JF2394: On Investor Relations and Strategic Marketing Initiatives and Business Operations with Charlie Stevenson

Charlie is an experienced business founder and passionate leader with a history of working in the marketing, travel, hospitality, and real estate investment industries. He is the founding partner of Akras Capital, a company that provides investment opportunities for those seeking passive income. He is currently scaling a real estate investment business focused on multifamily assets in inland growth markets across the US. Charlie is actively involved in the communities he resides, and serves as the local chapter leader for GoBundance, a Nationwide men’s and women’s group that supports “healthy, wealthy men and women leading balanced and epic lives.” In today’s episode, Charlie will be going into details about his journey in real-estate. He will share some challenges on investor relations and their strategies in business and marketing.

Charlie Stevenson Real Estate Background:

  • Founding Partner of Akras Capital
  • 3 years of multifamily investing
  • Portfolio consists of 4 properties totaling 450 units
  • Based in Boulder, CO
  • Say hi to him at: www.akrascapital.com

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Best Ever Tweet:

“If you try to go alone, you can go fast. But if you go together, you can go far. Go together and create a team. Don’t try to do it alone.” – Charlie Stevenson


Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Charlie Stevenson. Charlie’s joining us from Boulder, Colorado. He’s got four years of multifamily investing, and his portfolio consists of 450 units. Charlie, welcome to the show.

Charlie Stevenson: Thanks, Ash. Good to be here. Thanks for having me.

Ash Patel: Yeah. Tell us more about your background and what you’re focused on now.

Charlie Stevenson: Yeah. I kind of fell into real estate investing after a decent career in kind of serial entrepreneurship. After graduating college, I actually started an adventure travel company with my brother and best friend, because we love to travel, and we moved out to Italy and lived there for four years, building an adventure travel company, taking American students on trips to ski in the Alps and sail on the Greek islands. That was a blast, but it was a risky endeavor. You never knew exactly if the business was going to work out or not. So after returning to the United States and starting another business, and that one failing, I got into the corporate world. After meeting my wife and several years in the corporate grind, we both looked at each other on our honeymoon and said, “Let us take a break. Let’s quit our jobs, let’s go do what we really love to do, which is travel and spend time with family.” So literally, she quit her job as a finance investment professional in Boston, I quit my job as a travel industry director, and we bought some backpacks, and kind of like you, we went and traveled all over the world. We spent 14 months cruising around Southeast Asia, we were in Russia for a bit…

While we were there, we rented our condo in Boston, Massachusetts, which we bought for ourselves. We rented it out to a pharmacist and his beautiful young family. I kind of had this epiphany –while we were riding the Trans-Mongolian Railway across Russia with our good friend who’s now our business partner– that “Holy cow, this thing is cash-flowing. We’re making a grand a month just maybe replacing a washer and dryer every three years or something like this.” So we said, “Boy, if we had five more of these things or 10 more, we could do this continually. We could just keep traveling and spend time with family and live the dream.” That was kind of when the idea hatched; our friend and now business partner said, “Hey, I know you guys just realized this. I realized this about 10 years ago.” She’d been buying multi-families in Boston already. So she’s like, “Let’s combine forces, the three of us, and figure this out.” So we decided to form Akras Capital (that’s what it is now and began buying a small portfolio of small multi-families in Washington state, where I’m originally from.

Through that experience –using our own money, we just self-funded everything– we learned how to do it, we reinforced the experience that my other partners had, we utilized my two partners’ experience as Chartered Financial Analysts. They already knew how to underwrite stuff. I was just kind of a travel guy, I was having fun building the business. They were the ones that knew how to use the spreadsheets at first. So we began buying some bigger stuff. We actually went to the Best Ever conference, Joe Fairless’ conference a few years back, met some new partners and they introduced us to the world of syndication. We began buying much larger assets, starting with a 300 unit down in Orlando, and then another one over in Dallas, and it’s just kind of gone on since then.

Ash Patel: What did your portfolio look like before you partnered up with your now partners?

Charlie Stevenson: Before we partnered, it was one condominium in Boston, Massachusetts. My wife and I owned it; that was it, a single door. Our other partner had several units that she had a long-term leasing strategy on, one multifamily, and had a couple of condos that had Airbnb strategies in place.

Ash Patel: When you formed this partnership, did you all combine assets? Or did she keep her existing assets and did you keep yours? Or did you put it all under one umbrella?

Charlie Stevenson: No, we kept them totally separate. In fact, we sold our condo in Boston, because it generated a lot of appreciation, there was a lot of equity. So we actually sold that to generate some deployable capital. We used that as part of the money just to fuel the growth of the business and acquire our first multi-families in Washington.

Ash Patel: Okay. And then once you formed this company, where did your capital come from, to take on more deals?

Charlie Stevenson: So like I said, we use some of our own savings. We had savings in our own bank account, there was cash, we had IRAs built up from years and years in the corporate world that had decent size, and we used that money, converted it into self-directed IRAs. In doing that, essentially, had more deployable capital; so we used our own money at first, and then as we grew our portfolio and as we leveled up our experience and began taking on larger assets in the syndication space, we used external capital from private investors, private equity.

Ash Patel: Okay. So Charlie, we’ve been on a pretty good run. How many years have you been doing this?

Charlie Stevenson: Akras Capital was founded in 2017. So four years.

Ash Patel: Okay, so you’ve benefited from a great real estate environment. Give me an example of a deal where you lost money and learned a lesson.

Charlie Stevenson: That’s a good question. I was thinking about it… We’ve been really careful and intentional about making our investments. So far, of the investments we’ve made, the deals that we have acquired, and some of the disposition, we haven’t lost any money. So we certainly had components of the business plan that didn’t have the same performance that we had expected or projected; perhaps there was some kind of a natural disaster we had to handle that affected performance of that particular component of the business plan… But overall, when we’ve dispositioned assets or with existing assets that we’re operating, the returns have been at or above projection. So we’ve been really thankful for that.

Ash Patel: What was a natural disaster?

Charlie Stevenson: In Dallas Fort Worth, about a little less than a year ago, actually, in the fall of 2020, there was a tornado that went through the center of the city; actually several of them. One of them landed about a mile and a half from one of our assets. There were just intense winds that kind of tested the structural integrity of our roofs. We had to go through basically pausing the business plan while we mitigated that risk and handled the insurance claims and all that kind of thing. That was one particular example of components of a business plan, like the interior and exterior renovations being put totally on pause while we handled that situation.

Ash Patel: Okay, what are some of the challenges you had dealing with investors or acquiring investors?

Charlie Stevenson: Dealing with investors – I think in this environment, we’ve had such a great run. The economy has done so so well over the course of the last decade; it was the longest growth period in modern economic times. There’s a lot of capital out there. And because there’s a lot of capital, there’s also a lot of other operators, like ourselves, bringing deals to the market. Different operators have different ways of underwriting and different levels of conservatism in the way that they underwrite assets and underwrite the performance of business plans for assets. So you see a wide range of a spread of returns. Especially with the more retail investors, the folks investing maybe 50, 100, or $150,000, I think that some of our peers are putting deals out there that have very, very, let’s say, high expectations for return that may or may not be achievable. But what that’s doing is it’s setting the bar for return expectations with the retail investors very high.

When we underwrite our stuff, it’s not often that it has at this current stage in the market, it has really exciting returns that cannot compete with people that have lower than true value add business plans with their underwriting if that makes sense. So expectation setting has been kind of one of the challenges, I think.

Ash Patel: What are your typical returns on your deals?

Charlie Stevenson: Pre-COVID we were aiming for 17% to 22% as an IRR, kind of our floor for investing any deals, and 9% cash on cash return, and hopefully it’s higher than that. That still is the floor for any investments we do, but we’ve been setting expectations with investors that returns are now for a true value-add business plan are ranging probably between 13% to 17%. But of course, past performance is no guarantee of future results. I have to say all that for compliance stuff, otherwise my partners will not be happy with me. But yeah, I’d say 13% to 17% for the typical run-of-the-mill, large multifamily asset running a value-add business plan. Hopefully, that goes up, but we’re seeing cap rate compression, so it might not.

Ash Patel: How do you mitigate that?

Charlie Stevenson: How do you mitigate the changing of returns?

Ash Patel: Lower returns.

Charlie Stevenson: One way that we’ve done that is we focus on investors that have lower return needs, and institutions that have lower return needs, and that group is excited about a 13% to 17% IRR; maybe an investor that’s been in the market for two or three cycles. A 30-year veteran of investing is excited about anything that’s a multiple of what the treasury is returning. We’ve got an investor who’s a portfolio and fund manager for three decades and he looks at anything relative to the Treasury. So an 11% return is 10x over the Treasury so he’s very excited about that, because he sees higher returns than that as maybe a little riskier.

Ash Patel: How do you find those investors that are looking for a little bit lower returns?

Charlie Stevenson: It might not be that they’re looking for lower returns, it’s like they’re looking for a blend of different characteristics in a return profile. So a return, the actual ROI is one component of an investor who’s maybe a little bit of a higher net worth investor. But also liquidity needs are one particular need. Also, things like tax liability mitigation is another need. So if we’re approaching a high net worth investor who is okay with a 13% or a 10% return, they have other particular interests and needs that are more important to them than that actual return. They don’t care so much about cash flow, maybe they’re more of a five-year or 10-year hold appreciation, total-return-focused investor.

How do we find them? Well, a lot of it had to do with starting with our own personal networks. My two partners were in the financial industry for years and years in Wall Street, in Boston, and New York. So certainly, there’s a lot of folks in our colleagues within our past experience that we can tap on who has an interest. Also, attending conferences, like the Best Ever conference was a great way for us to meet higher net worth investors, or just investors in general. We love all investors, whether they’re retail or high net worth, we want to work with all of them and support all of them. I’m not saying we only go after one. Other ways – we network, essentially. There’s also a lot of referral that happens. One person refers us to a network of their friends, who all have large capital deployment needs.

Ash Patel: Charlie, can you tell me about your last acquisition?

Charlie Stevenson: Sure. Yeah, so our last deal was an interesting one. Like I said, we had a portfolio in Washington state, a smaller multifamily asset. This one was a 12 unit, a little bit of an older asset that was outside of Spokane, Washington, right next to Eastern Washington University, which is a large public university; directly across the street from it. It was unique in that regard because it was a great location and had no difficulty leasing it up. We actually found the deal with a wholesaler, which is kind of a unique deal provider. It’s different than a commercial broker. They find the deal, they get it under contract with a direct relationship with the seller, they trade a contract assignment fee that’s built into the agreement, and then when you work with them they essentially charge you that assignment fee, you then get assigned the contract, and then own it.

So that deal was great. Cap rates are pretty decent in Washington State, or at least in that region of Washington State. So we got it for $500,000 for a 12-unit, which is a great per unit price. It was cash flowing in a really nice way. A wholesaler said that cashflows like a hog, and I’ll never forget that phrase, because that was funny. We ran a typical value-add, like most of the BRRRR strategy on it; fixed up some of the interiors, some of the exteriors, forced some appreciation by moving the NOI up and getting the rent and the tenant base stabilized, and then we just dispositioned it. It’s set to close in like a week or something like that for 818,000. So, ultimately, we made about $300,000 on it, of which we’re 1031 exchanging that into another asset in a new market that we’re focusing on.

