah, it's definitely a good tool for investors. There's multiple things you can do as a real estate investor too. Do you categorize yourself as a real estate professional?
[ELSIE WU] (30:14 - 30:14)
Yes, I do.
[Stephen Husted] (30:15 - 30:15)
Okay.
[ELSIE WU] (30:15 - 30:18)
That was one of the reasons I quit tech.
[Stephen Husted] (30:18 - 30:22)
This is a big topic. Let's talk about this one. Is your husband still in tech?
[ELSIE WU] (30:22 - 31:20)
No, no. Our business was strong enough. Our mortgage business was strong enough.
He was able to quit when he wanted to, so that was nice. So when we were both in tech, no kids, not a lot of mortgage interest deduction, we were paying a lot of taxes. And that was 2004, 2005.
I think each one of us was making like $180,000 to $200,000 a year. So we did a very quick turbo tax calculation. What would happen if I quit my day job and get myself active in real estate so that I become a real estate professional?
What would that look like? And I found out that my $180,000 annual income was only really bringing home $20,000 because of all the taxes we paid versus if I were to convert to a real estate professional where I can write off some of the losses against his income. The difference was only $20,000.
[Stephen Husted] (31:21 - 31:22)
That's crazy.
[ELSIE WU] (31:22 - 31:26)
Yeah, forget it. We'll figure out another way to grow our net worth.
[Stephen Husted] (31:28 - 32:16)
It's such a big deal. I know that was a big turning point for our family too, because my wife works at Apple and so she's a W-2 and I'm a real estate professional. And it's made a huge, just a huge difference on everything.
It's such a big thing. And then I have a lot of newer investors that come to me that whether they're getting mentored or we partner, and let's the wife is, maybe she's a designer, but the husband works in tech. I go, you need to become the real estate professional in your family.
I go, and if you really want to know what it means to get around the right people that have learned a lot, this little piece of information is going to save you so much money. You're going to thank me later. It's such a huge one, right?
[ELSIE WU] (32:17 - 32:32)
It is. Yeah. But you also have to have the right real estate, right?
It has to be, and hopefully you're still also making money on your projects and not losing money as a real estate professional. I've heard that.
[Stephen Husted] (32:33 - 34:42)
Yes. Taking massive losses and just carrying it forward every time. No, it's funny you bring that up now.
Now that we're out in Seattle's market and we are developing, these projects seem, they make sense on paper. There's multiple exit strategies on it. I think that we have some, if the market were to shift, these properties could be turned into rentals very easily, and we can sit back.
I'm starting to see that right now. I just went through a project that we finished. Basically what we did is we took a single family, we lot split it, and we were getting ready to build an ADU.
Nice. We rehabbed the main house. It was a 4-2.
We turned it into a 5-2.5. It has a basement. We just finished it off with floors and added a room and a laundry room. We put it on the market.
The market started to shift. We pulled it off the market, put it on the rental market, and basically we're breaking even. We're breaking even on the main house.
We just kept it. We got tenants in it, and now the lot is split, and we're in planning. We're almost done.
We can build. We're not carrying any costs on the main house now, so that's good. We still have a basement that could be turned into a 3-bedroom, 2-bath.
Like I said, it's on a corner lot, so there's a lot of room there. That got me going, okay, I have exit strategies. If this market did take a turn, I can control when I really want to let go of some properties to get cash or move it and do a 1031, move it into something else.
It was good to see that. With these ADU projects too, the cost to build is about $400,000. Where the rental market is in Seattle, that's another break-even type investment.
If we had to put tenants in it, we can get our initial capital back out, put a tenant in play, and move on. I like that it gives me a little bit of comfort because I can't control where the market is three years from now. I don't know.
I just don't know.
[ELSIE WU] (34:42 - 34:53)
We did the same thing with one of our projects in the Bay Area recently. It didn't sell for the price we wanted. We're not in a hurry to sell, so we just decided to keep it as a rental for a while.
[Stephen Husted] (34:54 - 34:57)
Is it just break-even, or where do you have it at?
[ELSIE WU] (34:57 - 35:23)
Well, luckily, yeah, it's break-even because we have strong equity in the property as well. I'm amazed that within 12 hours, it was leased. Dual high-income couple, they don't want to own.
