1986 James Kennedy

JF1986: How to Sell a Wireless Lease Agreement with James Kennedy #SkillsetSunday

James Kennedy, founder and CEO of SteepSteel, discusses ground and rooftop leases for cell towers. He explains how to sell a cell tower lease at the same time as purchasing a property to be less out of pocket when buying. Listen to today’s #SkillsetSunday episode to find out how to manage or sell a wireless lease.

James Kennedy Real Estate Background:

  • Founder and CEO of SteepSteel
  • Has been working and consulting in real estate investment and development for more than 30 years
  • He is uniquely qualified to analyze, interpret, and discuss wireless agreements, as well as their impact on (and relationship to) underlying and adjacent real estate.
  • Based in Woodlands, TX
  • Say hi to him at https://steepsteel.com/

 

Best Ever Tweet:

“The possibilities are endless in terms of problems that aren’t anticipated by buyers because they’re just not used to looking at these types of assets relative to traditional real estate leases.” – James Kennedy


The Best Ever Conference is approaching quickly and you could earn your ticket for free. 

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell. 

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.

 

JF1980: Property management tech to make being a landlord refreshingly easy with Eachan Fletcher

In this episode, Theo Hicks interviews Eachan Fletcher, founder and CEO of the property management and maintenance platform Nestegg. Eachan discusses all of the insights they discovered while developing Nestegg. Learn about Nestegg’s core features for property management and how they designed their solutions to fit the needs of their targeted consumer. 

Eachan Fletcher Real Estate Background:

  • Founder and CEO of Nestegg
  • Worked as the CTO and VP of product at Expedia where he built and led multiple teams, developed award-winning products
  • Based in Chicago, IL
  • Say hi to him at https://nestegg.rent/ 
  • Best Ever Book: anything written by Steven Pinker

 

Best Ever Tweet:

“When you build technology products, particularly as a startup, you have to be hyper-focused. It’s so easy and so tempting to make your product for everyone.” – Eachan Fletcher

 

The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell. 

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.

JF1970: Property Management Beyond The Rent Roll with Tony LeBlanc

Tony caught the real estate bug at a young age, he started investing in multifamily buildings while working full time at a software company. Now he’s the head and founder of a large (2000+ doors UM) property management company in Canada. He likes to take a more broad approach to managing properties, branching into more revenue streams with more services offered than your typical company. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“By having additional services, you can make your management company stronger” – Tony LeBlanc

 

Tony LeBlanc Real Estate Background:

  • Entrepreneur and owner/manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast
  • Author of The Doorpreneur: Property Management Beyond the Rent Roll
  • Speaks to investors about why you should be cultivating rich and engaged partnerships with your property managers
  • Based in New Brunswick, Canada
  • Say hi to him at https://doorpreneur.com/

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of the fluffy stuff, what to stay. Tony LeBlanc, how are you doing, Tony?

Tony LeBlanc: I am doing great, Joe. Thanks for having me.

Joe Fairless: Well, I’m glad to hear that and my pleasure. A little bit about Tony – he’s an entrepreneur and owner-manager of Ground Floor Property Management, one of the largest property management companies on Canada’s East Coast. Author of Doorpreneur: Property Management Beyond the Rent Roll. With that being said, Tony, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Tony LeBlanc: Absolutely. So I come from a property management background, second generation. My mother managed the world of multifamily throughout her 35-year career. I was fortunate enough to have a place in that, early on in life, where I used to help her in the building that we lived in. We were resident managers, so I did a lot of the cleaning and various other activities to help her out. So I was very fortunate that I got the real estate bug actually quite early. Learning from the owners of her company put that in my mind as I went into college, although real estate and property management wasn’t my first career – I did a 15-year stint as a software engineer at IBM.

Luckily enough, early in that career I started investing in multifamily, quite young. I bought my first building when I was 23; I bought a triplex. I continued to invest, and then about 10 years later the traveling at IBM started to become problematic for the family situation… So I went back to my roots and started my own management company. Fast forward 10 years, we now have an amazing property management company that spans three provinces here in Atlantic Canada, with close to 2,000 doors that we currently take care of.

From that portfolio, we’ve been able to spin off around six other service businesses that complement the management business. I’ve taken that, what we’ve done, and put it into a book, The Doorpreneur, where I hope to provide some context and perhaps some new visions for other property managers out there that are looking to grow beyond just adding doors.

Joe Fairless: Yes, let’s talk about that. What are the six lines of business?

Tony LeBlanc: We currently have landscaping, snow removal, residential cleaning, commercial cleaning, mortgage sales, and we’re looking at two others – appliance repair and roofing.

Joe Fairless: Okay, and… I type as quick as I can while trying to be quiet, so that the Best Ever listeners don’t get annoyed by my quiet keyboard that I’ve purchased, because it was annoying before. So I wasn’t able to get all that. So landscaping, snow removal, mortgage sales, appliance repair, roofing… What else?

Tony LeBlanc: Commercial cleaning and residential cleaning, and the most important – maintenance services, handyman services. That was by far our biggest opportunity and our biggest workload for sure.

Joe Fairless: Okay. You said you’re looking into appliance repair and roofing. So does that mean we shouldn’t really talk about that for this conversation, because you’re not– okay, all right. So that’s two things you’re looking into. So let’s talk about the stuff you are doing. Maintenance repair, you said that’s the biggest opportunity. Is that currently the one that makes you the most profit?

Tony LeBlanc: I would say there’s definitely a financial reward to it. There are great opportunities in that space. Probably more importantly, from the property management perspective, is having control over that maintenance from a quality coordination, and all that, to be able to control that in-house. We’ve had the experience to where you work with different trades… When your unit count gets pretty high up, it just becomes more efficient to have your own staff take care of those things.

Joe Fairless: Absolutely. That makes a lot of sense. From a profitability standpoint – just to make sure I’m understanding correctly – out of those six, does maintenance services generate the most profit?

Tony LeBlanc: Yes.

Joe Fairless: Okay. How does it stack up against your profit from managing the 2,000 or so doors?

Tony LeBlanc:  I’d say, probably from a margin perspective, maintenance is a little bit lower. I would say the management side is a bit higher. But 2019 has been an interesting year that our maintenance division has actually grown bigger than our management company. That’s really when we knew we had something really cool that we want to share and put it out there, because a lot of property managers and even investors– it’s all about door count, door count, door count, and just “How can I accumulate more doors?”, when the reality is, from a property management perspective, there is a ton of things that you can do with one door before you go searching for door number two. We’ve done a lot of work in that and try to extract everything that we can with a single door before we start moving on.

Joe Fairless: When you say bigger than the management–

Tony LeBlanc: Revenue, general revenues.

Joe Fairless: Revenue, okay. So maintenance services has more revenue, but lower margins than management. It makes a lot of sense. I’ve never had my own property management company, but I’m thinking about if I did, the challenge I would have with having these other services is, I’d say, “Tony, there’s a lot of opportunity, you’re right, but I want to focus on what I’m good at, and that’s managing properties. And I want to hire the experts who are trained in the other areas.” So what’s your response to that?

Tony LeBlanc: I also had that mentality, probably for the first five years of running our management company, where we weren’t so much into the other things. But what I’ve learned over the last five years is – the second half of our company – is that by having these internal services, they’ve actually made our property management company ten times stronger, better and more profitable, because of the life cycle and the relationships that we’re able to build with our investors, and the reusability of the staff within the environment.

So property management, and I’m sure you can attest to, is a difficult industry; tough things about it. And growing in door count, continuously striving for more doors, more doors and more doors, and worrying about a churn rate – the amount of doors that are going out and you’ve gotta replace every year… By having additional services, in my opinion, you can make your management company stronger, and your churn rate is going to go down because you’re not having to go after as many properties… Because essentially, you don’t have to continuously grow in door count when you’re building the other businesses.

Joe Fairless: Well, does the churn rate go down or does it just become not as relevant?

Tony LeBlanc: It becomes not as relevant, and essentially, it has gone down tremendously.

Joe Fairless: Okay. Why do you have a lower churn rate by having these services?

Tony LeBlanc: Because you’re attracting a better quality owner and investor and partner. I’d say, over the last two years, that the quality of people that are with us now are much different than probably, seven or eight years ago. Now we’re working with investors that are financially okay, we’re dealing less with accidental landlords that are coming into situations where they really can’t do a whole lot with a property when situations may or may not come up… And we’ve been able to connect with different investors and entrepreneurs that have that mindset. They love what we’re doing, and they want to be part of it. It’s worked out really well.

Joe Fairless: I’d love to hear that for your business. I guess the question I have is, “How does having a higher quality of investors relate to having different lines of business?” It seems like that could be more just the result of you all being more intentional about who you bring on, and the evolution of your company getting more established… But help me understand that connection.

Tony LeBlanc: Quality of service is a big one and also costs. We’re lucky we’re being put in a position, or we are in a position to where, I would say, 99.9% of the time we can do things at a lower cost than outside trades. Oftentimes, we believe that we can do it much more efficiently and better, just because we have more control, everything. So probably the biggest bonus or benefit to our owners is from a cost perspective. We give them amazing deals. Now, the beauty about what we’ve done here is it’s important to note that these service companies – they handle our internal portfolio, but they’re also outside, facing businesses as well. So there’s a lot of clients from the outside. So our own internal portfolios are obviously priorities, and the pricing is pretty phenomenal. So we built it out intentionally.

Joe Fairless: So now let’s pretend that you have to remove one of your lines of business. Which one do you remove and why?

Tony LeBlanc: Landscaping. Landscaping – you’ve seen that over the years, it’s kind of a low-hanging-fruit type product. It’s very labor intensive, there’s a lot of overhead involved, and the margins are very, very small. Initially, we got into it because we weren’t happy with a lot of the vendors that we were working with, constant babysitting… So we ventured out into that market. We’ve done a great job, and it continues to provide some dividends for us, but it’s a lot of work.

Joe Fairless: Almost a loss leader.

Tony LeBlanc: Yeah, definitely. We do a lot of landscaping in order to get snow contracts. We love doing year-to-year type engagements to where we take care of everything, indoors and outdoors, for a client, whether if it’s our properties or outside.

Joe Fairless: Why is it that snow removal — because I’ve heard this from every landscaper I’ve spoken to, in places that have snow. They’re like, “I want to get into snow removal, much better margins.” So why is it that snow removal has better margins than cutting grass and planting flowers?

Tony LeBlanc: A lot of times it’s because of the big gear involved, the immediacy of the service. So when it snows, or if it’s ice out, you need somebody there now. It’s not something that can wait. On the snow removal side, the gear is incredibly expensive when you start talking about tractors, loaders, and all this other type of stuff… And one of the most important things is liability aspects. If you got an ice storm and your parking lot is full of ice, or your front walkways of your apartments or your houses are a mess, you’re setting yourself in danger, a lot of risk. So risk-reward in that type of environment — salting is definitely an area to where the margins in it are incredible. Snow removal, there’s a lot of risk in it as well. It’s all dependent on mother nature. We’ve had years where we’ve won tremendously, and we’ve had years where we were ready to pack it up. We were like, “I can’t go through another winter like that.” Or it just snows 30 centimeters every two weeks, and you just can’t get ahead.

Joe Fairless: Well, isn’t that a good thing, because that’s just a lot of business?

Tony LeBlanc: No, not when you have set contracts, set price.

Joe Fairless: Oh, there’s the rub…

Tony LeBlanc: There are some people that go out and they’ll charge an hourly rate for snow removal, but from a client perspective, they find that that’s too much of a risk. So a lot of them will go with fixed contracts. Regardless of how much snow falls – it could be next to none, or we could have a brutal winter, and just crush any snow operator. So you’ve gotta be really careful.

Joe Fairless: I love talking about this. You’ve got all these different lines of business and they’re all related, and it’s really interesting to talk about.

Tony LeBlanc: One of the points you made a while ago, how it rolls back up to the real estate investor – I want to make sure it’s clear that creating these additional businesses and lines of business doesn’t necessarily take our focus away from property management, because we know the game is getting access to the asset, controlling the asset, and then you have options. So without the management component of all this, all of this goes away to nothing.

So we’ve really put a focus to where our management is obviously number one, and then the other businesses that we’re bringing on board, once they’ve [unintelligible 00:13:19.04] a proper point person, a manager is put in charge to run that operation as if it’s its own little business.

Joe Fairless: So with close to 2000 doors, you’ve seen some things, and your team has seen some things, and there have been bad stuff and some great stuff, I’m sure… So let’s talk about a landlord that you worked with that no longer works with you, because they don’t like your company anymore and they went to a competitor. Tell us a story about when that happened.

Tony LeBlanc: I would probably say this will happen quite often with the accidental landlords. So an example of one is somebody that has a house, either they’re getting relocated, they’ve gotta move, or they’ve run into a separation. So we’re stuck with a single family home. They’ll call us out of desperation, “I got a move and I need somebody to take care of this house because I can’t sell it.” So we come into the picture and we start managing the property.

The tenant turns over, so it comes back up for rent, and the house is a mess. It needs a new paint job, it needs this, it needs that. Oftentimes, the owners are not in a position to financially be able to do the things that we’re requesting to have done. That has caused many relationships to be broken up. Just we’re not on the same wavelength in terms of what we think is rent-ready versus what they think is rent-ready… Especially when they’ve lived in the house and it used to be their personal home – there’s a lot of personal feelings involved, and it gets a little dicey. Multifamily apartment buildings, God love them, no emotions around them, it’s just numbers; and you don’t get that same attachment as you would a single family home. So that’s been a popular one.

Joe Fairless: That makes a lot of sense. It’s a black hole if you allow a new resident to live in there without it being rent-ready, according to you all… Because then they’re not going to be as qualified, and then you have to evict them, and then it’s a downward spiral; that’s what I should have said – not a black hole, but a downward spiral.

Tony LeBlanc: It’s a reputation thing. Nowadays with social media, if I don’t provide a house or an apartment that is spotless, that has hopefully a fresh coat of paint, that maintenance-wise it’s all intact, light bulbs are all in, light switches work, things that people expect, it all comes back falling on us. They are two minutes away from going to Facebook and telling the world that company XYZ sucks, when the reality is they don’t know the challenges that we face in the back end, nor should they. So that’s why we’ve learned over the years, over a lot of painful mistakes like that, that we go through a great amount of work to choose who we’re working with now, and to make sure that those types of things don’t come into the picture.

Joe Fairless: Yeah, I like that you mentioned that. One thing that comes to mind is — I’ll talk to owners who are looking at potential properties to buy, and they’re also looking at property management companies to manage them… So they’ll go drive by a property, they’ll see that the property — and I’m talking like a 20-unit, or a 30-unit apartment building… They’ll see the apartment building looks run down, and then they’ll immediately assume that the property management company is not good. But in reality, the property management company can only do so much, because they’re handcuffed by the money that’s available from the owner. They might be in the process of firing the owner, or they might be talking to the owner like, “Hey, let’s get this money into the property.” So there’s always two sides to the story. Now, it very well could be that the owner’s giving them the money but the property management company’s dropping the ball, but it shouldn’t be an immediate assumption.

Tony LeBlanc: Yep, absolutely. And unfortunately, it is, because we’re the face of most of the properties that we’re dealing with. So nobody knows the owners; they’re in the background, and that’s how it should be. We accept full responsibility when we take over a project, and that’s the way we like it… So we just got to make sure that everybody’s in line, everybody’s got the same core principles and guidelines in how they want to run a building. Maintenance is the number one topic that you’ve gotta get out of the way and you’ve got to be on the same wavelength.

Joe Fairless: What’s something challenging you’ve come across with a landlord or tenant outside of the accidental landlord component or dynamic? Either a particular tenant was complaining about something and you’re like, “Wait, how do we solve this?”, or you all were working with the landlord on a particular deal and it just took a lot of effort on your team’s behalf, and then you turned it around… Just anything like that.

Tony LeBlanc: So this has happened to us unfortunately quite a bit in the last, I would say, two years. So we get the management of a property; everything goes well, we get the tenant, everything’s going great. Then the owner decides to put the property up for sale. Trying to sell a property with a tenant living there is a nightmare. Apartment buildings are fine, it’s definitely a lot easier. The tenant is not expecting to get kicked out.

From a residential perspective, whether it’s a single-family or a duplex, kind of a smaller type property, specifically single family, it’s very, very tough for the tenant to be able to deal with those types of situations. So constant showings, constant interruptions, and the fact that they don’t know when they’re going to be kicked out.

So that’s a very tough situation for a property manager to be in, because we want to help support the investor in selling his assets and helping them do what’s best for them, but we also have to empathize with the side of the tenant, to say “Okay, how are we going to make this situation as painless as it can be?”

Sometimes it gets a little messy, in terms of they get a get a quick sale, the tenant is on a year lease, we’re supposed to give them this amount of time to get out, but the deal has gotta close in 30 days… Then you kind of get put in that awkward — you’re doing things that you necessarily don’t want to be doing, trying to kick the tenants out. It can get a little frustrating and a little hairy at times.

Joe Fairless: What’s a tip or two for someone who comes across that scenario in their management company?

Tony LeBlanc: Well, from a property management perspective, put in a new clause in your management agreements that protects you from this situation. So if an owner decides to put his property up for sale, then he has to provide a certain amount of notice to you, so that you can provide the proper context for the tenant… And the proper lease needs to be put in place. So if I’m signing up a new owner, and he’s wishy-washy about selling in a year or two, then I’m going to protect myself in my management agreement, but I’m also going to protect the tenant in terms of a lease.

So maybe I don’t do a year-to-year, and I do maybe either a month-to-month type lease, to where I went with them and saying, “Listen, this owner has decided to rent this place right now, but that could change. So I’m telling you in advance, there’s a risk here.” Then that way, when the situation – and if it comes up – I’ve covered as many bases as I can to make everybody happy. That works out really well.

Joe Fairless: Taking a step back, based on your experience, what’s your best real estate investing advice ever?

Tony LeBlanc: Property managers and real estate investors can create epic results when partnered properly.

Joe Fairless: Well, I think everyone would agree who’s had a good experience with a property manager that is the case, and I certainly would agree. Real quick, what are two or three questions (at most) that a real estate investor should ask a potential property management company that will manage their residential one to four-unit property?

Tony LeBlanc: Staffing. What does the staffing situation look like? There are a lot of property management companies that are one-man shows. They can have a nice website, they can have a nice this, and they can have a nice that, but you want to know what the staffing situation is, and you want to know the unit count of what you’re getting into.

So if it’s a one-man show and he’s got 250 units, you better be careful… Because in this business there can be days where there’s not a whole lot going on, and then you can be completely underwater the next day. So huge, huge importance is that whole staffing aspect or ratio in terms of how many units they have.

I would also look at, from a community perspective, what is the historical picture of the company, how long they’ve been in business, and what is kind of their primary job. We see a lot of realtors doing management on the side. So it’s really a little bit of a side hustle for them. Again, some of them are absolutely amazing, but it’s just a matter of being aware and okay in that situation.

Personally, if I’m handing over a million-dollar asset to a property manager, I want to make sure that there’s a company behind this and that there’s good insurance policies in place, they’ve got an office, there’s a staff… I want to make sure that it’s something legit in the back-end, and not just, again, somebody that’s just floating around with this on the side. It’s too dangerous and too many bad things can happen quickly.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?

Tony LeBlanc: Yeah.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:22:20:04] to [00:22:56:09]

Joe Fairless: Okay, what’s the best ever resource you couldn’t live without, that you use in your business?

Tony LeBlanc: I would say our property management software.

Joe Fairless: Proprietary software?

Tony LeBlanc: Yes, it is.

Joe Fairless: So proprietary — do you license it out, too?

Tony LeBlanc: Yeah, it’s a third-party software… Buildium is what we use.

Joe Fairless: Buildium? Okay, cool.

Tony LeBlanc: Absolutely could not live without it.

Joe Fairless: Best ever way you’d like to give back to the community.

Tony LeBlanc: We do a lot of lunch and learns, or coffee dates at our buildings. It’s a way for us to be able to get to know our tenants a little bit better. In the same way, we provide these types of boxes where they can make donations. We do a lot of work with the Red Cross when there’s emergencies that come up, like fires and stuff like that. So we’re able to take stuff that tenants give back and that we can give back to the Red Cross.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Tony LeBlanc: The best place is doorpreneur.com. All my information’s there.

Joe Fairless: Tony, thank you for being on the show, talking to us about your different lines of business as well as your focus on property management, having a discussion on certain lines of business that make more money than others, where opportunity is, and maintenance services, and questions to ask and think about prior to hiring your property management company. So I hope you have a best ever day, I really enjoyed our conversation, and we’ll talk to you again soon.

JF1966: How to Drive Profitability in Property Management with Jim Murray

With us today is Jim Murray, co-owner of Lyon Property Management Group and co-host of the podcast The Cashflow Kings. Jim shares with us the steps he took to get out of the W-2 world and build his property management company. He also shares his experience in the profitability of property management.

Best Ever Tweet:
“The biggest thing is you have to be a great saver before you can be a great investor.” – Jim Murray

Jim Murray’s Real Estate Background:


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless:  Best Ever listeners, how are you doing?  Welcome to the best real-estate investing advice ever show. I am Joe Fairless, this is the world’s longest- running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jim Murray.  How are you doing, Jim?

Jim Murray:  Hey Joe, thanks for having me on the podcast. I am really excited to be here.

Joe Fairless:  My pleasure.  I’m looking forward to our conversation.  A little bit about Jim, – he is the co-owner of Lyon Property Management Group and co-host of the podcast The Cashflow Kings. Invests in multifamily real estate and manages real estate. Based in Providence, Rhode Island.  So with that being said, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Jim Murray:  Absolutely. So I came out of college and started by house-hacking. So the first real estate investment was a house-hack. From there I went into wholesaling, I did a couple of flips, I bought my second house hack. The goal was always to become a corporate dropout. I have a degree in finance from Ohio State University – so shout-out to my [00:02:13.13] out there – and I landed a job at a large investment firm. I ended up catching a bad review, led me to…

Joe Fairless:  What did they say about you?

Jim Murray:  So my manager told me – and I will have to use without the profanity… But she told me “I don’t understand how you are so effing confident, because you are effing average.”  And I said…

Joe Fairless: [Laughs]

Jim Murray:  “Great. Great.”

Joe Fairless:  Dang… That is harsh coming out of college.

Jim Murray:  Yeah, I sent her a really cool email when I left, but it’s one of the world’s largest privately held investment managers, so that went over well. I sent an email to 200 of my closest friends, called her out doing part of the email…

Joe Fairless:  What did you say?

Jim Murray:  I called her out that she called me average.

Joe Fairless:  Well, if you are being average, I think it’s fine to call you average. Were you being average?

Jim Murray:   Honestly, at my corporate 9 to 5, I definitely was.

Joe Fairless:  So what’s wrong with her saying that you are average?

Jim Murray:  It was the confidence thing. She is saying “I don’t understand why you’re confident.”

Joe Fairless:  Yeah, that kind of was below the belt, right?

Jim Murray:  But I think where she was frustrated was the fact that I had automated my job the first month that I was there, and she was just trying to apply pressure.

Joe Fairless:  Okay, in what way did you automate it? I imagine others weren’t?

Jim Murray:   So I would produce a packet to be presented to the CFO on a monthly basis for the part of the company that I was within, and it was a bunch of Excel models. So I created it so I would just dump the data in and it would pump out the 50 slides for the deck that I needed, rather than all the manual work that the previous person who had the job had done… And I did that.

Joe Fairless: That’s so smart.

Jim Murray:  Well, yeah.

Joe Fairless:  You thought so?

Jim Murray: That’s what led me to be average the rest of the time, because I had automated my job. And honestly, it was an established business within the franchise that I worked for. They weren’t making any changes… I consistently asked for more work, I didn’t get it…  So I started to focus on my real estate investing. And that’s really when I started to build out the property management company and started to focus on the things that I really want to do to get me out of my 9 to 5.

Joe Fairless:  Okay. And what are some of the steps you took as a W-2 employee to get out of the W-2 employee world?

Jim Murray: So the biggest thing is that you have to be a great saver before you can be a great investor. As you are taking those nice paychecks hopefully from your day job, you’ve gotta make sure that you are saving at least 10%.  So I would say 10% for retirement but, then also your rainy day fund for when you leave.  So I was able to save up a sizeable nest egg for when I left, in case the property management business–

Joe Fairless:  How much did you save?

Jim Murray:  I saved 80,000 dollars in cash.

Joe Fairless:  Wow. Okay.

Jim Murray:  So I got a pretty good increase. So I left that job when she called me average. They moved me into another part of the company. They wanna bring me in from my previous background… I spent 6 years there.  They gave me a 40% increase, so I banked the entire thing. So that was the biggest component that was able to set me apart.

The other big thing trying to quit the 9 to 5 job outside of saving is networking. Networking is huge in real estate. And having a tool like a Bigger Pockets or a local REIA, it’s going to absolutely set you up for success.  That was the second component of how to get me out of the 9 to 5. And the third component was building a viable day job, so at least I had some funds to continue kind of my day to day life as I built the company that I wanted.

Joe Fairless:  At what point did you have the confidence to leave your W-2 and when did you do that?

Jim Murray:   That’s a great question, because I have some realtors that I know that are part-time now, and because of the height of market, they are doing really well.  They are getting a lot of deals and they asked me the same question… It’s when you feel the pain.  Mine was about a year and a half after launching the property management company. We had grown to a point that was sustainable. I left my W-2 job on a salary that was 30% of what I was previously making, but I always consistently lived well below my means… But the pain of not being able to chase my dream full time just became too much, so I grew the side hustle in order to make it a full time hustle.

Joe Fairless:  Property management…  So from what I’ve heard is if someone has 5 or 6 companies, they are an investor, they have a couple other non-real estate ventures, they also have a property management company, usually they say their least profitable is property management. What is your experience in the profitability of property management?

Jim Murray:  I would say we are profitable within reason. So we are not [00:06:14.21] our clients, but the most profitable part of property management is going to be your maintenance. So you’re gonna have a top-notch maintenance team; that’s where you are going to be able to drive profitability. I am not saying that you overcharge your clients, but charging them for the value that you provide.

On the other side, I noticed that a lot of property managers compete on price, and this is a conversation that I have all the time. There’s another company in our local market that continues to reduce their prices because they are losing business to us, but our pricing has remained the same.  So I talk with my business partner about this all the time… If you are in business competing on price, you are in the wrong business. Some of the entrepreneurship gurus talk about how you should really enter that high-end market. I am not the most expensive property manager in our area, we are about middle of the road, but we really drive that value home.

A lot of folks look at management fees and they are like, “Oh you only collect rents to earn that management fee?” That’s where it begins. There are a lot of intangibles in the management fee when you have great property managers. That’s going to be relationships with bankers to get your better financing, relationships with real-estate attorneys so when your tenants go to sue you over security deposits if you are tough on security deposits, I am getting that phone call first before the tenant even files, so at least the owner has a head-up… Or that attorney that I know is going to turn that business.

So there are a lot of intangibles booked into that management fee that owners don’t understand,  and that’s where owners will try and cut down some of these other guys to get a better price in the management fee, rather than property manager trying to show them the value that they can provide.

Joe Fairless:  Why did you choose to get into property management as a business?

Jim Murray:  That’s a great question. So I bought my first couple properties and I realized what you actually make at the end of the day per door. In our local market, a great investor is going to earn about $150 per door on a net basis annually. And that’s really in the long run, too. So if you buy a distressed property, you are going to spend a lot more money upfront before you are going to earn that $150 a month.  And I looked at it as, “Hey, as a property manager I won’t have the upside potential or the capital appreciation on one hand, but I can also earn that amount of dollars per door, but it gains me access to capital as well.”

At the end of the day, I always who had an entrepreneur tilt where I’ve wanted to buy companies, and I think that property management is a good starting place that has exposed us to other entrepreneurs and other really interesting opportunities.

Joe Fairless:  And what are some other opportunities? Just giving a couple examples.

Jim Murray:   This is a fun one that I think will connect with some of the listeners… We’ve had opportunities to purchase buildings to invest in medical marijuana growth.  We’ve had opportunities to purchase restaurants. So other folks that are familiar with our very process-oriented approach, they figured that it would bode well in the restaurant business.

And then the other cool thing is as we built this out, we’ve been able to go out and become paid speakers as well, just as entrepreneurs. Talk about the processes, things of that nature.

Joe Fairless:  And have you acted on any of those purchases or those opportunities to purchase?

Jim Murray:  At this point we haven’t. We’ve been focused on really building a great property management product. Here’s the difference in terms of being a good entrepreneur versus a great one… A good one is going to work in their business and get stuck.  A great entrepreneur is going to find a way to level themselves out and be able to work more on the business and not as much in it.  So we are very close, we’re probably at about the 10-yard line, about to run the pole across the goal line in terms of my partner and I leveling ourselves out of the business, so we can start focusing on some of those other opportunities.

Joe Fairless:  What would be the first one you’d focus on?

Jim Murray: The first one is we are going to get back into wholesaling.  Because wholesaling is going to naturally feed business back to the property management company.

Joe Fairless:  Ah, smart.

Jim Murray:  Yep, so that’s gonna be the big one, off the jump. We are also looking at opening up a hard money business. We have investors that are very well-capitalized, and we have connects with other local wholesalers or rehabbers that are always looking for good terms on capital, but it allows us to work with the investors that we want to and still make a margin on that business as well.

So off the jump it’s going to be really related to the core business. You build some that are closer to the core, and then you can expand from there.

Joe Fairless:  I see the logic and I really enjoy the logic of next focusing on wholesale, because that will naturally feed your property management business.  So it’s not like you are creating a new venture, but you are creating a close cousin to the venture that you are currently doing, and they’ll play off each of each other.

Jim Murray:  Absolutely.  And what helps is a lot of wholesalers start out and they’re like, “Well, who do I market to?” or “Where do I find my cash buyers?” Well, our buyers and our cash buyers are going to be built into the property management business. And if those guys don’t want to buy it, then we could buy it as well.

Joe Fairless:  Do you personally invest in real estate?

Jim Murray:  Yes. Currently, I own two four-unit properties. The opportunities in our local market has lead to more flipping of multifamilies lately than anything, just because we’re very late in the cycle in this real estate market currently.

Joe Fairless:  And who manages those properties — I am kidding. [Laughs]

Jim Murray:  [laughs] Rob, it’s my friend around — I am just kidding.

Joe Fairless:  Right, right. With the two properties – will you tell us about them?

Jim Murray:  Yeah. The first property I bought, I was 23 years old.

Joe Fairless:  How old are you now?

Jim Murray:  Thirty-one.

Joe Fairless:  Okay.

Jim Murray:  So it was scary as shit, the first night. Sleeping on an air-mattress, I had just closed on it… My girlfriend at the time, she wanted to get a puppy, so we got a puppy that night… I got stuck with it. I love dogs, but sleeping there with a new puppy on the air-mattress and a half remodeled unit, I thought to myself, “What did I get into?” From there it was a climb. Honestly, every weekend for the first year I was working on the property. My tenants gained an appreciation for that, and I gained an appreciation for the process. But I was able to get it up and cash-flowing.

It was a four-unit building I bought for 140,000 dollars. At purchase it generated a thousand dollars gross monthly. Once it was stabilized a year later, it’s now been generating gross between $3,600 and $3,800 on a monthly basis.

Joe Fairless:  Wow. Bravo.

Jim Murray:  Thank you.  The coolest thing is when I first bought it and I started to stabilize it, my mortgage was only $140 a month. And the first tenant I placed on the third floor – it was a 3-bedroom – they paid $900 monthly, and I’m like, “Holy cow, that’s a major part of the mortgage.” I had a great mentor that got me in; I didn’t realize I good it could be. So, very quickly I was cashflow-positive and headed in the right direction.

Joe Fairless:  Any thoughts on doing a refi on that one?

Jim Murray:   Yeah, I am in a really good position to do a refi right now. The property is worth about $300,000, and I still own 135k.  I had a great mentor in the beginning through a separate business that I worked a part of, and he told me “Hey, you should never refi unless you have somewhere to put the money.” I haven’t found the right opportunity of where to put the money, but when I do, I would definitely refi that one in a second. It’s in a favorable area, Pawtucket, Rhode Island, and I think that it will work out pretty well.

Joe Fairless:  That was one deal. What about the other one?

Jim Murray:  The second multifamily that I house-hacked… So here’s the cool part – I house-hacked the first one, and two years down the road I was actually able to roll my owner-occupied mortgage into an investor non-owner-occupied mortgage, which allowed me to use an FHA loan on the second property to come in for very low money.

The second property was a 4-unit in Lincoln, Rhode Island, and at that property I actually leveraged a 203K loan. So the bank finances the rehab. I went with a 203K loan that was $35,000 or less, so it’s a streamlined 203K, so the process was a lot easier.  If you go above $35,000 on rehab funds, the process becomes more difficult and more expensive. This is probably a good golden nugget for listeners.

I was able to live on that one again. When I picked it up, I had a bunch of one-bedrooms in an A neighborhood that rented at $500 a month. I came in, increase all the tenants to $800.  All my friends thought I was crazy. I retained one tenant who is actually still there today, but I was actually able to rent the other ones for $825 a month after removing the other tenants.

The inherited tenants were not happy going from $500 to $800, but I said “Hey listen, go take a look at the market. You are going to have to incur moving costs, you are also going to have to come up with first month’s rent in security on another place. This is still a really good deal for you guys, and I’d love to keep you.”

Joe Fairless:  What are some things that you do to the properties to increase the rent? It sounds like it was below market already, but any formulaic process that you typically do?

Jim Murray:   Honestly, it’s all going to start with painting and flooring. That’s going to get you a majority of the way there in most of the neighborhoods in my market.

The big thing with painting is painting the entire unit  one color, and using that paint color throughout everything you own. So it’s a very streamlined turnover process. Same thing, with using similar flooring in every single unit. If you can streamline the turnover process, it’s going to mitigate costs, and then the guys that you bring in, it’s going to help you out tremendously.

So we use the same paint, we paint the unit…  If we have hardwood floors, we refinish them because it’s very inexpensive. If we don’t have hardwood floors, we’d be pulling out the carpet and putting in the laminate vinyl flooring. It just lasts four or five turnovers, rather than two with typical wood laminate.

So those are some of the things that we focus on at the first turn over. I know it’s not crazy; these guys are probably thinking like “Oh, Jim puts in granite and stainless steel appliances”, and it’s not even at that level. It’s pretty straightforward, just the paint and the flooring, most of the time.

Joe Fairless:  What’s a mistake that you’ve made on a deal, whether with management or your two four-units?

Jim Murray: I am going to go back to a wholesale deal that I blew. So, I went out to see a five-unit in Lincoln, Rhode Island, five or six years ago. I met with a gentleman. He was incredibly distressed. I was ready to lock it up at a good price, we were pretty close, and as I went to walk away from that negotiation and go home and write the P&S, he’s like, “Oh man, I feel like you are buying this really well.” And my response was, “Yeah, well you make all your money on the buy.” [laughter] As investors, we can say that to ourselves, but don’t say that to the buyer that you are about to clear a really strong deal on a five-unit that’s off market… And  I still kick myself today for saying that. It was just a rookie mistake.

Joe Fairless:  Deal didn’t happen?

Jim Murray:  No.

Joe Fairless:  What did he say, if anything, when you said that?

Jim Murray: I followed up with them for six months, he blew me off for four months, but he told me that — he was an Asian investor and he was able to find another partner to bring in capital to help get him out of the pinch that he was in. Or at least that’s the story that he told me. [laughs] I looked it up on public record and he had it in one legal entity, and now it’s in two separate legal entities, so it does look like he brought the partner like he said.

Joe Fairless:  And what’s a deal, if any, that you’ve lost money on? Not opportunity cost in this example, but actually lost money.

Jim Murray:  My first flipped deal. I bought a four-bedroom/two-bath house for $22,000 dollars.  I did not realize it was a brothel and I did not realize that the previous owner was renting the garage to folks in the neighborhood to shoot up and do cocaine.  It was wild. So the prostitutes would kick in the side door and sign their name in lipstick on the windows.

Joe Fairless:  Oh, my goodness.

Jim Murray:  There were almost like Cops episodes where we would go and check on the property at night… And we ended up installing Simply Safe, so that helped out tremendously. But I can remember one time we had the cops called, they brought the canine, and he looked at us and he goes, “If anybody comes running out, tackle them. We are gonna be right behind them.”

Joe Fairless: [laughs]

Jim Murray:  It was crazy.

Joe Fairless:  Did you tackle anyone?

Jim Murray:  No. Nobody came out, but I was scared shitless for 30 seconds.

Joe Fairless: [laughs]

Jim Murray:  So on that property, the first contract that we were going to work with — so I had two other partners, so it was three partners in total, including myself. The money partner wanted us to work with his contractor.  I will use air quotes, even though nobody can see them, above “his contractor”. He wrote that guy a check for $30,000.  We never saw that guy again.

So, $30,000 was our margin on that project, and a $80,000 rehab, and it took us a year and half to sell it, because it was in a D neighborhood… So with carrying cost and everything factored in, we’d lost a couple of thousand dollars.

So it wasn’t a huge loss, but I learned that you’ve got to work with tried and true contractors, but also you’ve got to factor in, if you are going to buy in a D-neighborhood, even if you make that single-family really nice, it’s still going to be difficult to sell in the backside.

And even to end that crazy story of buying the brothel in the hood, we went to close, got the clear to close, and then they did one last check and it showed up on the terrorists watchlist, so it took us an extra week to close it in order to prove that he wasn’t the terrorist on the list that they had pulled up, which was wild.

Joe Fairless:  Wow. Clearly, there are some obvious things that “Hey, if you see this, you are not going to move forward on a deal”,  but what are three or four bullet points of “If you come across a deal like this in the future…”? Because I am sure there are ways to make money on any deal, but if you come across certain things on a future deal, you’ll approach it differently. What are those?

Jim Murray:  Having more control of the process. Candidly, I got into that deal with no money down. I just thought it was cool. The hard money or private money guy that I worked with, he said “Hey listen, rather than wholesale it, why don’t you work with me and you’ll make money on the back-end, so it’ll be more than your wholesale fee?” I would say, even if you are going to do that, try to get a wholesale fee so it makes it worth your time with the deal. You don’t always have to do that, but pay attention to that. And then just have more control or more of a level setting with your partners of the contractors that you are going to use, verify that they’ve worked with them before, or verify their references of the folks that they’d worked with. There are some other things on the deal that were just crazy.

Joe Fairless:  Yeah, please.

Jim Murray: I would say I should have put more time into the due diligence upfront of how long properties were taking to clear in that market, and then also broken apart the neighborhoods. We were in that in-between neighborhood where it could have taken a long time to sell or a shorter time to sell, so I should have budgeted more for that longer term to sell the property on the back-end.

Joe Fairless:  Okay. And how do you know what timeframe to budget on the back-end for selling a property?

Jim Murray:  You can reach out the local realtors in your market. You can very easily go to MLS or even to Zillow to see who is clearing deals in that market, and then reach out to them and ask them “How long does it typically take you to clear, either a rehab, so something that is in really good condition, or something that has a less favorable condition?”  But lean onto the experts in your market.

Joe Fairless:  Based on your experience, what’s your best real estate investing advice ever?

Jim Murray:  Take action, simply. I remember one of the very first Bigger Pockets podcasts I listened to — I can’t remember who said it, but they said “Massive action equals massive results.” And at the end of the day, you just have to take action. There are so many people that are stuck on the sidelines thinking about ‘What if I do this? What if I do that?” Just go out and do it, because at the end of the day you are always going to make more money.  Hopefully, you do make a return on everything that you buy, but just take the action and it’s going to get you to where you want to go.

Joe Fairless:  We’re gonna do a lightning round. Are you ready for the Best Ever lightning round?

Jim Murray:   Absolutely.

Joe Fairless:  Alright, let’s do it.  First, a quick word from your best ever partners.

Break: [00:20:39.14] to [00:21:19.18]

Joe Fairless:  Best ever book you’ve recently read?

Jim Murray:   The Wealthy Gardener.

Joe Fairless:  And what did you learn from that, that you’ve applied to your business?

Jim Murray:   It was a synopsis of every great book that I’ve ever read, but it led me to realize that we need a higher level of accountability in our business.

Joe Fairless:  And how did you implement that?

Jim Murray: So my partner and I have a weekly mastermind meeting, and now we are more direct in our weekly mastermind, meaning like “Here are the three things that we need to work on”, rather than saying “Hey, broad strokes.” They are very definitive, one, two, three, for each partner, so that we can go and tackle that in the next week.

Joe Fairless:  Best ever deal you’ve done.

Jim Murray:  It was the first deal that I ever did.

Joe Fairless:  What about a mistake you’ve made on a transaction that we have not talked about already?

Jim Murray:   That’s a tough one.  I know this is the lightning round, I am struggling now.

Joe Fairless:  You can take a minute, that’s alright.

Jim Murray:  I think it’s not getting tenant estoppels on a deal, and then showing up and the tenant telling me that the rent was half of what it actually was. That’s a big no-no, and that’s something that I will stand by on every income property investment that I ever make, for the rest of my life.

Joe Fairless:  And will you elaborate, in case someone is not familiar with what you are referring to with tenant estoppels?

Jim Murray:  So a tenant estoppel is a really fancy name for a document that just confirms the amount of rent the tenant pays.  So you’ll get one tenant estoppel for every income-producing unit in whatever you buy, and the tenant, the owner and the buyer all sign it, so there’s no questions asked in terms of the amount of rent for that unit.

Joe Fairless:  Best ever way you like to give back to the community?

Jim Murray:  It’s giving my time. I was able to speak at a local middle school about financial literacy, and that was one of the best things I have ever done. It was just a real feel-good moment.

Joe Fairless:  And how can best ever listeners learn more about what you are doing?

Jim Murray:  Give me a follow on the The Cashflow Kings on Instagram. The handle is @thecashflowkings. We post daily, and you will get to see the ins and outs of everything that I do on a day to day basis.

Joe Fairless:  Jim, thank you for being on the show talking about your thought process for creating a management company, how you position it among other property management companies, why you got into the business, and the lessons learned on some deals that did not go well, as well as lessons learned on some deals that did go very well. So I really appreciate your time. I hope you have a best ever day, and we’ll talk to you soon.

Jim Murray: Thanks.

JF1931: How You Can Rent Your House With No Headaches, Just Checks with Dave Friedman

Dave recently launched a new business venture in which he helps people rent their homes, hassle free. They help homeowners from A to Z with every aspect of turning your home into an investment property. Once they have placed a renter, they continue to do everything for the owner, and send them checks from their investment. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“People are worried less about square footage, and more about how many people they can squeeze in a space” – Dave Friedman

 

Dave Friedman Real Estate Background:

  • Founded Boston Logic (now Propertybase) in 2004, grew it into one of the largest software providers to real estate brokers, and sold it in 2016
  • recently co-founded Knox Financial, which offers a frictionless way to turn a home into an investment property.
  • They raised $1.4M, launched a pilot in Boston, and began accepting units onto the platform
  • Based in Boston, MA
  • Say hi to him at https://knoxfinancial.com/
  • Best Ever Book: Hillbilly Elegy

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Dave Friedman. How are you doing, Dave?

Dave Friedman: Awesome, thanks for having me.

Joe Fairless: Well, I’m glad to hear that, and it’s my pleasure. A little bit about Dave – he founded Boston Logic, now called Propertybase. In 2004 grew it to the largest software provider to real estate brokers, and sold it three years ago, in 2016. Recently co-founded Knox Financial, which offers a frictionless way to turn a home into an investment property. They raised 1.4 million, launched a pilot in Boston, and began accepting units onto the platform. Based in Boston, Massachusetts. This is gonna be a fun conversation… With that being said, Dave, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dave Friedman: Sure, happy to do it. I’ve been in the real estate tech world pretty much my entire career. As you noted, I founded a company called Boston Logic. We make software for real estate brokerages and the agents that work there; the people who help you buy, sell and rent a home – they are the users of the software. It’s actually pretty likely that most of your listeners have interacted with our software, and they didn’t know they were doing so, because it’s white label software.

I built that company over about a 12-year span, and sold it to a 50 billion dollar private equity firm, who said “Hey, this is a great company, but you guys need more stuff, so we’re gonna start buying other companies.” I still sit on the board of that company, it’s a lot of fun… And now that company owns half  a dozen software products and has clients in 60 countries, and offices all over the world. So that’s a fun ride… After that, I took a little time off, had a son…

Joe Fairless: Congratulations!

Dave Friedman: Thank you, sir. There’s another one on the way…

Joe Fairless: Congratulations!

Dave Friedman: Thank you! Last year, along with a friend and former colleague Spencer Taylor, I launched Knox Financial, which is my current day job, we might say. At Knox we make it incredibly easy to turn a home you own into an income property. If you already own an income property, we make owning that property as simple as owning a share of Apple or Microsoft. So  you put your home in the program,  you step away, we take care of everything else. We send you a check and a statement every quarter, we send you a 1099 for your taxes at end of the year, and other than  that you should have to do almost nothing.

Joe Fairless: Really? Okay… So I’ve got a house that I live in, I want to move to another house, but I hear about this and I’m like “You know what, I’m not gonna sell my current house, I’m just gonna sign up for Knox Financial.” You said just now that I put my home in your program, and then I step away, you make magic happen, and then I get money – what, every quarter, every month… And then I get some tax document at the end of the year. Is that accurate?

Dave Friedman: That’s pretty accurate. Let’s get into a little more of how that happens. You’re living there today, it’s time to move, and you say “You know what, this home – it’s been going up in value the entire time I’m here. This neighborhood is highly desirable, and that’s never gonna change. Why would I sell this fantastic investment?” It’s a common thought. Millions and millions of people have this thought every year. And we say “You’re right. Don’t sell it. Sign up with us.”

The first thing, you might need to do a refinancing of the home in order to afford your next home, for the down payment. Well, we have a financing arm. Next thing  – you’re gonna need a different insurance policy, because a homeowner’s policy is different than the policy you need for a renter. Well, we’re an insurance brokerage as well. Then you’re gonna need to find a renter, there’s gonna be maintenance needs, someone needs to pick up the phone on Saturday night at 11 PM, when there’s a leaky sink; we’ve got that function as well. If you need legal, and leasing, and background checking – we do all that.

So we find a renter, we put them in the home, we manage all the move-in/move-out, keys – you name it, we’ve taken care of it. We also do all the accounting and bookkeeping. So we collect the rent, we pay all the expenses on your behalf, we actually manage a bank account for you as a homeowner, and at the end of the quarter, every 90 days – again, just like a share of Microsoft or Apple that might pay a dividend, we send you the net profit on your home… And at the end of the year, because every single expense is run through us, we can send you a 1099 and it makes filing your taxes incredibly easy.

Joe Fairless: Huh. Alright… What are your fees?

Dave Friedman: We work different than the ways other people work. Other folks who might hire a property manager for somewhere between 4% and 8%, or higher… A realtor will charge you a month’s rent, so they get paid for more turnover. We never thought that made sense to us. You need to have a bookkeeper and an accountant, all that stuff. We charge 10 cents on every dollar we collect. So I don’t charge to put a renter in, I don’t charge for professional photography… We do professional real estate photography in every single unit in order to get better rent. We don’t charge rent collection fees, we don’t do any of that. All we do is 10% of the revenue that you see is paid to Knox.

Joe Fairless: Okay, so your fee is 10% on the collected income.

Dave Friedman: That’s right.

Joe Fairless: Okay. So when I refinance with you, when I get a new insurance policy, there are no fees to do the refinance?

Dave Friedman: No, the nice thing for a homeowner is that we do make money doing that, but it’s not you who pays, it’s the market. So banks pay for us to find the borrower. The bank pays us, or the insurance carrier pays us. Let’s say we go out to the market of insurance providers and Schwab is the insurer that comes back with the best deal for you – Schwab actually pays any insurance broker, for you bring them that policy. So we make money not from you, but from the market.

Joe Fairless: So on the refinance there are no fees to your customer; they are paid by the lender to you all. So the customer does not have to pay any fees.

Dave Friedman: The customers do not pay a fee to us. The lending market is its own beast, so there are times as markets go up and down that there may be fees for the loan. These days you’re very unlikely to pay fees. Certain borrowers might pay PMI, or something like that… But again, that’s a bank, and Fannie/Freddie thing, not something we really control.

Joe Fairless: Got it. So how many customers do you have on this platform?

Dave Friedman: We launched less than 90 days ago and we’ve got ten units on the platform so far.

Joe Fairless: Nice. Congratulations on the launch. You have a lot of things going on, personal and professional. You launched 90 days ago, and ten units are on…

Dave Friedman: I should say less than 80 days ago, but it’s coming up on 90 days.

Joe Fairless: Coming up on 90 days, ten units are on… Is that your friend, your best friend and some close relative of yours ten units?

Dave Friedman: No, it’s none of that, actually.

Joe Fairless: They’re  your enemies.

Dave Friedman: Yeah, exactly. At the heart of what we do – we’re a data and automation company, actually… So what we’ve done is we’ve looked at hundreds and hundreds of thousands of homes, because — I should say, we’re only focused right now in the Greater Boston Area. We actually run larger-scale models, but when we run the model in Boston, we looked at a few hundred thousand homes, and used the data  – we’ve identified the actual homes that we want in our program. Because we know which homes should be good rental investments and which should be cashflow-positive, or at least break even.

Based on that, we also look at the dataset and say “Okay, who is likely to move soon?” And those are the folks that we are targeting. We’re planning to scale a very large company here. Yes, we have ten units now, but we’re brand new, right?

Joe Fairless: Of course.

Dave Friedman: So we plan to soon have 10 units a month and then units a week entering the program. Then we’ll go into other markets; we’ll go from Boston to, say, Atlanta, and San Diego, and Chicago, and so on and so forth. And in order to do that, when we go into a market we need to do so in a scalable way, and it’s not only gonna be our friends and family; it needs to be that we can run a marketing campaign, describe the value we deliver, and have folks say “Yeah, Knox is a great investment. I’m gonna jump in that program.” So we’re launching that and figuring out how to do that in Boston first.

Joe Fairless: What do you need to accomplish in order to then move into another market?

Dave Friedman: That’s a great question. It actually comes down to a couple of things. First of all, we need to be able to acquire customers at a certain rate, for a certain customer acquisition cost. This is sort of business growth 101 if you’ve scaled a business in the past. So what does it cost me to acquire a customer? What do I see in revenue for that customer? …and therefore, is that a scalable revenue model?

One of the funniest things – it’s been in the news lately; I go a little bit off-topic here… It was in Lyft’s S-1, when they went public, they said “We’re not profitable. We may never be profitable”, and Uber said “We’re gonna need driverless cars in order to become profitable.” I thought that was amazing… Like, “How are you not making money every time I get into an Uber or get into a Lyft?” I just couldn’t believe that.

Joe Fairless: Details… No one needs a profit. It’s just speculation. That’s the foundation of our economy. [laughter]

Dave Friedman: Yeah, exactly. So we do not exist in that reality.  I don’t know how to get over there in that reality. We live in the real world, so we need to prove that in this market we can run units in a profitable, scalable way, and ideally in a very profitable way… And that’s where the automation parts of our business really shine.

Again, if we can acquire customers for a reasonable amount of money… If I have to market and spend $10,000 in ads buy to acquire a customer, I’m never gonna make any money. So we need to get some brand recognition out there, we need people to tell their friends and be happy about the service that we’re delivering, and so far all of our clients are very happy.

Then, say [unintelligible 00:10:38.23] we’ve got a few hundred units here in Boston, we’re growing. Let’s go do that in another city, and then two more, and then ten more.

Joe Fairless: Help us understand a little bit about how you’re making money with that 10%. I imagine it’s because of the infrastructure you set up, one and done, and maintain and enhance while you go… But the bulk of the work is upfront with your software, and then you rock and roll. But please, will you elaborate?

Dave Friedman: Sure. For starters, we have made certain things that are best practice standard in our product. For example, every single lease we sign – it includes a direct debit form for the tenant. We automatically collect rent. We will not be chasing rent checks. That automatically deposits that rent into an account; again, separate for every units, we don’t co-mingle funds. And then we automatically pay all the expenses on the unit. So we’ve created this automated financial management system so that the money flow is taken care of.

These accounts are also where maintenance costs come out of. So we have not built a construction company or a maintenance company; we have a license deal — that’s the wrong term… We have a contract with large maintenance providers at a rate that’s far below what a homeowner could get on their own. So we don’t include the maintenance cost in that 10%. If you’ve got a home that’s in good repair, you’re not gonna have a lot of maintenance costs. If you don’t, it might not make a good rental, and we’ll tell you that, we’ll be honest with you about it. But in that 10% we’re doing the financial management, not the actual work of nuts and bolts and hammers and screws on the home.

In addition, we are all about keeping tenants happy. Anybody who’s been a landlord knows the turnover will kill you, because a) you have the cost of turnover, and b) you have the risk of vacancy. That is something we work very hard to eliminate. We are treating tenants in a very different way.

I’ll give you an example… When you move into a Knox property, we send you a toolkit. It’s a gift. It’s got our logo on it. But we say to you “Hey, someday you probably wanna be a homeowner.” If you call us and say the garbage disposal is broken, we say “Hey, there’s this number 3 Allen wrench; go under your sink and just wiggle this. Put the Allen wrench in there and wiggle it. It’ll be fixed.” Tenants love that. So we’re treating tenants in a different way, and hopefully they’ll stick around longer.

Joe Fairless: Oh, alright… I thought you were going a different direction. You’re actually saying “Here’s  a wrench, go fix it yourself”, in a nicer way. What else is in the toolkit?

Dave Friedman: Oh, jeez. It’s like a 50-piece toolkit.

Joe Fairless: Name three or four others, please.

