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What real estate investors need to know about the Jackson MS market Jun 08, 2022

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Monique Kelly has been selling real estate since 2007 but has been around the business all of her life. She is the third generation in her family in the real estate business. Monique feels so privileged to work for the #1 company in the industry Century 21 and feels even prouder to work for the #1 Century 21 in over 38 states. Monique understands that a home is often the most important investment a family can make, and she wants to help make the process of buying and selling easy, successful and enjoyable. In this episode, Monique gives us her take on the Jackson, MS market. We cover what makes Jackson an attractive market, the areas within the market, price to rent ratios, level of competition, geographical considerations, and things investors need to be aware of when investing here. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What’s going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by Monique Kelly, who is a Roofstock certified agent out in Jackson, Mississippi and she's going to be talking to us about all of the things we as investors need to know, and what we should be aware of as we're getting involved in the Jackson market. So let's get into it. Hey, everyone, just a real quick shout out before we get into the episode today, on Wednesday, June 15th at 5pm Pacific time, I'm going to be hosting a group coaching session inside the Roofstock Academy. So that is for all of our Academy members on short term rentals. So we're gonna get together I sent out a message in Slack, I'll be sending everyone an email as well. For those in the academy, keep your eyes peeled. If you are not already a member of the Roofstock Academy, I definitely encourage you to come check us out at roofstockacademy.com and you can even come participate in this first group coaching session and learn quite a bit more about what we have to offer. Look forward to seeing y'all in there. Hey, Monique Kelly, thank you so much for taking the time to come on and chat with me today about the Jackson Mississippi market. I really appreciate you coming on. Monique: Yeah, thanks, Michael. I'm so excited to be on with you today. Michael: Me, too. So let's just jump right into it and then we'll circle back to your background. Why should people be excited about the Jackson Mississippi market? Monique: Well, it has historically been a really great market for rental properties. People tend to pay a pretty high price point for rentals, I don't really know why. But historically, that's been the way it is and so, you know, it's a great place to invest. You know, the property prices are not too high. But the rent values are pretty high. So you know, it's just a, it's a growing area as well, so just a good a good area to invest in. Michael: Just love it and give us a little bit of background on who you are as an individual and where you come from and what is it that you're doing in real estate today? Monique: Well, I grew up in here in Mississippi, my family has been in real estate. So I've been around real estate since I was in diapers. My dad started this company about 40 years ago and he started our company with my grandmother and my aunt and so I've just been around it my whole life. I started selling real estate right outside of college and worked with my mom for several years. We were kind of a team. She's since retired and you know, I do this full time I've been selling since 2007. So and then in the past, like, I'd say three or four years, my main focus has been investors, and most of them are from out of state. So it's been interesting, pretty crazy ride, but I really love it. Michael: Awesome and I think most of our listeners may not know the difference between like what an investor buyer client versus an owner occupant buyer client looks like. So why did you make the shifts to work with investors and what are some of the differences that you found? Monique: Well, um, it kind of was just something that happened, honestly, I'd started working with some local investors and then I got a call, you'd like a an open door with Roofstock and so I kind of had a little bit of the experience and my family, they've all been investing, you know, as long as I can remember, they've owned lots of rental properties and so I've seen it firsthand and I've seen you know what a great income that can be for people and so once I started working with Roofstock, it just kind of blew up and that's been my main focus. You know, it's great that I get to meet people from other areas of the country and even over the world, you know, and get to share the great things about Mississippi and most have never been here. So, you know, it's just great to introduce them to Mississippi and the market here and they're usually pretty shocked with the value of the homes that they can purchase here for and get good rent and everything so, but they are different than owner occupants. You know, of course, they're looking at cash flow, and they're looking at numbers and so I tried to find really good deals and properties that are in great shape. So there's not a lot of maintenance up front or issues in the beginning and try to find a good product for a good solid product that's going to bring in some good income. So Jackson is in what's considered Hinds County it's central Mississippi would be, and then around it, you have Madison County and Rankin County and so the population would be, you know, the large population would be in all three of those counties. I would say the main, probably study jobs come from government jobs. It is the state capitol. So we have a lot of state government jobs and then we have local government jobs, I would say probably number two, the employment would be medical and we have a ton of hospitals. We've got the big teaching hospital in Jackson. So you have a lot of med students, nursing students, dental students, and then you've got nurses and doctors and just a lot of people in the medical field that live around here and then I'd also say Trucking is another big industry here. We are centrally located. So if you go north, you hit Memphis, you go south, you hit New Orleans, if you go west, you're gonna hit Dallas and if you go east, you're gonna hit Atlanta. So you have a lot of traffic, and truckers coming through and so that is actually a big source of jobs here is. Michael: Interesting. Monique: We did we are… Yeah, yeah. So I'm in Canton, which is part of Madison County, Amazon is building a facility. So that will be a new source of jobs pretty soon. We do have a Continental Tire factory and Clinton, Mississippi, which is part of Heinz and, you know, so there are some other things, but it's pretty diverse here, most of the jobs. Michael: Fantastic, so for anyone listening, we're gonna be doing a kind of walkthrough of Jackson, Mississippi. So take it away, Monique, where should people be looking to find some of those cash flowing rentals and what neighborhoods are you most excited about? Monique: Well, okay, so um, I would kind of break it down into three counties. So you've got sort of like the higher income higher rent county would be Madison County and if you look, it's kind of up north of 55, you'll see Madison and if you look up where Lipstadt is right above it, that is actually a brand new city. So it was part of Madison, it still has Madison address, but they just became a city, they've just voted for a sheriff and they're going to vote for a mayor and that part of Madison is growing major. I mean, there are new restaurants coming and just a lot of growth in that area and it's actually not in the city limits. So you have tend to have lower taxes, it's part of the county and that area is where you're going to get the top rents in the whole Jackson metro area. The schools are some of the top schools in the state and that's a big reason why people want to be there and so I would say on average, the rent in that area is going to be around 2300 a month would be the median. Michael: Wow, okay. Yeah, for like, three to kind of run of the mill home. Monique: Yeah, you're looking at maybe 16 to 1700 square feet, and you're probably going to get around 2300 a month for that property. Michael: Right on and where are you seeing purchase prices? Monique: The median purchase price is around 363. Michael: All right, cool. Monique: So but you know, you're able to get a property for under 300, you know, maybe 250 to 300 and rent it out somewhere between 20 320 500. So, also, you know, of course, if you get four bedrooms, you're gonna get closer to 3000 for it. Michael: Okay. Right on. Monique: Yeah, so that's, that's a great area, I would say probably the middle part would be Rankin County, which if you go down, where you'll see, Brandon… close to 25. I don't know if you see how a 25 right there. That's going to be in Rankin County and I would consider that sort of kind of like in the middle of the three counties and in that, at that area, I would say the median rent you're gonna get is around 1700. You could probably get close to 2000 or a little more, depending on the size of the house. You know how new it is and there are a lot of new houses in that area as well. So there's still there's growth in there too and they have great schools too and I would say the average price for a house would be around 270 and then I would say so then after that would be Hinds County and that's where Jackson is and it's pretty diverse. I mean, you've got little pockets in there. Have that are going to be a little different and so the numbers I kind of pulled are pretty broad. But for Hinds County, you're looking at an average rent of around 1350. Some of the areas, you might get a little more, you might get closer to 1700. Like in Clinton over here. It's kind of like its own little community. There's a university there and it's actually where I went to school at Mississippi College University and so it's a little bit different than the rest of Hinds County, but and the average price for a house there would be around 207,000. Michael: Okay, right. So kind of starting to approach that 1% rule, so to speak. Monique: Yeah, yeah, you'll probably get a little bit more cash flow in Hinds County. But the houses tend to be older. You know, there's tends to be a little bit more maintenance and things there. But, you know, any of those counties are great areas to invest in. Michael: Perfect and talk to us a little bit, Monique, about how property taxes work out in if the three counties vary drastically, or if statewide, it's kind of similar. Monique: Well, so we do have homestead exemption in Mississippi and so you know, it that pretty much cuts taxes in half for an owner occupant and so you know, an investor is going to pay almost double, then when an owner occupant pays and each area is different. It depends on if it's in the city, the county, it what fire district it's in and so when I put, you know, upload properties to Roofstock, I tried to do all of that up front and put the investors tax amount into their, you know, Roofstock website so that they're getting the accurate amount and so I'm able to do that sometimes on the tax records, they can they'll let me do a tax estimator type thing and so it just varies depending on the location, how I get the taxes, but. Michael: Okay and let's just take a kind of shot in the dark for a $250,000 purchase price. What are you estimating ballpark for taxes, is it 1% of the purchase price, is it some other number? How should folks be thinking about that. Monique: In Jackson, it's a lot higher. So a property and Jack that will and it also depends. So in Mississippi, they don't base it on the actual value of the property, they have an assessed value, and it typically is about 80% lower than the actual value. So what I do is I go look at the tax records, figure out the actual assessed value, and then I can base it off of that. So it just depends. In Jackson, you're gonna pay city taxes, which tend to be a little higher county taxes in school taxes, and Madison, some of the areas you wouldn't pay city would only be county and school and so it can vary a lot with that. But I do try to give an accurate amount when I put in input any properties so that they know that upfront or if you know it have been investors interested in a property and is curious about the taxes, I'm happy to make sure to give them an accurate amount as well. Michael: Okay, fantastic. Well, that's a really good point to make about the homestead exemption. So for anyone listening out there, if they go on Zillow, and find an owner occupant home and look at the tax record and think, Oh, great, this is the amount I'm going to pay, they should at least be doubling it and then Monique, does the assessed value change on any kind of regular frequency, like here in California, anytime the property is sold, that's when they reassess the property at the price point at which it was purchased. So does a sale trigger reassessment or is it just every couple of years or how does that work? Monique: It's every couple years, the sale does not trigger it. So I think it's every like four to seven years, it gets reassessed. Michael: Okay, fantastic and talk to us about some of the things that are kind of maybe nuanced or unique to Jackson or maybe Mississippi in general, when it comes to like home inspections. In California, we have termites, that's a very common thing. So if you see termites, it's not the end of the world as long as the damage isn't super extensive. But if you're not used to that, that can make investors run to the hills. So what should people expect to find what's kind of par for the course in the Jackson market when it comes to home inspections? Monique: Okay, so in Central Mississippi, we have what's called Yazoo clay in the soil, and it can cause a lot of foundation issues. Just settlement in general. I would say in older homes, it's more common. Now they pretty much will do soil tests, dig up you know, so many feet of the clay and putting good soil so you don't typically see it with newer properties. You might see a little bit of settlement like a little crack in here or there but it's not anything major. But some of the older homes like in Jackson, or even southern brand and a Madison, I mean, depending on the age, it's a little bit more common and so there's a lot of houses that have had foundation work, or they might need it and so I do try to steer people clear from that, just because it can be an ongoing thing. You know, once you repair, it doesn't guarantee that you won't have more movement. You know, because that clay it's going to expand or shrink, depending on how wet it is and we have a lot of rain here in Mississippi. So um, you know, I do try to steer clear that, but I can usually tell, you know, we can look at engineer report and see how extensive the movement is, if it's within so many inches, like thre…

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Lessons from a pro hockey player for scaling your real estate business Jun 04, 2022

