In this episode, Justin and Jared explore real estate investing, the future of work trends, and how both are reshaping today’s markets. We dive into Galveston’s oversaturated Airbnb market, the return-to-office push, and what these shifts mean for hybrid work models and investors. Plus, we break down dividend strategies and the economic impact of ultra-luxury real estate projects like Ken Griffin’s billion-dollar Palm Beach estate.

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Welcome to Financial Planning for Oil and Gas Professionals, hosted by certified financial planners Justin Brownlee and Jared Machen of Brownlee Wealth Management, the only podcast dedicated to those of you in the oil and gas profession to help you optimize investments, lower future taxes, and grow your wealth.

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Welcome back to another episode of FP O NG Financial Planning for Oil and Gas Professionals.

This week on the podcast, we're going to do another lightning round.

We're going to talk about the Airbnb empire that might be crumbling in Galveston, Texas.

We're going to talk about return to office and the decline in hybrid work.

We'll also talk about dividend strategies and Ken Griffin building a billion dollar house in Palm Beach.

Right.

That's right.

Before we start, Justin, if you're going to keep the surprise segment going, I believe it's your turn.

So ask me a question about something.

I have no idea what it is.

We have the holiday weekend coming up, Labor Day.

And, Jared, I want to pretend that you have the ability to transport you and your family to one of these options.

And I need to know, what's your pick for Labor Day?

You can transport to the lake or to an ocean, to the beach.

Where are you going for Labor Day?

I'm going to the ocean.

Yeah, Ocean's just.

I like the ocean more than the lake.

I grew up by the ocean and to be clear, like an ocean with waves.

Right.

Okay.

I surf.

Or I.

A lot of our listeners don't know this.

Jared, you surf?

I surfed, yeah.

I mean, it's one of those things.

It's very hard.

So, like, I try to do it when I'm back in California or where there's waves, but it's.

It's very hard.

Yep.

I would say ocean caveat that.

With waves.

Okay, I like that answer.

The reason I wanted to ask with the Labor Day twist.

I feel like for whatever reason, that weekend just makes people think lake a little more because I'm also an ocean person.

But I think you're right.

Yeah.

Labor Day Lake, they both start with.

L, but I think I'm with you.

I think it doesn't matter.

Just take the one you like more.

Yeah.

Let's get into it, Justin.

And, like, prices are cratering and nothing selling the video kind of goes into why?

And we'll be sure to link to it in the show notes.

But what do you make of all that and what does that mean for our listeners?

What can they like learn from this?

Nathan Steel sent this to me and Nathan partner with us.

And you if you're listening to our podcast, you've heard Nathan probably a handful of times here on the podcast.

So Nathan sent me this Instagram post, which good job by Nathan.

I send Nathan Instagram post from time to time and he maybe, you know, gives the laughing emoji on like a third of them.

And so kudos to Nathan for sending this to me.

I think it's obviously an indication that it's going to be really hard to sell your home in Galveston right now in if you're wanting to get a high price so not a seller's market.

And we're seeing that in a lot of places right now.

I think it's an indication potentially of people buying homes two years ago, three years ago, four, five years ago, trying to turn it into an Airbnb investment and that being a very difficult road.

And the last thing I want to mention, I think that there is huge potential for this to be part of this wave of insurance prices skyrocketing.

And so think about buying an asset on day one and then three years later, your home insurance cost is in a different universe than what you thought it was going to be or really any time period.

Right.

You could have bought the home 14 years ago and your home insurance costs might be in a completely different stratosphere.

That's a big factor.

And you know, it's, it's going to continue to cause a lot of people to want to sell, especially second homes.

I think the big problem with a place like Galveston, I've never been, to be clear, I think like a lot of this demand spike was a function of a moment in time continuing indefinitely.

Right.

Like when a lot of these homes were purchased, like Covid was probably top of mind or even in the rearview mirror.

And like, hey, having a place to go that's proximate, where I can get outside safely is awesome and a no brainer.

And I'm close to one of the biggest cities in America with a large portion of people who have discretionary spending to spend on Galveston.

Right.

The problem with that is, is Galveston, the place I'm going to go when the world opens back up and I can get on a plane pretty easily.

Great question.

I think when you, when you think about investing, you got to think of where in the cycle are You.

Right.

Like a lot of people probably overpaid and they're realizing they overpaid.

And the problem is you don't just overpay, you have a higher break even rate than everybody else.

Right.

A lot of people that have probably been in Galveston for a while bought their home for a fraction of what a lot of these people did and can list, you know, their nightly, their nightly break even is probably a half or even a third of what a lot of these properties are.

