I realized the other day that all my tenants are white. I’d never thought about my tenants’ racial makeup until I read an article by Washington Post journalist, Michelle Singletary, entitled, “The Legacy Of Slavery Made My Grandmother Fear Investing.”
Michelle writes how discriminatory policies of the past shaped the way her grandmother approached investing. Her series of articles provides an interesting personal perspective on why there is a racial income and wealth gap today.
Here are some passages from her article that stood out:
When my first employer introduced a 401(k) retirement plan, I sought advice from Big Mama. But she actively discouraged me from “gambling” in the stock market.
“That’s for White folks,” Big Mama said. “They can afford to lose money.”
“The legacies of slavery, Jim Crow, and the New Deal — as well as the limited funding and scope of anti-discrimination agencies — are some of the biggest contributors to inequality in America,” says a 2019 report by the Center for American Progress
So, yes, it’s going to take more than a financial workshop to overcome the anxiety my grandmother lived with all her life and passed on to me.
There was only one investment that Big Mama trusted: her home.
The last line about Big Mama trusting only one investment, her home, really resonated with me.
This article will share some of the following insights:
- Why there are so many Asian landlords and small business owners
- Why real estate and small businesses are so highly valued among many minorities
- How the lack of equal opportunity changes behavior
- Where the belief of not depending on anyone but yourself comes from
Why Real Estate Is So Valuable To Minorities
But Michelle and her grandmother made me realize there may be an important racial component to my desire to own real estate as well.
Owning real estate and rental properties provides a fundamental feeling of security we all crave. The more turbulence you and your ancestors have experienced, the more you will value your home.
I’ve shared some of my racial encounters growing up in Virginia during high school and college. They were all unpleasant.
But at least these experiences motivated me to study more, earn more, and save aggressively. I felt that as an Asian person in America, education was my main way to ascend.
Once you get your living expenses under control, life becomes much easier. Your other expenses such as food and clothing are relatively inexpensive.
Health care is more affordable if you have a job or earn below 400% of the Federal Poverty Limit. Children can be as expensive or as reasonable as you want them to cost.
But here’s the thing about owning rental property. It not only provides shelter, it also provides income that you might not be able to earn because of who you are.
Real Estate Is A Hedge Against A Lack Of Opportunity
If you are a minority, there is a greater chance you will have fewer opportunities compared to if you are a majority.
It is simply human nature to accept, hire, promote, and pay people who are more similar to themselves. Human nature is why so many company leaders of almost any company tend to all look alike.
We also know based on simple math that majority rules. When you have a majority, whether it’s at your HOA board meeting or voting on a presidential candidate, the majority always wins.
The minority could make up 49.9% of the population and get run over because we have a winner-take-all system. Therefore, as a minority, you are consistently at a disadvantage when it comes to the numbers.
Pay careful attention to company organizational structures. Take note of the similarities between guests on podcast shows and the host. Observe the makeup of judges and award winners. Society takes care of their own. We love echo chambers.
I don’t blame people for wanting to hang out or take care of people with similar backgrounds. It’s natural to want to be with people who believe and amplify what you believe. I just accept that’s just the way things are and try to adapt.
By owning real estate, as a minority, you hedge against a lack of strong income-generating opportunities. The most common lack of opportunity is getting a great job.
My Three Sets Of White Tenants
In all, I have three rental properties as part of my passive income retirement portfolio. My goal as a landlord is to find the best tenants possible. I do not care about race.
During my screening process, I focus on financials, length of work, length at previous residence, references, and character. As diverse as San Francisco is, the thought of race never comes up. It just so happens that all three sets of tenants are White.
As a personal finance writer, I’m always fascinated by people’s financial backgrounds. To protect my tenants’ privacy, let me share some rough details about them.
- Tenant #1: Two individuals making a combined $28,000 a month gross, 780+ credit score. One is a VP in HR, another works for a mid-size tech company.
- Tenant #2: A couple making $27,000 a month gross, 800+ credit score. One is a pediatrician, one is a software engineer.
- Tenant #3: A couple making $50,000 a month gross, 800+ credit score. One works at big tech, another is a C-level executive.
