JF2302: Financial Fears With Belinda Rosenblum

Belinda Rosenblum, CPA and Money Strategist, helps women entrepreneurs ensure their businesses can survive and thrive during these crisis times. So when all of this wraps up back to a new “business as usual”, they can have the freedom and fun back into their businesses and become well-paid CEOs. 

Belinda Rosenblum  Real Estate Background: 

  • Wealth Coach, investor, and Co-Author of “Self-Worth To Net Worth”
  • Has been investing for over 20 years and has brought in over $840,000 in rental income
  • Her current portfolio consists of Two Units property in Boston, and 2 properties in Costa Rica 
  • Based in Littleton, MA
  • Say hi to her at: www.OwnYourMoney.com/dashboard 

Click here for more info on groundbreaker.co

Best Ever Tweet:

“You do have a relationship with money and you get to decide what that relationship is” – Belinda Rosenblum


TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’ll be speaking with Belinda Rosenblum. Belinda, how are you doing today?

Belinda Rosenblum: I’m awesome! I’m so excited to be here.

Theo Hicks: Great. Well, thank you for joining us. Looking forward to our conversation. A little bit about Belinda’s background. First, she is a wealth coach, investor, and co-author of the book Self-Worth To Net Worth. She’s been investing for over 20 years and has brought in over $840,000 in rental income. Her current portfolio consists of a two-unit property in Boston, as well as two properties in Costa Rica. She is based in Littleton, Massachusetts, and her website is ownyourmoney.com. So Belinda, do you mind telling us some more about your background and what you’re focused on today?

Belinda Rosenblum: Absolutely. So this has been really fun, to even have the opportunity to talk about real estate; it’s definitely been one of my more profitable hobbies. I started early in my 20s, and now I have been running this company called Own Your Money for 13 years. For the first 12, we focused more on personal finance and did some business consulting, I have my own TV show, radio show, a lot of speaking… And then at the beginning of 2019, I actually pivoted to help more small business owners and to really recognize that there’s only so much that I could tell people that were in jobs like “Go make more money”, because they were running out of options. It was like “Get a raise, get a promotion, leave your job, start a business.” And with my business owners though, honestly, they have an unlimited potential to make money. And I feel that way about real estate, too. I feel like it’s such an opportunity that not enough people capitalize on and go for it.

So now in Own Your Money, it’s really about helping people to figure out how can they work less, profit more, create a more strategic, aligned, and profitable business, so they can pay themselves consistently, so they can really create the freedom and lifestyle that they started the business for in the first place. So that’s what we’re doing now. It’s really fun.

Theo Hicks: Perfect. So I think this is a good transition into the topic we’re gonna be talking about, because I would imagine in order to accomplish all those things you just mentioned, you must have the right beliefs and thoughts about money. So the thing we want to talk about was financial fears, and then what your beliefs you have about money is going to affect your ability to accomplish all the things just mentioned, as a small business, as a real estate investor. So tell us about that.

I guess to start off, what would you say is the most common fear or the most common belief that people have that keeps them from reaching that success as a small business owner or as a real estate investor?

Belinda Rosenblum: I do see real estate investors as business owners, too. I think oftentimes they may not, but the more that they can start to see themselves as their properties are their businesses, the better off they will be.

There are several big ones, I think one of the most important ones is that “I have to work harder and harder for money.” And then people feel very capped, they’re like, “Well, I don’t want to work any harder. So I guess that means that I’m capped at what I can make.” And they block themselves. Oftentimes too, people are afraid of success, like “If I become too successful, then…”

And just listening now, start to think about, if you were to say Money is…”, what does money really represent for you? What do you really believe about money and about your ability to earn it, how easy it can come to you, how hard it will be…? I know I watched my dad have four jobs, so there was a time when money would come more easily to me, and I would feel bad, like “Am I doing something wrong? Why did he need four jobs, and I just need to tell people what I do and they sign up?” But I think that sometimes people have a fear of success around “If I become more wealthy, if I am making more money on a regular basis, then people are going to want something from me, I’m going to have to pick up the check when I go out…” We do hope to go out again… There might be different ways that you complete that sentence.

Also think though, are you afraid of failure? A lot of times people are holding themselves back from achieving and making the money that they can because they’re not actually taking the risks, and being unapologetic about what they need to do in real estate, and really putting yourself out there.

There are so many, and it’s about starting to recognize that you do have a relationship with money, that you get to decide. Much of the time it is very unconscious, because it starts when we’re growing up. And we don’t realize it; we’re young, we’re impressionable. It usually starts somewhere five to seven, max like 10. By then, we’ve formed our beliefs about money.