Right.

So like realizing where you are in the cycle is one thing, but also, hey, what's the base rate?

Is there anything there that makes this demand pretty sticky?

Right?

Because I think like if your principal thing for demand is like, oh, it's in vogue right now, that means it'll probably become out of vogue at some point.

I think we've shared this idea before, but the tricky thing with short term rentals as an investment is by and large you are probably, there's a very high percentage chance and if we word it differently, think about the amount of people buying a second home as an investment.

The percentage of those people that are using a 30 year mortgage.

It's gotta be really high, right?

Probably, yeah.

I mean I would guess it's just in vast majority are using a 30 year mortgage.

So then you are signing yourself up for a payment that is going to last for 30 years.

Well, the business plan that you're incorporating with this asset that you're buying better also have a likely 30 plus year viability.

I think there is an element where, understanding where you're at in the cycle.

And is this an enduring trend, is this an enduring potential that there could be hundreds of Airbnbs in a specific location and there's going to be enough demand for all or most of them.

Jared, maybe another thought I have too is I do think that I don't know what the right way to, let's just call it tier A.

Second home cities, I think they're going to retain value more than tier B or tier C. And that's nothing against tier B or tier C. Really.

Just saying that I think there are always going to be people that want to own a very, very expensive home in Aspen or Miami or something.

Palm beach, we'll come back to that.

Relative to, let's say, what's that Mountain town in Tennessee, Gatlinburg or something like that.

Yeah.

Our resident real estate expert, Josh Matthews, who's working at Heinz, before he joined us, he talks about the idea of like a flight to quality a lot.

Right.

So like in certain markets, some of the honestly more expensive core anchor tenants and buildings actually perform better because in times like that where there's little turmoil, there's.

There's always a pretty decent strong demand at the top.

I think the idea of flight to quality rings true here.

Justin.

So, thought experiment, based on everything you're saying, I feel like you're anti being an Airbnb mogul.

I would just definitely say I am.

But if you had to start an Airbnb, how would you think about making it successful?

Okay, I have to start an Airbnb.

How would I make it successful?

Gosh.

My first answer is I would not do it and I would instead buy low cost funds and invest passively.

I think.

Jared, my answer to that.

So a lot of people ridicule Dave Ramsey for this thought of like, well, if you're going to buy a second home as an investment property, you should probably buy it in cash.

I get the ridicule.

It's kind of an outrageous idea and obviously it's incredibly difficult for most people to do, which I think the answer there is most people shouldn't do it.

But I think there's something to that because you have the ability, especially with real estate, to then it's not tied to short term rentals.

So when, when I made a podcast episode on this topic like four years ago, predicting that it was going to go way down in value, I think I made the comment that short term rentals are the greatest way to maximize the yield that you're getting on a real estate property.

Simply put, you can make a lot more money renting your house for four days at a time than you can or on a four year long term rental with one tenant assuming that you have your unit booked out enough, it's a way to make more.

But I guess what I'm saying is if you're not bound to debt on the property, if you don't have a 30 year mortgage payment that you have to pay every single month, well, then the avenues for investment are now wide open.

If short term rentals go completely out of vogue, you can rent it to a long term renter.

And obviously when you're paying cash, it largely means that there's not going to be some hugely negative outcome.

It removes a ton of risk from the equation.

Now, again, Dave Ramsey gets ridiculed for that idea and I get it.

So take it with a Grain of salt, but that's the only answer that I can even think of.

Jared, how about you?

Yeah, it's interesting because you answered a more mechanics question with, like, a mechanical answer.

Like, hey, here's.

Here's how I would structure it.

If I think about, like, how to make Airbnb successful, I agree with you.

Like, I would stay away from them because the return on hassle is insane.

Yes.

Right.

Even if you build an Airbnb empire, like, I think, like, property law, squatters rights is like, a huge tail risk that, like, oh, my gosh.

Right.

So, like, you need to build a diversified portfolio, but then you're in remote geographies and.

And, like, it's just.

So I.

So I'd be pretty anti the Airbnb empire.

I think a good place to start would be college towns of Tier one universities.

I think, like, thinking about the idea of base rates, I think that really matters.

Right?

Like.

Like, I'm thinking of University City in Missouri.

Right.

Where it's, like, really proximate to Washington University.

Right.

Higher education's in turmoil, but again, getting back to that idea of flight to quality, I think there's always going to be strong demand for people wanting to send their kids to a school like Washu.

So there's a.