Dave Friedman: There’s a screwdriver, and then…

Joe Fairless: Oh, so they’re actually tools. [laughs]

Dave Friedman: Yeah, it’s a toolkit. [unintelligible 00:13:17.20] “You have to do your own maintenance.” If they say “No, I don’t wanna touch that thing”, we’ll send someone there.

Joe Fairless: You’re strongly implying it. [laughs]

Dave Friedman: To some ext– but this is one of the many ways we’re treating tenants differently. Also, for example, we require renters’ insurance on every single unit, on every single tenant. And we can offer that. We don’t make much money on renters’ insurance. It’s like $15/month. Most of that money goes to the insurer. But we’re treating tenants differently, and we’re actually treating homeowners differently.

When they jump in the program, they go “Oh, you guys are doing all of that?” Professional photography, and all these other things that we do that — yeah, there’s probably some property managers on the phone going “Oh, we do professional photography”, but they’re the really rare ones. So we’re really sort of packaging an awful lot of best in practice, and then we’re doing the bookkeeping and the accounting, and then we’re making sure they’re paying less in insurance and less on maintenance. When you add it all up, it’s a win/win.

Joe Fairless: Yeah, it’s a whole lot of stuff that you’re doing, as any landlord knows… I imagine there has to be a certain price point of rent that you look for in order to have the home participate in your program, for it to make sense for you… So what is that price point, if there is one?

Dave Friedman: That’s a great question. We have not figured that out yet… And for that matter, we don’t know if or when we might come into such a situation. The fact is we launched in a top five market… So I’d say the lowest value of any home we’ve brought into our program is over $400,000, and the average home in America is worth $230,000. So we’re almost double the average American home, just by being where we are.

There will come a day when we will launch in some great cities that just have a lower average home value. We’ll go into Houston some day, third-largest MSA in the country, but the average home value is like a third of the Boston area, and we’ll figure out how to operate there.

Joe Fairless: And I’m just curious, why are you talking about home values when you’re compensated on the collected income? In my mind, I would be thinking about the rental income. So out of the ten homes, the lowest amount or rental income we’re getting is $3,000, so we’re still getting that spread of $300.

Dave Friedman: That’s a good point. There are obviously — or maybe I shouldn’t use the word “obviously.” Home value and rent are proportional. They’re not necessarily linearly related, but if you take a look at the ratio – and [unintelligible 00:15:39.05] large data model, so let me paint this picture for you…

Joe Fairless: Yeah. Please.

Dave Friedman: If you look at the ratio of home value to 12 months of rental income opportunity, of a home or of an entire market… Let’s say you take all the two-bedroom homes in Houston and compare them to the two-bedroom homes in Boston; you take the average value of a home in Boston, the average value of a home in Houston, you take the average rental projected for that two-bedroom in Houston and Boston, and you get a percentage. That percentage rate in Boston is about 6%. That percentage rate in Houston is about 12%. So your rental potential to value ratio is actually much better in Houston, which is really interesting. That said, what insurance costs in Texas is very different. Insurance is more expensive.

So you can develop these models to be pretty darn intelligent, understanding where you’re gonna be breakeven or cashflow-positive, and what kind of profitability you can see on the units… But it is somewhat indexed to value.

Joe Fairless: As an entrepreneur, this is number two for you, right? Three — what was the other one?

Dave Friedman: I started  a small real estate investment partnership a long, long time ago. We bought some assets and then we liquidated them. It’s mostly like you buy it, you let it sit, and then you liquidate… But that was a long time ago.

Joe Fairless: How long ago?

Dave Friedman: We sold out in maybe ’05 or ’06… So that was the end of the [unintelligible 00:17:00.09]. It was like an ’03 to ’05 or ’06 story. It was pretty quick, because back then we could do that kind of thing. You could buy, the value would go up 10%-15% a year, and you could be out. We returned 56% per year cash-on-cash to people before tax… The financing terms you could get back then – that’s all evaporated now.

Joe Fairless: It would have been an interesting story if you had waited till ’09 to sell. [laughs]

Dave Friedman: Right. You know what’s funny – I’m trying to remember the exact… For the Boston market we were at the cusp. Things were leveling off and you just knew give it another 6-12 months they were gonna come down. It was already getting harder to get financing when we sold. We could not have recreated day one of that deal on day final, but we were able to still sell.

Joe Fairless: Yeah. Thank goodness. Alright, so this is round three for you on ventures… What in your approach have you honed, knowing that this is round three, that wasn’t as honed in round one and round two?… which sounds like they were a tremendous success, round one and round two, but you learned some stuff too along the way, and you get better as you go, regardless of the outcomes.

Dave Friedman: The number of things that you learn along the way are actually critical, and we should have done a few years ago… And then this time we’re putting  in place [unintelligible 00:18:12.15] is enormous. Putting in the right marketing software, putting in the right CRM, putting in the right accounting software, mechanizing any part of the business process you can to make it simpler and more repeatable and accurate – all that.

Joe Fairless: What CRM do you recommend?

Dave Friedman: Salesforce, all day long.

Joe Fairless: How come?

Dave Friedman: Well, with Salesforce if you’re a relatively technical person — I don’t mean like you have to be a coder; I’m not personally a coder, by the way. But if you have an attitude of like “Hey, I’ll get into something and I’ll figure it out. Enough clicking and button-pressing, I’ll figure just about anything out”, and if you’re an entrepreneur, you’re probably that type of person, you can get so much done with Salesforce. That’s bullet one.

Bullet two, it’ll scale with you to whatever size you wanna be. And third, it connects to everything. We’ve got Salesforce connected to Hubspot, which is our marketing automation system, it’s connected to DocuSign, which is how we do all of our contracts electronically… DocuSign saved my butt more times than I can tell, or just saved me thousands of hours of my life.

Joe Fairless: Yes… I use AdobeSign, but… Either one.

Dave Friedman: Yeah, sure. One of the cool things here is that DocuSign will actually take information out of Salesforce and fill in the fields for you if you do the integration correctly.

Joe Fairless: Wonderful.

Dave Friedman: So it accelerates that. We’re connecting – we haven’t done it yet – DocuSign to NetSuite, which is owner by Oracle; great accounting package and GL package. You need to have a third-party middleware company to connect them, but we’re doing that… So Salesforce becomes the hub for your data, it’s not just a CRM. That’s why I think it’s really great.

If I was more strapped for cash than I am, I might be using the out-of-the-box CRM in HubSpot, because I use HubSpot anyway and it comes with it… There’s a lot of decent CRMs out there. Even NetSuite comes with a CRM, so technically we have access to three of them, which is ridiculous.

Joe Fairless: That’s good. I’m glad you talked about that; I’m just interested in hearing your perspective. Alright, what’s your best real estate investing advice ever, based on your eclectic experience as a real estate entrepreneur?

Dave Friedman: Yeah, it’s funny, I just contributed to an article for Forbes. They asked a similar question… Their question was “How do you maximize value in a home?”, so this is sort of a top-of-mind answer… If you look at a property and there’s a way to add bedrooms, do it. This could be like you’ve got a house you’re buying and you’re gonna rent it out. I once turned a two-bed into a four-bed when I bought it. I’m actually in the process of turning a one-bed into a two-bed that I’ve just bought recently… And it’s usually not that much money to  put up a wall and a closet. You could do it on a  weekend if you’re handy. You could do it for a couple grand if you hire a contractor, or a few grand… Maybe you need to put another light switch or something, so maybe it’s five grand if you want it really crazy…

Joe Fairless: You need the egress and ingress too, but yeah…

Dave Friedman: And the rent you’ll get is just dramatically greater. And if you’re looking at a large multifamily, look at every unit and go “Okay, what’s my total number of bedrooms here?” Can I squeeze 10%, 20%, 50% more bedrooms out of this property? And suddenly, you’re renting better. In today’s market people are worried – in rentals anyway – less about square footage total, they’re worried more about “How many people can I squeeze into this house?” And that’ll get you better returns.

Joe Fairless: The thing I enjoy about this conversation is you’re coming at this from an investing standpoint, but then also from a data standpoint, right? So I imagine you’ve taken a look at the data, and that’s what it’s also showing you…?

Dave Friedman: Oh, yeah. Let me give you an example. One of my favorite places to look at data is short-term rentals, actually. One of my rental properties is only short-term rentals – Airbnb and VRBO. If you happen to own one – or even if you don’t – search in your neighborhood for one-bedroom rentals on those platforms, and then go and  search for five, or six, or seven-bedroom rentals. You’ll find there’s dramatically more competition when there’s fewer bedrooms. Again, you pay the same amount for the house, it’s got the same amount of square footage, it costs the same amount to heat, the bills are the same, you’ve still gotta plow the driveway, that costs the same… All your costs are the same, but one more bedroom? Revenue goes up.

So the minute you buy it, invest in putting in that extra bedroom for the lifetime that you own it, and you’re making more money.

Joe Fairless: That’s something to think about for every landlord. Thank you for that tip, and again, I really like it because it’s coming from your analysis of data, in addition to your first-hand experience. Alright, we’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Dave Friedman: Let’s do it!

Joe Fairless: Alright, first a quick word from our Best Ever partners.

Break: [00:22:38.12] to [00:23:19.06]

Joe Fairless: Okay, best ever book you’ve recently read?

Dave Friedman: Best ever book I’ve recently read… I’ve recently read an amazing book, Hillbilly Elegy. What’s amazing about that book to me is it’s an economic look at what happens to the Midwest – I don’t even know if Midwest is right; sort of like the Tennessee Valley and the Ozarks, that whole area – basically in the last century. And what it’s meant for the economic outcomes for several generations of people, and how they migrated for work and how populations have shifted, what that’s meant for housing… There’s a bunch of real estate meta. What it meant for the author, because it’s a memoir… So it’s an awesome book. It’s not a lot about real estate investing, honestly, but it is an amazing book.

I think the best book on technology that I’ve read in the last five years is The Innovators by Walter Isaacson. It’s a 200-hundred-year history of the computer and electronics industry starting in 1800. Isaacson is the guy who wrote the Jobs biography, the Einstein biography, the Franklin biography, and they’re amazing.

Joe Fairless: What’s the best ever way you like to give back to the community?

Dave Friedman: I was the president of my neighborhood association for a while, and I’ve found that incredibly rewarding, because it wasn’t just the community at large, it was literally my neighbors within a few blocks radius. It was great to be volunteering and helping out, but it was also great to build those relationships.

Joe Fairless: How can the best ever listeners learn more about what you’ve got going on?

Dave Friedman: Check us out at KnoxFinancial.com.

Joe Fairless: And we will include that in the show notes. Dave, I enjoyed our conversation, learning about Knox Financial, learning about your business model, how you arrived at that, thought process, what the value exchange is, talking a little bit about the services within it, and then also taking a step back – mindset, as well as the ventures that you had prior to this and how that’s led to some certain enhancements in how you approached your next venture.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Dave Friedman: Thanks, I really enjoyed it.

JF1923: From 0 to 82 Units In Just 3 Years with Jens Nielsen

Jens is focusing on building his rental portfolio via value add deals. While he’s building his portfolio, he’s also still working full time. There are a lot of people in the same situation – wanting to or currently building a portfolio while working full time, with hopes of being a real estate investor full time in the long run. Hear how he’s going about scaling his business, the deals he’s finding, how he’s finding them, how his business is structured with his partners, and a couple of deal specific case studies. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“We don’t have any investors, we’re just a group of people that are long term buy and hold investors” – Jens Nielsen

 

Jens Nielsen Real Estate Background:

  • Denmark native, been in the US since 1996, investing in multi family real estate since 2016
  • Owns 82 units in New Mexico and Colorado, all value add deals
  • Based in Durango, Colorado
  • Say hi to him at https://opendoorscapital.com/
  • Best Ever Book: Begin With Why

 


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jens Nielsen. How are you doing, Jens?

Jens Nielsen: I’m doing quite well. How are you, Joe?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Jens – he is a Denmark native, been in the U.S. since 1996, investing in multifamily since 2016, owns 82 units in New Mexico and Colorado. They’re all value-add deals. Based in Durango, Colorado. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jens Nielsen: Absolutely. I should just mention – I grew up in Denmark, been here since 1996, and I actually moved to London in the early ’90s, and then to the East Coast of the United States in Maryland, and then on to the West Coast through Albuquerque, New Mexico, and now Colorado.

I followed the traditional path – go to school, get a good education, get a job, saving in a 401K… That’s what I was supposed to do, until I got the wake-up call a few years ago and realized that probably was not the path for sustainable wealth and income… So I kind of had a mindset shift a few years ago.

Joe Fairless: What takes your focus now? What are you doing?

Jens Nielsen: I still have a W-2 job, but my focus really is a couple of things… When I had that realization a few years ago, I started out buying some smaller properties just because “Hey, let me put my own money at risk and see how this goes.” So I did that, and that’s worked out pretty well. I connected with some local investors, and then they told me to reach out to this broker, and he helped me a lot; an older gentleman who wants to help newer investors. He helped me a lot with sourcing deals, and rehabbing, and everything.

So I did that, I started with those smaller properties, and then since that it has kind of moved into some joint ventures, bought some larger properties with some friends and family, and then actually doing some syndications in the last year. It’s kind of progressing… Once you get that real estate bug, you can’t really stop, right?

Joe Fairless: Yeah, that is very true. Let’s talk about the 82 units you have in New Mexico and Colorado. What’s the largest deal of those 82?

Jens Nielsen: 38 units. That’s the one we bought about a year and a half ago.

Joe Fairless: Let’s talk about that one. Where was it, purchase price, business plan, all that stuff.

Jens Nielsen: So that’s in Albuquerque, NM. It’s a ’70s vintage, classy property, probably in a B- area. We bought that for 1.2 million dollars. “We” – that’s my broker/property manager, and a couple of friends, a group of five of us that brought capital to the deal.

Joe Fairless: So you, the broker plus three friends?

Jens Nielsen: Yeah.

Joe Fairless: Okay, got it.

Jens Nielsen: That thing was listed at 1.55, and we ended up getting it for 1.2 million. It was one of these situations where the owner was out of state, they hadn’t really put any money back into the deal, so it was just deteriorating. Plumbing issues, and delinquencies, and just kind of falling apart. We were able to get it at a reasonable price, but also with the realization it needed a lot of work. I think we only got a 50% loan-to-cost at that time, and then we brought another 600k to the deal. Then we got a construction loan from the bank, so we’ve been using that  600k to really fix up the property… Which is new roofs, because for some reason every roof in New Mexico is flat, which is a pain. They always tend to leak.

Joe Fairless: They have some mansard roof, too?

Jens Nielsen: What kind?

Joe Fairless: Mansard, where the shingles are on the front of the building, not just on the top… It looks hideous.

Jens Nielsen: No, it’s typically parapets, where you have built-up stucco, and then you have the roof a foot below that, with canales (as they call them) where the water runs off… But back in the day they all tended to be flat, and it’s hard to have any slope on this; a lot of issues with standing water, and so forth. We ended up putting a whole new membrane roof on there, and replaced all the windows, did new stucco, new — it’s a two-story, so new exterior decking, new parking lot… And then we’ve just been tearing up the units and pretty much gutting them to the studs. So a lot of work, a slow process… Not your typical slight value-add, where you’re trying to invest in a couple years. This is a longer-term hold, for sure.

Joe Fairless: Yeah, let’s talk about that. How do you make the decision to gut the units to the studs, versus just spruce it up some?

Jens Nielsen: Just because the cabinets were in poor shape, we had some plumbing issues, so we had to go into the walls to fix the plumbing… Flowing was — sub-floor in the upper stories were not very solid, so we had to put some backer down, and then put those vinyl plank flooring in… We didn’t tear the drywall out on every wall; if it was in good shape, we left that… But there were a lot of places we were in the studs, especially for the plumbing issues.

The decision was really —  we don’t have any investors, we were just a group of people that are long-term buying and hold… So if it takes us a few years to start seeing a return, that’s totally fine, because we know the long-term value is there, and we just wanna keep it as a long-term cashflow type thing.

Joe Fairless: How do you define long-term?

Jens Nielsen: 10+ years.

Joe Fairless: Is that how the rest of the four are defining it as well?

Jens Nielsen: Yeah, that was how we entered into it. It was basically “Hey, this is gonna be ten years at least in order for it to be worthwhile putting all that money into it.”

Joe Fairless: Okay. And how much money do you have in the deal?

Jens Nielsen: Personally, or…?

Joe Fairless: Yeah, personally.

Jens Nielsen: About 100k.

Joe Fairless: Okay. And does everyone have about 100k?

Jens Nielsen: It varies a little bit. Some have slightly less, some have slightly more… But I own about 20% of that deal personally.

Joe Fairless: And how did you all determine who brings what amount of money?

Jens Nielsen: We just sat down and negotiated. “Here’s what we need to raise”, and what people were interested in bringing to the deal. It was kind of an organic discussion; we just said “Hey, this is what I can bring, this is what I can bring”, and we just came up with the money. We needed the 600k, and that’s how we got to it.

Joe Fairless: Any challenges in putting together a partnership with five people that you’ve come across?

Jens Nielsen: I think some people want to be more active and have a more hands-on — but really, the rehab is being run by a property manager; he has a construction company… And he calls the shots. At times we’re questioning some of the decisions, like “Hey, why did you do this? What was the rationale behind it?” [unintelligible 00:07:35.01] and then try to understand that. I think that’s the major thing.

Joe Fairless: And what are the roles of everyone on the project? Because you talked about the broker/ property manager; that’s clear. What about you and the other three?

Jens Nielsen: I’m actually heading there this afternoon. I do the site visits, and see how the rehab is going. We have some of the other guys who look over the monthly expenses and summarize those, and tax returns, and other things. Some are more active than others for sure, but everybody takes an active role in what’s going on.

Joe Fairless: So that is the largest unit size, 38 units. What’s the next-largest?

Jens Nielsen: That’s a 16-unit that we’ve just closed on in May, and “we” are now in this case my wife and myself. We just bought that outright. I mean, not outright; we had the down payment and got a loan on it. It was interesting, because that was one that I found through direct mail, I sent out some letters?

Joe Fairless: Really?!

Jens Nielsen: Yeah.

Joe Fairless: Good for you.

Jens Nielsen: Everybody talks about it, but this actually worked out. It was a gentleman that had owned it for about ten years, and he was just — typical mom and pop type of managing it and dealing with his tenants… We negotiated for like eight months before we finally had enough relationship that he was willing to sell it to me, I guess… So that was interesting.

Joe Fairless: Oh, man… Let’s talk about this. Direct mail – where did you buy the list?

Jens Nielsen: Well, people are gonna think that this is crazy… I actually created my own list, me and my wife, a  few years ago. We just sat down and started looking at Apartments.com and just started looking “Where are the apartment buildings? The area we liked? What are the sizes?” and we started creating our own list from scratch, essentially. We figured out who the owners were… This was time-consuming, but also, New Mexico is a non-disclosure state, so it’s not super-easy to find that information… So we  just did it the hard way, created the list and started writing Mail Merge letters, and handwrote the envelopes, and that was the process.

Joe Fairless: So how did you find the information if it’s a non-disclosure state?

Jens Nielsen: Well, we could see somebody’s rental site, we could see what the unit size was, and then we could go to the assessor’s office and figure out who the owner was, and if it was an LLC we could go to the state’s business registration to figure that out and try to google a bunch of stuff. We didn’t have any information about when it was last sold, or what it was sold for… So I’m sure we sent letters to people who had just sold it, or had owned it for a short period of time. It wasn’t a lot of letters; probably 200-300 at a few different intervals.

Joe Fairless: What was your interval?

Jens Nielsen: Every 2-3 months we would target them.

Joe Fairless: Okay, every 2-3 months. How many intervals did you do before you got your first deal?

Jens Nielsen: This gentleman said “I’ve had your letter for a while, and I wasn’t ready to sell, but now I’m ready.” So I don’t know if we only sent one or two to him, but he didn’t get a whole bunch. [unintelligible 00:10:21.23]

Joe Fairless: That’s great.

Jens Nielsen: Yeah, absolutely.

Joe Fairless: So how many intervals have you done to date?

Jens Nielsen: I stopped again when I got more involved in syndications, because I realized — a 16-unit is great if you’re one or two people buying it, but you can’t syndicate it, and I kind of didn’t have a whole lot of capital left, so I stopped doing it… But I may start it up again if I wanna buy some smaller properties again, which is not really on my radar at this point.

Joe Fairless: Okay. So about how many intervals have you done then?

Jens Nielsen: Probably 3-4. It was about a year where we were sending them out every 2-3 months. It wasn’t a ton. I have a few other people that reached out to me, that I still have kind of in my backpocket, that maybe at some point I can reach back out to them and see if they’re willing to sell.

Joe Fairless: What did the letter say?

Jens Nielsen: It said something like “Dear Mr. John, we saw your property at 123 Main Street. We’re real estate investors in your state and we’re looking to buy your property if you’re interested in selling” and then a picture of me and my wife, and an email, and a phone number… So just very simple, clearly something that was hand-made, if you will… So it didn’t look like the postcards you may get dozens and dozens of.

Joe Fairless: Right. Do you have any children?

Jens Nielsen: No children.

Joe Fairless: Okay, and what type of attire were you and your wife wearing in the picture?

Jens Nielsen: I think it was a picture of us on vacation somewhere, very casual.

Joe Fairless: Okay. And did you address the person by name?

Jens Nielsen: Yeah, “Dear John”, and then the address of the property.

Joe Fairless: Okay. Eight months of negotiation… How did the first call go?

Jens Nielsen: He called me and said “Hey, I’ve had your letter for a while. I wasn’t ready to sell, but now I’m looking to sell…” And I think I made some mistakes there. I’m an analytical guy, so I wanted to go straight to “Hey, what do you want for your property? Let’s see if we can make a deal.”

Joe Fairless: Right. [laughs]

Jens Nielsen: So it was a mistake, and I’ve learned that since… Because I said “Well, that sounds interesting. Send me some info.” He shared his P&L and stuff like that. It was handwritten by him, but it was still pretty accurate, and I could see “Well, that actually kind of makes sense.” I went down there and he showed me the property… And then I think I probably offended him by trying to lowball him a little bit.

Joe Fairless: You couldn’t even get that out. You felt embarrassed almost. You’re like “I was trying to, um… Well, I lowballed him.” [laughs]

Jens Nielsen: Because I realized it needed some work. It really was a little bit tired, and stuff…

Joe Fairless: Did he have a number initially?

Jens Nielsen: He wanted somewhere close to $800,000 for it.

Joe Fairless: That’s what he told you initially?

Jens Nielsen: He said he had gotten a broker’s opinion on it, which was $780,000 or $800,000 or something.

Joe Fairless: Okay, and what was your offer?

Jens Nielsen: I think it was in the low 700k, because–

Joe Fairless: Your first one?

Jens Nielsen: Yeah.

Joe Fairless: That’s not an embarrassing low offer…

Jens Nielsen: People get very emotionally attached to something, because I know he paid — when I saw his loan pay-off, he had paid over 800k for it in 2008, or something like that. I said “Okay, well you’ve also had your 10+ years of rent income, and payoff of your mortgage, and everything else…” He said to me “Well, I guess we have nothing else to talk about…” [laughter]

Joe Fairless: How do you respond to that?

Jens Nielsen: I said, “Well, I’m sorry”, and then I just left him alone for  a bit, and then I was like “Okay, let me maybe be more realistic about my numbers.” I came back and I said “Okay, I’m thinking around 740k, I can probably do…” Because I had talked to the bank and they were willing to roll some rehab costs into the loan, and so forth. That’s what we ended up buying it for, it was 740k.

Joe Fairless: How long did it take for you to follow up with him on your revised offer?

Jens Nielsen: It was probably a month, or something. I thought the deal was dead, and– I just couldn’t get it out of my head, because I liked the property. So it was a while, I can’t remember exactly… But he cooled off, I cooled off, and we were back on speaking terms, you know… [laughs]

Joe Fairless: Was that a phone call, or was that an email, where you had the revised offer?

Jens Nielsen: I think it was an email and then following up with a phone call. Then he started kind of like “Yeah, I think that works out…” And I went back and I took my property manager and we toured the units… Because we wanted to make sure we weren’t overpaying for it in terms of the amount of work it needed. It was kind of a conversation that — I continued to develop that relationship I should have developed earlier, I guess.

Joe Fairless: So eight months timeframe… How long once you had it under contract did it take to close?

Jens Nielsen: Well, that actually took a while too, because he’s an attorney and he was off traveling, doing some work out of state… So from the LOI to actually closing was probably about four months, or five months, or something… So just because he was dragging his feet, and then the bank was kind of taking it slowly. But it actually worked out, because interest rates were kind of high late last year, so the interest rate actually ended up dropping by the time we closed on it in May, so that helped a lot.

Joe Fairless: Oh, wonderful.

Jens Nielsen: Yeah, right?!

Joe Fairless: Yeah. And with that 16-unit — was that when you made the decision,  “Okay, I don’t have much capital left to invest, so now I want to turn my focus to syndication”?

Jens Nielsen: Yeah, I think I have a kind of two-pronged approach. I like to have some properties that are just mine/ours; we don’t have to answer to our investors, and we can just keep them to give us some cashflow that will just continue to come in. I like that. And then syndications, investing – I’ve been investing in that passively for years, and some people reached out to me and said “Hey, we’ve seen the work you’ve done. Are you interested in being on the GP on one of our deals?” That was super-interesting, going from 38 to 205 units; it was pretty exciting, and it’s a whole different ball game.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Jens Nielsen: I think it’s basically creating — if you’re trying to work with individual investors, to create a relationship with them before you try to get to the bottom line.

Joe Fairless: Yeah, that was something that came true on that 16-unit, right?

Jens Nielsen: Exactly. I think if you’re buying a very large property, it may not make that much of a difference, because it’s strictly a business transaction, but if you’re trying to buy a smaller property, creating a relationship with the seller is hugely important, if it’s a direct to seller type thing.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jens Nielsen: Absolutely.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:16:38.12] to [00:17:36.17]

Joe Fairless: Best ever book you’ve recently read?

Jens Nielsen: Start With Why, Simon Sinek.

Joe Fairless: What’s the best ever deal you’ve done?

Jens Nielsen: I think the 16-unit is turning out to be a really good deal.

Joe Fairless: In what way?

Jens Nielsen: We’re actually 10% above our projected rents in the units we’ve rehabbed already, and we’ve gotten it painted and everything else, and it just looks really awesome. And it’s in a great area, so I think it’s gonna be a long-term, great cashflowing asset.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about already?

Jens Nielsen: I think initially I was buying properties in areas that weren’t that great, because “Oh, they’re cheap, so what could possibly go wrong?” Well, in reality, just because  it’s inexpensive and it looks good on paper doesn’t necessarily mean it’s gonna make money in the long-term.

Joe Fairless: Best ever way you like to give back to the community?

Jens Nielsen: I do some coaching. I have some students that I help coach, new investors, and stuff like that. That’s a great way to share some of my knowledge and help them grow.

Joe Fairless: And the best way the Best Ever listeners can get in touch with you and learn more about what you’re doing?

Jens Nielsen: My email is jens@opendoorscapital.com. I like to offer people — if they wanna schedule a call, go to my website, OpenDoorsCapital.com/call and schedule a call with me if you wanna chat about real estate.

Joe Fairless: Jens, thank you so much for being on the show and talking about your advice. The 16-unit – holy cow, I love hearing about the direct mail approach, and how that worked out for you, and the specifics for how you did direct mail… So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Jens Nielsen: Okay. Thanks, Joe. I appreciate your time.

 

JF1916: How This Investor Grew His Portfolio to over 125,000 Units with Jeff Klotz

Jeff is not only an investor, but also a broker who helps others grow their own portfolio. He struggled in the beginning to grow his business, so he focused on that until he was having some success. Now Jeff shares his knowledge with his clients and with us on today’s episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you buy right and you have the right business plan and business strategy, you should be able to survive another 2008 crisis” – Jeff Klotz”

 

Jeff Klotz Real Estate Background:

  • Serial entrepreneur, real estate investor and developer
  • Klotz’s investments have included 125,000 apartment units, 42 developments, and numerous other real estate projects
  • Founder of over 100 companies
  • Based in Jacksonville, FL
  • Say hi to him at http://theklotzcompanies.com/
  • Best Ever Book: 10X Rule

 


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jeff Klotz. How are you doing, Jeff?

Jeff Klotz: I’m doing great.

Joe Fairless: Well, I’m glad to hear that, and looking forward to our talk and our conversation. A little bit about Jeff – he’s a serial entrepreneur real estate investor and developer. Klotz investments have included 125,000 apartment units, 42 developments and a bunch of other real estate projects. He’s the founder of over 100 companies; based in Jacksonville, Florida. With that being said, Jeff, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jeff Klotz: Okay. Well, my background is interesting – I started out in real estate, literally straight out of high school. I actually bought my first investment property while still in high school. I fell in love with the multifamily business, and I guess the rest is history. For 24 years we’ve been intimately focused on the multifamily industry, and have built a platform called the Klotz Group, which is basically a group of wholly-owned subsidiaries that provide pretty much everything from concept through completion, along the way of both a multifamily value-add strategy, renovation, rehab, modernization, to a ground-up development strategy.

Like you said, that body of work over the last 24 years has been a little over 125,000 units of multifamily throughout the South-East, and just over 40 projects completely full-circle… And then of course the platform itself provides a whole series of services, including brokerage, property management, mortgage banking, construction, development, investment banking, and a handful of other (what we call) ancillary service providers that have probably racked up transaction volume into the billions.

So it’s been an interesting track record and an interesting 24-year stretch in the industry, and I still love it today as much as I loved it when I joined.

Joe Fairless: So you own companies like a mortgage brokerage within your portfolio? Did I hear that right?

Jeff Klotz: That is correct, yes. We are in the mortgage banking business, which is predominantly a commercial mortgage brokerage; I’d say 90% of that body of work is strictly multifamily.

Joe Fairless: So what made you want to be vertically integrated, versus just being focused on development?

Jeff Klotz: Well, for me, early stage I really struggled to grow. As a teenage entrepreneur, my challenge for business and business growth was probably the same as almost everyone else starting out – access to capital, capital constraints. I think experts will tell you the number one reason why most small businesses fail is a lack of capital… So I certainly battled that. As a kid, it’s hard to access capital. I didn’t grow up rich, I didn’t know any rich folks. I was kind of knocking on doors the hard way.

Early on, I really wanted to perfect my portfolio, and I needed to grow my business, and the best way to grow the business was to produce what I’ll call “ancillary revenue” from all these different services. But I started to become more successful, and then later on I began to really understand capital markets, and started to really solve my access to capital problems, it was almost the exact opposite.

We perfected the platform and really broadened the reach and the scope of all the different platform services to really serve our own needs, because that was the best way we found to control the results and to deliver superior results and returns by really controlling your own destiny. We learned along the way that it was next to impossible to rely on third-parties and get the same type of results if you were relying on yourself.

So long story short, I probably don’t desire to be in all these different businesses, but to some extent it’s a necessary evil.

Joe Fairless: Yeah, I get that. So how many companies do you actively oversee right now?

Jeff Klotz: The Klotz Group has as many as 12 subsidiaries that are in the real estate business. I’ve got some other investments, and we’ve got a family office that focuses on some philanthropic efforts and things like that, but probably for the focus of this call there’s 12 wholly-owned subsidiaries under the Klotz Group umbrella that provide all different types of services, pretty much a soup to nuts or an A-to-Z, or a concept through completion strategy in what we’ll call multifamily real estate investment.

Joe Fairless: And the purpose of those businesses is twofold, it sounds like. One is to help you and your team do your deals, but then also you might as well have other customers and clients outside of your company if you’re gonna have a business anyway. Is that the thought process?

Jeff Klotz: That’s exactly correct. The strategy is really a 50/50 strategy. I think that a healthy business is one where you’ve got diversification. About half of our business comes from what we call captive work, which is our own investments, and then the other half comes from the third-party marketplace. So that does a lot for both the industry and the organization. It allows us to have a lot of different touchpoints to the entire industry, and it really helps us grow the business. We meet a lot of really great people, and can help a lot of really great people…

You kind of hinged on the mortgage banking business – a lot of our clients come to us looking for debt, and for whatever reason they’re staking 75% leverage and we might only be able to get them 70%, because that’s what the deal qualifies for, so they might be 5% short on a deal, and we end up stepping in and becoming their partner, owning a piece of the deal and helping them get it across the finish line… And then of course, by that time they’ve figured out they can leverage a lot of our other services and really add value to the deal.

Joe Fairless: What’s the most and what’s the least profitable of those 12?

Jeff Klotz: Oh, boy… I’d say property management is probably the least profitable… And included in those 12 is the investment subsidiary, which is by far — the gain on sale, or the gain on real estate investments is by far the most profitable.

Joe Fairless: Okay.

Jeff Klotz: Many of those businesses are loss-leaders. They really contribute to the overall investment result. I might make X in the construction business, but I’m creating 10x at the property level because of my efforts on the construction side.

Joe Fairless: Yeah, it makes sense. And I imagine over the years you’ve created a business as a result of [unintelligible 00:07:15.09] loss-leader, but even — it wasn’t something that you wanted to be in the  business anymore. So you created one, then shut it down because you thought you needed it, or thought you wanted to be in it, but you didn’t… What’s an example of that? If there is an example of that.

Jeff Klotz: Okay. Well, there’s a couple of times… In 2001 we sold the construction business. We were able to stay out of that for a couple of years. In 2006, if you remember, the market was on fire. You couldn’t help but trip and fall and make money in the real estate business… So we thought we didn’t really need to be in the property management business, so I sold the property management company, only to really be forced back into the business a couple years later by my partners and investors, who said “Look, Jeff, this isn’t working. We’re not seeing the same results or returns from the properties and from the projects like we were when you were running it, so… Get back in the business”, basically. He who has to go makes the rules, right?

Joe Fairless: And with where you see your group of companies headed, do you see a new business coming up that you are gonna be creating, or maybe putting more emphasis in a current area that you have?

Jeff Klotz: Well, our business – we really hit a reset button back in 2015 after building a portfolio of (we’ll call it) C-class housing. We were one of the most active operators and groups focused on (what we’ll call) middle market C-class housing throughout the South-East. We’d built a portfolio close to 40,000 units, and that was the goal; so we accomplished our goal, but we really couldn’t celebrate the accomplishment because it was just a really tough struggle. That’s a tough business to scale, and it’s a really tough portfolio to operate… So we really kind of hit the reset button, spent the next couple years exiting that business, and really focused on a cleaner, more quality body of work. So for us it was testing and proving the concept in a much newer, higher-quality asset class [unintelligible 00:09:00.06] create the same type of results and returns.

Over the last couple of years we spent proving that concept out, so today the real focus is just growing that strategy. So we find ourselves doing a lot more luxury ground-up development today. It’s a different type of development than we’ve done previously. Previously we were just looking to get something built, and it was more workforce housing, and what have you. Today we’re able to develop some of what I’ll call best in class in several different markets.

The strategy today is not necessarily get into new business, but it’s just continue to grow the business both vertically and horizontally, so that we can once again — we were once upon a time the largest residential landlord in about 13-15 cities throughout the South-East, and that’s our goal, to do that again, just with a little different quality of assets.

Joe Fairless: And I’m sure you get this question a lot, but I’m gonna ask it anyway… When a correction takes place, what’s your thought about being in ground-up development luxury?

Jeff Klotz: Well, you’ve probably heard this, and I’m sure every one of your listeners have heard that – you make your money on the buy. That can mean a lot of different things, but it’s kind of an old cliché in real estate. It took me a long time to even really figure out what that meant… But being well-protected by your bases on the way in, so that you have what I’ll call “a lot of screw-up room” or a lot of mistake room, is really one of the founding principles that we operate by. So if you buy right and you have the right business plan and the right business strategy, you should be able to withstand another catastrophic event like in 2008.

Joe Fairless: What’s a quantifiable example of buying right? How do you stress-test that?

Jeff Klotz: Well, I think today this concept of value-add – that’s probably one of the bigger buzzwords in the multifamily industry, and a lot of times it’s a lot more complex than just buying a piece of real estate and raising rents. You’ve really gotta understand the asset, the asset class, the market… And I think you’ve gotta buy right. You’ve gotta buy at — I’ll still call it a discount. I’ll tell you what is not lining up through an internationally-marketed brokerage effort and participating in first, second, third round, best and final, and winning an option – the concept of who pays the most wins, I have always had a hard time understanding that. So almost all of the deals that we do are privately negotiated, they’re off-market, they’re situational acquisitions and they’ve got a good story.

Even in today’s very frothy real estate market, you look at the last 12 acquisitions that we’ve made  – they’ve all been what I consider below market value. I think there’s good deals out there, you’ve just gotta really know where to find them and where to look. Our platform, which has many touchpoints to the industry, helps to contribute to putting us at the right place, at the right time, and being able to have access to those deals that otherwise might not be available to us.

Joe Fairless: And just maybe one or two more follow-up questions on this, and then I’d love to learn more about the 40,000 units and the scaling challenges with the C-class housing. A lot of people will say when a correction takes place, class A is gonna get hit first, because they’re the ones who are gonna lose their jobs, so those residents are gonna then go down to class B… So you don’t wanna be in class A. And then the people will also say that ground-up development is riskier because there’s no income that’s being generated until you get out of the construction loan and you’re completely leased up in your long-term financing. What are your thoughts on those two points?

Jeff Klotz: Well, I agree with those two points, to some extent. In fact, that was the thesis of some of our early real estate funds, and that was the pitch. And again, we were focused on C-class… And I think, for the most part, that’s  a real concern, right? But we always like to shoot for a much shorter strategy. A long-term strategy – you have a greater chance of getting stuck holding the ball, or whenever the music stops, without a seat… So I think the merits of a project are strong. Again, if you buy or build the project plan with a lot of screw-up room, or mistake room, or whatever you wanna call it, it should pass the stress test for a softening in the market, or what have you.

The bottom line is people will always need a place to eat and sleep and call home… But there’s always gonna be a cyclical nature to our business and almost every other business, so I think you have to be afraid of that. You have to plan for that. When we underwrite a deal, when we go to acquire a deal, when we go to build a deal, there’s always a sense of urgency, and we always plan for the worst, but work for the best. So it’s always a concern of ours, which is one of the reasons why we have a short-term strategy.

We were a large multifamily owner going into 2008 in the recession/downturn/crash, and our strategy then was to really just protect the asset; if we were the best operator, with the best service and the best performance in the market, then we were well-protected… So we were fortunate enough to survive the downturn without losing any assets. In fact, we were quickly able to start a growth process.

I think it’s just a quality operator, with a quality project, in a quality location, with a quality credit risk. So the stronger your residents are, the more protected they are from a recession, and things like that. So I think there’s a whole series of merits that you really have to pay close attention to.

Joe Fairless: Let’s talk about the 40,000 units. What were some specific challenges that you had in scaling and executing on that level of collection of units, with that type of classification of property and resident base?

Jeff Klotz: Well, first of all it wasn’t so much the class of asset, but  it was. And what I mean by that is to succeed at C-class multifamily operations – it’s a lot more staff, or manpower, or people-intense. You’ve really gotta check the boxes and  dot the i’s and cross the t’s. You need a lot more people to succeed in that effort. We built a team of over 1,000 employees, and we went from 100 to over 1,000 really quick. So just that type of scale was really difficult. We were consistently chasing the growth.

And then to top it all off, the business strategy that we had – we were buying and selling quite quickly… For about five years in a row we were buying over 8,000 units/year on average. So to have that type of portfolio churn, you’re always moving. It’s hard to build a team, it’s hard to build consistency… And then of course, the assets themselves – yes, they’re challenging. They were in rougher neighborhoods… So it’s harder to find good people, it requires more training, it’s harder to find good residents, it requires a lot better screening and tenant evaluation or qualification. Even the municipalities started to neglect those types of neighborhoods, where there’s lower income. So it’s a tougher, longer, harder grind or battle or fight, and you almost had to fight for every bit of success, every good resident, and what have you. So all in all, the entire effort is more difficult.

On a personal level, I really underestimated or probably was naive in how difficult it really is to build and scale a business. I’ve found building a real estate portfolio easy. In fact, growing is easy. But actually building a business around all that growth, and building the right type of team, and the right types of policies and procedures and structure – that was probably the most challenging part of it all.

Joe Fairless: Thank you for that. I appreciate that insight. That’s very, very helpful. And one thing that I’d love to learn more about is if you were to have a 300-unit class C apartment building, in a class C area, and a 300-unit new development – picture whatever you’re building now, that 300 units – how many people would it take to staff each of those?

Jeff Klotz: There’s an old rule of thumb in the industry – 2 per 100. So in theory you’d need 6 people. Three in the office, and three in the field, on the maintenance team. I think that in a C-class operating property… Was the A-class a new build, new construction?

Joe Fairless: Yeah, it’s one you’ve just completed. We’ll just say one you just completed.

Jeff Klotz: I think on the property itself there’s probably only a slight difference in the amount of manpower needed. But we’ll call it the corporate oversight, or the regional/district oversight – you definitely need a whole heck of a lot more oversight on the C-class asset than you do the A-class asset.

Joe Fairless: Got it. Taking a giant step back, based on your experience in the industry – you’ve bought your first place while you were in high school; that is pretty close to a record, I think, from the 1,800 guests I’ve interviewed… What is your best real estate investing advice ever?

Jeff Klotz: Oh, boy… That’s a hard one. I think the real estate business is not a get-rich-quick plan/strategy. All these late-night advertisements for “You too can be rich like me” – it doesn’t work that way. I’ve been doing this for 24 years, and it took a long time to create success. It is a get-rich-slow business, by the way. It’s a lot of hard work, it’s a long late-night grind…It’s difficult, and it’s tough to think that yo can create success as a hobby or a part-time business. It’s a lot like the gym – there’s no shortcuts. Nothing takes the place of hard work and effort if you wanna get in shape. You can try all the latest, fad this or fad that, but you’ve gotta do the work.

I see way too many people enter this business thinking that they can do it part-time, or in-between a day job, or after a day job… And I think if you’re gonna be a passive investor – sure, that works. There’s a whole other topic of how do you make good passive investments; probably the least successful deals I’ve ever done were called passive investments… But  I think just preparing somebody for the time it takes to learn the business and what have you – it sounds pretty basic, but that’s where I see most people making a mistake; it’s the inability to really truly commit to the time, effort, energy and hard work it takes to be successful in this business.

Joe Fairless: And over the period of time that you’ve done it.

Jeff Klotz: Right.

Joe Fairless: Yeah, it’s a shiny object for some people, and then they find something else… Whereas put in decades – then you can see some results if you do things consistently that are the right thing, right?

Jeff Klotz: Right. And I think whether we’re talking real estate or we’re talking anything else in business, I think that part of our culture today is that of things happening quickly, and there’s almost a sense of lack of patience, and I can go on and on… But I just really think that you’ve gotta really be realistic with the goals, and the time it takes, and of course the effort it takes. There’s an old saying, “If it were easy, everybody would be doing it”, right?

Joe Fairless: Yup. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jeff Klotz: I’ll give it my best.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:19:15.10] to [00:20:13.09]

Joe Fairless: Okay, what’s the best ever book you’ve recently read?

Jeff Klotz: Oh, boy… I’m not a big book reader. There’s an interesting story behind it… But I’ve just recently read some of Grant Cardone’s stuff, and I was amazingly shocked with just how relatable it was, and just how great the content was. That was kind of an interesting experience for me.

Joe Fairless: What’s a deal you’ve lost the most money on?

Jeff Klotz: That would have been a passive investment. Once upon a time, prior to really committing to grow the entire platform vertically and horizontally, I thought I could leverage some other operators and other sponsors. I wasn’t in a good pick of a couple different guys. I had no control, and so therefore the outcomes weren’t that good.

Joe Fairless: And knowing what you know now, if you were to passively invest and you were to interview them again about the opportunity, what are some questions you would ask now that you didn’t ask before?

Jeff Klotz: Well, I’d really wanna understand the track record, their true experience in actually controlling outcomes… There’s a lot of sponsors out there that have worked for other folks, or have been alongside other sponsors, or have been on teams with sponsors, but I  really wanna see someone who has a solid track record of doing it themselves, signing on the debt, having real skin in the game, and really a solid commitment to the business.

I think nowadays there’s a lot of folks that think it looks a lot easier than it really is, so I think that might be the tone of what I’m saying here… I’d spent a lot more time getting to know the individual and the organization and understanding what their theories and philosophies and their ideas are for how they operate real estate.

Joe Fairless: What’s the best ever deal you’ve done?

Jeff Klotz: Well, the next deal, right? In this business you’re always as good as your last deal, so we continue to get better and better. I think that really my next deal will be the best deal I’ve ever done.

Joe Fairless: Best ever way you like to give back to the community.

Jeff Klotz: Years ago I’ve formed a family office called the Klotz Family Office. We have three main philanthropic efforts, including a faith-based not-for-profit named Save Your Communities, which is focused on creating and preserving, as well as providing sustainable [unintelligible 00:22:10.08] affordable multifamily housing. That’s a big part of our mission. I also have a Central-American-based foundation called [unintelligible 00:22:16.17] which basically serves the needs of those living in poverty, most likely as a result of natural disaster.

Then we have a third effort, which is basically an entrepreneurial scholarship. So once a year we pick a young individual who I think might possess some real serial entrepreneurial traits, and we try to partner with them and mentor with them, and help them get themselves in the door [unintelligible 00:22:35.20]

Joe Fairless: Best ever way the listeners can learn more about what you’re doing?

Jeff Klotz: Well, they can visit our website, TheKlotzCompanies.com. They can email me at jklotz@theklotzcompanies.com.

Joe Fairless: Cool. Well, Jeff, thank you so much for being on the show, talking about your experience, talking about your approach, what your focus is now, and the challenges that you came across on the passive investment, as well as when you achieved the goal of 40,000 units… Not really having time to celebrate, and then reconfiguring the structure of your focus. And what you’re doing now, building the luxury ground-up development.

Thanks for being on the show. I really enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again soon.

Jeff Klotz: Thanks, Joe. I enjoyed it.

 

JF1910: Residential Real Estate Expert’s Take On Short Term Rentals with Brian Page

Having become a millionaire in his twenties through residential real estate investing, Brain was on the fast track to being on top of the real estate game. That changed a little when he got into building homes, it didn’t work out as well. Brian got into short term rentals to turn things back around and now has the #1 selling Airbnb training out. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Partner with the owner of a property and list their house on Airbnb” – Brian Page

 

Brian Page Real Estate Background:

  • Became a millionaire in his 20’s as a residential real estate investor, only to lose it all in the historic crash of 2008
  • Created a training called the BNB Formula, which is now the world’s best selling Airbnb training
  • Based in Charleston, SC
  • Say hi to him at https://www.bnbformula.com/
  • Best Ever Book: Outwitting The Devil

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Brian Page. How are you doing, Brian?

Brian Page: I am great. Good to be here, buddy.

Joe Fairless: Well, I’m looking forward to our conversation. A little bit about Brian – he became a millionaire in his 20’s as a residential real estate investor, lost it all in 2008, and then created a training called BNB Formula, which is now the best-selling Airbnb training out there. Based in Charleston, South Carolina. With that being said, Brian, do you wanna give the best ever listeners a little bit more about your background and your current focus?

Brian Page: Sure. I have been a real estate investor for many years; ever since I graduated from college, I started flipping homes. That was the first thing that I did. I flipped a little over 100 properties, and did some wholesale deals, and multifamily, and you name it, I’ve probably done it. That was my main business for many years, up until the big crash around ’07-’08. That was where everything kind of came to a grinding halt. I had a huge portfolio of properties that I lost and were foreclosed on, and I had to find a way to start over… So somehow I backed into this idea of using other people’s properties and putting them on Airbnb. That led me down this road, and that’s what I do in addition to getting back into real estate investing.

Joe Fairless: A couple takeaways from losing it all are what…?

Brian Page: A couple takeaways… Well, don’t over-leverage. It’s not a good idea to leverage yourself, and it’s also —

Joe Fairless: How do you quantify that?

Brian Page: Well, for me – I had very little equity in my properties. I had a big portfolio of properties, but very little equity.

Joe Fairless: About how many properties did you have?

Brian Page: At the time I had 23 units, I believe it was…

Joe Fairless: Okay.

Brian Page: But that wasn’t the problem. It wasn’t the rentals. It was — I got into speculative real estate construction, and high-end residential construction. That’s something that’s high risk. I built a multi-million dollar home on the beach in North Carolina, and I had condos being built, and all these things… And when the market turned, of course, the first part of the market that got crushed was vacation properties.

So I would say that had I just stayed with my rentals and flipping business, I probably would have been okay… But I got too big for my britches and got into development and construction. So I would say be very careful if you’re getting into speculative real estate.

Joe Fairless: Okay. Noted on that front. It’s interesting that the high-end spec homes that you described – you mentioned they were more vacation homes… And now here we are with Airbnb, and your BNB Formula. You’re still focusing on the vacation customer, but you’re taking a different approach. Do you own the properties that you’re doing the Airbnbs with?

Brian Page: I don’t, but let me go back to the first thing you said – actually, vacation rentals and Airbnb are not the same thing. It’s a very small minority of people on Airbnb that are traveling for vacation.

Joe Fairless: Okay.

Brian Page: That’s more VRBO, Vacation Rental By Owner. Airbnb is a whole other subset, and we can get into that. But what I did is I started leasing properties, and I got written permission from the owners to list them on Airbnb. I did that over and over and over again, across a whole bunch of units, and that’s how I started making a whole bunch of money with Airbnb. Now I’m back into acquiring. I am buying properties and renovating them, and turning them into Airbnbs… But my primary business and what I teach is how to use someone else’s properties to do this.

A lot of your listeners, of course, are real estate investors, a lot of people listening right now… And that’s great; if you own property, you can do this. But the vast majority of people that go through my training have no real estate background whatsoever, so I encourage them to lease.

Joe Fairless: Okay. And will you educate me a little bit more on Airbnb most of them not being vacation people?

Brian Page: Well, Airbnb is similar to the hospitality industry as a whole, if you look at hotels, motels in the hospitality industry, most people that are staying at hotels are not staying there because they’re on vacation, they’re staying just because they need a short-term place to stay. They might be traveling, they might be coming into an area, but not necessarily on vacation.

There’s all kinds of reasons people travel. They could travel because they’re relocating and they need a place to live for a few weeks, they could be going to an event in a particular city, for example in cities with big convention centers… That’s actually how Airbnb started in San Francisco – it was near a convention center. People travel to go to visit colleges, they travel because they’re on business, they’re going to a town for a couple days… There’s all kinds of reasons people travel, and it’s generally not vacations.

We’ve seen it time and time again, that people are successful doing what I teach in the most random places that are not at all tourist destinations… And I know that for a fact, because some of my students are in towns of under 10,000 people I’ve never even heard of, and they’re doing really well.

Joe Fairless: So the primary model is getting permission from landlords to use their property as an Airbnb, so you’re basically subletting it on a short-term basis, right?

Brian Page: Well, there’s two models. The first model is leasing it, where you control the property for (let’s say) 12 months, and then you relist it on Airbnb. And let’s say it’s a $1,000 rental. You’re gonna make somewhere between 2k and 3k on average on that unit. After you pay for utilities and your rent…

Joe Fairless: Per month.

Brian Page: Yeah, per month, you could be making 1k, 1,5k, or even more. Now, that’s on a cheaper 1k rental. So that’s one model. The other model is where you partner with the owner. So you approach and owner and say “Hey, you’re asking 1k for your unit. What if I get you $1,300 for your unit, or even more? I propose that you let me list it on Airbnb, and we will split everything we make, all the profit, and I’ll guarantee you your first $1,000, so at least you make that… And we’ll do month-to-month. And if you don’t like the arrangement, at any point I’ll take a hike and you can go back to running it long-term.”

I basically teach people how to pitch these owners… Because I was an owner for many years; I had a lot of properties, and I had to think about what the objections are and how to overcome those objections, and why people might wanna consider doing this versus long-term rentals.

Joe Fairless: And I’ve interviewed some people who do this on the show, and one thing I’ve found surprising, but it made sense once they explained it, is the property is actually taken care of better with short-term rentals than long-term…

Brian Page: Yes, that shocks people.

Joe Fairless: Yeah, it shocked me whenever I heard it. Then this person explained it and I was like “Yeah, it does make sense.” Can you just elaborate quickly on that point?

Brian Page: Yeah. Well, one of the biggest objections I got meeting with dozens of not over 100 owners face-to-face was “Hey, Brian, it’s a cool idea, but it’s too much wear and tear on the property. And I don’t know who’s coming and going, all these people dragging their luggage in and out of the property… I just don’t like the idea.”

So I used to play this little game with the owners; I said, “Okay, I wanna play a quick game with you… It’s called Tenants vs. Guests.” I’m gonna make a statement. I just want you to think of whether this is more likely to happen with a tenant, or with a guest.” And I said “Okay, I’m gonna speak from personal experience here (I’m talking to the owner). Somebody paints the bedroom pink without permission. Is that gonna happen with a tenant or guest? Somebody leaves their car on blocks in the driveway. Somebody’s dog digs holes all over the yard and destroys it over the course of a year. Is that gonna happen with a guest? Well, no, because my guests don’t have pets, for example. Somebody’s ex-boyfriend or ex-girlfriend shows up at 2 in the morning and kicks the front door in. Somebody puts a satellite dish on the roof.” You can go on and on and on.