It’s funny, because I actually have a five-year-old and a seven-year-old right now. I’m like, “Oh, God, what are we teaching them about money?” But it’s really important to recognize that your beliefs started really early. And it’s interesting, there are a few distinctions sometimes between women and men. And oftentimes, women are a little bit more emotional. We, as human beings, are meaning-making machines, and we don’t realize how much energy and emotion we put with money.

And men – it’s interesting, because they’re not as much on the surface as emotional, but that sometimes they won’t take the risks, or they won’t compete in the way they can, or they won’t put themselves out there if they have some old belief that says, “This is kind of the cap. This is what I’m comfortable with. This is what feels safe.” And then above that, they’ll stop themselves. “I don’t know if I want to do one more property, because then…” and they make up all the stuff that can happen.

So the more that you can be aware of what you’re telling yourself and what you believe about money, the more you can start to do something about it. Otherwise, it’s just a self-fulfilling prophecy that we go and make happen.

The other thing that’s really interesting is noticing what you believe about people that have money. And this is an interesting one in our culture. Theo, you’re a little bit younger than me, but think about all the shows that villainize rich people. There are so many. There’s rarely a show when a rich person is a nice person. Did you ever notice that? Two broke girls are fun and hysterical and amazing and broke. And the rich people are like Dallas, or there are just so much rich people that are mean, or greedy, or selfish, or kill people… It’s ridiculous. All the way back to like 101 Dalmatians, where Cruella DeVille is like stealing 100 puppies. It’s like everywhere, right? To the extent that you buy into any of that, that rich people must have done something bad for money, or they’re greedy, or they’re selfish, or they’re not generous, they must have done things that you would never want to do to have their money, then you will actually not want to ever be rich or wealthy.

And if you’re one of those people that knows how to make money, but isn’t very good at keeping it or saving it, boom, this could totally be your cap, your upper limit, because you’re like “Well, I don’t want to have too much money, that then I’ll be a rich person and then it may turn me mean. It may turn me into somebody that I don’t want to be.”

And what I encourage you to do instead, if there is some of that that’s resonating with you, is to actually find role models, find people that have money that do great things with their money, that are philanthropic, that are generous, that you can really be like “Hey, I want to be a rich person like him.” And you can start to see “Wait a second, maybe not all rich people are bad.”

If I believe in Bill and Melinda Gates and what they’re doing, and look what they’re doing with their money, well then there are examples where not all rich people are bad. And then instead, do what I say, which is actually recognize that having more money will amplify who you are, but it doesn’t have to change who you are. As people can start to recognize some of this unconscious and bring it up to the surface and gain some awareness about it, then they can actually start to do something different. Because otherwise, the beliefs that we keep telling ourselves again and again, they feel like truth… When they’re not. [laughs] They’re actually lies that we keep telling ourselves again and again.

Theo Hicks: And that’s the question I want to ask you… You kind of went over a lot of examples of the types of beliefs people have about money… So I guess practically speaking, if someone is listening right now – you gave a few examples, but how do I actually, as you said, make these unconscious things conscious? So am I writing them down? Do I need a coach to help me get these things out of my mind? How do I know which ones I have?

Belinda Rosenblum: So one of the easiest ways is just to start to keep a little journal, start to just write them down. And you can follow me on Instagram, you can DM me your beliefs about money. I’m @OwnYourMoney, if you want someone to see them, to recognize them for you. And start to write them down and think to yourself “Okay, what do I tell myself about money?” And when this thing happens, one of the easiest ways is to notice what those beliefs are, or notice all of your interactions with money. Notice your triggers, your reactions; when x happens, y is what you do.

So long story super-short, my dad had a stroke when I was 21 years old. I had just graduated college, and became family CFO. It was not a job I wanted, I can assure you, even as an accounting major. And by 28, I’d band-aided things together, but it was really starting to pile up, because I was having a really hard time keeping up. So I found myself at my dining room table, staring or feeling stared down by three huge stacks of bills and mail, literally like as tall as I was, at my dining room table.

So for me a trigger is that I can’t let my mail pile up too much in my house, because it literally triggers me back to when I was 28 and I let things become a big mess, and they were totally out of control. So notice when things happen. The good news, PS, I became a self-made millionaire five years later, invested in real estate, did a lot of good things… But it all pivoted on that day, when I was like “I can’t keep avoiding this.” So notice the interactions that are happening in your life around money and notice your reaction to them. So when you go to pay a bill, are you like, “Oh my god, more bills?” Or are you like, “Oh, look, my lights stayed on. Let me pay my light bill”, and be grateful for that, but realize that “Okay, great. Let me get this done. Let me look at how much money is left. Let me look at the profit that I’m making on this. Let me look at when am I going to have my property paid off?” and realize, are you in reactionary mode with these triggers, these unconscious beliefs, you notice what you’re telling yourself, or am I actually able to not be in that scarcity, poverty mindset, but realize “Oh, I’m making money. How can I make even more? How can I make this even easier and faster to achieve?”