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Bob Lachance is a former professional hockey player who dived right into real estate investing with no experience. He took a leap of faith, by asking an investor if they needed help and from there, his story began. He shares a valuable lesson from a mistake he made along the way that cost him $150,000 in one day. Bob is a good example of why you keep pushing forward, taking every mistake as a lesson, and staying open-minded to discover what you will be good at. Today, Bob shares his transition story from becoming a professional hockey player to a real estate business owner and how you can grow your business using virtual assistants and getting your time back. Episode Link: https://revaglobal.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Bob Lachance, who is the CEO and founder of REVA GLOBAL, and Bob's gonna be talking to us today about what it is a VA can do for your business, and why you might want to think about actually hiring one. So let's get into it. Bob, what's going on, man, thank you so much for taking the time coming on with me, I appreciate you. Bob: Michael, thanks for having me. Appreciate it! Michael: Oh my god, so a pleasure. So I know a little bit about your background. We were chatting here before we hit record. But for anyone who is not familiar with you, if you can give us the quick and dirty who you are, where you come from, and what is it that you do in real estate today? Bob: Sounds good to second rundown and, uh, you and I, we you and I know each other a bit. So you and I have a lot in common actually, I started this thing might not be in common. But I started you know, I played freshman hockey for eight years. Prior to that went to Boston University for four years, and then played near my last four years actually playing hockey, I played in Europe. That was a pretty good run and then as soon as it started coming to an end, I had my first child and my wife was staying at home with him. So I figured you know what, I don't have really too much either to accomplish in my, in my planning career. So you know, I know a lot of people go through this, where they're looking at becoming a real estate investor, from one industry to the next and I know it's a very challenging time for a lot of people. So I know exactly what you went through. This was me back in 2004, to where you had to make an adjustment and really, you know, jump in, in a different industry, that's what I did. So I jumped into real estate investing back in 2004, start investing, my first deal was a fix and flip drove around neighborhoods, I know you have a lot of a lot of newer investors. So what you teach is farming areas, I did the same thing. So I drove around neighborhoods, I looked at properties that were dilapidated overgrown grass roof that needs to be done the whole nine yards. So I would call on literally I would go home, I would skip trace every single individual. So I write down a list of properties and a lot of what you teach, and write down a list of properties and go on to 401.com, which was a skip Tracing Service back then, you know, you have white pages, you have a lot of different services now and I literally would go home after I'd skip chairs, and I call them and say, Hey, I saw your property located at 123 Main Street. I'm looking to purchase properties. I'm a real estate investor in your area. Do you have anything for sale as your property for sale. So I got a good hit on one of them. It was actually listed property. So I had to go through the region and I knew nothing about real estate investing just so everybody's clear 2004 and went from the hockey locker room to a business owner which back in the day, man, I didn't have coaching programs that I knew about back then. So for me personally, I was kind of it was nerve racking. I had a little money put away but not a ton. So I made an offer on this property as listed at 185. I think I made an offer at 135 and they accepted it and I'm like, oh no, right. Just like any new investor, you're like, what do I do? Yeah, what do I do? I do contractors. I didn't have bank financing setup, right? I you know, at some money put away but I didn't have you know, it was 135 plus another $30,000 of rehab. I didn't have that sitting in my bank account, right. So I went out to what's called a rare reminder, I found a found some contractors called a bunch of mortgage brokers at the time and I'm finding money, funds with contractors fix and flip the property made 32 grand which was awesome, right? I'm all fired up and all pumped. However, I looked in the mirror and I'm like, I don't even know what marketing was. I mean, I drove around literally, you know, I drove around forever. I got lucky in the property. I had no systems processes nothing. It's all me and went to Home Depot probably, I don't know, 10 times a day because I again, nothing. I met that and then fast forward to the next Monday after I closed I joined a real estate investor Association and I met this dude, which was ended up being my partner for 10 years. His name was Pat Precourt great dude, awesome guy, I went up to him and I said, hey, Pat, I know you are a real estate investor in Connecticut and everyone points to you as being the best individual short sale. So I'm like, I'm looking for someone to work with. I'm not looking for any money. I'm not looking for like a nine to five job. I'm looking to join a team. Are you hiring? He said yes. I'm actually looking for an acquisition person and he goes in specific, I'm looking for a door knocker. Now, if anyone if anyone has ever done door knocking, door knocking absolutely sucks. I just have to throw it out there. However, you know, you know, my mindset was I said, the first thing I do understand is I know I have to I have to learn from ground up and I'm willing to do the dirty work to learn the business. So remember, I already flipped the property, but I didn't really learn anything, I just kind of managed it. I was mish, mosh and made money, so now I told Pat on my car, I will door knock, he gave me a list of pre foreclosure individuals, those are individuals that stopped paying their mortgage, and a script. So without any training at the beginning, I just got thrown to the wolves and I, from 10am to 3pm, every Monday through Friday, Monday through Friday for a year. So that's how I cut my teeth on understanding how to acquire property sell and then from that I graduated to negotiating with banks and we've done well over 1000 short sale transactions through the years again, this back in 2004, you know, when the crisis hit 2000-6-7-8, done a bunch of those fast forward started a couple of real estate education programs, which we're kind of having a good time about. One of them is called fortunate millers, which ended up being one of the top ones in the in the nation and then I left there. Remember, when I left there a couple about a year and a half ago, let's just say 2014. I know I'm jumping around 2014, I started my first virtual assistant company, out of the need of working with 1000s and 1000s and 1000s of students, they were looking at it saying listen, I know I want to make the jump from a regular job to real estate investing, but they didn't have enough time. So a lot of more working part time with, you know, another job and trying to get into real estate investing. So as a perfect segue to start that business, because you know, probably 99% of all of the students that I've worked with, in my life, needed a virtual assistant. So fast forward today, I have a real estate investment company, we just flipped 160 properties last year, different stuff. We're doing creative stuff and then this year, we're probably going to do about to a little over 200 If I have to estimate right now, while running a virtual assistant company. So I do a bunch of different stuff. Michael: That's awesome, I'm just curious, what's the typical tenure of a hockey professional hockey player? Bob: It is about I have to I have to check the staff for probably four years maybe so you doubled it. So I double it, I double so I made I made it a pretty long time and I went to play four years here in the US and four years in Europe, which is pretty cool. So I got a little different experiences. Michael: Oh, that's awesome. Okay, that was my own my own thoughts coming into play here. So okay, so you run now, you've done a lot of different things in the real estate space and now you're running a virtual assistant company specifically for that target, specifically real estate investors or virtual assistants for any type of book. Bob: So any type of real estate professionals, so that would be mortgage companies, that would be you know, wholesalers rehabbers, short sale investors, you name it, we have a lot of property managers, real estate agents, brokers. So that runs the gamut on a lot of different real estate investing. We also have a branch that we started in the medical space as well, that has medical virtual assistants that does you know, insurance verifications prior authorizations, but that's a whole different podcast. Michael: Okay, right on. So I'm curious to know… Bob: I personally focus in on I handle and manage to focus in on real estate, since that's my specialty. Michael: That's your space. Okay, cool. Well, I'm really curious about you know, when people are just getting started, or maybe they're already a seasoned investor, how do they know if a virtual assistant is right for them or when to make that leap or what kind of benefits they would see from using a virtual assistant as opposed to doing it all themselves? Bob: Great question. The simple answer is when you get when you get very, very overwhelmed, when you start looking at your calendar, you look at your phone, like, oh, what do I do next, and you have all these tasks. You know, I like to say, if you do $10 an hour tasks, you're going to have a $10 an hour bank account, that's typically when you start looking at that stuff and it's really important to you know, start looking at your calendar every day and see what tasks would should you get off your plate first, you know, for me, personally, I look at the way real estate investing is right now and in you start looking at all the miniscule tax tasks that we need, we need a social media presence we need you know, that needs to be that's very important. So that's part of branding what you can outsource and get off your plate. Next is obviously lead generation. You know, whether it's text messaging cold calling, taking in seller leads writing offers, right? You start looking at exactly how that goes in your business and those are the things that you have to look at because think about this. If I if I want to go on a boat ride with you, I want to go see you I don't know if Mike if you have a boat on are you live in a great area? So let's say you have a boat. Michael Albaum: Okay yeah, let's say that. Bob: Let's say that or would you want to play golf, right or I want to play golf with you. You're in my area and Michael, let's play golf and if you're not in the office, who's making money for you, if you're working by yourself, right? Nobody, nobody's making those direct mail or nobody's making those cold calls that are needed to drive in seller leads. No one's running your soul. Social media, no one's text message, no one's doing those things that consistently need to happen, right for you to run a successful business, you have to be literally sitting in that seat all day long or guess what your, your, you know, you're not going to answer on the phone, if you and I want to go on vacation, right or you want to, you know, go on vacation with their spouse or your friends, it doesn't matter, who's gonna be answering those calls for you, as well. Very, very important to have somebody sitting in that seat that you can replace and put someone in their perfect virtual system. Michael: Okay and what about for like, folks that are using investing, as a very, as a very traditional business model, the long term buy and hold investor, they're making that transition. Now their portfolio has grown to such a point where they're transitioning maybe from a full time job into real estate investing full time, but they're not flipping, they're not wholesaling. I mean, is there a space for them to take advantage of virtual assistants as well? Bob: Absolutely, you can look at two sides. Again, if it's if they still, if they're still looking to build their portfolio, that's one kind of set of tasks. Then another side is admin tasks, right? On the property management side, it all depends if they manage properties themselves. So if you want to look at both of them on the acquisition side, you know, if they're in an area that is competitive, they're going to need someone to cold call to text message and take calls to answer calls, maybe to make MLS offers, right? Because you can look at it and every area is different. So if I'm investing in Toledo, let's say you can have, you could have an algorithm or you could have a what's the word I'm looking for, you could have, you could run your numbers on how you your numbers, go and buy and hold right? Cash flow, what the cost of your money is, etc., different in Toledo than it is in San Francisco than it is in San Diego than it is in Connecticut. So you can have your virtual assistant comb through the MLS, if you have access to and make MLS offers as well to find and acquire properties on top of course, you know, taking in direct mail calls, taking in PPC calls, outbound dialing, text messaging, things like that. So that's on that storefront, because if we want to build our portfolio, we need properties that fit whatever kind of box that we want, right? Maybe it is an area that's more appreciation over cash flow. I don't know everyone's different these days, you know, because some people want to put more down, right as a as a deposit, whereas some people want least amount, but get an area that has more cash flow, right? It all depends. On the other side of it, if you could pause me because I'm from Connecticut, sometimes when I get talking, I go pretty well. Michael: This is great, man. This is awesome… Bob: So, on the property management side of they can do anything from you know, taking in seller calls, I'll give you a perfect example. Today, we have a number of properties that we own and we get calls in from tenants that just want to vent, right? Well my lease that shows that you're going to find me all the apply new appliances every time something happens bla bla bla bla, now as a an owner of houses that beats you down. So if you can actually outsource that to a virtual assistant, the first line of defense, so now they say, hey, let me walk you through the lease that you signed and when they walk you through the lease that you signed, that'll take an hour of your day and…

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Tom’s mortgage default nightmare and how to avoid this May 31, 2022