Ash Patel: What were the rehab numbers on that?

Charlie Stevenson: That’s a great question for my asset manager, who is my partner, Christina. I focus on business systems, capital raising, and investor relations. But I can kind of like… Let me think about this for a second. It was around 50,000, I think; $75,000 in total to do the repair cost, maybe a little bit less.

Ash Patel: How did you manage those rehabs? Was it a property management company?

Charlie Stevenson: Yes, we have a strong property management company in place there in Washington State. A team that we work with with a few of our assets. We also had a DC team that we worked with to get in there and help out.

Ash Patel: Washington State has some pretty unique tenant laws. Have you had any experience, positive or negative, with that?

Charlie Stevenson: From a positive perspective, I think it’s incumbent upon us as a multifamily operator to make sure tenants are really well protected. So I really do appreciate Washington’s progressive stance on taking care of tenants. That said, I think that the landlord-tenant balance has to be really managed, it should be fairly equalized, so that a good landlord can take care of their tenants and also take care of their assets and run a business plan. In Washington state, with COVID happening, a lot of some of the more progressive policies, like rent control and eviction moratorium, were accelerated. COVID — the federal level came in and accelerated some of that imbalance between landlord and tenant rights. That’s part of the reason we’re actually dispositioning our portfolio in Washington State and moving to states that have more landlord-friendly environments, business environments.

Ash Patel: So there’s a bit of a negative impact there?

Charlie Stevenson: There was. I’d say that while that market, I think, still has a lot of room to go and there’s still a lot of opportunity for investors, it was getting in the way of our hyper-growth, strategic positioning. We wanted to be able to move a little more quickly and that wasn’t allowing us to enact our business plans at the rate that we wanted to. So it had some impact on our strategy.

Ash Patel: And is there a specific example you can offer on how those laws impacted your business model?

Charlie Stevenson: Certainly, we need to have tenants that are taking good care of the asset. It’s sort of an unwritten and written rule on the lease that people that we bring in to provide them with housing should take good care of the asset. We had no situations where there were tenants that were from the previous ownership that had been not staying up on their rents, they hadn’t been taking care of the asset, and not taking care of some of the maintenance that needed to be handled. So we found situations coming into the ownership of this asset where some of these units needed to be totally removed or remodeled. And because of the current federal moratorium on eviction, we couldn’t do that at first. The tenant eventually left on their own accord, kind of skipped in the middle of the night, which was actually thankful. But if we wanted to get them out so we could take care of a pretty terrible bathroom mold issue, we couldn’t have done that at that moment in time because of the eviction moratorium.

Ash Patel: Got it. Charlie, what’s your Best Ever real estate investing advice?

Charlie Stevenson: My Best Ever advice is kind of philosophical. There’s this men’s group that I’ve heard of called GoBundance. Something that I really learned working with them was if you try to go alone you might go faster, but if you go together, you’ll go far. So it’s an ancient or African proverb that says, go alone and go fast, go together and go far. That’s been truly one of the hallmarks of our success in the business, is by pairing up with two other folks, my partners, who have a lot, frankly, more experienced than I am, [unintelligible [00:18:18].07] in the room, and can work with me. I can do what I’m good at and they can do what they’re good at. We can combine forces and really go a long way. I do see a lot of investors who go the lone wolf route, and maybe they get a project going a little more quickly, but ultimately, I see that we can have a lot more distance in the end. So yeah, go together, create a team, don’t try to do it alone.

Ash Patel: That’s a great philosophy and a great outlook. Charlie, are you ready for the lightning round?

Charlie Stevenson: Let’s do it.

Ash Patel: Alright, first, a quick word from our partners.

Break: [00:18:50][00:19:12]

Ash Patel: Charlie, what’s the Best Ever book you’ve recently read?

Charlie Stevenson: I use this book regularly and it sits right in our library. It’s actually the Best Ever Syndication Book. It’s kind of a handbook for us. We’re getting ready to put some offerings out there to our investor networks for some assets we’re looking to acquire, and the first thing I do is I open up that book and I look at the 25 or 30 questions that an investor will ask during the webinar process. That just gets me ready to go. So it’s a book that I read for the first time years ago, but it’s a constant reference, which is Theo’s and Joe’s Best Ever Syndication Book.

Ash Patel: Awesome. I’ve got that book sitting on my shelf. It’s on my list of things to do. So, thanks for that advice, I’ll get around to it.

Charlie Stevenson: Do it. There is good advice in there. Yeah.

Ash Patel: Charlie, what’s the Best Ever way you like to give back?

Charlie Stevenson: Giving back is something that is really important to me. Something that my dad really instilled in my brother and I. The way that I find that I can contribute the most value is at my university back in Boston, there is a venture accelerator that works with students who are undergrads and also alumni who are getting businesses off the ground. Back in 2010, when I was starting my adventure travel business, I was one of their first ventures, I was really lucky. It’s called Northeastern University’s IDEA Venture Accelerator. They gave me a ton of resources, a ton of advice, assigned me a mentor, and helped me to work through the process of starting and launching a business. That experience was so impactful to me that I now am part of that same organization, not as a venture, but as a mentor. Now I go in and I help out young organizations and growth ventures that are doing this very same thing. I coach a digital yoga platform, a travel business, and a couple of other things. I meet with them on a monthly or bi-weekly basis, I help them organize their business plans, their revenue models, all kinds of stuff. It’s fun, it keeps me young and keeps me thinking in an innovative way.

Ash Patel: Very cool, Charlie how can the Best Ever listeners reach out to you?

Charlie Stevenson: I think probably the best way is just go to our website at akrascapital.com. There’s a whole different bunch of ways that you can reach out to us. There is an Ebook you can download, which will collect some information. You can reach out directly to me and book a meeting with myself or one of my other partners to talk about what Akras is doing. We’re always looking for limited partners to come in, and also small institutions who want to invest with us. So certainly reach out, and happy to be a resource and build a relationship.

Ash Patel: Charlie, thank you for being on the show today. Thanks for all the great advice. You started out with the travel bug, accidentally got into real estate, and now with Akras Capital you’re doing syndications and building a giant portfolio. So thanks for sharing your story today.

Charlie Stevenson: Thanks, Ash. I appreciate it.

Ash Patel: Have a Best Ever day. Thank you again.

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JF1861: How To Raise $1 Million To Fund A Fix And Flip Business with Rocco Montana

Rocco left his sales job that was leaving him unfulfilled and underpaid. Real estate investing was what he wanted to do, and now he is a successful real estate investor, syndicating deals and flipping houses. We’ll hear a lot about how he was able to raise over $1 million to fund his flips. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


Best Ever Tweet:
“Be grateful for how far you’ve come” – Rocco Montana


Rocco Montana Real Estate Background:

  • Created a multifaceted real estate business from scratch in just over 2 years
  • He is an active realtor, AirBnB Superhost, house flipper, and multifamily investor
  • Raised over $1 million in private capital to fund his flips in his first year
  • Based in Boulder, CO
  • Say hi to him at https://www.jrocproperties.com/
  • Best Ever Book: Never Split the Difference 


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.


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 hate that fluffy stuff, so we don’t get into it.

With us today, Rocco Montana. How are you doing, Rocco?

Rocco Montana: I’m doing good, Joe. Thanks for having me.

Joe Fairless: Well, it’s my pleasure, and looking forward to our conversation. A little bit about Rocco – he has created a multifaceted real estate business from scratch in just over two years. He and his wife are active investors. He is an active realtor, he is an Airbnb superhost, he is a house flipper and he is a multifamily investor. Raised over a million dollars in private capital to fund his flips in the first year. Based in Boulder, Colorado. With that being said, Rocco, will you give the Best Ever listeners a little bit more about your background and your current focus?

Rocco Montana: Yeah, absolutely. My wife and I are both active realtors. I had success in a variety of different sales roles, different industries over a few years, and got kind of tired of working hard and making everybody else money, and getting a really small piece of the pie, and figured I’d make a bigger pie and take small pieces. That’s kind of what drove me into real estate, and multifamily is the future for me as well.

I can’t do any of this without my wife. She has a master’s degree, actually; she’s managed eight-figure budgets for a private university, she worked for DU for a while, and hundreds of employees… She’s kind of the operations, I’m a little bit more of the face. She’s kind of like my right arm, I couldn’t do anything without her.

We both come from sales, we met in a sales job together, and… Yeah, Airbnb was kind of our start, and I got licensed, she got licensed, we’re passive investors, we’re gonna syndicate our first deal this year to GPs, and… Yeah. Where do you wanna go from there?

Joe Fairless: Well, I’d like to know how you raised a million dollars in private capital to fund your flips in the first year.

Rocco Montana: That’s a great question, and I’m happy to share… I’m gonna write a book at some point when I build up a little bit more experience, and it’s gonna be something along the lines of creating success or creating your business one beer and coffee at a time. It really just comes from networking. My wife and I invested in a coaching program…

Joe Fairless: Which one?

Rocco Montana: Fortune Builders.

Joe Fairless: Okay.

Rocco Montana: [unintelligible [00:04:25].15] do wholesaling, then do flipping, and then do buy and hold. And that helped me get in front of a lot of people. Then I created a meetup based here in Boulder. Actually, some of you might know who Adam Adams is. He created the Real Estate Lunch Club of Denver. I run the Creative Real Estate Lunch Club of Boulder, and honestly, most of it came from there. My family was not my first investor, but I’ve got my family on board now, so that helps… And yeah, the meetups, and getting out there.

It was so hard for me to believe even investing in something like Fortune Builders and meeting other successful people of varying degrees and varying asset classes in real estate… “Where do you find your deals, where do you find your capital?”, and they all say networking. It’s underrated, and I think a lot of people are doing it wrong. There’s not always an intention. They refer to it as edutainment. You take these classes, you go to these groups, you invest in these programs, and you’re having fun and you’re learning, but are you actually executing? Having an intention with networking, knowing who you’re looking to meet, researching the group that you’re going to see, the people that are gonna be there and having an intention and goal…

I heard an interesting statistic not too long ago from one of the coaches I was working with – 95% of people never make a follow-up call after a meetup.

Joe Fairless: I believe it.

Rocco Montana: All these business cards you hand out or receive… If you actually schedule a coffee or schedule a phone call, you’re in the overwhelming minority.

Joe Fairless: Yeah, it’s pathetic, but I believe that it’s true… Which is good — and pathetic, because people should do it, but it’s good because people who do do it, surprisingly, they stand out. They shouldn’t, but they do, because most people don’t do that… So yeah, I’m glad that you mentioned that. It’s the small things that can help.

Let’s get into a little bit of the specifics of that million dollars in your first year though. I hear you on you joined Fortune Builders, you co-host a meetup, you’re intentional when you are attending places to know what you’re looking for, but now let’s talk about the actual million dollars within your first year. How many people approximately did that comprise of?

Rocco Montana: Honestly, a surprisingly few amount. It’s only about four.

Joe Fairless: Four people, okay. So on average 250k, or was one person 900k and the others were a smaller amount?