So all these nightmares that happen are with tenants, and I’ve had a lot of nightmare tenants. But with guests, it’s a different mentality, it’s a different psychology. Guests don’t treat the property like it’s theirs. They don’t say “This is my property. You can’t come in here and–” They look at it like they’re a guest; they’re there for 2 nights, one night, 3 nights, and then they’re gone. So the respect level is completely different than it is with tenants. You don’t see the wear and tear. And then additionally, the cleaning company is coming in every couple days and cleaning that place to be immaculate; because if my place is not immaculate, I’m gonna get bad reviews, nobody’s gonna book the place on Airbnb…

So my owners are always really shocked when they come in in month 4 or 5 and they look at the property, and they’re like “This thing is in the best shape I’ve ever seen it. This thing is immaculate.” I’m like “Yeah, that’s what I do.” So they’re very, very happy… And then owners all the time are like “Hey dude, I’ve got some other units that are becoming vacant soon. Do you wanna take those, too?” So that’s kind of how it works.

Joe Fairless: Yeah, it makes sense after it’s explained… But I imagine 90% of those conversations that question is asked and you have to change the perception of the owner…

Brian Page: Yeah, you’ve gotta educate them, you really do. And one of the biggest objections is “What about liability? What if somebody slips and falls, and sues me, and all this stuff?” The cool thing is there’s an entire insurance industry that sprung up around short-term rentals. For very little money you can get not only a liability policy to cover you if anybody gets sued, but you can also get a policy that’s specifically designed for short-term rentals… And I like to just pay for the policy myself. So I tell the owner “Look, not only am I gonna take excellent care of your property, I’m going to insure it. And on top of that, Airbnb has a one million dollar guarantee.

So you’ve got that, you’ve got the insurance that I’m paying for, you’ve got your own insurance… So your property is insured three different ways. When was the last time a tenant offered to insure your property?” So they’re like “Okay, I get what you’re saying here.”  So I overcome all those objections with reasonable arguments.

Joe Fairless: Would you say you make more money relative to the risk when you work with a landlord, versus when you own your own property and do it?

Brian Page: Well, that all depends on how you quantify risk. Somebody that’s brand new to real estate, has never been a real estate investor, I strongly recommend they don’t rush out and buy a property and put it on Airbnb, because they don’t really know the right locations to purchase in, and all that kind of stuff. An experienced real estate investor – of course, buy property, because you’re gonna build wealth, you’re gonna build equity; why not own the property. But the ROI on the small investment you’re gonna get doing a lease is just unbelievable… Because you’re talking first month’s rent, and deposit, and maybe some furnishings if it’s not already furnished. So for $5,000 you can get a property.

It’s like, if I said to you “How many properties would you buy if they only cost 5k/piece?” Because once you get into it, the cashflow is yours. And the cashflow is way more than if you just do a  long-term tenant and you own the property. So I look at it like, hey, every 5k I pop down, or even if it’s 10k, I know that that’s gonna generate 10k, 20k, 30k/year in net cashflow. And I don’t know any other thing in real estate where you can have that kind of ROI on a very small investment.

Joe Fairless: Let’s talk about an Airbnb that’s gone wrong.

Brian Page: [laughs] Hey, actually that’s a good question. I’ve never been asked that, strangely enough… Because you do hear about horror stories. I’ve  never had a horror story. I’ve had some very messy guests… Luckily, I’m not cleaning the property, so that really just — the cleaning company is like “Oh, boy.” And they charged me a little  extra to clean those. And I’ve never really heard any real horror stories from my students, other than messy guests.

Occasionally there’s small things that are damaged, but what I tell people do to is you can charge people a deposit – so Airbnb will do a hold on their credit card. It could be $100, it could be $500, whatever amount you want. That money is not taken off the card unless you make a claim. But the cool thing is you can make a claim up to a couple weeks after they leave. So if somebody breaks something, I can make a claim, saying “Hey look, I need 50 bucks”, and Airbnb will then ask me for proof and then they’ll release that money.

So you can do a deposit to cover that kind of stuff. And like I said, you wanna be insured for these kinds of things. You wanna do the business properly.

So does it happen? Yeah, I’m sure it happens. Does it happen at the rate that tenants destroy properties? I don’t think it’s anywhere even close in that neighborhood. And you’ve gotta remember, every guest that comes through Airbnb has already uploaded their identification… So I have a license or a passport of every individual. Their credit card has already been uploaded, they’ve already paid in advance for their stay, before they even show up at your property, because that’s what Airbnb does… So all these things – it’s not like you’re just taking a stranger off the street. And not only that, you can see the reviews. So I can say no to anybody that doesn’t have good reviews on Airbnb.

There’s a lot of safeguards there, which prevents a lot of the riff-raff and people that are gonna disrespect the property  from getting in there. So I’m not saying it can’t happen, I’m just saying it’s extremely, extremely rare.

Joe Fairless: When you take a look at the political climate in certain areas being against Airbnb, especially in the North-East and on the West Coast, what do you do as an investor who relies on Airbnb for your cashflow?

Brian Page: Okay, that’s a great question, and I’ve been asked this many times… So there were a couple years there where I was teaching this where I didn’t really know what to tell people, because they would say “Well, I don’t think it’s allowed where I live” or “I don’t know what the regulations are here” or “It’s definitely not allowed.” So I didn’t know how to really handle that, because I don’t know of every city and every town… So what I decided to do was I hired a research firm, and we paid a lot of money to do a study over the course of several months… And what we did is we essentially looked at every single town and city in the U.S. over 30k in population. And just so you know, that’s 2,000 cities. And we put them in a spreadsheet and we basically categorized then. We quantified whether short-term rentals were allowed, banned or not. And what we’ve found is really interesting. We’ve found that 92% of towns and cities do allow home sharing, and 8% don’t. So 9 out of 10 places you can do this.

Now, the ones that say no are usually the bigger cities, usually cities where the hotel industry is very powerful. We’re talking San Francisco, New York, Atlanta proper… These kinds of places. But what was interesting was as I started researching these cities, I found out that I had many students in all of those cities that were doing well, that have results, and I was like “How are you guys doing this?” So I reached out, “Are you guys breaking the rules, or what are you doing?” And some of them were; some of them were doing it despite the rules… But most of them were just “Hey Brian, I just drive to the next town over, where it’s not regulated, not restricted, and that’s where I do my Airbnbs.” And I was like “Ohh, okay.”

So I started looking into this and I found people in Atlanta for example wouldn’t do Airbnbs downtown, but they would do it in any of the ten other towns that make up that metro area. So I just tell people “Look, any kind of real estate is location-specific. So if you’re gonna open a Laundromat, you can’t do that in a residential neighborhood. You’ve gotta go where it’s zoned. And you can’t live in a Laundromat, you’ve gotta go to the residential.” So it’s the same thing – you’ve gotta go where it’s allowed. And for most people, that’s within a 20-30 minute drive of where they live, or it could be in their backyard if it’s an unrestricted town. Essentially, anywhere that you live in the U.S. you could do it, especially if you’re willing to just go where the opportunity is.

Joe Fairless: What’s something that we haven’t talked about, that we should?

Brian Page: Hm. Well, one of the questions that I get a lot from people is they doubt that owners would be willing to do this… And they say “Why in the world would an owner not just do this themselves?” And it’s a good question. There’s many reasons why they wouldn’t do it themselves, but I can just tell you over all the years of doing this I’ve never had an owner that said “Hey Brian, that’s a great idea. I’m gonna go do that right now myself.” They just don’t do that… Because you’ve gotta put yourself in the shoes of the owners.

I am an owner of properties, and many people listening are probably landlords… Most of us just want the least amount of hassle possible. We wanna get our rent, and we wanna make sure our property is gonna be maintained and taken care of. That’s all we care about. We do not wanna get in, start another business, or handle guests coming and going… And it sounds like a lot of work, and it can be a lot of work if you don’t have a system. So I’ve never really had that be an issue. I’ve never had owners just say they’re gonna do it.

So it’s really just a matter of “Hey, do you wanna rent to me, or do you wanna rent to some other random long-term person?” And if I can convince them that I’m the best choice, they’re going to lease it to me. That’s a huge opportunity, to be able to set up those properties. So that’s one of the questions I get a lot…

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Brian Page: Let’s do it!

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:41.08] to [00:17:17.23]

Joe Fairless: Alright, best ever book you’ve recently read.

Brian Page: Oh, man… I’ve just finished a book yesterday, and I read a lot of books. It was amazing; it’s by Napoleon Hill… It’s not the one you’re thinking of probably top of mind; it’s called Outwitting the Devil.

Joe Fairless: Really… With Sharon?

Brian Page: Unbelievable. Sharon Lechter… It was unpublished for 70 years. I didn’t know it came out in 2011, but that book rocked my world, and I shared it with other people and they said it’s changed their lives… So I can’t recommend that strongly enough.

Joe Fairless: It’s crazy… I love Three Feet From Gold; I think Sharon participated in that one. I can’t remember… I did not like Outwitting the Devil at all; it came highly recommended to me by someone, and… I just didn’t — I just wasn’t feeling it. But so many people said they love it, so Best Ever listeners, don’t listen to me…

Brian Page: Okay, there’s parts of the book that are slow. The first 2-3 chapters – you’ve gotta burrow through those. But once you get into the meat of it, it is so good.

Joe Fairless: Huh. Well, agree to disagree on that.

Brian Page: [laughs]

Joe Fairless: What’s the Best Ever deal you’ve done?

Brian Page: Best Ever deal I’ve done… In  real estate?

Joe Fairless: Yup.

Brian Page: Okay. So in real estate I would say I bought a fourplex that was fire-damaged. It was pretty huge… It was like a 3,500 sqft. building. There was a little tiny sign out front, and I approached the guy who I saw coming out the front door… I said “Hey, how much for this thing?” and he said “Thirty grand.” I said “Holy crap.” Thirty grand for four units; big, big building. And I knew that I could get $800/unit.

I bought it for thirty grand, I ended up fixing up those units… I don’t remember what I put into it. It was quite a bit of money to fix everything up. But I ended up flipping it and I think I made 130k on that deal. So that was really one of my most profitable deals ever. I probably should have kept it… I now like to acquire and not flip/sell… But that was probably my best deal.

Joe Fairless: What’s a mistake you’ve made in real estate that we haven’t talked about already?

Brian Page: A mistake that I’ve made in real estate… Huh.

Joe Fairless: Or maybe thinking about a particular transaction, just something that “Hey, I missed this, but I won’t miss it again”, something like that.

Brian Page: Yeah. I sometimes will pull the trigger really quick on junk properties, and not do a thorough inspection… But I’ve had a couple of those times where it’s backfired on me. But not enough to make it unprofitable deal.

For example, I just got a house a few weeks ago, and I drove up — I was the first person to respond. It was a wholesaler – I’m on his email list –  he’d sent out this deal… I dropped everything I was doing, rushed over to the house… I was the first person to arrive. And when I got there, there must have been five other pick-up trucks that pulled up right after me…

So I got on the phone with the guy, couldn’t get in the house, I was peeking through the windows… I just said “Look, I’m gonna pay you exactly what you are asking on this house, but you have to promise me you’re gonna sell it to me right now. I don’t wanna get in a bidding war with all the people that are about to look at this house.” And he said “Deal.” So I just bought it.

Today I went over there and looked at it… It needs some work, but nothing too major… So I sometimes roll the dice like that and it works out, but I knew that my numbers were good enough that even if there was something majorly wrong with it, it was still gonna be a good deal.

Joe Fairless: Best ever way the Best Ever listeners can get in touch with you?

Brian Page: Sure. Well, if they wanna learn my strategies of how I’m doing this and how I’m making money with other people’s properties, and how I do Airbnb, and most importantly how to scale it to 6-7 figures a year, then you’re gonna wanna check out my free training. Just go to thefreetraining.com.

Joe Fairless: Brian, thanks so much for being on the show, talking about how to pitch owners about these opportunities to partner up or lease out their properties and make the spread above whatever you’re paying them with that partnership or that lease, as well as talking about some things to keep in mind if we are gonna do this liability insurance, then clarifying some Airbnb stuff  that perhaps they’re amiss about certain perceptions, like what I was mentioning with the short-term rentals being much cleaner and more well taken care of than longer term…

So thanks for being on the show. I hope you have a Best Ever day, and we’ll talk to you again soon.

Brian Page: Thanks, Joe. I appreciate it.

JF1903: How This Investor Scaled To 15 Units In 2.5 Years with Melchor V. Domantay

For many newer investors, the goal is to create enough real estate income to have the option to leave their job if they choose. Melchor is well on his way as he has grown his portfolio from zero to 15 units in 2.5 years. Great episode for newer investors, but we also dive into some deal specifics for a little higher level insight. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you know your why, then educating yourself become easy” – Melchor V. Domantay

 

Melchor V. Domantay Jr. Real Estate Background:

 


The Best Ever Conference is approaching quickly and you could earn your ticket for free.

Simply visit https://www.bec20.com/affiliates/ and sign up to be an affiliate to start earning 15% of every ticket you sell.

Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless:  Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Melchor Domantay. How are you doing, Melchor?

Melchor Domantay:  Hey, how are you doing, Joe? Thanks for having me.

Joe Fairless:  Well, it’s my pleasure, and looking forward to our conversation. A little bit about Melchor… He is a controller of a non-profit company in Chicago, a CPA who a couple days ago got his CPA license – congrats on that – and a real estate investor. In just 2,5 years he has built up a portfolio of 15 units. Based in Chicago, Illinois. With that being said, Melchor, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Melchor Domantay:  Yeah, thanks Joe. I was born  in the Philippines and came here when I was 17. I’m 29 now, so – regular American dream, just trying to go to college, have a full-time job… But I had a great mentor, who was actually my boss… And he told me to buy real estate. I didn’t listen to him for five years, and after that I bought my first house. It was a two-flat house-hack, and I had a great tenant. I got that first check, and then just the light bulb — you know, that investor/landlording light bulb came off. Then from there I started researching everything, educating myself, looking for the right people in my team, and then with their help I acquired 15 units in the last 2,5 years.

Joe Fairless:  Well, I don’t wanna fast-forward too much… So you went from a two-flat house-hack, and in 2,5 years you have 15 units. The two-flat house-hack – how much did you buy it for, what did you have into it as a down payment, and improvement costs?

Melchor Domantay:  The first house was really kind of like a training wheel. I bought it fully rehabbed, $280,000. I put 3,5% down… I had a good realtor at the time, and she taught me about doing a credit. I had a 3% credit, so really, to be honest, I probably brought all-in $7,500.

Joe Fairless:  What’s the 3% credit you’re referring to?

Melchor Domantay:  It’s a seller’s credit that they gave me. It was a probate, and [unintelligible 00:03:32.22] just wanted to get rid of it, so they gave the 3% credit to me… So it was a cool structure.

Joe Fairless:  Okay. And is that 3% credit something that’s typical on a transaction, or how did you go about asking for it?

Melchor Domantay:  To be honest, most of my deals I always ask for a credit. The reason I do is because it’s an advantage for a person to not bring a lot of money to the closing table. For example, easy math, $100,000, if you’re putting down 5%, that’s $5,000, plus any closing costs. And if you ask for 3% credit, which most lenders I think will allow – that’s the cap – then that’s $3,000 off that you don’t have to bring to the closing table… So I try to do that structure as much as possible.

Joe Fairless:  Okay, so that was the two-flat. That was about 2,5 years ago. And then what did you do?

Melchor Domantay:  Then after that I found a realtor from Bigger Pockets that’s also an investor, so that helps a lot.

Joe Fairless:  Who?

Melchor Domantay:  John Warren. I’m not sure if you’re familiar with him. He helped me a lot, he added a lot of value… And seven months after I bought a foreclosure property, a two-flat in the West suburbs of Chicago. But the cool thing about it is there’s people living in there, so it was livable. But it was a foreclosure. I bought that for $80,000. Great deal. Then I put about $15,000 of work, and that kind of like propelled me and gave me a lot of confidence to do more real estate… Because I think my mortgage at the time was $750, and I was bringing in about $2,100, so it was great.

Joe Fairless:  It is. That is a great ratio there… The property was a foreclosure, but it had people living in it. Were those the people that were being foreclosed on?

Melchor Domantay:  Yeah, I think they were the owner, and they just couldn’t pay the mortgage. I asked them to stay, actually… So they can just stay there, and not worrying about moving, but I think a week before I closed they left already.

Joe Fairless:  Okay. So you made it a point to say it was a good thing that people were living in it… But if they moved out before you closed, what was the benefit of them living in it?

Melchor Domantay:  For me, the benefit of living in it — usually, a foreclosure property, an REO, usually they have been left behind for a long time… So when people are living in it, the advantage of it is there are still some people who live in it, and that means it’s livable. Most foreclosure properties have a leaky roof, or leaky pipes, and grass is five feet tall… So that’s the advantage of me saying that it’s great that there’s people living in it.

Joe Fairless:  Did they trash the place on their way out?

Melchor Domantay:  No, it was a Hispanic family and they were really nice. I got to talk to them when I was under contract. I had a conversation with them and they were really nice. I asked them, “Okay, why is that you’re getting foreclosed?” and they shared with me that something happened in the family and they just couldn’t pay the mortgage.

Joe Fairless:  And you put $15,000 into it… Did you do the work yourself and pay for supplies, or did you hire contractors?

Melchor Domantay:  I tried, but I’m just not a handyman. That’s not my strength.

Joe Fairless:  Me neither, by the way.

Melchor Domantay:  I hired a lot of people. It was – keep in mind – seven months after I bought my first property, and I think I was making $35,000, so I wasn’t making a lot of money. I was still a staff accountant at the time, and… I just hustled, man. I came up with the $25,000 to close, and another $15,000 to repair it… I hustled. I was driving Lyft before work, driving Lyft after work. It’s a good thing I worked in downtown Chicago. The parking here is hard, but I was fortunate that I can park right at my office. So it was a lot of hustle, a lot of driving Lyft… Because that’s not my skill. My skill is I can drive Lyft. So if I was making $20/hour driving Lyft, and in turn I can just pay a contractor to do the same job $30/hour, I feel like that’s okay, because I don’t have to do all the learning process, being skilled about it; that’s a lot of time. So I feel the right decision for me at the time was to just drive as much Lyft as possible, and pay the contractor to do the work.

My model was always get the property as fast ready as possible, because every time the property is vacant, you’re losing money.

Joe Fairless:  Did you have a general contractor who then hired subcontractors?

Melchor Domantay:  No, there was a lot of handymen at the time. I couldn’t hire a GC because there’s a margin the GC charges. So it was a lot of building relationships with all my handymen, and a lot of it came from my realtor. So having a great realtor, who’s an investor as well – they would know a lot of other people.

Joe Fairless:  Yes. Very important, especially with construction workers, to go through references, and good thing that you had that person. Okay, so that was the next two-flat, so at this point you have four.

Melchor Domantay:  Yeah.

Joe Fairless:  What did you do after that?

Melchor Domantay:  After that – I think November of 2017 – I bought a three-flat, another foreclosure, again, around the same area.

Joe Fairless:  And you’re making $35,000/year, you said, at the time.

Melchor Domantay:  Yes, at the time. I was still focused on my full-time job too, while doing this.

Joe Fairless:  Oh, of course.

Melchor Domantay:  So I was getting promoted… At the time when I started I was staff accountant, and now I’m a controller. So as I go, the last 2,5 years, I was still focused on my full-time job, and not forgetting that I have that responsibility. And I have great mentors. My boss at my full-time job knows everything that I’m doing, so with the support from them and from all the team members I have…

Joe Fairless:  I bring that up because, relatively speaking, it could be considered a low amount of money, but you’re buying all these properties; that’s my point. So you were getting this extra income from (I imagine) keeping your living expenses pretty low, and then also doing the side hustle of driving for Lyft?

Melchor Domantay:  Yeah, the key for me to buy the next property, the three-flat, my third property, is I refinanced the foreclosure, because at the time — it was considerably low when I bought it, so I bought it right… It was [unintelligible 00:09:44.12] I think about $130,000 after, so I basically got most of my money back.

Joe Fairless:  The one you bought for $88,000?

Melchor Domantay:  Yes, correct. And then I used that, and then some of my 401K to buy the three-flat that I bought. It was $240,000. And I learned how to paint. I think painting is the only one I can do. [laughs]

Joe Fairless:  The 401K money – did you pay a penalty? I guess you can probably do self-directed, because it’s your own deal…

Melchor Domantay:  It’s a loan. You can do a loan in your 401K. Basically, you pay a minimal interest. At the time I think it was 4.5%… And [unintelligible 00:10:22.02] That’s basically what happens.

Joe Fairless:  Alright. So you bought one for 240k, that’s the three-flat, so at this point you’ve got seven. What did you do next?

Melchor Domantay:  So that one was a foreclosure as well. I knew coming in it’s gonna be worth $300,000 when I bought it. So right away when I bought it I just created $60,000.

Joe Fairless:  Which one, the three-flat?

Melchor Domantay:  The three-flat, correct.

Joe Fairless:  Okay, alright.

Melchor Domantay:  So I think the key for me growing really was buying it right in the beginning. Most of these properties — the two-flat was a little distressed, but not too distressed. But the three-flat was really distressed. We’re talking about carpets that animals feed on… So I had to do a lot of work for it, but right now I think it’s worth $360,000.

Joe Fairless:  Good for you.

Melchor Domantay:  Again, that was about 3,300 sqft. I spent mornings and evenings after driving Lyft painting, just to get it ready. It was in the middle of winter, too… But it’s a lot of hard work. I think that’s what most beginning investors lack. Because I did excited listening to your 1,700 podcasts. I’ve listened to Bigger Pockets 300 podcasts while driving Lyft… So I like to think of myself like a taxi driver; all of them have a Ph.D. in something, because I’m sure they’re listening to everything.

So it’s a lot of hard work, man… Waking up at 4:30 in the morning, not coming home till 8 PM… I think at the time I was still single. I don’t know if I can get away with that now.

Joe Fairless:  [laughs] You were waking up at 4:30 in the morning, then what would you do? Just high-level, from 4:30 to 8 PM.

Melchor Domantay:  At the time I would wake up at 4:30 in the morning, go paint for like an hour, and hour and a half, and then drive Lyft. Go to the gym, then go to work, and then again drive Lyft. Around probably 7:30 I’d stop and then come home and paint till 11. That was really my day.

Joe Fairless:  4:30 AM to 11 PM… For what period of time did you do that?

Melchor Domantay:  I was doing that for about two, two and  a half months. I got sick a couple times doing that. [laughter]

Joe Fairless:  Your immune system was not enjoying the lack of sleep, plus the paint fumes, plus everything else that you were doing.

Melchor Domantay:  Yeah…

Joe Fairless:  Well, thank you for sharing that schedule. That is important and necessary to note, so thank you for that. Real quick, let’s go faster on the next properties. You had a three-flat, then what was the next one?

Melchor Domantay:  The next one was a five-unit, so that was nice…

Joe Fairless:  Alright…

Melchor Domantay:  It was totally distressed… At this point I’ve been talking to a lot of people and building a lot of relationships, and then after that, that actual seller of the five-unit got me the last property, the three-unit, which is a seller finance.

Joe Fairless:  Okay. Let’s talk about that five-unit – how did you hear about it?

Melchor Domantay:  I found it on the MLS, put an offer that day… Just the regular MLS; all of my properties are MLS, besides the last one.

Joe Fairless:  When you say “distressed”, will you describe the circumstance of the distress?

Melchor Domantay:  Sure. Floors are broken, tuck-pointing needed, it smells like pee… The problem with that too is there were people in there. So there were people in there paying rent. The seller was just your typical old, mom-and-pop, and doesn’t wanna basically deal with it.

Joe Fairless:  How much did you purchase it for?

Melchor Domantay:  I purchased this for 280k.

Joe Fairless:  280k. So for someone who’s not in Chicago or doesn’t know the market, that sounds like a  lot of money for  a property that is distressed, and smells like pee, and people not paying rent.

Melchor Domantay:  Yeah. I think I’d pay for it probably higher right now. That was probably around 56k per unit, if I’m not mistaken. So right now in the same area it’s probably exchanging at around 75k/unit. So there was a lot of meat on the bone, however I think all this stuff that I have to do – it’s probably just gonna even out.

But a thing that I wanna point out – because especially right now that’s how I’m looking at deals – is when you acquire it… Because I look at it long-term. Let’s say that property, for example, will net income, after I pay it off, let’s say it’ll give me $30,000/year. So if I acquire four of those, regardless of if they become a dollar — let’s say just the rent stays, and everything else stays… Which if the expense goes up, more likely than not the rent will go up. But if it stays just $30,000 after I paid it off, that’s $30,000 that I can earn without me basically doing anything. Just passing it to the management company. So that’s really how I look at deals now, and especially if the seller of the property has more properties.

It doesn’t hurt to buy it and build rapport that you can actually perform — because that’s the reason why I received the award for the seller finance, because the seller, after three months I kind of change the look of the property. They’ve been in the block, they saw how windows changed… They saw that I’m actually doing something with the property, instead of just staying like an eyesore. The seller saw that too, so — as a young guy especially, most people will say “Look, you don’t have a lot of experience”, but even if you don’t have a lot of experience, a lot of hustle, a lot of people that you know that you can leverage, it will kind of even the gap.

Joe Fairless:  Thank you for sharing that. The five-unit led to an opportunity with the three-unit and seller financing. Based on your experience, what’s your best real estate investing advice ever?

Melchor Domantay:  I was thinking about this, and it’s very generic, but I think the foundation of any business you can go to is knowing the purpose, what’s your Why. Because I think if you know your Why, then educating yourself becomes easier. There’s always a Why… And hustling becomes easier. Waking up at 4:30 in the morning becomes easier. Driving Lyft…

Joe Fairless:  What time do you wake up now?

Melchor Domantay:  Right now I still wake up at 4:30, but I do the Miracle Morning by Hal Elrod. I do that in the morning. I still drive Lyft, even though I’m a controller… But I’m more into just building relationships. The reason I wanna be a realtor is I wanna just exchange dollar-per-hour from Lyft, becoming a realtor… And I just love seeing houses, and helping people.

Joe Fairless:  We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Melchor Domantay:  Yes, sir!

Joe Fairless:  Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:17:08.11] to [00:17:42.20]

Joe Fairless:  Best ever book you’ve recently read?

Melchor Domantay:  Recently… Millionaire Success Habits, Dean Graziosi.

Joe Fairless:  Best ever deal you’ve done?

Melchor Domantay:  I think the second two-flat I bought, the foreclosure. The 80k one. That gave me a lot of confidence to do more real estate, definitely.

Joe Fairless:  What’s a mistake you’ve made on a deal?

Melchor Domantay:  Trusting contractors. I think a lot of us have done that before. I think if I have one skill, it’s to delegate… But the problem I had on that transaction is I didn’t put systems and processes in place to have a checks and balance. I asked the contractor to do something, thought it was done, but I didn’t check on the tenant, I didn’t ask for pictures, and I paid the contractor… And I’ve basically just not used that contractor again.

Joe Fairless:  Yeah. How much did you pay him?

Melchor Domantay:  Man, I paid him $700.

Joe Fairless:  And did they do any of the work?

Melchor Domantay:  Nope.

Joe Fairless:  [laughs] They did none of the work…

Melchor Domantay:  Nope, none of it. I learned from that. That was when I was dreaming still.

Joe Fairless:  Hey, it happens to everyone.

Melchor Domantay:  Yes. At least it was only $700.

Joe Fairless:  Right. Enough to remember, but not enough to side-track things majorly.

Melchor Domantay:  Yeah.

Joe Fairless:  Best ever way you like to give back to the community?

Melchor Domantay:  I do go to meetups, and I talk to other investors. I just started doing a video content every week, that I wanna share with everybody, because I think  a lot of the stuff that’s popular – they don’t really go through steps on how they got there. They just say “Okay, I have 100 units…”, and all that. I think sharing my experiences will help a lot of investors, especially new investors, with how to think about it. I was making $35,000… There’s a lot of people making more than that now, that I think can buy properties. I think there’s a little trigger that if they can see themselves, it would give them the trigger to pull it.

Joe Fairless:  That’s why we do this show, to share your story, so it will inspire others and help others. How can the Best Ever listeners learn more about what you’re doing?

Melchor Domantay:  Can I give my number?

Joe Fairless:  Give your number.

Melchor Domantay:  They can call me at 708-979-0852. If they’re around [unintelligible 00:19:49.24] or even Chicago area. They can also email me at mvdarental@gmail.com.

Joe Fairless:  Call, text, anytime, day or night.

Melchor Domantay:  Yes, yes, yes…! I don’t sleep.

Joe Fairless:  [laughs] Well, Melchor, thank you for being on the show. Thank you for talking about your habits and how you got to where you’re at. The 4:30 AM to 11 PM typical day that you had for 2,5 months whenever you were repositioning one of your properties, the business plan that you take with each of your properties, which is basically you find a distressed property and you fix it up, and then you take the proceeds from that and you parlay it to something else… And in some cases, you parlay the relationship into other deals, for example that 5-unit, into the 3-unit, which you got seller financing with that 3-unit.

Thanks for being on the show. I hope you have a best ever day. I enjoyed our conversation, and we’ll talk to you soon.

Melchor Domantay:  Thanks, Joe.

 

JF1896: How To Grow Your Property Management Company with Jason Hull

We have an expert in the field of property management on the show today. Since Joe and Ashcroft us third party management, we don’t get into the details of property management as a business and how to scale it. Jason is here to help us and anyone listening who wants to grow their property management company. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you take on bad clients, your operational costs will be 10x higher than a good client”

 

Jason Hull Real Estate Background:

  • CEO of DoorGrow, is a property management growth expert
  • They have:
    • 1,900 property management business owners in their Facebook community
    • Helped 400 clients since they opened in 2008
    • 135 active coaching clients
    • 53k downloads of their podcast DoorGrowShow
  • Based in Valencia, CA
  • Say hi to him at https://doorgrow.com/

 


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Our fourth annual conference will be taking place February 20-22 in Keystone, CO. We’ll be covering the higher level topics that our audience has requested to hear.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. We don’t deal with the fluffy stuff. With us today we’ve got Jason Hull.  How are you doing, Jason?

Jason Hull: I’m doing great. How are you?

Joe Fairless: Well, I am doing great as well, and I’m looking forward to our conversation. A little bit about Jason – he is a property management growth expert. They have 1,900 property management business owners in their Facebook community, they’ve helped 400 clients since they opened in 2008; 135 active coaching clients and 53,000 downloads on their podcast, “DoorGrow Show.” That rhymes, I like it. And you’re based in Valencia, California. With that being said, Jason, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jason Hull: Yeah. A little bit of background for your listeners, which are in the real estate industry – I grew up around a real estate mom. She paid me two cents a fold to fold tri-fold fliers that I would canvas neighborhoods with, on either a scooter or rollerblades. So I grew up with a mom who show me hustle, she was an entrepreneur. And I’ve got several brothers in the real estate industry, but I was the one that was a nerd. I just got into technology, I started geeking out on stuff, I love entrepreneurism… And fast-forward, I ended up somehow coaching property management business owners, in an industry that I’ve never even had a rental property, but they keep coming to me, and I’m really good at helping them do what they need to do.

Joe Fairless: So what do you help them do?

Jason Hull: Basically, what I do in a nutshell at DoorGrow is we take property management business that are struggling to grow and we rehab their business, just like you would rehab a property, so  it could cash-flow or rent-roll effectively. We rehab property management businesses so they can cash-flow or make money properly. Essentially, we’re doing anything from cleaning up their brand, to doing their website, to helping them set up a reputation strategy, to drive more warm leads, prospecting methods, sales process trainings, pricing strategy and psychology… Whatever it takes on the front-end of their business to help them grow. I just tell them “I’m not gonna teach you how to do property management. Not my jam. But I’ll teach you how to win.”

Joe Fairless: How do you know the industry so well if you haven’t done it yourself?

Jason Hull: Great question. I don’t know the nuts and bolts of property management. I’m not gonna coach somebody on how to deal with tenants, toilets and termites; not my thing. But I think the basics of what makes a business work really apply to any industry, and I just applied it to a niche that we started to get strong in organically, and it kind of took off. But there’s nothing magical in particular that I do, I would say, that wouldn’t work in any industry. But what we do is quite unique, and most business owners when they’re trying to grow their business, they first focus on SEO, pay-per-click, content marketing, social media marketing, and pay-per-lead services. And I don’t believe you need any of those in order to grow your business. We used to do those things, but we help property management companies grow without them… And they gro really well.

So the challenge is all of that really is kind of pinned on search engine marketing, all those channels. And the idea behind search engine marketing is if I could just have the top spot on Google, all my hopes and dreams would come true. And I jokingly call that the SEO lottery.

You don’t have to play the SEO lottery in which you have a few noisy winners at the top, and everybody else is a loser, in order to grow your business. There are other ways to grow your business.

Joe Fairless: Yeah, I think of the profit on A&E, I think; it doesn’t matter the channel… That’s gonna bother me, but anyway – it’s where he goes into a cupcake shop and he gives people products and process, and he gives an analysis of the business, and then figures out how to fix it. And he – to the best of my knowledge – hasn’t been in all of the business industries that he’s fixing, but he has a certain process. So I get the concept.

One thing that he did have is he had successfully created his own business, and sold it, and done well, and blah-blah-blah. What were you doing prior to DoorGrow?

Jason Hull: Really we were operating as a company called Open Potion, and we largely did website design. Originally, I started out freelance, really just me, and doing websites for clients… And I kind of quickly became the secret weapon of property managers. One of my first clients was my brother. He was bought into a property management franchise, he didn’t like the website, and asked me for some help; I gave him some tips from a marketing perspective…

Joe Fairless: What were they?

Jason Hull: I said add some faces to it.

Joe Fairless: Okay, add some faces…

Jason Hull: What were the tips?

Joe Fairless: Yeah.

Jason Hull: Add some faces; you need some humanity on your website. If there’s no faces on your homepage — imagine you walked into a town and you didn’t see any humans anywhere.

Joe Fairless: Scary.

Jason Hull: Yeah, it feels weird. And that’s how some businesses look. You see high-rise buildings, and maybe corporate structures, and you see text, and there’s no people. Or even worse, sometimes you see people, but they all look like really smiley, cheesy stock photos. They’re a little bit too good-looking; something’s off. They’re Stepford wives, or you’re in some sort of alternate reality… You need real people. People buy from people. People like people. Go figure. So that was one of the first tips I gave them.

Then I said “Why don’t you also take some of this content that’s just blobs of paragraphs of text, and let’s chunk this.” At least add bullet points. Something. Break it up a little bit. Make it easy to digest. Because people don’t read websites. They skim. So make it easy for them to do that. Add social proof, add trust symbols. There’s lots of little indicators that create trust, and sales happen at the speed of trust. So if your goal is to make money, the website really is all about creating trust, not about manipulating Google.

Joe Fairless: What are social symbols that add trust?

Jason Hull: For example social proof, or trust symbols… Social proof would be video testimonials, text testimonials with a face next to it, because that makes it real… Those things increase conversion rates.

Joe Fairless: Got it.

Jason Hull: It says somebody else is vouching for your company. Social proof would be indicators like if you’re a local business, having the Chamber of Commerce’s logo on there, that’s showing you’re a part of it. Better Business Bureau. Other trust symbols might be trade organizations. In my industry there’s NARPAM, which is the National Association of Residential Property Managers. So they’ll have their NARPAM logo. It might real estate logos, or Fair Housing stuff, whatever. Anything that says “We’re safe, we’re trustworthy. Here’s another third-party that’s vouching for us. We’re a part of this.” It just makes people feel safer. And if you put those trust symbols near lead capture, conversion rates are proven to go up.

Joe Fairless: When the prospective client comes to you and she says “Jason, I need help. My property management company is struggling to grow. We need to cash-flow more, and we wanna scale.” What are the questions you ask her?

Jason Hull: One of my favorite sales questions – and this is probably interesting for any listener – I first say “What is your biggest challenge in your business right now?” I love asking that question right now, because that’s the one thing they really care about. “Where is your pain?” Then they’ll tell me what their biggest challenge is. Sometimes they’re telling me what may not fully give me the story, so a great follow-up question I love to use in sales – if I don’t feel like I’m really getting the bedrock there – is “Why now?”

I’ll say to them “You’ve probably seen me on my podcast, you’ve probably watched a bunch of videos, you’ve probably been around me for a while… Why now? Why are you reaching out now? What’s changed?” And in those moments, you start to step onto sacred ground. Something interesting happens, because I start hearing stuff like “My wife just left me.” Or one guy said “I’m waiting for a double lung transplant, because I have a serious illness and disease and I wanna make sure my business is operating effectively, and I’m nervous.” Or “I had cancer, and I just came through it.” You’ll hear all kinds of crazy stuff. Sometimes it’s more simple, like “We just lost a bunch of our portfolio, our doors, and we’re struggling to grow, and it’s getting painful.” But it starts to go a little bit deeper beyond the superficial, because there’s something driving them to talk to you right now, if somebody’s reached out to you. If somebody’s become open to having a conversation with you that’s a sales conversation, “Why now?” is one of my favorite questions to ask.

Joe Fairless: What are top five things that when someone comes to you, you usually can implement rather easily to get them in the right direction?

Jason Hull: The basic things that we take a business through are really about five things. The first thing we wanna tackle–

Joe Fairless: Oh, what a coincidence.

Jason Hull: The first thing we wanna tackle is branding, because branding affects the very beginning of the sales pipeline, at the awareness stage. For example, in property management, a lot of property management companies have a brand name that says “Real Estate” in it, and real estate in your brand name in property management is a quick way to scare off maybe about half of your potential customers… Because they want a specialist, they don’t want somebody that’s out hunting/chasing real estate deals. They want somebody that’s actually gonna take care of their property. Like, is property management even really a focus for you? Because it’s not even in your name, or it’s not a main part of your name, or you’re trying to do two things.

So branding is a big thing, after we get that thing cleaned up with the company… And there’s a lot of potential pitfalls when it comes to branding. Using names that are generic, that people can’t remember… Because the crux of branding is being memorable. The number one source of leads and deals is word of mouth, for most businesses. And the crux of that is being remembered, too. So if they don’t remember you, your brand and positioning might be off. And if that’s off, you could be losing out on half the amount of deals and leads you could/should be getting… And that’s a big leak. So we wanna take care of that first. Then we move through the pipeline.

Reputation is a  big deal. You wanna make sure you have a strategy in place… Because most business owners get started and they think “If I just provide really good customer service, I’ll have great reviews all over Google, Yelp and everywhere else.” But that’s just not true. Those that have a really good reputation have some sort of process in place. They have a system they’ve created for soliciting feedback, for getting good reviews, for reaching out, identifying peak happiness, leveraging the law of reciprocity… These kinds of things. So we wanna make sure we build a process to get them better reviews.

We have a platform called GatherKudos.com, which any business or industry can use. We set it up to help facilitate this process, because property management companies have a hard time getting good reviews. This is a big challenge in this industry, because tenants generally are not very happy when they don’t get their full deposit back. So we had to build and create a system that would allow them to make the negative reviews more of an outlier, so that they were consistently getting positive feedback and reviews online from their happy tenants and owners.

GatherKudos.com is a service that we provide to do that for any industry; it just happened to be something our clients needed, and then we started tracking clients from all over. So we focus on that. Then we also focus on the websites…

Joe Fairless: Before you move on, how does GatherKudos work exactly?

Jason Hull: Real simple – we set up a landing page for the business, GatherKudos.com/yourbiz, or whatever, and then basically when people go to this page, in a single click it identifies whether they are happy or something else. And if there’s something else, then instead of giving them all your review site – so if they’re happy, it’ll just show all the different review sites, and it says “Pick whatever you’re comfortable with, basically. Pick whatever you’re used to.” Rather than trying to corral everybody to Google or to Yelp, they can pick from all the different sites. They may have come to you through Zillow, or Trulia, or something else, and that may be where they wanna go leave you feedback. So it allows them to go to the channel that they’re used to. Maybe Facebook is what they’re into and used to. Maybe they’re not a Google person or a Yelp person.

So it prevents waste of reviews, it prevents them from getting stuck or confused, and then it gives them directions how to do it. Real simple, text and images, and they click the button to go off to leave this review.

If it’s negative or neutral, then it a single click it will qualify them and identify them as this, and then it will give the opportunity for them to give you direct, immediate feedback. They can fill out a form there to send you an email, or we usually have the business owner put their cell phone number and say “We wanna hear from you directly. Call me if there’s an issue. We wanna take care of it.” So this allows people to bypass that natural barrier to feedback that every business owner creates as they build a team.

As we scale and build a team, we move our office into the back, we set up an auto-attendant, we have a receptionist… We’re protected, so that we can leverage our team, but the challenge is it creates a barrier to feedback between us and the customer, and we no longer have that direct feedback to know how we’re really doing… And the only person that really maybe knows is our frontline staff, that might be the ones offending our customer.

So this allows them to bypass your frontline staff for you to get direct feedback, and it makes it safe, so you can get feedback, good or bad. If it’s good, it’ll push them towards the review sites. If it’s bad, it gets to go to you directly, and then you can take care of it, so it helps prevent negative reviews… Because most people’s feedback is more in the neutral to negative category – they’re not at DEFCON 5 nuclear, wanting to destroy your business, but those are the ones that end up on review sites. And if you can capture them before they get to that point, you may be able to prevent a significant amount of negative reviews online. An ounce of prevention they say is worth a pound of cure.

Joe Fairless: So if it’s a positive review, did I hear you say they give text and an image…? Do you provide them with sample images within that platform?

Jason Hull: Yeah, so what it will say — for example if they click on Google, then it’ll say “Here’s how to leave a Google review. Here’s the steps”, it’ll show screenshots, like what the button looks like to click on, and it gives them directions.

Joe Fairless: Got it. But you don’t provide them with sample images to upload; they have to upload their own image and write their own text.

Jason Hull: Yeah, they leave their own review, they do their own thing, so it ends up being real.

Joe Fairless: Got it, okay. Cool. And just jumping back to the branding part, and being memorable – you said make sure that you don’t have “Real Estate” in the name, have “Property Management” in the name; it makes total sense. And be memorable. What are some other branding guidelines that you’d give to someone whenever they’re creating a brand in property management?

Jason Hull: Some of the basic rules in branding in general are you wanna avoid names generic to the category. So if you’re a real estate business, you don’t want your name to be “Best Real Estate Company”, or “Phoenix Realty” if you’re in Phoenix. You also don’t wanna have names that are generic to the location, like Phoenix Realty if you’re in Phoenix. You’ll notice that some of the most successful brands have nothing to do with the category. Who came into the scene of online books and crushed it? Amazon. Who came onto the scene and started crushing online search? Google. Who started the industry of facial tissue? Kleenex. These names had nothing really directly to do with the category. They were original, unique names. So you don’t want names that are generic to where you’re like the same as every other company in the market. In Phoenix, you would have “Phoenix Carpet Cleaning” and “Phoenix The Bank” and “Phoenix Whatever”, and you don’t wanna be “Phoenix Property Management” or “Phoenix Realty” etc. It just makes word of mouth really difficult. People can’t remember names that are generic.

So that’s one of the biggest rules, and there’s a whole host of rules when it comes to color, when it comes to layout, with the logo, when it comes to spelling there’s a lot of potential pitfalls… The absolute worst thing you can do with branding, for those listening – take a look at the brand name, and if you have a generic business name, it’s generic to the industry or the category, and you’ve misspelled it to be clever…

Joe Fairless: [laughs]

Jason Hull: Barber,  and you do Haircutz, with a z at the end, because you think you’re clever, you are probably losing out on tens of thousands of dollars in annual revenue. Probably monthly. So… Yeah.

Joe Fairless: Will  you just close the loop on why misspelling it would be a mistake?

Jason Hull: Oh, yeah… So there’s this great thing called autocorrect that happens, which if your name is misspelled, every system on the planet is gonna try and fix it, so people won’t find out. Another thing is people won’t hear this misspelling, so verbally word of mouth gets hurt and damaged… And if it’s a generic name, if they search for you because they’ve heard about you, who are they gonna find? All your competitors. That’s what they’re gonna find when they search for a generic term. So that’s the basis of that, I guess.

Joe Fairless: Great stuff. Let’s do one more. I know I asked for five, and you’re prepared for five, but we probably have time for one more… So what’s another step in the process you take someone through?

Jason Hull: Well, at the very front end you’ve got branding, reputation, and then the website. Because the reputation stuff is gonna feed you leads to your website. People are gonna check your website, so it needs to be high-converting, and it needs to be focused on trust. So the three biggest tips I could give for a website – look at your homepage; it needs to answer three core questions. Every visitor has three core questions when they land on your page. The first question is “What do you do? Is it what I need?” That’s question one. If it doesn’t answer that in big, bold text, at the top of the page, “We manage properties in Phoenix”, for example, or “We help real estate investors find property”, or whatever it might be… People wanna know “Am I at the right place?” That’s question number one.

Question number two once they know they’re at the right place, that you can do what they need, question number two is “Why should I choose you to do it? What’s special about you? Help me make a choice here. Why should I pick you over everyone else that does that? Because there’s other people that do that… What’s different about you?” Help them make a choice. So why choose us.

You should have some unique differentiators, or a unique selling proposition, or something that sets you apart, to say “Here’s why you should choose us to do this.” That crux of your content below the headlines that I was just saying you need, should be on the page. And then the third question – so once they know what you do, and why they should choose you to do it, the next logical thing they’re gonna be thinking is “Alright, what do you want me to do next?” Then you need the call to action. So the third question that they need answered is “What do you want me to do next? What’s the next logical step I would be willing to take as a consumer? Give me that direction and I’ll do it.”

You’d be surprised how many websites have no call to action on the homepage, no lead capture to fill out a lead… There’s no action that they’re asking them to take. They’re just hoping that somebody will just decide to do something.

Joe Fairless: What is a call to action that a property management company should have?

Jason Hull: One of the most simple is “Give us a call, or fill out this form for a free quote, or find out what your property could rent for”, or even just “View pricing. Go to our pricing page” is a great call to action for the homepage… Because everyone’s gonna want to do it anyway. Send them there, and then have that page sell really effectively.

Joe Fairless: Based on your experience as an entrepreneur in the real estate industry, what is your best advice ever for property managers?

Jason Hull: My best advice ever for property managers, especially for the business owners, is don’t be a property manager. Consider yourself an entrepreneur. Be the business owner. Property managers are who you hire. They’re the people that do the work in the business, for you. So be the business owner, and get out of the tactical day-to-day.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jason Hull: Let’s do it.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:20:53.14] to [00:21:34.23]

Joe Fairless: Best ever challenge you’ve come across when working with a property manager/business owner?

Jason Hull: Oh, man. The best challenge… There’s been so many different challenges, but I would say one that stands out is I had a client come to me that had 600 units under management. That’s a pretty healthy property management business. It’s rare to get to that point. But he was making zero dollars. He had zero profitability, he was making no money. And I said “How is this possible?” He said “Well, I’m doing three million a month in real estate in my brokerage.” So he had a really healthy real estate company, and his property management company was his cancerous tumor, sitting on the side of this healthy body called real estate. And that’s somewhat common in the industry, that you’ll have businesses that do both brokerage and property management, and a lot of times they artifically have broken past some of the typical barriers they would have had to make changes to get through by siphoning away resources from the real estate company.

So we took that challenge and I coached him through it, and he fired about half his staff, he fired about 200 doors, and he’s making a whole lot more money. So one of the biggest challenges in the industry that this reveals is what I call the cycle of suck. They take on bad clients. And this applies to any industry, any business. If you take on bad clients, your operational cost will be ten times higher than that of having a good client. So sometimes in order to move forward we have to trim the bush, so to speak. We have to get rid of the fat that’s causing harm… And some of these clients are eating up 80% of our resources and they’re only paying us  a small portion. If you can clear those people out, it creates a lot of room and space to be profitable, lower your operational costs and to grow and bring on more business.

Joe Fairless: Best ever book you’ve recently read?

Jason Hull: A really fantastic book is a book called “It doesn’t have to be crazy at work”, by Jason Fried. He is the CEO of Basecamp, and I actually got to hang out with him on a call, not unlike this, face-to-face on video, for about 90 minutes… And at the time, I had a bunch of different software tools we were using, we were really struggling in the company; I couldn’t wrap my head around why. And he spent 90 minutes with me, showed me how he runs his company… He’s written all kinds of books on virtual teams, and things… So I was really excited to hear what he had to say. No kidding, in a day he had cut my staffing costs in half. Our productivity had doubled.

This book is fantastic, because — he just recently  came out with it, and I had met with him years ago, and he had transformed my business from just that one call, showed me how he ran things. He just came out with this book and it reveals a lot of the principles that he had shared with me on the call, so I’m really excited to share that book with everybody.

One of the biggest takeaways is to eliminate interruptions. It was one of the biggest things that I got. One interruption will cost you about 18 minutes of productivity. So if you or your team members are interrupting each other, or coming into each other’s office once every 18 minutes, you’re basically at a standstill in your business. So by eliminating/cutting down interruptions, our teams become infinitely more productive; we cut down on all kinds of meetings that weren’t necessary. We don’t feel like we’re spinning our wheels anymore, and business gets a lot quieter.

Joe Fairless: What’s the name of the book again?

Jason Hull: “It doesn’t have to be crazy at work.” It’s all about creating calm in the workplace.

Joe Fairless: Best ever way the Best Ever listeners can get in touch with you?

Jason Hull: Really easy. I am the same username/handle/tag on all social media, King Jason Hull. I’d love to connect on Instagram, Facebook, Twitter, Snapchat, you name it. Feel free to connect with me there, and if you wanna connect with me for business reasons, I’m DoorGrow everywhere. You can check us out at DoorGrow.com.

Joe Fairless: Jason, the insights you gave are applicable to not only building a property management company successfully – or rather making it profitable – but also any company, so I’m grateful that you were on the show. It doesn’t take much of a connection to go from what you’re saying about building a property management company to building a fix and flip company, an apartment syndication company, a real estate brokerage… So I’m grateful that you were on the show, and sharing the tips, from branding, to websites, making them have the right messaging, and to reputation strategy and the importance of it, and the website that you have, GatherKudos.com.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Jason Hull: Thanks. I appreciate being here.

 

JF1887: From 10 Single Family Homes To 1600+ Apartment Units with Anthony Chara

Anthony got his start like many real estate investors, by doing a few smaller deals first. Once he had a taste of investing in apartments, he never looked back. We’ll hear how he scaled his business and also hear some specifics on a couple of his deals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“The only time that you fail is when you just give up, don’t give up, keep moving forward” – Anthony Chara

 

Anthony Chara Real Estate Background:

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Anthony Chara. How are you doing, Anthony?

Anthony Chara: I’m doing great, Joe. How are you?

Joe Fairless: I am doing well, and looking forward to our conversation. A little bit about Anthony – he started real estate investing in 2001, owns and/or has syndicated approximately 1,600 apartment units across the country. Based in Denver, Colorado. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Anthony Chara: Sure. I can certainly do that. Hello, everybody.  I actually started in creative investing back in ’93; I’ve been doing pretty much apartments almost full-time since about 2001-2002… But in ’93 my wife and I turned our first house into a rental and then moved into a larger, nicer house… And for ten years, that’s all we knew. Our world consisted of buy and hold, because we didn’t know you could do wholesaling, fixing and flipping apartments, short sales, or anything else. So we did that for about ten years; had nine or ten single-family homes and condos, and then met a gentleman named Robert Allen, which a lot of people know – he wrote  a book called “No Money Down” years and years ago, and started taking some classes from him and then realized that you could do wholesaling, fixing and flipping and other things, and I did a couple of those. One of the biggest things that I learned after I did learn something was to take it and put it into action.

So I did that, I did a couple wholesale deals, I did a couple fix and flips, and realized that “Wow, that was a lot of work, and some reward”, but once the deal was done, I had to go out and do it again. It was like getting a job, and the job was over, and now I had to go find another job. So I also learned how to do apartments, and in early 2003-2004 I did my first apartment deal. One of the things that I learned from that was that the money kept coming in, and they were a lot bigger checks than some of the single-family homes that I was doing… So I decided that I really liked that.

Our next deal was 98 units, then we went up to 120, and 140, and 150, and our largest deal so far to date was a 410-unit portfolio that we did in Indianapolis. As you mentioned earlier, right now I’ve either owned or syndicated a little over 1,600 units. I love doing apartments, so my main focus now is apartment investing, and I’ve got a lot of students around the country, because I do actually teach people how to get into this… And then just keep on buying more stuff. I love traveling around the country and doing the teaching, I love meeting up with my students and educating people on how to be successful with the different deals that they get into.

Joe Fairless: That 410-unit – is that the most recent purchase that you’ve been a general partner on?

Anthony Chara: No, that one was a few years ago. We actually sold that one back in — it was either 2015 or 2016… So the most recent one we just closed was a — wow, I’m trying to figure it out, because we’ve got a bunch of them that just closed within the last year.  About a year ago we did a 60-unit in Iowa, we did a 100-unit property in Macon, Georgia…

The most recent one was actually a 32-unit property that we closed — perfect timing, we closed in Panama City, Florida, and shortly after we bought it, the hurricane came through, and took the roof off of it… So that was kind of nice. But fortunately, we had the right insurance in place.

Joe Fairless: What is that process like, when a hurricane comes in — you’re in Colorado, the property is in Panama City, and you see your weather alerts, that there is some nasty weather coming to an area where your property is… What do you do to keep track of that, and then when you assess the damage, what’s the process?

Anthony Chara: Sure. Well, in that particular case the property was being run by one of my students, so he went down as quickly as he could after the hurricane came through. Of course, before then you absolutely wanna make sure you have the right coverage, which we did… So not only are we getting the property taken care of, but the insurance company is also paying us as if the property is still being rented, as if renters were still in it. That helps tremendously, especially when you have investors that need or  are expecting some type of cashflow.