And the mindset blocks are everywhere. So instead of feeling like, “Oh, I don’t have them,” and go into avoidance — we all have them. Newsflash. So it’s really a matter of recognizing what they are and how much they control your life. So to be able to start to connect with them, I like to look at all of your money interactions and start to write it down. Like, okay, when you paid a bill, when you were at the grocery store, when you bought something online, did you tell yourself “This is expensive. Can I afford it? Am I worth it?” I don’t like the term “Can I afford it?” because I feel like we can afford whatever we want. We have to decide “Do I want to afford it? Is this aligned with the way I want to be spending my money, with my values, with who I want to be in the world?” And really notice the languaging that you’re using around money and notice how things are making you feel in that moment. And I absolutely believe that our perspective is decisive, our perspective determines everything.

I’ll tell you a quick, funny story, Theo. I was getting married on the beach in Costa Rica, and we were at like this really poignant moment when they’re talking about those that couldn’t be with us, saying a prayer for them, and knowing that they’re all around us, and present… And my husband and I were in bliss, we were about to get married and seal the deal… And literally, these three dogs start walking by… We’re on the beach, Costa Rica, right? So these three dogs start walking down the beach. Well, one stops and pees on the beach of the canopy that was over us. And there was a moment where I was like, “Oh my God, is this for real?” And then my husband I kind of look at each other and we’re like “Do we cry? Do we laugh? Do we run? Do we stop? What do we do?” And then 10 seconds later, the second one then pees, and then they keep walking. [laughs]

The point of this is that I had a moment right there to decide what I wanted to believe, how did I want to feel about that moment. And it’s kind of a funny story; it’s not directly about money… But we just looked at each other and we started laughing. And we’re like “Oh, I guess the deceased are letting us know that they’re here with us.” And then we moved on with the wedding. But there are so many little things that happen in our lives where we have a choice to either get upset and to say “This is happening to me, and I’m a victim, and I can’t get to the other side of this.” Or we can decide instead “What do I want to believe about this? How can I choose instead a fun perspective on what just happened?”

So in that moment, when you’re feeling like “Oh, crap, another bill?” Or “Why is this happening?” Instead be like “Well, at least a dog’s not peeing on my wedding.” Or be like “Hey, it’s just another bill. It’s a little speed bump, it doesn’t have to feel like Mount Everest.” So you pay attention to your thoughts, and you choose more wisely.

Theo Hicks: A really good example, I think, about once you’ve identified these types of thoughts – you journal, you notice how you react to things, and you recognize that you have a belief that all rich people are evil. So once you’ve realized you have this belief, then the step to overcome that is to find someone who is rich and good that can be your role model.

Belinda Rosenblum: If that’s your belief.

Theo Hicks: Exactly. [unintelligible [00:16:37].00] an example. So if you have other types of beliefs about money, like for example the bill-paying that you gave, is identifying that belief enough to overcome it? Or is there something else I need to do in order to make sure I am not getting triggered whenever I see my pile of bills? Is the awareness of that belief enough, or is there something that I need to continuously do in order to always not be triggered when I see bills? And obviously, apply this to any other beliefs you have. I think the bills is just an example.

Belinda Rosenblum: An example. Yeah, totally. There is certainly deeper work. I actually just did a whole one-day intensive on changing your mindset around money. So there is a lot more you can do. But I think the easiest, fastest thing is to start to reframe, to release it, and to realize like “Oh, that’s not actually a truth. That’s just a lie I’ve been telling myself. So what’s a new truth that I can take on instead?” And to start to reframe it.

One of the other key elements – I’ll kind of go really big picture here – is to realize that you have a money story that has gotten created over your lifetime. It is a series of pivotal money moments that have happened; with each of those money moments, you locked in a belief about money. It usually starts really early.

I worked with [unintelligible [00:17:55].06] his mom literally stole money out of his piggy bank. Well, that had an effect on him 40 years later when he came to me, and he still didn’t trust women with money, didn’t trust himself to save money, didn’t trust money in the bank… And the result? He never held on to money; he was always broke, he was always very breakeven. So you can nail down, right into where that belief started and you can figure out “Okay, what did I [unintelligible [00:18:19].08] what were the facts of what happened? And how can I reframe what happened? And then how do I forgive what happened? So how do I forgive the person? And how do I forgive myself for holding on to that belief for years?”, usually, as a part of it.