There's a baseline amount of demand there.

And the thing about college towns, if you will, and that part of, you know, St. Louis is kind of a college town, I realize, within a big city, I think there's a lot of demand for, you know, temporary housing.

Right.

Whether it's students in transition, whether it's people coming to visit said students, whether, you know, a lot of these Tier one universities have really good hospitals, which means they have healthcare workers, so nurses that might do shifts there.

In my opinion, I think starting in Tier one university towns might be a good spot because, you know, kind of gives you a.

Not necessarily a margin of safety, because you can definitely overpay, but I would say, like a floor on demand.

Right.

And like, the double bonus points if it's in a spot where there's, you know, a robust athletic department, because then you have people coming in for sports.

I love that.

I've heard so many people say you make money on real estate not in terms of the rental income that the unit can produce, not in terms of, can you flip it?

Can you get a high sales price.

You make money on real estate, on the buy.

And so I think, to your point, I love that idea of university towns.

And can you kind of filter out and just simply have A lower initial purchase price.

That's going to be massive in determining whether you have a viable long term investment.

Luckily, neither of us have to do that.

Index funds and chill.

Let's go.

All right, next one.

So you put this one in here.

Return to Office and the Decline of Hybrid Work.

What do you think about that?

I wanted to Reddit because we personally have so much of an experience with this.

So we've maybe talked about this on the podcast loosely in different episodes.

I know we've mentioned it before, but we started bwm in a WeWork.

Right, a WeWork that no longer exists.

Well, I mean, it's shocking that WeWork exists at all, um, still.

But in the woodlands, Hughes Landing, WeWork, which, oddly enough, that was originally a deal, like an actual agreement between WeWork and ExxonMobil to an extent.

And WeWork actually developed the space.

They developed two floors in Hughes Landing, where ExxonMobil had their kind of secondary campus in the area.

And ExxonMobil rented and they leased.

Gosh, it was like 60% of the space from the WeWork.

Now, Jared, we fast forward today we are done with WeWork and we have three different physical offices and they're legitimately awesome spaces.

So we've really done a 180 on this.

What do you think?

Like, what's your experience being here in terms of the pros and cons of both?

I want to give a shout out to WeWork for running a non economic business because I think we got a.

Scream and bargain helped us tremendously.

Helped us tremendously.

Have they been actually running a profit?

Been probably twice as expensive.

So thank you, WeWork for getting us off the ground early by undercharging us.

I don't think there's any right answer.

I think there's an organizationally appropriate answer.

I think at the end of the day, you need to give people agency, you need to hire people who can perform well.

I think the answer is, oh, return to.

Return to office or hybrid.

I think it's.

And I'm in Fort Worth because I realized the ceiling of development and the speed at which we can move with me being remote.

Right.

Like, if you think about my job as we grow, it's to train and develop our people and doing that remotely is possible, but harder.

Right.

And so I think there's really a lot of value in just being in the office in person and being able to collaborate.

Right.

And when you're trying to build a culture of excellence, just being able to see, you know, hear people on the phone how they're interacting with clients, how they're interacting with custodians, how they're interacting with investment partners.

Right.

Just learning the way creates, like, a lot of teaching opportunities that are.

That aren't scheduled, I would say.

So I'm a big fan, uh, but I'm also a big fan of hybrid, like working remote when you need to, when you got a sick kid, kind of everything going on.

So I think having structured time to do that, you get the best of both worlds.

And man, honestly, I feel like the return to office, it feels like some organizations don't necessarily believe in it as much as they think they do.

It's just a great opportunity to trim their workforce.

Right.

Like, if you think about it like, workforces will randomly say, hey, we're 8% reduction.

You could do that.

And that sends one message to Wall street and to your people and your culture.

Or you could say, hey, we're all returning to office.

And then you're kind of hoping that there's a little bit of attrition because of that if you create a less generous work from home policy.

So I think both are valuable.

They've served us well, and I think the good mix going forward is both.

But I mean, it is just so much fun to have permanent office spaces that.

Where we get to control the environment and get to collaborate with each other.

Absolutely.

I agree.

Well, Justin, let's talk about this post from Reddit.

We'll link to this in the show notes.

There's a Schwab as a dividend fund, S, C, H, D, and it yields 2% more than the S and P. So it's a dividend centric ETF.

But over the past two years, it's underperformed the S&P by 35%.

And I know we have a podcast about the case against dividend investing, and we'll link to it in the show notes.

But what do you want to call out here other than this is just one of the many things that's wrong with dividend investing.

Yep.