But it’s definitely been a pain in the butt, it’s been trying. The student has been interfacing with the insurance company, and if you’ve ever worked with an insurance company, most of them try and take in as many premiums as they can and pay out the least amount possible… So we’ve also been working with a public adjustor, who’s gone out to the property, and is on our side, because they’re working with us to battle our insurance company… Because you can’t imagine that you’re actually on the same team when you actually have to put in a claim. It’s like a big battle to the finish, and whoever survives is the winner and the victor.

Joe Fairless: Which is very unfortunate, but it’s ridiculous that they take it that direction… But yeah, [unintelligible 00:06:00.15]

Anthony Chara: It is, yeah. Yeah, so the public adjustor is helping, because they’re coming out and showing other detailed information to the insurance company, that says “Your estimates are way undervalued, because we need to bring this property back up to the condition it was in before the hurricane came through.” We can show them pictures and videos of the interior of the property and how we want this property to be put back like it was before.

They generally like to push back, they think that we’re charging way too much or asking way too much, and we think that they’re paying too little. Eventually, we’ll come to an agreement and get everything done, and ultimately we are gonna win; we’re gonna be successful, but it’s a very long, painful process, because as I mentioned, insurance companies, even though they love to take your premiums, they don’t like to actually pay for those repairs.

Joe Fairless: So you have business interruption insurance; you are also insured for the property whenever something like this takes place… Let’s fast-forward 12 months from now. In your opinion, is the property better off having had this event take place, is it a neutral event, or is it a negative?

Anthony Chara: In this particular case it’s going to be a hugely positive event. It has already been a hugely positive event, simply because there’s been so many homes and housing that’s been wiped out in the Panhandle area there in Panama City. We’ve actually been taking our rent up, and I know that there are some people out there that would say “Oh, you’re taking advantage of people in the area.” It’s like, “No, we’re actually not.” Most of the people that were living in the property are actually working for insurance companies and contractors, and there’s no place for them to live, and we need to pay for our increased premiums and everything else that goes on… Because everything in that area has gone up.

Not only are we raising the rent, but the things that you would normally pay for, that might cost you X amount – well, it’s now X plus an extra 50%, because it’s harder for even things like lumber and drywall and roofing material to get into that area… And as soon as it gets in, it’s gone, because there’s just so much work that has to happen in those areas; the people that live there just to get food, and things like that. They’re still working on the power in that area, and making sure that the power is flowing the way it’s supposed to, they’re still clearing debris out of the area… And it’s a year later. As a matter of fact, I’m down in New Orleans right now, and it was 14-15 years ago when hurricane Katrina came through; last time I was here doing a presentation was on their 10-year anniversary and they were still recovering from the effects of Katrina.

So if you were like us, and you were in that area right as the situation happened, it is going to be a very positive event for us, because we are helping to continue to provide housing for people in that area. We are benefitting from it, because we can increase our rents, because there is a lack of housing… But we’re also providing a service that do need to be down in this area helping people recover by fixing up their units and getting back on track with their lives.

Joe Fairless: One challenge I came across with one of our deals that we owned in Houston – we’ve since sold it – when hurricane Harvey came, it did not directly hit our property, but what it did is it increased the cost of contract labor, because now all of a sudden what we had budgeted for contract labor dramatically increased, because they were more in demand, and there were other properties that were paying much more for their services, because they had to, in order to get their services. So then our budget had to increase. Have you come across that with your property?

Anthony Chara: Yeah, we certainly have, same exact situation… Because there’s only a certain number of people. There’s a lot of workers that were in that area that are now displaced. They moved to other areas of the country with family, or to find a job someplace else, because their home, their apartment might have been wiped out. So the people that are coming down, that are there, their cost of living and being there is higher… And we’ve also found out that insurance companies are paying these people more to entice them to come back to the market or into the market, so that they can actually do the work that needs to be done for the insurance company. So yes, all the costs have gone up because of the scarcity. The infrastructure is still suffering, so a lot of the stuff that we take for granted, like warehouses to store food, and building materials and things like that – they’re all gone; there’s no place to do it. So it’s a constant, endless truckload of things, and food, and parts, and pieces that need to come in, and all the people that need to take care of those things.

So yeah, expenses have gone up. Until you get to the point where it’s very easy to go down to the street corner and get a gallon of gasoline, things are gonna continue to be expensive until it normalizes… And if it’s anything like what New Orleans went through, it’s gonna be about ten years before Panama City comes back to fruition.

So it’s good for us, since we already have property there, and it’s gonna continue to stay strong for a while, but yeah, it’s also costing us more, as well.

Joe Fairless: The 60-unit in Iowa – switching gears a little bit – will you tell us about that?

Anthony Chara: Sure. That particular one is on the Eastern Coast, right on the Mississippi River, in a little town called Burlington. One of my students found that through a real estate connection that he had; he’s created relationships with brokers in that area. He likes buying in Iowa and Kansas and Nebraska… And the broker came to him. And the interesting part was we know that that same broker likes this type of property, so when he brought it to us, we said “Wait a second… Why aren’t  you buying it, if it’s such a great deal?” And he said because it was too far away from his target area. It was about a 2.5 hour drive from where he lives, and he only likes buying properties that are over 100 units, which we do, too… But in this particular case, that same student already owned about a 118 or 119 property about three miles away, so it was an easy transition.

So we went out, took a look at the property… It was actually a great little property. The owner of the property – about four years ago now the fire department came through, and why they didn’t do this years ago I have no idea, but the fire department came through for one of their typical inspections, and noticed that in all the second-floor units… These were townhouse-style, where you’ve got the living area on the lower end, and then you go up the stairs to the bedrooms in the upper area… All of the upper windows had the through-the-window air conditioning units, and the fire department finally figured out that “Oh, wait a second… You’re blocking an emergency egress.” So they made them take out all the upper air conditioning units. Well, if you’ve ever been in Kansas in July or August, it gets very hot and very humid, and people aren’t going to only stay down on the lower level with the air conditioning unit that is going through the wall on the lower level… So the owner made the decision when they pulled them all out to put in all brand new air conditioners and furnaces in all 60 units.

Joe Fairless: Nice.

Anthony Chara: At the same time, they redid all the roofs, they redid all the siding… So we ended up coming in and buying what should have been a C class property, that was probably more like a B-, just because it had all this new equipment in it… And we also inherited an 18-unit HAP (Housing Assistance) contract from HUD with that same property. So 18 of the units were paid for, whether they were occupied or not, and then the other 42 we take care of on the open market.

It’s been going pretty good for us. We’ve had a little over a year now, and we’re looking to refinance out of a short-term bridge loan that we got on that one in order to get into it.

Joe Fairless: What was the business plan for it?

Anthony Chara: Well, the business plan was because we knew that it was gonna be a good candidate for a HUD loan, was to buy it on a bridge loan, which we did; unfortunately, it’s taken us a little bit longer. We had some issues with HUD themselves, getting this particular property going. The original manager that was in the property for us ended up getting blacklisted by HUD because another property that they managed, that the owner was taking care of the maintenance. Well, HUD didn’t care that the owner was supposedly taking care of the maintenance, because this management company had their name on the property, and HUD was not happy with the repairs that they were doing… So HUD blacklisted them and made us get another manager. Well, that whole process set us back, because it took us about 3-5 months for three different parts of this.

Joe Fairless: Yeah…

Anthony Chara: The first part – we had to find a new manager that we liked. That took us about a month, a month and a half of interviewing quite a few managers in the area. Then once we liked them, then HUD had to interview them to confirm that they were okay with them, and then do a background check on them and look at some of their other properties to make sure they were maintaining them… And then the third part of it was because of this HAP contract, as soon as they blacklisted the first manager, they stopped paying us for the HAP contract. So it’s like “Well, wait a second… You’re the ones that blacklisted them, and now you won’t pay us.”

So once we finally got the new manager in place, the new management company then had to redo all the paperwork and submit all the paperwork for the 18 units, and that took another 2-3 months in order for us to get fully paid and up to date with all the paperwork. Well, at the same time, with the transition, the previous manager was short-timing it, so they weren’t really doing a very good job of putting new people in, plus they couldn’t talk to anybody that was on HAP, because they knew HAP wouldn’t pay them. So they could only talk to people who were coming in off the open market.

So anyway, we ended up getting a bridge loan, and the plan was to be out of that within a year, but then with this whole situation with HAP our vacancy started to creep up. We ended up at worst-case scenario; we ended up at 30% vacancy, 70% occupancy, going through this whole process… And now we’ve got it back on track. Over the last few months the manager has been putting in better quality people, and we’re back up around the 85% range, but we can’t actually do the HUD contract or the HUD loan until we’ve got 90% occupancy for at least 90 days. We’re still working on that.

So the plan – long answer to a short question – with the business plan was to have the short contract in order to buy the property with the bridge loan, take out financing within the first year, and now we’re just slightly over one year, so it’s probably gonna be about a year and a half, so we’re about six months behind on the plan.

Once we get that new loan in place, the interest rate is gonna drop drastically, the cashflow is gonna go up… The last thing that we need to do with the property – because there really wasn’t a whole lot, since the owner had been doing a good job of taking care of it – was replacing most of the windows. A lot of the windows were original from the early ’70s when the property was built. They still had some single panes, and some of the windows don’t open and close very well… So we’re gonna replace all of those, which is also gonna help with the energy efficiency of the property, and then we plan on selling it in five years, when the loan  balloons, to other investors. Of course, the goal is to at least double our money within that five-year period, if not better.

Joe Fairless: About how much does it cost to replace the windows in a 60-unit?

Anthony Chara: It depends on the quality. We’ve had quotes anywhere from some of the smaller windows for maybe $150 to $200 including labor, up to $350 to $400 for some of the larger windows… I think we budgeted about $120,000 to replace all the windows, including labor.

Joe Fairless: And how do you think of that in terms of ROI for the deal whenever you sell it in five years?

Anthony Chara: That’s a great question. We actually took that into consideration before we bought it, because that was part of our plan when we purchased it. We knew that these windows were a sore spot, not only with the residents, but with the energy efficiency of the property. Some of them don’t look very good, some of them that are the dual-pane also have the seals broken, so you can’t really seen through them… And they also are kind of an eyesore at this point, simply because if you look at some of the units that have been changed, they have the larger, thicker, white vinyl border, whereas some of the older ones are still the old aluminum windows… They look older, and they’re kind of an eyesore.

So we actually budgeted for that in our numbers, and that’s one of the reasons we were really excited about this property, just because even with the 120k or 160k total between the windows and some other things we wanted to do, our investors were still getting a cash-on-cash return around 10%, and then the total return we were projecting – I think the IRR is gonna be in there around the 18% range over a five-year period.

Joe Fairless: With the 18 units under the government assistance program, would you rather have just 18, or all 60, or zero? Which of those three options would you rather have?

Anthony Chara: You know, if you would ask me before we bought it, I might have —

Joe Fairless: Before they stopped paying you…

Anthony Chara: …before they stopped paying me, I might have been interested in the whole project being a Section 8, just because whether it’s occupied or not, they’re gonna pay the contract. The downside is after what happened here – and I’ve heard this from other owners as well – is that if HAP has an issue with something, whether it’s the condition of the property, how you’re taking care of it, they don’t like the manager, something goes on, they can literally cut off all of your payments. So I think I’m actually kind of happy the way it is now that we only have a part of the property, about 30% under the HAP contract… And we still are allowed to take HAP vouchers; we still have other people on the property that are on Section 8, but because they’re under a voucher program, as opposed to the HAP contract, they did not get cut off, those payments did not stop coming in.

So I kind of like the way it is now. We  have 18 of them where we have guaranteed rent, and then the other 42 are open market and Section 8 people… So we have a variety of people on the property.

Joe Fairless: Will you elaborate on the difference between a  voucher program versus a contract?

Anthony Chara: Sure. The contract is just like it sounds – you have  a contract with housing assistance that says “We want these 18 units. We’re gonna decide who’s gonna go in the units. We’re gonna pay for these units so that they’re available for us to utilize.” And they pay that–

Joe Fairless: So they screen the tenants and they put them in there, and all that process?

Anthony Chara: Well, they’re supposed to… We still have the ability to screen them, and if we don’t like the people that are coming – and we have the ability to go out and look at their work history and their eviction history, and things like that (even their criminal history) to see whether or not we wanna allow them into the property. But a lot of times because it’s under the HAP program they just say “Well, Mr. Jones is here, and we’d like Mr. Jones to move in.” With the HAP program, people just go wherever HAP says “We’ve got a contract. You can go here. Here’s the available unit. If you like it, let us know and we’ll put you in.”

With the voucher program, people can actually take the voucher. It’s what’s called “portable.” So they can move that voucher from one complex to another. They’re not limited on where HAP only has a contract. They can go to a house, for all that matter. They can go to a homeowner that is willing to accept a voucher, and they can walk in and say “I’ve got this voucher”, and based on how much money that person makes, then HAP has a metric, a formula that they put them through, that says based on how much money they make and what the average rent is in this certain area and how many people are in the house, whether it’s husband and wife, or girlfriend and girlfriend, or boyfriend and boyfriend, and whether or not they have any kids, the size of space that they need, the number of rooms, how much they qualified for what their share is going to be, if any… We’ve had some people that even on a voucher HAP has paid for their entire rental rate, and some they paid a minimum amount – $4, $9, $11/month…

So the big difference is with a contract it’s set. Most of the time you pretty much accept the people that come, but with the vouchers you can still screen them, they can take that voucher and they can use it on your property this year, and then next year if they decide to move out, they can take that voucher and their income and go someplace else to somebody else’s unit, where the HAP contract is set for — I think it’s a five-year contract that we have with them. I don’t remember off the top of my head, but I think it’s somewhere between a five and ten-year contract.

Joe Fairless: On a separate, but related note, regarding the property… You said you came in town and looked at the property. What are some things that you pay particular attention to? And we’ll be specific – let’s just talk about the 60-unit. When you came and looked at the 60-unit, what are some specific things that you read about the property, you saw the financials, so you had the paperwork, and you probably saw pictures, but now you’re actually there… What do you look at? What do you look for?

Anthony Chara: Well, the biggest things that I wanna look for are the major issues with the property that can cause you a lot of monetary loss if they’re not taken care of properly. Some of the biggest things I wanna look at when I come in are things like the roof, I wanna look at the parking lot, I wanna look at the drainage around the units… We’ve had issues where years ago we missed things, because — well, I shouldn’t  say we missed it; we just didn’t realize that it was an issue until we actually had an issue with it.

We had  one property where there was actually a creek flowing through the middle of the property. And we knew it was there, we did our best to check and make sure that it wasn’t gonna be a problem, we made sure that there was a drainage area underneath a little bridge on the property that we had to make sure was cleared out… And then lo and behold, we get a huge rainfall, and the creek was not the problem; the problem was the way the property was situated – it was up on a frontage road next to a freeway; there was so much rain coming off the frontage road down into the property where there was no creek, and no clear path for the water to drain, because it had never really rained that hard in the area to even cause an issue… It actually washed out the foundation underneath one of our buildings. So that was  a pain.

Now that we’ve learned that, we walk around the property, we look to see if there’s any (in essence) chokepoints like that… Because you do get a lot of rain in Eastern Kansas, especially since we are very close to the Mississippi River. We look at the elevation to see how close we are within the flood plain, because – I don’t know about you, but the Mississippi River and a few other rivers in Central America (as in Central United States of America) have been over-flowing and flooding… Roofs are always a very big ticket item. We look at the either boiler systems and/or chiller systems. In this case we have individual furnaces in all of the units. We knew those were only three years old, so we didn’t have an issue with any of those… But we wanna take a look at the big dollar ticket items.

We also wanna look and see if there’s any types of issues with mold, bugs, things like bed bugs, cockroaches, and see what we can do to mitigate some of those issues to the best of our ability… Because those things are what’s going to cost you in the long run. It’s going to be very expensive to do the roofs. Ours were only three years old, but even though they were three years old, we still got up on the roofs and checked them out, because occasionally you can have decking under the roofs that is weakened, and sometimes people don’t actually replace the decking when they put on new roofs; they just put new shingles over old shingles if they’re allowed to, based on code…

So we did our checking on that, and the roofs looked like they were in great shape. All the furnaces and air conditioners were all in great shape. The drainage issue… We had one little area where I let the team know and the managers know that they needed to keep a particular area, clear it out, because it seemed like a lot of stuff – whether it was people dumping trash, or the trash just blowing or draining down into that area as the rains came; that all needed to be cleared out… Plus, it didn’t look nice with some of the trash that was in the area. So those were some of the big things we look at.

Then, of course, the parking lot, whether it’s asphalt or concrete, what’s the condition, does the parking lot need to be sealed… A lot of people don’t realize that the asphalt parking lots need to be sealed on a regular basis and restriped, so that they don’t dry out… Because if they do dry out, they can literally turn to nothing but mush and gravel, and then it’s gonna be a much more expensive fix to clear all that out and then put down a new overlayment, instead of just taking care of it and doing preventative maintenance in the meantime.

Joe Fairless: Taking a giant step back, what’s  your best real estate investing advice ever?

Anthony Chara: My best real estate investing advice is 1) take action. Learn, and then take action. And then the other part of it I would tell people too is to not give up. There are going to be obstacles that you run into, and it’s all too often that in our society people just hit a roadblock and they quit. In my opinion, the only time that you fail in any type of investing or any type of endeavor is when you just give up. So don’t give up, keep moving forward. Even if you have setbacks, learn from the setbacks. Use that as a tool, so that you are a better investor the next time you go out and you do a deal. Don’t let setbacks hold you back. Keep moving forward, keep doing more and more deals, and you will be more and more successful.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Anthony Chara: Let me sit up straight here, and… Yup, I’m ready to go.

Joe Fairless: Alright, I know you’re ready… First, a quick word from our Best Ever partners.

Break: [00:27:06.02] to [00:27:44.27]

Joe Fairless: Alright, Anthony, best ever book you’ve recently read?

Anthony Chara: Cashflow Quadrant. I’ve just reread that a couple months ago.

Joe Fairless: Best ever way you like to give back to the community?

Anthony Chara: I donate money and time to a bunch of worthy charities, I donate a lot of money to Habitat, since I’m in real estate… I donate a lot of money to Habitat for Humanity, American Red Cross, Wounded Warriors…

Joe Fairless: And how can the Best Ever listeners learn more about what you’re doing?

Anthony Chara: You can go to my website, SuccessClasses.com. I do classes all across the country, and we’d love to see you out there.

Joe Fairless: I know some people in Cincinnati who have taken your class and had really good things to say. Anthony, thank you for being on the show, talking about some specific deals – the 32-unit challenges, with that and Mother Nature; the 60-unit in Iowa, and just talking through some things in the business plan, and what you and your team is doing, and things to look at from a big picture, whenever you’re taking a look at a property on a walkthrough.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Anthony Chara: Thanks, Joe.

 

JF1853: How Can Apartment Owners Leverage Smart Technology? With Mike Rovito

Mike is on the show today to tell us how he’s helping apartment owners save money in the long run by investing in smart technology. He’s also been around real estate for the majority of his career so he understands how owners and managers think about their investments. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“You need a partner” – Mike Rovito

 

Mike Rovito Real Estate Background:

  • CEO of Dwelo (dwell-oh)
  • Dwelo provides smart apartments to the owners and managers of multifamily communities
  • They have about 40,000 units on their platform
  • Based in San Francisco, CA
  • Say hi to him at https://www.dwelo.com

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Mike Rovito. How are you doing, Mike?

Mike Rovito: Good, how are you doing?

Joe Fairless: I am doing good as well, and looking forward to our conversation. A little bit about Mike – he is the CEO of Dwelo. Dwelo provides smart apartments to the owners and managers of multifamily communities. They’ve got about 40,000 units on their platform. His company is based in San Francisco, California. With that being said, Mike, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Mike Rovito: Sure. The current focus at Dwelo is to help the owners and managers of mid to large-sized apartments leverage the benefits of smart technology. We’re thinking smart thermostats, smart locks, smart light switches etc. Both so that they can provide it as an amenity to the residents, increasing the quality of their assets, but also to help them operate their properties more efficiently. We are a technology provider and a service provider to support that.

My background in real estate actually begins in the energy efficiency space, which is my entre to real estate at large. I was working in a consulting company called ERS, helping large real estate owners in New York City save money by reducing their energy spend… Working on projects like code generation, battery storage, smart thermostats, and even working with large industrial process. That kind of opened up my eyes to the world of real estate, understanding how owners and managers think about cap ex and op ex, and where they direct that spend, and how they’re trying to optimize the NOI of their assets.

That experience showed me what enormous opportunities there were in real estate, and also got me into the smart technology realm. While I was there, we launched a platform called InfiSense, which was a measurement platform leveraging IoT devices. Previously something that had been done manually, slapping some  monitors on these huge – we’re talking massive mechanical rooms in high rises and industrial process plants… Slapping some monitors on those, making that automated, and to the cloud. It taught me a lot about technology, and that was sort of how I ended up getting into Dwelo.

Joe Fairless: I’d love to – and we will – dig into Dwelo… You mentioned the energy efficiency space, and then you mentioned four or so things for reducing energy costs. Will you just mention those again? The first one was code generation, but what were the other things you mentioned?

Mike Rovito: Battery storage, smart thermostats, industrial process efficiency… We kind of ran the gamut there. There’s obviously more standard things, like improving your lighting efficiency… It really depended on who the client was. What makes sense for a commercial office owner, versus an apartment owner, versus Steinway Piano Manufacturing in Queens, New York is gonna be different.

Joe Fairless: Let’s just talk about that for a little bit… Office versus apartment owner. What are the different directions you would typically go with those owners?

Mike Rovito: In the office realm the people who are actually occupying that space often don’t have control, and the operating hours are fairly fixed, and they’re fairly long. If you look up at the New York Skyline into the evening on a winter night, the lights are on, and the heat is running, all these sorts of things. So mostly you’re working to improve the fundamental operating efficiency of that equipment – changing out old fluorescent lights to be LEDs; some of these aging boiler plants or chiller plants that are running the HVAC systems, the heating and cooling – getting them up to modern standards. Those can just run more efficiently, and it has nothing to do with scheduling or reducing waste in the sense of “We’re not gonna heat it when nobody’s there”, because those patterns are too fixed and it’s difficult.

In apartments you have much more of an opportunity to do demand-based stuff. Obviously, you wanna have efficient equipment, but then using smart technology with sensors, or just basic automation and scheduling, you can reduce that use. And I think there’s a split in terms of who the benefit flows to in apartments. You have your residents, your managers or the operators of the assets… And in most apartments your residents are paying for their own bills, so they don’t really care what happens when it’s occupied, except in so much as a resident perceives that they will save money and therefore they will pay more for that apartment… Which is a real thing, and there’s supporting documentation from Nest and folks like that, that you can save energy, that you can provide to your prospective residents, to help them see that benefit and value that in the asset.

But then for the operators it’s really about vacant unit settings… And there’s actually a pretty big opportunity for energy savings in vacant units at apartments, bigger than you might think. The average community – professionally-managed community – we’re talking like 200 units, it spends about $100,000/year on the energy in those units and common areas, just in the vacants… And by turning those off when nobody is there – we did an analysis in cooperation with Conservice, the multifamily utility billing provider, that there’s a long tail of just a subset of units that are using about half, and it’s all waste. The long tail is called by a vendor or a maintenance worker who goes in — think of a painter… They go in, they paint the room, they open up the windows, they turn the A/C on, and then it just runs and nobody checks on it for days and days… So the typical pattern that an operator will see in vacant units is a $20 bill, $20 bill, $20 bill… And a $180 bill automation can cut that out.

Joe Fairless: That’s wonderful information. Now segueing into Dwelo – how does Dwelo help with that part of the process? I know it’s much more than that, but how are you involved with that part of the process specifically?

Mike Rovito: Zooming out briefly to help answer that question… So we’re a technology and service provider that enables owners to take advantage of smart technology, which includes smart thermostats, smart light switches… And we provide the infrastructure that enables owners to take advantage of that particular value proposition that I’ve just described.

We will help them put in smart thermostats, smart light switches, and the [unintelligible 00:08:42.15] connectivity to get that in a place where it can be automated, so that you basically at the end of the day can just have that stuff turned off every day, if it’s vacant. We know if it’s vacant, and we can turn it off when it’s vacant. It’s pretty simple in theory; anything that can run on a schedule can be automated, can know when the unit is occupied and vacant… It’s not all that complicated. But actually getting that stuff to work at scale is sort of where we come in, and the value that we provide.

Also – not to maybe segue into a new topic, but also tying that in… Because that’s not the only value proposition. Building a technology platform that doubles that same piece of hardware as a resident amenity as well; not just a commercial solution, but also a consumer solution as well.

Joe Fairless: How is it a resident amenity?

Mike Rovito: A smart home is a really fast-growing category. For the residents, especially younger residents, but you’d be surprised – the demographic interest is pretty broad… The first commercial at the last Super Bowl was for Google Home. So this stuff is really coming. I think voice controllers like Amazon Echo and Google Home have really accelerated the interest in this.

The residents – we’ve shown empirically – are willing to pay more for tech-enabled apartments. Now, that can mean a lot of different things, but as a core, it’s a smart lock, a smart thermostat, a set of smart light switches. Maybe some outlets. But mostly just those things, that get you the core value proposition. What that is gonna enable the resident to do – we speak first to the thermostat – they’re gonna be able to control their comfort settings. There’s a convenience factor and a comfort factor that comes with that. If they’re coming home from work on a hot summer’s day, they can cool that apartment without having wasted energy all day by running the air conditioning while they’re gone. They can save energy in the same ways that the owners do by configuring automations that go to their schedule, or to their occupancy pattern as well.

For the locks it’s maybe a slightly different set of value propositions. It’s the convenience of being able to let a friend in to walk your dog while you’re on vacation, or somebody who’s coming to visit, giving them digital access to that lock. You don’t need to make a copy of the key or hand off a key. You might be at work that first day when they’re coming to visit, and you wanna let them in – you can either remotely open it, or you can actually give them a digital credential in the form of a thing on the phone that they can swipe, or a PIN code that works on that lock. So it gives them the freedom to control access remotely, while at the same time giving them comfort that they know “Did I lock my door or not?” They can see all those things.

As a bundle, those things add up to — at least on a perception basis… Different people are gonna use it different amounts. The value people get from that is gonna be subject to how they use it, but there’s definitely 100% perception in the marketing benefit for the owner of that asset, who can then position that asset in a different way, as a more progressive, forward-looking, technologically-enabled asset, as part of community aesthetic, and so forth.

Joe Fairless: And what’s the value proposition for the light switches?

Mike Rovito: There’s an energy component, for sure. It’s actually the most used component, I think. The value of the lock and the thermostat is clear and more obvious when you actually get into the apartment and you are able to control lights with your voice… You become extremely lazy. It’s actually a lot of fun; it’s the most magical component. You push a button and the lights just turn on and off. So it’s somewhat novelty, but there’s also a genuine convenience. I personally turn my lights off from bed every single night, using my voice. I haven’t touched a light switch in days.

Joe Fairless: So walk us through, please, the user experience for Dwelo. Is it apartment owners of 100+ units the user, or are the residents of those apartments the user, or is it both?

Mike Rovito: Both. I actually sort of divide it — it’s obviously a little bit grey, owner versus manager, and so forth… But I usually divide it stakeholder-wise. The owner is the buyer, and both the manager and the residents are users. There’s a web app for the managers, that enables them to sort of run the whole building. They’re blocked out from seeing what’s happening in occupied units for privacy reasons, but that’s gonna be their switchboard where they’re getting access to units, to vendors, and maintenance, and so forth; if it’s a vacant unit, that’s how they’re controlling the energy spend in those units, or preparing a model unit or a vacant unit for a showing by “Let’s get the lights on and the heat on before we show up, so it’s at the right level.” They’re not having to walk — especially at some of these large communities, there’s material time-savings that come from that.

Our managers self-purported about – for an average 200-unit community – 200 man-hours of time-savings from not having to deal with physical keys as they’re moving up at the property. So if you go out to show the one-bedroom and you’re no now on the third floor in the West Wing, and the resident says “Actually, I would be interested in seeing that second one”, they’re running through the halls, going back to the key track machine… They’re not doing that anymore with Dwelo. They have digital credentials and they can just [unintelligible 00:13:48.28] to that new unit. So there is a web portal that enables them to manage all of that, for the managers.

For the residents, it’s actually the most seamless experience you can have with home automation in general, because it’s pre-installed. When you move in, your account is already set up because the manager either manually added your email to the system, and it kicks off an invitation in your email inbox, and 30 seconds from there you’re able to have an account and control your unit… Or we have integrations with Yardi and RealPage that help with that, if you have those systems on-site for that property.

So the residents moves in, the stuff is already installed, and they get an account from the management system, and within 30 seconds they can be in the app, controlling all of it just as they would any other type of smart home system.

On top of that, we’re not trying to compete with Google and Amazon, we’re partners with them. We’re selling Google and Amazon hardware. Many of our apartments have Nest in them. We don’t make the hardware, we’re just reselling it and piecing it together on this platform… So they can take their account and attach it to their Amazon or Google account and have it show up in their preferred interface. So if they’re a Google family and they love the Google Home and they wanna connect it to their calendar and this and that, you can connect the Dwelo account there, and then the resident would never have to even use the Dwelo app if they don’t want to. That’s their choice.

Joe Fairless: What’s the cost?

Mike Rovito: It’s about $600 upfront to get started with a lock, a thermostat and two light switches. That’s gonna cover you for your average configuration. You can go up and down – we have a variety of locks and different aesthetics, different types of locks and thermostats and so forth. We’ve seen people push that to a thousand or more. We’ve seen people really scrimp and cut it to $400, but you’re probably in that $500 to $750 range for most units upfront. And then there’s the subscription, and this is gonna be subject to scale, and payment terms, and all other sorts of things… But to give a rough ballpark, think of it as starting at around $10 per the more typical [unintelligible 00:15:52.08] terms and configurations.

Joe Fairless: $10/unit?

Mike Rovito: Yeah.

Joe Fairless: Cool. When you think about the number one objection an owner gives you for not doing this after you speak to him or her, what is that objection?

Mike Rovito: I think they see this coming, they’re just not sure if now’s the exact moment to do it. I think there’s a fear factor, and [unintelligible 00:16:12.10] number one objection started to go away… The objection being “Is this truly gonna work? Am I really gonna see the benefits, or am I gonna introduce headaches for my management team?” And I think on the benefits side of it — so it’s just sort of a general skepticism.

On the benefit side of it we’ve empirically been able to show 1% to 3% rent premiums. We’ve been able to show time savings for the team, we’ve been able to show energy savings that dropped to the bottom line… So we’re building a pretty good — I mean, we’ve had tens of thousands of units at this point, we’ve been at this for four years, or actually longer… So we’ve got pretty good evidence at this point. The best evidence is when the competing product down the street puts us in.

And in terms of “Is it gonna work?”, I think we’ve got good customer references to support that. And it is a legitimate challenge, and that’s why we exist as a business; you need a partner, you need some help.

Joe Fairless: Anything else that we haven’t talked about as it relates to Dwelo and smart apartments that you think we should?

Mike Rovito: No, we’ve covered a lot of ground.

Joe Fairless: Cool. Well, that’s because of you, and I appreciate it. Mike, thank you for talking about Dwelo, the services that your company provides, as well as getting into the specifics of energy savings, as well as what generally is referred to as a smart home – having a lock, thermostat, light switches… And the value proposition for each of those, as well as the costs associated to it.

We should have mentioned at the beginning of our conversations – Best Ever listeners, this is a Skillset Sunday episode, so I hope you’re having a best ever weekend, and Mike thank you for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Mike Rovito: Thanks, Joe. I appreciate it.

JF1852: From No Real Estate Knowledge To Over $40 Million AUM with Michelle Bosch

Michelle immigrated to the states to study business and work a normal job like most people expected. She did that, and she was not happy. Thankfully she came across real estate investing as a way out of that. Now doing syndications and buying and selling land, Michelle and her team are doing really well and she’s here today to share her story and knowledge with us. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I wish he had focused on the who of our business a lot sooner, we’ve been focusing a lot on the team” – Michelle Bosch

 

Michelle Bosch Real Estate Background:

  • Co-founder and CFO of Orbit Investments and a full time real estate investor since 2002
  • They have over $40 Million AUM
  • She has bought and sold over 4,000 pieces of real estate and built the 3rd largest land investment and auction company in the US
  • Based in Phoenix, AZ
  • Say hi to her at https://www.michellebosch.com/
  • Best Ever Book: This is how we rise

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I am your host today, Theo Hicks, and today we’ll be talking with Michelle Bosch. Michelle, how are you doing today?

Michelle Bosch: Wonderful, Theo. Thank you for having me.

Theo Hicks: Absolutely, and thank you for joining us. Looking forward to our conversation. A little bit about Michelle, she is the co-founder and CFO of Orbit Investments, as well as she’s been a full-time real estate investor since 2002. Currently, she has over 40 million dollars worth of assets under management. She has bought and sold over 4,000 pieces of real estate and built the third-largest land investment and auction company in the U.S. She’s based out of Phoenix, Arizona, and you can say hi to her at MichelleBosch.com.

Before we get into the meat of the conversation, do you mind telling us a little bit more about your background and what you’re focused on now?

Michelle Bosch: Sure, absolutely. I am originally from Honduras, so just to give you a little bit of background – I’m an immigrant to the U.S. I came here in 1995 to study Business School, then an MBA. I went to work, like everyone expected, and hated it, and started looking into real estate — well, before real estate, into other business opportunities, but then looked into real estate. We knew absolutely nothing about real estate, nothing regarding how to build a home. My husband’s also from Germany, so how we build and construction in general was completely different.

It was a little bit overwhelming for us, because most people start with houses, and that’s what we wanted to start with… And we had no clue, so then we decided to focus actually on land. The reason why we focused on land was because, like I said, we didn’t know anything about how to estimate repairs, how to deal with tenants, or deal with toilets; they were getting broken, or roofs, or repairs, or molds, or anything of that sort.

So I had humble beginnings in the land space, and then we were able to really quickly scale that, and we went from doing our first year 60 land deals, to the next year doing a little bit over 100, and then the third year deciding, “Okay, we are working our butts off. Either we go big, or shrink back up.” We decided to go big and started selling our land through live auctions. Here in Phoenix we would have about one a quarter, so about 250 pieces of land in one day… That’s kind of where we started.

Then in 2009 we were in the incredibly fortunate situation of having created incredible large cash profits from selling land, either through cash or through seller financing, so quite a bit of cashflow coming in as well… And we were sitting in quite a bit of liquidity. And Phoenix was for sale, so we just went crazy shopping for homes. We could get them for anywhere between $30,000 and $50,000 and we could rent for $950 to $1,100 every month.

Then just three years ago, in 2016, we started in the multifamily space, syndicating our first deal, partnering with someone that knew how to do this really well, and now three years later we’re getting actually ready to sell that first asset. Then we moved on to two additional syndications in two other markets… So that’s where we are now. But we continue to this day to do land, just because it is so simple to work. You have virtually no competition, you don’t have the typical three T’s, of the tenants, toilets and termites. You don’t have to deal with mold, you don’t have to deal with anyone letting you into the property, getting a key to get into the property, because there is no key… [laughs] You just walk into the dirt.

At this point, all of the land that we do right now flip, we do it site unseen. We don’t need to be going to the property anymore, and that’s who we were able to actually scale, by just using Google Earth, maps, coordinates that we can send our buyers to, or when we’re buying, to really assess and do our due diligence upfront. We really don’t need to visit the property.

So it’s simple – we have developed a really good process to find sellers that don’t want their property anymore, and it’s a numbers game at this point. We have a team that is a very well-oiled machine, that we can really rely on to operate as we would operate. And I know you’re gonna ask me this a little bit later, but I wish we would have focused on the Who much, much sooner in our business. I would say during the last maybe six to seven years, our major emphasis has been on developing our team, on making sure that we hire based on core values, that even if someone has the expertise and skillset, that they must also align in core values and in our mission in order to join our company. That has really brought an incredible amount of ease and effortlessness for my husband and I.

We work together on this business. We’re one of those weird couples that can actually work together… And really just having that unique ability team to rely on has been just instrumental in us being able to move from being generators of results inside of our business to really being creators of opportunities for our business.

Theo Hicks: I appreciate going through all that; lots of things to hit on… We’re gonna break it into first talking about land, and then your syndication deals, and then some more high-level stuff about building your team. First, what part of Germany is your husband from?

Michelle Bosch: He is from the very South, from an area called the Lake of Konstanz. This is absolutely beautiful. It borders to Switzerland on one end, to Austria on the other… We actually fly into Zurich when we go visit every year. We’ve been doing that yearly pilgrimage thanks to real estate, for the last 22 years. He’s just right across the border, so 45 minutes after landing and getting out of customs in Zurich, we are on the German side and enjoying a beautiful area of Germany. Just incredibly orderly, clean, flowers everywhere, vineyards… I always tell him, “What a pity that the Germans don’t really advertise this area so well”, because it has nothing to be envious about or jealous about if you compare it to Tuscany. It’s just that Tuscany has an incredible amount of advertising that is being done for that area and that region in Italy… But it’s beautiful. It’s very, very quaint.

Theo Hicks: Yeah, that’s great. I just ask because my mom was born in Munich, so it’s always interesting to see people–

Michelle Bosch: Oh, yeah? About a 4-hour car ride or 3 hours by train. We’re actually going to be right now in September at Oktoberfest. I’ve heard for years about Oktoberfest, and I’m like “Jack, we need to make it out there sometime.” Especially since we had our daughter – we have an 11-year old daughter – we’re restricted to that school schedule. She’s usually back in school by the time Oktoberfest comes around, but I’m like “We’re just gonna go ahead and do it. We’re gonna pull her out for a week.” We already have tickets to it, our flight’s booked, and we’re excited. [laughs] Yeah, because he’s been talking about it for 22 years, and I’m like “I finally want to experience this.”

Theo Hicks: There you go. Alrighty, so let’s start off by talking about the land. In particular, you mentioned that you’re able to buy these properties sight-unseen. I know some people do that for properties as well. You mentioned a few things that allow you to do that – Google Earth, maps, coordinates… We don’t have to necessarily dive into that, but you did say you’ve got a well-oiled machine process, and I just wanted to go over that process of how you’re finding these deals… You said that  you’ve got a good way of finding people who no longer wanna have their land… So how are you finding them, how are you evaluating them, and how are you finding sellers in the back-end?

Michelle Bosch: The first step is basically identifying an area that you want to buy land in. Usually, there’s three types of properties that we’re after. Either an infill lot in the city, a lot that is in the path of growth, so on the outskirts of the city, or a recreational property, which can be out in the boonies, or close to lakes, or ski areas, or anything that you can think of recreational.

Here in Arizona it’s usually — I say “out in the boonies”, people that wanna go and set up a camper, or come out there with their RV on the weekends, or wanna go riding their ATVs… And the more washes the piece of land has, the more attractive it is for them. So we have to be open-minded when thinking about land. We always think of like “Oh my gosh, it’s got a ton of washes”, and that’s actually — a property that I can think of, one of our very first 40 acres in really rural Arizona, had quite a bit of washes, and we’re like “Oh my gosh, we’re gonna be stuck with this. What are we gonna do?”

And then there comes along a buyer that says “I am actually looking to pan gold, and I want a property that has quite a bit of washes”, because the mineral rights actually come with the property here in Arizona. In some other states the railroad companies own the mineral rights, but here in Arizona you have that situation. Or someone says “I don’t want it flat, I don’t care if it’s buildable, because I just wanna take it out there with my kids and ride our ATVs on the weekend.”

So the first part is basically identifying an area, and then once you have identified an area, you wanna procure a list of owners in that area, and you want to sort that list  by vacant land list owners only. Ideally, that list should have the owner’s mailing address, so you can actually contact them. And then what we do is we send them what we call our land profit generator proven letters. We tested quite a bit at the beginning until we ended up with the letter that we have been using now for quite some time. It is signed by me.

We even tested at the beginning having Jack sign the letters, and we had higher response rates when it was a lady soliciting them. So they go out with my signature. Invariably, there’s some people that still cannot conceive that a lady is soliciting them, so they will ask for Michael instead of Michelle.. But that’s okay… [laughter] And you send them a letter, pretty much. Then people will call you based on that letter, and they will raise their hand and say “Yeah, I do have this piece of land. I am interested in selling.” And we basically go through a script that we’ve developed to find as much information as we can, and gauge motivation from the seller.

We make offers. In the process of making offers we don’t take very long, because at this point we still don’t have our property under contract… So we do a relatively quick value analysis just to give us a ballpark. Most of our offers are anywhere on the 5 cents to 25 cents on the dollar of value of the property. We send those offers out, and then invariably, contracts will come back in accepted. You send that to a title company, close on the deal, and if you have been doing this for quite some time, you will more than likely the moment that you have an acceptance, you will start marketing the property, so that you can start doing that in parallel.

You also have the scenario where you don’t even have to use your own money, but you could do what we call a double-close, where you find a buyer and then that buyer really pays your salary, and the difference – they cut you a check, and there’s no money in the deal. Or you can assign a contract to another investor. So there’ different ways to do it, you don’t have to buy it. It’s just that for us it’s such lower price amounts that we just go ahead and buy it. Unless it’s a higher-priced property, then we’ll either put an option on it, or do a double close to find a buyer first, and then close on that transaction.

So that’s pretty much the process… And a lot of the selling can be done online as well. You don’t have to have your own website, you don’t have to really be tech-savvy. You just need to go to the places where people are already looking for real estate. We list our properties on Craigslist, on Zillow, on LandWatch, on Facebook Marketplace. Actually, Facebook Marketplace for the last year and a half has been fantastic… So we’ve been using and shifting a lot of our focus towards Facebook Marketplace to sell quite a bit of our land… And there, again, you can send them coordinates, plat maps…

This is all information that you will probably acquire upfront, in the process of the purchase, but basically as you are accumulating all this information in the process of you purchasing it, or putting it under contract, this is the same information that you’re gonna be using to market your property and find your buyer and send your buyer out there if they need to go look at the property before they invest.

Theo Hicks: That’s a really good, succinct six-step process for essentially going from beginning to end. There’s a few follow-up questions, starting with your script in your letters. Do you mind just telling us what you’re — you don’t have to tell exactly what it is if you don’t want to, but what’s the letter… Don’t go through the entire script, but…

Michelle Bosch: Yeah, yeah. I don’t have it handy, so I don’t know it off of my head anymore. On the letters it is a numbers game, but the number of mailings that we have to do in comparison to houses is minimal to get a deal. You can expect from a mailing of 100 letters to get anywhere between 8 and 16 callbacks, and then probably 2-3 deals, depending on the area and the property that you’re after. If it’s rural or infill lot. An infill lot will probably require a little bit more, just because it’s in a city and there’ll be a little bit more competition… So that’s what I wanted to say on the letter side.

It’s basically a letter that says “Hey, I know you own property in such-and-such county here in Arizona (or Texas, or wherever you’re at), and I’m really interested in buying it from you. I can pay you cash, I can help you get rid of the burden of property ownership. I close quickly, I have a track record. I’ve been doing this for so many years now.” Or if you don’t have that track record, you can say “My company is looking to buy and acquire in this area we’re moving in, and if you would be interested in having a quick cash sale, please give me a call.” And you give them the contact information. There’s a little reference.

We have actually developed a proprietary software, so that helps us manage all our deal flow… So part of that letter, when it goes out, there’s a little reference number on the side, that even if someone calls me back and I miss their call, they can leave a voicemail and I have an outgoing recording that says “Leave me your reference number, and with that I can look up your information, and I can look up your property, and I can call you back”, if that’s what they want, a callback. Otherwise I’ll just send them an offer. Because that’s all I need really from them; it’s nice to talk to them on the phone, just because, like I said, you can talk to people on the phone and you probably get a higher acceptance rate, but it limits you in terms of either you hire three people to help you, or you outsource it to a call center, so that they can help you receive those inbound calls, and you are able to personalize that call a little bit more… But there’s only so much volume you’ll be able to handle.

Or you can decide  – if you still have a job – that you’re gonna let it go to voicemail, or outsource it, whichever way… And perhaps you personally are not gonna make that relationship with your seller on the phone, but it’s gonna give you the ability to scale, basically, and send out much more letters, send out much more direct mail, and be able to service many more inbound calls, and therefore send out many more offers, and get more contracts accepted, and so on and so forth. So that’s just on the letter side.

When you’re receiving the call, the questions that you wanna ask people are along the lines of “Are  you the owner of record?” More than likely, I would say about maybe a little bit over 50% of the people that we get either they inherited it, there is a divorce of some sorts… Some kind of a hardship has happened, or mainly they’ve inherited it and they’re miles away from that property, and they don’t wanna have to deal with it… And it’s either in the name of their parents, or of the estate, or whatever… So you wanna ask them, “Am I dealing with the owner of record, or who are you in relation to the owner of record?” You wanna make sure that you are talking to the person that has decision power.

Then you wanna ask them about the property. “Can you confirm the size? Does it have access? Does it have utilities? Electricity? Is the road access paved or unpaved? (Because we’re talking land here) Do you know if it’s difficult to get in a septic tank, or have you had your land percolation test?” It’s basically a test that they do to figure out how fast water drains in order for you to be able to put in a standard septic system… So you basically go through a series of those questions to try to see what is out there in terms of value already in the property; any improvements that they have done, fencing it, or anything of that sort… And then  you can ask if they have an idea of what they would like to get for their property. That’s pretty much the gist of the script.

What you’ll find out is that during the course of that conversation, if you are servicing the calls, which is how we started — actually, both Jack and I would take all those inbound calls, and because when we had just moved here in the U.S. our English wasn’t so good, we struggled at the beginning. I’m like “No, you take that call.” “No, no, YOU take the call.” “No, YOU take the call.” Because we were really concerned and self-conscious about our accent, and people feeling like they could do business with someone that sounded like a foreigner.

Honestly, we were very concerned about that. And actually, it was never an issue. People loved talking to me and telling me their stories of how they had purchased that piece of land… If it was here in Arizona along with another lot in Florida, but they had decided to go ahead and retire in Florida, and now they didn’t want their property… A lot of out-of-state owners. And it really gives you the opportunity, when you take the call, to really connect and hear from your seller as to what’s going on with the property.

Theo Hicks: Very detailed. This is a very solid episode for those who want to get into the land game. The last question before the best real estate investing advice ever question, which is “How are you formulating the offer price?” I know you ask them what they want, I know you said that you do between 5 and 25 cents on the dollar of the value of the property, but how are you determining that actual value? Do you have software that you use, is there a formula? How does that work?

Michelle Bosch: Yeah, our software actually is tied in with Trulia and Zillow, so we can see comparables very quickly. Otherwise, a simple Google search if it’s a subdivision and I don’t find anything on Zillow or Trulia; I can just google it and get a feeling for 5-10 minutes at most for value, and go ahead and make my offer anywhere between 5 to 20 cents on the percent of that… And send it out, and see what happens.

There’s gonna be people always that are not gonna be accepting that offer, and they might even write you back, saying “Hello, how do you dare write me such a low-ball offer?” But then you have a ton of others that actually accept your offer and wanna do business with you. That was your question, right? What was it?

Theo Hicks: Yeah, that was the question, how you’re valuing the property. So basically all the properties are comparables.

Michelle Bosch: Well, one more thing is in an infill lot situation, that’s where it would vary a little bit. You might not have comparables, because say a subdivision is completely built out, and perhaps you’re looking at the last infill lot there to acquire. So how you would do that is you would basically look at the average price sale of homes in that area, and then figure out basically per square foot what a builder would be having to spend in terms of building a similar-sized property now, and then from there say “Okay, about 20%-30% of that value is going to be going to the land. So the land is really worth this much, and of that I’m going to offer 10%, 15%, 20%.” So you kind of like back into the value of the land based on the value of the house. So that’s the only place where you kind of need to back into it. Otherwise it’s pretty much straightforward for the most part, and it’s just looking at comparables, and size, proximity, price per acreage that has sold in the area that you’re looking at.

Theo Hicks: Alright, Michelle, what’s your best real estate investing advice ever?

Michelle Bosch: I think the best advice ever – and even to this day we continue to apply it and we need to remind ourselves, because as we have transitioned in our journey as investors, you get so enamored with “Oh my god, I can entertain so much complexity now.” But my best advice would be to always, no matter what it is, even if it’s an apartment syndication, to keep things simple. The key to prosperity is simplicity, and to keep things simple. That would be one. And then the second would be to really focus on your Who and on building your team that is rock-solid, that is people that share your same core values, that are going to have the same intentions that you are, that really rally behind your vision and the mission that you have for your company as a business owner; that is the biggest a-ha.

Theo Hicks: Alright, Michelle, are you ready for the Best Ever Lightning Round?

Michelle Bosch: Sure! I can do this! [laughs]

Theo Hicks: Alright. I’ve got faith. First, a quick word from our sponsor.

Break: [00:22:49.28] to [00:23:50.14]

Theo Hicks: Alright, what is the best ever book you’ve recently read?

Michelle Bosch: I am actually in the process of reading it right now, and it’s called “This is how we rise.” It is by a lady by the name of Claudia Chan. She is the founder of the S.H.E. Summit. Part of what I’m really interested right now is in really advancing women and getting many more women into real estate. So it’s a leadership book, and I would highly recommend it. She talks a lot about whole life leadership – in order for you to become a business leader, you really have to develop yourself personally, and in order to develop yourself personally, you really need to develop yourself spiritually. When you go to that place of spirit, because nobody wants to talk about that too openly — but when you do go to that place of developing yourself spiritually, you start thinking about leading in your life with a purpose, and everything that you do in leading in your business, and in your community, with a purpose. I would highly, highly recommend that book, “This is how we rise.”

Theo Hicks: If you had to start over today with little or no capital, how would you do that?

Michelle Bosch: I would go back to doing land. When we started doing land, how we did it was lower-priced property, high volume. I would probably turn that around, just because I can entertain a little bit more complexity now, and I would have had the benefit of that experience… So I would now focus on slightly larger-priced properties when it comes to the land, but I would definitely go back to the land… Because what I like about land is that it gives you the opportunity to create large cash profits if you just do a quick flip… Which we call one-time cash, by the way, in our family.

And if we decide to do seller financing and really carry the note, become a bank, and have someone pay us monthly payments every month on our land, that’s temporary cash… So it allows us to go from one-time cash, to temporary cash, and then use that money to go and park it into passive cashflow type of investments such as apartments. So that’s what I would do – I would build my team around core values much quicker than I did in the beginning, for sure, and leverage the knowledge that we have, the capability, the confidence, the courage.

We always say that our process has been a process of following what we call the four C’s, which is we committed to something simple, which was land… But that helped us build the courage, the capability and the confidence to move into the next asset class, which was houses. And then after doing that for some time, and 50 rentals later, in three different markets, we’re like “Okay, we committed to that, we mustered the courage, we gained the capability, now we have the confidence to move to the next big project.” So leverage that, leverage our network, and then move as quickly as possible again into passive investments and get what we call our Security Plan in place through passive investing in plays as quickly as possible.

Theo Hicks: Alright, and then lastly, what’s the best ever place to reach you?

Michelle Bosch: The best ever place to reach me I think would be to just go to my website. It’s www.michellebosch.com. Of course, Facebook, Michelle Bosch, Instagram @MichelleBoschOfficial. We have a free Facebook group called The Land Profit Generator Real Estate Investing Group – very active; it’s an incredible community of very generous people; generous with their time, with their knowledge, that really help each other just figure out land deals if you’re starting at the beginning, or if you don’t know what the heck you’re doing. It’s an amazing resource to have. And just a source of inspiration every single week. “I have three offers accepted. I just closed on a deal.” Just last week we had a gentleman – his first deal was $18,000. Another guy said “I just sold something for $35,000.” The next lady had another offer that go accepted, and so on. It’s a place to come in and celebrate your wins, and really share your struggles, because everyone else there is going to help you get over those. They’re a very, very giving community.

Theo Hicks: Well, Michelle, I really appreciate you coming on the show today and going into extreme detail on how to get started in land. This episode should be called “The Ultimate Blueprint to Buying Land.” I’ll quickly summarize the six steps… Number one, identify the area, and you went over the types of land you can look at. Step two is you get a list of owners – you said specifically sort by vacant land only – contact those owners, and then send them your letter… And you went over exactly what to include in that letter.

We talked about the pretty high conversion rate of these rate of these letters for land, compared to other real estate niches.

Three is to screen the calls. You went through some of the questions to ask and how to approach actually screening the calls from a logistics perspective. Four, make offers… Again, you went over exactly how to calculate the value of your offer.

Five is as the signed contracts come in, send those to your title company to close, and then step six, which kind of like 5.b) at the same time, once you get that contract, you can start to market those properties, and you gave us examples on how to do that.

And then your best ever advice was two parts. One, keep things simple; don’t make things super-complex and just confuse yourself; if it ain’t broke, don’t fix it, as they say. And then you also talked about how you should focus on building a team that shares the same core values and mission and you, and that trumps someone who’s highly skilled in land, for example, but doesn’t share those values.

Again, I really appreciate taking the time to speak with us today. Best Ever listeners, thank you to everyone who listened. Have a best ever day, and we’ll talk to you soon.

Michelle Bosch: Thank you for the opportunity.

JF1831: Real Estate Rookie Buys 5 Rentals in 12 Months with 25% COC Return with Greg Gaudet

Greg is a long time Best Ever Listener, who took the plunge into real estate in 2018. Now Greg is a guest on the same podcast he listened to to learn the ins and outs of real estate. We’ll hear how he got over the fear of making mistakes, bought some properties, and is making a great income from those properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I just talked to everyone I could and learned what I needed to learn” – Greg Gaudet

 

Greg Gaudet Real Estate Background:

  • Started in Real Estate as an Appraiser right out of high school in 2002
  • Lost job in the recession, moved around the real estate industry before getting his first deal in 2018
  • Bought 5 rentals in first 12 months averaging a 25% COC return and has done 1 wholesale
  • Based in Maui, HI
  • Say hi to him at greg@mauihomebuyers.com
  • Best Ever Book: Never Split the Difference by Chris Voss

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Greg Gaudet. How are you doing, Greg?