I also — let me go back really quick… You had asked a question about what are some of the bigger beliefs, the lies that we tell ourselves around money… It’s often things like “I have no money, time, energy. Money just seems too… Hard, complicated, confusing, overwhelming.” Or “I’m not good at it. I’m not good at math. I’m not good at numbers. I’m not good at details. I’m too blank, ashamed, scared to look at my numbers.” Or five — “I guess this is how it’s going to be”, like they go to a resignation. Or six, “I don’t trust myself to keep up with the books or with money in general.” I think those are some of the bigger ones that I often see.

So people can listen and think, “Wait, which one of those do I have?” Because you probably have one of them. There’s a lot you could have. But I think those are some of the more popular ones.

Theo Hicks: What’s your best real estate investing advice ever?

Belinda Rosenblum: Do it. Don’t wait. I bought my two-family house at 28, and it was absolutely the best move. I wish I bought two. I think that sometimes people just wait way too long.

Theo Hicks: And then we’re going to skip ahead to the last lightning round question, because we’re running out of time. What’s the Best Ever place to reach you? And then any other call to action you have about learning more about what we talked about today? You mentioned that the second step, the reframing step, isn’t something that you can get across in a 20-minute podcast; maybe to learn more about that kind of stuff.

Belinda Rosenblum: Sure. So the Best Ever place to reach me, I’m @OwnYourMoney on Instagram, on Facebook @OwnYourMoney, I am ownyourmoney.com. If you know that part of what you want to do is just get a grasp of the numbers in your business, so you want to know and track the most important numbers in your business in just 10 minutes a month, go to ownyourmoney.com/dashboard.

I do have a book which could be really helpful. It’s very much on point with what we talked about. It’s called Self-Worth To Net Worth: 12 Keys to Creating Wealth Inside and Out. I wrote it with a psychotherapist and this was my learning and testing of a lot of what I’ve been talking about today. That’s it, selfworthbook.com.

Theo Hicks: Perfect, Belinda. Well, thank you for joining us. The main topic of today was why your beliefs around money affect your profit. So you gave a lot of examples of the types of beliefs people will have, type of fears, obstacles, whatever word you want to use, about money… But the main crux of it is to listen to what she talked about, and then also pay attention to different reactions that you have whenever you’re interacting with money, and then figure out which beliefs you have about money. This can be accomplished by observing and then writing it down, having a journal with you whenever you’re interacting with bills, or some TV show, or whatever. Write down–

Belinda Rosenblum: Right. All things money. Yeah.

Theo Hicks: Yeah. Essentially, really anything. Write down what thoughts you’re having, how you’re reacting to this. And then once you’ve recognized these types of thoughts you have, one really simple way – but I’m sure it takes a while to overcome these beliefs – is to reframe the story you’re telling yourself into a new story. And then you kind of mentioned that recognizing and figuring out the major plot points in your life that created story, the money moments, and then again, kind of reframing that in your mind. You gave the example of the guy whose mom stole money from his piggy bank.

And then your Best Ever advice in regards to real estate – and I’m sure this is probably another fear people have – about taking action, is just to do it. Don’t wait. You wish you would have bought more for your first deal.

So Belinda, thank you for joining us. Make sure you check her out at her website ownyourmoney.com. Get her book, which is Self-Worth To Net Worth. And then figuring out the numbers in 10 minutes is ownyourmoney.com/dashboard. So thanks again for joining us. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

Belinda Rosenblum: Thank you. Bye.

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Best Real Estate Investing Advice Ever Show Podcast

JF984: She Beat Airbnb to It, and Here’s How

Furnished residential real estate with high-yields is not a new thing. Our guest was doing it for decades… and she even knows the right connections with high paying customers for top-of-the-line quality and furnished spaces. She covers traveling nurses and other niche tenants that fit well into her operations, this is an episode you won’t want to miss!

Best Ever Tweet:

Kimberly Smith Real Estate Background:

– Owner and CEO of AvenueWest Global Franchise, a multi-million dollar success story
– Accomplished entrepreneur and real estate author
– Over 20 years experience as an entrepreneur in real estate, property management, corporate housing, website development and franchising.
– Based in Littleton, Colorado
– Say hi to her at https://avenuewestfranchise.com

Click here for a summary of Kimberly’s Best Ever advice: http://bit.ly/2rd0ecT

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investing in furnished real estate

 

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, Kimberley Smith. How are you doing, Kimberley?

Kimberley Smith: I’m doing great, thanks for having me!

Joe Fairless: My pleasure, and looking forward to digging in. Kimberley has over 20 years of experience as an entrepreneur and real estate property management corporate housing. She is an accomplished entrepreneur and a real estate author. She’s the CEO and owner of Avenue West Global Franchise, which is a multi-million dollar company. She is based in Littleton, Colorado. With that being said, Kimberley, do you wanna give the Best Ever listeners a little bit more about your background and your focus?

