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Take control of your finances and invest with a purpose w/Jaden Sterling Apr 26, 2022

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Jaden Sterling is an award-winning, international Best-selling author of, “The Alchemy of True Success.” Creator of Wealth & Wisdom Daily Oracle Cards and founder of Sterling Stock Ed. Inc., an International stock investment program with hundreds of students worldwide. Sterling draws on 30 + years as a professional investor assisting people to become confident investors by simplifying the investment process. Prior to consulting, Sterling held title as Regional Vice President of Asset Management for Citigroup increasing sales from 100 Million to over 300 Million in two years. Sterling also worked as a financial consultant for Merrill Lynch and Smith Barney advising some of the wealthiest families in the United States. Sterling’s passion and purpose is to assist people to take control of their finances and live life financially free. Sterling teaches via online platforms how to invest in stocks and how to buy and sell stocks via his software, “Sterling Stock Picker.” Join Jaden, as shares his story, his passion for teaching and helping people in real estate, what people need to be aware of going into their investment career, and an overview of his software, Sterling Stock Picker. Episode Links: https://sterlingstockpicker.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 today I have with me Jaden Sterling, who is going to be sharing his story about going from equity stock investor, to real estate investor to now equities teacher back in the markets which he left but with a purpose this time. So let's get into it. Jaden, what is going on? Man, thank you so much for taking the time to hang out with me that I really appreciate it. Jaden: Hey, my pleasure, Michael, happy to be here with you. Michael: Awesome. Well, I think we're gonna have a lot of fun today and I know a little bit about your background. But I would love if you could share with our listeners who you are, where you come from, and what is it that you're doing in the financial sector today? Jaden: Currently presently in British Columbia, Canada, absolutely beautiful up here and working in the financial realm. I've worked in this area for 33 years and finances and 11 years in real estate, and then the last 20 in the equity markets. So I'm super familiar with both and yeah, happy to be here with you and share some value with your audience. Michael: Awesome and so you're living up in Canada. But did you always work up there? Are you doing equities in Canada or in the states talk to us a little bit about that? Jaden: So I've been up here 11 years prior to that I was in St. Petersburg, Florida, where I built a portfolio of affordable housing units with the city of St. Pete partnered with them. We did 125 projects, and it worked out really well built a 12 and a half million dollar business in the real estate markets and this was even during the 0708 when it was really tough money was tight, super challenging, but got through it, thank goodness and but my background is steeped in the equity markets. My an initial training was in my 20s, I worked on Wall Street for Merrill Lynch and Citigroup and loved everything that I learned from my wealthy clients, not what I learned from the brokerage firms. That was actually kind of shocking in terms of what I learned about the equity markets and how the system is rigged and it's rigged to make the wealthy wealthier, and the firms are situated in a way to make money off of clients, not for clients. So when I recognize this, yeah, when I learned this truth, I was like, okay, I'm out of here and I'm going to help people also understand how this is set up, and then help people work through work around the situation there. Michael: Interesting, so can you say more on that about how the system is rigged? Just curious to get, you know, an insider scoop on it, because you hear that being said, and but you also hear the opposition of no, we're here to make money for you and with you and grow with you. So talk to us about how you came to that conclusion. Jaden: Yeah, a lot of professionals in the financial arena are great people, you know, they have great intentions to help their clients, they, they sincerely have some have a desire to really help people and make a difference and the challenge is the system is set up to steer clients in the direction that makes more money for the brokerage firm, not for the client. One aspect is you know, a lot of people think they need to diversify. We've heard that throughout the ages, right? Diversify for a safety. The challenge is it's like I love what Warren Buffett says diversification is the tax that people pay who don't know what they're doing. Michael: That is a great quote. Jaden: He's so right about that. You know, the key is to really focus folk focus your business when I was in real estate, I focused on one area affordable housing. Now, when the stock market, I have owned eight companies, shares of eight different companies. That's it not 100, not 200, not 300. So it really gives an investor leverage to get their money to finally