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In this episode, Tom shares his experience with a failed autopayment on one of his mortgages, sending him into mortgage default. We discuss how this happened and what can be done to avoid this hassle in the future. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my two co-hosts, Tom: Tom Schneider Emil: and Emil Shour... Michael: and today we're going to be talking about an issue that Tom ran into that could easily happen to anyone with a mortgage. So let's get into it. Alright, guys, it's been a minute good to see you both. How are things? Tom: Things are good. Busy got two year olds and three month year olds and life man. It is, it is in it right now. But you know, things are really good. Everybody's happy, healthy. Well, so, can't complain. Michael: Good, good, Emil? Emil: Man. I can't, I feel like it's been forever that the three of us have been on a podcast forever time. Your kid is three months. That's, that's amazing, man. Yeah, same, same thing. I got two kids life is crazy. I feel like I never get to go surfing anymore. So I just like, live in my home gym, because that's the only activity I can do that keeps me occupied and sane. But everything's good, man. So I'm excited to hear what's going on today. Because we were about to tell me what we're like, no, let's just start recording this episode. So I'm very interested to hear what's going on with your portfolio. Michael: Yeah, Tom, just take it away, man bring Emil and everybody listening up to speed on what's been going on in your world and we're going to talk through about how to solve it and how to avoid this type of situation going forward. Tom: I think I'm gonna start with a shorter path of what is going on, and then we can kind of unpack a little bit. So I through the great financing opportunities, I refinanced a ton of my properties and the most recent one that I refinanced I found, you know, sort of a, you know, bad reviews on the lender, but hey, great rate, I complete the refinance, I sign up for, as with all my mortgages, sign up for paperless notifications, I sign up for, I guess, I'm doing a little more meandering one, I sign up for auto payment on my mortgage, my auto payment…, and my auto payment never hits, so it never hits and a couple of months go by, and I get a notice from my credit card that I've got a foreclosure on my record. So I go back to log in to the mortgage, servicer, and I'm blocked, I can't get in. So now the, speeding up the story much faster. I just reinstated my loan and went through a foreclosure never got like notification on this and I am absolutely, you know, kind of in the middle of it right now and that I just reinstated the loan and I'm going through the process of like, kind of demanding that they fix my credit, and all that stuff. So anyways, that's the that is the issue that I've been going through and go ahead, Michael grill me I'm you know, yeah… Michael: Well, just in taking a step back. So you missed the first mortgage payment after the refinance? Tom: Yep, yeah. Michael: Okay. How, how did that happen? Because you signed up for auto pay. Tom: I signed up for auto pay as the first mortgage payment was hitting, and I signed up for it, and figured I was done. The email correspondence I got was, hey, you're all set up for auto pay. What happened is that initial charge hit. So I, the auto pay doesn't work, if you have any amount delinquent. They don't tell them what's on the account. If there's a balance on the account, they don't tell you if their auto pay is not working. Now, I very much like I'm a dummy and I should have noticed in my checking account that there was certain dollars not going out. I have like a bunch of mortgages. So you know, I think this is a mistake by me. I think I am going through right now and you know, paying the you know, few 100 bucks to like make it right. But man, it was kind of easy for me to happen. So go ahead, go ahead, Michael. Emil: I have a question here. Tom. How long, how long of payments did you miss before you went into foreclosure, was it just one missed payment, was it like three months? How long was it? Tom: So I think it was two months. So as I said, I set up the auto payment, where when I finished it, there was like, a balance on it didn't hit and then two months later, I from my Chase credit card, I, hey, by the way, you have some major derogatory marks on your account and, guys, it is really, they make it so hard to like, come back out, like, they blocked me out of my account, because I like immediately tried to log in to pay. So you can't log in your account, they move the paper your loan immediately to this foreclosure, random foreclosure attorney, you know, in the state, I asked to reinstate the loan from that foreclosure attorney, they say, great, we'll send you a response and a quote in seven to 14 days. So I can't even pay I'm trying to get this done with, you know, from the time that I found out about it, there's like nothing you can do and they have various phone numbers associated with the attorney associated with the mortgage servicer and every time you talk to them, get prepared to wait 30 minutes to talk to another human and it's like, they like kind of, are really rooting for you to fail. Because like, that's a huge incentive for them to sell the loan, you know, but, you know, I like resources and time and like, you know, help where I'm able to move this as fast as humanly possible. But it is really just a gut punch every step of the way. Trying to and again, I'm saying like I made a mistake, I should have noticed that it wasn't. But if you look at my email history, the only emails I have from this lender is congratulations, your setup on paperless congratulations, you're set up on eBay and that's it you know. Emil: That's the weird part is that you didn't get like I would think if I'm missing a payment I would get a letter, an email something like hey, you're 30 days past due on your mortgage payment like yeah, what's how do you go straight from miss payment to just like in foreclosure, no correspondence and in foreclosure, that's crazy to me. Tom: They would have sold it and I never would have known about it had chase, like my credit card company not told me this. Now. I will say that. I think it was like Friday, like a week after it moved into foreclosure. I got a letter that was backdated. So today is May 23. Friday was made what 21st. I got a letter that Friday, backdating from May 6, letting me know that I'm in foreclosure and it was like a certified mail from May 6, but delivered on May 19. I mean, it's just really flawed the incentives of these companies and go ahead hit me with some more questions. I got the bloods boiling a little bit, so… Michael: So where are, where do things stand today? Tom: Yeah. So we're in a time where it stands right now. So that seven day period passed or whatever, 10 days where the attorney, perfectly fine attorney doing their job, they sent me this pay off, I pay it off within five minutes. You know, whatever the balance was, I was, I was honestly concerned it was going to be like, you know, 1000s and 1000s of dollars to move it back out. But current interest style interest, yeah, it ended up being a cash, I think it was like somewhere between two and $500, which is like not cool, which like really sucks. But, you know, there's, there's so much appreciation, my loan to value is so low on this property, like, you know, there's much worse situations. So I have reinstated that the attorney gave me a phone number to call to like follow up for making sure auto pay is in place I call the number it turns out it's the wrong group. This is like the group that's having trouble the payment, but it's like, no, you're back with the foreclosure because of reinstating the loan and oh, it looks like you know, you we have received the funds, but you got to call these people tomorrow and it's like if I didn't have like the time and energy and like the resources Michael, thank, you know, introduce me to you know, his attorney to help me out and reaching out to her. It's, it is it is this could easily slip through the cracks and it's just miserable. You know, a couple of other things I'll say on the like, notification piece. So I don't know if anybody else has rental properties, but I get at least 10 phone calls a day from people trying to buy my house, you know, and you know, I have some like spam phone call, like listening stuff that like makes the person talk first. So it's like, it's not some like auto tree. So I mean, they said that they left a phone call, but it's like, ah, you know, I didn't I didn't get one if you did you know you might be using like a phone tree. Am I supposed to answer every one of these, you know, 10 or however many calls a day that I'm getting from a wholesaler who's trying to buy you know all cash whatever it's like, you know, yeah, go go ahead. Emil: I have a funny aside for those I had saw you guys know I'm trying to sell a property in Jacksonville and I just I know they're usually garbage calls when those come in, but I was like, let's see what happens. Like I think I got a couple text messages and emails I like tried to go through the process with them and someone was like, okay, cool, we'll get back to you with a quote tomorrow. Never heard back from any of them. It's hilarious how, like, you guys are spending all this money on lead acquisition, and you guys don't even extend me. You know, lowball offer or something like, just funny anyway, sorry, total aside, then add a comment about. Tom: Dude, it's all in this whole ecosystem, you know, like, as part of the process is them leaving a call with me and it's like, you know, they might have left a call, but it probably just got picked up into these random, you know, spam spammers, you know, I don't know. Yeah… Michael: That's so frustrating. But so if we take a step back, Tom, you said something at the beginning of your story and I'm curious, if you were to do this all over again, would you change your process any other than of course, looking more closely at the, at your bank statements? Like, I'm Tom, I just have drowning in too many mortgages, like too much income? Like, yeah, but like, what do you do differently? How do you ensure this doesn't happen again and what would you say to people listening so that they don't find themselves in a similar situation? Tom: So I got a couple of thoughts on this. Excellent question, Michael, one of them would be, you know, quality does matter obviously, you know, we talk a lot about this podcast, like how important that relationship is with your PM and it's like, don't be penny wise, pound foolish. No more than learning about it. Man, if I could pick up a call and talk to like someone servicing my loan and not have to wait on hold for 30 minutes? Like there's some real value in that. So would I be willing to pay like a few more bits up on my debt servicing? I think so. Like this is, this has been really painful. So like, I would, instead of just like always hunting for the absolutely lowest like mortgage payment. If you have the time to like, navigate through whatever hellscape…. Michael: Welcome your real estate, folks, it's gonna get to be a hellscape and run the gauntlet. Tom: Yeah, no, no, I, I, you know, I love my rental problem are the reviews are great. They're awesome but like, this is for sure been one of the more kind of like frustrating incidents about it. So back to your regular original question, what would I do differently, I had a lender that was great and I was hoping to get a little bit lower an interest rate, and it was a little bit lower, but like, not enough to have a simpler process, where I just have one lender that's managing everything, and I can call them and talk to them, you know, when I when I need to. So that would be it. The other would be around the fund flow thing I you know, we talked about that before is every month there's gotta be expectations about what money money is coming in, and what is coming out the right and left side of the ledger and I was lazy about it. I you know, I had like a sheet and I kind of just didn't think twice about it and, you know, life gets busy sometimes with kids, work, you know, all that stuff. But like, if you're gonna play this game, like, man, what a what a dumb way to get tripped up on it and I think like a, knowing what the CYA is, you know, he gets familiar with that… Michael: Very much so... Tom: Cover your butt, yeah and what is that making sure that your debt servicing is in place, is a big one. So, you know, my sort of 10 sense on it. I'm going through the experience. Emil: Guys, what is CYA? I've never heard that. Michael: It stands for cover your cover your V height with an A. Emil: Huh, got it got it. This is probably a good place for us to give a little shout out to stessa you know, if you're if you're using stessa and probably checking it once a month, probably would have come up. So go hop on the stessa train, stessa.com. Tom: Yeah, it's good a great point Emil. Michael: Great, great, great point, like, yeah, that stuff would have been highlighted for sure. Oh, man. So I think that's something that I share sentiment that I share, Tom is like paying a little bit more on your interest or your loan products for service like to be able to pick up the phone and have a conversation with a live person I think is so invaluable and I think it's a shame because it's one of those things that you don't realize how valuable it is until you need it and it's oftentimes too late. So that's a great you know, a great tidbit for folks. Tom: And super relevant you know, insurance right insurance the same thing like if you're trying to like get a claim like I can imagine a situation similar to this where you're hunting for the absolutely lowest premiums and hey, guess what, you bought a piece of paper like you know, it hits the fan I mean, this is like you know, smart, smart money you know Pennywise Pound Foolish the thing. Property Management, like if you're if you're chasing the cheapest dollar like you may get away with it or you may not and like there's something to be said for sure about the quality side… Michael: Yeah, absolutely. So going forward, what do you do differently? Tom: Yeah, well going forward? Well, one of them is, you know, there's going to be I is kind of fighting tooth and nail to get this like expunged from my record. Just because it's so silly like it was there for like two days. And I think I have like, really pretty reasonable documentation against that this was like, almost a wrongful because I mean, maybe they did, like call me or something. But I like I didn't realize it, but like my email trail. So going forward, I don't t…

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What you should know about investing in the Savannah, Georgia market May 28, 2022

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George Meyers was born and raised in Savannah. During his years as a business owner, George learned a lot about business and the inner workings of the business. Today he prides himself in helping new and existing entrepreneurs make educated decisions that will help their businesses be more successful. In years past George has owned and sold numerous personal properties that include commercial, residential, and investment. This personal, commercial, investment, and business experience helps him better understand his client's needs. Today George is a full-time professional Realtor and the founder and principal of Mia Madison Properties LLC. He is a member of the National Association of Realtors, Georgia Association of Realtors, Realtors Commercial Alliance of Savannah/Hilton Past president of the Savannah Landlord and Real Estate Investors Association. Savannah, Georgia was the beneficiary of rapid growth in the first part of last year but settled into a more sustainable pace that we have become familiar within today’s economy. That said, the city has undergone a considerable amount of growth in the past 18 months. Tourism, port activity, business services, and above all – the housing market –set the stage for above-average employment and economic growth. Today, George talks about investing in Savannah, Georgia: market trends, neighborhoods, price to rent ratio, economic drivers, geographic considerations, and more. Episode Links: https://www.miamadisonrealtygroup.com/george-meyers/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by George Meyers, who's our Roofstock certified agent out in the Savannah Georgia market and today George is gonna be talking to us about everything we need to know if we're considering investing out in that market. So let's get into it. Everyone, just a quick shout out to the Rootstock Academy before we get started with the episode. Rootstock Academy is your one stop shop for real estate education, whether you're just starting out, or a seasoned investor, or just looking to learn more about real estate investing as a whole, we've got something for you. Over 50 hours of automated lecture access to one on one coaching private slack forums and more, come check us out a roofstockacademy.com. Look forward to seeing you in there. Happy investing. George, what’s going on, man. Thanks so much, take the time to hang out with me. I appreciate you coming on. George: Michael, thanks for having me. I really appreciate you having me on. Michael: Oh, of course. My pleasure, so right out the gates, give me your elevator sales pitch on why should people be investing in Savannah, Georgia? George: Savannah is a man is one of the best markets are the best one. What we have in our areas is a lot of different drivers for investment. One would be military, we have a lot of military that come into the area which make our rental market really, really good. The great thing with that is it's a good economy and bad economy doesn't matter if we have a high economy or low economy we have renter's because of military. We also have a lot of manufacturing plants that produce no matter where there's a high income or low income situations. You know, for rentals, we also have the ports, we were one of the largest ports in the country, and we just deepened our harbors. So we're growing even more and they're saying that will probably be the number one in the next couple of years. Then you got other drivers around us a lot of colleges. So even in a bad economy or a good economy, everybody's going to school. So you got a lot of that going on around us we have some of the biggest colleges in the state here in our area. You know, the other thing that we have is a good amount of influx of people coming in that are transient. So if you want to do short term vacation rental with us, or if you want to do long term, we have a little bit of everything in order Michael: Right on, well I'm so we can just call this episode a wrap and go home and you know, that's awesome, George. So let's definitely unpack a lot of what you just said. But I would first love if you could share with our listeners a little bit about who you are, where you come from, and what is it that you're doing in real estate. George: Okay, so my name is George Meyers. I am the owner and a realtor at Lea Madison properties. Our company opened in 2002. It's named after my daughter's view as my youngest daughter, Madison's my oldest daughter. We're a full service brokerage. So we do a little bit of everything. We have commercial residential, we do property management, association management for commercial properties. And we have a high on investment department. So in our investment department, we do everything from single family to multifamily. You know, we've been doing it for so long that we work with a lot of subcontractors and stuff as well to help us be the industry. So we're here to help you through a little bit of everything that you can. So me personally, I was born and raised here in Savannah, Georgia. I'm 42 years old, a family man of three, an entrepreneur and a full time realtor he just loves it loves investing. Michael: Right on and George, I'm always curious to know with a lot of our partner agents, do you invest yourself? George: I do invest myself. So I'm short term vacation rental, I own commercial rentals, and long term, long term rentals as well. Michael: Right on. Okay, well, here's a question for you. What do you say to the folks that think that having their property manager also own rentals, there's a conflict of interest there. Because if I own property and you own property, and we both got a vacancy, we all kind of know who's is probably going to get filled first. George: Yeah, so we run into that question a lot. You know, in my case, I'm kind of like the Hair Club for Men. I'm not only the President, I'm also a client. So in my case, you know, there is no competition. And the reason there's no competition is because I placed my properties into a property management department, which as I'm the owner, yes, but I have a person who runs my company for me, because I'm a day to day Realtor in a day to day investor myself as well. But in that particular case, there is no priority for my property or another property. The other great thing is in the Savannah market, we are social and housing that industry comes through, I have to worry about my property before their property, because there's probably a waiting list. I mean, and to give you a good example. I mean, we had an announcement yesterday that Hyundai is going to come to you what we call our mega site, which is an industrial park that we have. It was built a number of years ago, and it's been filling up with some great manufacturers and some great warehousing facilities. but Hyundai has announced that they're gonna be coming in there in the coming months and they're saying I think they're gonna bring, like 1100 jobs to the area or something like that it could be a little job number. But the crazy thing is we don't have the housing for it. I mean, when it comes to both purchasing or renting, we were already in the shortage prior to that announcement and that's just one announcement of many that are coming to this area, I mean, Amazon's gonna be opening a facility. They're not calling an Amazon facility, but it is an Amazon facility that's opening in the area that does distribution, and a few other logistic companies are going to be opening that are large providers of employer. So when it comes down to that question, what I can say is, as I said a little while ago, I don't think there's any competition between my property or priority, because we don't have enough properties. I mean, if you were to go to our property management website, and even from the purchase side for investments, our struggle is inventory. I mean, we typically prior to prior to 2019, we average 30 properties on our website for rent, as good as availability. Okay, currently, we have five properties on the site at any given time, because we're renting them before people even walk out the door. Michael: Oh, my gosh, that's wild. We've been hearing the same thing in so many markets throughout the country. George: Yeah, it is. Wow, it is scary. I mean, you know, the funny thing is everybody in this market, and you've probably heard this from other realtors, everybody thinks that we're just getting rich right now we're making all this money. It's just amazing. Well, the fact of the matter is, I mean, I can be honest with you, I didn't want a business in the recession that I did now, because there was inventory. You know, now we're in a place where we're not selling as many properties I mean, yes, we're making a little bit more money, because the cost of homes are more so organically, you can sell a little bit less inventory, and still make just as much money. But the fact of the matter is, we're not we're not shooting over the moon, because we don't have the inventory to sell. I mean, if we did, and we'd be amazing, and we would all be absolutely rich as realtors, but most realtors are still probably about the same place, they are making a little bit more money, except for that one that top one percentile who who's doing, you know, a high volume of stuff. Michael: Yeah, I wonder too, how many realtors decided to get their license during the pandemic, because they saw how frothy the market was and so there's all this new inventory of people fighting for the same number of deals. George: It's absolutely crazy. I mean, I've got a couple of friends who own real estate companies and they also schools, you know, that do pre licensing to become realtors and they said they could probably add four or five more classes, it doesn't matter where they are, it doesn't matter if they're here, if they're in Charleston, if they're in Texas, or if they're in California, when I talk to these friends, they say I can add five more classes a month, and still not have enough to let people come in. You know, and I heard a statistic the other day that there were some there are some real estate markets where the associations and the MLS is are adding approximately 50 agents a month onto the roster. Now, of what I understand, I didn't get into the market until 2008. I started in the business in 2007, and was an investor prior to that, and I owned another business before I got into this and I was told that back then it was the same way that they had where they were adding tons and tons of people and then a recession occurred or they figured out they weren't going to make the money that they thought they were going to make and you just have a bunch of licensed individuals, but they're not good realtors and not to say they couldn't be good realtors, they're just not in it full time. They're doing it part time. They're working a full time job during the day, and then they're doing something else in the evening, which is real estate. It's their side hustle, I guess you would say. Michael: Yeah, yeah. Okay, interesting. Well, George, you touched on it a little bit, as you were kind of gearing up and talking about the Savannah market. But who are some of the biggest employers, if someone is thinking about investing in the market? Who should they be looking to be kind of bolstering and supporting the economy? George: Yeah, so we've got a number of large, large employers in the area. So first of all, we got the military and the government, as we talked about, you know, we have one of the largest air strips in the country. So that's Hunter Army Airfield, within close proximity, about 45 minutes from here in Huntsville, we have forged Stewart, which for Stewart is one of the major bases when most things start to occur for a war or something overseas, typically, everything starts to move first at Fort Stewart and Hunter before it does anywhere else in the country based on my experience over the years. So you got a lot of military there. You've also got a lot of government facilities and government civilian jobs that are supporting both of those bases and all the things going on. So then, if you move on to the private sector, you've got Gulfstream so Gulfstream aerospace, which is owned by General Dynamics, we all know Gulfstream planes, we all wish we could afford one, especially when you live here, and you see him flying over every day in the drought biome, you know, so we got gold stream, their huge employer. The great thing about Gulfstream is over the last few years, they've started to bring a lot of their manufacturing of additional parts from their subcontractors in house. So they're doing a lot of that and a lot of expansion in our area. They've built I think two or three extra facilities at the airport over the last probably five to 10 years. So they've really increased employment, a lot of logistics and warehouse we've had the largest logistics and warehousing boom we've ever seen over the last three to four years, especially in the last few years. I mean, a lot of areas that were desolate country sides, and down two lane highways are now six, four and six lane highways and now on both sides of those roads, where the train tracks on the other side is nothing but logistics warehouses, and I'm talking massive logistics warehouses, hundreds and hundreds of 1000s of square feet of logistics warehousing, laid out in yards in the same way. So a lot of truck drivers, you know, a lot of people working within these within these facilities to do all the different things and as you can imagine, by building those facilities, you've got construction companies that have been popping up everywhere, they're doing all of the infrastructure, and that kind of stuff, then we go to the ports authority. So the ports authority, as I mentioned, at the beginning, were one of the largest ports in the country, I think we're either the second or first largest port on the East Coast. Actually, I think New York is right ahead of us still. But at that particular case, I think they just said they were gonna bring another 500 to 1000 jobs over the next year, just for the ports authority and what you have to realize that we've noticed there our research is over the last couple of years, what we started to see is the majority of people, even if they're going to buy a home, they come and rent for the first one to three years because they want to learn the city, they want to learn the market and the thing about our city is lots of places you have just the inner city itself. So for us, the majority of the stuff is going to be an outlying suburbs that are growing really quickly, like cooler, Port Wentworth, Reagan Gaiden and like, for example, cooler and cooler is one of the fastest growing cities in the country, by both population by economic standard, and by growth rate of pure property, meaning the property they're building for…

