JF1777: How To Buy And Sell 1000 Houses & Own 150 Rental Units with Joe Lieber
Tune in and hear Joe and Joe walk through the journey of starting out, buying and selling 1000 homes, and building a very nice, profitable, cash flowing 150 unit portfolio. One unique aspect of Joe’s business and his 150 units – they’re all single family homes. We’ll hear how he manages 150 separate properties. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“I’ve found a great niche in the single family home area and I do very well there” – Joe Lieber
Joe Lieber Real Estate Background:
- Broker/President of JL Investment Group
- Has bought and sold more than 1,000 houses, owns 150 units
- Based in Cleveland, OH
- Say hi to him at https://clevelandinvestor.com/
- Best Ever Book: Rocket Fuel
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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, Joe Lieber. How are you doing, Joe?
Joe Lieber: Doing well, sir.
Joe Fairless: I’m glad to hear it, and looking forward to our conversation. Joe is the broker and president of JL Investment Group. He’s bought and sold more than 1,000 houses, and owns 150 units. He’s based in Cleveland, Ohio, and I love your URL – ClevelandInvestor.com. Nice work on getting that URL. With that being said, do you wanna give the best ever listeners a little bit more about your background and your current focus?
Joe Lieber: Absolutely. This is my 21st year in the real estate business. I got into real estate just pretty much right out of high school, and I’ve been through all those trials and tribulations and bumps in the road, from owning a real estate brokerage, to doing fix and flips, and lease options, and landlording… And I even had a little run there in multifamily. I’m very well-versed in all aspects of this business, and it’s been quite an interesting journey.
Joe Fairless: Well, let’s talk about it. So you’ve been in the business for 21 years… What are the major areas of focus that you’ve had, as you had them?
Joe Lieber: You know, it’s always been residential single-family homes, for the most part. This is where I have just shined over the years, and this is also where slow and steady really wins the race. I’m a cashflow guy, I’m all about cashflow, and being in the Midwestern market here like Cleveland – we’re known for our cashflow, we’re a cashflow state… And I’ve done very well.
I currently have 150 single-family homes in my portfolio, and it has turned out to be very good, very lucrative for cashflow, and now even equity. This is unbelievable.
Joe Fairless: So those are 150 single-family homes? Wow! We’re gonna talk about how you manage that. What’s the average monthly profit per door?
Joe Lieber: I’m at a point now where in 2017, right around the first quarter of 2017, I got my entire portfolio paid for. I’m very grateful for that. It took me a long time to do that. My average rent is about $800/door… And it works. Before though, when you have liens against the property, I would say — and it’ll make for a good story later on, but between $200 and $0 per month was the average cashflow, when you’re liened up there.
Joe Fairless: Right. And when you say liens, are you referring to mechanical liens, or are you talking about a mortgage?
Joe Lieber: I’m talking about mortgages.
Joe Fairless: Got it. Okay, cool. Well, even with it being paid off now, and you’re bringing in $800/month on average in rent, I’m sure you have some expenses…
Joe Lieber: Sure. I run at about a 36% operating expense ratio annually on that.
Joe Fairless: Got it, okay. And what are those expenses?
Joe Lieber: Pretty much the basics – they’re your taxes, they’re your insurance… If it’s a Section-8 property I always pay the water and sewer bill, and a little bit of a budget for repairs, of course. That’s how I get to that number, about 36%. But [unintelligible [00:05:10].23] property management. I self-manage.
Joe Fairless: You self-manage, okay. I was gonna ask you about that. So you generate approximately $512 per unit, and you’ve got 150, so you’re bringing in about $76,000/month profits. Is that pretty accurate?
Joe Lieber: Hey, Joe, I don’t count your money… What’s going on here? [laughter]
Joe Fairless: We’re talking specifics though, right?
Joe Lieber: You’re right, and that is what it is. That’s correct.
Joe Fairless: Cool. So why did you make it a point to pay off your properties, versus continue to have them leveraged and then use that cashflow to buy more properties?