So I feel like there's a lot of bullet points to cover here.

And some of these are going to be for, and some of these are going to be against dividend or total return investing.

So I think we can kind of point out the good and bad in all of this.

Starting as an investor, I cannot imagine a total return not being your obsession over how you reach that total return and instead being obsessed with dividends.

Obviously, when you look at what's happened over the last 16 years in the markets, it hasn't been great for dividends because so much of the growth in the global stock markets have been driven by growth companies, specifically tech companies.

That's the first thing I want to say.

If you are an investor, why in the world would you care where the return comes from?

If you can have a higher total return that is so much more important than where that return comes from, whether it be dividends or something else.

I would also even take it like a step further, right?

Dividends.

People say certainty in dividends, but dividends are cut all the time.

There's not nearly the certainty that you think there is.

But man, I think even if you care about return of shareholder capital, dividends are so tax inefficient.

Right?

Like I could say, hey, I'm paying a 10% dividend every year or I'm going to buy back 10% of stock every year.

Right?

And because I'm buying back the stock and the shares outstanding are going down, the price should go up proportionally, Right?

Right.

Same with dividends.

Dividends paid and so the price goes down proportionally.

It's not magical.

It's not magical money.

Right.

But the problem with dividends is those are taxable in the year I received them, regardless of when I need them.

Yeah, right.

Share buyback, you know, you get additional appreciation because of that, but you have autonomy.

And when do you realize the gain associated with that?

Right.

So if you're a retiree that has one income today and a future income with a very different tax rate, if you can defer and have the stock appreciate and then actually sell it and create taxable events when you're in a more favorable tax bracket, that's hugely valuable, right?

So like, even if you like the certainty of kind of the dividend investing, I feel like MEB Faber talks about this a lot.

But like shareholder yield, which is like dividends and buybacks, because a lot of companies realize, hey, buybacks are much more tax efficient way to return capital to shareholders.

So I think even if you said, hey, I'm really hyper fixated on shareholder return, which is more tax efficient than dividends, I would start with shareholder yield and thinking about that versus just dividends.

But again, total return is really where you need to focus because in a more defensive environment, high dividend stocks might outperform.

But in an environment like this one, where a lot of the innovative companies in tech have been driving performance, those are low dividend, right?

Inherently because they're investing a lot of CapEx into growing their businesses and into AI superintelligence so, like, I just, I just think, you know, you.

You take a tactical bet in terms of the types of companies you own, which generally skews old tech by doing that.

Right.

So there's a monstrosity of problems.

And this just kind of illustrates the idea, hey, dividends, should they be considered?

Yes, but it is a component.

Jared, you used a word multiple times there that I think is really critical certainty.

So people like the certainty of dividends.

Right.

But as we've discussed, it really is the illusion of certainty.

Because what's more certain, if you are an investor and you need income from your portfolio, is it more certain to have a limited number of stocks that pay a dividend, or is it more certain to have to.

Well, in this Reddit post, we can just use this as the example.

Is it more certain to own the s and P500?

It's emphatically more certain.

There is a tremendous amount more safety security found in having exposure to 500 companies compared to having exposure to a number that is a fraction of 500.

And so every time you look at a dividend portfolio, the reason that portfolio exists is really the idea, the allure of certainty.

And in many ways, it is an illusion.

Specifically, think through the last 30, 40 years.

Take any year, take any time period.

Well, some of them are bankrupt.

And so just because a stock pays a dividend does not inherently mean it's great.

Now, I will say dividend investing can be great if the purpose or the main kind of driver for finding those specific companies is not their dividend, but rather the quality or value metrics within their balance sheet as a company.

And so if you are accidentally getting dividends because you are purchasing value stocks, quality stocks, that could lead to great returns.

But it's not just because of the dividend.

I'll caveat this by saying this post is comparing it over the last two years.

There is totally a universe where there's economic deterioration, a flight to more stability, lower price to earnings, companies which generally have higher dividend payouts.

And so there's a scenario where the inverse of this is true.

We don't make any decisions on two years.

Yeah.

But it is just kind of an interesting thought exercise, and it illuminates the point of, like, there's, you know, choppier times in the market.

We're probably getting more questions about dividends Times like this, you know, everybody's pretty content not owning dividends.

But it's, it's good to remember, hey, you know, in good times, to remind people, because there will inevitably be a period where dividend stock probably outperform low dividend paying stocks or no dividend paying stocks.

But it's just, it's cyclical.

So you have to think about, okay, what am I solving for, what are the tax trade offs related to the strategies I doing and what are my investment convictions?