Kimberley Smith: Sure. My focus is corporate housing, which is furnished monthly rentals. In 2016, furnished rentals on a monthly basis in the United States was 3.2 billion dollars in rental dollars. So for dozens of years, long before there was an Airbnb, there has been an industry that provides furnished residential properties for businesses relocating and needing temporary housing. It’s amazing how it’s now the new key thing and everybody wants to be part of Airbnb and figure out how to do this; we’ve actually been doing it for decades.

Joe Fairless: [laughs] It’s old news to you, right? Alright, well let’s talk about this; this is gonna be an interesting conversation. I’ve got apartment communities; they’re B-class apartment communities, built between 1980 to 2000, in working class neighborhoods. Is this relevant to me?

Kimberley Smith: Absolutely. It’s relevant to anybody who owns residential real estate. When you’re providing a rental property, all you have to do to be successful is find the right tenants, set the expectations and then meet or exceed the expectations of the tenants.

In the United States there’s about 100k-200k traveling nurses in any given year, and they go and they have an entirely fun lifestyle where they pop from city to city, and they work for 6-12 months on a contract basis, so a B property would be a perfect situation for them. But what I want to say – what’s most important for me is what I call portfolio of diversification. We talk about all these fun and exciting things, and everyone has a bad habit of just jumping in; so let’s say you have an apartment complex with 10, 20 or 100 units in it. How can you maximize the revenue by making sure your long-term ROI is stable?

If you could take 5-10 of those properties and make them furnished monthly rentals, it’s a lot less work than doing painful dollar with your vacation rentals. You’re talking about getting 2-4 renters a year, but if you could make an extra $5,000-$10,000/year/rental property, that might be interesting. But as we know, in real estate everything goes in cycles, so you wanna keep a large portion of your portfolio; still in those monthly rentals where you can pay it on the first of every month, and that’s consistent… But these furnished monthly rentals allow you to capture some of that increased revenue you would be getting otherwise.

Joe Fairless: That’s smart. I love it. After we’re done with our conversation, I’m gonna pretend that I’m going to make it happen at one of my properties, so I’m gonna ask you all the questions that I can think of that I would need to implement this at my property, because who cares about me? It’s all about the best ever listeners, and I suspect that the questions I’m about to ask will be relevant to them if they’re gonna implement it on their stuff. So 1) how do I find people who are going to rent a furnished property?

Kimberley Smith: That’s one of the key secret sauces. In the old days, this 3.2 billion dollar industry that most people have never heard of – unless you’ve been relocated by your company – was a B2B business. So I would set up a corporate housing business, I would set up hundreds furnished rental properties and I would go out and I would do old-fashioned request for proposals with major corporations, and they would say “Okay, I need 103 one-bedrooms for six months. Can you get them all ready for me?”

What’s happening today with the transformation of the internet is there are these new distribution portals. Now, if you’re watching any of the news right now, the Airbnb’s are just now starting to think about “How do I talk to a corporation?” So there’s a learning curve.

Part of the challenge right now is finding those right tenants, and it’s done through a number of different ways. Some of it is through distribution portals, some of it is through old-fashioned relationship-building… Is there a university in your area? Is there a hospital where there’s a housing coordinator? Are there human resource directors who do this on a regular basis?

One of the first things that you’re gonna do before go anywhere into starting anything with your property is for the last eight years, Corporate Housing By Owner has created an annual report; you can get it on Amazon.com or you can register for free at CorporateHousingByOwner.com and you can download it for free. And it will tell you — we asked hundreds of people across the country “How do you market your furnished rentals and where do you get your best results from?” We have eight years of data in that report and it’s gonna start by just reading the details.

Joe Fairless: Distribution portals – you’ve said that a couple times… What are the distribution portals? Can you name them?

Kimberley Smith: Sure. So Corporate Housing By Owner is an old-fashioned distribution portal that’s created relationships over the last 11 years with major corporations, and it’s a subscription-based marketing platform. What that means is you put your property there, it calls you and you do the deal on the side. The great news is it’s a fabulous return on your investment. You’re investing a couple hundred dollars to get someone who’s gonna make you 5k-10k/year.

The Airbnb’s are there, and in certain markets like in San Francisco, where businesses like to be high-tech. You do your rental transaction through the Airbnb’s of the world, and you pay a much higher return on that for their platform to transact your rentals’ processes. So you’ve got HomeSuite, you’ve got Airbnb, you’ve got Booking.com, you’ve got HomeAway… All of these guys are just starting to think “How do we best service the needs of the business traveler?” So in the short run, you wanna be in all of those places.