Rocco Montana: I’ve got one person over 500k, and the other three comprised the other 500k.

Joe Fairless: Okay, cool. So you’ve got one person at over 500k, and – the other three over 100k each?

Rocco Montana: One is about 200k, and the other two 150k.

Joe Fairless: Someone invested a good chunk, you’ve got another person investing about 200k-250k, and then you’ve got two others that are doing about 150k. Alright. So how did you meet that person who has invested over 500k?

Rocco Montana: It’s kind of the little things, like we said earlier, Joe… I tapped somebody on the shoulder, I was working with a hard money lender for a  flip, and the timeline didn’t work out, even though the hard money lenders can close fast… I needed a little bit faster or I was gonna lose the deal. I already had earnest money up… And I tapped them on the shoulder after they were in my meetup for about a year. We built a relationship, a little bit personally, but mostly meeting once a week. This year we’re doing once a month or twice a month in Denver and Boulder meetup… And she had faith in me and gave me an opportunity.

In that first deal she went first position, took up the whole loan, purchase price and repairs, for 280k, and now she’s in four other projects with us.

Joe Fairless: So you approached her when you had a deal and the timeline wasn’t working out with the other hard money lender? Did I hear that right?

Rocco Montana: Yeah, so I clarify the difference between a hard and a private money lender as the hard money lender is like an asset-based lender, that’s typically a fund or something like that, private equity funds that focus on fix and flip real estate… And the private money lender is exactly that – a private individual. The hard money lender – I was pre-approved, I had worked with them, and I was kind of ready to go with my first big flip. I did a small flip, a little [unintelligible [00:08:38].27] I actually lent personally on it, with a little experience from the lender side as well… And I just reached out and they were like “Yeah, we can’t really quite move that fast.” I thought they could.

I tapped this woman on the shoulder, who was becoming a close friend of ours as well, which had been part of our business, and she said “Yeah, I’ll help you out. You can secure me with a lien and a promissory note.” The return sounded awesome – double-digit annualized returns, backed by insured, hard assets…

Joe Fairless: So path A wasn’t working, path B ended up working… You said you had known her for a year… How did you initially meet her?

Rocco Montana: Through the meetup that I was hosting.

Joe Fairless: So you were hosting a meetup for how long? At least a year, I guess… Prior to you doing this first big flip.

Rocco Montana: January 18th I started my meetup, and tapped this lender on the shoulder in July or August. This was a weekly meetup, she was a regular attendee. She manages a small portfolio of condo rentals in Boulder, and she was looking for more passive opportunities. She had been self-managing so many units, and it was a lot of work, she was kind of doing 30, 60, 90-day rentals because they have short-term rental regulations in Boulder and Denver, so she couldn’t give the nightly stuff… And it was a lot of work. She had some capital, and she took a chance.

My sales experience definitely helps in negotiations, and being able to communicate with people and articulate your point, and a value proposition… Stuff guys like you and I do all the time in raising capital or meeting new partners. She was into it.

Joe Fairless: And in January when you started your meetup, did you start it as a result of something else taking place, to give you the idea to start it?

Rocco Montana: So Adam Adams, who is a multifamily syndicator himself, based out of Denver, started the Creative Real Estate Lunch Club of Denver, and he wanted to expand it to other places. We know that Boulder is a pretty affluent area, and it was a fairly affluent city as well, and he said “Well, why don’t you take lead and host a Boulder chapter, if you will?” He was doing every week on Thursdays through 2016 and 2017 – or maybe just 2017 even – and then in 2018 I started in Boulder, another guy started in Fort Collins, and they tried to start one in Colorado Springs… Today it’s just Denver and Boulder that still exist.

Joe Fairless: Okay, so you’re holding strong, and you have seen the benefits of doing it… So I’m glad that we dug in there. What value did you see for starting that meetup in Boulder, that perhaps others did not?

Rocco Montana: The value we see is providing value to others, and meeting other people. It’s like a two-way street, right? We provide value first, create something that brings people together… Our format was a different speaker for every week. All the different sorts of real estate. No sales pitches, no “Sign up for my consulting program”, no “Buy my book.” Just “I’m a specialist in 1031 exchanges. We’re gonna talk about that for 40 minutes.” “I’m a specialist in multifamily syndication. We’re gonna talk about that.” “I flip” etc.

We did that, and it brought people together to talk about real estate, people that are interested in real estate. And then the other side is I knew by providing value first, that in some way, shape or form, even with not a clearly defined goal  at the time, I would receive value in return. It’s karma, if you will, and you can call me a Boulder hippie if you will, but it’s just karma, and putting good energy out there and helping other people and bringing people together. That comes back twofold, and it has, in a short time.

Joe Fairless: Segueing to something else, unrelated – you’re an Airbnb superhost… How much Airbnb stuff do you do right now?

Rocco Montana: We have two properties. We listed six different listings with just two properties. That could definitely be a fairly long conversation in itself. It is mildly passive. We airbnb our condo in Boulder. Sometimes my wife and I literally sleep on our couch and rent out our two bedrooms. Another thing that people think we’re nuts, but it’s temporary and it’s helping us get to our other goals, and it just generates enough revenue that it’s worth it. And we have a nice couch in front of the fireplace… [laughs]

So we’ve been doing that for about 2,5 maybe 3 years now, over about 500 guests, 260 stays, maintaining that superhost rating, so we’re in the top tier of feedback… And we got into that because we did Uber/Lyft for a little while, while starting out, just being young, newly married business owners… It was difficult to just keep food on the table, especially because real estate has a bit of a longer sales cycle, as you know and most of the Best Ever listeners would know. It’s not a weekly paycheck, like the 9-to-5 deals. And there wasn’t a lot of value in it, dollars versus time.

Airbnb really gaining popularity about three years ago, we figured we’d try with one bedroom, then we’d try it with two bedrooms, then we actually put our whole house on Instant Book, after we had purchased another property… That was actually a bad partnership, and we bought a partner out and ended up keeping the asset. It was supposed to be a buy and hold, like a BRRRR method; we were gonna buy it, renovate it, refinance it, rent it, repeat. It didn’t work out so well with the partner. We bought it… It was in a floodplain, after the fact; standard rent wasn’t really gonna cover it, long-term rent [unintelligible [00:14:17].03] so now we airbnb that house as well, which – in our experience, Airbnb brings in 1,5x-2x what long-term rent does.

Joe Fairless: In terms of profits or in terms of income?

Rocco Montana: Gross income. Gross income is typically 1,5x to 2x for short-term than it is for long-term rentals. I wish I could cite where I’m getting some of the data from… But there’s less wear and tear on short-term rentals. People show up, they shower, they shave, they sleep, and they go out. Especially in Boulder and Denver.

We learned the hard way, through a certain price point; [unintelligible [00:14:54].08] come to Colorado to smoke weed and sit on your couch. [laughs] It can’t go less than $50/night, or you’re gonna get that clientele. [laughter] More than $50/night per bedroom, people come that go out to dinner, they go to a show, they go to a conference, they go to CU, their kids are there,  a graduation, a show in town… It’s endless, the amount of stuff to do in Boulder and Denver.

Joe Fairless: And then they come sleep on your couch?

Rocco Montana: No, they sleep in bedrooms. My wife and I sleep on our queen-size pull-out couch.

Joe Fairless: Oh, got it. You two sleep on your couch, and they sleep in your bedrooms. And you said you had six listings with two properties. Help me with that math.

Rocco Montana: Yeah, so we have the whole house listing in Boulder, and then we have two individual bedroom listings. So either you get a private bedroom in a shared house, or you get a private two-bedroom condo. And then the other property has three bedrooms. We actually keep one bedroom for ourselves, so we do a lot more sleeping in that bedroom now than on the couch… So we have two separate bedrooms there that we rent out, plus the whole house listing.

So two houses, at least two bedrooms for rent, could actually be six listings – as individual bedrooms or as whole house listings. The calendars sync up, so if one’s blocked, you can’t get the other one etc.

Joe Fairless: Let’s go back to the million dollars in the first year of flipping. We talked about the first person… What about the second person, who brought about 250k or so? How did you meet him/her?

Rocco Montana: The second person was actually a family; a successful investor in their own right. They created a business, did really well, we showed them that we were executing on the bigger vision. We actually approached the family first, when we first started. We invested in Fortune Builders, and… Some people hear the term “friends, family and fools”, so we started off–

Joe Fairless: [laughs] I’ve never heard that before.

Rocco Montana: Oh  yeah, you start off with friends and family, and they’re like “Yeah, that sounds really great. Show us something.” And it’s like “Well, I’ve invested in this education program”, and pamphlets, and brochures, and… The sort of blue-sky thinking, if you will. “Oh, it’ll work out.” And once we started to do deals, then a family member was like “Cool, I’m there for you.” Obviously, they get a rate of return, just like any other private investor, so it’s mutually beneficial.

Joe Fairless: What’s something that has gone wrong in your path so far, in the last couple of years in real estate?

Rocco Montana: Something that has gone wrong is I let a small amount of earnest money go hard, and lost if, because I had enough information to be dangerous, but not enough to complete the execution. Part of it might have been fear at the time. So one of my first deals I lost my earnest money on a single-family house.

Joe Fairless: How much?

Rocco Montana: $2,500. But when you’re starting out and you’ve only got so many resources… My wife and I were still both working full-time, and it hurt. But we got through it, because we also did a wholesale in the same day and made 16k. So we didn’t feel it as bad.

Airbnb – we had our first negative experience with guests about two months ago. They really trashed the whole room. We had to replace linens, pillows, carpet even, the mattress we threw away… I don’t know what they were doing, but Airbnb covered almost all of it, which was really cool… Which not everybody can say.

Joe Fairless: Were you staying there with them at the time?

Rocco Montana: We were staying there, they were in the bedroom, we smelled something funny… It definitely wasn’t marijuana. We addressed it, we tried to not be judgmental of the people based on [unintelligible [00:18:20].29] It was a last-minute booking; we don’t get a lot of them… I’m talking like same day… We have a cut-off at 9 PM. So you can book at [8:50]. “Hey, I’ll be there in ten minutes.”

And our success came from being a little loose in the beginning with the guidelines, and letting people come in. Now we’ve tightened it up a little bit, and we haven’t seen any lack of business, because we have great reviews and a great experience.

Yeah, they trashed the whole room, and I don’t know what they were doing. And it was a bit of a nightmare, because it’s our primary residence in Boulder where we live, and it was just like “Oh, my gosh…” We had other bookings, and we just kind of grit our teeth and bear it… Being in flipping, we were able to get the carpet replaced in 12 hours. We made a phone call and  a guy showed up with four samples, and ripped out the carpet and redid it.

We own a design company, Jmix Design – my wife and a girlfriend of hers started that. It helps with staging and design in our flips, and as retail brokers, as real estate agents, which is kind of our day-to-day stuff, it puts food on the table today, while we build our long-term future in multifamily and flipping and all that. But that was pretty crazy.

Joe Fairless: What’s your best real estate investing advice ever?