All of my tenants have stable jobs that pay well. They could also all be prototypical Financial Samurai readers who follow my housing expense guideline of not spending more than 20% of household income on rent.
Here’s the kicker.
There’s only a small chance I would ever be able to get any of my tenants’ jobs. I know because I’ve tried.
Real Estate Is A Hedge Against Rejection
In early 2012, before I left finance, I submitted dozens of resumes to various tech companies like Airbnb, Google, Facebook, and Apple. I either didn’t get a response or got rejected by all of them.
After I left finance, as part of the unemployment benefits and severance process, I was required to apply to several jobs once a week and record my efforts.
Below is one rejection e-mail example from Airbnb. At the time, I knew Airbnb would be a winner. I even went to Airbnb’s Friday happy hours. Alas, no luck in getting a job.
Objectively speaking, I wasn’t an excellent job seeker. While I would have entertained potential job offers had there been a great fit, at the time, my main focus was on traveling and taking a break.
That said, I still followed the job application process. After applying to over 100 jobs online, I didn’t get any nibbles.
Rejected From A Journalism Fellowship
After giving up on my job search, in 2013, I applied for a journalism fellowship and got rejected. This was a disappointment because I had visited the school twice and talked to multiple professors. I also thought I had something unique to offer after creating my own platform from scratch.
Earning $75,000 a year to essentially go to school and meet new people would have been a blast! Alas, it was not meant to be.
Rejected By Startup Incubators
In 2015, I applied to a couple of startup incubators. One was a straight-up rejection and another had me go pitch my idea. I ended up getting rejected by that one too.
Only one of the six startups that eventually got accepted by the incubator is still around today. And I’ve seen a couple of different companies execute on my initial idea with great success.
Darn. I could have made everyone rich, including myself! Oh well. Just gotta keep on trying.
Rejected To Consult For A Potential Affiliate Partner
In 2016, I got to the final job interview round of a Series A startup. They even took me for a team pastrami sandwich and beer lunch. The opportunity came about because the company was looking for affiliate partners and was in the personal finance space.
Always one to explore opportunities, I drove 35 minutes to meet all of the founders and employees in the marketing department several times. There are so many startups in the SF Bay Area that you never know which one might hit it big.
My hope was to get an official offer and then ask them if they’d be willing to let me consult from home part-time. The arrangement would hopefully be similar to when I consulted for Personal Capital back in 2014-2015 and got stock options that turned out very well once the company got sold in 2020 for $850M+.
Alas, I never got the chance to ask because they didn’t extend an offer. The startup, however, did ask if Financial Samurai could become an affiliate partner, but I decided to pass.
The startup is now a public company in the personal lending space and is up more than 10X the valuation when I first applied!
Real Estate Is A Hedge Against Less Desirable Traits
I don’t think being a minority was a reason for me being rejected by so many places. My lack of experience or too much experience were the main reasons. Or maybe, I simply didn’t give off the true enthusiasm of a typical job seeker.
However, let’s be brutally honest. My lack of intelligence (or competence, as one reader commented) probably played a big role in getting rejected. The people who landed these fellowships, incubators, and jobs are all extremely smart with glowing resumes. Whereas I’m objectively average. The only above-average trait I possess is high endurance.
Owning real estate is a hedge against being born with below-average intelligence that hinders you from landing more opportunities. It doesn’t take a genius to properly analyze a real estate investment opportunity.
Real estate can also be a hedge against less desirable traits that can prevent you from landing a job or raising funds for your company.
Some of these less desirable traits include: poor social skills, a boring personality, a lack of charisma, a lack of confidence, and mental or physical illnesses or disabilities.
Roughly 15% of the world’s population has some type of disability. This is a significant minority population we should strive to help out the most.
We can all work on improving our social skills. However, it’s much harder to improve upon genetic traits such as high anxiety or sweaty palms!
Your Connections Matter For Income Opportunities
A lot about getting a job and getting ahead is about who you know. And if there are more people who look like you in power, the easier it will be for you to get ahead.