Right, that's well put.

I know nothing about this.

This last one.

Ken Griffin is building a billion dollar home in Palm Beach.

Jared, what in the world?

A $1 billion home.

I don't really even know where to start with this.

I found this picture and we can have this on the show.

Notes.

There is a picture of the plot of land in Palm beach where Ken Griffin apparently owns now 27 acres.

Acres.

My first thought, that's just amazing.

With this, how long?

Well, in kind of a testament, Ken Griffin has been able to amass this land which will probably lead to a home that's worth $1 billion.

Because think about his time frame.

He had to be patient for decades in order to get all of these continuous lots.

I'd be curious, a, how many transactions did this take and when was the first one?

But also when was he like, okay, let's proceed on the home, you know what I mean?

Like, was 26 slots not a good enough or like, you know what I mean?

Like, how much of this house was already built as he started acquiring lots?

Or was like, hey, over the next 30 years, I'm gonna acquire as many lots as I can and then 20, 25 is the expiration date and then we're gonna build whatever it is we can.

So like a lot of diligence and discipline.

But I'm curious, do we have any idea of the configuration of how much of this is gonna be lot purchases versus like the actual construction costs of the home?

Because it's an eye popping thing and it leads me to think about like we were talking about Galveston earlier.

Who on earth is going to insure this?

I'm pretty.

Jared, you want the answer to that question?

No.

Self adjacent.

The answer is kid Griffin is going to insure it.

Yeah.

So I've got some answers for you.

So most of this was done within the last 10 years.

Jared, he has invested something to the tune of 450 to 500 million dollars to purchase different lots.

What's also interesting.

So this is apparently billionaires ro in Palm Beach.

This is very prime real estate the article mentions.

It's maybe a half mile south of Mar a Lago, I think, but specifically with the $450 million of properties that he has purchased.

I mean, Jared, he is purchasing homes for tens of millions of dollars and then tearing them down.

Imagine the Highland park, the river oaks of Palm Beach.

Like, these are very nice homes, and he is buying them and just tearing all of them down.

It's also just such a testament to play your own game.

Right.

There's a lot of these people that have worked so hard and have made it by every stretch and definition of their imagination, right beyond their wildest dreams.

99.999% of people would envy their situation.

And then Ken Griffin comes in, probably pays over above asking because it's where he is, and then just plans to just let it sit there and then tears it down to build something else.

Right.

That's incredible.

A crush.

A crush to the ego.

So it's important to play your own game.

These people are the envy of the world, if you will, and they're getting their houses torn down.

Yeah, that's really something like that was a crown achievement for them, I bet, to own that property on that street.

And now it's just gone.

This is going to be something.

I'll be interested to see what the end product looks like.

It'll probably be understated based on the budget.

And the number of lots he's acquired would be my guess.

A very subtle.

Subtle.

You want a really hot take to finish this off with.

So this is just like a wild exercise in someone having an incredible amount of wealth and spending it.

I think the end result of this is going to be far better for society than had this been basically amassed to the government in the form of wealth tax or eventually an estate tax.

Keep going.

So he's just produced an incredible amount of legal fees to amass these properties.

He's produced an incredible amount of real estate fees to do so.

He's going to employ, I'm going to guess, a thousand people on this home that he's about to build.

And so I kind of think just let people spend the money and it will.

There's so much opportunity when people spend a ton of money.

Yeah.

If you had to get into the economic impact of this start to finish the transactions, the, you know, the permits, the building costs, all the consultants involved, because when you go this big, there's no way you're half doing it.

Yeah.

They got arborists, you know, they have frozen ice sculpture aficionados, I'm sure.

Yeah.

So I do think that's an interesting take.

Thinking about like a lot of people think this is just over the top.

It's completely unnecessary.

Yeah, you can afford it.

And I do think there's some positive economic impact.

I will be interested to.

There'll be no way to know.

But to do this and to potentially self insure just is insane to me.

It's totally insane.

But I love what you're thinking.

Maybe we need to be bullish on the frozen ice market in Miami.

I like that a lot.

Awesome.

Well, that seems like a good place to wrap up this lightning pod.

As always, love to hear ideas for future episodes, thoughts on current episodes, or just want to shoot the breeze with us.

We'd love to hear from you.

Podcastrownleewealthmanagement.com thanks.

We'll see you next time.

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This podcast is for informational purposes only.

Nothing discussed during this show or episode should be viewed as investment, legal and tax advice.

If you have questions pertaining to your specific situation, please consult the appropriate qualified professional.