They just sold their property. Multiple parties like this, they don't want to own. They just want to rent.
Even though they have dual income, they have lots of deposits.
[Stephen Husted] (35:24 - 35:27)
Yeah. Well, just like that gentleman I just told you about.
[ELSIE WU] (35:27 - 35:27)
Yeah.
[Stephen Husted] (35:28 - 35:35)
When he said that, I was like, I'm like, this is crazy. You're hearing this from somebody who's making that kind of money, and they're just like, eh, not a big deal to us.
[ELSIE WU] (35:35 - 35:38)
What did he say? He called tax write-offs, I wonder.
[Stephen Husted] (35:40 - 35:41)
He's doing his thing.
[ELSIE WU] (35:42 - 35:56)
Yeah. Until we did that triple-tax analysis of what happens when I quit my tech job, I thought we were doing really well. I didn't realize $180,000 a year salary, total difference to the family was only $20,000.
Why bother?
[Stephen Husted] (35:56 - 36:17)
Especially in California, we're getting taxed left and right here. It's crazy. So what do you do?
Now, when we first talked, it was more on partnering with you on private money to do some of our projects. So what are you doing for your day-to-day?
[ELSIE WU] (36:18 - 37:11)
I am an independent mortgage broker. We do residential loans, commercial loans. We do the conventional loans, Wall Street loans, and we do private money loans.
For the private money loans we do, we also do loan servicing. This is where I mentioned earlier that we had more investors than we ever did before. So for the construction loans or for the fix and flip or for properties where conventional lenders don't want to lend, we have investors pulled together to be the lender on those assets.
Generally, it's a short-term loan, bridge loan, so that they can get a property to a state where they can get inexpensive conventional financing. I would say that's 95% of how we spend our time as an independent mortgage broker, but we are still also actively looking at real estate.
[Stephen Husted] (37:12 - 37:15)
You still are? Yeah, we still are. Locally?
[ELSIE WU] (37:16 - 37:17)
Yeah, locally.
[Stephen Husted] (37:18 - 37:19)
What are you looking for?
[ELSIE WU] (37:19 - 37:28)
I'm too tired to travel. I travel for 10, 14 years managing those seven states where we have properties. No, thank you.
I'm staying in California.
[Stephen Husted] (37:29 - 37:31)
You want to be able to drive to it at least.
[ELSIE WU] (37:31 - 38:02)
I want to be able to look at the properties, look at the market conditions for myself. Remember what I said at the beginning about trust and verify. Every single one of those properties we bought, we trusted local professionals who didn't know how to read the market, who wanted us to close deals.
We didn't have the data. We didn't have the license. We trusted people to tell us if it wasn't a right investment, and none of those brokers ever told us it was not a right investment.
[Stephen Husted] (38:02 - 38:04)
Let's stop right there on trust. Let's talk about trust.
[ELSIE WU] (38:05 - 38:05)
Okay.
[Stephen Husted] (38:06 - 38:50)
Let's talk about trust because I feel like that is the thing that's burned me the most because I typically trust people. And when I'm hiring a property manager or a contractor or handyman, I get them on the phone and I read them like, okay, is this a person that I can have a conversation with every week? Do I like them?
That's a big one for me. Do I like them? Can I talk to them?
But I've learned from experience that I've put that in the forefront and gotten burned where the contractor burned me or the property manager. Trust is one of those things. Now it's like you have to earn it.
I'm very cautious. I might like you, but I'm cautious in the beginning. Let's just say that.
What's your thoughts on that?
[ELSIE WU] (38:50 - 39:53)
I agree. But I think at the end of the day, we're all human. We all have life events.
For example, I was renovating our 36 unit apartment building in Albuquerque. 36 units, only two floor plans, cookie cutter. I wanted the same thing every single time.
I had to hire three contractors. Even after my experience renovating, guiding and all that, I had to go through three different contractors and I couldn't make it the same every single time. There was a little surprise every step along the way.
These people, they have life. They go through life events, divorces, family emergencies. Some of them may be really good at their trade, maybe a really good electrician, but they have no idea how to do accounting or bookkeeping.
They don't know how well their business is doing and they don't have a contingency plan. If something happens to them, they don't know who to call to fill their job that they couldn't finish, that they were in the middle. Right?
[Stephen Husted] (39:53 - 39:53)
Absolutely true.