Rocco Montana: It might be life advice, but gratitude, hard work and patience is something my wife Jami and I live by. Everything stems from “Be grateful for how far you’ve come. Put in the work to get to your next level, and then have patience to let it all play out.” Gratitude, hard work and patience is what we live by.

Joe Fairless: I like it. I think that is a wonderful recipe, in my humble opinion. We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Rocco Montana: I am ready.

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

Break: [00:20:02].13]

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

Rocco Montana: Never Split the Difference, by Chris Voss, about the strategy of negotiation, and a lot of psychology around it. A former hostage negotiator with the FBI wrote this book. Again, Chris Voss. He’s got great stuff on YouTube, and I believe he’s in a TED talk… Fantastic book on negotiation.

Joe Fairless: Yeah, he’s been a guest on this show as well. Best Ever listeners, you can just search “Chris Voss Joe Fairless” and you can listen to that interview. What’s a mistake you’ve made on a transaction that we haven’t talked about already?

Rocco Montana: Being too personal almost. Not wanting to give bad feedback to a client because of fear of their reaction… And I think we could have served that client better by being a little bit more direct. It’s a deal we actually never fully executed on. It was a listing, we were selling a property for somebody; they were in a difficult situation, and I was more concerned with the emotion, as opposed to just being like “Hey, we’re professionals, this is what we do. This is their experience, and this is the next step to get to success based on your wants and needs.” We didn’t handle that appropriately.

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

Rocco Montana: Best ever deal I have done is marrying my wife, Jami. [laughs] Punching outside my weight class, as they say; she’s just a phenomenal woman and business partner and friend… But I’ve got a kind of little bit of a shameless plug for the love of my wife there.

Joe Fairless: Speaking of wives, mine – as you probably saw – was coming in and out. She was wonderful enough to make me lunch, so… She did not know we were doing video. [laughter] If you can rewind it, anyone watching on YouTube, you’ll see her expression as soon as she realizes we’re doing video and she was not aware of that.

Best ever way you like to give back to the community?

Rocco Montana: My wife and I are CASA advocates. That’s the Court Appointed Special Advocate program. It’s in a lot of counties, a lot of states; I don’t know how big it is… But we are the only non-biased, one case-focused advocates for children who are victims of abuse and neglect. So as you’re 18 years old, the judge here in Boulder county likes to have a CASA appointed. I’m like  a therapist, or a lawyer, or a case worker for a social services person.

We’re not trying to fit these kids in a box. We just meet with them a on a minimum of once a month; my wife and I pride ourselves on more than that… We figure out what their needs are at a human level. We only get one case at a time, and then they report back to the court. Kind of like a mentoring program, guidance, if you will… But we’re really passionate about helping out our community.

I’ve got some family that had some issues with drug abuse, and we don’t need to get into that, but it’s a really personal way for us to give back. My wife loves it, I love it, and we just like to help other people.

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

Rocco Montana: JROCProperties.com. Jami and Rocco. You can also reach me directly; I’ll give you my cell phone even – 908-420-4052. I would love to talk to any of you about investing, real estate, life, whatever… Networking and small things make such a big difference, like I said.

Joe Fairless: Well, Rocco, thank you for being on the show, talking about your journey, talking about  how you got into it, and over the last couple of years how for the year one you raised a million bucks. How you did that – well, you started a meetup, started to add a whole lot of value to people on a weekly basis… I think there’s a key there – it’s not only that you started a meetup with a friend of yours (an extension of a friend of yours, of Adam Adams), but you did it weekly. And then when you had an opportunity – and really a challenge, but then also an opportunity – for someone to partner with you, you had the network already built, and you simply offered an opportunity where it was mutually beneficial.

And now, fast-forward the year after that – ish, if I’m getting the timeline correct – she’s brought over 500k to your deals, and you have other investors who have as well, so I know that’s important to talk about… As well as interesting stuff about Airbnb. I did not think about the shorter-term rentals have less wear and tear than longer-term, and I agree with that. I know you talked about the horror story with people doing meth, or crack cocaine, or whatever the heck they were smoking… It wasn’t pot, apparently, according to  you… But I agree – short-term rentals probably would have less wear and tear, and I never thought about that. I think it’s counter-intuitive, so I’m glad that you mentioned that.

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

Rocco Montana: Thanks, Joe.

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JF1596: Creatively Purchasing Short Term Rentals & Scaling A Management Company with Zeona McIntyre

Zeona got her start with real estate investing in 2012 with one AirBnB property. She never looked back, purchased more short term rental properties, and even started a management company where she manages other investors short term rentals all around the world. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Zeona McIntyre Real Estate Background:

  • Travels the world for half of each year using and teaching a variety of tactics for others to do the same
  • She owns six Airbnb’s and manages 15 properties and teaches others how to invest and set up automates Airbnb business’s
  • Based in Boulder, CO
  • Say hi to her at https://www.zeonamcintyre.com/
  • Best Ever Book: Never Split the Difference


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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. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today is Zeona Mcintyre. How are you doing, Zeona?

Zeona Mcintyre: I’m so good, thanks for having me on.

Joe Fairless: Well, it’s my pleasure, nice to have you on the show. A little bit about Zeona – she travels the world for half of the year, using and teaching a variety of tactics to help others do the same. Specifically, she owns six Airbnbs and manages 15 properties and teaches others how to invest and set up and automate their Airbnb business. Based in Boulder, Colorado, and she’s now traveling the world… With that being said, Zeona, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Zeona Mcintyre: Yeah, so I grew up in Hawaii, which is not really an entrepreneurial market; I think that’s kind of a place that they don’t really encourage that sort of behavior… But luckily, I found my way to Boulder, Colorado. This is just like a startup frenzy, super-passionate entrepreneurial place, so I’m just thriving here, I’m loving it.

But yes, I got started with Airbnb in 2012, and I haven’t really looked back. I started with just a room in my house, in a place that I was renting, and blew it up into owning six properties, managing about 15-20 around the world, and I think it’s super-accessible for anybody just wanting to get into real estate. So yeah, I’m excited to share that.

Joe Fairless: Where are the six properties that you own?

Zeona Mcintyre: I own one in Colorado Springs, one here in Boulder, and then four in St. Louis.

Joe Fairless: How did you end up in St. Louis?

Zeona Mcintyre: I had a friend who moved there, that we were friends from Hawaii, and after about five years I went to go check it out, and just kind of heard how affordable the market was, and then decided that I would come back and buy something. I had a place a month after I visited.

Joe Fairless: And how have the St. Louis ones compared to Boulder and Colorado Springs?

Zeona Mcintyre: Well, Colorado is more hyped. We do have a huge summer here, and the prices are a lot higher, so you can charge more… But because it’s so affordable in St. Louis, the margins are way better.

Joe Fairless: Hm, okay. Factoring in vacancies, you make better cash-on-cash return in St. Louis with Airbnbs than Boulder and Colorado Springs?

Zeona Mcintyre: Yeah, heads and tails more, because you can’t buy anything in Boulder under maybe 300k, and my cheapest property I ever bought in St. Louis was 52k.

Joe Fairless: Okay. And what are those returns that you’re getting in St. Louis?

Zeona Mcintyre: It’s about 20%-22%.

Joe Fairless: And what about the Colorado ones?

Zeona Mcintyre: Wow, I actually don’t know right off the top of my head. Yeah, that’s interesting…

Joe Fairless: But not 20%-22%.

Zeona Mcintyre: No, no… Monthly, in St. Louis, these homes – they’re gonna do $1,600 to $3,000/month, and they’re all under $100,000. And then in Colorado the condo I have here was $162,000, which now is $350,000, and that maybe does $4,000/month in summer in the height-height; otherwise it’s about $1,600. It’s just a huge spread there on what you can get and what you can make.

Joe Fairless: What type of financing did you get on each of the six?

Zeona Mcintyre: When I started in Boulder, I just knew that I probably couldn’t qualify for a loan after having done Airbnb for a couple of years… And that was early days, when — even now it’s still hard to qualify for a loan; they just don’t see it as traditional real estate income. But before, it was even worse, because nobody really knew what Airbnb was.

I asked a friend and he gave me a private loan, kind of under the table. I was able to pay that off pretty quickly, so that one is without a loan currently. Then I use that property to leverage my first one in St. Louis through that same private lender. It was kind of like a HELOC sort of deal; you just put a lien on the property. I did that kind of cash.

Then the other couple – the next two in St. Louis I bought at the same time, and I used cash for both. One I paid for myself, and then the other one I split with a friend. The last St. Louis one and the one in Colorado Springs – I did mortgages, but I have a friend who gets the mortgage and we’re partners on it.

Joe Fairless: How resourceful is this?

Zeona Mcintyre: [laughs] You’ve gotta be, right?

Joe Fairless: Wow… I’m glad I asked that question. There was not one traditional way of financing those purchases.

Zeona Mcintyre: Oh, no… I still don’t know if I qualify for a mortgage, honestly. My finances are so wild. I’ve got seven bank accounts, and Airbnb pays you on the day someone checks in, so I have hundreds of payments… It’s all over the place.

Yes, I have a lot of money that comes through my accounts and that’s great, but it’s so much easier when you’ve got a friend who’s got a W-2 job that’s super predictable. If you can get someone else to get the mortgage and then you just sit on the sidelines – way better.

Joe Fairless: When you split the one deal in St. Louis with your friend, how did you structure that?

Zeona Mcintyre: I had it where he paid for it upfront just cash. That house was $60,000. I took 60% equity, he got 40% equity, and I do all of it. The thing he helped me with was furnishing at the beginning, and then I do all the management going forward the whole time. I think it’s a pretty fair deal. He doesn’t even know the house is still standing; he hasn’t seen it in years. I’m the one who goes and makes sure everything’s good, and works with all the cleaners, and does all the turning over, and he’s just happy looking in the bank account that we’re doing great.

Joe Fairless: Is every dollar that is profit split 60/40, or…?

Zeona Mcintyre: Yeah.

Joe Fairless: Okay, so he doesn’t get his first 60k out, and then 60/40; every dollar is 60/40.

Zeona Mcintyre: Yeah.

Joe Fairless: Cool, okay.

Zeona Mcintyre: And equity gains, because it’s appreciated a lot. It’s been a double win. Generally, the Midwest is pretty flat.

Joe Fairless: What’s it worth now?

Zeona Mcintyre: It’s about 100k now. But we’re probably going into a recession coming up, so I’m not betting on that money, because I don’t intend to sell at all. I’m just happy with cashflow.

Joe Fairless: When you looked for the Airbnbs in St. Louis – and I’m more interested in St. Louis than Colorado Springs and Boulder because I feel like it’s easier to get a good Airbnb in Colorado Springs and Boulder, but in St. Louis my assumption is that you’ve got to be more particular or selective about where you go, in order for it to be a good Airbnb location.

Zeona Mcintyre: Yeah… I mean, I actually think it’s backwards. I think it’s so much harder to find something good here, because the prices are so–

Joe Fairless: Well, okay, sorry – prices aside, which is obviously a big variable… I’m just saying as far as the area for where people wanna Airbnb – I feel like Colorado Springs and Boulder you could just throw a dart at the city map and you’re probably okay with Airbnb, whereas with St. Louis, if you throw a dart, you better make sure you’re directing that dart to a certain area, is my guess…

Zeona Mcintyre: Sure, yeah.

