The Wisconsin Investor

Real Estate Investing Basics: Leverage, Equity, and Long-Term Wealth

• Corey Reyment

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In this solo episode of The Wisconsin Investor Podcast, Reese Brown steps in behind the mic and brings the conversation back to the basics, & why real estate still works in 2026.

Rather than chasing trends or debating headlines, this episode focuses on fundamentals: leverage, equity growth, long-term appreciation, and tax advantages. Reese challenges the idea that cash flow is the only thing that matters and reframes real estate as a system, not a single bet.

Using simple analogies (including gold, leverage, and tenants as “partners”), the episode walks listeners through:

  • Why real estate has remained resilient for decades
  • How leverage multiplies returns responsibly
  • Why equity beats short-term cash flow
  • How BRRRR still works, even in today’s market
  • Why investors waiting on the sidelines may miss an opportunity

This episode is especially relevant for:

  • New investors feeling overwhelmed
  • Experienced investors stuck over-analyzing deals
  • Anyone questioning whether “now” is still a good time

The core message is clear: real estate hasn’t changed... expectations have.

Speaker:

What is going on, everyone? Welcome to the Wisconsin Investor Podcast. I am your host, Reese Brown, uh new voice behind the microphone today, filling in for Corey, and I am really excited about what we have to cover today. We're gonna talk some numbers, some strategy, but most importantly, we're gonna go back to the basics and we're gonna talk about why real estate is still the best tool to reach financial freedom, even as we're in 2026 here. But before we jump in, want to give a quick shout out to today's show sponsor, Wisconsin Discount Properties. If you're looking for off-market deals in Wisconsin, this is your one-stop shop. Every single Monday morning, there are new off-market real estate opportunities that hit your email inbox. Guys, these are deals that you will not see in Zillow, you won't see on Realtor.com, the MLS, you're not gonna see them anywhere. In 2025 alone, over 150 off-market deals were released. And a lot of people never even saw them because they weren't on the list. So if you want in, head to Wisconsin Discount Properties.com, click join the list in the top banner, uh, fill out your info, and someone from the team will reach out. And uh a side note to this: if you're listening right now between Monday and Thursday, there are live deals right now waiting for bids. So don't wait. All right, without further ado, let's get into today's show. So, before we dive into some of the strategies and some of the things I'm excited to talk about uh with you guys today, I want to start with something uh you know more important than all that. Uh, something that Corey has talked about time and time again on this podcast. Uh, and that is the why. You know, what brought you to be listening to this podcast right now? So a quick, you know, 30-second exercise you guys can do with me is ask yourself, why am I trying to build something with real estate? For me, it's simple. The reason I want to build something uh bigger is so that my wife does not have to work a full-time job. You know, right now, or with us both working full-time jobs, you know, our schedules are packed, we consistently feel like we're behind, the house is a mess, you know. Someday we want to have kids, and we want to be more present uh at that time, right? We don't want to have to hire out to a sitter to raise our kid for us. So that is my why. You know, yours could look different, right? It might be freedom to travel, might be you know, less stress, more control over your schedule. But if you haven't defined that yet, uh it's a good time to pause for a second and think about it. Because at the end of the day, real estate it's really not about money, it's about the options that it can create. So, once your why is clear, the next question becomes why real estate? And a forewarning, guys, some of this is gonna feel elementary that we're talking about, especially to our seasoned investors, but that is the point. Um, and I think this I think this is even targeted to seasoned investors more. Um, it is it's the point to kind of dumb this down and go back to the basics. I think it's an important reminder. But to get back to it, why real estate, right? Why not invest in the stock market? Why not put your money in a 401k? You know, why not just save more, you know, play it safe? And instead of opinions here, I like to start with the history. So we're gonna go back to we're gonna go back to the Battle of Midway, guys. We're going back to 1942. Not a great year because, you know, the Allies started gaining traction over the Axis. It is a great year, in my opinion, because this is the year we started getting consistent data about real estate values appreciating year over year. 75 and seven. That is the record that real estate has had since 1942. 