My White tenants all work at high-caliber companies. Once you’ve worked at a place like Facebook, you can easily job hop to a Google, Apple, Palantir and so forth.
Then, of course, it’s much easier for your siblings, friends, and relatives to get into these companies as well due to referrals and legacy admissions. Although nepotism is frowned upon, it still happens all the time.
But for most, there is simply no way to get in. Check out the latest employee racial profile at Facebook, a company that pays at the top-end of the range. We’re talking ~$150,000 compensation packages for new college graduates.
If you are a Black or Hispanic person wanting to join Facebook, you may look at the percentages and feel you have little hope of getting in. With no connections, you might not bother applying. There’s simply nobody pulling for you.
Representation matters to give those who are underrepresented hope for even trying.
Even if you do land a job at Facebook, you might not enjoy the environment due to the lack of diversity.
Overrepresentation Matters Too
As an Asian person, you might look at the percentages at Facebook and think you’ve got a decent shot at landing a job. However, you might also look at the figures and feel dread.
Due to the overrepresentation of Asians at Facebook and other big tech companies, there’s a feeling the competition is too fierce to get in. Unless you’ve invented a new algorithm that will save the company millions, forget about even applying. These companies are focusing on diversifying their workforce, not concentrating their workforce further.
Unfortunately, instead of thinking people like me have a great chance of getting a job at a big tech company, I’ve adopted the latter attitude of competition being too fierce due to my constant rejections.
When you are shut out from opportunities or feel like you are shut out from opportunities, you tend to make your own opportunities instead.
Real Estate Feels Like A Security Blanket
Real estate is a way to participate in a booming economy that doesn’t quite permeate throughout all members of society.
We know that the rich have gotten much richer during the pandemic. Whereas tens of millions of others are struggling to get by. This is called a K-shaped recovery.
By owning real estate, even if you can’t get a good job, you can still benefit from rising rents and property values due to a strengthening economy.
Even if you can’t join a promising company that plans to go public, real estate should benefit from the unleashing of new liquidity in the local economy.
At long last, I look forward to thousands of Airbnb employees upgrading to nicer homes once their IPO lockup period is over. My baby needs new shoes every three months!
Yes, it is a little ironic that a minority who couldn’t land a job at any of his tenant’s companies is their landlord.
However, in 2005, I made a conscious decision to build a rental property portfolio in case my future income opportunities dried up. I knew opportunities would dry up eventually because I was already tired of work at age 28.
Seeking Security For Your Family
It’s important to predict way out into the future because it’s not just your opportunities that are at risk. Your children’s opportunities may be at risk as well. It is unlikely your children’s intelligence and traits will differ largely from your own.
Over the last two years, we got rejected by six preschools.
One reason for the rejections was due to tremendous competition for a limited amount of spaces. Another reason is because my family has no status. Another reason may be because we haven’t explicitly said we would donate money. The final reason may be because my son simply wasn’t skillful enough at playing blocks during his playdate interviews.
Who knows for sure why we got rejected. However, the classroom makeup of all the preschools we got rejected to is majority White, even though minorities are the majority in San Francisco.
Finding An Education Solution
What we do know is that pre-pandemic, my son was almost shutout. Thankfully, one preschool accepted him and has a spot waiting for him if we decide to send him back. In the meantime, my wife and I will homeschool.
Due to our preschool rejection experience, the cycle of lost opportunities will likely repeat for my children. Rejection is not unique to us or other minorities. It is a sad inevitability.
Owning a real estate portfolio provides me some comfort that no matter how many times my children get rejected, they won’t starve. Worst case, they can earn a living as property managers.
Funny enough, as I’m updating this post, our son was offered admissions to one of the most selective preschools in the city. We now have to decide whether to forfeit the enrollment deposit of his current planned school. Maybe everything does work out in the end.
A Permission-less Business
Security for your family is also why you see so many minority-owned restaurants, nail salons, and retail stores. All of these businesses are permission-less businesses. Only a perfunctory use of English is needed. If you have the capital, you can start a business without any gatekeepers.