Joe Fairless: So how did you pick the location for St. Louis when you were picking your Airbnb?

Zeona Mcintyre: I knew that Boulder being a college town did really well, so I sort of was betting on that. I thought “Okay, let me talk to a few people in St. Louis, see what they say about neighborhoods”, and I did a lot of research just online, which I think is a great resource. I didn’t actually go and visit the home before I bought it, and if you can’t do that, I’m pretty sure now with all my experience that you can do 99% of it online.

With that, I was looking for the biggest college in St. Louis… Washington University is their biggest school there. They’ve got about 15k students. And with that, it’s got a really strong medical program, so people come all over for treatments there, and then also just to interview for the medical school… I knew that was gonna bring parents, students, traveling instructors, traveling nurses… So that was just a great hot spot.

Then in that location in the university area it’s 15 minutes from the airport, 15 minutes from all those sports fields, the Convention Center, downtown… So I thought that that seemed like a really good hub. But yeah, I think you wanna know that the location has something that’s bringing people there. You can’t — I mean, you can, but being just in the suburbs is a lot harder to make it work.

Joe Fairless: Agreed. So you focused on — Washington University I think is an Ivy League, too… Aren’t they?

Zeona Mcintyre: I actually don’t know.

Joe Fairless: I think they are. Well, either way…

Zeona Mcintyre: Maybe they’re private, or something… I mean, it’s a beautiful school; I don’t actually know for sure, but it definitely has helped us… And also being in a student area, because I started kind of early days there and I wasn’t sure what the climate, how friendly people were gonna be towards Airbnb – students generally don’t care about people coming and going and all that, and they’re gonna [unintelligible [00:10:32].01] maybe an older neighbor, or something… So I sort of knew that that would be a good bet, as well.

Joe Fairless: So when you are doing the research, you look for the college town, which makes sense… Or the area which the college is located in that city, and you find a place that’s close by. It makes sense. What are the other characteristics of a property that you need to see in order to purchase it for an Airbnb?

Zeona Mcintyre: Now you can look on Airbnb and put in specific addresses and kind of see what people are charging around you. It doesn’t give you a whole story, because prices change based on the seasons, but that does tell you a little bit.

I like using Google maps to walk down the street. Again, it doesn’t tell you everything, but you can see how nice the cars are, you can see if homes are boarded up, and you can get a general vibe of “Is there trash in the yard? Are homes taken care of?” that kind of deal.

I use Trulia for crime maps… St. Louis does have a bit of crime, and it can really be street to street, so the crime maps are pretty helpful. That university area in general is just very low-crime, but again, there are some neighboring areas that are not as good, so I really had to kind of rely on things like that.

There are lots of tools, and then I’d say lastly AirDNA is a website that does analytics, and they have some basic stuff that you can see for free, and then you can buy based on the area that you’re looking to invest… But you can actually put in your address and how many people, how many beds, and it’ll tell you what it thinks you can get per night, what your occupancy rate is, and what you would make a year.

Joe Fairless: And as far as the actual property itself – number of bedrooms, your [unintelligible [00:12:19].11] anything like that, if that’s relevant… Is there anything that is a go or no-go that you always look for and would cross off the list?

Zeona Mcintyre: Yeah. I generally stay away from condos, because I don’t want an HOA… Or even homes with an HOA. I don’t want an HOA to tell me what I can and can’t do, so I stay away from that. I end up with older homes, just because they’re more affordable… But yeah, if you can get something brand new, that would probably be more attractive, but I try to play up the character of an older home. I don’t go for pools there, but if you live in Florida, that’s a definite; you need a pool kind of deal. So that depends market to market.

I would say bedroom size — this is kind of a new thing I’m playing with, but in the market of Airbnb, it kind of grew on the backbone of one and two-bedrooms, and in urban markets with condos. So now there’s a flood of that and a lot of competition in that space. But if you can have a home that’s 5-6 bedrooms, there’s not that many other homes that can sleep 10 or 15 people. So all of a sudden you’re in a different pool where you can charge a lot more because there’s a lot of people and they’re all sharing that… But it doesn’t actually cost you that much more to get a couple extra bedrooms. I’ve found that that’s a nice that’s growing a lot. And yeah, there are a lot of people that travel in groups for weddings, family reunions, all that kind of thing, where they wanna stay together.

Joe Fairless: Switching gears to now managing properties… You said at the beginning of our conversation you manage 15-20 around the world – how do you manage those properties? Give us some perspective of about maybe where are some of these properties, just so we know what you mean by “around the world.”

Zeona Mcintyre: Yeah. I have one in Spain that we manage, we’ve got in Seattle, New York, Colorado… They’re kind of all over and they pop up in different areas, because we’ll manage for a time, and then sometimes people are changing their plans… So yeah, we’ve had them in Florida, Atlanta… Just kind of all over.

Wherever people hear from me – because people will find my blog or hear me on a podcast, and then they call me up, and they could live anywhere. I’ve even managed in Greece, in South Africa… So it can definitely be done anywhere, and what’s great about it is it just takes a very small team.

I had to learn this with St. Louis, because I don’t live anywhere near there, and I only go maybe once every year and a half, so I had to figure out a way to make it work long-distance. What I discovered is that if you have a couple of good cleaners, that are really reliable, and then you’ve got a really good handyman or two, then you’re great. That’s pretty much all you need. Because the cleaners you could pay to go check up if there’s some sort of emergency, but otherwise they just go and they’re checking on the home everytime they clean, and they’re very familiar with it, so they’ll tell you if there’s anything out of place.

Then having a really good handyman that’s kind of a jack of all trades – that’s great. And if we need anything else specialized, we just google for it. It’s not really rocket science, but when things go wrong sometimes you can feel helpless being far away, and that’s just part of something I have to get used to.

Joe Fairless: Where there is something that is special that goes wrong and you have to google it, what would be an example of that?

Zeona Mcintyre: I guess if it’s more involved – plumber, or some kind of maintenance like vent cleaning, or just something that he might not have the tools for… But in general, it’s all kind of just regular maintenance, and I’ve also found that the more we’re on top of scheduling, maintenance based on the seasons rather than just waiting for something to go wrong, it can be really good preventative, and then we have less things to call him about.

Joe Fairless: Who meets that plumber at the property.

Zeona Mcintyre: Nobody… If it’s our regular handyman, he knows how to get into the property; he’s got the code, and all our homes have door codes, so that’s fine. But if it is somebody who requires that, then the cleaner will meet him, and we’ll just pay her extra for that.

Joe Fairless: Okay. How much do you make on a property when you’re managing it?

Zeona Mcintyre: We charge 20%, and then there are a couple percentage points that are taken off based on services that we have. I have a property management service that does 24-hour receptionist, and it automatically schedules cleaners, and does a bunch of back-end things for us. Then we also use pricing software, that optimizes day by day, and just really makes that hands-off for us, because pricing is a huge part of it.

Joe Fairless: What’s something that’s gone wrong with Airbnb rentals of yours?

Zeona Mcintyre: I think as this is becoming a bigger and bigger industry, there’s a lot more room for fraud. Working with Airbnb, they collect all the money for us, but when you work with other websites like HomeAway, VRBO, Booking.com, some of them require that we collect the money. So we’ll use a third-party like Stripe, that does the credit card processing, and we’ll find that people are using stolen credit cards, that people are sometimes making a double listing and trying to rent that listing to other people… There’s a lot of crazy stuff that’s happening out there.

Yeah, sometimes things go wrong and sometimes we’re not able to recoup the money, but I think it’s just part of doing business. Sometimes you just have to write certain things off.

Joe Fairless: What are your thoughts on finding a house that is for rent, and then talking to the owner and saying “I’m gonna rent this out to someone else via short-term rentals, but I’ll give you a premium for whatever the rent is” and just scaling your business that way?

Zeona Mcintyre: I think that’s a great way to go. That’s called master leasing, and really with Airbnb I feel like there’s three paths. You can be the owner of the home, which takes the most effort; you have to have a big down payment, and furniture and everything. You can manage someone’s home, which takes almost nothing. So if someone’s just starting out, you don’t have to have the furniture because it’s someone else’s home, and you don’t have to put anything down. You just go and you’re getting 20% just creaming it off the top.

The real good middle ground is master leasing. It’s someone else’s home, but you have to pay for the furniture, which could be 10k-15k upfront, but going forward you’re gonna make a bigger percentage. People say that they average around 60% rather than 20%. So that is a really good way to go. And if it doesn’t work out down the line, you just fill up the U-Haul and you move it to the next property.

Joe Fairless: What’s your best real estate investing advice ever based on your experience?

Zeona Mcintyre: I think the best thing is just to get started, and what I love about Airbnb is that you can. I think for a lot of people that I talk to in real estate it’s like “Oh, I’ve been listening to all the podcasts and reading all the books, and in two years maybe I’ll be ready to finally buy.” There’s a lot of saving and getting ready. I think with Airbnb what you can do today, tomorrow, is list what you already have. Most people live somewhere. Even if you live in a van, you can list that for rent. People list a tent in their backyard, a furnished basement, an extra room, the couch in their living room. So it gives you opportunity to get experience now, and then you can see “Okay, I like what I’m doing here. Let’s see about managing” or “Let’s see about master leasing” and then eventually buy. I think it makes it so much more accessible for people that don’t really have money or experience.

Joe Fairless: What’s a van go for a night?

Zeona Mcintyre: [laughs] Oh, I was like “What’s a Van Gogh…?” It depends how you have it set up. If you have an Airstream or a van or something in your driveway and you’re giving them access to the bathroom, but it’s not something you can drive around with, it’s $75-$100 a night. And if you can drive around with it, maybe it’s more like $200 if you’re renting kind of an RV sort of setup. But it really depends on the place where you are.

I was just looking at some vans in Hawaii, and they’re old vans. We’re talking like ’80s vans. But if somebody is maintaining them and they can buy them for a couple thousand and then rent it for $200/night, heck yeah. You’ve just gotta be crafty.

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

Zeona Mcintyre: Sure.

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

Break: [00:20:35].15] to [00:21:43].16]

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

Zeona Mcintyre: I love Never Split the Difference by Christopher Voss. It’s all about negotiation, and I just think it’s got so much good information that I could just keep re-reading it, because it’s really dense… But negotiation is everything, even in Airbnb.

Joe Fairless: Where does it come up in Airbnb?

Zeona Mcintyre: A lot of people ask for discounts. I think a lot of people think that the price that you see is what you get, but it’s not. So much of it is fluid. On that end, just kind of getting the idea of not naming a price first, and really seeing what somebody’s got in their mind, and going back and forth, and giving people a discount just so they feel happy that they got a discount sometimes gets you the booking.

But also, if you’re negotiating with landlords to master lease, that’s definitely a lot of back and forth, and it’s not just money, but it’s sometimes terms. But I think it’s a great  skill.

Joe Fairless: Speaking of Chris Voss, episode 1244 I interviewed him, so Best Ever listeners, if you want to listen to that episode, it is episode 1244. What’s the best ever deal you’ve done so far?