Greg Gaudet: I’m great, Joe. Thanks for having me on the show.

Joe Fairless: I’m glad to hear that, and you are welcome. First off, let’s learn a little bit about Greg – he started in real estate as an appraiser, right out of high school, in 2002. He lost his job in the recession, moved around the real estate industry before getting his first deal in 2018. He bought five rentals in the first 12 months, averaging a 25% cash-on-cash return, and has done one wholesale. Based in Honolulu, Hawaii. With that being said, Greg, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Greg Gaudet: Absolutely, Joe. You covered a lot of it there. Just one correction – I’m based in Maui, Hawaii, in the Pukalani/Kahului area. Different island, but very close to Honolulu.

Like you said, my background – I’ve worked in real estate for most of my life; I’ve always been very interested in investing. I’ve made a lot of offers over the years. For about 15 years I was really interested in investing, but just never actually pulled the trigger… And I’ glad I didn’t, because I didn’t have any real education on investing; I just understood real estate, but I was really thinking of buying for appreciation.

Around 2017 I’ve found your podcast and some other resources, and started educating myself and learning how to really analyze a deal, and that’s when I finally took the plunge and made the commitment, and I haven’t looked back since.

Joe Fairless: Five rentals in the first 12 months, averaging 25% cash-on-cash return. Yes, please. That’s incredible, let’s talk about it. The first deal – give us the numbers and tell us a little bit about how you found it, please.

Greg Gaudet: Yeah, the first deal — so I’ll back up a little bit; in 2017 when I was ready to start and I was trying to figure out which route to take, I was looking at turnkey properties in (of course) the Central-Midwest area because of the price points; I live in a really expensive market. The median price here is $819,000. So because of that, I was looking at those cheaper markets. I called in to a guest that was on your show. It was something about him, I really liked him, and he sounded like he was willing to help anybody that gave him a call.

So I called him, told him “Hey, there’s this one building here in Maui that I can buy condos really cheap, but it’s a lower-end building and it scares me, so I’m gonna do turnkey in the Midwest.” And he said “I think you should look at your market. I don’t think you should do that.” And because of that conversation, I ended up taking a closer look at this one building — not one building, but there’s a few buildings; this one area with some buildings in Maui that are lower-end, and the price points are really low for Maui, in the 100k range.

Joe Fairless: 100k for what. A one-unit, or…?

Greg Gaudet: For a two-bedroom condo, yeah. At the time, the average sales price was 100k.

Joe Fairless: Okay, cool.

Greg Gaudet: So I was looking at units on the MLS there… A friend of mine that does a lot of different stuff with investments and auctions, foreclosures and that stuff, and she told me about this unit that was going to foreclosure auction; she said “This is a good deal, I think you should bid on it. It’s an ocean view, top floor corner unit, and it’s $65,000.” At first I kind of brushed it off, I thought “No, I don’t know anything about foreclosure auctions.” [unintelligible 00:05:44.11]

Joe Fairless: Right. It could be intimidating.

Greg Gaudet: Yeah. But some time went by, I made some offers on some other units… I was offering around 70k, 80k, 90k, and getting rejected… So I came back to it and said “Hey, is that thing still available?” She said, “Yeah, the hearing is coming up soon”, so I started doing my research. I’ve put a ton of work into learning how the system works here, by going to the unit and actually knocking on the door, talking to the tenants, I got to see the inside… I did all my due diligence. I found out everything was good. Then I went to the auction and bid on it.

Joe Fairless: Real quick though – usually when you’re knocking on the door of a place that’s going up for auction, you’re not gonna get a receptive audience. How did that go?

Greg Gaudet: Well, I think that’s not a really crowded market, so it’s not like any other city on the mainland. Probably you’d have a lot of people coming by and knocking on the door, or peeking in… Here that’s not really an issue. In fact, a lot of times they allow you to go into the property before the auction.

They were living there rent-free. They knew that their time was coming. I just approached them really nicely, and they let me take a look around. I told them, “Look, I’m gonna buy this unit. We can work together and I can be really reasonable. I can probably help you guys through this process, and you can help me, or we can not be nice to each other and it’ll just be worse for everybody… And they worked with me.

Joe Fairless: Huh. Okay. So you educated yourself. How did you go about educating yourself about the auction process? Because at this point you hadn’t purchased a rental property yet, correct?

Greg Gaudet: No.

Joe Fairless: Okay.

Greg Gaudet: So I would go to all the auctions, I’d talk to everybody there, I’d talk to the people that were bidding, I’d talk to the commissioners that were doing the sales… I would just talk to everybody and learn everything I needed to learn. And also talking to a lender, because another important detail is I used a traditional mortgage to purchase that unit. I found out everything I needed to know, I felt confident enough, I went through and did it.

Now I’ve bought a couple more at the auction, and I kind of know this system a little bit better. Looking back on that, there’s so many things that could have gone wrong. That was not a good decision. It’s just unbelievable that it all worked out. I’m super-happy I did it, because it was a great deal. I bought it for $70,000, it appraised at purchase for $95,000, and on the one-year mark from the date I closed on it, the bank valued it at $142,000, so it basically doubled in value from what I paid for it in one year. And it cash-flows about $650-$700 a month. So it does well, but it was really risky. A lot of things could have gone wrong.

Joe Fairless: What are some things that could have gone wrong based on what you’ve heard, or some other experiences and conversations with investors?

Greg Gaudet: One thing that could have gone wrong… The day the appraiser came – because remember, I didn’t have the cash to close on this unit – the tenants could have said “No, we’re not gonna let you in”, and I would have been out of my 10% deposit, non-refundable. So that could have happened. I could have found out that it was a second position mortgage that was foreclosing, and there could have been a $300,000 first-position mortgage that would not be wiped off… There’s a lot of things that could have gone wrong.

Joe Fairless: So that property was purchased, and — what does it rent for again?

Greg Gaudet: It’s rented for $1,700.

Joe Fairless: Wow! [laughs] That’s some return.

Greg Gaudet: Keep in mind, it’s a condo, so the HOA dues are $585/month. So that’s a big chunk of that.

Joe Fairless: Okay.

Greg Gaudet: If you factor that in, you might look at it and say “70k purchase price, for $1,700 rent, it’s more than a 2% rent to price ratio”, but the maintenance fees… Those probably sound really high to people on the mainland, but those are kind of average here in Maui, also because the building has a pool, 24-hour security, and all these amenities.

The taxes are really low though. The taxes are $50/month, $600/year, so all-in expenses are about $1,000.

Joe Fairless: Those ARE really low taxes… Is that typical for the area?

Greg Gaudet: Yeah. Hawaii’s got some of the lowest property taxes in the country.

Joe Fairless: Oh, yes they do. Wow. With the property – that was your first one; you jumped in feet-first, a foreclosure auction. Then what did you do after that, in terms of acquisitions?

Greg Gaudet: The next one I bought on the MLS, actually. The only one I’ve ever bought on the MLS was a rundown unit that I got a good deal on it, fixed it up, and I did an incredibly frugal rehab on it. The contractors were giving me $10,000 estimates; these guys were going in there saying “Oh, I can’t do this. It’s too nasty.” It was pretty bad. And then I ended up actually rehabbing it for about $2,100 just by saving everything I could, being super-frugal.

Then after that, the same realtor that represented me on that one, I would see him surfing in the water, I’d see him all the time, and I’d mention “Hey, I’m looking for units. Let me know about off market deals.” He texted me a couple months later (or actually probably like a month later) and said he had run into an agent at an open house, and said he’d just inherited a unit at that same building, and wanted to sell it quick… So I made him an offer, I bought that one under market value, nice and quick.

Joe Fairless: What did you make the offer for?

Greg Gaudet: That unit actually — at the time, the value was about 120k (about a year ago). I wanted to offer him in the ’80s. My agent – he’s a retail agent, and he said, “Oh, I think you’ve gotta be in the hundreds…”, and being my third deal, I was still very new, so I let him sway me a little bit… So I started at 90k, and ended up getting it for 95k. At the time it was worth about 120k, 125k.

Joe Fairless: Okay.

Greg Gaudet: So it was right at the cut-off. That’s probably my worst deal, I paid a little too much on that one.

Joe Fairless: What does that rent for?

Greg Gaudet: $1,700.

Joe Fairless: I’m noticing a theme… Same HOA, $585/month?

Greg Gaudet: Yeah. Same building… And also, it’ notable that a lot of my units are HUD rentals, Section 8. So the $1,700 is kind of like that’s what I’ll get. I’ve built a relationship with the HUD inspectors and case workers, and I pretty much know that if I have a two-bedroom…

So one of the ways that I was able to make this happen – these numbers sound really great – I got really lucky. I bought at a good time, when prices were still reasonable, rents were going up, and prices just happened to go up a lot over the last year, year-and-a-half now.

Joe Fairless: How much could you sell the second one for?

Greg Gaudet: The second one… That was a one-bedroom unit. There haven’t been any comps actually since that one sold, but there’s one in escrow right now for about 120k, so I’d say I could sell it for about 110k to 120k… And I bought that one for 75k.

Joe Fairless: Why are they so inexpensive relative to my perception of how much they should be?

Greg Gaudet: It’s mostly just because this particular building is not a desirable building. It’s about a D-class building, from Maui. In any mainland market I’d say it’d probably be considered like a C, C- class. But since Maui doesn’t’ really have any rough neighborhoods or lower-class neighborhoods, the cheapest you can buy a single-family house here is at least 400k, maybe 500k, unless it’s a knockdown. If it’s a teardown, you’ll get it in the 300s maybe.

This particular building – everybody knows it. It’s a huge, really large building, over 350 units, so it’s a well-known building, and it has a bad reputation… But people need to live. There’s a lot of people here that are just low-wage earners, or young families that have young kids and don’t make a lot of money, and they need a place to live. It’s central, it’s right in the middle of the town, across the street from the ocean, and… It’s not a bad place, it’s just not a fancy place.

Joe Fairless: You’ve bought five rentals in the first 12 months. Why weren’t you buying properties before?

Greg Gaudet: I made a lot of offers before. I was making a lot of offers in 2011 and 2012, 2013… But back then I was looking at real estate as “I buy my home, and then in a couple years I sell it and I make a bunch of money.” I didn’t understand that there’s so many principles in investing that you use to determine when to buy and when not to buy, and how to invest. So I did wanna buy, and I was trying to buy previously, but because I was just based on speculation, I was making really low offers, and only willing to buy if I got it– and I also didn’t know about other methods to buy. I was only looking at MLS listings, and none of those retail sellers were taking my offers.

I kind of wish that I had bought a couple of units, as I look back at 2012, because I was gonna buy them around 100k back then, and now they’re 250k(ish) today. So I didn’t know what I didn’t know back then.

Joe Fairless: For the five transactions in the first 12 months, how much money out of pocket in total were you to get those five transactions completed?

Greg Gaudet: I was putting about 20% down on each unit. Again, I’m really frugal, so I was saving, and I still do save probably 60% of my income… So I put about 20k to 25k per unit, except for one of the last ones. The last one I’ve just bought for 30k, so that one I just paid cash. So I got that one free and clear for just a little more than I’ve put as a down payment on all the others, and it’s worth the same. It’s in the same building.

Joe Fairless: It’s in the same building! Are all five in the same building?

Greg Gaudet: Not in the same building, but yes, in the same condominium project, the same association.

Joe Fairless: Okay, so you said there’s 300 of them, and you have five within the 300?

Greg Gaudet: Yeah, there’s like 352, and I have  five of them… And I’m done there. I’ve got five, I’ve got enough there. They do very good returns.

Joe Fairless: Why?

Greg Gaudet: Well, I just don’t think it’s smart to–

Joe Fairless: By 70 years you’re gonna own the whole building at this rate.

Greg Gaudet: Right?! Well, I don’t know; my mentor’s got a bunch there, and another guy I know there has got probably 15 of them there… Because obviously, they make great cashflow. Funny story, my mentor today is actually the guy that showed up to that first auction and bid against me. I showed up expecting to buy it for 64k, and I didn’t think anybody else was interested… And I show up to the auction, there’s another bidder there. He bid against me, and we both had a max bid of 70k, and just because I happened to bid first, I was the one that bid 70k, and he couldn’t go any higher, so I won it. And today he’s my mentor.

But yeah, I have five units there, I have a lot of my capital invested there, and if the whole place burned to the ground, I just wanna diversify. So as much as I love the returns there, I think it’s time to diversify, so I’m looking for other units now.

Joe Fairless: How did you come across the last one, where you bought it for $30,000 cash?

Greg Gaudet: That was just from marketing myself. I did some direct mail, I just talk to everybody, I tell everybody what I do, I give my card to everybody… And a seller called me up, and [unintelligible 00:17:15.27]

Joe Fairless: From the direct mail?

Greg Gaudet: Yeah.

Joe Fairless: Okay. So you were mailing direct mail pieces to all 346 units at the time.

Greg Gaudet: I actually didn’t mail everybody. This is really time-consuming and I don’t necessarily recommend this, but I went through all the tax records and looked at the units that were worth mailing. I probably mailed about a little more than half of them. Anybody that bought in the last year – I didn’t bother mailing those people; they’re paying full retail. So I mailed all the people that I thought would be motivated. I actually made my own list and mailed them.

So she called me up… She had inherited it ten years ago, and she wanted nothing to do with it. She was going over there every month to collect rent. Tenants were a month behind… It was just a mess, and she just wanted to unload it really quick. So that one worked out great, I’m really happy with that.

Joe Fairless: I bet. And when you were looking at the tax records, you weren’t gonna mail to anyone who bought it within the last year… So did you mail to anyone who bought within 13 months or earlier, or did you have a different timeframe that you had a cut-off at?

Greg Gaudet: No, I didn’t have a set timeframe. If they bought two or three years ago but they bought it pretty cheap, I would add them. I just went on a case-by-case basis. I probably didn’t add anybody that bought in the last maybe two years, maybe even three years.

Joe Fairless: Okay, cool. You have these five units… Are you managing them yourself?

Greg Gaudet: I am self-managing them, just because I have property management experience, so I’m comfortable with it… And I also think that it’s important for me to learn my specific market issues. I don’t have experience managing D-class rentals and units in this building, so this was important for me to learn, so that when I do go to hire a manager, I will know what to expect and what not to expect. So if they send me a bill for something that doesn’t make sense, I can say “What are you doing?” and I’ll know that’s not the right property manager.

And also, I have the time and the ability. It’s not very time-consuming to manage these five units that are ten minutes from my house, so I do it to increase my cashflow and returns and learn more about my market.

Joe Fairless: What are some tips for someone who wants to have Section 8 tenants in their properties? Whether it’s tips for the process, or anything else that you have that comes to mind?

Greg Gaudet: Screening. Screening, screening… Screen some more. Just screen the heck out of those tenants, and don’t believe the stories. That goes for all tenants. I don’t like to classify anybody, but I do think that there tends to be a lot of tenants that end up in a situation where they’re on Section 8 because maybe they weren’t very responsible with some things. So I try to watch  out for those tenants, and I try to find the people that are good people.

A lot of my tenants were good, hardworking people, even homeowners, and something happened in their lives; it could be me tomorrow, so I kind of — actually, a little side detail I’ll throw out there… I’m really proud of this – all my tenants have come from the homeless shelter. We have a major housing shortage now. A lot of people – even people with jobs and working people can’t afford housing here, and they end up in the shelter… So I’m really proud of being able to add value to the community and provide housing to these people, and give them a nice place too, and be a good landlord.

Anyways, the point is – screen them. There’s a lot of bad tenants out there, but I check all their references, I’m very thorough with them, I’m very strict with them. I tell them upfront, I will do everything I can to be the best landlord and make you guys happy, but don’t be late on the rent.

Joe Fairless: And how much of the voucher pays for the $1,700?

Greg Gaudet: It depends on the tenant. Some tenants have a higher income; their portion will be higher. They’re limited to paying about 30% to 40% of their monthly income. I have a tenant that pays $80, and I have a tenant that pays $500, but pretty much HUD pays the majority for all of them.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Greg Gaudet: Based on my experience, it’s to get started. Educate yourselves and take action. I wish that I had educated myself a long time ago, and I would have taken action a long time ago. That’s my biggest regret, is not starting sooner. But it all comes down to preparation, and taking action.

Joe Fairless: Why do you think you had zero properties up until 2018, and then bam! Five rentals one after another after another after another. You mentioned that you were trying to time the market before, and you were trying to approach things a certain way, and now you don’t… But I’m more asking how you were able to buy five so quickly after not having bought any?

Greg Gaudet: One other detail about in the past when I was making offers – I was doing escrow for a really high-end brokerage, and my resource for market information was my broker. He was a retail broker. He didn’t understand anything about creating cashflow and buying below market value, and I didn’t know about any of the online resources and podcasts at the time. If I had found those back then, I would have started back then, in 2012.

Now, the other thing that changed was over the years I increased my income, so I was able to save a lot more for a down payment. I’d also mentioned that I bought all my units below market value, but I haven’t refinanced any of them, so I’m kind of doing a delayed BRRRR strategy. The only one that I have taken equity own on is that last one that I bought for $30,000. Since I paid $30,000 cash, I just took out a HELOC from the bank. The day after I closed on it I just went to the bank and they gave me a HELOC for $76,000, so I’m gonna use that to buy my next three, so hopefully in 2019 I’ll buy three more units… But I still have all that equity and all those units, and I’m kind of waiting for a time where I can refinance them all and use that capital to buy something bigger. But to answer your question, it was between the preparation and all of that, and also just earning more over the years, and saving up the money to be able to scale.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Greg Gaudet: Let’s do it!

Joe Fairless: Alright, let’s do it! First, a quick word from our Best Ever partners.

Break: [00:24:02.07] to [00:24:51.16]

Joe Fairless: Best ever book you’ve recently read?

Greg Gaudet: I’m gonna say Never Split the Difference. I love that book.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Greg Gaudet: I would say a mistake I made was — I’ve just mentioned how I’ve been saving up my equity… I wish [unintelligible 00:25:03.15] true BRRRR strategy, but I didn’t plan it out that way, and it’s gonna be a lot more complicated to refinance to get all of my equity out, than if I had just been refinancing as I went… So I wish that I had better strategized my long-term plans, and tapped into my equity as I went.

Joe Fairless: What’s the best ever deal you’ve done?

Greg Gaudet: Definitely that last one. I mentioned I purchased it for 30k, market value is about 100k, and then the ARV — it’s not renovated; it’s rough, but it’s already rented out, so I’m not gonna be renovating it until the tenants decide to move… Purchase price 30k, ARV is about 140k, current market value is 100k, and the bank gave me 76k for it, as a line of credit, right after closing.

Joe Fairless: That’s beautiful. Nice job on that.

Greg Gaudet: Oh, and it cash-flows $600/month.

Joe Fairless: Oh, by the way, you make money as you go along. What’s the best ever way you like to give back to the community?

Greg Gaudet: Like I mentioned, helping people in need. There’s a lot of people in Maui that are good, hardworking people, and they’re really struggling… And a lot of landlords don’t want to accept HUD, because it is more work, and it is riskier, and there is a lot of downsides to it. There’s upsides too, though. I like that my rent is guaranteed every month, and I like that I’m helping the families. These people are so grateful. Other than that last tenant that I said I inherited,  every one of my tenants has come from the homeless shelter, and they’re so grateful… And it feels good to be able to help them out.

And then also, the unit that I inherited the tenants on – it’s a guy in his thirties and his mom had cancer, and they’ve lived in the unit for 20 years. She’s really sick. The old owner, I mentioned he mismanaged it; he had it rented way below market rent. It’s rented at $1,200/month. So I feel really good about buying that unit, because I feel pretty confident that most investors would go and take them out, renovate it, and either sell it for $150,000 or rent it for $1,700… And I’m not increasing their rents, I’m not kicking them out, I’m just letting them stay, letting them go through whatever they’ve gotta go through, and I’m sure I’ll be able to rent it for more at some point in the future… But for right now, it’s making a great return, I’ve got a ton of equity, and it’s the best deal I’ve ever done and there’s no need to increase the rent. That’s kind of a cool way for me to be able to give back, to be able to help that family stay in their housing and focus on their health, instead of worry about increased rent or finding a new place.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Greg Gaudet: They can hit me up on Bigger Pockets, search for Greg Gaudet in Pukalani, Hawaii, or I’ll give out my email address – ponoproperties@gmail.com.

Joe Fairless: Greg, thank you for being on the show… Thanks for talking about what was holding you back, and then when you had a different mindset and different strategy, and then reached out to a guest on this podcast and you changed your approach… Holy cow – watch out, Maui, because here you go… Five transactions, 12 months, 25% cash-on-cash, and some good amount of equity to boot along the way.

Thanks for talking about how you found those deals, you jumped into deep waters on your first transaction with the foreclosure auction, and then on the last transaction, the direct mail, looking at the tax records, being intentional about who you’re mailing it out to, and having conversations… And lo and behold, it netted a very, very lucrative deal.

Thanks for being on the show. I hope you have a best ever day, and talk to you again soon.

Greg Gaudet: Thanks so much for having me, Joe. It’s been a blast.

 

JF1827: Is Your Short Term Rental Legal Or Illegal? With Erin Spradlin

Erin is here today to help us understand the different laws and restrictions that some areas are placing on STR’s. Along with her team, they help investors find, buy, and run legal short term rental properties. You may be surprised by how many different regulations and laws exist that investors may not know about until it is too late. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“If you want to be serious about this, don’t treat it as a hobby” – Erin Spradlin

 

Erin Spradlin Real Estate Background:

  • Co-owner and broker of James Carlson Real Estate
  • They focus on setting people up with legal Airbnbs to cover their mortgage or reduce it significantly
  • Erin also focuses on female investors, they’ve done a BiggerPockets video series, and she is a blogger for on BP
  • Based in Denver, CO
  • Say hi to her at https://www.jamescarlsonrealestate.com/
  • Best Ever Book: Long Distance Investing

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Erin Spradlin. How are you doing, Erin?

Erin Spradlin: Good, how are you doing today?

Joe Fairless: I am doing well as well, and looking forward to our conversation. A little  bit about Erin – she is the co-owner and broker of James Carlson Real Estate, where they focus on setting people up with legal Airbnbs to cover their mortgage or reduce it significantly. Erin also has a focus on female investors, where she’s done a Bigger Pockets video series, and she’s also a blogger for Bigger Pockets. Based in Denver, Colorado.

With that being said, Erin, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Erin Spradlin: Sure. In the past I’ve had an 8-to-5 job, as I’m sure many real estate agents and investors did. Starting about 2014 my husband and I got into Airbnb here in Denver, and it just started to change our lives pretty rapidly, because there was a significant extra income. After that, we started to look at ways to acquire different properties in Denver. This was before Denver had established laws around Airbnb… So like a lot of other cities throughout the country, they had a law where it made it illegal, because it was under a 30-day rental, but the city wasn’t really following up with that, they didn’t really have the zest to look into that… So at that point we were looking at other rentals, and we started seeing other people that were doing that as well, so then we ended up getting our real estate license, dropping out of our 8-to-5 jobs and going into real estate and helping other people identify Airbnbs and properties that were good for that.

Then the laws changed, so now our focus really is getting people into legal Airbnbs, because as an ambassador you wanna know that what you’re doing is okay and it’s not gonna change significantly in the next few years, depending on what the city council decides.

Joe Fairless: Yes. And as a human being it’s good to do legal things…

Erin Spradlin: [laughs] That too, that too.

Joe Fairless: That’s normally good advice. [laughs]

Erin Spradlin: Laws exist for a reason…

Joe Fairless: Yes. What were you and your husband doing professionally, prior to getting your real estate license and going all-in with real estate?

Erin Spradlin: I was a digital marketing director and he worked for the State Supreme Court in communications. I actually think both of those past careers have been really beneficial for us… Because I think we came to real estate with a professional background, so we had an idea as far good communication, or what that looked like, and also being able to support or justify whatever recommendations you’re making to clients, and then also just understanding — I know we both felt like we didn’t understand really the value of a real estate agent before we got into it, so we felt like being professionals, we could kind of explain what our value-add was, and then also get back, have good communication, explain things in a way that we didn’t necessarily feel like we’d had that experience in the past when we’d worked with real estate agents.

Joe Fairless: Let’s talk about what you offer exactly. Who is your ideal client and what do you do for them?

Erin Spradlin: Our ideal client is usually a homebuyer, and a homebuyer that’s looking to knock down their mortgage, or cover their mortgage primarily with short-term rentals. The way we go about that is that we research the laws for whatever city they’re looking in; whether or not that city has passed the law, if they haven’t passed the law, what that law looks like, also the temperament of the city council, if the city council is discussing it and researching it and just hasn’t made a decision yet… And then installing them in some kind of property that works for them.

A lot of times what that looks like is a basement apartment. Sometimes that’s a full duplex, so it’ll be an up/down duplex, it’ll be zoned that way, and have a kitchen downstairs… And then sometimes it just looks like a basement with a back entrance, where you can really knock out the rest of the house, but then you’re not seeing the Airbnb guests all the time, it’s still legal… But that property might not have a kitchen and it might still be zoned for a single-family house, but it’s still good for an Airbnb, and legal.

So a lot of our clients that come in have that profile, like “Okay, I wanna do this, but I wanna do it legally and I don’t know how the property works for that.” I think our value-add is coming in and saying “Okay, this is the law for that city, and these are the kinds of properties that work for that.”

Joe Fairless: So how do you make money when you do that?

Erin Spradlin: From my end or from my client’s end?

Joe Fairless: Your end?

Erin Spradlin: From my end, I’m a real estate agent, so I make the commission off of that. And then we have ongoing relationships; [unintelligible 00:06:43.23] if people will come in, they’ll buy their primary, and they’ll end up using that money to cut down their mortgage, and then they’ll turn around and buy an investment property… Whether it makes sense to do it short-term, because some cities allow short-terms for investors, or if it just becomes a long-term investment. Usually we just have ongoing relationships with clients based off of that model. And then we do that model as well, on some of our own properties.

Joe Fairless: Okay. You’re in Denver, Colorado, so you’re able to make commissions on places outside of Colorado?

Erin Spradlin: No. We do it primarily for Denver and Colorado Springs. Denver has different laws than Colorado Springs. Colorado Springs is a total free-for-all; you can go own, buy anything. The city actually is positioned as far as they are fine with people coming in and doing short-term rentals, whereas Denver is not. Denver has a primarily residence-based law. So we do both, two different communities, based on what our clients are looking for.

Joe Fairless: Okay, that’s the part I was missing. When I asked how you make money on it, I was thinking you’re working with people in New Jersey, so I was wondering how–

Erin Spradlin: No.

Joe Fairless: Okay, alright. So you’re making commission as a real estate agent, for the properties that you find for them. Let’s talk a little bit more about that, and your business model. So you’re helping them find the property, and then do you consult with them after that, or do you not have that part of the business, and it’s just “Here’s a property. It’s gonna be good for Airbnb. Now go execute the business plan.”

Erin Spradlin: I think that’s a great question, because people definitely have that curiosity about us all the time. I will say upfront, we don’t do property management. I have a lot of respect for people that do do that, but that just seems like an awful — or a job that is very hard. How we set people up is we do the front-end as far as figuring out if the law makes sense, the property makes sense, and what they can expect to make money-wise. Then we help them as far as talking about how they wanna furnish it, getting checklists  in front of them, how they would wanna set up their Airbnb advertisement, and what that looks like. Some of the things that you wanna highlight, how you would be different… And then also introduce them to people. Obviously, we have relationships with property managers, general contractors, so we put [unintelligible 00:08:55.13] with them post-close, just to make sure that it’s going well.

It’s really important to us that our clients do well, because we care about them, but also as a business model it’s not good to have people where you set them free and they’re failing, or whatever… So we have a pretty intense check-in after the fact.

Joe Fairless: When you have intense check-in – will you elaborate on that?

Erin Spradlin: It just means we have that relationship with the property manager, so we’re always checking in with them to see what the numbers are, and then we’re checking with our clients every once, two months, in the beginning, not after that; maybe six months to a year after the first one or two months… To see how their setup has gone, if they’re having any issues, if there’s anything that we can help out with, and just to make sure too that the numbers are running, and that they are meeting the expectations of what we told them.

Joe Fairless: Okay, great. Is that all part of the initial commission that you receive, or do you have a consulting thing that covers how to furnish it, how to set it up, advertising, introducing them to the team members?

Erin Spradlin: Yeah, for our clients there’s no extra charge for that, so it would just be the straight commission. In Denver typically it’s 2.8%, and then in Colorado Springs it’s 3%. But from our clients, that’s all they pay. For people that aren’t our clients, we do charge an hourly consulting fee.

Joe Fairless: Let’s talk about your Airbnbs. What do you have?

Erin Spradlin: We had two in Denver that we’ve actually converted to medium-term rentals, because Denver’s laws changed, so we didn’t wanna be outside the law. We have converted them to furnished medium-term rentals, which means 30 days or more; but they’re still furnished. Typically, the types of people we’re going after are corporate professionals, traveling nurses, people that have gotten divorced and that are kind of figuring out their situation, or are in the middle of the divorce, people that have moved here… That’s what our situation looks like in Denver.

And in Colorado Springs we just have a straight duplex that is about a mile from downtown, and people do Airbnb there, because again, it’s legal in Colorado Springs, whereas here it’s not. So I say Airbnb broadly, but it’s actually all the short-term rental markets, whether that’s VRBO, or Booking.com, or HomeAway – that falls under that – [unintelligible 00:11:07.19] Colorado Springs, and then obviously in Denver the law is a little bit different.

Joe Fairless: Okay, so you don’t help clients get short-term rentals in Denver, you help them get medium-term rentals in Denver.

Erin Spradlin: Well, you can do short-term rentals, and we definitely do help people do short-term rentals in Denver, but they have to live in that house.

Joe Fairless: Oh, okay.

Erin Spradlin: So it can be a room in the house, it can be a basement in the house, it can be a mother in law suite. The rule here though is that it has to be where you take your mail. So we help people with that kind of configuration, and again, how to do it legally. I would say probably 50% of our investor clients in Denver do Airbnb, and they do it in the house where they take mail. Whereas Colorado Springs, which is also a big part of our investor pool, they don’t have to live there. It can just be a straight investment, and then you bring in a property manager obviously, because you can’t do short-term rentals very effectively long-distance, unless you have a property manager on it.

Joe Fairless: Let’s talk about the last deal in Denver that you found for a client. What’s the purchase price and what’s the income-producing potential for it?

Erin Spradlin: Sure. Right now we had someone buy a four-bedroom house in Arvada, Colorado. That’s a city outside of Denver. They are doing it in their basement. The purchase price of that house was 425k, and for their first month it paid $1,600. They are doing a bedroom downstairs; there’s another bedroom downstairs, but that bedroom they’re using as an office and a kitchen space, so… It’s not a true kitchen, but it has a microwave, a mini-fridge, whatnot. So they pulled in $1,600.

I don’t think that they were overly aggressive; I think they could make more, but they kept their prices lower because it was their first month, and then also because they were just kind of trying to figure out what they were doing.

Joe Fairless: Okay. $1,600 a month?

Erin Spradlin: Yup.

Joe Fairless: Okay. Which would probably not cover the mortgage, depending on how much they’d put down, I guess, but… It’d knock out a  chunk of it, right?

Erin Spradlin: Yes, definitely. And we try to be clear with people about that; depending on where you’re at, what you’re doing, sometimes it can cover the mortgage. A lot of times it won’t. But it will make the payment a lot more comfortable.

Joe Fairless: Oh yeah, absolutely. The background of people who do this, your recent clients, maybe your last three clients who have closed on a house… Obviously, without disclosing who they are, but just tell us a little bit more about their background, and their age, and maybe their life-stage, that sort of thing.

Erin Spradlin: That’s also a good question. I think in general they tend to be first-time homebuyers, or a little bit younger. By younger I mean like 45, or 40, or younger. But I think that is because – honestly, a lot of that profile is more interested in Airbnb, and has had more exposure to it. Sometimes with an older clientele it’s hard to get them to have buy-in on that, or they’re new to it… And it’s interesting, because I think that seniors actually are the fastest-growing demographic for Airbnb, but they tend to do a room in their house, or  a house that they already own. They’re not looking to purchase a house and do that.

So typically, our clients tend to be in big life stages – they’ve just gotten married, or they’re just having a baby, or they’re just purchasing that first house, and then they’re open to doing something to cut down their mortgage… And usually, they’ve heard of us, because they’ve done some research online, or they’re hearing about it through Bigger Pockets, and/or they’ve had that experience where they’ve gone and stayed at an Airbnb [unintelligible 00:14:33.11] and then thought to themselves, “Oh, maybe I should try and do this.”

Joe Fairless: What are some misconceptions your clients have when they initially start working with you and they’re asking questions about the process?

Erin Spradlin: Two things. I think the first – sometimes people think it’s easy money, or free money… And it’s like, it’s good money, but it’s neither easy, nor free.

Joe Fairless: [laughs]

Erin Spradlin: I think they should have that expectation. If you’re doing it in your house, you are going to be doing cleaning, sometimes you’re gonna be fighting with your spouse about the furnishing, and things like that… So I always try to knock that down immediately, like “Expect this to be sort of a second job, and also expect to think about it as a business.” If you really wanna [unintelligible 00:15:15.24] don’t think about it as a hobby… And honestly, that’s true for any second business, or a business that you own – not to think of it as a hobby, but to think of it seriously, and run your numbers, and have your sheets, and everything. That’s part of it.

And I would say the other thing is getting them over the hump of what you can make. Sometimes they’re locked in on the long-term rental numbers, and they have a hard time getting over “This is what you can do short-term” and “These are the nightly rates, and this is what’s happening in your neighborhood.” So I feel like there’s an education piece as far as getting that into their head that this is actually what the numbers are… Because they’re looking at long-term numbers, or likely, if they’ve decided to go into investing, they have a family member that did it before them, and that family member is saying “No, you don’t want a two-bedroom. I’m cash-flowing $100”, or whatever. So just getting them to come along on that.

Joe Fairless: Wouldn’t the short-term numbers nine times out of ten be more favorable than the long-term renter numbers?

Erin Spradlin: Yeah, 100%. Usually what we see is about 150% to 200%, if you’re doing it full-time. So definitely not that example that I told you about with the $1,600. If you’re a full-time investor, usually we say 1,5x to 2x. We try to back that up obviously with neighborhoods; unless you’ve made a pretty bad decision, usually I think the short-term rental numbers are better. But there are additional costs you have to take into account though. Now you’re paying the utilities, the [unintelligible 00:16:41.20] in the beginning to furnish the place… Usually, your insurance is at 1,5x higher, because even though Airbnb promises insurance, we usually like our clients to have an additional insurance product on it.

So there are other expenses, and I would say in the beginning that can be a little bit more expensive, but long-term your monthly should definitely be better.

Joe Fairless: When you do those follow-ups with your clients, what’s one thing that someone’s complained about, or they didn’t take into account initially as much as they should have?

Erin Spradlin: Setup, honestly. I think that’s always an issue. That’s where we ran into problems, and it’s definitely where we see clients run into problems. There’s just a lot of decisions that have to be made on the furnishing, and how long that takes. I think there’s different philosophies on that, as far as whether or not you wanna go through a Craigslist, or Facebook Market, to acquire cheaper furniture, versus just going to IKEA. I think you see people maybe stretch out a timeline longer than they should based off of that, or you see business partners and/or couples getting in fights over how they think they should do it.

I think that part of it, and I also think property management. Sometimes you have people that have different ideas as far as how much the property manager should be involved, how much they should be involved… Those are some of the sticking points that come up a lot.

Joe Fairless: What are the fees that are typical for a property management company, should they be involved to the greatest extent that they could be involved?

Erin Spradlin: Usually, we see 17% to 25%. I would say 20% seems to be the average where we’re at, though those people are pretty intense. For our properties, the property manager that we use charges 18%, and we are really no part of it. We’re pretty hands-off. They provide us with a monthly report, and that’s it.

Joe Fairless: And that’s of the collected income?

Erin Spradlin: Yup.

Joe Fairless: Okay. So what are the responsibilities that they undertake, in your example, where they collect 18%?

Erin Spradlin: They are handling all the communication, which I think the communication on a short-term rental is a lot more intense. People have a lot of questions…

Joe Fairless: Yeah…

Erin Spradlin: You’re saying “Yeah…”

Joe Fairless: Because I’ve rented from one – my wife and I have – and I know she asks a lot of questions, so… I wouldn’t wanna be on the receiving end.

Erin Spradlin: [laughs] Well, there’s this idea — I mean it’s good; it’s why people like it and why it got started, but they wanna know the coolest places to go in town, where do you like to go get your beers, or what’s something that’s off the beaten path, that’s not just a touristy thing to do. I think there’s ways to limit those questions by building out your Airbnb profile correctly, but I think there’s just a lot of communication that goes on… So I think your property managers really dealing with all of that – cleaning, obviously is a  huge issue… If you have a long-term rental, you’re not worried about these things. But if you have a short-term rental, you’re changing out and doing a clean every single time someone stays… It’s honestly  a huge complaint that we hear about from the guest side – people always want it to be really clean, and they don’t wanna see a rogue hair somewhere, something gross… So I think your property manager has to put in place a really good team, and make sure that that’s done.

Those seem to be the stressors, and then again, dealing with just any kind of issue that happens, that would happen with a long-term property as well – your short-term rental management has to take care of it… If there’s a flood, or a backed-up toilet, or whatever. They’re dealing with that piece, so the normal long-term rental piece, but then on top of it the communication and the cleaning.

Joe Fairless: And what do you do?

Erin Spradlin: What do you mean what do I do? [laughs] I sit back…

Joe Fairless: Right, yeah. I have three single-family homes, and I sit back, too. I just get a monthly report… Is that the extent of it for you, since you have a property management company doing all this?

Erin Spradlin: Yes, it is. And that’s how we want it. I really feel like a good property manager — I really don’t wanna hear from them that often; I wanna have a relationship where we trust each other, and if I let them make any decisions up to $500, I feel like “I trust you, that’s why I have that relationship, and I really want you to handle this.” And then if something bigger comes up, or we need to change something, or I see a drop in numbers, then maybe we’re talking. But in general, I don’t wanna be involved.

Joe Fairless: Based on your experience, what is your best real estate investing advice ever?

Erin Spradlin: Short-term rentals… [laughs] It’s definitely been our market, and I think going after cities — we’re pretty bullish on Colorado Springs, and I think the reason for that is that you see a lot of millennials come in. It’s a city that had pretty depressed housing costs, because people didn’t wanna be there. It’s sort of interesting; it was on the front range, but now it’s benefitting from the fact that Denver is so expensive, so people are flooding into that…

So I guess I would say look at cities that surround cities that are very popular, because it turns out that the cities are probably gonna get expensive, and you’re gonna benefit from that overflow. And again, if you can find a place that will allow for short-term rentals, that is sort of a destination, I think you’re gonna do pretty well that way.

Joe Fairless: We’re gonna do a Lightning Round. Are you ready for the Best Ever Lightning Round?

Erin Spradlin: I am.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:22:05.22] to [00:22:45.15]

Joe Fairless: Alright Erin, best ever book you’ve recently read?

Erin Spradlin: Long Distance Investing, by David Green.

Joe Fairless: If Airbnb and short-term rentals became illegal, they had the same policies in place in Colorado Springs as they do Denver, what would you do with your business?

Erin Spradlin: I would try to keep our business model similar, but I would tell people to move into medium-term rentals, like they’ve done in Denver. I think it’s been a really positive experience for us. As people tend to pay more, they’re really responsible, and a lot of times they convert into long-term renters anyways, because they get into this situation – they think they’re gonna be there for three months, and just because of life circumstances they end up being a 6-month or a year-long tenant, and it just ends up being a good relationship for everyone. And I honestly think you could just build a business model around those people, without the short or the long-term on it.

Joe Fairless: Best ever deal you’ve done?

Erin Spradlin: Definitely my place in Colorado Springs. The duplex that we have down there is cash-flowing quite well. It’s a duplex, and then again, I just think Colorado Springs is a hot place, where the prices are increasing, and they have a lot going on down there.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Erin Spradlin: Buying in an HOA. No doubt. I know since then I’ve read about people not buying in condos, and that stuff has been true for us. We had a really good investment that was cash-flowing quite well, and then we were gonna get hit with a huge special assessment, and the HOA was just causing a lot of issues… So I don’t think we would repeat that.

Joe Fairless: Best ever way you like to give back to the community?

Erin Spradlin: We have something called [unintelligible 00:24:17.09] so every single commission we do, we give 2.8% back into a charity of our client’s choosing. That’s one way I think we like to keep it local… And then also we do a lot of free education, because like I said before, Airbnb really affected and changed our lives, let us quit our jobs, so it’s exciting to talk to other people and help other people get in that position as well.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing and your company?

Erin Spradlin: They can find us on jamescarlsonrealestate.com, that is our website. They can also find us on Bigger Pockets; I have a dedicated blog there, under Erin Spradlin, and then my husband (who is my business partner) also has a profile, and that’s James Carlson.

Joe Fairless: Erin, thank you for being on the show, talking about your approach to short and medium-term rentals, and talking about some misconceptions that are in place with people who are just getting started… And then also some challenges for furnishings, property management, and solutions to those challenges.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Erin Spradlin: Yeah, thank you so much. Have a great day.

JF1826: Saving Tax Money On Short Term Rentals & Other Properties with Robert Stephens

Taxes are a major expense for real estate investors, and Robert is here to explain some of the taxes that we may not know about, and how to save money on those taxes. In the short term rental area, there are lodging taxes. Much of the conversation focuses on that today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“A lot of people think since they’re not running a hotel that the lodging tax doesn’t apply to them” – Robert Stephens

 

Robert Stephens Real Estate Background:

  • Co-founder of Avalara MyLodgeTax (formerly HotSpot Tax), formed in 2002 out of his own necessity to understand and manage compliance with his rental property.
  • Helps homeowners, hotel operators, and other businesses with short term lodging tax regulations
  • Based in Englewood, CO
  • Say hi to him at https://www.avalara.com
  • Best Ever Book: The Big Short

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Rob Stephens. How are you doing, Rob?

Rob Stephens: Great, thanks for having me, Joe.

Joe Fairless: Well, I’m glad to hear it, and looking forward to our conversation. A little bit about Rob – he’s the co-founder of Avalara MyLodgeTax, which was formed in 2002 out of his own necessity to understand and manage compliance with his rental property. He helps homeowners, hotel operators and other businesses with short-term lodging tax regulations. Based in Englewood, Colorado. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Rob Stephens: Sure. You touched on it, but… 20 years ago I purchased a second home in Vail, I wanted to generate rental income on it, because I needed to do that to be able to afford the property, which is pretty common. I put it up on some of these short-term rental sites, which were very new at the time. It worked great, but through that experience I realized there’s a bunch of other things I need to do to be successful at this, one of them being [unintelligible 00:03:15.23] remitting lodging taxes, which I didn’t know really anything about at the time. So it was really through that experience we built what we think is a very simple solution for people that are engaged in short-term rentals, and that’s really our focus – leverage technology to provide cloud-based or internet-based very simple solutions for people to be charging the right taxes, collecting them from their guests, paying into the jurisdictions at the right time. We handle all of those tax tasks for people, so that’s really our purpose – helping people with that kind of back-office function of tax, that are involved in short-term rentals.

Joe Fairless: Okay, let’s talk about this. I’d love to learn more. What are lodging taxes, and aren’t they already accounted for on the site that you have your house on?

Rob Stephens: Great question. Two-part question. The first is what are lodging taxes… So really the same taxes that hotels pay. By and large, the hotel is going to be paying the same sales and lodging taxes that a short-term rental apartment, single-family home, condo, whatever the property type is… With a few exceptions. Generally, it’s the same types of taxes. It’s called different things – sometimes it’s sales tax, sometimes it’s hotel tax, room tax, lodging tax, accommodations tax. It’s a tax on short-term renting, and I think some people miss that at the beginning; they think “I’m not a hotel, this doesn’t apply to me.” If you actually read the law, it’s pretty broad. Any type of property where you’re providing overnight accommodation is gonna trip these taxes.

Secondly, yeah, there’s a lot of change going on in the short-term rental industry. One of those things is the big platforms, one of them being Airbnb, starting a couple of years ago, have decided to collect and remit some of the taxes on their own. So in certain markets they are collecting and remitting some of the taxes. Usually, they’re doing state taxes… And I don’t know how in the weeds we wanna get, Joe, but a lot of these taxes, for most locations in the U.S, there’s a state tax you have to pay, at the Department of Revenue, but then there’s very often a city or county tax you have to pay, too.

What’s happening now is Airbnb is paying most of the state taxes, but they’re not paying the city and county taxes. That then leaves the host the responsibility to collect and remit some of these taxes. And they’re really the only platform right now broadly paying taxes. So if people are on VRBO, or Booking.com, or TripAdvisor, they’re gonna need to collect and remit the taxes, because that platform isn’t handling it.

Joe Fairless: How much are we talking? Just specific, maybe use an example for a certain market.

Rob Stephens: Sure. I think these taxes are a lot. The average I would tell you is 10%-12%, and that’s of gross rent. So if you’re charging a guest $200 a night, or $2,000 for the week, it’s an extra 10%-12% on top of that. When you get in urban markets, the taxes typically are 15% or higher. Chicago actually has over a 23% tax on short-term rentals now… So if you get into big, urban cities… Kind of like rental cars, hotels – it’s easy for those big municipalities; it’s a good revenue source for those cities to tax those types of activities, because it’s not residents, it’s travelers and guests tom the community.

So these taxes tend to be very high, and if you’re missing it, you’re not doing it, it can add up to be a pretty significant amount over time if you’re not collecting it from your guests.

Joe Fairless: I would imagine the majority of people are not accounting for this, or even paying it. What would your guess be?

Rob Stephens: That’s a great question. We have that debate here internally, and I generally think you’re correct. Look, it’s gotten a lot better; I’d say in the last couple of years there’s a lot more awareness and focus on this issue… And look, short-term rentals have really become a mainstream part of the travel segment. I suspect a lot of your listeners are engaged in this, or they have long-term properties… They may be actually looking at getting into that market. And I do think, by and large, there’s some people doing it, but I think there’s a pretty high non-compliance rate. Now, whether that’s 80% non-compliance, or 50% – I don’t think anybody knows for certain, but we’re hoping to help with that. There’s a lot more room to go in terms of being compliant, and I believe it’s just a matter of time. If we’re gonna be a real, legitimate industry, protecting our property rights in these cities and these communities, one of the things we’re all gonna have to do is make sure we’re paying these taxes.

Joe Fairless: What are the consequences of not being compliant as  a rental property owner?

Rob Stephens: Your obligation is to collect the tax… And typically, the way to think about this is the guest, the traveler – they pay the tax. If it’s a 10% tax, you charge that guest an extra 10%, they pay it. Your obligation as an operator is to collect it and then remit it to the different agencies.

I always tell our customers, “Look, this isn’t really an economic cost to you. This is kind of a passthrough; it’s your cost for doing business, you have to collect these taxes from your guests.” But if you’re not doing it, typically what they’ll do is audit, or inquire and go back typically at least 2-3 years – typically not more than 4-5 years, unless they believe there’s some sort of fraud or something like that involved – and they’ll look to pull your income tax returns or whatever records they can to validate how many rentals you had… And then if it’s a 12% tax and you’re doing $30,000/year in rent – which is pretty typical for a short-term rental – you’re looking at $3,000-$4,000/year in tax. So the liability can add up quickly, and then they’ll slap on penalties and interest on top of that, which can unfortunately be pretty significant. Those penalties can be easily 25%-50%.

We’ve seen it happen unfortunately to customers, or new customers coming in with the problem. It could be thousands of dollars of back-taxes, plus penalties and interest.

Joe Fairless: What’s the worst scenario that someone’s come to you with?

Rob Stephens: The worst scenario… These governmental agencies have a lot of power. In the tax world, in your market, or multifamily or long-term rental markets, every property has a property tax; and if you don’t pay your property tax bill, ultimately the tax agency can put a tax lien on your property. Same thing in the hotel tax, lodging tax world – if you’re not paying your taxes, they can make an assessment against your property for back-tax due, and if you don’t pay it, they’ll put a  tax lien on the property, and then anytime the property is sold, that’s when they can step in there and recover their funds. Obviously, the worst case is they’re seizing the property.

I don’t know that we’ve ever seen a property seized, but we’ve certainly seen people with tax liens, and had to sell their property just to get out from under that liability.

Joe Fairless: Tell us more about what you all have come up with as a solution.

Rob Stephens: Historically, all these taxes – it’s a manual process. If somebody’s short-term renting, they have to go to the state site, figure out the state requirements, go to their city site, figure out what the requirements are for the city, maybe even go to the county… So there’s multiple agencies involved, multiple forms, you have to register with these different agencies, you have to pay tax, usually monthly and quarterly to these different agencies… So there’s a fair amount of moving parts and complexity.

What we were talking about earlier, Joe – the rank and file person involved in this space just has never dealt with these types of taxes before, so they’re not aware of it. So what we’ve really tried to do is really just with technology solve all of that. Sometimes I’ll use an analogy – think of it like TurboTax, but for hotel taxes. We have a software platform, the customer can sign up, they put in the property address that they’re renting, we immediately tell them what the correct, accurate tax rate is to charge from the guest, then they [unintelligible 00:10:51.12] Airbnb account, or VRBO account, they collect the tax from the guest, we handle all the moving parts of registering them, filling out the paperwork, get all that in place, whatever licenses are needed… And at that point they’re really all set up; it becomes a monthly cadence of just they report whatever the rent was for the month, so there’s automated processes around this; they report their monthly rent, and then based on that we calculate the taxes, file and remit them on their behalf.

So from our customer perspective, really all they have to do is come to the website, sign up, put in their profile, their address, some of their profile information, and we take it from there – rates, we register them and file and pay the tax… And we just make sure everything’s done on time, correctly.

The way we describe it is it’s really a way for a host or a homeowner or an investor just to put al this on autopilot and make sure these taxes are done… And at a price point of $20/month/property. We think it’s good value, and leveraging technology to solve what’s kind of a headache for most people.

Joe Fairless: Oh, absolutely… Big-time headache for most people. And if it’s not a headache for them, then they’re probably not doing it, so then it will be a major migraine in the future.

Rob Stephens: It’s funny you say that, because some of our best customers – the most eager to sign up – are often people that have been doing this on their own and understand the monthly filings that have to be done, and some of the paperwork, or have tried to do it on their own are were confused, or frustrated… Or simply don’t have time. At a $20/month price point they’re happy to say “You know what – put this on autopilot, take care of this for me.”

Joe Fairless: Yes. With certain markets, one of them being close-ish to you – Denver, Colorado – moving away from short-term rentals and then being more medium-term (over a month), because regulations are against the short-term, what are the tax implications and reporting implications for medium-term rentals versus short-term ?

Rob Stephens: Sometimes it’s really good on the tax side, for Colorado… So we’ve talked about taxes on short-term rentals; in most states, in most locations, that’s 30 days. Once you flip over and you use the term “medium-term”, so once you’re doing monthly rentals or longer, you’re gonna be out from under, having to collect and file all these taxes. That’s the good news, that bad burden is gone. Now, in some states like New York, New Jersey, Massachusetts, it’s 90 days. Big travel states, like Florida and Hawaii, it’s 180 days. So some states do have longer definitions of short-term. But to use your example, Denver would be a city where if you’re doing monthly rentals, then you wouldn’t have to deal with the hotel tax portion of it. So that’s good.

Now, I always tell people – unfortunately, short-term rentals are in high demand, and I’m sure you have a lot of your listeners that have realized that in certain markets they can generate very high rents on kind of a nightly, weekly basis, relative to a long-term rental contract. So yeah, it’s great – 30 days you avoid the complications and expenses, administering these taxes, but I think most people in this market realize that short-term is certainly the most lucrative… But again, there’s increasing regulation and limitations in certain cities on people’s ability to do that.

Joe Fairless: What else should we talk about that we haven’t talked about already, as it relates to your business and real estate investors in short-term rental tax?

Rob Stephens: I would say — I’m a short-term rental property owner myself, which is how I got into this… I suspect your listening audience probably has mainly long-term investors, but I’m sure a lot of those people are getting in the short-term rental space… What I would say is a couple things. I think the big platforms – Airbnb, VRBO – they’ve invested a lot of money over the last decade; it’s getting easier and easier to do. So if people are thinking about this, I would encourage them to take the leap.

The other part of it is you hear lots of noise about tax and regulation… There is some of that. Again, there’s services like ours that can cover the tax fees; I think that regulation sometimes is overstated. I mean, there are cities where there’s real challenges, but in most places across the U.S. you can still short-term rent without too many problems.

And the other thing is sometimes people have — look, we’re in a community. We have tens of thousands of short-term rental property owners; I go to conferences, there’s often angst about wear and tear, or partiers, or what that short-term rental crowd is gonna be like… And I can tell you, by and large these are responsible travelers, higher than average incomes. A lot of times it’s families going to events, or vacationers if you’re in a ski market, or a beach market, or a lake market… The issue of high turnover in your property, or damage — I’ve been doing this for 20 years and I probably have one instance where there was some sort of issue that I had with a guest.

So again, if people are thinking about it, I think a lot of people are very successful at it. It’s a hot space. The nightly rents can be very attractive. Again, I’m a short-term rental advocate; I would encourage people that are looking at it to not hesitate. Give it a try.