Joe Lieber: It’s a great question. So I bought a lot of my properties – the bulk – between 2008 and 2013. At that time, these properties were very cheap here in Cleveland. When I say cheap, I’m talking between 8k and 25k cheap, which as you know, is probably very hard to [unintelligible [00:06:06].16] your financing… So that’s when this whole world of private lending opened up to me. And what I would do is I would go out and buy five properties rehabbed for $100,000. I would call up a private lender, get a $100,000 loan… And I just thought “I wanna get them paid off as quickly as possible”, right? So I would do a five-year fully-amortized loan, at like a hefty rate; I was paying these private guys between 10% and 12%. But they were five-year fully-amortized loans. So I wasn’t really cash-flowing monthly; I was breaking even. I shouldn’t say I wasn’t cash-flowing… I actually was cash-flowing a little bit, believe it or not; there were these short-term, rapid-paid-out loans, and I went buck-wild and bought all these houses; tons and tons of houses… And then they all got paid off by January of 2017. Once the first loan pays off, they just keep falling, like dominoes; they keep falling, and falling, and falling. And everything got paid off.
I’m a little old-school, and I like being debt-free. I still acquire new assets, but now I acquire them with my $76,000/month in positive cashflow. I can buy a house, or two, or three or whatever a month, and buy it without any debt.
Joe Fairless: When you say you’re a little more old-school and you like to be debt-free, why is that important to you?
Joe Lieber: It’s important to me because I went through a time in the early 2000’s where I was mortgaged up on everything. My cashflows were razor-thin, and I had some sleepless nights. I had to feed that portfolio a couple of times, and I didn’t like that spot. So when the opportunity presented itself, after the mortgage madness meltdown – we could buy cheap houses, this and that – I just wanted to be debt-free; I wanted to be completely relaxed in my real estate investment business. That’s the way I just chose to do it.
Joe Fairless: With the portfolio you have now, and the acquisitions that you look to do, and whatever other activities you’re doing, how would you break out your time in terms of what you focus on? 100% of your time – what percent goes to what category, over any given week?
Joe Lieber: It’s a great question. I’m doing a lot of turnkey stuff right now here in my market. I focus a lot of time on acquiring assets to buy, fix, repair and sell to other investors that wanna try to live a cashflow lifestyle, like I do now. Everything else as far as my real estate brokerage – it’s really an autopilot business. [unintelligible [00:08:25].06] all the day-to-day operations, which is just wonderful. I’m very grateful for her. So I spend probably 10% of my time on my real estate brokerage. I probably spend 50% of my time or more in my turnkey business… And my rental properties – those 150 properties we discussed – with the right systems and processes, you can really run an autopilot rental property real estate business.
I have great workflows, I have project managers, leasing agents, disposition agents, and they run all those things for me… Although — I don’t wanna be mistaken; I am involved in my business every day, I’m not completely away from it, but it does run with very little of my involvement.
Joe Fairless: Please educate me on how you have that set up, because I’m sure a lot of Best Ever listeners who have a single-family portfolio would love to learn how you have 150 single-family homes, and — how many hours would you say you spend a week on that? You personally.
Joe Lieber: Less than 10.
Joe Fairless: Okay. So how do you do that?
Joe Lieber: Okay, so we use a system called Asana. It’s basically a task management system that I have all the properties in. We have workflows in each one of those different things, so I can constantly see what’s going on and what’s outstanding. If it wasn’t for that particular free software, I would probably be a mess. I love using that for the business.
And then also, you wanna set things up. When a service call comes it, it comes in through our RingCentral line, and you’ll hear prompts… Like “What do you need? Do you need a copy of your lease? Do you need to tell my office manager your rent is gonna be late? Do you have a maintenance call?” And they’ll follow the prompts and they’ll say “Push button 3.” Then it goes to the maintenance man. And the call is recorded, so there’s a tracking of it. A work order is created; they’ll go out, they’ll take a look at the property and see what’s going on, and then it comes back to me for approval. Now, that’s the only part of it — people are gonna say “Oh, you’re involved!” Yes, I am involved. But we’re spending my money. I wanna know what’s going on, because it’s very near and dear to me. [unintelligible [00:10:33].20] I wanna know why. That’s $800 literally over here in Uncle Joe’s pocket, and I want that money; so I need to know why and what’s going on. So I do stay involved in that aspect.
I have taken my eye off of that ball before, and I can promise you, when you take your eye off that ball, it’s going to cost you money. When people see you relaxed, they think you don’t care about money, they think you don’t care about the employee working for you. So by being involved like that, it just works better.
Joe Fairless: What happened when you weren’t involved, that it didn’t work out so much?