75 wins, winning years, right? Years that values went up, seven years where values decreased, and five out of those seven years happened during the housing bubble in Hawaii. But including everything, on average, it goes up between four to five percent a year. Now you're probably thinking, you know, four to five percent, man, the stock market is at eight percent usually. And in recent years, it's been higher than that. Um, but that's where the power of affordable leverage um comes in. So, right, if we have we have sixty thousand dollars, that sixty thousand dollars could potentially buy you a three hundred thousand dollar property, eighty percent loan to value ratio. Now, if that property appreciates, we'll be conservative, we'll say four percent. It's a twelve thousand dollar increase, right? On the three hundred thousand dollar property, four percent annual returns, twelve thousand dollar increase. But our investment is only sixty thousand, so it is a twenty percent return on our investment. And part number three is gonna be the multiple ways to win. So, right, of course, we have appreciation. Um, right behind appreciation, uh, just as important I would say, is our equity paydown. So if we go back to that example, while you've earned twelve thousand dollars in the first year, you've also begun to pay down the $300,000, or excuse me, the $240,000 loan that you took out to buy that property. Right? We have the other side, the 80% loan-to-value ratio. So we're also starting to pay that down, a huge portion that I think gets overlooked. Also a value add opportunities, right? Think of the Burr method here. You have opportunities to fix up the property, um, whether it's in year one or a couple years down the road after renting it out. Um, you have value add opportunities. And intentionally, last, we have optional, I call it optional cash flow, um, which is a part of real estate, a great part of real estate when you can make it work, is is the additional funds that you're making month over month. But like I said, guys, I know this is like this is real estate 101. Like we are going back to baby steps here. But I think it's a really important reminder that this it's a system, it is not a single bet, and this system is not going anywhere in 2026. The system has been going for decades, and it's not going anywhere. So, so far, everything we've talked about makes you know logical sense. However, uh, somewhere along the way, um, in recent years, we have investors that you know have kind of started analyzing deals based on cash flow and treating cash flow as what matters. And that belief, in my opinion, is actually it's actually creating a pretty cool opportunity for the rest of us. And I will explain this through a segment that I like to call Who Cares About Cash Flow? So we're gonna do this through an analogy using gold. We're dumbing it down again, guys. So let's say I have $20,000, right? Buy $20,000 worth of gold, gold goes up 10%, I make two grand. Option two. I go to the bank, I say, hey, I want a hundred thousand dollars worth of gold. I'll put twenty grand down. And we just talked about this leverage. I'll put 20 grand down, you know, borrow 80 grand from the bank. Same gold, same 10% increase, but instead of the two grand, you are making 10 grand now. All right, there's our leverage factor. So here's where it gets interesting. Imagine I have a friend, right? Friend comes up to me. Friend says, Hey, you know, I don't want to own gold. And I sure as hell don't want to save up a hundred thousand dollars. But I do kind of want gold, you know, displayed in my house. I think it would look nice on the shelf. So my friend, he he talks to me, he offers me a deal. He says, If you buy the gold, I will make every payment on your eighty thousand dollar loan. I'll pay you extra each month so you can cover your insurance and you can