The good news is if you understand your technology, you can sync your availability calendars from one platform to another to keep everything organized. So you can sign up with a reservations program like Access.com, list all your rental properties in there, and then you can see all your properties through APIs to these distribution portals. That’s a lot of detail, sorry.

Joe Fairless: No, we love details, especially for those of us like me, who take notes on these calls. So that’s great. What about if we have a third-party management company and they’ve never done this before?

Kimberley Smith: That’s actually what I do every day, and part of it is understanding the difference between the tortoise and the hare. In unfurnished property management, you are the tortoise; you’re renting a property for a year, and if your kitchen sink has a leak, you report it and they come out in the next week and they’re gonna fix it for you. In corporate housing, if I’m there for 30, 60, 90 days and there’s something wrong, I need you to deal with that. As a corporation, I need you to deal with me on a business-to-business type transaction. I need to understand that, I need to be invoiced in a certain way. I’m not gonna pay you a security deposit, because I don’t wanna tie up my cash. I need you to understand my reputation as a business client and [unintelligible [00:10:04].10] responsibility.

Typical unfurnished property managers do not understand corporate housing, so what I do is I work with real estate brokers and property managers to develop Avenue West corporate housing, which is a management brand that focuses only on furnished rentals.

So right now there are eight Avenue West property management companies across the country, and our goal is to get 50-75. I would be a little wary in just handing a furnished rental that you’re expecting to get a business client into an unfurnished property management, because they don’t really understand how to find that right tenant.

Joe Fairless: There’s a couple scenarios, and I’m gonna give you both of them — well, I’m sure there’s more, but I have two on my mind. I’m gonna give you one, and then I’ll give you another. One is I have a single-family home in Dallas, and I have a management company that I’m happy with, but certainly your idea piques my curiosity and intrigues me. Do you replace the current management company, or do you educate them? How does this work?

Kimberley Smith: Dallas is an easy answer for me, because there is an Avenue West Dallas office. So you would replace your management company with Avenue West Dallas, if you really wanted to make it a full-time corporate housing company. You could sit down and work an educational basis with your property management company and say “Hey, I really just need to be able to call you when there’s something wrong, and I need you to deliver the keys when I need the keys delivered, but I’m personally gonna go out and I’m gonna start meeting the needs of the corporate housing travelers.”

Part of the challenge is in unfurnished we’re used to being able to plan ahead and do things slowly. Most corporate housing tenants call you today and they actually wanna move in within seven days. So if I’m an auditor and I’m going to a new city to do a project, I’m not gonna need my corporate housing until I’ve actually signed that deal, but once I sign that deal, I need to be there tomorrow. So there’s a speed to that. Now, with you as the investor, maybe in the short run you want to answer those calls and figure out the best client for you, and then just have your property management company back you up, but there is a bit of a learning curve there.

Joe Fairless: And then the other scenario I can think of is I have an apartment building – I’ll give you a real example… I’ve got a 296-unit apartment building in Dallas. As you said earlier, have a small percentage, not the whole thing, that way we have a diversified portfolio. How do you work with that management company? Because I imagine since you’re only taking a very small piece of the pie in terms of number of units, that you wouldn’t want to take over the whole management of the apartment community.

Kimberley Smith: Maybe we should go back one step before we get there. When I talk to investors, there’s three things that I really wanna focus in on. One is I want you, the investor, to know thyself. What is it that makes you tick and what’s your threshold of pain when it comes to real estate and cash flow? That next step is understanding your pain per dollar, and there’s lots of opportunities out there, but you need to understand, if you have absolutely not a single ounce of time left in your day at any given time, the idea of making an extra $5,000-$10,000 a year may not be of interest for you, so you  need to understand…

In certain markets you can do vacation rentals, but you’re flipping something all the time, but that’s a lot of work. So you need to understand what your pain per dollar is, and then you need to understand the lifecycle of real estate. Every market and every type of property will have ebbs and flows, so if you can understand that a little bit more, you have some flexibility.

So a 296-unit… You would probably wanna sit down and say “Hey, let’s put together a business plan. Who in my area — is there a hospital? Are there traveling nurses there?” So I’d create two different levels of corporate housing. Could I create what I call a CHBO complete property, which is really designed… Have 5-10 units that are perfect: they have Wi-Fi, cable, exactly the right number of forks, and king-size beds and TVs in every room. That really works for that business traveler.

Now, are there 10-20 units that I could use more for the traveling nurse? They just need basic accommodation. Then if you have an on-site property manager, every couple of years you may wanna say “Hey, this year they’re working on a power plant that’s down the street, and they’re gonna get a whole bunch of extra contract workers, so for the next 12 months I’m gonna do 30 units that are gonna be basic, furnished units.” “Oh, but you know, that power plant contract is done, so I’m gonna take 20 of those this year and just do the typically furnished/unfurnished.”