Joe Lieber: They took advantage of my generosity by not being involved – like, really involved – in it. And now that I’m watching my money and I’m watching what’s going on… I think my leasing agents were just writing leases to write leases, and not having my best interest in play, and just wanting to get paychecks. They’d want to just underwrite anyone. “Oh yeah, they fit the criteria. Let’s put them in there.” “No, let me just take a look at it. Let’s make sure they’re making the money. Let’s make sure they haven’t been evicted recently. Let’s do a drive-by on their current house and where they’re living now, and make sure it’s not a complete disaster.” Things like that. A little bit more due diligence is much better for me by staying in this seat here a little bit.
Joe Fairless: So from what I’ve heard so far, the two areas you continue to be actively involved in is 1) new leases, and 2) maintenance expenses, approval of that. Are those the main two areas, or there are others?
Joe Lieber: They really are. Those are the main two things.
Joe Fairless: Okay. And with the maintenance expenses, is there a dollar amount that if it is this dollar amount or below, then you do not get involved?
Joe Lieber: I do. I do $300. Anything under $300 — don’t call me to put a faucet in, or replace a toilet. I don’t care about that. It’s the bigger things. You tell me when we need to reroof a house, or we have to replace a furnace and air conditioner, things like that. I really wanna have a conversation and make sure we’re getting the best possible pricing, and we’re using the best equipment.
Joe Fairless: And when one of your leasing agents has a prospective resident and they send you their information, do you have any process where you’re not having to be overwhelmed with a bunch of stuff, that you just want some core information? Or is there something else that you do to streamline that?
Joe Lieber: Yeah, I only make them send me people that fit a general criteria. And when I look at it, I still don’t go through and I don’t pull credit and do all that crazy stuff, because what I’ve noticed is most people that are renting the houses that I’m offering don’t have great credit. That’s to be expected. My main thing is “Are you making the money? Do you make three times gross income of what the rent is?” That’s one of my criteria. And have you been evicted in the past? Because if you have, it’s kind of like — when you did it once, you’re not as afraid to get evicted a second time…
Joe Fairless: Yeah, I guess…
Joe Lieber: Yeah, so I just don’t want people that have typically been evicted in the last seven years. So I’ll kind of watch that a little bit. But that’s it. I want my leasing agents to send me just the best stuff that comes through. Do you really like this person, do you believe they’re the right person for our property? That comes from a training, of course, and time spend in office meetings, and things of that nature… But when I get them, it’s pretty much a pretty quick review process.
Joe Fairless: I have three homes, not 150 homes… But I know when I get a request from my property management company, and they give me the information… At first they just gave me the information and that was it. But then I got a little bit smarter and I was like “Before you send me information, you tell me if you would approve them”, and then I will just look at it and I’ll say “Yeah, good with me too.” Because at first I think they were sending me people who they may or may not have approved, and like “Why are you sending me these people if you’re not 100% on board with them?”
Joe Lieber: Exactly. It saves a lot of time, and you have to have them be your eyes and ears out there. It really helps.
Joe Fairless: What’s a deal where you lost money?
Joe Lieber: Oh, yes, Joe! Great question! So in 2009 I decided “Hey, I wanna step up my game. I wanna go big time. I’m gonna buy an apartment building.” So I bought a class D 48-unit apartment building here in Cleveland, Ohio. I owned it for almost ten years.
Joe Fairless: Okay…
Joe Lieber: And it literally stole my life from me. That was a very challenging building to run. I could not get it right. Everything is very expensive when you’re talking multifamily. It seems like the price triples. Boilers are not $400, they’re $14,000… Crazy things like that. A front door on a house costs $300. A front door on a commercial apartment building costs $3,000. I could not get the thing to work right. I think about it constantly, even though I’ve been out of this building for over two years now, and I have not been able to dive back into multifamily since.
Joe Fairless: And what would you say is a couple things that — you mentioned the expenses, and things… But objectively speaking, if you were to take a step back, are there certain things you would have done going into that deal, or a deal like that, that you would do a little bit differently?
Joe Lieber: You know, I would. I honestly think about it all the time. I think “What went wrong? Did I overpay for it? Did I buy in the wrong neighborhood? What would I do if I had repurchased that building?” And I think what I would have done this time is I would have made it fully, 100% Section 8 building, or I think I would have tried to turn it into some type of residential assisted living facility, find an operator… I would have rather done something like that with that building, than trying to just work with private pay individuals over there, in a very challenging neighborhood.