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Here is what investors should know about the Tampa Bay real estate market May 17, 2022

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A Florida Native and graduate of University of South Florida, Jeff Wills is an accomplished Tampa Bay Area agent who brings a strategic yet personable approach to the home buying and home selling process. Drawing from years of experience as an agent in the Tampa market, he has built a solid reputation for himself as an industry leader with a solid track record that specializes in attention to detail in commercial and residential transactions. Investors are buying homes in Tampa at a record rate. Between July and September 2021, one in four homes that sold had an investor as the buyer. According to a report from the Tampa Bay Times, Tampa Bay ranks as the 7th hottest metro area for investors nationwide. Today, Jeff talks about the Tampa Bay market: neighborhoods, price to rent ratios, economic drivers, geographic considerations, and more insights that investors will want to know before making moves there. Episode Links: https://sefair-inv.com/ --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and joining me today is Jeff Wills, our certified agent out in Tampa Bay, Florida and Jeff's gonna be talking to us today about all the things we as investors need to know and should be aware of, if we're investing in that market. So let's get into it. Really quickly, before we get into the episode today, I want to encourage everyone to go check out roofstockacademy.com. Roofstock Academy is our one stop shop for real estate education, independent of whether you're just getting started or a seasoned investor looking to scale up or get involved in a different asset class. We've got lectures, we've got coaching, we've got one on one slack access forum and a plethora of other financial benefits, as well as money back on your marketplace fee credits. If you're transacting on Roofstock. So come check us out at rootstockacademy.com look forward to seeing you in there. Jeff wills thanks so much for taking the time to hang out with me today, man really appreciate you coming on. Jeff: Absolutely, man. Love to do it and thank you for having me. Yeah, of course. So Michael: Yeah, of course. So we're just gonna like jump right into it and we're talking today about Tampa Bay, Florida. I want you to give all of our listeners why Tampa why now. Jeff: So why Tampa why now honestly, I've been hearing that a lot. However, it has been very, very popular as of late. A lot of the big things that people are hearing, actually, just yesterday, Goldman Sachs bought 305 units in downtown Tampa for 168 million, setting another record price per unit and a crazy valuation for cap rates right now and so there's just there's a lot of synergy. The biggest thing behind it has been Water Street water streets about halfway through its 10 year growth plan. They've got phase one out of the way, phase two starting, and that has really brought a lot of life and vibrance to Tampa that was kind of growing and burgeoning there prior to COVID prior to all the popularity we have now, but I think it's really hit its peak and honestly, it's probably got a good you know, 10-20 30.50 years stride to soon looking like Miami, although personally I hope not. I'd like there to be a little bit less people and, and keep the enjoyment that we have here and honestly, you know, Tampa is a big town, it's a big population. But it really does have an extremely small town feel with the micro communities inside the neighborhoods inside the certain you know, sectors and where we are on the map and near the water and so I think Tampa has a lot to offer, both from an investment standpoint, from a long term hold appreciation standpoint, and especially, especially a rent gross. I don't know what that's gonna look like now, just because you know, kind of has hit a very, very high mark. However, we're not seeing any vacancies. We're not seeing, you know, any kind of rent concessions. I was just talking to a very big property manager yesterday for a different reason. But they were saying, yeah, we're barely giving written concessions. We're hitting full market rent. Everything's at 95% occupancy or above and there's no signs of stopping. So I love it, I I've always thought Tampa was a hidden gem before COVID and before things got crazy, but you know, kind of very lucky to be here now and enjoying every minute of it. Michael: Right on, Jeff, that is that's super interesting. So I'm wondering, what was that cap rate that they got for the Goldman Sachs purchase, do you recall? Jeff: Honestly, I don't have that in front of me, I can almost guarantee it was probably sub four. Even after tax adjustment, it's crazy. I actually lived in that building. When it first opened, I got a I snuck in with some written concessions and realtor bonuses and stuff like that. So I kind of skated in a bit but I mean, it went through a lot of challenges. I mean, management was horrible. Two years, they had the same management then fired that one and then fired another one and they've had problems left, right and center what that building just knowing because I've got friends that live there and stuff still and it's still selling for that price given I mean there's a bar across the street that has so much drama tied to it. It's insane, that the publicity from that sale has anything to do and so backing up from that Goldman Sachs has long been rumored to be taking a very, very big piece of the pie in the Waterstreet office space and so while that hasn't been announced Goldman Sachs buying that building to me just sounds like corporate housing instead of them having to go and give all their employees stimulus, oh, we'll give you a 5000 monthly allowance. They'll say hey here, we've got a block of rooms, pick one enjoy yourself. It's paid for and I think that might be how they're skating that market rent because some of the stuff and water St. Tampa is going up. Actually, I just talked to my friend yesterday 966 square feet with a big balcony 5000 a month and it's it was exactly what I did you have 550 a square foot. Yeah, um, it's, it's insane and I mean, once you set that, once you set that standard, I mean, they do. I mean, okay, the Heron is the best multifamily building I've ever seen. But I mean, setting that precedent, all people have to do is just be nearby and just enjoy the overflows, people who can live there and by the way, they have zero vacancy, and they have a weightless for that unit. That's coming up down hole, it's crazy. Michael: Holy smokes. So Jeff, you clearly an expert on the area, give people a little bit background, who you are, where is it that you come from and what is it you do in real estate today? Jeff: Absolutely, so I grew up about an hour north of Tampa and a county called Pasco, a very small town and to me growing up, Tampa was a big city, a really big city, I had been there three, four times the aquarium a couple of times, and I just every time staring at the top of the skyscrapers and that was just the biggest thing to me and growing up, went to college, didn't really know what I was doing there. When for finance, I was like, yeah, let me kind of figure stuff out. My dad one day was like, hey, why don't you just, you know, pop into real estate, see what's going on? I'm like, yeah, sounds fun, should be pretty flexible. I like people, like, give it a go. Seven years later, here I am and it's just been, you know, from top to bottom, you get to help people with something that's extremely difficult, extremely stressful, and very nuanced and I mean, you know, from deal to deal, there's always something different. There's always a different backstory a different why and even growing up prior to all that I've always kind of felt that I was a good listener. You know, I, of course, I have my own, you know, opinions and desires and stuff. But I was always able to kind of peel back, what is somebody looking for? What does somebody want to do? You know, what they're, they're telling me one thing, but what do they actually mean and I've always, you know, of course, ask them, hey, you know, you're saying this, but what do you want this, and it's just been very enjoyable and, you know, the client feedback is the same, I've got a ton of referrals, a ton of repeat customers, and it's just, it's very, very enjoyable for me to be able to, you know, simmer it down to its the parts that they can control and make sense of, and then I just handle all the other legal mumbo jumbo stuff on the back end and it's just been very, very enjoyable. The first three years, I was very retail focused, you know, end user not very investor friendly, and kind of got bored with that and I was like, you know, I, I've always enjoyed numbers always been pretty good at numbers, like, why can't I get to the investor side of things and that's when I joined my current brokerage see fair investments and from there, it just kind of skyrocketed. Our offices set up extremely streamlined and efficient, to the point where in the past 13 months, just me and my broker together have done about 137 million in business, and 98% of that was investors and we're just, we're just masterfully efficient, fine-tuned and, you know, we know how to strike valuations from, you know, Jacksonville down to Fort Myers, it's, you know, it's a few things we know how the appraisers operate, we know what a tenant is going to do to it as far as evaluation what people are paying, because we've got 30 under contract that we can look at and say, oh, you know, hey, a cap rate is this based on this or like, we just have a ton of insight and ability to help our investors and you know, even just last week, you know, we have, you know, I guess it's kind of our, our secret sauce, but it's very simple. Every Friday, all of our clients get an update, regardless of status did nothing happen, hey, nothing happened today, you know, that just wanted to let you know, have a great day and yet again, I had another client last week said, hey, you know, honestly, we haven't even spoke on the phone. Once. It's been all email. I just wanted to say thank you. You were exemplary and you know, he even brought up the Friday things like every Friday, I had an update, I didn't need an update. I didn't you know, I didn't ever had a question about what you were doing, how the property was going and so while those compliments don't always come, I mean, it's always 9 to 10 with that, we haven't had very many upset people at all and they always bring us their next listing or, hey, I'm trying to buy in here and buying has been very challenging right now. So a lot of the investors are on hold being patient, seeing what rates are doing. But all in all, it's been really, really great, especially on the sales side, and we're just, you know, happy to help people while we can while the market is doing great. Michael: Right on. Well, it sounds like if you ever transition careers whenever you're done to be ready to be done with real estate, you'd be a great therapist. good listener. Jeff: Oh my gosh, I joke about that all the time. I tell people sometimes like, man, I've done so much marriage counseling, I'm good to go. We need to like do one deal. You'll know you'll get one and I'm saying, oh, that's pretty, it's, it's a lot, but it's just very easy. You know, I mean, the end of the day, people want a couple of things. They want to be comforted, they want to be, you know, they want to know that you're honest, and they want someone reliable and if you can fit those buckets, while being a joy to talk to and to interact with, I think that's really all I needed to do. Michael: Love it, love it, love it. Well, Jeff, let's dig into the kind of meat and potatoes of the Tampa market a little bit and give listeners some insights into other than this Goldman Sachs transaction, which set new record highs and the buying being a little bit difficult. Let's educate people about the Tampa market. So who are some of the major employers in the market and are you seeing people moving to the area or maybe moving out of Tampa? Jeff: Definitely a massive influx, I'm not sure the exact daily rates, but I know Florida, pre COVID was about 1200 people per day. After COVID, we're at about 2400 to 2600 people per day from out of state moving to Florida and while that's not always Tampa, that really is the only place that has had affordable housing, affordable rents, especially compared to Miami. Compared to Orlando, Orlando is a relatively higher price than us just because it was more pocketed it was hard to find an actual community over there. While there are a handful. It's very spread out and sprawling, and Tampa is extremely concentrated. Some of the larger employers in Tampa are, I wouldn't say there's one or two, the majority are a lot of health care providers, hospitals, doctors, stuff of that nature, a very big presence with attorneys and then honestly Tampa is becoming a very, very big tech hub. Reliaquest is a very big cybersecurity firm, they signed in Waterstreet for the top of their class, a class A office tower and so it's been rumored I've seen a couple articles that Tampa is the next Austin as far as a tech hub and you know, we're tax friendly. We don't have any state income tax, we have homestead, there's a lot of things that were already here and then now as other states like California are being, you know, more tax even more stricter on a lot of things. It's just it's increased that flow and I don't think that stops for a long, long time. Because Florida has so much land, we have so much room for stuff and while you know, even though you might not be right in the heart of Tampa, a 3540 minute drive is no big deal and you are close to a million different things inside that span. So just you know all of those things and then one underlying factor too, that I like to tell that nearly no one knows that I mentioned is pre COVID. I haven't checked these numbers after the Port of Tampa. Probably Never heard of it does 3 billion in revenue every year, if not more and so that has been a very silent provider. Actually, one of the biggest companies in Tampa is mosaic. They own right over 400,000 acres, and they're a fertilizer company. So they are huge in Tampa, as you know, from ground all the way up to politics and everything else. So they are very big employer and advocate for the port and everything else that's going on there. Michael: Right on and Jeff, you give folks a sense of like, what is a traditional typical three, two, single family home cost and what would the rent look like and maybe you can give people an idea of some of the different neighborhoods in which they could be considering? Jeff: The median home price now is right around 335,000 today, and we have about less than two months of inventory, scroll back to 2019, we had about six and a half months of inventor…