So if you’re really talking about a 296-unit building, sitting down, putting together a business plan, saying “What clients am I gonna get now?” and then reviewing that on an annual basis is gonna help you through that process.

Joe Fairless: Fascinating. The business plan and the opportunity just molds to however the market shifts, as you said. So you’ve got traveling nurses, business travelers, if there’s something happening – okay, that makes sense.

Let’s talk about money. How much more money can we make?

Kimberley Smith: Return on investment – that’s what everybody wants. I talk to investors and I say “Hey, you have a furnished rental… Let’s just look at the numbers and say you have an annual occupancy of 80%.” Okay, so you wanna look at the extent of stays in your neighborhood, you wanna look at the hotel rates in your neighborhood, you may even be able to find exact corporate housing rates in your neighborhood.

Last year, in the United States, the average daily rate on a corporate housing rental was $150. The average U.S. corporate housing rental is also a one-bedroom. So if you take a one-bedroom unit and you say “Okay, I’m getting $150/night” and run that at an 80% occupancy… Now, most individuals are not gonna get that $150/night. You have to understand your individual market and figure out where you fit, and you can purchase something called Corporate Housing Industry Report, which this year is a 206-page document that goes through all major metropolitan state areas and looks at “What’s the average rent that was collected last year on a studio on a one-bedroom, on a two-bedroom…?”

Again, when you’re looking at houses, you could look at the Corporate Housing By Owner report; it’s gonna give you average rental rates… So then you’d back into that.

I just come up with round numbers of $5,000-$10,000 extra returns, because I’m talking very generally. But if you look at something like Phoenix, you could have a one-bedroom apartment that you’re buying for 100k-150k, that would rent unfurnished for like $750, but you might actually be able to rent it as a furnished rental for $2,500. Some markets have really big spreads, and then there are other markets that have unusual spreads that are reversed, like San Francisco.

San Francisco is a little soft this year, but if you look at San Francisco in 2016, you could actually in some cases get more as an unfurnished rental than you could as a corporate housing rental… But in San Francisco people don’t like to tie up their rentals for 12 months, because rents are changing so much. So by putting in the corporate housing rental model, they can turn that and get an increased rent every 90 days, depending on the market.
So you do wanna understand your individual market – the Corporate Housing Industry report can do that for you, which is put out by the Corporate Housing Providers associations and also the CHBO report.

Joe Fairless: What type of management fee should the management company charge for corporate? Because we know what they charge for residential or regular residents, but what about corporate residents?

Kimberley Smith: If you were a vacation rental property, the property manager typically charges 50% of the rent in order to do full property management.

Joe Fairless: Is that right, 50%? Is that what you said?

Kimberley Smith: That’s correct.

Joe Fairless: Okay.

Kimberley Smith: So for corporate housing, an Avenue West managed corporate housing brokerage would charge you between 25%-35%, depending on the market. If it’s a corporation, it’s paying the rents via credit card. Avenue West is incurring that expense, and not passing that on to you, the owner. They’re doing all the key arrivals, they’re doing whatever background checks are necessary; they’re doing all of that service for that corporate tenant. They have extensive software to do the invoicing and such that’s necessary as part of that whole thing… And they’re building relationships. They’re working with a management company that doesn’t say “Oh, I HOPE to find you a corporate housing rental.” You’re dealing with an Avenue West company who’s been around for 18 years, developing these relationships, that says “Hey, these are the corporations that work with me every day.”

Joe Fairless: Just running some quick math… I love specific examples. I’ve got a house that rents for $1,200 in Dallas, and let’s say I got $100/day for this house with a corporate rental. That’s $3,100, and then 35% off the top, so that’s $2,000. So basically, I go from $1,200 to $2,000 – so an $800 difference.

I’m sure there are other things, like paying for all the forks and Wi-Fi or whatever else that’s involved, so the expenses would be higher, but both the CapEx expenses and then the ongoing expenses would be higher, right?

Kimberley Smith: Yeah, that’s correct. But how many bedrooms do you have?

Joe Fairless: This one house example? Four bedrooms.

Kimberley Smith: Okay. So at four bedrooms, you’re really undervaluing the property at $3,100. It probably rents more for like $4,100/month.

Joe Fairless: Interesting. I had my conference actually a stone’s throw away from you, in Denver, Colorado, and we had someone speak about corporate rentals, and it makes a lot of sense, especially to diversify your portfolio. The key is – and this is where the genius of what you created – the management, and having the management team be experts in it. I think it’s a really smart business.