Once you own a business, you will likely succeed if you put out a great service or fantastic product. Race doesn’t matter. At least it shouldn’t. This is one of the reasons why we need to preserve the stepped-up basis. So my minorities and immigrants are small business owners. Their children will be hurt if they have to pay massive capital gains tax upon inheriting their family businesses.
While building your business, you can put your kids to work washing dishes, serving food, cleaning, and more. With earned income, you can open a Roth IRA for each child.
Who knows, with a strong enough work ethic and solid investment returns, your kids might become millionaires at a young age. Breaking the cycle of poverty takes a tremendous amount of parental guidance, among many other factors.
And just in case things don’t go well for your kids on their own, they can always come back and work at the family business.
The Freedom To Operate How I See Fit
I love running Financial Samurai because nobody tells me what to do. I can write about whatever I want when I want. Further, there’s no need to work with businesses partners I don’t find valuable.
If my children ever ask me to teach them about online entrepreneurship, I’ll be more than happy to share what I’ve learned.
When the system is stacked against you, not feeling like your future will be determined by someone else is huge.
Depend Only On Yourself To Survive
Do not rely on society to help you. Do not dependent on the government to save you. If you adopt this Asian American mentality, I’m confident you will build more wealth than the average person.
I even reached out to Michelle Singletary from The Washington Post to say that I shared her story and appreciate her work, but received no feedback. This is even though we follow each other on Twitter too.
I doubt America will fight for equal opportunity for Asians as much as it does for other minorities. After all, Asians only make up ~6% of the U.S. population. This is despite many Asian small business owners facing racism and hate crimes during the pandemic.
I was ordering cookies on Uber Eats from my favorite place, Anthony’s Cookies. Anthony has the best toffee cookies in San Francisco. For cookie lovers, also check out Insomnia cookies downtown.
As I was ordering, I noticed at the end of the description it said “Black-owned.” Cool! I knew Anthony was Black because I have met him many times before.
I was happy Uber Eats was trying to do more to support Black-owned restaurants. At the same time, I started thinking about all the Asian-owned restaurants who are suffering during this pandemic as well.
Will there ever be a “Bhutanese-owned” descriptor in any of the food delivery apps to support Asian-owned restaurants? Unlikely, because we seem to be the wrong minority worth fighting for.
But I still have hope Asian Americans will gain more support from the community. It may just take another generation.
Making Academic Opportunities More Difficult
Then I started wondering will there ever be a school admissions policy that helps under-represented Asians or poor Asians get in? Doubtful, if you look at what’s going on with Lowell High School and Thomas Jefferson High School doing away with entrance exams and Harvard University revealing its entrance formula.
Therefore, instead of spending all our energy fighting for equal opportunity, it’s logical to use our energy to focus on what we can control. Complaining about a suboptimal situation gets us nowhere!
This culture of focusing on what we can control and non-confrontation is why the voice against racism isn’t as loud from the Asian community. Further, the last thing Asians want to do is take away opportunities from other minorities.
Competition is fierce for all races. Hopefully, this article has shed some light on why there are so many Asian landlords and Asian small business owners. Again, I don’t fault people for wanting to provide more opportunities for people most similar to themselves. It’s just the way things will always be.
The desire to feel secure is what all of us want. By owning real estate or a small business, some of that security for you and your children can be achieved. My children are what drives me to keep Financial Samurai running for the next 20 years.
Achieve Financial Freedom Through Real Estate
As a minority, real estate is my favorite way to achieving financial freedom. Real estate is a tangible asset that is less volatile, provides utility, and generates income. Real estate currently generate roughly $150,000 a year in semi-passive and passive income to help provide fo my family.
Given interest rates have come way down, the value of rental income has gone way up. It now takes a lot more capital to generate the same amount of risk-adjusted income. Further, the demand for real estate is increasing due to positive demographic trends.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eREITs. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. Investing in a diversified real estate fund is the easiest way to gain exposure.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a good amount of capital, you can build your own select real estate fund.
Investing is the one of the best ways to equalize opportunities for ourselves and for our children over time. There are obviously risks too investing. But over time, investing in real estate, stocks, and other classes have proven to build wealth.
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