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Cash-out refinance or home equity line of credit: Which one should I use? May 14, 2022

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Your home can be a powerful source of ready cash to fuel financial growth, add value to your property, or even provide a cushion should an emergency occur. Refinancing your mortgage and taking a home equity line of credit out on your home are two ways to make that capital available to you. HELOCs and refis are quite different from each other, though, so knowing which one fits your strategy best is important. In this episode, Pierre and Michael talk about the attributes of each and what situations might be best fit for either of them. Links mentioned: www.roofstockacademy.com --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Pierre: Hey, everyone, welcome to the Remote Real Estate Investor. My name is Pierre Carrillo and today I am joined with… Michael: Michael Albaum… Pierre: ….and today we're going to talk about refinancing and HELOC and which ones make more sense. So let's jump in. How's it going, Michael? Michael: Good here, I was telling you yesterday, my van broke down in the middle of California. So I had to get that taken care of and get a lift home from a buddy of mine… Pierre: In my hometown? Michael: In your hometown. That's right, that's right. We were smoking off the highway. So he said, oh, we got to pull over and get this thing fixed and it was going to be a week to diagnose it and get parts. So we just said let's leave it down there and then a buddy of ours was able to give us a lift home and we were like on our way home from being on the road for a month and a half. So we were super excited, super close and then wahh wahh wahh… Pierre: Not usually the best place to get stuck, I left… Michael: Yeah, if I had to point if I had to pick and choose it would not have been in this particular town. But that's okay, it's how it goes. Pierre: All tight. Okay, so let's talk about refinance, what just roughly, what is a refinance? And why would someone want to use it. Michael: So a refinancing that's not familiar is basically just getting a new mortgage on top of an existing one and it basically this new mortgage is going to replace the old one and so there are kind of there are two different types of refinances. One is called a rate and term refinance, where you're simply just changing the rates and the term of the loan and so if you have a 30 year fixed mortgage at 4%, and you go get a new 30 year fixed mortgage at 3%, because interest rates are better, but the loan balance remains the same. That would be a rate and term refinance, the other kinds of refinances called the cash out refinance and that's basically where you're actually you're getting money out of the transaction and so if you have that same 30 year fixed mortgage at 4% interest, and you have a balance of $200,000, but your home is appreciated significantly, or the property has appreciated significantly, you might be able to go get a new mortgage, a 30 year fixed mortgage at maybe the same 4% but for $300,000 and so that new mortgage is going to replace your old one, it's going to pay off the 200,000. But there's $100,000 left, that goes to you as cash in the form of tax free cash and so that can be a really, really powerful mechanism or lever to pull if you need access to cash and so those are kind of the two different types of refinances and how they work. Pierre: So those both sound like awesome options. Why wouldn't everyone always just refinance? Michael: Yeah, it's a really good question and a lot of people do they refinance, and refinance and refinance throughout the life of their property or maybe their own lives because it is such a powerful tool. Pierre: Refi till you die. Michael: Yeah, refi till you die, so it was it was not shocked to swap your job for the 1031 refi till you die. I love it. So yeah, I mean, it's a very powerful tool and of course, everyone's probably thinking, wow, if it's so powerful, like, is there no downside? I think that there are some downsides that we do have to talk about and understand. So first and foremost is it costs money to refinance, and some lenders will tell you oh, we can wrap the closing costs into the loan and so what that basically means is, if we go back to our initial example of like, $200,000, if it cost five grand to refinance, your new loan might be $200,000, to pay off that initial $200,000 loan, but it might, your new loan might actually be $205,000 and so they're wrapping your closing costs into the loan. So you don't have to pay anything out of pocket upfront day one. Now, you're still paying interest on that extra $5,000 over the course of that 30 year loan and so it ends up costing a lot. But for from a day one cash out your pocket perspective, it might not and so that's an option for folks to be asking their lenders about is that an option for them, depending on their situation. The other thing I think it's really important to keep in mind is that it resets the time clock, and for how your payment is broken down and so on a 30 year fixed mortgage or any kind of fixed mortgage, your monthly payment every single month is fixed, we know it's not going to change, it's gonna remain the same for the duration of the fixed period of the loan. But what does change over time is the amount that goes to principal and the amount that goes to interest and at the beginning of a loan, the majority of your payment is going to pay down interest. So if someone is towards the end of the life of their loan, they're paying down their principal very, very quickly and so if you go do a refinance again, that time clock is going to reset and now you're going to have a duration that you determined for the loan, but most of your payments going towards the interest. So that's important to understand that distinction as well. Pierre: What is a HELOC and how is it different? Michael: So a HELOC is an acronym and it stands for a home equity line of credit and basically, that is a line of credit against the equity that you have in the property and so a lot of refinances, they will give you 80% or 75% of the property's appraised value or they'll simply just replace the mortgage if you're going to take a lesser amount. So if you've got a $200,000 property, and it's worth 400k, but you do and rate and term refinance, you're gonna go get another $200,000 mortgage, that would be a 50%, LTV loan, versus going maximum 80%, LTV or 75%, if you're going to take out $300,000 loan, then you're going to be at 75%, you're gonna get cashed out. So a HELOC is basically on the equity and so if you have a let's say you have $100,000 of equity in the property, and a lender says, hey, we'll give you 80% equity line of credit, that means that they're going to give you like a line of credit of say $80,000 and the cool thing about line of credit is that they just sit there until you use them or until you need them and so if you set one up, you set up a line of credit, they're often free to set up with lenders, and never touch the thing, you're not going to pay a penny in terms of interest or principal payments, because you're not drawing on that line and you can think of it like a credit card. So with a credit card, if you're not spending any money on a credit card, you don't have any payments to make, there's no interest accruing. Same thing with a line of credit, so a lot of these lines of credit have a checkbook associated with them or an account associated with them. And so if I needed a $10,000, tomorrow, or in two days from now for repair, I could write myself a check, write Michael Albaum, a check from Michael Albaum line of credit, I'll deposit the check with my mobile deposit depositing app, it'll have $10,000 in my account, by the time the check clears now is when the time clock starts running on the interest payments and he locks are going to be traditionally interest only payments and the interest rate is going to be fluctuating it's going to be variable and it usually changes monthly. And there's oftentimes a ceiling and a floor. But so if I have a $10,000 balance, let's say my payments 100 bucks next month, if I make that $100 a month interest only payment, my balance hasn't decreased at all. So I'm not getting this benefit of the loan pay down like I am in a fully amortizing loan, which is basically what a cash out refinance or writing term refinances. So I want to just be very cognizant of what my balance is, what my interest rate is, and how much I'm paying off every month. Because you could pay off the entire thing tomorrow, or the day after, if you got a big $10,000 check in the mail, you decided, hey, I'm gonna go pay this thing off. There's usually no prepayment penalties, you can pay it off as aggressively or as slow as you'd like. It has a set period of set life that you have to pay it off in X amount of time. But that's going to be HELOC specific, but it's a very flexible tool and so your cash out refi is gonna be full interest, full interest and principal payments, fully amortized loan, your line of credit tends to be an interest only variable flexible line of credit you have access to. Pierre: Okay, cool. I have a few questions on so the So you're essentially on a HELOC, you're borrowing that money from the equity in your property? Michael: Yes. Pierre: So when, who are the interest payments going to? Michael: They are going to the bank, they're going to the lender that has that line if you have that line of credit with. Pierre: Okay, all right. Next question is you said it's a variable rate. Michael: Yes. Pierre: What okay, so say you're, you have a certain amount of equity in your property based off of its current valuation, and there is some like major market correction where the value of your property drops down significantly. Does that new calculated equity in your property, then replace the amount that you had available to you and that HELOC? Michael: It's a super good question and so it's something that a lot of people were very concerned with, sort of COVID is, hey, I've got these lines of credit out, are our lenders gonna start calling them do which they can, they're legally allowed to do that and it's all in the mortgage language and so it's important to read and understand that language very closely. But it can happen, lenders can say, hey, major downturn, like we're closing your line, you need to pay it all back and understanding what that mechanism is and how that works is going to be specific to your lender and your HELOC. Traditionally, I haven't seen that happen a whole lot, because values tend to fluctuate with time and lenders when they're looking at how much line of credit will extend to you. They're building in buffer and that's why lenders are only giving out 80% loan to value or 75% loan to value. They're like hey, Pierre, you've got to have 20% 25% skin in the game and so the property has to drop 25% before their investment is even at risk. So same thing with the locks they tend to go a little bit higher on the LTV I've seen up to 90% and so there's still that tempers sent buffer, which lenders that's how they're underwriting things, but to your question, short question long answer, they can close these lines of credit, yes. Pierre: Okay and then how do the HELOC affect your credit rating? I mean, it's pretty big chunk of credit that you're then pulling out on $80,000. That's a huge credit card. Michael: Yeah, potentially. So it's a lot of it'll show up as a second mortgage. That's really what it is. It's a second loan against the property and I, I'm not 1,000% sure. So I would ask the lender that you're getting the line of credit from, but my understanding is that most lenders when they do a credit poll, they'll see the full balance, the full amount of the line of credit as a debt on your credit score and so they'll just assume that you're making the minimum monthly payments on that loan, affecting your debt to income negatively. So I hope that answers your question. But again, I'm not 1,000% sure. But that's how I've seen it done in the past. Pierre: Going back to the variable rate on a HELOC are can that rate just change from one day to the next or is there a schedule that it changes? Well, you can you plan ahead, you know, and say, you know, did you can use it within this certain time period before the rate rises or is it just like, rates are variable, we changed it. Michael: Most lenders do monthly rate adjustments, and there tends to be a ceiling and a floor and so you know, going into it, okay, this is my maximum interest rate this, this will ever be throughout the life of this HELOC, which tends to be five to 10 years. So you can have an understanding, but no, it's really tough to forecast. Okay, rates are gonna go up on this date, and this is what they're going to go to. Okay and if you figure out how to do that. Pierre: Alright, so that brings us to, when do we use which one? When does a HELOC make sense and when does a refi make sense? Which one's better? Michael: It's a super good question and one that I get in the Roofstock Academy all the time, I'm constantly chatting about it with folks, especially given today's market environment where there a lot of people have made a bunch of equity in their home over the last couple of years. So it really depends which one is better, it really depends on it's a case by case basis. What I often share with folks is if you have a plan for the cash, within six to 12 months, I would go cash out refinance, if you're not sure, but you just know you want to have access to cash. I go with the HELOC because again, in that in that cash out refi scenario, you're paying on those borrowed dollars, day one, independent of what you do with the money independent what you do with the proceeds. So if I've got $100,000 proceed from a cash out refinance, but I don't quite know what I'm gonna do with it, I'm just kind of having it sit in my bank account that's costing me principal and interest every single day it's sitting there. Versus if I go the HELOC route, I set up a line of credit for $100,000. I can access it tomorrow if I needed it, but doesn't cost me anything to have the ability to access it on a moment's notice. So it really depends, I would say on what you're planning on doing with the proceeds. It also depends on your current loan terms, and what your new loan terms would be in terms of a rate and term or cash out refi if you're at a two and a half percent loan, 30 year fixed, and you would have to go through a five and a half percent. If you want to do a cash out refinance, I would think long and hard about that depending on the loan size on the smaller the loan less impactful a delta and interest rates gonna be, but on a really big loan, that can be really really, really impactful to your monthly payment. Now you could make the argument that oh, I can always refinance again down the road. Yeah, but today, I know exactly what your payment isn't at two and a half percent and I know it's pretty darn attract…

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How much is too much real estate in your portfolio? May 07, 2022