Joe Fairless: You’ve been doing short-term rentals for 20 years?

Rob Stephens: Yeah. That means a) I’m old, but yeah…

Joe Fairless: You’re experienced.

Rob Stephens: Yeah, we’ve bought this in 1999 and put our property in Vail on VRBO. So I’ve seen a lot of change; it’s a completely different industry, obviously, than it was 20 years ago.

Joe Fairless: Oh, my goodness. Yeah. Airbnb wasn’t around, right?

Rob Stephens: Yeah, Airbnb came around I think 2009 or 2010.

Joe Fairless: Yeah.

Rob Stephens: There was no online booking, nobody took credit card payments… You had to call somebody or email somebody. It was a much more difficult experience. Kind of one of my points – it’s becoming easier and easier, and travelers love it, and it’s getting easier for travelers, because the travelers want that instant book. They wanna have that same hotel-booking experience with a vacation rental, which is pulling more travelers into this segment. So it’s a  lot of progress, a lot of exciting things happening.

Joe Fairless: Let’s talk about your short-term rental. How many do you have right now?

Rob Stephens: I have one short-term rental and one long-term rental.

Joe Fairless: One short-term and one long-term, okay. So with the short-term — have you have multiple short-terms at one point in time?

Rob Stephens: I have not. I’ve had multiple different short-term rentals, but not multiple at one time.

Joe Fairless: Okay, got it. So this one that you have now is not the one that you started with 20 years ago.

Rob Stephens: Correct.

Joe Fairless: Okay. Tell us about how your thought process for buying one, selling it, and then continuing to go until you’ve reached today the one that you have now.

Rob Stephens: Sure. I live in Denver. For a lot of us on the front range, that grew up in Colorado, lifelong skiers, owning mountain property or property in the ski resorts is a big goal. So for us, that first purchase was I would say as much or more a lifestyle decision than it was investment, and I think when you get in the short-term rental space, especially the vacation rental segment of that, that’s a lot of the mindset. People are like “I like to go to Myrtle Beach” or “I like to go to South Florida” or “I like to ski in Vail. I’m gonna purchase a property there, anchor there. I’m gonna go there… I’m gonna build equity over time there.”

There certainly was the investment thesis too that if you looked over time, real estate in a market like Vail was phenomenal, and it just gets more and more expensive. So my psychology – and this was 20 years ago – was at some point you’ve just gotta jump in, make that commitment. And when we did that at the time, we could afford just to own a second property on our own and pay that mortgage, so we needed the rental income to basically help cover the carrying costs. So that’s what we did, and it worked great.

We looked at using a property manager at the time. Property managers in Colorado at the time took about 50% of your gross rent for their management fee, so… We were looking for a better option, and that’s when we found the websites, VRBO, and for really nominal dollars put it on there, and it rented up very successfully.

So that was 1999. We ended up selling that one to our partner in 2007. Joe, you’ve been in real estate [unintelligible 00:18:48.05] 2007 was probably the peak of the real estate bubble, so we saw a huge appreciation. The property tripled in value in about 7-8 years. So when you reflect back on that, you say “Well, that was great… Probably a bubble.” So we turned it around and bought another one in Vail. This is the Best Ever Show – that second one was probably the worst ever investment. We bought it at the absolute peak of the market.

I remember doing the financing at the time, which — mortgages seemed to just give away; we had perfectly fine credit, and all that, but we were starting to struggle getting a mortgage, which was at the time a bizarre experience. Little did we know behind the scenes the mortgage markets were really melting down. Anyway, we closed that one, but bought it at the peak of the market…

Joe Fairless: What did you buy it for?

Rob Stephens: That was about $850,000.

Joe Fairless: Okay.

Rob Stephens: It dropped precipitously. I think the market just came back. It took about ten years to come back. It just came back recently. In fact, we’ve just sold it a year ago for a little bit less than $900,000.

Joe Fairless: Good for you.

Rob Stephens: But we’ve put about $100,000 of improvements into it, too.

Joe Fairless: Oh, there’s the catch!

Rob Stephens: And the first several years we had to support it operationally. Again, this is my worst deal ever, and anybody who does anything – not everything always works out great.

Joe Fairless: Yup.

Rob Stephens: But we sold that one and then bought a very tired, rundown property in the heart of Vail, which is a great location… And kind of immediately saw the opportunity. I had a contractor that had done some remodeling projects with us in Vail, and immediately — we gutted the place last summer, ripped out everything… So we’ve put in all new everything. It’s a small unit, 850 square feet, but a great location. It’s 75 yards from the Gondola… We’ve put it on the short-term rental market, and that type of central location – the rentals were just super-strong, and the property turned out great. The rentals are super-strong and we’re personally excited to be really close in where we can walk to restaurants, and the slopes, and bars, and that type of thing. But from a real estate perspective – we’ll see over time, but I’m excited about getting in… This property was very beaten up, and I think we got it at a great price, put in the work and dollars to improve it, and I think we’re well-situated now on that one.

Joe Fairless: Nice. Lessons learned, that’s for sure. When you think about your experience as a short-term landlord, and then also you have one long-term, what is your best real estate investing advice ever?

Rob Stephens: I was in this camp for years. I’ve always [unintelligible 00:21:12.02] myself. Joe, I’m sure you’re a real estate expert; I have a couple of properties and I’m in the short-term rental space, but we have this tax automation solution… But I still think of myself somewhat as a real estate novice, or did for years… And I’m always kind of looking at doing things, but not pulling the trigger. So my advice is to just take action, jump in, do something. That doesn’t mean you wanna do anything stupidly, obviously, but I was just talking to one of the young folks here; they’re looking at buying a house in Denver. Denver has become  a very expensive market for real estate over the last several years, and I was talking about — the first time [unintelligible 00:21:45.13] 25 years ago, and I got married, and we upgraded, and that whole story… I said “Look, this was the mid-90’s. We thought it was all super-expensive and super-hot then.” I remember friends telling me “I wouldn’t get on this market”, and the first time we bought in central Denver, we sold 3,5 years later for 60% appreciation.

So I guess my point is you can also look to time the market, or wait for the next correction or crash, but just take action. If you have an interest, you have some capital, you think you have a sound investment plan… It’s obviously important to have a plan, and run the numbers and the math and make sure it makes sense, but… At some point you’ve just gotta jump in and take action.

Joe Fairless: And I think with that taking action, it’s also having a fallback plan, or at least a reserve or something, because if you do accidentally time it for a 2007 purchase, then you’ve gotta be able to float that property for a period of time, right?

Rob Stephens: That’s a very good comment. You can’t necessarily go all-in; you need to be capitalized such that if the rental market doesn’t materialize as expected, or rates drop, that you do have the capital or the staying power to ride it out. You don’t wanna be over-leveraged, or that mortgage payment too high, or extend too much for a property; that’s gonna put you in a really bad position. So absolutely, there needs to be a level of prudent planning and thoughtful analysis that goes into these.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Rob Stephens: Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:23:24.23] to [00:24:03.06]

Joe Fairless: Best ever book you’ve recently read?

Rob Stephens: The Big Short.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about?

Rob Stephens: Not enough due diligence.

Joe Fairless: Best ever deal you’ve done?

Rob Stephens: That would probably be my first condo in Vail. It tripled in value over eight years.

Joe Fairless: And with not enough due diligence on the mistake – will you elaborate? An example of where you didn’t do enough due diligence?

Rob Stephens: Just not researching the market well enough, and maybe understanding the property well enough.

Joe Fairless: Best ever way you like to give back to the community?

Rob Stephens: This is gonna be self-serving, Joe. I’m an entrepreneur, I started a company, so I think employing people is very powerful. For the people that work here – I really take care of them, I give them an opportunity.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Rob Stephens: Anyone interested – go to our website, MyLodgeTax.com, and learn all about our tax automation solutions.

Joe Fairless: Well, thank you so much, Rob, for being on the show. It sounds like you’ve got a great out-of-the-box solution for short-term rental landlords to help them make sure they’re compliant with the taxes that they will need to pay; whether they know it or not, they need to pay them. And I did not know the taxes were so high. You said the average tax is 10%-12% of the gross rent, and in some markets 15% or higher if it’s an urban market. And Chicago… Oh, Chicago. It doesn’t surprise me that they’ve got [unintelligible 00:25:30.29] tax on this.

Rob Stephens: Yeah.

Joe Fairless: They’ve got some things to work out…

Rob Stephens: Indeed.

Joe Fairless: But thank you, Bob, for being on the show. I hope you have a best ever day. I really appreciate your time, and we will talk to you again soon.

Rob Stephens: Happy to do it. Thanks, Joe.

JF1825: Building A Short Term Rental Business With Other People’s Properties #SkilSetSunday with Michael Sjogren

Michael is here today to tell us more about short term rentals. We’ll hear three different ways to make money from short term rentals. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Here is how I will mitigate all these risks” – Michael Sjogren

 

Michael Sjogren Real Estate Background:

  • Michael and his wife Krysten are the founders of Occupied, LLC, a short-term rental investment and management company
  • They have a portfolio of six properties across three markets and are actively expanding across the northeast
  • Recently launched an education platform called Short Term Rental Secrets to help real estate investors launch their own STR business
  • Based in Boston, MA
  • Say hi to him at https://www.occupiednow.com/

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. First off, I hope  you’re having a best ever weekend. Because today is Sunday, I’ve got a special segment for you called Skillset Sunday. The purpose of this conversation is to help you acquire or hone a skill in real estate investing.

The skill we’re gonna be talking about today – and I suggest, if you’ve got some rentals, this is a skill that you at least become aware of, and then you can choose what to do with it – is the skill of making money on short-term rentals. Our guest today has been on the show before; he is an expert at short-term rentals, and he’s gonna talk about three ways to make money on short-term rentals. One of them is gonna be fairly obvious – you have a property and you make that a short-term rental, but we’ve got two other ways that are gonna be interesting, and we’re gonna dive deep into.

First off, how are you doing, Michael Sjogren?

Michael Sjogren: Hey, Joe. Thanks for having me back.

Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. Best Ever listeners, you can just search Michael’s name and my name, and you can listen to his previous episode that he was on. We’re gonna dive right into short-term rentals. First, let me introduce you, Michael, just to refresh memories. Michael and his wife, Christen, are founders of Occupied LLC, which is a short-term rental investment and management company. They have a portfolio of seven properties across three markets, and are actively expanding across the North-East. They recently launched an education platform called Short-term Rental Secrets, to help real estate investors launch their short-term rental business. Based in Boston, Massachusetts.

Here’s what we’re gonna talk about – three ways to make money on short-term rentals. What are those three ways? And then we’ll get into the details of those three ways.

Michael Sjogren: Sure. The first is to purchase a property. The second is to lease a property from a landlord, you furnish it and then you put it on Airbnb, or HomeAway, or Rent It Out, however you want, and you make the difference between what your rent payment is to the landlord and how much revenue you can generate on a nightly basis. And then the third is to partner with a landlord, or landlords to partner with somebody that knows how to run a short-term rental business, and you set up a management fee, a percentage of the revenue collected. What I find is typically the landlord makes more with this model, obviously, than if you’re just gonna rent it out on 12-month leases to somebody.

Joe Fairless: Alright, let’s talk about number two and number three, because the first one is the “Buy  a property, make it short-term.” If you are interested in that, Best Ever listeners, then go listen to the first conversation I had with Michael, where he talks in detail about how to do that. You have a webinar for that… What’s the webinar?

Michael Sjogren: It’s STRSecrets.com.

Joe Fairless: Okay, STRSecrets.com. If you wanna do that, then go to STRSecrets.com, and/or listen to the interview. So let’s talk about number two and a number three – lease a property from a landlord. How do you approach a landlord and convince him/her that this is a good idea.

Michael Sjogren: I think the first thing to think about before you approach someone is what problem are you trying to solve for them? If you’re approaching a landlord that has a vacancy at their property, what is their biggest problem? Their biggest problem is vacancy. Every month that that property sits vacant, they’re not making money but they still have to pay their mortgage, and their expenses, and everything else. So the problem that you are solving is that you’re going to fill their vacancy, and that you’re going to take better care of their property than anybody else, and not be a pain in the butt and calling them every time a toilet gets clogged. Those are the three problems that you’re solving.

I know a lot of folks think “Oh, short-term rentals – that sounds like there’s more wear and tear on the property. How can that possibly be better for the property?” If you think of it, the last time you stayed at a hotel, or an Airbnb, or wherever you traveled to, how much time did you actually spend in the property? Probably from 8-9 o’clock at night until about 9-10 o’clock in the morning, and the majority of that time you’re sleeping. How many of you actually use the stove, or the dishwasher, or the washer and dryer, or any of the major appliances in there? You probably didn’t. And for those of us that are landlords, ask yourself this question – when was the last time one of your tenants hired a professional cleaning company to come in and sanitize and deep-clean that entire property? Probably never.

So with this model, the property stays in pristine condition, because it has to. It gets professionally deep-cleaned multiple times a week, and it has to look pristine every single day, otherwise we don’t make money. It has to look great every single day. So those are the problems that you’re solving. If you’re gonna sign a lease with a landlord, or if you’re approaching a landlord and saying “Listen, I’m happy to sign a 12, 18, 24-month lease and take care of your vacancy problem. And by the way, here’s why I’m going to take way better care of your property than anybody else… Oh, and by the way (and this is totally up to the listeners if you wanna go this route), I’ll actually take care of any maintenance requests that are $250 or less. I’m not even gonna call you, I’ll just handle it. If anything major happens, I’ll let you know, but otherwise I’ll take care of it myself. And if you ever wanna go inspect the property, just give me a heads up; I’ll make sure nobody’s in there, and you can go in there any time you want.”

Joe Fairless: That sounds like a very compelling case. [laughs]

Michael Sjogren: Right? So many folks get scared, like “Why would somebody rent me their property?” Well, what problem are you solving for them?

Joe Fairless: Yeah. So I’m gonna flip the script on this… If the listeners are listening and they’re like “Well, sold”, how does a listener or real estate investor find people who want to do this at their property?

Michael Sjogren: Email me. I’ve got a whole database of students that follow my exact system. Or just go on some of the platforms. Go on Bigger Pockets, go on the different groups, and find out who’s active in the space. Then it’s just like “Okay, well, show me your numbers. Show me your data.” If they don’t’ have experience, “Okay, well who are you learning from? Who are your mentors? What has been their success, and how involved are they gonna be?” So if you’re on the other side, like some of my students – they’re just getting started – they get so nervous, like “Yeah, but I don’t have a track record.” That’s fine, leverage my track record; say I’ll analyze the deals. You’re following a proven system from somebody who’s been in the business for two years and has trained a bunch of students doing this, and walk them through. Figure out what their fears are, and then walk them through how you’re gonna address those fears.

Joe Fairless: And one last follow-up question on that line of thinking… If a Best Ever listener has property, and they’re thinking “Well, I’d like this, too. I’d like my property in better condition than full-time residents, and I’d like to make more money than I could, and I’d like somebody to handle $250 or less in expenses, because then I would make more money (whether or not they offer that is another story).” How can a landlord quickly determine, “Hey, does my property qualify to be a short-term rental or not?”

Michael Sjogren: You can go back and listen to the interview that Joe and I did a little while ago, where I broke down the nine different traveler profiles. I’ll recap them real quick, and we’re not gonna go into detail. If you’re anywhere near a vacation town, that’s great. If you’re anywhere near an employment base… It doesn’t have to be huge; but are there decent-sized offices anywhere near you for corporate travelers that are coming in? Are you near any medical offices or specialty treatment centers, or major hospitals? Are you anywhere near a university, or a cosmetology school, or any type of trade school? Are you anywhere near an entertainment area, like a music hall or a convention center, or a professional sports stadium? Are you near a military base? There’s a few other ones, but those are applicable in any market; emergency situations, life events like birthdays, Christmas, wakes, funerals, all that stuff. And then relocation. People are always relocating, people are always moving. So if you’re anywhere near those… Basically, if you live anywhere near other people, it probably will work in your market.

Joe Fairless: Now let’s talk about someone who is facilitating this, so you in this case, or someone who’s in the industry… How much can you actually make on the spread when you are renting from a landlording and covering all this stuff, and then you’re getting short-term people coming in?

Michael Sjogren: As one example – we’ll take one property that I have, it’s a 2-bed 1-bath, about 40 minutes outside of Boston. It’s in a small city. That property previously was renting for $2,000/month. Now, during slow season in March, that property generated $4,400 in revenue. In July it’s gonna bring in close to $8,000 in revenue. In October probably closer to $9,000. So for somebody to go in and pay you $2,000 in rent, they’d be happy to do that.

Or on the flipside, like I did with this landlord, I said “I’ll give you the 2k, but quite frankly, you’re way better off staying in the deal. I’ll build it out, you invest the $10,000 to furnish it, but you’re gonna make way more money if I just manage it for you for 25% of the revenue. You’re still gonna make way more money than if I just rented it from you long-term.”

Joe Fairless: What did they decide?

Michael Sjogren: They decided to partner with me. This person’s been clearing at least 25% more than they would have made as a long-term rental.

Joe Fairless: Let’s talk about the third option. So there’s three ways to make money on short-term rentals. One, you buy the property and you do it yourself. Two, you lease the property from a landlord and you make the spread on what you lease it, and all the expenses, and what you actually rent it for. Three is you partner with a landlord and you get a management fee. Will you describe that model in detail?

Michael Sjogren: Sure. Real quick though, just to recap, when you look at the three different models, it kind of goes from based on how much capital you have. If you have capital to purchase property, great. Do the first model. If you’re got a little bit of capital, say 15k-20k – okay, great, you can do the leasing model. But if you have no capital and you’re just getting started, the co-hosting or the management model is the way to go. I’m not blowing smoke, you’re literally doing this with none of your own money. This is how I built my portfolio; other than the property I own, I have no money in these other deals.

Joe Fairless: Thank you for putting that in context.

Michael Sjogren: No problem. So the third model is similar to a property management company for a long-term rental, except now you’re doing it on a nightly basis. You’re basically running a distributed hotel. In this instance, in that example, he was getting $2,000/month for this two-bedroom property, unfurnished, as is. So I said “Okay, if you invest 10k, I’ll have my wife design it, because I don’t have an eye for that; she’s an interior designer, so she’ll design it. I’ll build it out, and then I will run the operations for you and take 25% of the revenue after cleanings.” Because I didn’t feel it was right to take my cut on top of the cleanings; that just didn’t feel right to me. So if this property brought in 4k/month in revenue, and say the cleanings were $500 for the month, then I’d take 25% of $3,500, and then he’ll clear the rest of it.

Joe Fairless: Okay.

Michael Sjogren: So for him, if he can get anywhere from $2,4000 and up per month, he’ll get his initial investment back within 15-18 months, and then he’s just increased his profitability by 25% forever.

Joe Fairless: When you’re starting out and you propose that fee structure, is there any negotiation that takes place with the landlord?

Michael Sjogren: I’ve had some landlords push back and say “I don’t know…”, and I said “Okay, fine. Here’s the deal. I have one landlord that actually will do the cleanings. He’s a retired gentleman, great guy. And I tell him he’s nuts to do this, but… He’ll actually do the cleanings, just to make an extra $70 or whatever it is per clean… And he’ll manage the supplies. So I don’t have to deal with coordinating supplies, he takes care of all that, so I charge him 15%.”

I’ve got another gentleman who handles a similar amount of the work, and I’ll do 15%. But if I’m doing everything, soup to nuts, I’m charging 25%. And quite frankly, I show them the numbers – and I’ll give the listeners another nugget, to give them some ammunition… You can go to a site called AirDNA.co, and that is a site that pulls all the data behind Airbnb and HomeAway, and you can plug in any address and it’ll spit out 5-10 comparable properties and what they did for revenue and occupancy last year, and what the site thinks this property will do for occupancy and revenue.

So I would just print that piece of paper out and I’d go to the landlord and say “Listen, you’re bringing in $2,000/month right now. This thing is telling me that you should bring in like $50,000/year as a short-term rental. I’ll manage it for you. What do you think?” And then obviously, we go through and talk about all the other controls that I have in place, around security, and locks, and all that fun stuff that we talked about on the last interview.”

Joe Fairless: That’s great. Anything else as it relates to these three ways to make money on short-term rentals that we haven’t talked about, that you think we should in this conversation?

Michael Sjogren: Now, I’ll just reiterate – just put yourself in their shoes. If they’ve never considered this, what are their biggest fears? Typically, it’s that their place is gonna get trashed, so how are you gonna mitigate that risk and how are you gonna explain that to them? Because it almost sounds too good to be true. At the beginning you’re like “Wow, okay…” But if you can explain it and just show them… I have all these credibility packs that I bring to these meetings, and I just show them “Okay, here’s what this property could do, here’s how I’m gonna mitigate all these risks”, step by step, with screenshots, and past experience, and reviews, and everything else… And I just show them. If you’re interested in this, great; if you’re not, that’s totally fine, too. Never get attached to it or try to force somebody into a deal that they don’t wanna do. There’s plenty of fish out there, and I see so many people get caught up “Oh, I talked to ten people last week…” Okay, go talk to ten more. It’s a numbers game. Keep going, man… You’re not done yet.

Joe Fairless: Yeah.

Michael Sjogren: Go back and listen to Joe’s podcast; how many guests have you had on that — I was listening to one the other day that you had… He emailed brokers for like nine months, every two weeks… I’m like, “Yes! Grind, man. Go make it happen.” It will happen.

Joe Fairless: Yup. And on the ninth month he got his largest deal he’s ever done, and then he’s continued to scale from there, to like a 50 or 60-unit property.

Michael Sjogren: Another piece of advice that you gave me a long time ago, that I took and it worked, for this model, was “How can I become an authority figure?” I started a local meetup called “Airbnb Mastery.” Every month I was getting people in a room, educating them about this, and I got three leads just from hosting that meetup. And it didn’t happen right away. That happened like five months in. And I had two months where not a single person showed up. And I said “Okay, fine. I’m gonna do it again next month, and again, and again.” So start a meetup, start putting content on social media, start becoming an authority figure in the space, and showing people “Hey, when I think of Airbnb, I think of so-and-so.” I changed my name in Instagram and Facebook to “The Airbnb Guy.” So anytime somebody thinks of Airbnb, I want them to think of The Airbnb Guy. How can you position yourself as an expert in your field?

Joe Fairless: And the last question real quick – this might be a larger question, but it can be a quicker answer… How can we determine if our property is in an area where the city or the township or whatever regulatory body there is, it is okay for us to do short-term rentals? Because I know New York City – not so much.

Michael Sjogren: Yeah, absolutely. Great question. For me, I always like to go to the source; so what I would do is I would google these exact words “short-term rental ordinance”, and then insert your city name. Try and go directly to their website. You can do a general search and just type in “Short term rental laws” and see what articles come up, but I always try and go to the source.

The reason that I am not in Boston, or in San Francisco, or New York City, or any of these major markets, is because these markets have a lack of “housing” or affordable housing. Lobbyists and everything else are going to say “Hey, you should put restrictions on short-term rentals, because they’re taking our inventory off the street.” So I would look for markets where they’re not seeing that message. And if you are, then just go 30 minutes outside of the city. If you’re in Manhattan – okay, go 30 minutes North, or go 30 minutes South, somewhere in New Jersey.

I told you, my property is three hours away in New Hampshire, and I manage that no problem. The last one we picked up was in Florida, and I can manage that remotely. So don’t be afraid to go a little bit outside your comfort zone.

Joe Fairless: Thanks for being on the show, talking about three ways to make money on short-term rentals. One, you buy the property, two, you lease the property, three, you partner with the landlord. And those are tiers based on how much cash you have access to. The value proposition to owners, landlords, of first identifying what problem we’re trying to solve for them, and then we are filling a vacancy, taking better care of the property, and we’ll be a painless person to work with, and actually might make their life even easier and even more profitable on the expense side if we’re handling things up to $250.

Thanks for being on the show. How can the Best Ever listeners learn more about what you’re doing?

Michael Sjogren: They can follow me on the social platforms @TheAirbnbGuy. You can send me a note at info@occupiednow.com, and for the free training that Joe and I were talking about, it’s a 60-minute class that I break down my entire business model, and help you kick off your own business within 6 weeks. Go to STRSecrets.com.

Joe Fairless: Thanks a lot for being on the show. I hope you have a best ever weekend, and we’ll talk to you again soon.

Michael Sjogren: Thanks, Joe.

JF1812: Starting An Investment Club, Renting RV’s & Building Indoor Sports Arenas with Ryan Enk

Ryan is here to share his story today, which will have a heavy focus on hard work and passive income. Ryan’s passion is helping other working class people earn passive income to better their own futures. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Some people have no money and no network, they can start with wholesaling” – Ryan Enk

 

Ryan Enk Real Estate Background:

  • Founder of Columbia Real Estate Investment Club, the author of Rolling Real Estate Formula and owner of an RV rental fleet
  • Has built 2 two million dollar indoor sports arenas
  • Based in Covington, LA
  • Say hi to him at www.cashflowdadlife.com
  • Best Ever Book: Rich Dad Poor Dad

 


Evicting a tenant can be painful, costing as much as $10,000 in court costs and legal fees, and take as long as four weeks to complete.

TransUnion SmartMove’s online tenant screening solution can help you quickly understand if you’re getting a reliable tenant, which can help you avoid potential problems such as non-payment and evictions.  For a limited time, listeners of this podcast are invited to try SmartMove tenant screening for 25% off.

Go to tenantscreening.com and enter code FAIRLESS for 25% off your next screening.


TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks and I will be the host today. Today I will be speaking with Ryan Enk. How are you doing today, Ryan?

Ryan Enk: Doing great. I’m glad to be on the show, Theo. Thank you.

Theo Hicks: Yeah, I’m glad to have you on. I’m looking forward to our conversation. A little bit about Ryan. He is the founder of Columbia Real Estate Investment Club, the author of Rolling Real Estate Investment Formula, and the owner of an RV rental fleet.

He has built a few in-door sports arenas – I’m looking forward to talking about that. He’s based in Covington, Louisiana, and you can say hi to him at cashflowdadlife.com. We’ll have that website in the show notes of this episode.

Before we get started, Ryan, do you mind telling us a little bit more about your background and what you’re focused on now?

Ryan Enk: Yeah. The main thing that I’m focused on right now is helping people achieve passive income, specifically through real estate investing… And enough passive income to replace their working income. The reason that I’ve got a heart for that is because I’ve got five kids, I’ve got five boys (I don’t know how to make girls, but I’m not a quitter, so we’ll see what happens there), and when I was going through corporate America, and had a corporate job selling copiers – I don’t know if you’ve ever seen that movie Office Space, where they take the copier to the backfield and beat it with a baseball bat… That was how people felt about me when I walked in the door unsolicited to sell them a copier.

I was really at this crossroads, because I was having all these kids, and I just got chewed out by this [unintelligible 00:03:57.11] who I sold a copier to, and I was like “Man, I’m in a really bad place right now…” And I asked myself a critical question that I think everybody should ask themselves, and that’s “What would you do if money didn’t matter?” Because if money didn’t matter, I would be more present for my wife and my family and my kids, I’d be able to serve my community better… And I just chased that rabbit all the way down the hole, and the vehicle I used to achieve that was real estate investing… So that’s what I help people now.

Theo Hicks: That’s such a great business model, and I’m sure people really appreciate you helping them out with that. So when you’re helping people achieve their passive income, is it more you’re helping them set up their own real estate business, or are they investing in some of the deals that you do, or is it a combination of those two things?

Ryan Enk: Yeah, it’s a combination of those two. A lot of real estate mentors sometimes pigeon-hole you into one strategy or another, and as you know, there’s tons of strategies out there…  So what we like to do is we like to reverse-engineer the situation, because some people might not have money, but they have a big network. Or they have a lot of money but they don’t really wanna spend a whole lot of time going out and finding deals… So we focus on creating single-family portfolios and multifamily portfolios as the main two strategies.

But that being said, some people have no money and no network, in which case sometimes we’ll say “Well, let’s get started with wholesaling.”

So we really kind of figure out where people are with their current capital situation, their current time constraints, their current network, and then we recommend a strategy and educate them from there.

Theo Hicks: Okay, that’s great. That’s how you’ve gotta do it; you don’t wanna just present one strategy and say “This is exactly how you have to do it”, because as you mentioned, it’s based on where they’re at right now, and everyone’s situation is different, so… That’s a great strategy.

As we said it in your background, you’ve built a few indoor sports arenas… I’ve personally never met anyone who’s done that before, so do you mind telling us a story about that? How you determined that that’s what you want to do, and then maybe kind of walk us through the numbers on one of those deals?

Ryan Enk: Yeah. So as part of the story I was giving you earlier, I asked myself what I would do if money didn’t matter… I was actually driving across the bridge from New Orleans – it’s the longest bridge in the world, across Lake Pontchartrain, and I just prayed for a little bit, I asked God to help me, because I was miserable; I was waking up every day with anxiety with what I had to do for work… So it popped in my head, “Well, what would I do if money didn’t matter?” I’ve always loved played soccer and football, and I was previously a teacher before Hurricane Katrina hit… This school I was at was six feet underwater.

So I was like “You know what, I’d like to do something where people are happy when I walk in the door, they want to know me… And something that people look forward to every week.” People look forward to their games every week, and it makes a positive impact on the community… And I also played guitar too, so I was like “There’s three things – I would either mentor people, help people, I’d open up an indoor sports arena where people can come and play sports, have birthday parties, whatever it is, or I would play music, if money didn’t matter.”

So I called my wife – and we had never had this discussion before – and I said “Obviously, you see me coming home unhappy and miserable, and not totally present to you and the kids… What could you see me doing if money didn’t matter?” She said “I don’t know, maybe opening up an indoor sports arena, playing music, or mentoring people.” So I was like “Alright, that’s my golden ticket to remind her that’s her idea, as I try to pursue this.” [laughs]

And at the time I didn’t have anything in my bank account really but overdraft fees. For anybody looking to get started, most people think that that’s a huge brick wall… But there’s a saying that I heard – I think it was Tony Robbins that said “Most people’s problem isn’t the lack of resources, it’s a lack of resourcefulness.” So I just decided whatever brick wall I was gonna come across, whatever I didn’t have, I would go look to find who had that.

So I began, I created a business plan, started looking for money, looking for capital, met with investors, met with banks, I got a consultant… One thing just led to another until we got our first deal. I think we built it for 1.7 million dollars. We structured like 11 investors in order to build that arena. So it was 1.7 million for the actual building, and then it was like another 380k just for the furniture, fixtures and equipment, the indoor turf and whatnot.

So that was just an experience, and all I brought to the table at that time was sweat equity. It turned out to be a pretty good deal. I don’t know if that answers your question, but if you’re looking at a little  bit about how that was structured, I basically got investors to help me build it.

Theo Hicks: And at this point had you done anything like that before?

Ryan Enk: No. [laughs] That was actually a huge problem, because when I first started, I was like “Alright, I know that I’ve gotta get a consultant”, and a lot of people when they first start something – and you can apply this to multifamily apartments, to anything that you’re starting for the first time – a lot of times the question that you’re gonna get is “Well, what’s your experience with this? Have you done this before?” And the biggest advice that you can give is it’s not like going to a job interview, where you have to present your own resume. I think too many people are trained in that mentality, like “This is just my job resume.”

When you’re pursuing something in investing, or a business, whether it’s an indoor sports arena or a multifamily apartment, you basically can give everybody else’s resume as part of the team. So you start creating a team around you, and that’s what I had to do – basically, look to leverage other people’s experience, other people’s money in order to prove myself to investors and to bankers.

Theo Hicks: And how did you find these team members? Because this is a very specific and unique niche, indoor sports arenas… Obviously, when you’re talking to investors for multifamily – it’s not easy, but it’s not super-difficult to find a multifamily consultant. How did you find  an indoor sports arena consultant? And the rest of your entire team.

Ryan Enk: The biggest thing I can say is I kept on saying if the door closed, I was like “Well, what’s another door?” With consultants, I just did a Google search; I found this one guy, called him, he wasn’t interested. Then I found this website, USindoor.com. They had a bunch of consultants listed. I called them all, interviewed them all… It was gonna cost $15,000 for the consultation. Obviously, I didn’t have that, so I took a second mortgage on my house in order to pay for some of it, and then I offered the guy equity in the arena if we were to get it off the ground. That way, I could say to the bankers and whatnot, not just “This is my consultant” but “This is my business partner.” That gave them more confidence in moving forward with it.

And then as far as finding the other partners, I went around and I had this airtight business plan that my consultant had drafted. It was this 40-page thing, it was very good… And I got so excited about meeting with investors once I had that business plan, because it really made me look like I knew what I was doing. But then everybody started telling me no. So I was like “I’ve gotta have some sort of experience here”, because everybody’s looking at me like “Well, you are a teacher and a copier salesman. I have no confidence that you know how to run an indoor sports arena.” And to be honest, I would probably say the same thing, too.

So I started a daytime business for the arena called SoccerTots. Basically, it’s this small franchise — I don’t think it’s around now; I’ve since sold it. But it’s this child’s sports development franchise. You can rent out a gym, like a basketball gym, a local recreation center, or even a church gym, and pay them a percentage of your revenue, and just basically train two-year-olds and four-year-olds how to play soccer.

So as soon as I had that, I was like “Alright, I now have the daytime business for an indoor sports arena.” That changed the conversation, and I ended up connecting with this one guy, connecting me to another guy, and they pooled together some investors; then this other guy knew another guy, and it just snowballed once I had a couple of those pieces in place.

Theo Hicks: That’s a great story. You explained how you went from not necessarily having any experience whatsoever, it was just kind of a dream of yours based off of that money question, “What would you do if money didn’t matter?”, and then you kind of just hustled your way to get it done. Every time, as you mentioned, you faced one of those brick walls, you just figured out a way to overcome that. That’s great advice.

As you mentioned, all these strategies we’re discussing can be applied to any strategy… And if I’m being honest, it’s probably gonna be easier if you’re doing this for multifamily, as opposed to doing it for a sports arena. That’s awesome.

Ryan Enk: Way easier.

Theo Hicks: Yeah, seriously. So what types of returns are you getting on that deal? You mentioned how much money you invested… What’s the return factor that you use, the cash-on-cash return, or whatever, and how are you making money on this sports arena?

Ryan Enk: Yeah, the sports arena is mostly the business, and actually at first we got investors in just the business, and not necessarily — the real estate investor was separate. Three years into it, we’re like “Wow, this is incredibly stupid. I wish we would have thought of this before, to actually own the real estate, instead of just the business…” Because we’ve got an exit strategy with the real estate. With the business, you either sell it, and what is the market for that…

So three years later we ended up negotiating with the landlord to “Please, help us out and sell us the building.” He sold us the building for two million dollars. So he built it for 1.7, and three years later – he basically make 100k a year – sold it for 2 million.

We didn’t make any returns the first three years. In fact, we lost money. As soon as we started owning it, we were looking at closer to 20%-30% returns.

Theo Hicks: So how did those conversations go with your investors when you didn’t make any money those first three years?

Ryan Enk: It wasn’t fun. But we did have business projections… When you’re starting a new business like that, not a whole lot of people make money their first three years in business. I think they say that your first 3-5 years you actually lose money. So we actually projected losing money in our business plan. That being said, presenting that business plan, a lot of investors are like “Yeah, I understand, you’re being conservative”, but then they kind of expect that you make money.

So the first year all the silent investors were silent. By the third year, all the silent investors were not silent anymore. They were constantly “What are we doing here on this management?” So that part was not fun. But as soon as we owned the real estate, it changed things around.

Theo Hicks: And then on that second deal, did you apply all those lessons and did you actually own the real estate from the get-go?

Ryan Enk: Well, the second deal was a little bit of a different situation, where we didn’t have to own the real estate. We kind of took over a foreclosed business on the other side of the lake. It was a foreclosed sports arena, because the guy – I think he was a doctor – who bought it didn’t manage it himself; the people he thought were gonna manage it kind of ran it into the ground.

So we ended up being able to get the actual business – you’re looking at 380k to 500k just to start the business for the assets. We got the assets for free, and we took over a lease that was half the cost of our lease on the [unintelligible 00:15:13.24] building. Ideally, we would have liked to own the property, but because the cost to lease it was so little and we could get the assets for free, it was a little different of a situation.

Theo Hicks: Okay. And transitioning to the other business model, which is the RV rental fleet – do you mind telling us a little bit about that business plan?

Ryan Enk: Sure. I call it rolling real estate. It’s basically Airbnb, but for RVs. Once I had done enough with real estate — and the indoor sports arena was more of a passion investment; it is an exciting story and I’ve put a lot into it, but I had most of my success developing single-family and multifamily portfolios in real estate. That really gave me the comfort and the passive income to do all these other things… So once I’d gotten to a certain point, I told my wife that I wanted to buy a boat, a little cabin cruiser or something… And she was like “No, I’ve always wanted to do an RV trip.” So from that standpoint obviously we had to get the RV, because “Happy wife, happy life”, right?

So I didn’t want to just have a liability. I wanted to see — kind of taking the page from Rich Dad, Poor Dad, instead of saying “I can’t afford it. How can I afford it?” I could afford it, but at the time I was like “How can I make this into an asset, something that cash-flows, instead of something that I’m just wasting $600/month on a payment?”

So I looked into it, and there’s a couple platforms out there – RVshare and Outdoorsy are two of them. Basically, like the Airbnb or the VRBO of the internet world. It looked like there was some demand for privately-owned RV rentals. So I went ahead and got a class A RV, traveled all over the country with my family for a couple weeks, and then listed it on these platforms just to see “Alright, let me see if I can get enough rental income to cushion my payments.”

Well, I ended up making $32,000 in profit in that first year, so that’s when I was like “Okay, this could be a really great business model.” Kind of  a real estate play, but it’s rolling real estate; the same thing as the house, but on wheels, and you can take advantage of the trends in the short-term rental industry.

So I ended up getting three others in the fleet, but using other people’s money and other people’s RVs instead of putting my own capital towards it. It ended up being a neat little business.

Theo Hicks: That’s interesting. So you bought your first RV, and then once you had the proof of concept and saw that you were able to generate profit, you would reach out to other people who already had their RVs, and then rent their RVs out too, and sharing the profits?

Ryan Enk: Yeah, I basically said “Hey look, this RV is doing nothing but costing you in storage fees your monthly rent. We’ve got an airtight operation.” We basically outsourced and created a small little management company that was part-time.. And we were like “We’ve got a pretty good operation, so if you want to share in this trend and some of the rental revenues, then why don’t you go ahead and put it in our fleet. We’ll cover you on the insurance, and you can make money on this instead of losing money on it when you’re not using it.”

Theo Hicks: Wow, very interesting. Alright, Ryan, what is your best real estate investing advice ever?

Ryan Enk: I would say if I had to go back in time and slap myself around, the first thing that I would tell myself is that there is a difference between speculating and investing. Speculating is kind of like your flipping houses type thing, where you’re going in and you think you might be able to get this, but you’re susceptible for market crashes; you don’t know if you can get a tenant in there. You might research the demand and see that there’s a demand for rentals in the area, but you’re not sure. You’re not sure if you can sell; you think based on days on market you can… So that’s speculative.

And there is a way to do it in a low-risk way, but at the same time there are better investments out there, such as apartments and multifamily, where you know without doing any value-add or any improvements on day one – you know what you’re gonna make when you go in there and rent something… Because you see the T-12, you see the P&L statement. So on day one you’re getting the money that the property has been able to generate for the past 20-30 years.

That is the biggest advice that I give people when they wanna first get started in investing. A lot of them come up with all these ideas. “Let’s see the foreclosure sale, let’s see this…” – look, all those can be fun and lucrative, but they are still speculative. The best thing you can do with your capital is to invest it and not use it for speculation.

Theo Hicks: That’s solid advice. Are  you ready for the Best Ever Lightning Round?

Ryan Enk: Yeah, let’s do it.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:19:59.24] to [00:20:40.29]

Theo Hicks: Alright, Ryan, what is the best ever book you’ve recently read?

Ryan Enk: Recently read…

Theo Hicks: It can be within the past few years. Recent subjective.

Ryan Enk: I’d say my best ever book – not recently read; read like 10-15 years ago was Rich Dad, Poor Dad, by Robert Kiyosaki.

Theo Hicks: If your businesses were to collapse today, what would you do next?

Ryan Enk: I would syndicate multifamily apartments.

Theo Hicks: How would start over today if you had little or no capital?

Ryan Enk: Little or no capital… I always say the biggest domino is to find the deals. So if you can perfect that skill, finding deals, I would go find deals anywhere in real estate. Once you do that, with little or no capital, the money tends to follow. Now, there’s strategies to find the money, but I would focus on getting out there and finding any real estate deal and then getting started.

Theo Hicks: What is the worst deal that you’ve done?

Ryan Enk: I can tell you exactly what it is. I started playing around with different strategies, and I heard that coworking was an up-and-coming trend. Like WeWork, and whatnot. So I decided to buy this million-dollar building in the downtown area where I live, which is on a very nice street… And the downstairs wasn’t occupied. Totally speculative, again. I planned on getting the same kind of rents that you could get for a coworking facility. Well, it’s a little town with a big ego, and I had the big ego, and nobody else really understood the concept. It had a few people that understood it, but most people were interested in just regular office space. I ended up hemorrhaging about $3,000-$4,000 a month on just that one real estate deal. So that’s where the earlier advice comes in on – know the difference between investing and speculating.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Ryan Enk: Best ever place to reach me… Probably on Facebook.

Theo Hicks: Well, Ryan, this has been a very fascinating conversation, a very interesting journey, and also very inspiring because of all the obstacles you overcame. Just to summarize what we talked about today – you talked about right now you’re focused on helping people achieve passive income in order to replace their full-time income, their full-time jobs. The way that you do that is you don’t just have a one-size-fits-all formula, you reverse-engineer a specific strategy based on this person’s specific current situation.

Then we dove deep into your indoor sports arena, and we discussed the most important question you asked yourself was “What would you do if money didn’t matter?” You decided on investing in this indoor sports arena. We talked about some of the numbers, and how much money you paid for the deal, and the investors… But more specifically, you talked about how you were able to complete the deal without having any experience in that indoor sports arena. This advice can apply to really any real estate or business niche in general, and that is to find someone who has done it before and leverage that person’s experience when you are going out to raise capital.

Specifically, you talked about how you found your consultant through a Google search, and just reached out to a bunch of people until someone was interested. And you actually had to take a second mortgage out on your house, as well as offer equity to the consultant in order to have them come on board.

Then you talked about once you had that business plan, you still weren’t able to get investors. They still wanted to see some sort of experience from you, so  you actually went and started a business just to gain that experience in order to raise that capital.

We also talked about how in business you expect to not necessarily make money those first few years, but for this sports arena, once you actually bought the building, you were able to achieve 20%-30% returns.

Then we also quickly talked about the story behind your RV rental fleet, and how you wanted to buy a boat, your wife wanted the RV, and you didn’t want a liability, so you decided to check out a way to make money off of that, and you ended up making about $32,000 a year  by renting out the RV to other people, in kind of like an Airbnb form, and ended up turning that into a business.

Then lastly, you provided your best ever advice, which is to know the difference between speculating and investing, and that it’s great to have all these ideas of what you can do with the property, and it’s fun, and it could work out, but at the end of the day, the best course of action is to invest in deals that you will know what you’re going to be making from day one.

Again, very fascinating conversation. I learned a ton. I appreciate you coming on the show and speaking with us today. Thank you to everyone who listened to the episode. Ryan, have a best ever day, and we will talk to you soon.

Ryan Enk: Thank you. And is it okay with you if I offer your audience my book?

Theo Hicks: Yeah, absolutely. You asked a question earlier about what would you do if you had to start from scratch – I actually wrote a book called The 7-day Real Estate Survival Blueprint: How to Create $10,000 Out of Nothing in Less Than a Month. It deals with wholesaling and sandwich lease options, and it’s basically an hour-by-hour, play-by-play of what I would do in seven days to make sure I had a check at the end of the month. So if your audience is interested in picking up that book, it’s got nothing but five-star ratings on Amazon. We’ve been selling these books like crazy. A lot of people are getting a ton of value out of them.

You can get it for free if you just cover the shipping charge at cashflowdadlife.com/7.

Theo Hicks: Alright, cashflowdadlife.com/7. We’ll make sure that the website will be in the show notes.

Ryan Enk: Perfect.

Theo Hicks: Alright, thanks for coming on, Ryan. We will talk to you soon.

Ryan Enk: Thank you.

JF1796: What Is Residential Assisted Living? How Can You Profit From It? With Emmanuel Guarino

Emmanuel is here to share his story and experience with residential assisted living facilities. We’ll hear the mistakes they made on their first deal, and what they’ve done now to eliminate making those same mistakes again. We also hear what they do to help other entrepreneurs and investors build their own residential assisted living facility. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“When you add up everything they get, it’s actually a really good deal” – Emmanuel Guarino

 

Emmanuel Guarino Real Estate Background:

  • Realtor for residential assisted living in Arizona
  • He trains entrepreneurs and investors at the Residential Assisted Living Academy in Phoenix, AZ
  • Based in Phoenix, AZ
  • Say hi to him at www.ral101.com
  • Best Ever Book: How To Win Friends And Influence People

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Emmanuel Guarino. How are you doing, Emmanuel?

Emmanuel Guarino: Hey, I’m doing great. Thanks for having me, Joe.

Joe Fairless: Well, I’m glad to  hear that, and it’s my pleasure. A little bit about Emmanuel – he is a realtor for residential assisted living in Arizona. He trains entrepreneurs and investors at Residential Assisted Living Academy in Phoenix, Arizona. With that being said, do you wanna give the Best Ever listeners a little bit more about your background and  your current focus?

Emmanuel Guarino: Sure, that’d be great. Well the Residential Assisted Living Academy – what that is is we teach investors in how to invest in residential assisted living homes; how to start them, how to create them and how to run those businesses.

We got involved in that – my father and I – about 7-8 years ago. He had heard a  gentleman about 15 years before that who said “You’ve gotta get into assisted living, in that space.” We’ve all heard, the baby boomers, and this and that. And this guy was in front of the room and he was saying “You’ve gotta get involved.” And then my father went up to the guy and he said “Teach me, show me how to do it.” The guy said “Well, I don’t do it, I think you should do it.” So my dad is like “I don’t know where to go, I don’t know what to do…”, and around that same time my grandmother – her health was starting to decline. She lived in Upstate New York, we live in the middle of the desert in Arizona, and we wanted to go visit her, and we were noticing that hey, she probably shouldn’t be living on her own. Then we said “Well, we’ve gotta put her into an assisted living, or we need to move someone into the home, so that they can take care of her.”

The reason why not everyone wants to move someone into a larger facility is that the level of care isn’t very good. You might have one caregiver for ten or twenty people in that facility. And then the idea of bringing a stranger into the home to take care of our mother, our grandmother – that’s a little dicey situation on its own. So at that point we said “You know what – this is the time to get started in residential assisted living.” So we started our first residential assisted living, we made all the mistakes in the world, and on the second one we got better, and by the third one we had it down and we had perfected it… And people were coming up to us and they were saying “Hey, you’re doing this. We wanna learn how to do this. How do we do it?” And that’s how we started teaching on this topic. That’s a little bit about us.

Joe Fairless: Thank you for sharing that background. I would love to learn more about the mistakes on the first one… So let’s just talk about those.

Emmanuel Guarino: Sure. One of the big mistakes – and I’m at an event right now and people are coming up to me saying “Well, don’t you need this, and don’t you need that?” and one of the things that people always think is “Well, don’t you need a van for all the residents in the home? Don’t they wanna go to the movies, and restaurants, and the opera, and this and that?” And when we started, we actually bought  a $50,000 van for the residents, so they could go out and do those types of things… But once you’re in the industry, you realize that’s really not a daily thing that’s going on. They’re in the home, they’re there, they’re relaxing… The idea of them going to the movies, and this and that – that’s a whole lot for them at this point. So that was one of the early mistakes we made – buying a $50,000 van. We drove it from the car dealership to the house, and then from the house back to the car dealership. So that’s kind of a funny one from that standpoint.

Joe Fairless: Okay. So that’s one mistake. You said you’ve made a bunch of them, so what are some other ones?

Emmanuel Guarino: Well, we’re not so bad, right? …but one of the other mistakes I would say is maybe not doing it in the right area. This is a business where you wanna make sure that you’re doing it in the right area. So we have three homes, they’re in three very different locations; we have a scale that we use – level one through five. Five is high-end, one is low-end. And we have a level three, and a level four, and a level five.

Our level four and our level five – those are our favorite homes. Then the level three home – it’s okay… But it’s kind of like being a realtor – when you sell a $200,000 house, you make your 3% or 6% commission; when you sell a two million dollar house, you make your 3% or 6%, but it’s not a worlds apart difference of what you’re really having to do in regards to work… So that was one of the mistakes – instead of maximizing our work, our efforts, we were saying “Well, let’s start small and then let’s move bigger.” That’s one of the key mistakes when people are wanting to get into anything – they start too  small, when really they need to be thinking bigger.

Joe Fairless: Sure. So the levels correspond to the value of the property that’s being purchased?

Emmanuel Guarino: Quality of the home, quality of the area… Yes, exactly.

Joe Fairless: Okay. So what were the purchase prices of the first, second and third house that you all have?

Emmanuel Guarino: The first home was around 550k all-in, and that was an existing business; so the real estate was 500k, the business was 50k. The second one was a single-family home that we actually converted. It was a five-bedroom, four-bathroom home, and it had a giant, great room in the middle of this home.

I remember my father taking me to this home when he said “I find the perfect home, man. You’re gonna love this.” And we’re walking through this home and it’s got this 30 by 30 room in the middle of the house, and I’m like “This is weird.” It was just like “Oh, my goodness…” And my father told me that the realtor told him that they used to throw ’70s style parties in that room. I don’t know what that means; that was before my time, but… They were getting crazy.

Joe Fairless: People were getting down, and really high, I think…

Emmanuel Guarino: [laughs] So nobody wanted that house; I wonder why. And we were able to pick that one up — I believe that one was about 650k; we put about 150k in renovations into that home, turned that from a five-bedroom, four-bathroom home into a nine-bedroom, six-bathroom home where it is today.

Then our nicest home, in Scottsdale – that one we actually bought for around 800k; we’ve put about 200k into that one, so that one was about a million all-in.

Joe Fairless: And what did you do to it with that 200k

Emmanuel Guarino: It had a four-car garage that we actually converted into about five new bedrooms. That one was almost like more of a custom-type project, because there was probably about 2,500 square feet to that property, and we added on about 3,000-4,000 square footage to that home for that Scottsdale property. So that one was almost like a custom type project that we did there.

Joe Fairless: And how many bedrooms does the third one have now?

Emmanuel Guarino: That one is – you’re gonna love this – a 10/10. Ten bedrooms, ten bathrooms. In fact, that one actually has an extra bedroom that’s attached to the side of the house, where it has an entrance through the backyard, where if one of the residents’ family members wants to stay, instead of staying at the Hilton or Sheraton when they’re visiting mom or dad, they can actually stay at the home, for a small fee. So that’s a really cool thing we have about that home. So I guess it’s an 11-bathroom, 10-bathroom home that we converted that one into.

Joe Fairless: What is the fee for them to stay there for a night?

Emmanuel Guarino: Yeah, that’s a great question. Right now across the U.S. the average to live in an assisted living home in a private room, a facility or a residential facility, is $4,000 to stay in a home. So that’s covering food, that’s covering care, that’s covering everything for them. It sounds like a lot, but really when you add it up, it’s actually a good deal for the most, when you really think about it.

For our homes – our level three home, our middle of the road home is about $3,500/month per resident. Our little bit nicer ones are about $4,000 and $5,000 per resident, and then our nicest home is about $5,000 to $6,000 per resident to live in the home.

Joe Fairless: And then how much to rent out that 11th bedroom for the night?

Emmanuel Guarino: That one it’ll be $50 or $100 for them to come over there and stay if they wanna visit mom or dad… But really that’s one of the cool amenities, and that’s one of the reasons why people pay more to be in that home. We really didn’t even touch on the numbers too much.

Just as kind of an example for the listeners there, let’s just say our level four home, the one right in the middle – that one has ten residents who live there, and they each pay around $4,000/month to live in that home. So that home brings in around $40,000 of gross income each month… But there’s expenses; there’s caregivers who are taking care of the residents, there’s electricity, food, things like that. So the expenses on a home like that might be 20k-25k at the end of the day. So that one home, after all that is said and done, could be netting 10k, 15k, 20k a month, with that one single-family home.

Joe Fairless: And you said there are ten residents who live in the second one?

Emmanuel Guarino: Yes. Ten residents in all three of ours, actually.

Joe Fairless: Okay. And I think you said the second one is a nine-bedroom, right?

Emmanuel Guarino: Yeah. That one has one room that a couple of the residents share.

Joe Fairless: Okay. Is that common?

Emmanuel Guarino: You know, it’s not as common as you would think. Sometimes we think “Well, isn’t that like college? Don’t they wanna share a room with a dorm mate, and things like that?” And really, when someone’s moving into an assisted living, they’re going to want their own private bedroom. And the better way to think about it is it’s kind of like a hotel. I’m in a hotel right now, I’m at an event, and if they gave me an option, they said “Mr. Guarino, you can have a private room for $100/night in our hotel, or you can have a shared room with a total stranger for $75/night. Which would you prefer?” As long as I have the money, I would probably say I want the private room, 95% of the time. That’s the same way it is with an assisted living.

The children who are moving their mom and dad in, they would like for mom to have a private bedroom, private bathroom if possible; so those are all added amenities, and again, one of the reasons why someone might pay more to live in one of these homes.

Joe Fairless: You mentioned the expenses… What’s an expense that can sneak up on people if they’re not careful?