What is your best real estate investing advice ever?

Kimberley Smith: Best advice is a couple different things. One is understand yourself. It’s so simple to go to real estate conferences and get so excited… There’s lots of ways to make money in real estate, but know yourself first. Not all real estate is created equal, so you’ve gotta do your homework, you’ve gotta understand who your developer is, you’ve gotta kick the tyres, you’ve gotta know three different ways you can make money off of that rental property.

And then return on investment is an interesting thing. Understand that sometimes you do not want to cash-flow real estate. What happens if you went and bought that four-bedroom house today and you decided “I’m gonna put a 15-year mortgage on it and I’m not gonna cash-flow it at all for the next 15 years. But I just had a cute little baby boy today, and 15 years from now I’m gonna have to pay for him to go to college, and it’s gonna cash-flow like there’s no tomorrow in 15 years.”
So there are lots of interesting ways through financing in what you need. If you are a young investor and you wanted to cash-flow today so you can buy the next one, that’s cool, too. But the way to get the long-term return on your investment is not necessarily about making a dollar today, so have fun learning about some of those different ideas.

My figure book is The Idiot’s Guide: Making Money With Rental Properties. You can check it out at most libraries, you can buy it on Amazon.com. It talks about all of those ins and outs. There will always be a “What if…” in real estate investing, you just need to know a scenario and a solution to all of those what ifs as life changes.

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

Kimberley Smith: Sounds scary.

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

Break: [00:22:25].13] to [00:23:13].05]

Joe Fairless: Best ever book you’ve read?

Kimberley Smith: That’s a great one. I was thinking about it, and I’m on whatever great book I’m reading now… So read something now, right?! Right now I’m reading Stealing Fire, and it’s how if you create great, amazing teams, you can exponentially outperform the individual. The navy SEALs do it, the googles of the world do it… So my advice is just to always have a book in your hand. I read non-stop.

Joe Fairless: Best ever deal you’ve done?

Kimberley Smith: I was a couple months out of college; I found a 400 square foot studio that I bought for $89,000. I got a first-time homebuyer’s loan on it, I put  $2,300 down. That 400 square foot studio happened to be in San Francisco before the dotcom era, and it grew and grew and grew. I was able to rent it for $3,900/month, I was able to eventually sell it for $400,000 and buy my primary home during — the dotcom bust happened, September 11th happened, no one could sell real estate, and I could sell that 400 square foot studio to finance an entire primary house. So always buy that smallest property in the best neighborhood.

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

Kimberley Smith: I love to connect people and ideas. It’s amazing what is possible. I work a lot with mentoring and business development; that’s why I love doing the franchising side of my business, because I get to help other people build their businesses.

I support [unintelligible [00:24:38].06] healthcare innovation. We are currently functioning in Nicaragua. We are now working with the Nicaraguan government to renovate and manage a rural health clinic, and it’s amazing, when you take one step at a time, the incredible things that you can accomplish.

Joe Fairless: What’s a mistake you’ve made on a particular transaction.

Kimberley Smith: Trusting a developer. I have a hard time buying things pre-construction. Don’t just assume that the permits and all of the things are gonna do all of the checks and balances for you. Learn what other things that developer has built in the past, what are the reviews on that building… In my particular case, when [unintelligible [00:25:17].12] prior to close, I was so disgusted that I actually walked away from my security deposit. So don’t just buy something and think that all properties are created equal.

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

Kimberley Smith: Kimberley@AvenueWest.com. You can look up AvenueWest.com, which is the property management side of the business. I’m always happy to answer questions.

Joe Fairless: I enjoyed our conversation, learning about corporate housing, how we can benefit by diversifying our portfolio by using corporate housing, and how we can maximize the income by just maybe swapping out maybe on a single-family house for corporate housing tenants. How to find them through distribution portals (like you listed earlier), relationship building, are there any hospitals close by for traveling nurses, talking to the housing coordinator if there is one, or at least a human resources contact; a university would be another source for this type of housing… And then the management side of things, too. You’ve got your own business; you’ve got Avenue West Dallas, Avenue West Fill-in-the-blank-for-the-city… And then also the type of money we can make with corporate housing – you went through that.

Basically, if we want a rough estimate from what I took from our conversation, we project 80% occupancy and look at the extended stay businesses in our area, and see what they’re charging, look at the hotel rates, look at Airbnb, and we’ll have a general idea of what we can charge, then we can back into some numbers, and assuming 35% off for the rent, and then factoring in some other CapEx expenses that we need to put into the property in order to get it ready, as well as some other ongoing things as well that we would normally have.

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

Kimberley Smith: Thanks so much, Joe. Have a good day, too.

 

 

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Joe Fairless