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A common refrain in the investment world is, diversify your portfolio. But many real estate investors have a massive majority of their net worth in property. In this episode, Michael shares his thoughts on portfolio diversification and why he is so heavily focused on rental property. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Pierre: Hey everyone, welcome to the Remote Real Estate Investor. My name is Pierre Carrillo and today I am joined by… Michael: Michael Albaum Pierre: and today we are going to talk about portfolio diversification, so let's just jump right in. Hey, Michael. Michael: How's it going Pierre? Pierre: So Michael, one of the basic pieces of investment advice that I hear everywhere is diversification, diversification, diversify, don't be too consolidated. Because if any one piece of the market goes down, you're going to be left exposed somewhere. I remember you saying in a previous episode, that you're about 80-85% in real estate, and that made me think, wow, that's heavily consolidated. How do you find, how do you find comfort in being so consolidated in one asset class? Michael: Yeah, it's a really good question, Pierre and I think, for me, my strategy has changed over the 10 plus years that I've been investing and so for me, I was very focused on single family when I first got started and I think a lot of people do kind of find their niche inside of single family investing and it's funny because there's this, there's kind of two camps. There's one that says, diversify, diversify, diversify and then another one says, get rich in your niche and niche down and pick one thing to do and do it really well and if you can do it really well, you don't really need diversification. Diversification is for people that maybe aren't able to niche down or pick one thing or particular that they're passionate about, or really good at. So for me, I was always thinking about single families. I wanted to purchase a bunch of them, I wanted to own a bunch and I thought that was great and at the end of the day, and we've talked about it on prior episodes, the like I think what people are always scared about is their value decreasing, given some event or over time and that's when people talk about, like the S&P 500 index funds, you have a bunch of different companies. And so if one goes out of business, you're not only holding that stock and so that is usually because the value can evaporate and unless the stock is paying some kind of dividend, or it's paying some kind of yeah, I guess that's what stocks dividends, the value of the stock is really in the value and hopefully it goes up over time. With rental real estate, we've got kind of a two headed play here. One is like a yield play a cashflow play, that pays us every single month and every single year and then the other is the appreciation, which is congruent, or synonymous with the stock value going up over time and so again, I'm really less concerned with the value of the property over time, because given a long enough time horizon, I'm comfortable, that thing is going up into the right. But even in the event of a downturn where the value is decreased, I've got yearlong leases and so the rent that I'm going to be collecting is likely going to be unaffected and unchanged. So for that reason, I was really comfortable getting very involved in the single family asset class. The other thing to think about is, I think real estate is this big, all-encompassing umbrella, if you will, it catches a lot of things, and a lot of different events like sub asset classes, for those you watching. I'm doing air quotes, so there's single family investing, there's multifamily investing, there's triple net lease investing, there's industrial, there's flipping, there's all these other things that you can be doing under the real estate umbrella, that I would argue are diversifying you within the asset class itself and so if you'll say, well, people talked a lot about during when COVID first hit, oh, apartments are doomed. Everyone's moving to single family, they want more space. Well, a lot of people thought a lot of things about during COVID when the pandemic first hit, and I don't think that was necessarily true. It was maybe in a little bit of San Francisco and New York and some of these major, major, major metros, but most of our listeners and most of our beginning investors aren't investing in those cities to begin with and so A) I don't think we saw that happen B) we definitely didn't see values fall through the floor, they kind of went the other way. But you can be diversified within the asset class. So if you own multifamily, you own single family, maybe you did see some folks leave your multifamily but maybe you saw your single family values increase. So I think that there's a lot of different ways to play this and then last but not least, I would say if you're in the short term space, you've been killing it for last two years and so again, that's a kind of third way to diversify with in the real estate asset class itself. Pierre: So with for people just starting out and if they're just you know, you save up a big chunk of money and you because there's a high barrier to entry to get into real estate. How should like is does that diversification just happen over time or is there some sort of comfort you can find in that initial first down payment that you're putting up? It's like, chopping an arm off just to get started? Michael: Yeah, well, I think for those people who are just getting started, one of the reasons that they may have been attracted initially into real estate is because it is diverse and different from the other things that they're doing. It's not the stock market, it's not a it's not an investor, a retirement portfolio, which is often invest in the stock market. It's not in bonds, so it is different and without getting into like the correlation of the real estate market versus the stock market and talking about, I think it's beta, or maybe it's alpha talking about the differences in the correlations, it's different than what they're currently doing and I think that in and of itself means that you are diversifying and if that's a part of your investment thesis, that diversification is important, this can be a great place to come do that. So I think with regard to your question about saving so much for the down payment, or kind of chopping off an arm and putting a big chunk of your potential overall net worth into that first property, I think people need to think long and hard about that, I think they need to understand what the risks are, what the benefits are and if those are both tolerable, I think the conclusion that I came to and that a lot of other people have come to for themselves is that real estate's a fairly safe place to park money, because of what I mentioned earlier, if it's rented and the value goes down, it doesn't really affect us and it's an unrealized gain or loss, just like in the stock market and so you'll say, oh, I made a bunch of money, the stock market today, well, not unless you bought or sold. So unless you're actually doing a transaction, the value is kind of meaningless. It's always fun to talk about at parties or get together with your friends. Oh, that's probably my net worth whatever like, but doesn't mean anything. It's not tangible and realized until you do something with it and so if you are planning on doing this for the long term, and for the long haul, parking money in real estate, for my experience has been a really great thing for me over time. Pierre: Okay, so I know you're not, we're not giving investment advice at all here. But from the tone of it, real estate is a safe place to park your money that implies to me that you are like, you're not super worried about a major market correction affecting your values or affecting rent prices to the point where it brings you into the red. You are you feeling good moving forward into the next year? Michael: Yeah, I'm feeling really good and here's why. Like, I was just listening to a book, an audio book, as part of the Roofstock Academy, we do a book club, and this quarter, we're reading first 2 million by Dan sheets, and he's gonna be joining us for a Q&A session with all of our members who read the book. And so I'm reading this book, and he's talking about the 4% rule and for anyone that might not be familiar, the 4% rule basically says, once you've hit a $1 amount inside of an investment portfolio, and a stock portfolio, you can very safely and confidently withdraw 4% of the value every year, because the hope is that you're essentially living off the interest, you're essentially living off the gains that that portfolio is throwing off, and the principle is not going to be reduced. Well, that's all fine well and good when the markets going up. But when the market goes down, and you're continuing to draw on this account, you could see that dwindle very quickly, and possibly to a point that's unrecoverable and so that again, is the value of the stock is going up or the stocks are going up in value, the portfolio is going up, you're drawing down a certain percentage. For real estate oftentimes, we're not relying on the principal value of the property to do this stuff with, right we can, there are tons of people that I know that only live off the cash flow that the real estate portfolios are generating, they don't care what the value is, it can go up, it can go down, it can go sideways, it doesn't matter because the cash flow the property generates is independent of the value. Your tenants aren't saying, oh, well, the property is valued at x. So I'm only going to pay you why and rent doesn't work like that, which is the nice thing and so I'm much more comfortable and confident in the historic performance, the really strong historic performance of real estate, again, for the rental market, independent of what values are doing and so if I'm someone that's planning to live off my cash flow, I get a great deal of my living income from cash flow. I'm not worried about the principal balance versus in the stock market. When it goes up. It's great when it goes down. I mean, that can that can take a long time to recover from. So yeah, I'm very comfortable going into this the upcoming year 2022 and beyond. That's like a Buzz Lightyear saying to infinity and beyond. Pierre: That's good to hear, that makes a lot of sense. I guess there's other ways you can find that diversification beyond just between single family and multifamily or even commercial. I know you're investing in vacation rentals outside of the country. I mean, you're completely separate from the US economy. So and then we've spoken on the podcast before with Peter Badger doing the investing in agricultural land and, and internationally as well. So yeah, I guess there's a lot of different ways that you can achieve that diversity with or diversification within your portfolio just using real estate. Are there ways that someone might be exposing themselves to learn how to say this, but like being under diversified in real estate? What are some things that people need to look out for? Michael: I mean, I guess in theory, you could be if you were invested in New Orleans, when Katrina hit and didn't have really great insurance policies, that's probably an area where you could easily be overexposed. It's a really good question and one that I haven't really thought about because I come from the insurance world and so I'm make darn sure that I'm, I'm not taking on too much because aggregate exposure in the insurance world, an insurance company will look at all of the insurance that they have in a particular area and say, okay, well, if an earthquake happens, we're going to have claims on all of these buildings, that's going to be a ton to pay out. So that's how they're evaluating the risk. I do something similar, and say, okay, well, if something really bad happens, I've got the insurance. But how long? Is it going to take these properties to get rebuilt? And what does that look like going forward? So I think you absolutely could, but I think it's, it's going to be a factor related to other things, not purely the fact that you are investing in own properties all in the same geographic location, are all inside the same asset class and as we talked about regularly on the podcast, real estate is so hyperlocal and so someone could argue, oh, you've got 10 homes in Louisiana, and 10 homes in North Carolina and 10 homes in California and so you're all in single families you ever exposed? Well, I would argue that that might not be the case, I don't think we can look at that. That surface level data point and say, yes, someone's overexposed, I would say, let's look and understand, okay, what kind of natural catastrophes are in an area? Are they all on the same street? Do they have good insurance policies? What does that look like? What does their occupancy look like? So it's tough to say, without doing a little bit of a deeper dive, that just because someone owns X amount of properties, that represents Y percentage of their net worth, they are over or underexposed and it also comes down to risk tolerance, you can have two people that own very similar portfolios. One is can't sleep at night, because they're worried about a hailstorm taking out all the roofs, the other could not think twice about it, because they got good insurance, or whatever the case is for that person. So it becomes very personal and that's why one of the reasons I love real estate is because there's no right or wrong, there's only right or wrong for you as an individual. Pierre: Yeah nd some other thing is it's working out in the past, it's just making sure you have multiple strategies available for you with every property that you have. So if you're buying a short term rental, you know, see if it's going to work, maybe you won't make as much money. But could it work as a long term rental? That's another way just to kind of build diversity within your single property. Michael: Totally And you're seeing a lot of people do that. Now as they're pivoting. They're realizing, hey, my single family has long term makes way more sense as a short term rental, awesome, don't have to do a whole lot to the property to pivot that way. Pierre: So that that'll make sense And thanks for all of that. Speaking about the other remainder of your portfolio, how do you assess where you're going to put your money outside of real estate? Michael. That's a good question; That's going into index funds. Just diversification, I have to think about it, I have to worry about it. I just set it and forget it type of thing. We just had a guest on the podcast couple weeks ago, he was talking about picking stocks, and how index fund investing is kind of silly, bu…

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Here’s what you need to know about investing in the Greenville SC market May 06, 2022

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In this episode, we are joined by Matt Crawford and Alex Fischer, two Roofstock Certified Agents, to discuss the Greenville and Spartanburg South Carolina markets. We cover the different asset classes, neighborhoods, demographics, price points and return metrics, short term rentals, geographic considerations and much more. If you want to learn more about investing in South Carolina, Matt and Alex have the goods. Contact Matt and Alex at: acquisitions@evernest.co --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The remote real estate investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. What's going on everyone? Welcome to another episode of the remote real estate investor. I'm Michael album and today I'm joined by Matt and Alex, two of our agents as part of Roofstock Certified agent network down in South Carolina. And they're going to be talking to us today about the Greenville and Spartanburg markets and everything we as investors need to know about it. So let's get into it. Matt Crawford, Alex Fisher, how are you guys? Man? We're doing great Michael here. Thank you guys so much for having us. Good to be here. I guess. Yeah, our pleasure. So I know you because I work with you guys regularly as part of our certified agent network with Roofstock. But for anyone who might not be familiar with who you are, give us a quick rundown who you are. Where do you live? What what markets do you operate in? And what is it that you're all doing in real estate? Absolutely. So for everybody out there, you know, welcome to the Roofstock remote podcast as you guys know, Michael, he's a champion of the people he's the one in the van rockin. But for us, you know me now it's we're the greatest broker Team roofstock has ever seen. That lightly, but I do mean it. I think we're very passionate about we, that what we do, how we present the products to you guys, as consumers. And as the educational base, you know, we're very thankful for the opportunity. So we represent a couple of markets here in South Carolina. It's where Alex and I are born raised. Alex, you want to add two cents on top of that, sir? Yeah, I mean, obviously, our hometown is Columbia, really anywhere in South Carolina. That's where we have most of our experience. And you know, we love doing nothing more than trying to get out here and make some people some money and find some good deals. So our obviously our go to is going to be South Carolina areas. Love it. And why did you guys partner up? And how did you two meet? That's such a long story. But it's been we've been kicking it for, like 12 years. And and you know, and we're both we're both 32. So I mean, we were we were young lads and our ladies at the time were like best friends. And you know, Alex's wife was always talking to my girl about meeting Alex and I thought he was strange because he was like, a financially adept teenager, like Alex had his first house and like nine years older, or like, 19, whatever. Don't none of those. And meet Alex just kept kicking it in. You know, Alex was working at one of the top four consultancy firms. PwC. And I was out in Denver, sort of so notes and Alex, you know, hats off to him. He'd call me like, every week, checking up on me, and it's like, Matt, you know, we got to get new real estate, we have the potential. He really convinced me to move back to South Carolina. And fast forward five years. We have our own companies now. Love it. All right, you too. Well, let's talk about Greenville and Spartanburg, South Carolina. It's a market that I'm not very familiar with. And so we're going to, you know, talk to me, like I'm five years old walked me through. Why is are these markets? Interesting? Why should people be interested in investing in rental properties in these two markets? Yeah, so I guess the main differences between, you know, the Upstate and Columbia is property values are a little bit higher. You know, Greenville is an incredibly cool city, especially compared to Columbia. So it's, it's pretty big, and it's owned, but there's a lot around Greenville, which would, you know, be the mountains, you know, it's convenient to the beach, which is maybe about two and a half, three hours away. But also, you've got the North Carolina, you've obviously got, you know, Clemson around the area. There's a lot of opportunities in regards to Reynolds because there are a lot of colleges around there. But you know, our biggest thing is pushing the appreciation, you're going to see that the rents are not keeping up as much with the property values are at least as quickly. But the good news is they are good opportunities for long term holds because of the appreciation and from what we've been seeing the appreciation there in the upstate in general is just much stronger than it is in Colombia, that the good thing about Colombia is the opportunity for rents because the rents are keeping up with the property values, but I think we're going to see a lot of that stuff slowly. You know, I guess level off a little Bit just based on how the market is kind of moving now. So then the rents will eventually kind of just end up evening out with what the appreciation is actually doing. And Matt, who are some of the big employers, I know, Alex, you mentioned, Clemson and a lot of colleges around there, but are other than college students and college faculty. What are people moving to the area for for your typical jobs? I mean, are there big employers there? Yeah, you know, I think Michael, you know, putting you in the frame of mind of like a new investor coming into South Carolina, and for all the investor, and whether you're 18 years old, looking for your first rental or a seasoned investor with 100 properties, I always like to sort of start at the origin story of the market. And Greenville upstate in general, is like the textile industry of the US. I mean, you got to look historically, in South Carolina and the South, you know, this is where a large majority of the cotton of the Indigo dies of anything the derivative of the textile industry, really was created. And that really set its roots into Greenville and to Spartanburg itself. So Greenville still has a ton of products from that era, which include huge textile mills. What that means from an investor's standpoint, is that you had all this workforce housing, you know, even my mom was from easily, which is about 25 minutes from downtown Greenville. They grew up on the Mill Hill. And so as you can imagine, it's perfect substance for the gentrification to happen, you know, and it's not 20 years ago, where we could buy a house for 75,000. And now it's worth 500. But you can still follow that development curve does molding out of Greenville into areas like easily fantastic market to look into. The biggest one, I think the all star of this podcast for everyone listening is going to be Travelers Rest. And I think Alex knows a lot about this as well. Because Greenville on the Clemson grab, right, Clemson, Clemson Tigers, you know, we're about 30 minutes past Greenville. And so I got to see this beautiful development happened in Greenville, which is just created a pretty high saturated market. So now for any investors and yourself, Michael, you know, I think pushing to the satellite markets that are still quite contingent to Greenville population and economic drivers makes the most sense. So that's really were trout interest is becoming an all stock market, low property purchase prices, you know, you're talking three twos 175,000 or less, the really good median rents, almost to the 1% rule. I don't think it's as sexy as here in Colombia. It is just because Greenville has already seen so much more maturation than here in the middle the state says Greenville, so biggest thing on Greenville. Here we go Pierre’s driving in and if we drive in, travelers risks going to be you're looking at o'clock at 11 o'clock to us. So guys, if you're out there, you're wanting to see properties. I can guarantee if you Zillow, Greenville, you're gonna see stuff for like 300,000 400,000 that rinse 2500 or so now you go up to Travelers Rest, those economic numbers are totally going to flip flop. So please feel free to look at these kinds of products is the same MLS as Greenville. So Alex and I will be publishing properties. And then if we come back to the center of the city in Greenville, and look at nine o'clock on the clock hands, you're going to look at easily so it's directly to the left of Greenville. Sort of right in the left there to the screen. Thanks, Pierre. Also a great case study for what's happening in this market. As a lot of the renters, the investors and the development dollars are starting to bleed out of Greenville, which is sort of the cool analogy as Greenville really had its foothold in the indigo dye business. So if you can imagine this indigo dye starting to come out of this central geo easily is fantastic. You can still find great inventory. But even as Alex and I thought, Hey man, let's open up the upstate with roof stock ease these going to be just fish in a barrel. It's not the case. You know, it's still very, very saturated with investment and institutional dollars, which puts Traveler's Rest as my number one submarket You heard it here first, ladies and gentlemen. I love it, Matt. And to give people kind of a frame of reference, what was the general population of Greenberg? MSA? Yeah, I think it's almost like 500,000 Okay, so it's pretty massive city. definitely bigger than I think it's like the fifth or sixth largest city in South Carolina. I definitely Being a local think it's like, probably number two of like, most sought after livable millennial culture cities. I think it goes Charleston and probably Greenville. And you know, guys, if you're looking for Airbnbs, totally different ballgame, we're talking totally different set of data here. But the short term rental market in Greenville is off the charts. And I think that is, yeah, definitely is perfectly perfectly tied to the nightlife and the culture that Greenville has done. And even just to dig a little deeper here, you know, 25 years ago, there really wasn't a main street or a main vein in Greenville, in fact, what they call false Park, which is a main park, and mainstream Greenville was beautiful, natural waterfall, it was actually covered by an overpass right here appears on a false park on the reading. So the Reedy River cuts to the city, this used to be covered up. And now in the last 10 to 15 years, they've probably dumped 100 million or more into this gorgeous walkable facility that has these natural features are just a beautiful suspension bridge. And that is has created this really nice culture that is in Greenville. And I think that's why the short term rental market really works if you're looking for higher property purchase prices, but I think your Airbnb models will be rock star here. That's really interesting that and so talk to me a little bit about property taxes, because I think that's something that's always on people's mind is one of the a big expense that can either make or break in investment. So how do those work in in South Carolina? Or maybe more specifically, in Greenville? Yeah, so typically what we do, and a lot of people don't realize this from the get go, but everybody's looking at Zillow, you can go to any house, and you can see what the roughly what the what the taxes would be. However, with Columbia, South Carolina, in general, the property taxes are different, you know, there's two different types of property taxes, you got an owner occupied and the non owner occupied and people don't realize the non owner occupied is obviously, you know, the, these big investors that come in, these are the taxes that these guys are gonna have to pay the small guys, whatever. So when you live in the house, and you look into Zillow, you're gonna see one number, but in reality, that number can essentially be doubled, when you start to consider that you're actually going to put a renter in place, which is a huge buzzkill for a lot of investors. But at the same time, once you kind of understand that is the case, now you can kind of work your numbers around you can kind of you'll you'll look in a different direction for the opportunity, I guess you could say. But typically, what we tell people is when it comes to taxes, the non unoccupied rate is going to be roughly and again, this is just a rule of thumb, this is not exact, is about two and a half percent of the purchase price that will give you a good gauge on, you know what your monthly cash flow would be. And as you can imagine, you know, what I would say is, you know, the owner occupied tax rate is probably around one to, you know, one and a half percent. So as you can imagine, you do the math, it's almost double what the the owner occupied rate is, which is very unfortunate. And that's probably been our biggest hurdle for the South Carolina markets. But again, you know, it just allows us to kind of, you know, I guess stretch our fingers out and see what we can find in regards to more off market properties. Maybe some smaller homes, but it really does make it more difficult for investors to actually go out and find something just because it does, it does hurt the cash flow a good bit. Yeah, that makes total sense. And we talked a lot about Greenville. What about Spartanburg? What Should folks be aware of and where should they be looking out there? Okay, cool. Cool. Let's uh, so drive the car, probably about 45 minutes east. And now we're at Sparkle city baby, which is sort of just a local term slang for Spartanburg that I can give no context to. I have no idea why they call it sparkle city, but it makes for a fantastic nickname. Totally. So we're driving the sparkle city. Or we're laying it down and to me, and I think even to Alex's standpoint, I'm a bigger fan of Spartanburg than Greenville. Granted, you know, snagging the Airbnb downtown mainstream Greenville. Sounds awesome. I think if you're looking to build long term rental portfolios, maybe two or three a year you're wanting to be in Spartanburg. That's just because it's more like a It's not rural in the sense, but it's more workforce housing. I think Greenville, you're going to be playing with a lot of individuals that are potentially, you know, making 80 to 100 grand a year. Not necessarily looking for a true three two rental whereas in Spartanburg it's definitely labor force and I think you find that labor force In the biggest BMW plant in the southeast, so BMW Michelin all have one of their largest manufacturing plants, right outside of Spartanburg. I think all the x five series beamers in the world are made here in this BMW plant. Which is beautiful. Yeah. So like you drive by it as it's as gorgeous setup. So really, really cool. And I think that's driven, this workforce class of tenants that you would see, of course, there's 10 colleges in Spartanburg. And if you were to visit Greenville, you're like, oh, man, this place is poppin. Like, there's Michelin star restaurants.…