Emmanuel Guarino: That’s a great one. Really the big one is gonna be our caregivers. That’s a hard cost that’s gonna be there. Sometimes people say “Well, I wanna pay my caregivers $30/hour, because they’re working hard, and I want this and that”, and that’s great, but the business is gonna start to crumble if you’re not keeping all those things in check. So the staff is gonna be one of the biggest expenses; actually, the biggest expense that you have.

Then the other one might be your food cost… Because everyone needs to eat in that home, making sure that you’re keeping your food cost down. So  your manager, Gene and I, we’re not personally in the homes, taking care of the residents, taking care of the staff. We’re overseeing our manager. So our manager is making sure that we’re getting the best deals at the grocery store, buying in bulk, all of those things, to make sure to keep those costs down.

Joe Fairless: What is the hourly rate range for the caregiver?

Emmanuel Guarino: Usually it’s minimum wage plus a couple of dollars. If they’re there for a very long time, many years, and things like that, obviously we’ll give them incremental raises as time goes on… But usually that’s what you see as the industry standard – minimum wage plus a couple of dollars.

Joe Fairless: What’s the process for estimating how much food should cost?

Emmanuel Guarino: That’s a great question. Usually, what we see is about $5 to $8 per day, per person. Now, that sounds like crazy; like “What are you feeding them, stone soup over there?” But $5 per person per day… You and I – it’s lunchtime coming up here in a second – could go to Outback Steakhouse and spend three times the amount on one meal, for one of us. But with this home, we’ve gotta remember – they’re not eating out; that’s your most expensive way of eating. They’re eating at the home, and it’s not pre-made food; we’re making food from scratch.

The other thing is we’re buying in bulk, and we’re preparing food in bulk, so that brings down the prices as well. And then the other thing is – at this stage of their lives they’re just eating less. They’re not moving around as much as you or I would be, they’re not in the gym running five miles a day or anything like that, so they’re eating less.

So we might have unlimited Jumbo Shrimp or anything like that, but they might be eating one or two, and you and I might be eating six or seven or eight, something like that. So usually that’s what we see – about $5-$8 per person, per day.

Joe Fairless: And you mentioned that you and your dad aren’t doing the actual running around and getting groceries, and stuff… I think you said your manager is. Is the manager the same person as the caregiver?

Emmanuel Guarino: Yes, that can be the same person as the manager. In our homes we have caregivers who are taking care of the residence, and then our manager is above them. In some homes maybe one of the lead caregivers will be the manager for your home. In ours, we have a specified manager, and her job is just to oversee all three of the homes. That’s her full-time job. And if she needs to jump in and take a shift, she’s ready to go; she’s trained to do that. But her job is really to oversee the staff, oversee the residents, make sure that the homes are running great, and then our job is just to make sure that she’s doing her job from that standpoint. So working on the business, not in the business is the way that we teach on how to run these homes.

Joe Fairless: How much are they compensated?

Emmanuel Guarino: A manager can be compensated differently, depending on – like we were saying – what they’re doing. If they’re a caregiver, let’s say, and let’s say they’re just taking on a little bit of extra duties being the manager, we might give them $500 or $1,000 additionally to do that job… Because the manager’s position is more of an entrepreneurial healthcare position. They need to be there when they need to be there; but if there’s nothing going on, they don’t need to be there.

So with a caregiver who’d maybe take on that position, it might be $500 or $1,000 a month. If we have someone who let’s say gets licensed through the state to be a manager of one of these homes, and let’s say they just wanna hang their license on the wall, that also might be $500 or $1,000 a month. But if it’s someone like our manager, it might be $1,500 per home, because she’s doing a little bit more, and we’re putting her in charge of everything.

We have a saying that we tell her – “The less we hear from you, the more you get paid.” Because if she’s calling us every two seconds, we’re having to do the work. So “The less you call us, the more that you get paid” is what we usually say.

Joe Fairless: Anything else as it relates to this business that we haven’t discussed, that you think we should?

Emmanuel Guarino: Well, there’s tons of stuff to be going over from that standpoint, but one of the big things when someone’s considering doing this – what’s nice about this industry is doing good and doing well. You get to help a lot of people, you get to make a lot of money. We talked about the money a little bit here… But for any of the listeners who have ever put a loved one in one of these homes, you understand the feeling of “I wish I didn’t have to do this. I wish I knew certainly that they were getting better care than they were”, and what’s nice about this is when you own one of these homes, you get that feeling of doing good and doing well. You get to help a lot of people and make a lot of money, and that’s what we’re all about at the Residential Assisted Living Academy – teaching people exactly how to do that.

Joe Fairless: What’s your best real estate investing advice ever?

Emmanuel Guarino: Oh, my goodness… The best real estate investing advice. I would have to say “Buy low, sell high”, from that standpoint. [laughs]

Joe Fairless: Yes, that’s tried and true, that’s for sure. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Emmanuel Guarino: Let’s do it.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:18:13.02] to [00:18:58.16]

Joe Fairless: What’s the best ever book you’ve recently read?

Emmanuel Guarino: How to Win Friends and Influence People. And then in addition, Outwitting the Devil, by Napoleon Hill. Those two right now.

Joe Fairless: What’s the worst deal you’ve done?

Emmanuel Guarino: Worst deal I’ve ever done? How much time do you have? No, I’m joking. The worst deal I’ve ever done – I took on a listing that I just never should have taken on, and it was just the ultimate time-waster. I was about 3-4 months of my life that I’ll never see back… But the lessons I’ve learned from it were very valuable. So even the worst deal can still bring good things, I guess.

Joe Fairless: So if you were presented a similar opportunity, what questions would you ask where you would approach it differently in the future.

Emmanuel Guarino: I guess what I would have done is — I took on the listing and it was a little bit too long, and I see things throughout; so if I tell them “Hey, I’m gonna work hard for four months”, I’m gonna work hard for four months. And at that point what I should have done is said “You know what – let’s try this for 30 days, and then let’s come back, let’s discuss, let’s see if we wanna move forward.”

That’s a little thing that I do with a lot of my listings now… A lot of agents want to list the home for a year, or two years, or six months… I say “Let’s do this thing for 30 days, and if you’re not proud of my performance, then all that you’re out right now is 30 days. So what’s the worst that can happen? Let’s do this.”

I’ve found that to be the best, because then I’m earning that trust with them, I’m showing them what I can do, and so that’s really that lesson that I learned from that listing, for sure.

Joe Fairless: Best ever way you like to give back to the community?

Emmanuel Guarino: I have a big part of my heart for the special needs community… I have a good friend I love hanging out with and being friends with, Jordan; so whenever I get a chance, I love hanging out with him.

Joe Fairless: How can the best ever listeners learn more about what you’ve got going on?

Emmanuel Guarino: Ral101.com. On that website we have videos, we’ve got a free book for you, and then we also have the number for our discovery call, to help you find out if this is the right opportunity for you… Because it’s not for everyone. But if it is, that’s a chance to find out if it is the right opportunity for you.

Joe Fairless: Well, thank you for talking through the three properties that you’ve got, and the details about each of those properties, how you think about them in terms of levels based on the area, and the value of the properties, and what you did to each of the properties, as well as some of the biggest expenses with this business model… So thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Emmanuel Guarino: Thanks, Joe.

JF1785: Side Hustle Nets $7.5M In Real Estate In 10 Years with Matt Spangenberg

Matt shares his Best Ever Advice with us, which includes his first rental property that he was cash flowing over $1k per month. He used the equity he had from his personal property, which was obtained through working as much as possible to make money and pay down his mortgage. When he found out he could use that equity to purchase property, Matt knew real estate was a business he could scale. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“I spent a year of my life just working as much as possible and saving money” – Matt Spangenberg

 

Matt Spangenberg Real Estate Background:

  • 36 year old real estate investor who started from nothing
  • Used a HELOC to do 30 BRRRR deals
  • Acquired $7.5 Million in real estate over the last decade as a side hustle
  • Owns 51 units with 7 closing next month
  • Based in Pennsylvania
  • Say hi to him at karleyinvestmentholdingsATgmail.com
  • Best Ever Book: Never Split The Difference

 


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TRANSCRIPTION

Theo Hicks: Hi, Best Ever listeners. Welcome to the best real estate investing advice ever show. I am your host today, Theo Hicks. Today we will be speaking with Matt Spangenberg. Matt, how are you doing today?

Matt Spangenberg: I’m doing great, Theo. How about yourself?

Theo Hicks: I am doing fantastic, thank you for asking. A little bit about Matt before we get started – he is a 36-year-old real estate investor who started from absolutely nothing. He actually used a HELOC loan to do 30 BRRRR deals. That’s the buy, rehab, rent, refinance, repeat strategy. He has acquired 7.5 million dollars in real estate over the past decade as a side hustle, and currently owns 51 units, with seven additional units closing in the next month. He’s based in the Lehigh Valley, Pennsylvania, and you can say hi to him at karleyinvestmentholdings@gmail.com.

Now, me and Matt were talking a little bit before we went live, and he mentioned two deals in particular that I am looking forward to diving into during our conversation. One of those deals was where he was able to create over $350,000 in equity, and then another one was 100% owner-financed.

Before we hop into discussing those deals, can you tell us a little bit more about your background and what you’re focused on now?

Matt Spangenberg: Sure. So my email is actually karley with a k. Everything else you said was good, but it’s Karley with a k. Karleyinvestmentholdings. So as far as my background, I grew up as an average person, I left home at 18… I bought my first house at 20 years old; I worked my butt off, saved money for a down payment, 20% down, thought that was the way to do it. But as a 20-year-old I bought a foreclosure, as is, no water, no electrical; everything was off. But I just had the guts to just buy it. I didn’t really know what I was doing. But I fixed that up. My wife and I got married three weeks later. We were hanging sheetrocks together, we were painting together, doing all that… But the cool thing was we bought that, we got a good deal on it, and the market went up in 2004-2005, and we were able to get a HELOC and get a $100,000 home equity line of equity because of the equity we had made in that first house we bought, that we lived in. So that’s kind of how I got started – getting the first house young, building up sweat equity, and then getting a HELOC.

Theo Hicks: So that $100,000 HELOC loan – was that the foundation that you used to acquire the remaining 29 BRRRR properties? So you just kind of rinse and repeated with that same capital?

Matt Spangenberg: Absolutely, yeah. My first deal was a twin in the local city of [unintelligible 00:05:00.26] near me. I bought it for 68k because it had a fire. So then I’m 24 years old and I have a 100k line of credit; I see a house for sale (actually, my brother found it and brought it to me, told me about it). 68k, I bought it… I got laid off from my job; the market crashed, I got laid off, so I didn’t have much to do… I went in and started working on this house, fixing it, painting it, doing it all myself.

I didn’t even know about the BRRRR. I’d never heard that term before. This was ten years ago. I fixed it up, got it rented… I was in it total for about 95k, I would say, after I bought it for 68k and put some money into it. I went to the bank and said “Hey, I wanna refinance this”, and they came out and appraised it at 130k, and gave me a loan for 100k. I was like “Man, this is awesome. I’ve just got 5k back.” And my mortgage tax insurance was $900/month for this place, and I rented it to local college students and they paid me 2k a month. So my first rental property I was clearing $1,100/month, and I was hooked and off to the races.

Theo Hicks: Did you buy that property all-cash? Was it 95k out of your own pocket, or did you mention that you got a loan for 25% down?

Matt Spangenberg: No, the first rental property I used my HELOC for, and I bought cash with my HELOC for 68k, did the improvements with my HELOC. Then I refinanced it, got 80% of appraised value, which is all my money back, paid my HELOC  back down to zero, and then had that house basically no money out of pocket, and $1,100/month cashflow, with no money out.

Theo Hicks: That’s a slam dunk. Where did the money come from for that initial down payment on your first house, at 20 years old?

Matt Spangenberg: My first house, at 20 years old, I just worked my butt off, man… When I was 19, I did nothing but work every night and weekend. I saw my fiancée on Friday nights and Sunday afternoons, and other than that I just worked for a whole year and was able to save $28,000. My first house was 98k, and I put 25k down, and that was it.

Theo Hicks: That’s a great success story, and I’m glad you were able to do that, to work hard and make that money. It sounds like you’ve essentially created this 7.5 million dollars business with just that $28,000 cash-wise; the rest is coming from your own sweat equity and spending time doing it yourself.

Matt Spangenberg: Exactly.

Theo Hicks: So I wanna dive into these two deals. Let’s talk about the first deal that you mentioned, when you were able to create over $350,000 in equity. Walk us through how you found it, how much you paid for it, how much you put into it, and how the heck were you able to create so much equity?

Matt Spangenberg: Sure. I was doing single-family homes; I used my HELOC maybe 20 times myself, I just kept doing one at a time. Then I realized “Man, if I partner with a friend, we could do more.” I only had 100k to work with, so talked to a friend who had a home equity line of credit, and him and I said “Hey, let’s go together and we’ll have more money to do bigger deals.”

So I was driving by this property, a rundown six-unit apartment building; all rundown, dilapidated, and there was a “For Rent” sign out front. It said “Apartments for rent.” So I called the phone number, talked to the guy, who was in his eighties, and I said “Hey, I’m calling about your apartment for rent.” He says “Okay, how many people are gonna be living there?” and I said “No, I don’t wanna rent it, I wanna buy your whole building. Would you wanna sell it?” And he said “Um, I don’t know. Maybe. Make me an offer.”

So I just pulled up the tax assessments, which means nothing; the tax assessment was 300k, and I said “Would you take 300k?” He said “Sure. 300k.”

I didn’t have the money, so I called my friend and I said “Hey man, I’ve got this deal. I think it’s a great deal.Do you wanna go in on it with me? We’re gonna need money down and money to fix it.” He said “Yeah, I’m in.” So that deal – we bought it for 300k, we went to the bank, and because I had done so many BRRRRs and refis with the local bank, they knew me and they knew I could do this… And I said “Listen, I want you to finance 80%. We’re gonna put 60k down, 20%, with our HELOCs, and then we’re gonna fix it and then we’re gonna come back and refi.” And the bank said “Okay, sure.” So we bought it for 300k.

We went in, and the rents were $600, $550… There was stray cats everywhere, there was [unintelligible 00:09:08.22] infested apartments, there was mice, and rats, and hoarders, and all the typical stuff. But we went in, bought it, and started fixing the vacant ones up. We gutted them down to the studs, new plumbing, new heating, new everything, ripped out [unintelligible 00:09:23.13] This was a 100-year-old-building. And when we were all done — it took us about a year, because we were doing it on the side. So we had to get one tenant out, fix the apartment, rerun it…

We put 500k into it, maxed out our HELOCs, maxed out our savings, borrowed hard money… Anything we could get. We borrowed money from friends, family, whatever, to come up with the 500k ourselves. So when we were done, we took the building from rents of $600 and $550 to $1,350 and $1,500/month rents. Hardwood floors, granite countertops, central air. We took it from a D class building to an A+ class building.

Once we finished, we went back to our bank and said “Hey, we’re done. Let’s refi. Let’s get some money out.” So we were in it for 800k, and they came out and appraised it, and it appraised at 1.2 million. So we got a loan for 850k, we got all our money back, paid back all the loans, put 50k in our pockets, and it still cashflows amazing.

Theo Hicks: Talk about a success story… So you said it was a D property when you bought it, and then you upgraded it to an A… Did you know that the market would be able to support this A property? When you bought it, did you know that the market was a B market, but you found this really rundown property that you knew if you fixed it up, put in all those high-end amenities you’d be able to get higher rents and find those tenants that were willing to pay those higher rents?

Matt Spangenberg: Yeah, and the reason being is because I have 30 single-family homes in that same town, where I’ve done the same thing – bought old homes, fixed them up, and was able to get top dollar. So to me it was like “Oh, this is just six homes, and I can just repeat what I’ve been doing.”

Theo Hicks: Okay. And then you mentioned that you put that $500,000 into it, and obviously you and your partner friend fronted some of that cash, you said you maxed out your HELOC loans, got some hard money loans, asked friends and family for cash… How did  you present the opportunity to those friends and family in order to convince them to invest?

Matt Spangenberg: We kind of just told them our track record. “Hey look, this is what I’ve been doing. I’ve been buying these homes, and I’ve acquired (at that time it was maybe) 3 million in real estate by buying one at a time”, and showed them my track record. Then I said “Would you like to invest the money with us? We’re giving you a promissory note, we’ll give you an 8% return on your money. We’ll probably use it for a year or two.” And they were like, “Okay, sure. I’ve seen your track record, I see what you’re doing, you know what you’re doing… I’d love to make 8% on my money, as it’s sitting in the bank right now.”

Theo Hicks: So that’s the one deal; you created $350,000-$400,000 in value. What about the other deal that you mentioned to me? The one where you were able to get for 100% owner financing. Can you walk us through that deal as well?

Matt Spangenberg: Sure. That was another six-unit apartment building in the same town. The guy was in his seventies, owned it for 30 years; it wasn’t as dilapidated, but it definitely had a lot of deferred maintenance and a lot of updating needed. So that deal – I actually knocked on the guy’s door and said “Hey, I see you own this property over at 123 Main Street. Would you be interested in selling it?” And he says “Nah, I don’t wanna sell it. I like the cashflow.” And he says “And I don’t wanna pay capital gains.” I said “Okay, I understand. If you were to sell it and get rid of that headache, and sell it to us, we would allow you to owner-finance it.” He said “What would that mean?” I said “Well, we would pay you every month, and you’d still get the cashflow, you’d get no headaches. We’d do an installment sale owner finance, so you only pay your capital gains each year on the profits you make.” He said “Well, I’d want $450,000 for that building if I had to sell it.” I said “Well, I’d love to give you that if it’s worth that. Let’s go look at it.”

In the meantime I was actually reading the book “Never Split the Difference”, Chris Voss, about negotiating. And I used all the tactics – I used guns blazing on the poor old guy, I used all the different tactics of negotiating. I got him down to $310,000 from $450,000, and then he said “I don’t know if I wanna sell for that little.” I said “Well, you know what – to even make the deal sweeter for you, why don’t we do interest-only for two years, and then we’ll buy it from you?” He said “Well, how does that benefit me?” I said “Then we’re gonna basically give you…” — it came out to like 15k in interest we would be paying. “So we’re gonna pay you 310k, interest-only two years, which is 15k and 15k, so you’re gonna get 30k in interest from us, and then we’ll buy it for 310k. So you’re actually gonna get 340k if you look at it that way.” He said “Oh, I like that.”

Now, obviously, to us interest-only is great, because now we have more cashflow to put back into the building… And because he owned this for 30 years, he really had attachment to it, he really liked the building, and we said “Listen, if we buy it from you we’re gonna do a new roof, we’re gonna do new windows, we’re gonna update the outside, put some siding on… We’ve got a lot of improvements we wanna do. So we’d be happy to give you a down payment, but if we give you a down payment, that’s  [unintelligible 00:14:14.16] gonna get an interest. If we give you 20k-30k, that’s 30k less in interest you’re gonna make. Or instead, if you wanna do 100% owner financing, we’ll take that 20k-30k and we’re gonna dump it right back into the building right away. So you’re not losing the money, you’re getting that in equity.” And he said “Okay. I’ll finance it, 5%, interest-only two years, 100% finance.”

My partner and I were looking at each other shocked, because we went in with a low anchor, expecting to go up, and we stuck to it and he took the low anchor. So that was a great deal.

Theo Hicks: That’s a great deal. The entire concept of identifying the pain point and then presenting a solution… This is like a picture-perfect example of that. You knocked on his door… Well, first of all — because me and Joe talked about this before, because we’ve heard the door-knocking strategy on single-family homes, or we’ve heard the door-knocking strategy on places where multifamily properties have the owner actually living in the building… So  you actually knocked on this guy’s personal home; so you looked up the property on the assessor site, you found out where he lived and you showed up to his house, asking him about his property, correct?

Matt Spangenberg: Yeah, exactly. I didn’t even know what I was gonna say when I got to the door. I just knocked and just winged it when he answered the door.

Theo Hicks: That’s fantastic. That’s probably the first time hearing that particular type of door knocking… But what I was saying is that you identified his pain point; he didn’t wanna sell it because of capital gains, so you fixed that by rather than buying it straight up, you paid him cashflow each month, so he’d only pay taxes on those, as opposed to paying massive tax on the sale. He also wanted the cashflow, so you were able to solve that by giving him the interest-only for however many years, that $50,000. He didn’t want the reduced price, so instead you presented this interest-only… I mean, you [unintelligible 00:16:04.08] and you essentially were able to remove all of the pain points.

Matt Spangenberg: Yeah. And I told him — obviously, he’s in his seventies, and he wants to go to Florida for a couple months in the winter, but he mentioned when he goes down he gets calls from the tenants… So  I said “Listen, if you do this deal, you can be sitting on a beach in Florida and you’re gonna get your checks every month from us, and you’ll get no headaches from any tenants.”

A month and a half later when we closed, after we closed, he said to us “I never thought I’d sell it for so cheap, but I’m really happy I sold it. And the thing that got me is when you said “You could be sitting on the beach, collecting your check from us and not have a headache.” That’s what sealed it for me.”

Theo Hicks: It’s everyone’s dream… So good for you. Alright, Matt, for the money question – what is your best real estate investing advice ever?

Matt Spangenberg: Best advice would be just to be creative. You’ve gotta think outside the box. If you see a door closed, look for windows. You have to be disciplined. So many people today wanna have everything upfront… But I spent a year of my life when I was 19 just working my butt off and saving that money, and that’s what started the whole empire – just being disciplined and not giving up.

Theo Hicks: Solid advice. Alright, Matt, are you ready for the Best Ever Lightning Round?

Matt Spangenberg: Sure.

Theo Hicks: Alright. First, a quick word from our sponsor.

Break: [00:17:26.16] to [00:18:14.24]

Theo Hicks: Alright Matt, what is the best ever book you’ve recently read, besides Never Split the Difference, which you’ve already mentioned?

Matt Spangenberg: Oh, man! That was my book. I was gonna say Never Split the Difference. That’s a good one. There’s always Rich Dad, Poor Dad. I’m in the process of reading Fake right now, by Robert Kiyosaki. That’s pretty good, too. It talks about reserve banking stuff. But Never Split the Difference is the top one.

Theo Hicks: Alright, I’ll give it to you.

Matt Spangenberg: Alright, thanks.

Theo Hicks: If your business were to collapse today, what would you do next?

Matt Spangenberg: I would hustle and find deals. If I had no money, I would go out there, knock on doors, call people, and I’d find deals. Once you find the deals, you will find the money.

Theo Hicks: Besides your first deal and your last deal – and go ahead and say the two deals we’ve mentioned already – what is your best ever deal?

Matt Spangenberg: Alright, so I’ve got another one that I bought back in January – it was a seven-unit, off market deal. The guy wanted 450k and I got him down to 370k, but all my money was tied up in other deals that I had going, so I went to a friend of mine and said “Hey, do you wanna make 8% on your money?” He said “Yeah. What do you need?” I said “Give me 75k for two years.” He said “Okay.”

So he gave me 75k and I used that as the 20% down, and got 80% owner financing from the bank for the rest. So that’s another seven-unit I bought with none of my own money, with hard money, friend money for down payment, and bank financing for the rest.

Theo Hicks: And then what is the worst deal that you’ve done?

Matt Spangenberg: Worst deal… I don’t wanna say worst deal; maybe a mistake I made would be over-improving a unit. I bought a C, C- apartment and I thought I could make it an A, and it wasn’t the neighborhood, and I put 25k into remodeling it, putting in hardwood floors, granite, all that stuff, and the rent was like $75 more than if I didn’t do any of that stuff. So I was just kicking myself, like “Man, I over-improved that…!” I guess I just didn’t know the neighborhood.

Theo Hicks: Okay. What is the best ever way you like to give back?

Matt Spangenberg: I give money to my church, commissions [unintelligible 00:20:09.15] I also love to help young guys or girls coming up that wanna learn about real estate, wanna learn about debt, and leverage… And the good debt, not the bad debt. I love to open young people’s minds up. When you start telling them about real estate, and cash-on-cash returns, and no money down – I just see their eyes light up when it clicks.

Theo Hicks: And then lastly, what is the best way to reach you?

Matt Spangenberg: The best way would be email. I’m not on Facebook, I’m not on Instagram, I’m not on Twitter… I think I’m on Bigger Pockets, but I never check that. I’m too busy finding deals and working that stuff to go on social media. So the best way would be to email me at karleyinvestmentholdings@gmail.com.

Theo Hicks: Matt, I thoroughly enjoyed this conversation. I learned a lot. It’s always great to hear success stories where it’s literally just 100% about hustling, and just grinding, and especially doing it at such a young age.

Just to recap what we discussed – you mentioned how you bought your first property at the age of 20, you worked for a year to save up money for the down payment, and you happened to be laid off from work, so you and your fiancée at the time worked on the — you actually got married a few weeks later…

Matt Spangenberg: Yup.

Theo Hicks: …and you guys were the ones that put all the sweat equity into the house, and were able to create $100,000 in equity, which you used as a HELOC, and that was the foundation of your business. We went over two deals in particular. One is where you were able to create 350k. It was your first deal, where you (in a sense) raised money; you had a business partner who brought some capital and you raised money from other people that you knew, and you were able to do that because of your track record, and you explained to them “Hey, I’ve done this before. I know what I’m doing. I’m definitely gonna make money.” Also because of your relationship with the local bank you were able to pull out all of that capital to pay back your investors and put $50,000 in your own pocket.

The specific numbers were you bought it for $300,000, put $500,000 into it, raised the rents from around $600 up to $1,300 to $1,500, appraised for 1.2 million, and got a loan for $850,000.

Then your second deal, which was the first one I’ve ever heard of someone knocking on the door of an apartment owner. They don’t live there, you found their house, knocked on the door, didn’t know what you were gonna do, didn’t know what you were gonna say, ended up buying the six-unit property well below the price that the owner wanted because of the negotiating tactics you learned from Never Split the Difference, and essentially every single pain point, every single reason why he didn’t want to see, you were able to solve for him. Ultimately, the thing that closed the deal was when you mentioned how he can be sitting on the beach, getting paid, instead of having to deal with any headaches from the tenants moving forward.

And then, of course, your Best Ever advice, which you’ve obviously implemented in your own life, is to be creative, think outside the box, and be disciplined. You worked your butt off for a full year, saving money, seeing your fiancée only a few times a week, and that’s what allows you to launch this 7.5 million dollar real estate empire, and I’m sure that it’ll only go up in the future.

Matt Spangenberg: Absolutely.

Theo Hicks: Matt, I really appreciate you taking the time to talk to us today. Best Ever listeners, thank you for listening, and we will talk to you soon.

Matt Spangenberg: Thanks, Theo.

JF1768: Investing Niche: Providing Furnished Apartments For Short Term & Long Term with Hank Jonap

Hank and his company work with rental companies to help furnish their apartments and move in great tenants. Typically their tenants stay for multiple years, but they also have month to month lease options available. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“When we’re moving in a unit, we move in that first day, after that, our sales team handles everything” – Hank Jonap

 

Hank Jonap Real Estate Background:

 


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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Hank Jonap. How are you doing, Hank?

Hank Jonap: I’m doing very well, thank you. Thanks for having me on the show.

Joe Fairless: Yeah, my pleasure, and I’m glad to hear that. A little bit about Hank – he is the director of real estate for Blueground. He oversees the company’s location expansion strategy, and new space acquisitions. Based in the Big Apple. With that being said, Hank, do you wanna give the best ever listeners a little bit more about your background and your current focus?

Hank Jonap: Sure, absolutely. I’ll tell you a little bit about  Blueground first. Blueground is a real estate tech company offering beautifully-furnished and thoughtfully-equipped apartments, for stays ranging from 32 days to a year, or even longer. Here at Blueground we’re on a mission to create a tech-powered living experience that guests love, homed in an organization where great people are proud to work with these carefully-selected, ideally-located apartments, and upgrade them to be fully furnished homes, so people can show up and really start living from day one. Our vision is really to make people feel at home, wherever they choose to live.

More on a personal note, I started my real estate career out of college on the brokerage side of the business, working with Newmark Knight Frank, [unintelligible 00:03:19.09], then kind of transitioned over to SL Green Realty, who’s a large commercial real estate company here in New York, where I’ve dabbled in everything from property management and instruction project management, and then kind of moved into more of an underwriting and operational, construction side of the business, where I would be evaluating large deals, where the company would potentially be acquiring and creating a value-add situation.

After spending about eight years at SL Green, I ended up in a little bit different of a lifestyle, and moved into the startup culture where I worked for Breather products, who is a flexible workspace solution that is catering to instantaneous workspace and on-demand solutions, whether it’s for a short-term meeting, or a great office for 10, 30, 50 people, that really just provides you great flexibility in your daily work environment.

Joe Fairless: So with Blueground, help me understand a little bit more… Because furnished apartments have existed before Blueground. So what is it about Blueground that’s unique?

Hank Jonap: Blueground offers many unique things, one of them really being just that we have tech at our core, and that really enhances the client experience and the stay, where our clients can really learn a lot about our products through our website, which is the blueground.com, or even through our mobile application.

We really provide a much higher level of experience, from design, to the cultural fit. Our clients really feel at home and are happy to stay in our homes for a very long duration of time. We actually have an average stay of six months and longer in many of our cities, which just tells you that our clients are really happy to be in our apartments, and really appreciate the unique design, and high-quality furniture, and just the living experience we provide to them.

Joe Fairless: Okay, so your units are competing with hotels and Airbnbs then, correct?

Hank Jonap: In some cases. We don’t really overlay much with the hotel world. We have a shorter stay of 32 days, which eliminates the transient nature of the business, when a hotel would be for a handful of days, or a week maybe. Our clients are really staying with us for a longer duration of time.

Joe Fairless: So you’d be competing with maybe an extended stay hotel, or something like that.

Hank Jonap: Correct.

Joe Fairless: Okay, got it. So you mentioned a design and cultural fit… How do you deliver on that value proposition?

Hank Jonap: We’re fortunate enough to have a wonderful design team, that really provides a unique layout and experience for every one of our units, but also [unintelligible 00:06:00.14] into our brand identity. One of the things that makes Blueground so amazing in reference to what we do is that we actually manufacture and streamline all of our own furniture. We’re making high-end furniture that’s unique for our apartments, where we can really just highlight certain details and elevate the experience of the unit… Whether that’s with our furniture, our beds, our couches, as well as fully-equipped kitchens, which is really one of the things that our clients do value, at the end of the day.

Joe Fairless: Huh. What other ways is your company integrated? You mentioned you manufacture your own furniture… Anything else that you do that would be noteworthy?

Hank Jonap: I guess one other thing is that when you compare it to a hotel, people are staying in our units and they really value the additional space, and the ability to not just have a bed and a shower in a hotel room with a TV on the wall; they love the ability to make our units their home, and the ability to stretch our on one of our high-quality sofas, or have dinner at one of our dining tables. The furniture is made to improve and enhance their way of living.

We provide everything to our clients, from their towels and linens… It really makes them feel that they’re in a place they wanna live instead, and not something they happen to just pass through.

Joe Fairless: Got it. So with the manufacturing of your own furniture, I imagine that the price point for the consumer is gonna be in line with more of  a luxury type of extended stay hotel… If there is such a thing. I don’t even know. What type of price point are we talking about for staying here? I know it depends on the area.

Hank Jonap: Yeah, area and city plays a large factor into the price point. Even talking about here in Manhattan, you’re gonna pay a different price point for being in the financial district, to the Upper West Side. But our clients, typically, depending on the duration of stay — if we have a client that’s looking for one of our great units for, say, a 12-month lease, pricing is gonna start around $3,000 for that monthly rate. That includes all of their services. There’s no hidden fees, or anything like that.

Joe Fairless: Cool. And that’s in New York City?

Hank Jonap: That’s correct. But prices range across that platform, across all of our markets.

Joe Fairless: Sure, sure. I lived in New York City for ten years, I get the varying price range for sure. Okay, so your focus is the company’s location expansion, and getting new space acquisitions… Can you talk a little bit about your business model and how you grow your footprint?

Hank Jonap: Sure, so we grow our footprint in many different ways, really depending on the city and our partners. We have a great team of real estate business development associates and managers in all markets, that are out in the market, meeting with different owners, brokers, individual landlords, really trying to tell them that we are the best option for them over your everyday renter… Or coming into units and meeting with landlords to help them stabilize a unit. We’re not a tenant that’s coming in for a year; we’re typically there for 3, 5+ years… But we work with regular rental companies, companies like Related, or Stonehenge, or Pinnacle (New York), but we also work with a lot of the large institutional companies, like Blackrock or Blackstone, that have assets throughout the world.

We also work with various individual investors and condo owners, who are looking to potentially purchase a condo in New York as an investment. To have steady income, they’re able to work with Blueground, who is able to come in, fully furnish their unit, operate this for them, and all they have to do is pretty much sit back and know they’re having steady income on an asset that they can hold on to for many years.

Joe Fairless: And I’ve noticed on your website you’re in about 8-10 markets… The major ones in the U.S, and then some international markets.

Hank Jonap: That’s correct. We’re in nine markets in total, six here in the U.S. We’re currently operating here in New York City, as well as Boston, D.C, San Francisco, L.A. and Chicago. We have approximately about 900 units spread out across the U.S, and a little more than 2,000 globally.

Joe Fairless: What’s the sales pitch to the owner, other than you’ll be there for 3-5 years? …which is significant, because turnover costs, as you know, eat into the bottom line for owners. What else is the value proposition when you’re speaking to owners?

Hank Jonap: Sure. We’re [unintelligible 00:10:25.21] with owners, and basically really able to drive home many different factors. Some of the other ones would be that when we’re moving into a unit, we’re moving in that first day we take possession of it, bring in all of our furniture in there. After that, our operations and our sales team is filling units for extended periods of time. So it’s not a transient type of business, we are not dealing with people coming in and out with suitcases every few weeks. Our clients are coming, and in many cases these are high-end business professionals that are looking to stay in the units for their job. These are their homes; it’s a place for them to come home to, and the average renter than any landlord would be happy to have just needs flexibility in their living situation, and that’s what we do, too – that flexibility that in many cases landlords can’t offer, but can  work with Blueground to expand their offering as a building or as a company.

Joe Fairless: You were originally a broker in your career… What are some things that you learned from that experience that you’re applying to what you do today?

Hank Jonap: Time is everything when dealing with real estate. Time can kill a deal, so the ability to move quickly, to know what works and to be able to close. That’s been something that’s always been true to me. In real estate it comes down to location, so understanding what you’re looking for, having a strategy, and kind of going into it with a purpose is something that allows you (or anybody) to really get the deal done, and to go in knowing exactly what you need to walk away with.

Joe Fairless: What are you looking for in a location whenever you look at growing the footprint?

Hank Jonap: In many cases, we’re looking for accessibility to public transportation, whether that be subways or buses. Our clients wanna have a feel natural air, and like coming into the units, so typically we’re on a floor that’s gonna cater to those elements.

We have many clients that are coming that wanna be close to their office for the convenience factor, but we also have many units that allow the clients and our guests to get away from certain parts of the city, so they can step away to the Upper West Side and have an office in Midtown, be close to the great restaurants, parks or things that are important to them when they’re not working.

So our units can range from great transportation, to great restaurants, to parks and access… That’s really the one thing, that we’re strategically locating in places where the everyday individual wants to be.

Joe Fairless: And that certainly holds true in New York City, but when you get to outside of the bubble of New York City and you go to Dallas, Fort Worth, or Miami, or other cities where most likely people are not gonna be taking public transportation – at least en masse, they’re not taking public transportation; they have a car. What would you look for in those types of cities?

Hank Jonap: In those types of cities, as you said, people are driving. Mass transit isn’t [unintelligible 00:13:15.22] It’s access to parking, in many cases, and allowing people to have the ability to conveniently get around to different parts of the city, or being able to have some space to enjoy life a little bit differently. Now, I can’t get into too much about the markets we’ll be going to, and I do know in some of our locations we are very focused on certain downtown business districts, and the convenience for people to work and live, and kind of bring it all together in a very high-end, unique way.

Joe Fairless: And will you describe your typical customer who is renting from you?

Hank Jonap: We have many different customers, and that’s something that we’re proud to say we have. I would say our average customer is a business professional who might be from a consulting company, or a startup, that is traveling around, trying a new city, or being sent somewhere, that just wants a unique experience, wants something more than just a hotel room… Wants to sample a new city and see what it has to offer, and really kind of just have a different experience than what others might be able to provide them. But at the end of the day, it’s not so much that you try to cater to a certain client, but you’re catering to a certain type of living style.

Joe Fairless: And just so I’m clear on how you deliver on that unique experience – you mentioned there’s a layout for every unit, it’s customized, and you manufacture your own furniture… What else do you do to deliver on that unique experience?

Hank Jonap: Outside of just the design and everything that we provide to our clients, it’s the customer experience. The ability to work with our staff to get additional cleaning services, have us help them with certain things they’re trying to do, or recommendations for restaurants, or things to do in the area. It’s allowing our clients, at the end of the day, to just have a seamless experience. It can take the worrying away of moving, or trying to find a place, or buying furniture… They can literally just show up into one of our units, know exactly what they’re getting, and start living.

Joe Fairless: So you have a concierge. Along with renting the unit, you’ve got someone who serves as a concierge for them.

Hank Jonap: Correct, and that’s all through our tech platform. That’s the nice thing, where everybody today is on their mobile device; you don’t have to go to a lobby and talk to somebody and wait on line. It’s all through our mobile application, where you can get immediate attention from one of our trained staff.

Joe Fairless: Taking a giant step back – based on your experience as a real estate professional and investor, what is your best advice ever for real estate investors?

Hank Jonap: My advice for real estate professionals and investors – it’s a long game; there’s many people that are always looking for the quick dollar in real estate. I always like to look for those — I’ll call it kind of the low-hanging fruit, where something that might not be the best opportunity today, and just a stable thing, but you have to look to the future and know that it’s a safe bet. That’s just something that I’ve always personally realized – you never know what’s gonna happen, but if you’re willing to hold on to it and understand the long-term value in real estate, that’s what I’ve always thought is a great separator from some of the larger players out there.

Joe Fairless: Do you have an example of something you’ve purchased or you’ve been involved in a transaction, where you took that to heart and held on to it for the long run, and it came to fruition?

Hank Jonap: To be honest, personally, no. I’ve been investigating a lot of various opportunities, but I’m a new father, so most of my recent savings has been going to my family and raising my young child. Currently, I’m a renter, and thankfully, I have the ability to stay in some Blueground apartments, which makes me feel like I’m home even when I’m not.

Joe Fairless: Well, congrats on new fatherhood. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Hank Jonap: Absolutely.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:17:12.17] to [00:17:55.10]

Joe Fairless: Best ever book you’ve recently read?

Hank Jonap: I’ve been reading a lot of kids’ books. Other books that I’ve probably read recently is Rich Dad, Poor Dad.

Joe Fairless: What’s a mistake you’ve made in business?

Hank Jonap: A mistake I’ve made in business… Sometimes fact-checking. There’s been an opportunity where I checked the date of something that was just a quick oversight, but the date was actually two days out instead of two years out.

Joe Fairless: Best ever way you like to give back to the community?

Hank Jonap: I love giving back to the community by helping, whether it’s charitable donations, or doing various walks and marches for breast cancer, or even over Thanksgiving working at a Food Kitchen, or something of that nature.

Joe Fairless: How can the Best Ever listeners learn more about your company?

Hank Jonap: The best way to check out our company and learn more about our great units would be to check out our website, at theblueground.com, where you can see all of our cities, all of our apartments, and learn more about what we have to offer and how we can help [unintelligible 00:18:43.13]

Joe Fairless: Hank, thanks for being on the show, talking about the business model, talking about the value proposition, and how you and your company that you work at deliver on that. I really appreciate your time. I hope you have a best ever day, and we’ll talk to  you again soon.

Hank Jonap: Thanks so much, Joe. I appreciate you having me on.

JF1756: Filling Vacant Units With Short Term Renters | WhyHotel with Jason Fudin

As new apartment communities come to market, they’re empty. Jason’s business model is to find those apartment communities, get access to some of those units as they are being leased up, and turn them into short term rentals for 8-24 months. “Pop-up hotels” as Jason calls them, WhyHotel only moves in during the lease up of new communities, helping investors mitigated the normal losses occurred during the lease up. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“In the U.S. between 200,000-400,000 MF units are delivered each year, on average, they take about a year to fill up, so that means there is somewhere between 100,000 to 200,000 units vacant at all times in major U.S. cities” – Jason Fudin

 

Jason Fudin Real Estate Background:

  • CEO and Co-Founder of WhyHotel
  • WhyHotel is a platform for renting a full size apartment with a 24/7 hotel staff onsite when traveling vs staying in a hotel
  • Based in Washington D.C.
  • Say hi to him at https://whyhotel.com/
  • Best Ever Book: Hiring A Players

 


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.
We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Jason Fudin. How are you doing, Jason?

Jason Fudin: Good, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Jason – he is the CEO and co-founder of WhyHotel. WhyHotel is a platform for renting a full size apartment with a 24/7 hotel staff on site when traveling, versus staying in a hotel. Based in Washington DC. With that being said, Jason, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jason Fudin: Sure. My background is in institutional high rise real estate development. I managed a couple billion dollars of multifamily for rent apartment developments for a large company called Vornado. In that role I realized – not quickly enough, but pretty quickly – that when you deliver a high rise apartment building for rent, there’s a decent amount of vacancy when you open up, as in it’s almost entirely empty. I saw that opportunity and tried to turn it into a business, which is now WhyHotel.

Joe Fairless: You work with class A developers of multifamily and you propose your business model to them, and partner up that way? Is that the gist?

Jason Fudin: Yeah. For example, a few months ago we opened 100 units with Equity Residential. Equity had a 200-unit apartment building delivering, delivered empty as all apartment buildings do, and we said to them “If you give us access to 95 units, we’re gonna turn those vacant units into a temporary hotel, we’ll put them to work, and Equity will make extra money while you fill up your building with long-term residents. We, WhyHotel, will be able to have an asset that is top class.”

We’re also opening with Brookfield here in about four weeks. So yeah, all top-tier, major real estate player.

Joe Fairless: Are you primarily partnering with developers, or are you working with owners who have existing assets?

Jason Fudin: Just developers. Our model is based on the premise that there’s vacancy during lease-up. We say that each of our hotels is a pop-up hotel, and that it will be there somewhere between 8 and 24 months, depending on how long it takes to fill up the building with renters.

Joe Fairless: Wow. That’s really interesting, because I’m putting myself in your shoes, and the insight – clearly, that makes a lot of sense… But if I’m in your shoes, I’m constantly having to hop around from one place to another, since I’ve got that 8 to 12-month window, versus establishing a long-term portfolio where I can rock and roll, and this company can scale… So how do you think about that?

Jason Fudin: In the United States between 200k and 400k multifamily units are delivered each year, and on average they take about a year to fill up. That means that there’s somewhere between 100k and 200k vacant units at all times in major U.S. cities. This is a pretty large opportunity.

If you went after conventional hotels, the margins are super-tight because you have to justify why your use of land and building is more valuable than somebody else’s in terms of driving profit. In our case, we have to justify why if we do something it’s worth more than nothing, because these units are otherwise vacant… So what it allows us to do is build a national [unintelligible 00:04:05.12] in other people’s beautiful  buildings. It allows us to build a brand, back-end yield optimization and a very healthy amount of profit, without taking on the development risk that you would typically see in a real estate deal.

Joe Fairless: Okay. Do you attempt to establish relationships with some core developers, that way you’re not having to constantly reintroduce  yourself to new developers over and over and over again?

Jason Fudin: Yeah, the development community knows us pretty well at this point in time. We have deals with most of the large publicly-traded multifamily players, and a lot of the national developers that are backed by pensions… So yeah, there’s less of introducing, it’s more like just “Good to see you.”

Today what’s interesting is we’re found money. We bring something extra to the table. What we expect to have happen now is through the next cycle of high rise multi development, when someone’s trying to get a deal that depends on them trying to buy the land, if they know they’re gonna make a significant amount of money in addition to the regular apartment buildings by having this interim cashflow, they’ll pay a little more for the land. And that means that we go from being a “nice to have” to a “need to have”, because we’re part of the economics that justify the development of that project.

At that point in time it’s not us meeting with our friends and saying “Hey, do you want an extra chunk of change?”, it’s us saying “Hey, we’re the pop-up hotel operator in town. We’re best suited to produce that interim income for you.”

Joe Fairless: As a developer, if I have the 200 units and you come to me and say “Give me 95 of the units”, I know you’re bringing income where there otherwise wouldn’t be, but are there any expenses, or wear-and-tear, or other things that would detract me from doing that partnership?

Jason Fudin: People could always think of something, but no, the answer is we turn the units back in the same rent-ready condition we got them in. An unknown fact to most people is that multifamily buildings actually grow faster when someone’s lived in the units than when they’re new, because you start to have pricing power and you have occupancy… So there’s no detriment to the actual pricing–

Joe Fairless: Will you say that again?

Jason Fudin: Yeah, so when you stabilize the rent roll for an apartment building, for the next on average three years you’re able to grow the rent roll at a rate that’s higher than the overall market, and that’s because now that you have a stable asset, you’re able to push rate and burn off concessions. Buildings that are once lived in, as in literally there’s been one tenant in that unit – you can do better than a brand new building in terms of rates.

Joe Fairless: What are some reasons — because I’m sure you all have approached developers, and there have been some that said “Thanks, but no thanks.” What are some reasons that they’ve stated?

Jason Fudin: Yeah, there’s probably been a bunch that said “Thanks, but no thanks.” One of the biggest reasons we get is how is regulatory gonna work? What we do is in advance of delivering a building we secure permits for a hotel use; we often pull a hotel license. But some folks are like “I’m just not willing to go back into any kind of public process”, and sometimes that is required. We’ll have zoning hearings, and we’ll meet with planning commissions. So that’s one.

The other is the unknown. We’re a newer concept, we’re a young company – about two years old – so some people say “Hey, it’s a 100 million dollar asset, and I don’t know you.” We’re getting way less of that now, given some of the partners we’re bringing in; groups that can validate how we’ve operated and how we’ve been highly productive for the projects… But those are the two – regulatory, and the newness of us as a company.

In terms of economics, the developer is not taking any downside risk. We go about monetizing the vacant units; they’re not paying for that.

Joe Fairless: And let’s talk about that now. From your perspective and your company’s perspective, you just got the greenlight to go into an apartment community… Now what do you do?

Jason Fudin: Normally, we sign an LOI to say “Hey, these are the terms”, and then in parallel we negotiate the–

Joe Fairless: What are the typical terms?

Jason Fudin: Things we’re interested in is how many units are we gonna take in the building, how long are we guaranteed time in the building, what’s the distribution of revenue look like, who’s responsible for what things on regulatory… Kind of the high-level deal points. Basically, carve-outs for lender approval, or regulatory, those kinds of things.

Once we have our set of terms, we then normally go to pursue regulatory while we in parallel finalize the larger agreement. Those larger agreements are like 40 to 60 pages, because they’re big real estate deals… So that’s normally the process. By the time we have the agreement signed and the regulatory approvals in place, we then prepare to open, which is a whole process. We have go-live team that places all the furniture, it gets the telecom set up, we have a general manager that will hire, onboard, train our hospitality team; most of them come from conventional hotel brands. Then two weeks before the things opens, everyone goes through their training and we get ready to go. We’ve been taking bookings for 3-4 months prior, and then we open and it’s kind of off to the races.

Joe Fairless: How many markets are you in right now?

Jason Fudin: As of now I would say it’s one market, but it’s really two. We’re in DC Metro and Baltimore. That has been a plan of ours, to double down in our backyard as we kind of get better at operating and optimizing revenue, and our funnel of customers, and building a brand… But in 2020 we’ll be doing a huge push nationally, and while I can’t say where we’re going yet, I can tell you we’re going to a number of major cities across the U.S.

Joe Fairless: And what’s the value proposition to the consumer?

Jason Fudin: The consumer gets the best end of the deal. They get to stay in these brand new full size apartments for less cost than staying at a residence inn, or a [unintelligible 00:09:28.24] So they get a higher end product… And by the way, everything’s brand new hospitality – great furniture, all the telecom, you can stream Netflix and Hulu on ChromeCast, there’s a full cable package, you have a bedroom separate from your living room, you have a washer/dryer, you have a brand new high-end gym, rooftop pool potentially… So you get all of those things, and you get a 24/7 on-site hotel staff.

So you get all the best parts of the service of a hotel, but all of the space, comfort and lifestyle advantages of a home-share.

Joe Fairless: And where do you see you all fitting in relative to Airbnb?

Jason Fudin: We see Airbnb, HomeAway, VRBO, Expedia, Booking.com — I would say Hotel Tonight, but I just heard that Airbnb bought them… We view all of them as channels. They are marketplaces where we’re able to find customers, and we pay a customer acquisition cost for those customers, and we also have our own set of direct channels and sales teams that sell directly to the community.

Joe Fairless: As you’ve honed the business plan and the execution in DC and Baltimore, what are some things that you’ve learned?

Jason Fudin: We’ve learned a lot of things. One of the things we’ve learned pretty quickly is when you have 100 or more units, unlike just a traditional home share where you have a unit or two, you’ve gotta run the thing like a hotel; you’re staffing it like a hotel, you have the same number of channels and funnels of demand as a hotel… You’re also subject to the same seasonality, days of the week, shoulder days of  a hotel. So what we’ve had to get smart on is optimizing the way that we sell into a market, so that we’re able to fill up 100-160 in short order.

Joe Fairless: And from an execution on the ground standpoint, with the go-live team – anything with that process that you have honed? Whether it’s as small as a certain telecom approach, or furniture approach, or as large as just your macro-level strategy?

Jason Fudin: We’ve learned how long it takes to put plates, and cups, and silverware in the unit, and have people work some pretty long hours, having underestimated that originally…

Joe Fairless: How long did it take?

Jason Fudin: It takes about six man-hours a unit, which is surprisingly long,  but there’s a lot of back and forth trips, so we’re getting better at that. We have learned how important it is to have the telecom on in advance, because potentially a Verizon or a ChromeCast might just be two weeks late, so you don’t wanna have it turned on right before… There’s a lot of those lessons learned. A lot of them are just on the execution, and so each one just gets easier execute. Decisions on furniture, where furniture [unintelligible 00:11:52.28] get damaged…

On our very first pilot we used Apple TV’s, and people would forget to log out, so we don’t use Apple TV’s anymore… So those kinds of things are just learned along the way.

Joe Fairless: You worked for —

Jason Fudin: Vornado.

Joe Fairless: Vornado. Huge company. I could remember the exact pronunciation. I remember walking by one of their offices in New York City all the time… Were you based n New York or DC when you were working there?

Jason Fudin: DC. I managed a large amount of multifamily development just for the Washington DC market in my first role with them, and then I ended up coming back as an executive to run their innovation group out of DC.

Joe Fairless: Okay, and what are some things that you learned there, other than the main insight that drove the creation of this company? What are some more tactical things that you learned there, that you’re applying with this company?

Jason Fudin: That’s  a good question. I would say one of the things I learned personally there is the patience and the time it takes to build something of scale. I’m a pretty high-energy person, and I wanted to be in real estate development. But obviously, buildings don’t grow up overnight, they’re still hand-built. So having to live through the process of putting up a 400 million dollar asset teaches you that patience.

That’s really important for us, because at our company – we’re a startup, we have to grow fast, we are growing fast, but still having an eye on the long game, to know that it still takes some time to get up to a couple thousand units and a couple hundred employees, and it’s not gonna happen overnight. That’s probably one.

And I’d say the second thing that I learned – and I don’t know if it it’s tactical, but… Real estate moves at a different pace than technology. And I think a perfect example of that is I was a development manager for a high rise apartment building, and we had pegged the rents at a certain dollar amount. That was in 2011. Then we went about entitling it, and then building it, and then delivering it. That delivered in 2016, so five years later…

Joe Fairless: Wow.

Jason Fudin: It was a very large project; I think it’s probably worth — well, now Amazon is gonna be on the [unintelligible 00:13:52.03] It’s probably worth about half a billion dollars; it’s a large project. And what’s interesting in that particular project is Uber changed the rental fundamentals of that project, because Uber wasn’t a thing in 2011 in any meaningful way, and it was kind of  a sleepy market in Arlington, Virginia. Then Uber arrived, and now all of a sudden we are only a $9 and 9 minute Uber ride from a more active lifestyle market. So while we thought it was a $500-$600/month chunk price discount to live in our building, now people are like “Well, why would I spend $600 more if I can be there in 9 minutes for $9?”

So we had tremendous upward pricing power, having to do with something that we didn’t control, and hadn’t thought about. I think that for me that was a big life lesson, in that real estate doesn’t move at the pace of technology and can be highly disrupted by it when it’s in motion, because you can’t stop it; you can’t stop building a couple hundred million dollar project.

Joe Fairless: Right. It’s a powerful lesson, especially when you’re dealing with those large of numbers, but certainly can be applied to any type of transaction.

Based on your experience as a real estate investor and entrepreneur, what is your best real estate investing advice ever?

Jason Fudin: My best real estate investing advice… I guess I’ve got two pieces – go where the market is going, not where it is today. A lot of people get caught up in the excitement of “This is this amazing spot”, but the spots change, so go where the market is going, not where it is today. And that’s if you don’t have that much money. And if you have a bunch of money, make your own market, so that where it’s going is where you make it. I think that’s important, because [unintelligible 00:15:23.12] large company like Vornado, and they can make a neighborhood that didn’t exist by investing 2-3 billion dollars. But if you’re a smaller developer, you’re not gonna be able to have that kind of outsized influence on any particular submarket. So you’ve gotta go directionally, where the rest of the market is going.