Zeona Mcintyre: One of the homes in St. Louis. I bought it for $52,000 and it was listed on the market, I didn’t have to do any sneaky finding… And that house continues to make me around $2,000/month, so between $1,600 and $3,000… And it’s paid off, and very low expenses on a double lot. It’s a beautiful place.

Joe Fairless: If you were renting it traditionally, what would you be netting?

Zeona Mcintyre: I’d probably only get $800-$850 a month.

Joe Fairless: Net?

Zeona Mcintyre: Well, my expenses — all I pay a year in taxes is like $1,000… Not even $1,000. So monthly it would be $800 or $750 or $780, something like that net… But with Airbnb you have more expenses, because you pay all the utilities, so it probably costs $300/month, that house.

Joe Fairless: Is there an expense ratio that you use for Airbnb?

Zeona Mcintyre: No, I just have a spreadsheet, and when I’m gonna look at buying a home, I figure out what all the utilities are gonna average, and I put everything down there so I sort of have an idea of what the net is gonna be each month… And I look at things on a month to month snapshot.

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

Zeona Mcintyre: That house in particular I bought with somebody else, and it blew up in my face. I bought it with a friend, and I kind of had this whole idea that “Oh, we’ll make some contracts, but we don’t really need to have them. We’re friends, and we’ve got an idea…” But the guy never brought money to the table, and I was asking for very little. So after a year of never receiving any money, and him thinking that he was a half partner, we had to split ways, and we didn’t go to court, but he sued me, and it was just super-messy. I got out with the house, and didn’t have to pay him that much, but it was just a painful process. I learned a lot through that for sure.

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

Zeona Mcintyre: I love to give back with time. I think what I love about Airbnb is that it’s so easy to automate that I have a lot of free time, so I can babysit someone’s kid on the fly, I can help them move, I can go for a walk in the middle of the day, I can cook someone a meal… I’m kind of the person in town that people call when they need something, and I like being there.

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

Zeona Mcintyre: My website is the best way to get a hold of me, and that’s zeonamcintyre.com.

Joe Fairless: Well, Zeona, thank you so much for being on the show and talking about Airbnb rentals that you have, how you finance them – I found that incredibly interesting – and also the types of returns you’re getting, where you look in different cities (you look for a college, in particular), then how you research the locations without visiting the locations, and then also how you manage them, and some tips there.

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

Zeona Mcintyre: Thank you.

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JF1464: Passive Investing, Active Investing, and Raccoon Communities? With Whitney Elkins-Hutten

Whitney is an investor with a wealth of knowledge and experience with multiple strategies and asset classes. She invests passively in multifamily syndications and self storage, actively invests in her own multifamily and does BRRRR deals! Joe and Whitney dive into different deals she’s either been a part of or was the lead on. There are a lot of valuable tips to pick up on in this episode. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Whitney Elkins-Hutten Real Estate Background:

  • Public health research turned operations and systems manager
  • Started real estate investing in 2001 with $0 of her own  
  • Now controls 345+ residential units and 1,437 self-storage units across 7 states utilizing BRRR, creative financing, and syndication strategies
  • Based in Boulder, CO
  • Say hi to her at: whitney.elkinsATgmail.com
  • Best Ever Book: Long Distance Real Estate Investing by David Greene

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Do you need debt, equity, or a loan guarantor for your deals?

Eastern Union Funding and Arbor Realty Trust are the companies to talk to, specifically Marc Belsky.

I have used him for both agency debt, help with the equity raise, and my consulting clients have successfully closed deals with Marc’s help.

See how Marc can help you by calling him at 212-897-9875 or emailing him mbelsky@easterneq.com


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, Whitney Elkins-Hutten. How are you doing, Whitney?

Whitney Elkins-Hutten: Good! How are you, Joe?

Joe Fairless: I’m doing great, nice to have you on the show. A little bit about Whitney – she is a public health researcher turned operations and system manager. She started investing in real estate in 2001, with zero dollars of her own. She now controls 345 residential units and 1,437 self-storage units across seven states, using the BRRRR method, creative financing and syndication strategies. Based in Boulder, Colorado. With that being said, Whitney, will you give the Best Ever listeners a little bit more about your background and your current focus?

Whitney Elkins-Hutten: Yes, thanks Joe. So I started off post-college in public health research; I really always just leaned into helping communities and helping people. Over the course of my career I ventured into community health and nutrition primarily, working pharmacies, and my husband actually works for the government, and he realized just a few years ago that what we were doing to save for our retirement just wasn’t gonna get us there, and we wanted to have better clarity and control.

So we took my experience in real estate investing that I learned in 2001, and I rolled that into building out a rental portfolio that we hold single-family rentals, as well as a multifamily portfolio that we control – almost 345 residential units, and then also some self-storage units across the United States.

Joe Fairless: Self-storage, residential – is the residential a part of that? Is that an apartment community, I imagine?

Whitney Elkins-Hutten: The residential — no, we actually buy single-family homes and we utilize the BRRRR strategy. So we’ll buy low, rehab the unit, put a tenant in it, then refinance out and then just rinse and repeat.

Joe Fairless: So all 345 residential units are all single-families?

Whitney Elkins-Hutten: No…

Joe Fairless: That’s what I was asking, sorry.

Whitney Elkins-Hutten: No, it’s okay. We’re coming up on 20 residential units that we’ve through various strategies, including the BRRRR strategy. Of the 345 units, 325 are actually multifamily units that are in multifamily syndications.

Joe Fairless: Got it. So were you the GP on those deals?

Whitney Elkins-Hutten: No, LP.

Joe Fairless: I’m with you, okay. Now the picture is crystallizing. So you have 20 residential units, and then separately you are limited partner on 325 apartment units.

Whitney Elkins-Hutten: And increasing month over month.

Joe Fairless: Okay, cool. And the 1,437 self-storage – are you a limited partner on those?

Whitney Elkins-Hutten: Yes, limited partner on those as well.

Joe Fairless: Okay, cool. What has been your experience in the differences between investing as a limited partner in apartments, versus self-storage?

Whitney Elkins-Hutten: The self-storage units are relatively new for me, but just looking at the business model, both multifamily and self-storage operate like a business; so you’re looking at the proforma and the P&L as if you were running your own business. Income coming in, all the expenses are figured into the numbers upon the purchase.

Now, self-storage – I think there’s additional ways, especially if you’re doing value-add, that you can bring in and partner with other entities, say like maybe who have a U-Haul contract that you wanted to bring in… So you can leverage other big names in order to build into that value-add.

Joe Fairless: And how do you pick which type of partnership or which type of deal that you invest in? I know that’s a loaded question…

Whitney Elkins-Hutten: [laughs] Great question though. I think really what has allowed me to scale as quickly as I have is to build out a trusted network, and to basically leverage that network, get to learn the people that are actually putting together those deals, and be able to build such a [unintelligible [00:07:00].28] where you can pick apart the numbers and really dive in on their particular strategy and where they’re going, their path that they’ve taken on building out their financials. So you really wanna put your money with a trusted provider.

Joe Fairless: And with the self-storage versus residential, and plus also combining with the 20 residential units that you’re doing, where does your focus go, and to what degree do you have to manage the limited partner investments?

Whitney Elkins-Hutten: Once you do the due diligence in the limited partner investments, the management behind that is relatively minimal… So  just making sure that the deposits are coming in on time, and then just kind of keeping an eye on how are things trending – are they trending according to the proforma that was put together? And then just staying on top of that investment.

As far as time, the 20 single-families take up far more time… Faaar more time! But it’s something that my husband and I actually really enjoy doing, so for now we’re okay with that.

Joe Fairless: What aspects of managing 20 residential units do you actually enjoy? I’m really curious to hear this.

Whitney Elkins-Hutten: Oh, no, no, no, we don’t self-manage our units; all of our twenty single-family residential units are managed by a property manager. We just really enjoy taking a home that’s been run down in the community and rehabilitating it and basically bolstering that community in a variety of ways. We’ve just actually finished one in Grandview, Missouri, that would be a beautiful home on an amazing street, and literally nobody would touch it with a 10-foot pole.

We went in there and really basically just removed the raccoon community. It’s just taking something that’s really run down and just making it beautiful again. That’s just something that I love doing, but at the same time it is a labor of love, and it’s not the best use of your time, but to that point we leverage our property managers in order to do our rehabs, so we’re not actually swinging the hammer or putting the paint on the walls ourselves.

Joe Fairless: And what would you say is the area where you make the most difference when overseeing your portfolio, in terms of profit and loss?

Whitney Elkins-Hutten: As far as where I have the most impact and control of the expenses, it’s gonna be within managing our single-family residential portfolio. As a limited partner, once you do the due diligence on the deal, you’re really a passive investor; depending on the relationship you have with the GP, you can maybe offer suggestions and give feedback, but as far like actually once you have bought into that syndication, you buy into it specifically for it to be passive, whereas on the residential portfolio there’s several different strings that you can pull to manage the numbers… But again, in both cases you’re really looking to buy right, and run either one like a business, as you would.

Joe Fairless: What’s been something that hasn’t gone right, that you can tell us about?

Whitney Elkins-Hutten: Well, I have a few examples. [laughs] Most recently, actually with the BRRRRR property that we just spoke about, that we just rehabbed in Kansas City, Missouri, we bought it at 95k, did all of our due diligence that we normally do up front; we were looking to put about 30k into it. Once we started tearing the walls apart, there were just things that we couldn’t anticipate based on the inspection, and we ended up putting about another 10k-12k into it. Fortunately, I build those variances into any of our proformas whenever we’re doing this type of deals, so it wasn’t too much of a hit, but it did impact our numbers in the end. We were looking for, obviously, a home run. Not all of them are gonna be that way.

We are still gonna be looking to make about 20% cash-on-cash return, and with that investment we were aiming for closer to 30% to 31%.

Joe Fairless: What were some things that came up during due diligence?

Whitney Elkins-Hutten: Well, we thought the raccoon family actually moved out. It turns out they weren’t… So we ended up putting a new roof on, and whenever the roofer was done — actually, he was almost done, and he forgot to put the soffit back on… The raccoon entered in one of the open soffits, and came back into the house, so all of the drywall that we had put up in one of the bedrooms had to be replaced.

Also, when we went to tear down the wallpaper in the living room, there was mold behind the wallpaper, so that was an expense that we had to mitigate… And to turn around and remove all that drywall, mitigate that as well. That was something that we hadn’t anticipated.

And then just the amount of work that we had to do in the kitchen, we underestimated for that, as well. But again, with any of these projects, I think anytime that you’re removing drywall, you just don’t know what’s behind it. You have to build that into your numbers, because there will be surprises.

Joe Fairless: You mentioned the variance, but I didn’t write it down… So how do you project that in your numbers, so that you have that cushion?

Whitney Elkins-Hutten: With this particular property, just due to the condition of it, I wanted to almost put in a 50% variance… So we were allotting 30k for our rehab, and I just went ahead and built in another 15k just in case.

There were things that we didn’t think that we were gonna have to actually do at the property that I wanted to make sure that we  were accounting for just in case we did… Perhaps replacing the mast with the electrical, if we had to upgrade the electrical box. If we got in that situation, I wanted to make sure that we had a 5k cushion to be able to account for that.