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A quick guide to commercial lending for real estate investors May 03, 2022

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Most investors are familiar with using conventional mortgages on residential property, but how do loans work in the commercial space, or after you have hit your 10 conventual loan limit? In today’s episode, Emil and Michael walk through what you need to know about using a commercial mortgage. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions, and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by my co-host… Emil: Emil Shour. Michael: And today we're gonna be talking about a topic that I've been getting a lot of questions about inside the Roofstock Academy and that's commercial mortgages and what do I do with I've hit my 10 loan limit on the conventional side. So let's get into it. Emil, what's going on, my man? Emil: Hey, dude, how you doing? Michael: Hanging in there, traveling on the road. Hanging out, no complaints how you doing? Emil: As always…I'm good, I'm good man. Just ready to talk real estate and loans, conventional commercial. I mean, this is it is an interesting one, actually. Because I think when you're new, and you hear about like the 10 loan limit, you're like, what do I do after that? I remember being like, what am I going to do after that and then you learn a little bit more about commercial, you're like, oh, this isn't that complicated and it's really not that much more expensive from an interest rate perspective. Michael: Yeah, yeah. It's so funny, I hear the same thing all the time from folks like, oh, what I do, like, I can't get started investing in real estate, because what if I hit my 10 limit, like you have a little worry about that after you have 10 properties, like, that's a great problem to have and by that point, most people figure out an alternative source of financing anyhow, so. So I just, you know, let's start by talking about what a conventional mortgage is kind of how it works, what the mechanics are of it, and then we can transition to talking about commercial mortgage. So Emil give me the breakdown of what a conventional mortgage looks like, and sounds like and what some of the terms are. Emil: Sure and please correct me if I incorrectly say any of this. So conventional mortgages, you know, your typical bank will loan these out, they are usually government backed, they come in 30 or 15 year amortization, meaning that is the life of the loan and the repayment period. What else am I forgetting here? You pay your I mean, do we want to get into like the nitty gritty like, most of your interest is paid up front, and then more, your principal is paid on the back end. So it's not like a linear payment through those 30 or 15 years, but… Michael: Not yet, I think that's perfect, man. So most people, when they go to their bank, they're gonna see their 15 year fixed, 30 year fixed, they also have ARMs, a lot of banks will offer ARMs, which just as an acronym for adjustable rate mortgage and you'll usually see that as a five one or a seven, one or a 10 one and that first number is just how long the interest rate is fixed for. So in a five, one situation, it's fixed for five years, and then it adjusts once per year, every year, is what that five one means and that amortization can either be a 15 year or a 30 year, I believe, but check with your lender see what options they have and just like Emil mentioned, the, it's like how many pieces the loan is cut into is the amortization, so 15 years, you're gonna pay 15 years by 12 months, or 30 years gonna be 30 years by 12 months. So on a shorter mortgage on a 15 year mortgage, your payments are going to be higher for the same interest rate, because you're just paying it back sooner. So let's shift gears here a little bit and talk about commercial mortgages to you I can't remember called do you have any yet? Emil: I don't, I have only used since I've only bought single family and two to four unit, I've been okay using conventional 30 year fixed. Michael: Awesome and that's a great point to that, like for everyone listening, that might not be familiar, two to four units, you can still use conventional financing. So you can still go to your Standard Bank get a mortgage on that property, commercial is anything five units or greater and this can take the form of a couple, this can look like a couple of different things. This could be five single family homes purchased as part of a portfolio that you want to put into a single note or a single mortgage, as opposed to having them on each individual five mortgages. So you can go can commercial that way or it can be a five unit building a small apartment building small multifamily and so commercial mortgages work a little bit differently and one of the biggest differences is that the lender is going to look to the property or the asset to carry the debt as opposed to you as the borrower. So anyone who's gotten a conventional mortgage for the for their primary or for an investment property is likely familiar with the full cavity search that the that the process the mortgage process is and so they want to see tax returns and income statements and bank statements and who your mailman was at your last three properties and all that sort of thing. So it's just like it's so intense, which is great and a big part of that came about after 2008 people said, hey, we have to get stricter with our lending requirements so that people aren't defaulting on their mortgages causing this whole, massive tailspin. So the lending institutions really tightened up and I think that's a good thing. People who shouldn't be getting mortgages are having a harder time getting them. Now, the commercial industry is a little bit different, because those loans tend to not be backed by the federal government, like Emil was talking about Fannie and Freddie are two government industries, agencies that back and often purchase these mortgages, the commercial world is a little bit different and so a lot of these mortgages are actually kept on the books of the lender and so that's often referred to as a portfolio lender, the mortgages, they on their portfolio are part of their portfolio and so because of that, they don't have the same lending requirements that conventional lenders do and so they can actually look to the property or to the asset itself to say, okay, this is what the taxes are this with the insurance are, this is how much the debt services or the mortgage payment is. That means there's this much leftover for you okay, the property works, the numbers work and what they're often looking for is what's called a debt service coverage ratio, or a DSCR of some number, a lot of banks use 1.2, or 1.25 and they want to see, okay, the debt is $1,000, I want to see that the property brings in at least 1200, because that's going to be a 1.2% debt service coverage ratio. So they're taking the fraction of how much the property brings in as compared to how much debt you have on the property, they're also going to look at what the taxes and insurance and other expenses are an underwriting accordingly. But that's in essence, what they're looking at, they are going to be concerned with you as a borrower, they make sure that you have money in your account that you're not in the middle of a bankruptcy, and that you haven't defaulted on a bunch of other loans. But you also have what's called non-recourse loans, which are basically where the lender is saying, okay, if you default on the loan, we're not coming to you as an individual, we are going to just take the property back, and we'll deal with it afterwards versus full recourse is, hey, you still make your mortgage payment, that lender is going to take the property back, and they're going to come after you to get their full payment back. Emil: I have a question for you, Michael, what is when are you usually eligible for non-recourse? Because who wouldn't want non-recourse? Michael: Yeah, so some lenders offer it at a certain dollar amount for the loan, that's the threshold like over a million dollars is non-recourse, or you can potentially buy it and so you can pay a higher interest rate to have it be non-recourse some lenders will offer that and so it's a really good question to ask lenders as you're having the conversation with him is, hey, is this recourse or non-recourse? Oh, if they tell you it's recourse, ask them if there's an option for non-recourse and see what they say. Because you're right, it's given the choice, non-recourse is definitely better. I have the vast majority of my loans are full recourse. I'm a personal guarantor on these loans, even though they're made to my LLC, the loan isn't the name of the LLC, I'm a personal grantor on these, but I'm in the business of paying back my loans. So I'm, I'm less concerned with the non-recourse part. But again, all things being equal on choose a non-recourse 10 days at a 10. Emil: Did you choose recourse because you got better rates and for all the like the reasons you meant, you're just getting like, it's cheaper, I guess, for you… Michael: It's cheaper, and it really wasn't an option for a lot of the loan sizes that I was taking on. I just now to get a loan on a on a commercial property ownership on that property that I own with my two brothers. And that was non-recourse half of its non-recourse half of its full recourse qnd then similar on another loan that I'm working on for cash out refi up to x dollars is full recourse and everything above that was non-recourse. So I'm getting into that kind of sphere now. Emil: Very cool. Michael: Yeah, it's a pretty cool thing and then we did a webinar last night for Roofstock Academy and somebody asked a question about getting Portfolio loans out of their self-directed IRAs and I'm pretty sure that all of the lending done in the self-directed space is non-recourse, but definitely check with those lenders who are lending there as well. Getting back to it, so the terms are just going to be a little bit different on your commercial property, the amortization period is gonna be a little bit shorter, typically gonna be 20 or 25 years, and the fixed term of the interest rate is kind of like an arm. So that first number you see, in a commercial loan statement, it could be a 525. That first number five is the fixed period, just like with an arm, and then the second number, the 25 is the amortization period. So 520-525-1027-20 these are all very common mortgage terms, and amortization periods and again, it's just important to keep in mind that the shorter the amortization period, the more expensive or the larger the monthly loan payment. So I'll just give everybody an example here. On a 200,000 to $250,000 property, you put down your 20% 50 grand you have a mortgage of 200,000 at a 4% interest rate on a 30 year amortization, your payments 954 if we shorten the amortization period of 20 five years, your payment goes up to 1055. So about an extra 100 bucks a month by shortening the amortization period by five years. So again, just want to be aware of as you're running your, your analysis, make sure that you're getting your amortization periods, right. I know a lot of folks are using a 30 year calculator, make sure that you adjust that accordingly, if you are going commercial, or you are using a different amortization period. Emil: Aren't there commercial loans where it's like amortize over 25 years, but there's a balloon payment at the end of like 10, where you basically have to refinance or pay the whole loan or something. Michael: Yes, super good point Emil, so you want to make very sure that you understand how your loan operates at the end of that fixed interest rate period. So oftentimes, what you'll see is the loan, let's call it a 525, at the end of that five year period, it's just going to reset, it's going to reset for another five years at whatever the prevailing interest rate is, and most lenders will say it will never go below your current rate. So let's say you're a 4%, five year fixed for over 25 years, and in five years, now rates are at 6% well, your loan is just going to reset at 6% for the next five years, if rates go down to 3%, your loan is going to stay at that 4%. So you might have to refinance, go through that whole rigmarole process to get a better rate. But you could also talk to your lender about hey, you know, rates are dropping out, let's talk about a loan modification kind of thing, which is I mean, I've done in the past and that's really one of the benefits of a portfolio lender is that they keep the loan on their books and so they can be a lot more flexible with what they're doing with their loans, as opposed to the conventional world that serviced by a servicer, there's really not a whole lot they can do to change it without going through the full refinance process. So what Emil your referencing is if the alternative type of loan is one that has a balloon payment at the end and so if we go back to our 525, five year fix over a 25 year amortization period, at the end of that five year period, you might actually owe the entire remaining balance of that loan. Now, you've only paid it off over five years. So you're only 20% through that loan, and the majority of the interest is paid at the front and so you're paying very little principal at the beginning of the life of that loan. So let's say on that $200,000 loan, after five years, let's say you paid off 10 grand, I just picked it over. So you would essentially owe 190,000 still on that mortgage and that's due at the end of that five year period. So what it forces you to do is you've got to go refinance, unless you had a windfall, you had some cash laying around, you can go pay off that full balance, but what most people do is they end up refinancing a little bit 30,60, 90 days before the maturity of that loan, and then they'll go get new debt, pay off the old existing debt. Now they'll have a new mortgage, hopefully, at better terms, maybe it was even with some cash out, if you're in an appreciating market. So people tend to recycle this over and over again. Now something that's super important to keep in mind is the cost of capital, or the cost of doing a refinance or doing a loan. Most lenders are going to charge origination points, their title and escrow fees and so personally, I love locking in the longest term rates, the longest term loans I can get. Because if it cost you five grand to do a loan, and you're doing that every five years, that can start to add up pretty quickly and so even if I've taken a slightly higher rate on the interest rate, but I get to lock it in for 10 years, I can calculate out, okay, if I'm paying an extra $50 $75 a month on the mortgage, because I take a higher rate, but I'm saving $5,000 every five years by not refinancing. That's a pretty big win in my book. So definitely be strategic and look at the math and the numbers behind what type of mortgage you're getting conventional versus commercial, and a…