[ELSIE WU] (39:54 - 40:31)
So I think nowadays when I look for contractors, I try to make sure that are they willing to have that discussion? Are they going to spend the time to build a business and help me build a business that's sustainable, that's scalable so that we can both grow? Or if they're mature enough, they don't need to grow.
They already have backup plans and contingency plans. Great. But I need to be able to, especially for out-of-state properties, I need to be able to know that these are the people that can manage the ups and downs with me.
Not everyone has the skills for that.
[Stephen Husted] (40:32 - 40:37)
That's so true. You nailed it. It's so true.
It's so true.
[ELSIE WU] (40:37 - 41:10)
On one of my properties, the same property in New Mexico, the contractor had a heart attack on the property and he didn't tell me. I learned it months, months later after I found out that he was hiring day laborers to do the projects on our site while he was at the hospital. Wow.
Yeah. So one of the other things that my safer property manager told me is you have to verify for what you expect.
[Stephen Husted] (41:11 - 41:12)
How do you do that? How do you do that?
[ELSIE WU] (41:13 - 41:23)
You have to be there. You have to be there or you have to have someone that you trust, local, who can be there on a regular basis to manage to your expectation.
[Stephen Husted] (41:23 - 41:52)
Absolutely. On top of, if you're doing a project out-of-state and you got a contractor and they're working on it, you need somebody that actually understands construction, that can stop by once a week, maybe on that Friday after the work was supposedly done and verify. And you have to trust them.
You have to build that rapport to pay them well and that they're on your team. That's just another way of understanding what is going on because you're not there. You can't fly there every time and look at projects.
[ELSIE WU] (41:53 - 41:54)
Right. I had checklists.
[Stephen Husted] (41:55 - 41:56)
You did?
[ELSIE WU] (41:56 - 42:25)
Of the vendor. Hey, I'm not paying you until the checklist is done. And I tried to pay them.
I tried to give them a good amount of business also. I had a checklist. I couldn't get the checklist completed.
And when they needed money to pay their staff, guess what? I'm still there to pay them, even though they haven't completed the checklist. So it's not always the best way to be, but I had to take care of them so that they can take care of their team, so that they would have a loyal team to help them through bad times.
[Stephen Husted] (42:27 - 42:31)
You really have to learn systems. And processes.
[ELSIE WU] (42:32 - 42:32)
Yes.
[Stephen Husted] (42:32 - 43:06)
It's a huge part of, especially if you can probably get away with it with a couple properties, but if you're going at scale, like you'll get eaten up if you don't have a real thorough systems in place on what you're doing within the business. There's a lot of moving parts. It's not just about the construction part.
It's financing. It's the property management. It's accounting.
It's the tax planning. There's a lot of steps and investing. I think people hear a lot of the positives of what's going on, but at the end of the day, it can turn into a full-time job in no time.
[ELSIE WU] (43:07 - 43:21)
Oh, it is definitely a full-time job for me. It has been a full... I thought real estate investing was passive.
Big mistake. I have been full-time since I left tech, nonstop.
[Stephen Husted] (43:22 - 43:25)
I know for me, it's on my mind until I go to bed.
[ELSIE WU] (43:26 - 43:26)
Yeah.
[Stephen Husted] (43:26 - 43:38)
Do you have a problem with that? Do you know how to let it shut down and not think about it? Do you property manage?
Back to your out-of-state, do you even own anything out-of-state? Are you all back in New York, California?
[ELSIE WU] (43:38 - 43:42)
I still have 14 acres that I haven't developed.
[Stephen Husted] (43:42 - 43:43)
Oh, the developed ones?
[ELSIE WU] (43:44 - 44:21)
Yes. Other than that, they're all in-state. Yes, I did do property management for a while for my own property and for my clients' properties.
I don't do that anymore, partly because I need to take care of my parents, especially my mother with her dementia. But the other reason is I realized that for me to do it well, I needed to be able to scale up my property management to about 1,000 units at least, and I just don't have the skills. I don't know that I can staff to the quality that I want for 1,000 units here in Bay Area.
[Stephen Husted] (44:23 - 44:24)
Really? Yeah.
[ELSIE WU] (44:24 - 44:28)
For me to have a work-life balance, I feel like I'm finally at that stage.