work for them and not work against them. So the industry absolutely, it tracks the it's called velocity, it's still to this day, and I was in it 30 years ago, it tracks how much a portfolio turns over, meaning how much a broker or banker makes on that client's portfolio, not what they make for the client. So just in that understanding alone, you just kind of go yeah, I think I need to find another way than a banker broker to help me make money. Michael: Yeah, yeah, that makes tons of sense and so just a curiosity. How did you end up in the affordable housing sector? Jaden: Well, no, I got out of the brokerage business and when I was 31 and I looked around and I something very strong inside me said, start buying real estate and I didn't, I didn't really know I mean, I, you know, I didn't know what to do, I didn't have a mentor in that direction, I just knew that I had to do it. So I researched raw land, I researched apartment buildings, I researched trailer parks, I researched single family homes, commercial real estate and I landed in a, in a category that I felt comfortable with and that was like, from a personal level, doing good helping other people. I'm a big believer in that, the more the better we do for others, the more we help ourselves and it's a beautiful circle that way and so I liked the idea of affordable housing and I also felt like it gave me leverage, if I bought an apartment building that was you know, let's say 12 units, I could, I could renovate, you know, half of them in the beginning, and then still have income coming in. You know, there's only one roof on an apartment building, rather than if you buy 12 single family homes, you've got 12 roofs to deal with, and everything that comes with that. So I felt like the leverage was great and did you know with affordable housing, I didn't know this. But I learned back then that there's special financing for investors who get into that arena, you can get loans that are better rates, some of the money is forgivable in terms of the down payment, less down payment, like it had all these great attributes from an investor's standpoint and then once I bought my first affordable housing project, and made a lot of money, by the way, there's a lot of money to be made in affordable housing, it was always confirmation that when you do good by others and for others, that you'll be abundantly blessed. Michael: Interesting. So you did that for quite a while and sounds like did quite well and then you moved back into the equities market. Jaden: Yeah, I knew that my mission was to assist people to teach people how to become wealthy how to work with money, how to understand the principles of money that actually bring in money, rather than take someone's wealth and I wasn't teaching it. You know, I was in my office, I was running a big real estate company, I had 15 employees, we were busy, you know, so I wasn't I wasn't doing what I was intending to do, which was to teach others. So I wrapped up my entire portfolio all in one shot and stepped into my actually my twin brother got sick with cancer. He was diagnosed with stage four cancer. Michael: I'm so sorry. Jaden: And this is back in oh seven and he basically they told him look, you have two years to live and during that time, we had incredibly deep conversations and one at one point he said to me, you know, bro, I don't feel like I've lived my purpose and I said, What do you mean, you're doing great. You're a realtor, you're married, you got two great kids, like, what are you talking about? You know, I didn't really understand and he said, no, no, I just feel like, I didn't do what I came here to do and that really struck me because I knew at a very young age, what I was here to do, I had an epiphany at 14, you know, it's like something told me deep down inside, that I would be working with people assisting people to be empowered by money rather than enslaved by it. I just had this clear knowing and that's why I went into working in the equity markets and then ultimately real estate, you know, putting to practice what I had learned and, and I knew I had to start getting out and teaching so I made an about face right then and there. I told my brother I said, man, I'm going to do it for you and for me, I'm going to start getting out there living my purpose and start teaching. So I did I sold my entire real estate portfolio right then I met my wife, she's up in Canada, we realize our relationship worked better and we lived in the same country. So I made the big leap and came up here and man, it's been amazing. It did bring me right back to my training and stocks and knowing because I I was able to build my real estate portfolio from what I had built from my stock investments over an eight year period. So one fed the other and you know, people ask me all the time, you know what, which do you like best right? Did you like stocks or real estate? I know this is the real estate show. I totally respect that and the thing that that I really draw from is real estate will give you a roof over your head. But stocks are a whole lot easier. There's no fixing toilets and dealing with tenants and you know that situation. So I think a balance of both is key. You can use one