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Investing in multi-family real estate and opportunity zones w/ Michael Episcope Apr 30, 2022

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Michael Episcope is co-CEO of Origin, co-chairs the Investment Committee, and oversees investor relations, marketing, and company operations. Michael brings 25 years of investment and risk management experience to the company and believes that calculated risk-taking in inefficient markets is the key to building wealth. He frequently shares his knowledge with individual investors on Origin’s blog, Forbes, ValueWalk, and HuffPost, and his expertise has made him a frequent speaker on real estate investment panels and podcasts. Michael learned about the physical aspects of real estate in his youth as he helped his grandfather manage his apartment buildings on Chicago’s west side. He began college at DePaul University and a year later was introduced to the floors of the Chicago Mercantile Exchange. He continued to work full-time on the trading floor for the next sixteen years while attending night courses to complete his undergraduate degree. After rising from runner to broker, Michael was given an opportunity to become a floor trader by a Chicago-based hedge fund, Tradelink, LLC, and then had a prolific nine-year trading career, twice named one of the top 100 traders in the world by Trader Monthly Magazine. Join Michael, as he walks us through his role doing ground-up multifamily development and discusses current market conditions and qualified opportunity zones. --- Episode Links: https://origininvestments.com/ --- Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by Michael Episcope, who is the principal at origin investments and Michael is going to be talking to us today about his role in doing round up multifamily development in today's current market conditions. We're also gonna be talking about inflation, and qualified opportunity zones. So let's get into it. Michael, thanks so much for taking the time to hang out with me today. I really appreciate you coming on. Michael E.: Thanks for having me, Michael. Michael: My pleasure. So I know a little bit about your background. But I would love if you could share just a quick and dirty Spiel who you are, where you're coming from and what is it that you're doing today in real estate? Michael E.: Yeah, how is the quick and dirty so I'll take you back. Well, I'm CO-CEO of origin investments were a real estate investment firm, located in Chicago, we primarily focus on ground up development in what we call the smile states tax friendly, climate friendly, business friendly states. Even though we're located in Chicago, we don't do any investing here and my real estate career if I want to, you know, take you kind of far back started God, I didn't realize this, but I was about 10 years old and I used to go and work for my grandfather in the summer and he was somebody who was pretty gritty bought buildings in the west side of Chicago and if anybody knows, the west side of Chicago, it's not a good area, it hasn't been a good area. Never was and he bought buildings out of tax sales and that was at a time when people didn't take pay their taxes, you can go in there and buy, I mean, a 25 story building for $100,000 and that's what he did and in order to run those, though, you had to be hands on you had to be gritty and so I used to spend my summers with him and, and then I had another friend too, that his dad was in construction. So I love swinging hammers and the bricks and sticks and putting up garages and things like that and didn't get paid much. You know, he'd throw me 20 bucks at the end of the day, which felt great, you know, you had fun building things and then you know, it kind of I left that industry obviously I wasn't in it, you know as a as an employee or even thinking about it. But I got my feet wet there, went to college, I studied finance and econ at DePaul, I got a job at the Chicago Mercantile Exchange when I was about 19 years old, and I was a runner, and that's kind of the lowest position you can hold down there and I loved it, I thought it was amazing. It was just like nothing I'd ever been exposed to and I pushed all my classes tonight and started what I'll call my first career at a very young age and again, I didn't realize that was my career. But I'd stayed in there for seven or eight years till I got an opportunity to trade at the age of 27. So I've worked my way up from a, from a runner to a clerk to a broker and it really didn't love anything I was doing and I wanted to try my hand at trading and I and I got an opportunity and it turns out, I was pretty good at it. So I did that for nine years and ended up just building more wealth than I had ever set out to and when I was done with my career, I was married, I had two kids, I had another one on way on the way my risk profile had changed and I literally decided I don't want to do this anymore. I don't want to be leveraging myself 300 to one every day, and have you know, like be always faced with the potential for a four or five standard deviation because the bigger you get trading, you know, those moves can wipe you out and I've seen guys literally, you know, like lose everything in these moves. So I punched out of that career and oh five, I stayed home for about three months and I think my wife thought I was retired at that time. So I quickly you know, I sort of started at what I'll call a family office. But I also enrolled in the Masters of Science program at DePaul, right to really retool, I knew this is where I wanted to go into real estate to grow my wealth to build passive income because when you get out of one career and I know a lot of people out there are in the same boat you have your asset rich, but you're kind of income poor and how do you turn your assets in income? How do you do it in a very tax efficient manner and real estate is one of the greatest avenues to be able to do that and I never loved the stock market bonds didn't pay enough and figured like, you know, my partner and I got together in oh seven. Candidly, we didn't have a lot of great experiences out there investing our own capital and we just said, look, we can do better than this. Like let's do it together, let's pool our money. Let's build something together and we did and that's what it was in the beginning hanging it started out with the two of us. In oh seven, we syndicated a couple of deals in 0809 started building the high net worth, investor base launched our first fund and 11 launched the next one and 13, the next one in 16 and so today, we, you know, we have four open funds, we've closed for funds, we have close to 3000 High Net Worth investors, two and a half billion dollars in assets under, you know, equity assets, which is the total value of the real estate and it you know, we're considered a top decile manager for all of our performance. So it's been a fantastic run, that's probably a lot more than he wanted in this this quick. But, you know, it's hard to condense all that. Because I think the story from how I started to how I got here sometimes doesn't connect unless I share those early days with you Michael: No, it's so so good. So I just curious, Michael, you started with multifamily, or that's kind of where you ended up? Michael E.: It's more or less where we ended up where we gravitated towards and in in, 0708. I mean, you can think of us more like a family office, we were two guys trying to put our money into real estate and we're buying deals and at that time, were buying distressed notes. The world looked very different, though, in a way that in oh eight, capital had all the leverage, everything was trading. So far below replacement costs, we were buying bank loans, and it was more of a pricing exercise which fit perfectly for us because we wanted to protect our wealth, we wanted to manage it, we were looking for big edge in the market and that was the way that you were able to find it and when we launched our first fund in 2011, the dead space and sort of dried up right the distress that and throughout that entire exercise of buying debt, what we really gravitated towards was value add buying things cheap, fixing them up adding value and so that's what our first fund was about. But it was really agnostic in terms of asset class. So we did everything from industrial, retail, multifamily, even student housing in that and then fun two was a little bit narrow or fun two was multifamily office and industrial fun, fun three was office and multifamily and today we've sort of narrowed the world down to multifamily only and the reason is, is what I talked about earlier is that in the beginning capital had all the leverage and then as you as the world normalized, and things started a trade at or above replacement costs, you really have to understand how to win at margins and the only way to do that is by setting up operations in a way where you can, you can buy at scale that you know every penny nickel dime and when you're pricing things like you are true experts and for us as a as an investment firm, just making sure that all of our technology, our people have that institutional knowledge and they can bring it with them every day and it's hard to do that if you know, if you're as big as Blackstone, you can have these massive divisions that are huge companies in themselves. But for a company like us, I can't look people in the eye and say, yeah, we're the best at industrial and we're the best at student housing and in and we're the best at multifamily and what I love about the real estate market, it really is dynamic, and we say market, but what do you mean by that? When you say the market? Is it self-storage? Is it you know, multifamily? Is it industrial? Is it ground up? Is it value add is that the dead space and I just you know there is I guess what we would quote unquote, call a market out there. But there's so many different avenues that you have to choose where you want to play and there's no wrong answer, you can make money anywhere in this market. Michael: Love it and Michael, you've mentioned this concept twice now and I want to come back to it for our listeners that might not be familiar with it. But you said that it was cheaper to build or you are buying value buying properties at less than replacement cost. What does that mean and why is that impactful? Michael E.: Well, if you think about the Great Recession, what came out of there, prices reset everywhere and one of the governor's in real estate investing is replacement costs generally as you bump up against it and you go, you know, above replacement costs new supply is going to come in, because of the fundamentals. If you can build for a multifamily project, when we do a lot of this for $270,000 a unit, you'd rather build in that case, then go out and buy something that's 10 years old for $300,000 a unit right, eventually, the fundamentals prevail. What came out of oh eight is that the market was so distressed that if you if the market, you know properties that were 357 years old, even 20 years old, we're training 50% of replacement costs 40% of replacement costs in some cases. I mean it was we were buying some class C we don't operate in that today but some of those deals were too good to pass up where we buying, you know in the Atlanta market $15,000 a unit, where if you were trying to build brand new even back then those would have been 150 $180,000 per unit, they were a little bit on the rougher side, you know, so replacement cost is maybe a little bit, you know, not a play there. But when you're buying buildings, 10 years old at, you know, half the value of replacement costs, and you can lease those up. You know, that is, that's a great way, kind of a barometer to, you know, when you're out there investing money and when the market is trading like that, especially what happened in 09-10 11, no shovels went into the ground for years. Because why would you build brand new when you can buy something that is a few years old at such a discount to what you can build for today, because ultimately, if you build, you have to get rents that support those higher costs and so we were really well protected at that time. But the market ultimately caught up and then we saw building start to take off in certain markets and in the higher growth markets that were under supplied in 12 right, that that was the very early stage of development, and then 13, a little more, 14 a little bit more and, and then it's taken off and today because the market is so under supplied. You see a tremendous amount of new construction happening across both single family rentals, or single family homes and multifamily. Michael: Yeah, it's so interesting, and it just out of curiosity, how long do you think it's going to take to get caught up before we see kind of a more equilibrium? Michael E.: It's got to be two to three years, I mean, the supply chain logistics COVID set us back. But right now, we need to deliver about 500,000 units a year just to keep up with current demand and we're delivering about 300,000 units of current demand. So between single family homes and apartments, we're still way under supplied on both sides and what's interesting right now, that's going on in the multifamily side is that a lot of millennials are trapped renting, because we all know what's going on with the interest rate side. Well, the it definitely the financing costs hurt us. But what's helping is that it's actually driving demand for apartments, because Millennials can no longer afford to buy a house. Because even as much as construction prices have come up for the projects that we've been building, it's 35% more today than it was 18 months ago, that calculus holds true. Also, for single family homes, you add on top of that mortgage rates, 30 year mortgage rates that have gone from 3% to 5% they've gone up 70% in the last year, millions and millions of individuals can no longer afford to buy a house and are stuck renting. So that's really creating these kind of anomalies in the market right now. They'll eventually work their way out and that's why from our perspective, you want to own quality, you want to own newer, you don't want to be, you know, chasing something, I think that those who are buying existing properties today above replacement costs, there's a short runway to make money, and then and then you're gonna see the water settle. Michael: Interesting, okay and so what would you say to newer investors that are running up against that issue, they're going to look at the properties, where the prices are, where the cap rates are, and they're getting their insurance quotes, and they're seeing this disconnect between the replacement cost and the purchase price how do you what do you say to those folks? Michael E.: Tread lightly in those situations, because here's the thing, everything works on paper and when you look at historical norms, they all look great. But ultimately, the fundamentals do prevail and this is why we're not in the value add space today. We haven…

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