[Stephen Husted] (44:28 - 44:30)
Yeah, that you can let go of the reins.
[ELSIE WU] (44:30 - 45:05)
So right now with my mortgage business, we have a team of nine people, and I have redundancy built in. I have systems. I have processes.
We have referral sources. We have repeat clients. When I need to take care of my parents, I can take care of my parents.
When my mom needs me, I can drop everything and take care of her, and we do not jeopardize our client relationships. We do not jeopardize our business because I'm busy taking care of family. I'm finally at a stage where I have that work-life balance, and so no, I'm not looking out of state right now.
[Stephen Husted] (45:06 - 45:08)
I'm waiting for that work-life balance. I'm waiting for it.
[ELSIE WU] (45:09 - 45:11)
Look at that. You'll be there. Systems and processes.
[Stephen Husted] (45:13 - 45:34)
It's like little by little. I think one of my big goals is I just want to get to that point. I want to buy a sprinter van, and I want to just cruise up the coast and go to Seattle to some of my properties, maybe stay in one of them, and then travel and get off the grid for a couple days.
That's my semi-retirement solution. That's really what I want.
[ELSIE WU] (45:34 - 46:01)
I have a friend who was in the mortgage business. She designed her mortgage business so that each one of the three partners can take three or four months off a year and still earn a six-digit income. So you have to design your team, your systems, your processes that way so that anybody can step in anytime, and everyone has access to the same information, and the client sees you the same way.
[Stephen Husted] (46:02 - 46:59)
Absolutely. It's funny you bring that up. I'm going through that right now.
We're automating everything and using AI. It's a big thing that I tell my team right now. I have several VAs that help me on a daily basis.
Well, here's one problem. A lot of my VAs are in the Philippines, and from time to time, the electricity goes out. They have a storm, right?
I know if one of them gets off the clock and I can't figure out how to find the EIN number of an LLC when I'm getting ready to do financing, there's a problem. You know what I mean? So I'm constantly going, okay, I want everything so systemized out that no matter who, if I'm not around, if I'm out of town, somebody else is here, that everybody can step in and know where everything is.
It's centralized. It's going to be a big undertaking, but I do want it built out within the next six months like that, six months to a year. I'm using AI to build it out for now.
[ELSIE WU] (46:59 - 47:02)
Are your partners asking you for a succession plan?
[Stephen Husted] (47:03 - 48:06)
We talk about it, yes. I think that's a big talking point, and I also bring that up in the very beginning. I always like to look out 10 years and work backwards.
You know, like, hey, what are we going to get to this point? What are we going to do at that? When do you think you want to cash out?
I always had these kind of meetings up front on really, why do they want to partner? What are they trying to get out of this? Is it they want to do something different?
Do they want to make cash flow? What are they seeing? A lot of them actually really don't know.
You know what I'm saying? They hear what people are doing and they just think that, oh, this seems like a good idea, but they don't know the dynamics. So I really deep dive that part of like, what are you trying to do in the next 10 years?
Because I think it is a 10-year horizon. Unless it's a project that gets in your lap and it's a fix and flip and you're in it for about a year and you can really lay that out and this is what we're going to do. Here's a projected, you know, what we're going to make.
Okay. That's different. So how do you do it?
[ELSIE WU] (48:07 - 48:57)
Well, I have, I mean, because my investors have wanted to, some of them are CFOs, COOs. So before they invested with me, they wanted to see my succession plan. So I had to put that in place.
That's why my husband has a broker's license. My brother has a real estate agent license so that we could all service the loans, manage the loans. And then we also define, hey, you know, if something happens to Elsie, who gets to handle what part of the business?
That's all defined. And so from a business perspective, we are planning to be here for another 20, 30 years. So that succession, by then I will be closer to 80 years old.
So people do expect to see succession plan from us. Yeah. So it's been built into our business for the long haul.
[Stephen Husted] (48:58 - 49:00)
It's cool. There's a lot of moving parts, right?
[ELSIE WU] (49:00 - 49:02)
Yeah, there is. It's fun.
[Stephen Husted] (49:02 - 49:03)
I like that too.
[ELSIE WU] (49:03 - 49:16)
It's fun to see it growing and to be able to step back and see things moving. The business can run itself without me if I'm taking a few days off. That's all good.
Not all part of our business are like that yet, but we're getting there.