Again, anytime you take apart drywall, you just don’t know what’s behind it, so I always put in an extra 2k-3k in. In this case, knowing that we had to mitigate the pest, I doubled that and put in an additional 5k. So like I said, when we went over budget, it was just a couple thousand within our worst-case scenario that we had planned for.

Joe Fairless: What’s another story of a challenging situation?

Whitney Elkins-Hutten: Well, I’m not sure if this would be of interest to your listeners, but we actually had to turn an inherited property lately. I can dive into the financials around that…

Joe Fairless: Please, yeah.

Whitney Elkins-Hutten: We had a family member of mine pass away recently, and unfortunately – or fortunately, depending on how you look at it – we inherited a home in Houston, Texas. We live in Boulder, Colorado, so automatically we’re dealing with distance. The home we knew had not been maintained for the past at least 8 years, and we knew that there were plenty of issues with the house. We already knew that there was gonna be HVAC issues with the house.

What we didn’t realize when we ended up to go in to clean up the house – just the extent of the damage from the various plumbing issues, the HVAC going out… [unintelligible [00:14:03].17] the water heater had gone out, and in Houston, for some reason, in two-story homes they put the water heater in the second story; I don’t know why… So we had damage in the family room, into the kitchen… And then we generally had to deal with [unintelligible [00:14:20].21] situation in the house, and then unfortunately the death occurred in the house, so we had a stigma to deal with as well.

As we were digging in and looking to reposition this property, or figuring out what we were gonna do – if we’re gonna rehab it ourselves and keep it in our portfolio, revive it and sell it, or just turn it to an investor… Surprise, the house is in foreclosure! So it really took an all hands on deck. We really dove in and leveraged our network of realtors, contractors and other investors that we knew in the area to be able to just really understand what we had on our hands, but reposition it quickly and effectively… That way we could do write by the estate.

Joe Fairless: When you were going through that process, what aspect of all those things was the hardest?

Whitney Elkins-Hutten: Aside from the emotional part?

Joe Fairless: Right.

Whitney Elkins-Hutten: Dealing with the bank, honestly. Dealing with the foreclosure was by far for me the hardest… Just getting into a position to where you can actually communicate with the banks effectively and have them understand what your plan is… They are concerned; they have an asset that hasn’t been paid on for a number of months, and when they learn of the death, they’re scared, in a way… They’re gonna put pressure on the estate in order to reposition the home or get things paid off.

The other thing that we learned in this process is just being on the other end of the BRRRRR investor… Just how refreshing it was when we did end up working with investors that really took time to care about our situation and help find the best-fit need for us, as opposed to seeing an opportunity to get a cheap house really fast.

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

Whitney Elkins-Hutten: I’d say for the Best Ever listeners my best advice would be that if you [unintelligible [00:16:11].27] a proforma on a single-family deal or even a syndication, if the numbers don’t make sense, find out where the numbers do make sense, make your package or make your offer on that, and if you just can’t close the gap quickly enough, walk away because there’s always gonna be another deal behind it.

Joe Fairless: I was asking about things that haven’t gone right… What’s a proud moment that you’ve had as an investor?

Whitney Elkins-Hutten: Oh, wow… We actually just came off another rehab this spring, where we had a family — and I think we were going through it at the same time as we were dealing with this inherited property. We had a family in a house that we were looking to pick up, and they were just in dire straits, and just really going back to them and being able to empathize with them where they’re at, and work with them to strike the deal, get to the right number that works for both parties, also the right timeline that worked for both parties, and not to be too anxious.

That was a really proud moment for me, just to have that conscious awareness as an investor.

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Whitney Elkins-Hutten: Sure, let’s do it.

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

Break: [00:17:27].09] to [00:18:05].00]

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

Whitney Elkins-Hutten: Long Distance Real Estate Investing by David Green.

Joe Fairless: How come?

Whitney Elkins-Hutten: You know, it really encouraged me to go back and put the systems in place that I hadn’t already.

Joe Fairless: Like what?

Whitney Elkins-Hutten: I think the biggest takeaway that I had from that book is we had been putting together our own deals, really looking at hundreds and hundreds of properties every month… The thing that struck me was leverage the people around you, find the deal finder that will bring you deals. And since we did that, our portfolio acquisition has really accelerated.

Joe Fairless: And will you elaborate on how you found the deal finder, how you compensate him/her, that sort of thing?

Whitney Elkins-Hutten: In a variety of different was – pure networking, reaching out and just making connections, attending different REIA groups, talking to people in your area or in your network and asking them who they are doing deals with, or who they would recommend, and then just really getting to know that person and building a relationship with them.

As far as compensation, we look to partner with people that can find us the deal, but also potentially manage the deal if we’re doing a rehab deal. So they’re getting compensated on the purchase of the property, they’re getting compensated on the rehab, and then if we reposition the property in any way, hopefully perhaps with property management, or if we’re flipping it, they would get compensated there as well. So we kind of create a win/win/win.

Joe Fairless: Best ever deal you’ve done that we haven’t talked about?

Whitney Elkins-Hutten: My first property – I purchased it for 171k with none of my own money. I took out a second on the property; this was back in 2004, whenever you could get 103% financing… We put about 8k in rehab into it and then flipped it about 11 months later for 219k.

In that time I had renters living in the house, so I was living for free. So I made about $50,000 off the deal, between not having to pay housing expenses, and then also the sale of the house

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

Whitney Elkins-Hutten: Let’s see… The biggest mistake – I would say just not buying with the location in mind. I picked up a vacation rental… I was really starry-eyed; I picked up a vacation rental here locally in [unintelligible [00:20:26].21] I found it extremely hard to rent, hard to resell, and then eventually, when I was going through the sales process, I had to rebuild the retaining wall out behind the house, which opened up a whole can of works with the city… And then when we closed on the property, literally 48 hours after we closed on the property, my neighbor had parked her motorhome right behind the house, on top of the newly/freshly-built retaining wall, and it tumbled into the roof of the house… And I thought I was gonna get sued.

Joe Fairless: You didn’t?

Whitney Elkins-Hutten: I did  not, no. My realtor at the time had both parties sign a waiver, because we mutually agreed on who the construction crew and engineer was gonna be on rebuilding the retaining wall behind the house… I have to admit I was kicking and screaming whenever I did that, but at the same time that was probably the best asset protection that I did during that deal.

Joe Fairless: Yeah, that’s good to know; I appreciate you sharing that story. What’s the best ever way you like to give back?

Whitney Elkins-Hutten: My husband and I, we actually participate in the Boulder County [unintelligible [00:21:29].18] program here, and I volunteer at my child’s school, and then we’re also both avid supporters of “Charity: water.”

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

Whitney Elkins-Hutten: They can reach out to me directly at whitney.elkins@gmail.com, or they can find me on Bigger Pockets.

Joe Fairless: Well, Whitney, thank you so much for being on the show, talking about a wide range of topics. A lot of what we talked about was specific deals, and wins and losses and lessons learned along the way, from your 20-unit residential portfolio to some things that you look for when investing as a limited partner… So thank you so much for being on the show, sharing your advice, and we’ll talk to you again soon.

Whitney Elkins-Hutten: Thanks, Joe.

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JF973: How to Make a Pot of Gold with Tax Advantages

Just go to the end of the rainbow… Okay Okay, well in fact this is all about IRAs. Yes, with tax advantages, why wouldn’t you open a self-directed IRA to invest out of? It’s definitely not for everybody, but if you are one to hold large sums of cash and not sure what to do with it, this episode is for you!

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Clay Malcolm Real Estate Background:

– Chief Business Development Officer at New Direction IRA, Inc.
– 20 years of teaching and 25 years of management experience
– Teaches continuing education classes for CPAs, CFPs, and real estate professionals
– Degree in communications from Northwestern University
– Based in Boulder, Colorado
– Say hi to him at https://ndtco.com/home
– Best Ever Book: Spectrum of Consciousness

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benefiting from tax advantages


Joe Fairless: Best Ever listeners, 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 fluff.

With us today, Clay Malcolm. How are you doing, Clay?

Clay Malcolm: Great! Good to be here, Joe.

Joe Fairless: Nice to have you on the show, and glad you are here. A little bit about Joe – he is the chief business development officer at New Direction IRA. He’s got 20 years of teaching and 25 years of management experience. He teaches continuing education classes for CPAs, CFPs and real estate professionals. He’s based near Boulder, Colorado – between Boulder and Denver. With that being said, Clay, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Clay Malcolm: Sure. Well, I’ve been here at New Direction IRA for a little over five years, coming up on six, and for my real estate investing experience it’s been a great learning place, because IRAs can be a real estate investor, and it’s something a lot of people don’t know. From my perspective, I came into it personally needing to change my retirement investments, because they were pretty static in 2008… A lot of people got clobbered. So this has met my personal needs, as well as my professional needs. It’s a great learning experience, like I said, and the nice thing is that I’m usually telling somebody something that they can use and that they haven’t heard before, so it’s a really satisfying position to be in. It turns out not to be for everybody, but certainly it’s a nice thing to be able to give somebody more options.

Joe Fairless: Who isn’t it for?

Clay Malcolm: Well, I would say that it can be for everybody, but I would say that if you’re in a long-term government position or a company that has a very robust pension, you might not need to do this, simply because IRAs in and of themselves, your retirement accounts, including HSAs are really built to help yourself later in life, give you income and hopefully retire the way that you want to, pay for your medical expenses, so on and so forth.

If you have that stuff covered, you might not need to move those retirement funds into alternative assets like real estate, but then again, you might. But a lot of those plans for government and some pension plans don’t actually allow you to move the money or to do real estate… So if your mind’s locked up, then it’s probably not the exact right tool for you, but pretty much anybody else, especially somebody who has contributed to a 401k or 401a, 403b, 457 – any of those plans, and you separated from employment, and those plans aren’t making money… A lot of those are static; a lot of people actually have put them on the sidelines, and they have real estate investing expertise, but they’re unaware of the fact that they can actually combine the tax advantages of the account with their real estate investing experience and preferences. That’s the combination that a lot of people don’t have in their heads.

Joe Fairless: Can you elaborate on that combo that you just mentioned?

Clay Malcolm: Certainly. The IRS does not limit your IRAs asset purchases other than to say “No collectibles and no life insurance.” The IRS does not however tell IRA providers which assets they have to handle, so IRA providers like us, or Schwab, or Fidelity, or your bank – we’ve all chosen a business model built around the rules [unintelligible [00:05:32].19] and so on and so forth. Banks and brokerage houses typically have built their business where you have to invest in publicly traded securities, which often you get a commission from, and so on and so forth; that’s the business model.