Joe Fairless: When you take a look at all the properties you’ve purchased, is it that one 48-unit and then just single-families, or have you bought other things besides the 48-unit and single-families?
Joe Lieber: Just those.
Joe Fairless: So no duplexes or triplexes or anything?
Joe Lieber: I’m sorry, I do own ten duplexes.
Joe Fairless: Okay, alright. That’s part of the 150…
Joe Lieber: That’s part of the 150.
Joe Fairless: Okay, got it. And why not do more duplexes and fourplexes, versus single-family homes?
Joe Lieber: Here’s why… For me and my market – this is market-specific; so in Cleveland, OH about the cheapest you can live is $500/month. And typically, in these two-family homes here in the Cleveland area that’s the cheapest rents. And it seems like I get just about anybody and everybody making applications for these houses, and it’s a challenge to get them to run right. They don’t run perfectly. I have more turnover in my duplexes than I would in my single-family homes… And there’s always silly issues coming up, like “They’re making too much noise upstairs”, and “Jimmy downstairs is playing his music, or smoking weed”, or silly things like this. So I have found just a great niche in the single-family home area, and I do very well there… Unless I do master lease options. I’ve done those on the two-family homes, where I’ll do a master lease option to one person, give them both sides, and they put family members, or friends, or ailing parents in one side… And they’ve done things like, but typically I just can’t get them to work awesome.
Joe Fairless: You stay in your lane. You know what you’re really good at, so you just double-down on that, right?
Joe Lieber: Pretty much, yeah. I like staying in my lane anymore.
Joe Fairless: You said you’ve got 21 years in the real estate business with your brokerage… Why not try and get 70 agents under your brokerage, and then get some residual income that way?
Joe Lieber: Great question. I went at that real hard in about 2004. First of all, my brokerage name is called Real Estate Quest. We’re just a small, independent brokerage. And going out there and through all these trials and tribulations of trying to get agents into my company – I have about 17 right now; they’ve been with me for a very long time – but trying to attract more agents… For whatever reason, agents wanna work for the big name companies; they wanna work for the RE/MAXes, the KWs, the C21s. And I’m gonna go into a story about that…
I have a colleague here in the Cleveland area who had a RE/MAX franchise… And she had 110 agents. She said – without trying to go into any names of what division RE/MAX it was called… They have subnames, like RE/MAX New Horizon Realty, or RE/MAX Blue Chair Group, or whatever.
Joe Fairless: Okay…
Joe Lieber: So this particular RE/MAX franchise, Blue Chair Group – the broker had a great relationship with all of her agents, 110 of them. They loved her, thought she was great… And one day she came out and said “Guys, listen. Let’s have an office meeting. 110 agents. I wanna drop the RE/MAX franchise. Let’s just be called Blue Chair Group. Forget the RE/MAX Blue Chair Group”, and the agents said “You know what, we’re on board with you. Let’s do it. Let’s get rid of that franchise fee. We’ve got a name stake in the community… We don’t need the RE/MAX!”
Joe Fairless: [laughs]
Joe Lieber: So she dropped it. Do you know what happened the next day, Joe?
Joe Fairless: What?
Joe Lieber: 78 agents quit.
Joe Fairless: [laughs]
Joe Lieber: Why they did her dirty like that I still don’t know to this day. I just saw her recently – it’s been about five years now – and she only has 12 agents. So for whatever reason, these agents wanna work for larger names. And I was always afraid — I had the salespeople for these franchises come into my office, from EXIT Realties, your C21’s, and pitch me on getting a franchise, and I always just felt like I was getting a job and I was responsible to hit certain numbers to satisfy the franchiser… I didn’t want a job; I wanted to actually be an entrepreneur and figure it out myself, so… I did try [unintelligible [00:20:09].20] I did a pretty good job, but I found myself sitting at my desk a lot, answering a lot of questions, and really just trying to work through issues of the day. And agents – I love them, but they’re just not super-loyal to the broker, let’s be honest.
Joe Fairless: Right.
Joe Lieber: If RE/MAX is offering 100% commission to you and a $400 desk fee – they’re gone, they’re gonna leave you. Or if down the street another company is offering 80% commission and you’re at 75%, they’re going to leave you once again. So I [unintelligible [00:20:34].10] for a few years, and I did okay; I didn’t think it was super-lucrative, at least in my area, in my market… Once again, a little smaller sales price of homes than other places in the country… So I kind of left it. I still have it, I think it’s great, but that was about it for me.