[Stephen Husted] (49:17 - 50:12)
Yeah, it's fun. Let's say you're going a new strategy and you're kind of going through and you're building it out and it doesn't feel like things are going, they're not moving in that direction. And then like a year goes by, two years go by, and then you look back at where have come and you're like, oh, that's cool.
Or like, oh, I built that house. You know what I mean? Like I built that house and I built that house in this neighborhood, or I got five in this one.
You know what I mean? It's really cool. That part of it is, it's not all that.
I can say that I don't enjoy all aspects of real estate investing and what goes around. You're not going to get me going through accounting. I can tell you that right now.
I told my partners, the minute you guys hear me start telling you accounting and going through numbers and stuff, I think that's when you have to let me go because I don't know what I'm talking about here. I have my account, we get on a call and I said, just give me the numbers. Okay, cool.
I'm moving on. Anything I can do better? What's going on here?
Any problems? Okay, thank you. Talk to you later.
[ELSIE WU] (50:12 - 50:17)
Yeah, that's the way to do it. Delegate to the crew and delegate to the talents.
[Stephen Husted] (50:18 - 50:50)
Yeah, you have to learn how to be really good at delegating. That's definitely a key trait you need to have. I really appreciate you taking the time to jump in on the podcast with me today.
I knew that when we had that quick little 10-15 minute conversation driving and you were just bringing up the Midwest and then bringing the money back to California and I was like, oh, that's kind of like what I'm doing, but it's in California, not in Seattle, but same journey. At the end of the day, I think what people got to understand is when you get into real estate investing, it is a journey.
[ELSIE WU] (50:51 - 51:15)
It is a journey. And then investing, I mean, I think you have to have that momentum. You were talking about that earlier.
Your first property was in Detroit, right? You needed a way to start that momentum. If you don't start, it's going to be hard for you to, you need that traction and you need to build on that traction.
You have to start somewhere and you need to find reasons to start as opposed to reasons to hold back.
[Stephen Husted] (51:16 - 51:36)
Right. There's no perfect moment and I think that's another thing that people get lost in is that they want the perfect deal, the perfect opportunity, perfect team and there's going to be bumps along the road and you're going to have to learn how to deal with that. At the end of the day, all it does is make you a better investor and to be able to move on to the next deal.
[ELSIE WU] (51:37 - 51:44)
Yeah. And the other suggestion I have is reach out to people who are going to you honest feedback. That's so true.
[Stephen Husted] (51:45 - 51:49)
Seems simple. Seems simple, but it's not really that simple.
[ELSIE WU] (51:49 - 52:27)
Questions, have doubts? Give Stephen a call. Give me a call.
It's surprising. I mean, I've made the offer to many, many people. It's surprising how many people follow up with me on that.
And then it's surprising for me how many mistakes I still see them make, even though I would have been able to tell them, no. I mean, I'm working on one right now where someone partnered with another entity in the Midwest on a property where he has minority interest and the person that has a majority interest has filed several bankruptcies and it's going to probably bring him down.
[Stephen Husted] (52:28 - 52:28)
Oh, wow.
[ELSIE WU] (52:29 - 52:46)
Yeah. So, yes, there are great opportunities out there. Yes, there are lots of people who are very happy and willing to share their experiences and knowledge.
Reach out to them so that you can get some good tips before you get too far.
[Stephen Husted] (52:47 - 52:52)
It's perfect. Yeah. It's great tips.
So where can the audience find you? Where are you at?
[ELSIE WU] (52:53 - 53:03)
I'm on YouTube. I'm on LinkedIn. And if someone wants to reach out to me, they can also schedule a time on my calendar.
So I'll give that to you so you can put them in the show notes.
[Stephen Husted] (53:03 - 53:23)
Yeah, that's perfect. I really appreciate you jumping on today. I'm glad we were able to get you on.
I know last time we had to cancel and get you back on the schedule, but I really appreciate it. And of course, I'm going to be talking to you real soon about our projects here in California that we are looking for. So, yeah, I'll be talking to you.
[ELSIE WU] (53:24 - 53:25)
Yeah, I look forward to it.
[Stephen Husted] (53:25 - 54:00)
Yeah. Thanks so much. All right.
You have a great day. You too. All right.
Take care. You too. Bye.