Joe Fairless: And how do you identify where the market is going, not where it is today?

Jason Fudin: You’ve gotta be a local. Anyone who tells you you can develop from afar, without local insight, is cheating themselves.

Joe Fairless: So you’ve got to be local, or have a local on the ground insight.

Jason Fudin: Yeah, you’ve gotta have local talent as part of any project, because sometimes street by street or exit by exit – there’s certain perceptions of what is and isn’t happening, and people know what’s coming… And if you’re outside of that and you’re not living, you’re gonna get tripped up on something you didn’t realize was a thing. You’re gonna be the outsider who made the dumb move.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Jason Fudin: Yeah, let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:16:24.01] to [00:17:09.03]

Joe Fairless: Okay, Jason, best ever book you’ve recently read.

Jason Fudin: It’s called Hiring A-Players. A smart method for hiring people. It has changed the way we hire at WhyHotel. A company, especially a small company, is only as good as its team, and it’s exceptional. Based on hundreds of thousands of hirings.

Joe Fairless: What’s a top of mind tip you can give us from that book for hiring people?

Jason Fudin: Be thoughtful, be structured, and only hire the best.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Jason Fudin: Caring too much about how it impacted the other side of the table.

Joe Fairless: Best ever deal you’ve done?

Jason Fudin: The best ever real estate deal I did was a public deal, where there was a time dislocation between when we tied it up and where the market would be when we got to build it.

Joe Fairless: When you say “time dislocation” – will you elaborate on that?

Jason Fudin: Yeah, basically we tied up a deal with the city at one of the companies I worked at, but we knew we would break ground on it for a number of years because of the process, but we didn’t have to pay for it until we broke ground, and therefore, back to the earlier advice I gave about “Go where the market is going”, we knew that market was moving, and to be able to tie it up, but then not have to break ground until later put us at an advantage in terms of basis and the ability to get a return.

Joe Fairless: Best ever way you like to give back to the community.

Jason Fudin: Teaching. I’ve mentored, I’ve taught at a college level, and I think that to be able to give back to the people that are coming next is powerful, not only because it’s enjoyable, but because they can then have an impact.

Joe Fairless: And how can the best ever listeners learn more about what you’ve got going on.

Jason Fudin: They can go to our website, WhyHotel.com. We say “Why a hotel, when you can have a place like home?”

Joe Fairless: Jason, thanks for being on the show, talking about the insight that led you to co-found WhyHotel, and the business model behind it, as well as the value proposition for all the players – your team, the developers, as well as the consumer. Interesting stuff. Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Jason Fudin: Awesome. Thanks, Joe.

JF1736: $10k Per Month Passive Income, Requires Just 1 Hour Per Week To Manage with Anton Ivanov

Wouldn’t $10k per month of passive income be nice? Anton currently has that with his portfolio, and he only has to spend one hour each week to manage. He also has another career, so his real estate investments are not his main focus, which makes the passive nature of his investments ideal for him. Joe digs into Anton’s portfolio and story, extracting the lessons for us to learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

Best Ever Tweet:

“Get your foot in the door, you’ll learn more from your first deal than any kind of reading or research” – Anton Ivanov

 

Anton Ivanov Real Estate Background:

  • US Navy veteran, real estate investor and entrepreneur
  • Owns 35 units across 4 states, generating $10k in monthly passive income, requiring only 1 hour a week to manage
  • Based in San Diego, CA
  • Say hi to him at https://dealcheck.io/
  • Best Ever Book: 4 Hour Work Week by Tim Ferriss

 


If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.

We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com


TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Anton Ivanov. How are you doing, Anton?

Anton Ivanov: I’m doing great, Joe. How are you?

Joe Fairless: I am doing really well, and nice to have you on the show. A little bit about Anton – he is a U.S. Navy vet. Thank you for what you did for our country. He is a real estate investor and an entrepreneur. He owns 35 units across four states, generating $10,000 monthly passive income. Here’s the kicker – it requires only one hour a week to manage… And he is based in San Diego, California. With that being said, Anton, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Anton Ivanov: Absolutely, Joe. Thanks, first, for inviting me on the show. I got started with real estate kind of in a set of unfortunate circumstances. I was in the U.S. Navy a few years ago, and both of my parents passed away actually while I was stationed in Japan, overseas. They owned a condo here in San Diego, and I ended up inheriting it after their deaths. Prior to that I never had honestly any intention of getting into real estate, at least in the immediate future. I didn’t know much about it, so here I am, I’m living in Japan obviously, deployed with the U.S. Navy, I’ve got this condo… I wasn’t really sure what to do with it at the beginning. I thought about selling it. I glad I didn’t; I talked to a few folks smarter than me, and they were like “Well, you know what – it’s a good asset. Why don’t you try renting it out? Get a property manager and see where it goes. Don’t make any rash decisions.” Which I did.

I happened to find a local property manager here in San Diego, I rented the property out… It didn’t cashflow very well. San Diego prices are very expensive, rents not so much… But it trickled in, a little bit at a time. But over the years it kind of gave me my first look at what passive real estate investing can do for you in terms of cashflow. That was the kicker for the whole driver of after I got out of the Navy and kind of settled in a more normal life, so to speak… It really opened my eyes about what real estate can do for you in terms of passive income specifically, and replacing your full-time job, and obviously helping you retire early. I like to think of that as kind of the start of what followed.

After I got out of the Navy, I moved back to San Diego. Me and my wife, we purchased a duplex that we house-hacked actually, with a low down payment VA loan. That was our first ever property that we bought ourselves, without inheriting it. And from then on we just kept growing. We started investing out of state, we bought four turnkey properties in Atlanta, Georgia, and then Birmingham, Alabama, and from that we went a more traditional route and built a local team in Kansas City, started buying value-add multifamily properties, doing our own rehab, doing our own management, and right now we’re at 35 total units, over 10k monthly cashflow, and the most important aspect for me is our portfolio is more or less 100% self-sustaining and passive, whereas if I wanted to take a six-month vacation, and just basically not worry about it, I have the confidence that it’s going to keep running. It doesn’t need me there every day. And in fact, I work full-time. I’m not a full-time investor. I have a career, I have a business startup, so that’s my full-time focus, and real estate provides me with that passive income, and eventually retirement.

Joe Fairless: When you say it’s self-sustaining and passive, will you elaborate on how you’re defining that? And perhaps elaborate by giving some examples of “If this were to happen, I’m still okay on a six-month vacation, and I don’t need to be present and spend time focusing on that, because I have it solved for.”

Anton Ivanov: Absolutely. To me obviously, passive means that I don’t have to spend my own personal time managing my portfolio. It’s not my full-time job, and it’s not something that even requires my presence. Most of my properties are out of state, and the first key in having this system set up is obviously finding good property managers. Somebody has to manage the properties for you, so if you’re not gonna be doing it, you need a team, and specifically a really good property management company to do that for you. So my first step, and always advice to all investors who want to invest out of state, or just have a passive portfolio locally, is you need to find an absolutely stellar property management company or team to help you.

I’ve found that the best property managers I’ve always worked with have been through referrals from other investors. There’s a lot of companies that manage properties out there, a lot of them are okay, subpar; instead of googling or finding one randomly, first meet investors that invest in that market, that have a track record with using some company for the same types of projects that you want to use them for. So if it’s single-family, find investors who invest in single-family; multifamily – find investors who invest in multifamily, ask them who their property manager is and if they’re happy with them, and get your first few referrals and contacts that way.

And then obviously, interview the property management firm yourself, see if they’ll work for you in terms of the properties you want to buy, whether you want to do a rehab or not, what kind of maintenance fees do they have, what kind of management fees do they have, and so forth. That’s the key, Joe. Obviously, I’m  sure you and your listeners know, first find a good property manager.

The second for me has always been to kind of — I call it training or grooming your property managers. A lot of investors I meet – they find a company to manage their properties, and they expect “Okay, I’m done at this point. I turned it over to them”, and everything’s gonna go smoothly from then on. That may or may not be the case, but the best thing you can do is basically go through as many scenarios before they happen, with your property manager.

We’re talking about your unit becoming vacant, what type of turn rehab are you doing, what is your budget, what are the specific items that you want done on the property. They’re getting ready to lease it – what is the leasing criteria? Do you want pets, do you want no pets? Section 8, no  section 8? Identify and agree on a list of criteria with them. Evictions. What is your late payment policy? What is your eviction policy?

Go through the entire process with the property manager and make sure you guys are on the same page. By being proactive, especially when you’re working with a new company, and establishing a set of checklists, guidelines, basically processes that you agree on, you’re setting yourself up for success later. So when you say “I go on vacation for six months”, because I walked my property managers through pretty much every possible scenario that could happen, and I’m comfortable with the process that they’re going to follow – we reviewed it, we agreed on it – I’m not really worried that something unexpected is going to come up. Because if it does, I’ve already talked to my property manager about how to handle it, what steps to take, how much this is going to cost, and so forth.

So you’re basically delegating your work to them, and giving them the power to make decisions and actually manage the process, but at the same time you’re maintaining control over the overall structure of the process, the fees, and so forth… So when you come back six months later from your vacation and they call you up and say “Hey, we had an eviction. This is exactly how I handled it, like we agreed. Here’s the costs. Everything was done basically how you wanted to” – that for me is truly having a passive portfolio that you’re not constantly stressing over all the time.

Joe Fairless: You live in San Diego… Where are your properties?

Anton Ivanov: I have three properties here locally. I don’t manage them myself either. I have one in Atlanta, three in Birmingham, and 28 units in Kansas City.

Joe Fairless: Let’s talk about the 28 units in KC… Are they all single-family?

Anton Ivanov: No, they’re actually all 2-4 multifamily.

Joe Fairless: Okay. How did you end up in Kansas City?

Anton Ivanov: I kind of started investing out of state, reasons being that Southern California was not a good rental market, in my opinion. I like a combination of both cashflow and appreciation for a good long-term growth. San Diego sees some pretty good appreciation if you buy at the right time. The cashflow here is terrible. So I started looking out of state, and I basically did  an analysis of various markets.

I focused first on bigger cities; I didn’t wanna invest anywhere that was too small. I focused on markets that had very strong economic, population and job growth, because I believe that those qualities are what drive both price and rent growth over time. As a real estate investor in rental properties, that is what I wanna see. I don’t wanna see prices stagnate or decline, I don’t wanna see rents stagnate or decline. I want both to appreciate, and what I’ve found based on my research and reading is if a market has economic growth, population growth and job growth, then that will cause overall prices on rents to go up.

And furthermore, I wanted a market that had a fairly low entry point. We’re talking about maybe between 60k and 80k purchase price per unit. Obviously, compared to San Diego, we’re looking at hundreds of thousands per unit, and Kansas City basically fit all those criteria – it had good economic, population growth, it was a thriving city, diverse economy… At the same time, it didn’t really get hit by the real estate cycle recovery like some of the other markets, so you could still find deals for fairly cheap there.

Joe Fairless: So once you identified Kansas City, how did you start purchasing property there?

Anton Ivanov: The first thing I actually did is network and build my team. That’s the key, like I mentioned before; starting with a property manager, but also finding contractors, rehab teams, brokers, agents, and so forth, to basically assemble a group of people to help you with acquisition, rehab and management of your properties, because I’m not there myself doing it. And the first thing I did was actually connect with local investors, like I mentioned. I think that’s the key.

So instead of finding a broker and an agent, I actually went on sites like Bigger Pockets, a  few local people I knew here in San Diego that had friends who invested in Kansas City, and basically met 5-10 other investors who were successful in that market, learned from them, learned what types of properties they were buying, learned what areas they preferred, and also used them to grow my own network of real estate professionals.

So I did all of that, and it probably took about 6-8 months frankly, just networking, researching, doing this part-time, because again, I work full-time, so I just had to find time to  do it. I flew out to Kansas City myself, met all these people that I was talking to over the phone or e-mail, actually drove around the city probably for two straight days, got a first-hand experience of what these different areas are and look like, to make sure I’m not just blindly buying a property in some area that I think is good.

So I went through the 6-8 month preliminary work that was absolutely essential, because it laid the foundation for being successful in that market later. And only when I had the team, when I was comfortable, only then did I start looking for properties to buy.

Joe Fairless: What’s something that has not gone right?

Anton Ivanov: Specifically in Kansas City, I would say a few times I over-estimated the performance of certain properties, and that’s obviously the key to being a successful real estate investor – you’re about to buy a property, you’re going to run the cashflow projections and make some assumptions of what you think the rent is, what you think the vacancy is, what you think the maintenance will be. Because I was new to the city, didn’t really live there before and only had indirect knowledge, a few times I did over-estimate how much the property could rent for, what the vacancy rate would be, what the maintenance would be. That resulted in less cashflow than I predicted.

Now, thankfully, what helps when you invest in a city that’s thriving and growing is that it does give you some room for error. Because if you think rents are higher than what they actually are, but they do appreciate over time anyway, then maybe the first few years your cashflow will be diminished, but then it’ll catch up  to your estimate. That’s really what saved me in terms of my estimates. But learning from that, obviously; when it’s a new city, new market, you will make some mistakes. The best you can do is use different sources of information, double-check your numbers with other investors, brokers, agents, run it by them, see what they think. Don’t just go on Rentometer or something like that, find one estimate for the rent and think that that’s what it’s gonna be.

Joe Fairless: I noticed in those examples you said brokers, agents and other investors… Did you intentionally omit other property managers, or was that just “…and property managers”?

Anton Ivanov: No, property managers are great people to run by rental estimates. Again, I wouldn’t base the projections on any one estimate, so definitely ask a few brokers, agents, a few property managers what they think a given property may rent for, and take all that collectively, find a middle ground and use that in your projections.

Joe Fairless: Let’s say you were to find a four-unit property that you typically buy in Kansas City today. What would you estimate for vacancy and maintenance? Feel free to pick whatever area you usually buy in, because I know that plays into it, too.

Anton Ivanov: Right. So now that I have some track record in Kansas City, estimating all these numbers, especially in the same areas, is much easier, because I can look at my previous performance and estimate vacancy based on that. For example, for new fourplexes I buy in the same areas, my vacancy estimate is at least 10%. Historically, it’s been around 8% so far over the few years that I’ve been in that market, in the areas. I just add a few little percentages, round out to 10%, to be a little more conservative… Especially because it’s multifamily and these are B-class areas.

So it’s helpful when you have past performance. Definitely use that if you already own properties in the market. Definitely look at how they’re performing. But at the same time, do keep in mind that if it’s a slightly different area, a slightly different property, the vacancy or rent or maintenance may be slightly different… So don’t just blindly throw estimates out there.

Joe Fairless: And as far as the maintenance, how would you estimate that?

Anton Ivanov: The maintenance – typically, when I first get into a market, like Kansas City, when I’m brand new, I usually use a percentage of the rent as an estimate. For multifamily, I do something like 12%-15%. Again, probably a little high, but if I’m new, I’d rather overestimate. Once I have a little bit of track record, like I do now, I can assign a more specific dollar figure, usually in a certain amount per month, per unit in maintenance costs, basically based on the average of how my portfolio is performing in a given area.

Joe Fairless: And what’s that a percent of?

Anton Ivanov: If I use a percent to estimate maintenance, it’s typically of the gross rent. And then if I use a dollar figure, it would just be, let’s say, $100/unit/month for the entire building.

Joe Fairless: You’ve got 24 in KC? Did I hear you correct?

Anton Ivanov: 28 total.

Joe Fairless: Sorry, 28 total in Kansas City. You’re also in Birmingham, Alabama and in Atlanta. Did you come across Atlanta and Birmingham the same way that you did Kansas City?

Anton Ivanov: Fairly similar. The Birmingham and Alabama properties – I bought them turnkey. This is where basically a company rehabs the property, finds a tenant, sells it to you off-market for a sub-price. Those were my first forays into out-of-state  investing when I wasn’t comfortable building my own team. I still did some research on the markets and made sure I’m investing in the areas that I believed will appreciate over time, but obviously I was also investing in the areas where turnkey properties were being sold.

Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?

Anton Ivanov: What I always like to tell new investors, those getting started, is don’t be afraid to start small. It’s tempting to say “Hey, I wanna buy a 50-unit apartment complex”, or even a fourplex, but when you buy a bigger property like that you basically compound your potential to make mistakes… And as new investors, you probably will make mistakes, and you’ll learn from them, but the bigger the properties you start with, the more costly your mistakes will be.

I always say, don’t be afraid to start small, whether that’s just one local single-family property. Maybe you house-hack a duplex… Just get your foot in the door. You’ll learn more through the first deal that you buy than any reading and research you do online. That will set you up nicely for growing your portfolio going forward.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Anton Ivanov: Let’s do it, Joe.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:18:17.22] to [00:19:11.03]

Joe Fairless: Okay, best ever book you’ve recently read?

Anton Ivanov: 4-Hour Workweek by Tim Ferriss.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about already?

Anton Ivanov: Probably I’ll have to mention the duplex I house-hacked at the beginning, just because this was the very first property I bought. I learned a ton. I still own it, and it’s still performing greatly.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Anton Ivanov: I’ve kind of mentioned this before, but over-estimating certain numbers in your cashflow projections, like potential rents, vacancy, maintenance… For example in Kansas City, when I was first getting started, I probably used estimates that were a little over-optimistic, and the learning from that was to be more conservative, to talk to more people about your estimates, and then in the future use past performance as an indicator for more properties that you buy.

Joe Fairless: Best ever way you like to give back?

Anton Ivanov: Sure, Joe. I’m the founder of DealCheck.io. It’s a property analysis platform that you can use to analyze rental properties, flips, multifamily and commercial buildings. It’s available as a mobile app. Just search for DealCheck on the iOS or Google Play store, or use DealCheck.io online. It’s free to try out. If you’d like to upgrade to a more full-featured plan, type in “bestever25” promo code at checkout to get a 25% discount, just for Best Ever listeners. Again, DealCheck.io, “bestever25” promo code to get your discount if you’d like to upgrade.

Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on? Follow what you’ve just said, I imagine?

Anton Ivanov: Absolutely, DealCheck.io. We’re on Twitter and Facebook, and if you’d like to e-mail me personally, it’s Anton@DealCheck.io. I’d love to answer any questions or hear from you.

Joe Fairless: Anton, thank you so much for being on the show, talking about your investment approach that you take to open up a new market and invest in it if it’s not the market that you live in, and how you approach building the team, as well as some underwriting assumptions that you do, and your overall investment philosophy. Thank you so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Anton Ivanov: Thanks, Joe. You do as well. Thanks for inviting me.

no fluff real estate advice

JF702: How to Flip Properties, Manage Them, and Run a TURN KEY Business

Today’s guest has a limb in every pool as he flips properties, manages homes, and runs his turn key operations in an extremely rapid market of appreciation. Hear his experience in Philadelphia and what he’s focused on today!

Best Ever Tweet:

[spp-tweet tweet=”You’ve got to live and die by your numbers.”]

Josh Weidman Real Estate Background:

– Founder and CEO of Turn Key Philly
– Flips 8 to 12 contracts a month
– Based in Philadelphia, Pennsylvania
– Say hi at turnkeyphilly.com
– Best Ever Book: Atlas Shrugged by Ayn Rand

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

no fluff real estate advice

JF700: How You Should DIVERSIFY Your Income Streams in Real Estate

Ever thought about being a property manager? Try being a landlord of multiple styles of homes, acquiring properties creatively, Property Management, and selling inventory! Today’s guest has dug himself deep in the roots of Fort Worth Texas where he can make multiple income streams, you are next!

Best Ever Tweet:

[spp-tweet tweet=”Create multiple streams of income through real estate.”]

James Like Real Estate Background:

-Owner of Revolution Real Estate
-Sold over $30,000,000
-Based in Fort Worth, TX
-Say hi at jameslike.com
-Best Ever Book: Getting Things Done by David Allen

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

no fluff real estate advice

JF681: How He Acquired a FREE Duplex Renting For $1,300 a Month

Today’s guest is a property manager who specializes in seller financed transactions. During the years of his beginning a lady found his website and Natan to take over her duplex, it was a deal! Here how he did it and what he’s doing now!

Best Ever Tweet:

[spp-tweet tweet=”Hire a property manager, life will be easier.”]

Dick Rosen Real Estate Background:

– Founder of Legacy Home Management
– Acquired a duplex with no money down
– Based in Phoenix, AZ
– Say hi at dick@legacyhomemanagement.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Show Real Estate Advice

JF644: Ex Financial Planner Creates LONG TERM Retirement Program Backed by His Portfolio

It’s complicated, but ingenious! He is currently working on a long term fund that allows others to invest in where dividends are paid and the whole thing is backed by real estate. Turn up the volume!

Best Ever Tweet:

[spp-tweet tweet=”Don’t buy a property if you are not willing to live there.”]

Peter Mackercher Real Estate Background:

– Realtor and broker
– Investor with his own construction company
– Based in St Louis, Missouri
– You can reach him at stlmogul.com
– Read about his worst mistake here http://www.stlmogul.com/blog/my-biggest-mistake-in-real-estate/

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Show Real Estate Advice

JF639: How You Could Own a Property Management Franchise

Franchise? Yes, that’s right. Today’s guest has sold and bought over 1500 homes and has decided to create a property management franchise in which others can build their own business upon. Hear how he set it up, the rules and regulations he follows, the pros and cons, and what he’s up to next!

Best Ever Tweet:

[spp-tweet tweet=”You make money when you buy, be sure you buy right.”]

Aaron Marshall Real Estate Background:

– Sold over 1,500 homes
– Successfully franchised a property management business
– Based in Salt Lake City, Utah
– You can reach him at aaron@keyrenter.com

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Made Possible Because of Our Best Ever Sponsors:

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors.

We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Show Real Estate Advice

JF610: What This Dynamic Duo Does to Own Over 8 Properties in TWO YEARS

Owning a Home Vestors franchise, today’s couple brings different
skill-sets to the table. The husband is a general contractor and
the wife runs the marketing and sales. Hear how they hustled these
past two years to cash flow big today!

Best Ever Tweet:

[spp-tweet tweet=”Get out there and make connections.”]

Bethany and Bob Willis real estate background:

Please Take 4 Min and Rate and Review the Best Ever
Show
 in iTunes. 

Listen to all episodes and get a FREE crash course
on real estate investing at: http://www.joefairless.com

Sponsored by:

Door Devil – visit  http://www.doordevil.com and enter “bestever” to get an exclusive 20% discount on your purchase.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF606: Fix and Flip Goes South in MULTIPLE Ways! #situationsaturday

Today’s story starts off sounding like a homerun deal, a $50,000
purchase on a $350,000 turn around could be exciting, except there
were many roadblocks in the way. Hear how this situation turned
into a hairy one every step of the way, and got worse and worse
until the end.

Matt Faircloth real estate background:

  • Co-Founder of The DeRosa Group and has done more than
    $10,000,00 of transactions using private money
  • Raised over $3,000,000 in private money without investing any
    of their own money into the deals
  • Based in Trenton, New Jersey
  • Say hi to them at http://www.derosagroup.com/
  • Check out landlord tips on their YouTube channel, Landlord
    Chronicles

Best Ever Tweet:

[spp-tweet tweet=”I think the mistake is to assume that things are static in real
estate.”]

Please Take 4 Min and Rate and Review the Best
Ever Show
 in iTunes. 

Listen to all episodes and get a FREE crash course on
real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and
flips?

I recommend talking to Lima One Capital. A Best Ever
Guest told me about them after I asked how he financed 10
properties in one year. They are an asset-based lender with unique
programs for long-term hold and fix and flippers.

Click to
learn
more or, better yet, reach out to Cortney Newmans at Lima
One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn
multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an
episode!

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JF604: How Rent Concessions and Other Marketing Tools Can Attract Tenants in a Tough Market

Our New York City guest is a real estate agent who specializes
in leases. He understands the market inside and out and is going to
share how landlords are able to get the highest return in the
fastest amount of time, this is not an episode to be missed!

Best Ever Tweet:

[spp-tweet tweet=”Don’t cut corners.”]

Elliot Osgood real estate background:

  • Based in New York City, New York and has 6 years of experience
    in the industry as a real estate agent
  • Recently received Rookie of the Year Award at Citi
    Habitats
  • Say hi to him at citibabitats.com
  • He is currently focused on Brooklyn, New York

Please Take 4 Min and Rate and Review the Best
Ever Show
 in iTunes. 

Listen to all episodes and get a FREE crash course on
real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and
flips?

I recommend talking to Lima One Capital. A Best Ever
Guest told me about them after I asked how he financed 10
properties in one year. They are an asset-based lender with unique
programs for long-term hold and fix and flippers.

Click to
learn
more or, better yet, reach out to Cortney Newmans at Lima
One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn
multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an
episode!

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JF603: Why Your Leasing Process Isn’t Effective and How to Change It

Tenant Turner, it has a ring to it. Today’s guest put it all together, a software and company that can set up your rental properties from scratch. From a vacant start to a cash flow finish, this company will do it all. They will even contact your potential tenant’s current and previous employer, how about that? Turn up the volume!

Best Ever Tweet:

[spp-tweet tweet=”The biggest mistake is not learning from mistakes.”]

James Barrett real estate background:

  • Co-founder of TenantTurner.com/bestever,
    a tenant lead vetting and scheduling tool for landlords and
    residential property managers
  • James became a landlord in 2009 then again in 2011. After years
    of leasing the old way, he partnered with his best friends and
    fellow landlords to streamline the leasing process with
    software.
  • Based in Richmond, Virginia
  • His Best Ever book: How to Create Products Customers Love by Marty Cagan

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:

https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes and Stitcher so you don’t miss an episode!

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JF600: How to BOOST Your Apartment/Multifamily Marketing to Rack Up Occupancy #skillsetsunday

Want exposure selling or occupying your properties? Today’s guest is a pro when it comes to branding apartment communities and other properties. He ensures that signs, brochures, websites, and other tools are top notch and attract all people to investigate the space. Hear how important it is to set up a great brand on your multifamily property.

Best Ever Tweet:

[spp-tweet tweet=”There’s a positive correlation between marketing and sales.”]

Doug Backman real estate background:

  • Managing Director at DB Marketing
  • Seasoned advertising agency executive who, among other things, helps clients with the branding of their apartment communities
  • Based in Denver, Colorado and say hi to him at http://dbmarketingltd.com/

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF597: Where You Could Back a BIG Deal with People Who Don’t Even Live Here

Our Best Ever guest is able to put together large New York City long-term cash flow syndications backed by people that don’t even live here, all international! He is a licensed agent with a keen sense of Manhattan and the Bronx inventory and the path of growth, and he has already completed 20!

Best Ever Tweet:

[spp-tweet tweet=”Buy it right and do your homework.”]

Russell Putterman real estate background:

  • Started Focus Real Estate in 2010 and merged with Keller Williams in 2014
  • He is based in New York City, New York
  • Began career as a tax consultant and senior auditor
  • Real estate investor since 2008 and has about 20 properties
  • Say hi to him at focusreg.com
  • His Best Ever book: Slight Edge by John Olson

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF596: How the Vice President of South Africa Found Our NYC Local Real Estate Expert

Our guest is a local expert in the Co-Op and condo space in New York City. He shares how much money he invests in real estate platforms such as Zillow and Trulia to attract foreign buyers. He is currently helping the Vice President of South Africa purchase a space in the city. Hear his expert advice and knowledge in the New York real estate market!

Best Ever Tweet:

[spp-tweet tweet=”You have to be careful trusting people.”]

Jules Borbely real estate background:

  • Based in New York City, NY with a focus in Mahnattan
  • Real estate agent for last five years and has sold about $14,000,000 just last year
  • Say hi to him at http://www.opgny.com, Oxford Property Group
  • His Best Ever book: The Sell by Fredrik Eklund

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF585: From $0.00 to $800.00 to Rich and How He Did It #situationsaturday

He lost it all after jumping into a business he knew nothing about. He decided to come back to his home…real estate. Joe specializes in lease options and creative finance structures today, he also runs a mentor program. He shares how important it is not to give up; his drive took him from broke to wealth. Here his Best Ever advice!

Best Ever Tweet:

[spp-tweet tweet=”Real estate always works…you will always need a place to live.”]

Joe Bodek real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF582: Why Hearing “No!” is MONEY and What this Property Manager can Teach You about Lead Generation

This highly proactive property manager is our guest today and he is on the attack! He take massive action by calculating how many “No’s” it takes to get to the yes. He calculates all his metrics and spend three hours daily prospecting, he has also purchased several buy-and-hold’s in the last 12 months, this is a powerful show and you should hear it!

Best Ever Tweet:

[spp-tweet tweet=”There’s two ways to build your business, passive or active and I chose the active way.”]

David Kerner real estate background:

  • In real estate for 20 years as a realtor-broker in residential sales
  • Been doing property management for 8 years and has 50 clients
  • Started investing 1 year ago and has 7 buy-and-holds with a focus now of growing his property management company and investing business for passive cash flow
  • Say hi to him at: davidkerner.com
  • Based in Charlotte, North Carolina
  • His Best Ever book: E-Myth by Michael Gerber

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Need financing?

Are you a buy-and-hold investor or doing fix and flips?

I recommend talking to Lima One Capital. A Best Ever Guest told me about them after I asked how he financed 10 properties in one year. They are an asset-based lender with unique programs for long-term hold and fix and flippers.

Click to learn more or, better yet, reach out to Cortney Newmans at Lima One Capital. His cell is 404.824.6121.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF580: How He Traded a BMW for a HOUSE, and Masters Memphis REI

He started young at age 25, and was told he couldn’t invest in real estate. Our guest ignored the noise and began with a Nice and easy single-family residence. Like a snowball rolling down the mountain he picked up Momentum and learning about Hardmoney, portfolio lending, and being a landlord and now owns a massive line of properties while still doing deals. He’s an advocate of online marketing, grassroots marketing, and adding value to others, you gotta turn up the volume!

Best Ever Tweet:

[spp-tweet tweet=”I know exactly what I want and I know how I’m going to get it.”]

Bryan Harris real estate background:

  • Bought, sold and wholesaled 89 properties in 2015 and done over 500 properties in his career
  • Based in Memphis, Tennessee
  • Say hi to him at HomesFor10k.com, the source for low priced real estate in the south

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF577: What $829 BILLION of Appraised Properties Entails

Our Best Ever guest is a commercial and residential appraiser in the Dallas, Texas market. He has been involved in amusement park projects such as Six Flags and laser tag arenas. He shares his expertise in the appraisal process and how he has found successful opportunities!
Best Ever Tweet:
[spp-tweet tweet=”Look for success, if it’s out there, copy it!”]
Jake Thacker’s real estate background:
–          Been in the real estate industry for 16 years
–          Third generation of real estate in the family
–          Specializing in commercial appraisals and property investments
–          He is based in Dallas, TX with Gaither Commercial Realty
–          Author of: ApprRAISE the Roof, a step-by-step guide to successfully finding and evaluating commercial properties

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Best Ever Real Estate Investing Advice banner

JF574: LIVE-IN FLIP and His Plan to Contract the Work!

Today’s guest is about to jump into his first fix and flip while he invests on the side. He won’t actually live in it during the flip (he will have his contractor rehab the home while he is absent), but it will be an owner occupied home. He is slowly but surely buying rentals and building his wealth!

Best Ever Tweet:

[spp-tweet tweet=”I want to be my own boss and do my own thing.”]

Tyler Flagg real estate background:

  • Owns three properties in Oklahoma City, Oklahoma
  • In process of closing on a HUD foreclosure for his primary residence then will flip it for practice
  • Been a pilot in the United States Air Force since 2011
  • His Best Ever book: Four Hour Work Week by Tim Ferriss

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF569: How this Foreign Investor Makes a Luxury Country Club Product

Our guest is not from the United States, he’s a European genius with an eye for high-class remodels in beautiful California. He has experience creating beautiful homes and leaves his signature in the upper-class niche, you have to hear his story and where he’s from!

Best Ever Tweet:

[spp-tweet “Things don’t change change by themselves unless you make them change.”]

Stefan Vogel real estate background:

  • Owner of Von Dassel Group, a boutique firm that specializes in luxury residential real estate in Greater Palm Springs, California
  • Since he got started in 2008 he’s done around 45 transactions with total gross transaction is $24 million
  • Focus is on renovations and construction projects in exclusive country club areas
  • Say hi to him at vondassel.com
  • Best Ever book: Think and Grow Richby Napoleon Hill

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF568: Why He Finds the BUYER Before He Negotiates the Deal

Our guest is creative, and serious about all his exit strategies. He finds a buyer before he negotiates a deal which will ensure the sale. We also purchased a large commercial building and bought out the tenants to re-rent at higher rates to eventually create a better cash flow investment to resell later. You have to hear this man’s show!

Best Ever Tweet:

[spp-tweet “Negotiation is an artform.”]

Adam Cohen real estate background:

  • President of West One International
  • 23 years of experience as a real estate investor, hard money lender, developer and advisor
  • Based in Miami, Florida but works in the UK as well (as you’ll hear from his accent)
  • Say hi to him at Westoneinternational.com
  • His Best Ever book is The Magician by Raymond Feist

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF559: What BIG THINGS You Could Do with the Equity in Your Properties

His Best Ever advice will shock you, and especially real estate agents. Today’s guest is a bridge lender and has extensive experience in equity funding. He shares with us his parameters for funding and what he is looking for in the numbers, listen in and prepare to reach out with your properties.

Best Ever Tweet:

[spp-tweet “When  you’re selling a property, list low.”]

Mike Zlotnik real estate background:

  • Debt and equity investor in real estate for more than 15 years
  • He’s done over a $100,000,000 in underwritten loans
  • In 2009 Mike joined Tempo Funding and is the Managing Director
  • Say hi to him at tempofunding.com
  • He’s based in Brooklyn, New York
  • His Best Ever book: Retire Rich by Nora Peterson

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF557: How Making a Tough Decision Elevated Her Rental Company

Need to make a change in the business due to underperforming partners? It may be better to do it now and do it quickly. Our Best Ever guest shares with us her property management underachievers and how letting one go was the best decision.

Best Ever Tweet:

[spp-tweet “Rip off the Band-Aid!”]

Brie Schmidt real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF555: How This Investor/Biz Owner Retains and capitalizes on AMAZING Clients Through REALTORS

Today’s guest has a program all property management business owners needs, and it’s all about quality retention. He shares what he has learned over the years in regards to marketing and business development. He is not new, and has some advice for the small apartment owners to the heavy hitter community investors. Listen in!

Best Ever Tweet:

[spp-tweet “Don’t consider marketing and expense, consider it an investment.”]

Pete Neubig Real Estate Background:

  • Co-founder and CEO of Empire Industries and president for the National Association of Residential Property Managers (NARPM) Houston Chapter
  • Has grown Empire from 0 to 500 doors under management in three years and is based in Houston, Texas
  • Say hi to him at http://www.empireindustriesllc.com/
  • His Best Ever book: Think and Grow Rich by Napoleon Hill

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF546: Why YOU Need to Adopt this “Get Rich Slow” Vision

A veteran, with a “get rich slow” mindset, our Best Ever guest took his time decades ago to accomplish the extraordinary, paid off properties! Hear his ups and downs through the years and why he isn’t a fan of partnerships. Can’t miss this one!

Best Ever Tweet:

[spp-tweet “Real estate investments is a relationship business and you really have to know who you’re working with.”]

[spp-tweet “Happiness is a positive cash flow.”]

Craig Horton real estate background:

  • Real estate investor since 1975 and owns 22 units mostly single family homes with 17 of them being paid off
  • Board Member of People’s Bank of Commerce since 2004 and past president of the Southern Oregon Real Owners’ Association
  • Owns 55% of a 17 unit apt community in Ashland, Oregon and has option to buy 45% this July
  • Did a 36-condo conversion project in a partnership and would not do such a project again (listen to hear why!)
  • Based in Medford, Oregon
  • His Best Ever book is Success is a Journey by Brian Tracy

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF545: STOP, and Hear These Hard Money Lessons from an Industry Consultant

She knows Hardmoney, our Best Ever guest is a consultant in the Hardmoney industry and she sees how money is professionally borrowed, lended, and the mistakes both borrowers and lenders make. Here this episode to be informed before you keep borrowing Hardmoney.

Best Ever Tweet:

[spp-tweet “Know your investment.”]

Jamie Seaton real estate background:

  • Began career in 2000 as a property manager based in Auburn, California
  • In 2002 got her appraiser license and serviced Northern California for 7 years
  • Since 2009 she has been a hard money consultant where she advises investors, brokers and borrowers
  • Say hi to her at dcuprivatemoney.com
  • Her Best Ever book is The Four Agreements by Don Miguel Ruiz

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF544: How to Change Your Employee Mindset into the Entrepreneurial Mindset #skillsetsunday

We must be interdependent. Employees exist to depend on the paychecks month after month while entrepreneurs work diligently while depending on many variables. Hear his incredible story of financial and mind transformation while he travels the road the road to freedom!

Best Ever Tweet:

[spp-tweet “There is no point in which I’m done…there’s always something else to learn!”]

Ivan Leger real estate background:

  • Based in Phoenix, Arizona and created $60,000 in residual income this past year
  • Two months away from becoming job optional
  • Top 1% in his industry of network marketing
  • Started with zero previous experience as a business owner
  • Say hi to him at http://lifeunleashedaz.com/

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF543: What to Do When Your Property Management Company Underperforms #situationsaturday

What is your vacancy rate? What is your turnover? Do you know the answer to these questions? If you’re not sure, then your property management company may not be keeping track. Reports are necessary for added value and improvement, tune in to hear how our guest took care of a sticky situation with his property management company.

Best Ever Tweet:

[spp-tweet “At the end of the day it’s about what’s best for the property.”]

Spencer Cullor real estate background:

  • Director of Commercial Acquisitions at Apartmentvestors
  • Say hi to him at apartmentvestors.com
  • Been involved in over $20,000,000 worth of deals including a multifamily and a retail center
  • Based in Kansas City, Kansas
  • Here’s a copy of Spencer’s letter that helped him find on his first two apartment communities:
  • His Best Ever book is: The One Thing by Gary Keller and Jay Papasan

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF540: These 4 Rules Will Ensure Success in Real Estate

Today’s guest is  seasoned investor in the Phoenix, Arizona market, and she has four statutes that she swears by; if you adopt these same principles, only greatness can become of your business. Hear her story of ups and downs and the steps to her success!

Best Ever Tweet:

[spp-tweet “Being in real estate, there’s always highs and lows.”]

Karen Abinet’s real estate background:

–          She has been in real estate for 15 years and has overseen and sold over 2,000 homes since 2008

–          Worked with international buyers and oversaw the rehabs of over 200 units in a span of 12 months

–          Was averaging 120 homes per year when the real estate market crash of 2008 occurred

–          Based in Glendale, Arizona and you can say hi to her at http://www.karenabinet.com

–          Her Best Ever books: Who Moved My Cheese by Spencer Johnson and A Course of Miracles by Helen Schucman

 

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF536: How He Avoided LAWSUITS Using This Technique #situationsaturday

Do you own real estate in your name? Why? There is really no advantage to owning properties in your name, in fact if you own multiple and someone decided to charge you with….you could lose them all. You have to hear this situation and how to avoid piercing the corporate veil.

Best Ever Tweet:

[spp-tweet “Do not own real estate in your name.”]

Randy Hughes real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF534:College Graduate Buys 16 Rentals in Six Cities Using CRAIGSLIST

She decided that her route to wealth would be through passive income, so she bought some rentals, and yes she did use craigslist. She also purchased these rentals in six different cities, but was confident that the numbers outside the local market would be better. Hear how she did it.

Best Ever Tweet:

[spp-tweet “[Investing] definitely relies on outside experts.”]

Nicole Bryan real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF532: A Closer LOOK at Optimizing Your Mortgage and How to Save Through Leverage

We have had a previous guest explain a phenomenon that seemed too good to be true, paying down your mortgage rapidly and saving by leveraging another interest bearing loan. Today’s guest will come to shed more light on the matter and tell us exactly how it works. He claims you can save in interest payments by leveraging another debt, don’t miss this episode!

Best Ever Tweet:

[spp-tweet “Look at the efficiency of the financial model in which you operate.”]

Bill Westrom background:

  • For the past 13 years he’s been teaching homeowners an innovative financial strategy called Equity Optimization
  • Co-author of Master Your Debt
  • Based in Portland, Oregon and company is in Tampa, Florida
  • Say hi to him at truthinequity.com

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF527: She Purchased a 4-Plex for $13,000 with a $2,100 Monthly Income!

Today’s guest has extensive experience in mortgages, retail, fix and flips, rehab, and buy-and-hold properties. Her advice will leave you wondering how she did it, and at the end of the interview she gives you her phone number. She believes in great relationships and an exchange of services. Hear how she built her capital to invest!

Best Ever Tweet:

[spp-tweet “I would caution anyone to have a strong plan in place when buying a property.”]

Tamairo Moutry real estate background:

  • Owner and broker in Georgia’s Best Real Estate Services and Milwaukee’s Best Real Estate Services
  • Landlord, rehabber, property manager, investor and licensed notary for the state of Wisconsin
  • Works with the top agents in the nation
  • Splits her time between Atlanta and Milwaukee
  • Say hi to her at: georgiasbestrealestate.georgiamls.com
  • Her Best Ever book: REO Boom by Aram Shah

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF526: Proof That YOU are Working Too Hard and How to Leverage People

Virtual assistants are becoming popular, and for today’s Best Ever guests, they are a big part of their multiple businesses. Our couple left the corporate world becoming a property management, fix and flip, buy and hold, and VA training company—they do it all! Hear why they choose virtual assistants and their impact.

Best Ever Tweet:

[spp-tweet “My ultimate goal is to have XXXXX passive income per month.”]

Mark and Anne Lackey background:

  • Real estate investors, authors and speakers based in Atlanta, Georgia
  • #1 Amazon Best Seller in Multiply Yourself Increase Your Productivity and Profits Using Virtual Assistants
  • Fix-and-flip and buy-and-hold investors and been investing since 2000
  • Say hi to them at: hiresmartvas.com
  • Their Best Ever book: Think and Grow Rich by Napoleon Hill

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips:
https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF525: The 5 Questions You MUST Ask for the Best Tenants

He does it all! He invests, he’s a licensed real estate agent, and an insurance agent on top! He jumped into real estate by first investing in the lower class areas of Cleveland where someone stole stuff from his car! He now is more seasoned and is about to purchase a 4 Plex while waning his own commission through the transaction and insurance, this is an entertaining show you cannot miss!

Best Ever Tweet:

[spp-tweet “You need to ask more questions over the phone than anything else.”]

Kevin Hoag real estate background:

  • Real estate agent with Holton Wise Property Group based in Cleveland, Ohio
  • Has leased over 75 rental units since becoming and agent in 2015 and is also a licensed insurance agent
  • Real estate investor who has purchased and sold several turnkey rentals
  • Say hi to him at: holtonwisepropertygroup.com
  • His Best Ever book: The Property and Casualty Insurance Book

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF524: New Investor Finding Her Way to DEAL #1

She attended the classes, works a full time job, and took massive action! Our Best Ever guest found her way through all the normal complications of getting started in real estate investing, including bad partnerships, contractual misunderstandings, and a lack of buyers. We all feel the growing pains which she surpassed and is now a little more well rounded, hear her story!

Best Ever Tweet:

[spp-tweet “Shiny object syndrome is real…it’s really easy to get distracted…focus!”]

Randi Bergo real estate background:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF522: How NOT to Handle Evictions #situationsaturday

He made some mistakes in the eviction process, as do most first time land lords. He learned quickly and doesn’t waste time when rent is late—notice will be posted that day. Hear his advice about the whole process and be educated!

Best Ever Tweet:

[spp-tweet “Begin with the end in mind.”]

Bill Shaffer real estate background:

  • Him and his wife buy are buy and hold investors and have 14 properties with 36 units in Colorado
  • His properties range from single family homes to an 8 unit Him and his wife own 10 properties with 22 units and they have been investing since 2002 and is based in Denver, Colorado
  • He’s a real estate agent and has a brokerage called Reliant Real Estate
  • Say hi to him at: ibuycoloradore.com and http://evictioninformationdenver.com/

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

– Subscribe to Joe’s YouTube Channel here to learn multifamily and raising money tips: https://www.youtube.com/channel/UCwTzctSEMu4L0tKN2b_esfg

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

 

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JF519: See What He Bought after Selling Around 55 Rental Properties

A “tape” is a spreadsheet of loans that are for sale, and our Best Ever guest decided to liquidate his 55 rental properties and invest in a $3MM tape of mortgages. He desired to be the bank instead of the landlord. Hear his story and how he made better use of his time!

Best Ever Tweet:

[spp-tweet “It’s the movement of money that allows us to make money.”]

Sid Hameed’s real estate background:

–          Based in Annapolis, Maryland

–          Been in real estate investing since 1989 in bank owned properties

–          Say hi to him at http://www.Brickfrontproperties.com

–          Merged his real estate brokerage with Keller Williams of $27M gross commission income

–          Licensed general contractor and has built 2 apt buildings

–          His Best Eve book is: The Millionaire Real Estate Agent by Gary Keller

 

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

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JF518: He’s Funded Over 6,000 Deals by Being a BETTER Lender

Our guest today is able to fund deals when other lenders hesitate. His step-by-step process and seasoned experience allows him to break down the numbers, Investor, and the deal strategically and fund in record time. Hear his feedback about funding private and Hardmoney deals and what he is specifically looking for.

Best Ever Tweet:

[spp-tweet “There’s a reason why everyone doesn’t live in a $5MM House.”]

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Ken Vesely’s real estate background:

  • A hard money and private money lender specializing in funding rehab and construction loans
  • Based in Toms River, New Jersey
  • Say hi to him at hardmoneyman.com
  • Involved in over 6000 deals spanning 18 years totaling over $800M in transactions
  • His Best Ever book: Think and Grow Rich by Napoleon Hill

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Have you tried REFM’s Valuate software yet? It makes investment analyses a breeze, and makes you look like you spent all week on them. Go to app.getrefm.com to sign up today.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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JF515: How he Survived Bankruptcy and Rose from the Ashes Twice #situationsaturday

He lost 70 homes in the crash…but what he found is even greater. Our Best Ever guest is an advocate of liquidity and still uses leverage to acquire more properties. His “free and clear” philosophy is motivating, hear his situation and how he invests today!

Best Ever Tweet:

[spp-tweet “The problem solving skill can be developed as an entrepreneur.”]

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Nick Ruiz Real Estate Background:

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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JF513: How YOU Can Buy Apartments NOW

Our Best Ever guest has assisted many investors in the purchase of apartment complexes, in fact he is an attorney that knows the paperwork. He purchases investments for himself and eventually created his own in-house property management company. You must hear his story and advice to get started on your next syndication!

Best Ever Tweet:

[spp-tweet “You’ve got to know the flavor of the money of your investors.”]

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

 

Charles Dobens real estate background:

  • Say hi to him at multifamilyinvestingacademy.com
  • Attorney who specializes in working with multifamily investors
  • Owned over 800 units himself and been involved in close to 1B of transactions for investors
  • Owner, operator, syndicator and owned his property mgmt. company
  • Based in Boston, Mass
  • His Best Ever book: E-Myth Revisited by Michael Gerber

 

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

 

 

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JF511: Wholesale to Other Wholesalers and How to Do It

Tired of rehabbing? Did you know you can put properties under contract and sell the paper to other wholesalers? Today’s guest does just that, and he is highly successful teaching others to sell deals to other investors. Hear how he does it!

Best Ever Tweet:

[spp-tweet “What you need is a real mentor, someone who can look over your shoulder.”]

Dave Dinkel Real Estate Background:

  • National speaker, contributor to local real estate clubs and consultant to numerous real estate investors while running his own real estate biz
  • Dave and his partners, students and associates have completed over 5,000 real estate transactions and continue to do 30 – 50 closings a month
  • Say hi to him at davedinkel.com
  • Based in Fort Lauderdale, Florida
  • His Best Ever book: Secrets of a Millionaire Mind by T. Harv Eker

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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5 Tips for Attracting QUALITY Tenants via Facebook Ads #skillsetsunday

167,000,000 people login to Facebook every day! If you know which of the 167 MM people would make a great tenant, then you are in business! How do you target the best tenant? How do you get a reaction? Hear this episode to bump your Facebook marketing and get awesome tenants for your properties!

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. 

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

Best Ever Tweet:

[spp-tweet “There’s no one size fits all.”]

Gary Griffiths’s background:

  • Founder of ThreeSides Local which helps realtors attract more buyer and seller leads
  • He is a “for purpose” entrepreneur where he donates his time and money to volunteer to run non profits
  • Say hi to him at http://www.threesideslocal.com/
  • Based in Australia and moved to the US about a year ago and is based Fairfield County, Connecticut

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

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JF508: Many Mistakes Made on ONE Deal #situationsaturday

The title sounded bad, but our Best Ever guest absorbed the consequences and applied what he learned after making many mistakes on a SFR purchase. After closing, he planned to move in his Section 8 tenant and everything was going to work smoothly…After the repairs, notifying the Section 8 case worker, he rid himself of the property and lost money. He suggests that you do this…

 

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

 

Best Ever Tweet:

[spp-tweet “Do an inspection on your house!”]

 

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

 

Are you committed to transforming your life through Real Estate this year? If so, then go to http://www.CoachWithTrevor.Com and claim your FREE Coaching Session.  Trevor is my personal real estate coach and I’ve been working with him for years. Spots are limited, so be sure to do it now before all the spots are gone.

 

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

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JF506: His Firm Buys in 22 Student/Multiunit MARKETS Nationwide!

He saw value in the student housing market, and took it to the next level! Chicago based investor appeals to the millennial tenant in many different states, while he speaks at universities regarding entrepreneurship and business. Hear how he grew and selected his multiunit niche!

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

Best Ever Tweet:

[spp-tweet “Always assume YOUR proforma’s wrong.”]

Rajen Shastri’s real estate background:

  • Over 12 years of experience in senior management roles across spectrum of commercial real estate
  • Founder and CEO of Akara Partners based in Chicago, Illinois
  • Prior to founding Akara Partners in 2013, Rajen was a principle of Campus Acquisitions, a developer and operator of student housing where he led the capitalization and monetization of over $1 billion in student housing assets across the US including the sale of a $627 million portfolio
  • Say hi to him at http://www.akarapartners.com

Made Possible Because of Our Best Ever Sponsors

Subscribe in iTunes  and  Stitcher  so you don’t miss an episode!

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Listen to all episodes and get a FREE crash course on real estate investing at: http://www.joefairless.com

 

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JF505: This Lender Closed a Deal for a Client that was Denied 24 Hours Prior!

Price? Cost of rehab? Retail sales price after rehab? He asks these questions to his clients hoping to qualify for a quick loan. His best move was moving to California, and there he found the hard money industry. As a hard money lender, he has made some tough decisions, but one of them turned out well…and was made in 24 hours!

Best Ever Tweet:

[spp-tweet “You always make money on the purchase.”]

Ben Stoodley (stood-ley) real estate background:

  • Civil Engineering grad turned real estate sales person turned investor and hard money lender
  • He’s a loan originator and did over 100 loans in 2015 averaging about $1M a month on average
  • Active real estate investor as both a buy and hold and fix and flip
  • Based in San Diego, California and say hi to him at lantzmanlending.com
  • His Best Ever book recommendation: Four Hour Work Week by Tim Ferriss

Made Possible Because of Our Best Ever Sponsors:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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JF504: How You Can Achieve COMPLETE Automation in Your Real Estate Biz!

System building is his definition of being an entrepreneur. Our Best Ever guest is tenaciously seeking to create a product and environment that streamlines YOUR wholesale business using workflows and Podio, a simplified CRM. He started in a band and later jumped into systematic software creation for real estate. You will save thousands of hours if you listen to him, tune in!

Best Ever Tweet:

[spp-tweet “Work less, do more.”]

Dan Schwartz background:

– Musician, real estate investor and automation junkie determined to enhance the freedom  of entrepreneurs through technology and systems
– Has done 100+ wholesale deals since 2011 and a handful of rehabs
– based in Baltimore Maryland and say hi to him at http://www.investorfuse.com
– working on a lead management platform designed around the 80/20 principle
– Will be launching a fully automated membership work space called InvestorFuse in 2016.


Made Possible Because of Our Best Ever Sponsors:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

 

 

 

 

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JF503: He Thought BIG, From 8 Broken Houses to Multimillion Developments

At 25 years old, he purchased 8 “crack houses”, or shells rather, to jump into real estate, and specifically big deal developments. In Philadelphia, he had a vision to add value to residential communities, and he did so. He even renovated a portion of what was once one of the largest brew towns in the nation. You gotta hear his start and what he’s doing now!

Best Ever Tweet:

[spp-tweet “If you start small, you’re not going to lose your shirt.”]

Dave Waxman background:

  • Co-founder of MMP, a leading urban infill development company in Philadelphia, Pennsylvania
  • Has done over $50M of development and has over $75M in new developments in the pipeline
  • Say hi to him at mmpartnersllc.com
  • His Best Ever book: Titan: The Life of John D Rockefeller by Ron Chernow

Made Possible Because of Our Best Ever Sponsors:

Please Take 4 Min and Rate and Review the Best Ever Show in iTunes. . 

You find the deals. We’ll fund them. Yes, it’s that simple. Fund That Flip is an online lender that provides fast and affordable capital to real estate investors. We make funding your projects easy so you can focus on what you do best…rehabilitating homes. Learn more at http://www.fundthatflip.com/bestever.

What’s the Best Ever health plan for YOU?

Go to http://www.stridehealth.com/bestever and find a better health plan in 10 minutes or less. On average you’ll save $418 on coverage and care.

Listen to all episodes and get a FREE crash course on real estate investing at:http://www.joefairless.com

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