Joe Fairless: What is your best real estate investing advice ever?
Joe Lieber: Alright, so this might be a little cliché, but my best advice ever is the rich people work for assets, they don’t work for money. And I really took this to heart as a young man, and accumulated as many assets as I could. For a while there I didn’t understand; it wasn’t even making sense. I wasn’t even making money, but I held these assets, and I literally couldn’t pay for lunch… It was at that point. But I think anyone who’s gonna do this knows what I’m talking about.
But the magic of it is that it all comes together. Real estate is a get rich slow business, not a get rich quick business. But when you get rich in this business – wow! It is unbelievable, the opportunity and the things this business can give you.
Here we are, 20 years later, and I feel good about it. I’m in a great place with my business right now, it’s real, I’m a real player, and it’s a good spot. So that would be my best advice ever – buy these assets. No matter what they are, you’re not gonna go wrong buying real estate assets.
Joe Fairless: I clearly know the concept of “the rich people work for assets”, but I’ve never heard it phrased that way… So I appreciate you putting a fresh spin, at least for me, on a tried and true concept. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Joe Lieber: Yeah, let’s go for it!
Joe Fairless: Alright, let’s do it. First though, a quick word from our Best Ever partners.
Joe Fairless: Okay, best ever book you’ve recently read?
Joe Lieber: Rocket Fuel.
Joe Fairless: What’s the best ever deal you’ve done that we haven’t talked about already?
Joe Lieber: Alright… 2009 – I buy a single-family home that’s 4 bedroom/3 bath. Kind of a weird setup, because it was like a duplex, but it wasn’t really a duplex; something crazy going on. I paid $9,000 for this home.
I go into it, I finish the upstairs, I cut some bedrooms in, I make it a 7 bedroom/3 bath home. I put a wonderful, very grateful Section 8 family in this home. I receive $1,250/month, Section 8, fully subsidized, on a $15,000 investment – 9k for the house, 6k for the rehab, and I’ve been getting that money all these years, same tenant in the property, same house. It’s been going on since 2009.
Joe Fairless: I bought a house in 2009 for $76,000, and the rent was $1,100, so… [laughs] Nice work on that. That’s quite the return on your investment. Plus you’re helping people out along the way.
Joe Lieber: They’re such a grateful family, too. The whole family is [unintelligible [00:24:13].25] they’re extremely grateful. I’ll even go over there occasionally, stop by, see how they’re doing; I go to Costco, get a big bag of candy… I’ll take it over there, give it to the kids, and stuff… Just to be cool, just to do cool stuff like that. People love that, and I love doing it.
Joe Fairless: What’s a mistake you’ve made on a transaction in real estate?
Joe Lieber: Oh, good questions. Gosh, I’ve made a lot of them over the years. If you saw me, you’d see me all beat up, and bruised, and scratched… A mistake I’ve made is I started doing some private lending, and I lent to people that I (I’ll say) like, and you can get burned like that. And I’ve been burned doing private lending.
My mistakes are make sure you get your documents in order; get the right things, get what you need, so in case something goes wrong – because I guess it will go wrong, even if it is your friend, or you’ve known the guy for 20 years… Things will go wrong, so make sure you’re right.
Joe Fairless: Best ever way you like to give back?
Joe Lieber: I am involved in some high-end masterminds in our business, in real estate, and there’s some really great guys out there, who have some wonderful charities… And I love getting involved and donating to their charities, and watching them take it and run with it. There are some really great organizations out there, run by some really good people, and I am more than happy to donate to my friends’ organizations.
Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?
Joe Lieber: The best way to reach me, Joe Lieber – feel free to drop me an email. My personal email address is firstname.lastname@example.org. You can always call me here at the office – 440 387 4800. I’m at extension 2. Or check me out on the web, at clevelandinvestor.com.
Joe Fairless: I enjoyed our conversation. It was a conversation about identifying where you have the most competitive advantage, and what you thrive doing, and then doubling down on that. I enjoyed hearing about your approach to debt (you hate it), and how you structure your portfolio accordingly. The lessons learned on the 48-unit apartment building, and that success story of the renovation with the 15k all-in project.
Thanks again 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.
Joe Lieber: Thank you.