We’ve actually taken the opposite approach, and we’re not the only company that does this, of course, which is that we handle almost all the assets that are allowed by the IRS – including real estate – and the fact of the matter is the IRS does not limit real estate investors. So if I get one message across today, it’s really that your IRA can keep its tax advantages and be a real estate investor. The thing that conceptually you’re kind of adjusting to is just that the money, once it’s been contributed to the account, instead of it buying stocks and bonds and funds and looking at the appreciation or dividends and things like that, that same (tax advantage) money is buying real estate, or making a real estate loan, or something like that, and that’s how the IRA or the account makes the revenue. It’s still tax-deferred while the money is in there, so if your IRA buys a house at $80,000 and several years later gets to sell it for 95k, first of all, good job! Second of all, that entire 15k, the profit, would come back into your IRA and be ready to be reinvested without any capital gains and things like that.

By using the tax advantages, the tax-deferred status, hopefully you can get that money to compound faster, so that’s really the get. So really just taking those tax advantages and graphing it on to your real estate investment preferences.

Joe Fairless: This is two separate questions — actually, I’m not gonna ask you two separate questions, I’m just gonna ask you one question: what are some mistakes that you see people make when it comes to setting up or thinking about a self-directed IRA?

Clay Malcolm: I’ll give you the two most common ones. One is people are very unaware of the differences between a 401k and an IRA, and there are some specific rules that they have to follow, one of which is that the IRA provider is the signer for the account, and things like that. So I would say conceptualizing that difference is one thing.

The other paradigm shift that I think is a little bit tough for some people to get into their heads is that in this particular scenario, which is typically called “Self-directed IRA Investing”, the account holder is calling all the shots. The provider, us – we’re a very neutral part of the equation. Our job is to make sure that the account is documented properly, so that the IRS knows that it’s a part of that account type and it gets to keep the tax advantages. But the account holder himself is the one who chooses the assets, and you can use your regular real estate team or a financial team, but you choose the assets, you negotiate the deal, you’re the motive force.

In the scenario where somebody’s IRA is with a managed company, whether that’s a bank or brokerage house, it’s a very passive kind of participation. In the self-directed world, especially in real estate, it’s very active; you get to make calls, and we’re really just responding to your scenario, the thing that you’ve developed. And again, we don’t supplant anybody, so bring your own real estate team, bring your financial team, whoever helps you work, your preferred method for real estate investing – bring them all, and they can just, again, take that same scenario and move it into your IRA. But a lot of people don’t realize that you’re gonna have to be the motive force, and get to be the motive force.

Joe Fairless: When your company starts working with someone, what are some surprising elements that they come across? And perhaps you just covered it, where that’s basically the same question. If so, say “Joe, dude, that’s the same question”… But I’m wondering what surprises people when they’re working with you.

Clay Malcolm: I’ll give you a different slant. I think that one of the surprising things is that they think it’s gonna be very expensive usually, and they think that it’s gonna be difficult. Neither of those things is necessarily true. One of the things I mentioned is that each IRA provider has their own revenue models and their own technology… But in this day and age of electronic banking things, tools that you can use, so on and so forth, a real estate investor who has an IRA that owns a property – you can pay your bills online for free with some providers, the paperwork is becoming almost always electronic – things like that.

Again, it will vary from provider to provider, but I think people are surprised that it can be relatively easy. The information is out there, we do a lot of education, so we want people to do it well. The other thing is that our fees are different and often less than what they’ve been paying at a 401k company or an IRA company, so that surprises some folks, too. But I would just say that your ability to get into this type of investing – it probably doesn’t have the barriers that a lot of people expect that it will.

Joe Fairless: What is your company’s revenue model?

Clay Malcolm: We basically charge for our bookkeeping labor… Things like when you open an account, it’s $50, because we have to push some paper. When you make a purchase or sale, we have a transaction fee that corresponds to how much paper it is, basically. If you’re buying precious metals, it’s $40. If you’re buying a piece of real estate, it’s $250. All of it is really based on our bookkeeping labor. It’s like hiring a bookkeeping and custodial entity to document your IRA transactions.

We’re not gonna take percentages, we’re not gonna be reliant on — we don’t sell any assets, things like that… So that’s the way historically banks and brokerage houses have built their revenue model. So again, we’ve kind of taken the other approach – you’re hiring us as a service so you get to do the type of investing you want, and we’ll just tell you what we charge and you run the show.

Joe Fairless: There has to be a larger way that your company makes money other than just charging $250 here and there…

Clay Malcolm: Well, there is an ongoing annual fee, because an IRA obviously keeps its tax advantages over a number of years, so a lot of the real estate investors that we work with choose our flat, which is $295/asset/year; it doesn’t matter what the value of the asset is… It could be 100k or one million, or whatever it is, because every year we report to the IRS the value of the account, and certainly we have to set you up with the online portal so you can pay bills, and that kind of thing. So that’s what the ongoing fee is about. So yes, there is an ongoing piece.

Joe Fairless: There’s gotta be another way that your company makes money. Do you invest? Because $295 – you have to have 203 people just to make $60,000, which would be to pay one person’s salary -ish… So do you invest the money that is in the self-directed IRA or do you borrow against it and then invest in something else from a larger revenue standpoint for your company?

Clay Malcolm: It’s a good question. We, as part of [unintelligible [00:12:15].07] FDIC-insured, but it’s also static… But typically speaking, in our agreement with account holders we’re allowed to invest any of the cash position that’s left with us. Now, as you might imagine, most people come to us with an asset in mind, so the cash is only here for a short amount of time. So they open an account, they do a transfer or a rollover, and then they take that money to buy a condo or a commercial property, or whatever it is that they do to invest. So the cash doesn’t typically stay with us very long, but we are allowed to invest it in the interim while we have it. It’s still liquid for everybody, but we can invest it, so there is some revenue there.

Joe Fairless: Okay, I imagine that’s gotta be the foundation of the business from just a business model standpoint for you all.

Clay Malcolm: Well, in our particular case because we try to get people to understand that their cash position is gonna be static and that they really need to be looking for investments, it’s not our major source of funds, and it’s not something that we really promote. We can do it and we do do it and it does help us to keep our costs down, but generally speaking, most of the way that we’re approaching this is we’ve been very bullish on investing in technology. We have IRA holders who have real estate, and the renters can pay the rent electronically. As you might imagine, in the bookkeeping and in the financial world, anytime you can automate a process and take a person’s attention away, so you don’t have to sit there and go “Okay, this check is for this thing, and I’ll enter it into here and there…” – any of those efficiencies that we can create, we do. So we’re trying to keep our cost down because, frankly, it’s all part of the bottom line, and we encourage people — if you’re the motive force in any investing venture (and that’s basically what you’re doing with your IRA here), we encourage you to do due diligence on every participant, whether it’s the asset or the IRA provider, or anybody that you’re working with… So we encourage people to look into our business model as well.

Those are the two things that we’re trying to work on: making sure that people understand what we’re doing, and also make it easy for them.

Joe Fairless: Based on your experience as a self-directed IRA expert, what is your best advice ever for real estate investors?

Clay Malcolm: Well, the best advice ever for the Best Ever listeners is really just to keep the idea that your IRA money is in play when you’re out looking at deals. That doesn’t mean just your IRA money either; if you’re gonna invest in a deal and you are gonna control it, but you need other investors, introducing that idea to them, that their IRA money is available to possibly invest in a project can be a huge boon.

Lots of times people are out looking for money, looking for investors, and all they really need to do, in some cases, is to just introduce the concept that their IRA money can invest in real estate, because most people don’t know, and that’s a fact… Most people will go, “Huh? Never heard of that.” I asked my bank, “Could I invest in real estate with my IRA?” and he said no. And the reason he said no is because they don’t handle real estate, not because the IRS prohibits it.

So I think my best ever advice for listeners is really to just keep in mind that that pot of money that is tax advantaged is available… So don’t forget about it, make sure that you incorporate it, and it can be for other people, as well, so it’s a real estate investor in and of itself.

Joe Fairless: What does someone have to submit, once they identify that they wanna do a self-directed IRA, in order to be fully up and running, and how long does that take?

Clay Malcolm: Good question. The typical process that we see is that somebody will open an account with us – in our particular case it’s online, so it takes 15-20 minutes to fill it out. The account is usually officially open within a business day. Transfers, rollovers and contributions are the way that money gets into that account in order to be positioned to disburse. Contributions are very fast, you can do those online with us. Transfers and rollovers are a little bit longer process, simply because we don’t control them; you’re actually asking your bank or brokerage house to liquidate those funds and then send them over.

We tend to tell people it’s 1-3 weeks to get that money from the old IRA or the old 401k over to us. Often, it is somebody who has a 401k at a company that they no longer work for or that they forgot about and left it there, so that comes over via transfer or rollover; no tax, no penalty… You’re really just moving it from one custodial entity to another. So I would say opening the account and getting it in position – we’re probably looking at 1-3 weeks; that can vary some.

During that time, most of our investors are already looking for the project or even negotiating the deal. So you can make an offer on a property even if all of your money hasn’t hit us yet. You can make an offer, be negotiating the deal, because the money will be needed at closing time. Often, people are in this sequence – they’ll be multitasking along the way, trying to get the investment ready to go as the money moves. So I would say that you’re looking at a few weeks.

Joe Fairless: Very helpful. Clay, are you ready for the Best Ever Lightning Round?

Clay Malcolm: Ready, Joe!

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

Break: [00:17:34].22] to [00:18:26].19]

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

Clay Malcolm: I will say Spectrum of Consciousness, although anything that Wallace Stegner wrote, I really like.

Joe Fairless: Alright… New author for me, new book for me – thank you for sharing that.

Clay Malcolm: Certainly.

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

Clay Malcolm: Well, my favorite way is I have been involved with a company that reads textbooks onto tape, so that blind students can use those textbooks in their studies. I always thought that was cool.

Joe Fairless: What would you say is a mistake you’ve made on a particular business deal or just as a business professional?

Clay Malcolm: I would say not empowering myself to make a move… And I’ll go back to 2008 – I hadn’t practiced moving funds into different investments, and it stalled me. It was an interesting thing, it’s part of my psychology that if I haven’t done it before, it seems bigger than it would be, and if I had been more agile and thinking and been empowered already to make financial moves, I think I could have mitigated some of my losses. It didn’t work, but that was the lesson, for sure.

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

Clay Malcolm: Well, the easiest way to get in touch with me is an e-mail address, which is info@ndira.com. I do get to travel a lot and have a lot of things that I need to be doing around here, but that way I can get that information, that question or anything and get back to you pretty much anywhere I am.

Joe Fairless: Well, from giving specifics on the process for opening up a self-directed IRA, and the timeframe that that requires (usually about 2-3 weeks from start to finish), to talking about the price points that it does cost with your company in particular, to the mistakes, like not knowing the difference between a 401k and an IRA, and the ramifications for the difference (like you said, the IRA provider is a signer on the contract), as well as the little know fact for some investors – perhaps not all of the Best Ever listeners, because we’ve talked to self-directed IRA experts, but as you mentioned, the self-directed IRA account holder is the one calling the shots… And then your overall lesson learned, that can be applied really towards anything we do as a real estate entrepreneur, and that is – I love your quote – “if you hadn’t done it before, it seemed a lot bigger than it should have been”… Isn’t that the truth with anything in life? If we haven’t done it before, it just seems like it’s a whole lot more complicated and harder than it actually is once we end up doing it.

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

Clay Malcolm: Sure, I enjoyed it!



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