cover any maintenance, you know, if you need to come back and shine it up or you know, fix the case it's in. I'll pay a little extra for those things. And we'll treat this like a long-term arrangement. So let's let's take that in, right? You put $20,000 down, your friend pays $80,000 over time. During this time, the asset is appreciating, and at the end, you own 100% of it. Guys, that sounds insane. But that is exactly right. This is exactly how rental properties work. A lot of you knew that's where I was going with this. Right? And your friend, in this case, is a tenant. Now, imagine getting pitched a deal like this, right? Your friend's like, yeah, I'll pay the mortgage, I'll pay extra for the maintenance, I'll pay extra for insurance. And then you have the audacity to ask your friend, you're like, hey, you know, I know you're paying for like 80% of this asset that I'm gonna own 100% of uh after a while, but I kind of want like 300 bucks a month uh as well. Right? That's that's your cash flow. And guys, I know I'm going I'm going over the top here. I don't think that landlords with strong cash flow, I don't think they're greedy. But at the same time, if my friend told me, right, he's gonna pay the loan, he's gonna pay enough to cover insurance for the gold, and he's gonna pay to, you know, pay me extra to make sure I can maintain it, and then he tells me I'm not paying a dime more than that, what I would say to that is who cares? Right? The debt is still being paid down, the asset is still appreciating, and the equity is still growing. Cash flow is the tip jar, guys. Equity is your real paycheck. So why what makes this an opportunity in 2026, right? This this is is one-on-one, right? This has existed forever. Well, I think where that opportunity comes in is is because you know, we go back four or five years, right? Deals would hit the market, they would have multiple offers in a 24-hour period, right? Some investors were strategic and you know were intentional at this time, picking these properties up. You know, some were just getting their start at the perfect time. But everyone who's lucky enough to win one of those bidding wars as an investor, they look like a genius. That wasn't sustainable, and I don't think it should have been. But what it created is investors that are now saying, you know, hey, I'm not gonna buy anything unless it cash flows, you know, $500 a door. And I believe me, I talk to investors all day, every day, and I have heard this time and time again. And I really don't see it as a problem. I see it as more of an opportunity because we're gonna have plenty of investors that are gonna be waiting on the sidelines for a time that just is not coming. And that means there's gonna be more investment opportunities uh in 2026 than we've seen before, and it won't take you know some of these bidding wars. I mean, to me, uh the comparison here, right, of sitting on the sidelines and waiting for something like that again, uh, you know, say rents used to grow six percent every year, right? Now they grow three percent. So instead of taking the three percent, you're like, hey, I'm not gonna let the tenants rip me off, man. I am not gonna lease out you know this unit until I get six percent more than last year. I don't think that is a savvy investor. I don't think that's conservative. I it is simply the inability to adapt to a new market. So let's summarize this all up. If someone offered to help you buy a $100,000 asset, they pay 80% of the debt for you, they pay you extra to maintain it, and you just sit and let it grow in value. The question wouldn't be, does it cash flow? The question would be how many times can I do this? And guess what else, guys? Guess what else we still have in 2026? We have dirty gold. So let's talk about dirty gold. Right? The the first example we were talking about, nice shiny gold that we bought. Now let's buy the gold that no one wants. Say we go buy some dirty gold for $70,000. You know, we spend $10,000 cleaning it, polishing it up, you know, fixing the display case. Now we're all in for $80,000, right? So $70,000 purchase, $10,000 cleaning it, fixing it up, all in for $80. Gold looks amazing. We take it to the bank. The bank goes, wow, you know, this gold, this this looks really nice. Right? This gold, this gold's probably worth $100,000. And I know last time we cut you a check for, you know, 80% of the total value. So we'll cut you a check for $80,000.

unknown:

Right?

Speaker:

A lot of you guys know where I'm going with this. But put $80,000 in, get $80,000 back. I own a $100,000 asset with none of my own money in the deal. This is 100% recycled investment. And it's Burr, of course, you guys knew where I was going uh with this. But we still have our friend in this equation. We still have our friend who makes the loan payments, pays you that extra money for insurance and maintenance. So now you have no money in a deal, the loan is still getting paid down, the asset is still appreciating, and you can do this again and again and again. And that is where the term, you know, infinite return on investment comes from. And I think it's also important to remember, guys, sometimes when you're buying dirty gold, you won't pull all your money out, right? Sometimes the the rehab on that dirty gold is going to be 20,000 instead of 10. So you're you're all in for 90,000 and the bank only gives you 80. But that is still an insane return on investment when you start to add up, you know, the appreciation, the debt pay down, and those other factors. All right, guys. We've talked about leverage, we've talked about equity, we've talked about strategy. Now we can finally get to the fun part. Taxes. Before I get into this, you don't need to know the ins and outs of these features at all to get started. And I'm not even going to talk about them because I don't really want to. I do not like this portion. Um, but it is very important that you know that they exist. Uh, and the reason I'm sharing them is because tax advantages in real estate is what separates it most from other investment vehicles. Um, and these tax advantages are not going anywhere. So while it is boring, um, it is very important and it becomes more important as you know build a portfolio. So, number one is depreciation. Depreciation is the backbone of real estate tax efficiency. Even though properties are often going up in value, we just talked about since 1942, four to five percent year over year increases. So, even though that is happening, the IRS allows you to depreciate the building over time as if it's wearing out. It's over a 27 and a half year period. So on paper, you're allowed to show a loss even when a property is cash flowing or if it's breaking even, you can show a loss. And this is obviously something you can't do with some of the other vehicles, like stocks and bonds and whatnot. Number two is bonus depreciation. And more recently here in 2025, uh 100% bonus depreciation. Again, we're not going to get into this too much, but what that allows you to do is instead of spreading out your depreciation over 27 and a half years, you can accelerate that in the early years of ownership, all in the first year of ownership. So this is done through what's called a cost segregation study, and it creates larger deductions earlier on, which can improve cash flow and give you more capital to reinvest. And it's especially impactful if you plan to hold real estate long term. Number three is real estate professional status. So this is great for couples, right? Maybe couples who uh one is a high-income W-2 earner, and the other one, you know, spends maybe works part-time. So, what real estate professional status is, is as long as you're spending over half of your time or 750 hours in a year, um, you know, working on your real estate business, you know, maintaining properties, property management, you know, fixing up properties, it changes how real estate income is taxed. And instead of it being passive, it is now active income. So losses now or gains, right, are are an active income instead of a passive income. And if we combine this with bonus depreciation, you can actually write off um large portions of what a you know one spouse might make in their W 2 income. The entire tax burden that you'd have from one earner can be written off with 100% bonus depreciation. Now, there are a lot of layers there, guys. I'm not a tax professional. Highly recommend talking to someone who is if you're at that point in your real estate journey. Um, but to give an example, I have talked to people who have utilized uh real estate professional status, and they can't even tell me uh about it in much detail. So it it there are a lot of layers to it, but they can tell me, hey, I received a big check uh you know, when they got their tax returns back. So that part they know. Um, but don't want to overwhelm you guys with needing to know all of these things before you get started, because even the people who are benefiting from it don't know these things sometimes. So number four is mortgage interest deduction, right? So early on in a loan amortized over 30 years, a lot of those initial payments are gonna be interesting and you're allowed to write that interest off in addition to your depreciation and you know any expense write-offs as well, so any repairs or maintenance. And then the final one, 1031 exchange. So some of you guys have heard of this before. Again, not going to go into too much detail, but what this would allow you to do is if you have two properties, right? Say you have two single family homes and you really want a four unit, but you're thinking, well, hey, if I gotta pay, you know, long term capital gains when I sell this to buy my four unit, it it hardly makes sense at that point. Um A 1031 exchange allows you to defer those capital gains if you're buying more real estate. So a very cool tool that allows you to have more flexibility, you know, utilizing bonus depreciation. So these can all layer, these tax benefits can. And that's where it's really important to talk to, you know, a tax professional if you're at a point where you've got a few properties and whatnot. So alrighty. To bring this all home, guys, let's talk about the last piece of the puzzle of fitting ending. Talk about retirement and why real estate is, I think, the best retirement uh plan that is out there. So we combine things like leverage, we combine equity pay down, you know, our recycled capital, all the tax efficiencies. We don't just build an income through that, we build options. And a rental portfolio uh can easily replace a traditional retirement. The example I like to go to is, you know, a couple who owns, say they own five duplexes that they've paid off over time. That those five duplexes could generate, you know, $70,000, $80,000, $100,000 a year in rental income once they're paid off. And that you know, could easily replace a traditional retirement account. So it is not 50, 60, 70 units that are needed. It is much more attainable to reach a point where rental properties are your retirement income. So, with that, folks, retirement a perfect place to wrap this up. We will end it here. Um, if today's episode helped you reconnect with your why, or even challenged how you've been looking at deals, especially around cash flow, it uh did its job. So remember that it's not right, it's not about knowing everything, doing everything perfectly. It's about starting, learning, staying intentional as you go along. And my hope is today gave you a clear picture of why real estate is still the main vehicle for building financial freedom in 2026, right? It's not just appreciation, it's not just cash flow, of course, but it's because of how leverage, equity, tax benefits, how all of these things um can work together. We might not be in the same market we were a few years back, but this beautiful machine that we call real estate has shown resilience year after year, decade after decade, and it is not going anywhere. So thank you guys for hanging out with me today. Uh, remember, if you want access to real off market opportunities here in Wisconsin, you want to get this process started for yourself or keep it going, uh, don't forget to check out our our show sponsor, Wisconsin Discount Properties, and get on that list is Wisconsin Discount Properties.com. New deals are dropping every Monday morning. So thanks again, guys. Appreciate you hanging out with me, and we will see you next time on the Wisconsin Investor Podcast.

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Corey Reyment

Host