to support the other and one to actually buy hi there, I've, I bought an eight unit apartment building by putting my IRA up as collateral with a bank. So no money down. I just said here, take my IRA, and I'm going to do you know, X, Y and Z to this building. Once I get the rents raised and get it improved make these capital improvements, can I get my IRA back? And they said, sure. So I bought it, I got an appraisal done at that time. Six months later, after we made the capital improvements, raise the rents, I got another appraisal done. They issued they released my IRA back to me, so it was a no money down deal worked really well. But had I not had that IRA, it would have been a whole different situation. Michael: That's unbelievable, Jaden, that's wild. So people, I think in your sphere, some of your coaching students know you as the spiritual money guy and I'm detecting a little bit of that as we converse here, but I would be loved. I'd love to hear from you. How did you come by that name? Jaden: Two reasons. A lot of people know my background story, that epiphany that I had it 14 that I shared with you that understanding and really clear knowing I've always been a clear knower. So some people call it Claire cognizant, Claire means clear, and then Cognizant is knowing so I've had always had a super clear knowing in my life. But I live that way. You know, I just have, I have a very simple life and there's nothing complicated. I do my best by not lying, stealing, or anything like that and I think by having, having virtues like that, and paying attention to those virtues, and honoring them for yourself, you have a certain amount of clarity in life and things get a little simpler that way. So when I heard one day, it's actually a speaker in a podcast. I wish I could remember who it was because I would give her credit. But she said something really interesting. She said, look at the word prosperity, the Latin derivative of that word is pro spare, which means force spirit and she went on to say, you know, you honor your spirit when you're prosperous and that really spoke to me because I, I really, I believe that I believe she was absolutely correct in that and, you know, think about it, we're not here to worry about money, right? We're not here to let play life and in a small way to play a game that, you know, I look at life as a game. It's a big monopoly board, you know, you have so many houses that convert to hotels, and then apartment buildings, and yada, yada… Michael: And you hope don't go to jail. Jaden: That's right, yes right. That saves a lot of hassle when you say right, right. Michael: Yeah. So let's get deep for just a minute if that's okay. So you I think, are a very lucky person in the sense that you've always been knowing and you've had this clear direction for your life. What do you say to folks that don't have that clarity or that are struggling to find that clarity? How do you how do you become how do you gain that clarity? Jaden: Well, we know that purpose doesn't it's not like a billboard that drops out of the sky and says, this is your purpose. You know, it doesn't work that way. What I find for most people who asked me that question is what they're doing in that present moment is truly their purpose or else they wouldn't be doing it. So what someone is really asking is, how do I know if I need to be doing something different? That's really the question you're asking, right? Because if we start to acknowledge that where that person is, in that moment, is exactly where they're intended to be. If there's discomfort around that, if they say, you know, I know there's more for me, or there's something out there, but I'm not sure what it is, then it's, there's no way around it, my friend, it's a deep dive inside. It's, it's, you know, I, when I got out of corporate America, I took six months off and I did yoga, I worked with a shaman, I did a deep spiritual, inner work around what I was here to do and that really helped to give the clarity. So I think people have to spend a little more time off screen and more inner work time. Push away from the, you know, these devices that we use these iPads and phones and computers, lower your brain function that your brain has to actually slowdown in order to connect in with this device to be able to take the information in. So what someone can do, I'm just thinking back then the practice that I did every morning, I'd wait before your eyes open, connect in with your higher self and just ask what do I need to know right now? So this is before the brain kicks in before your phone before any type of device phone or what have you that y…

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Building the life you want through real estate investing with Omni Casey Apr 21, 2022

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Omni Casey has been a real estate investor, broker, and coach for nearly 20 years. His real estate career started in Hawaii where he grew up. Over the last 10+ years, he and his family have lived in Northern Virginia and have been very active in both growing their real estate investment portfolio and growing a top-performing real estate team and office in Loudoun County Virginia. With a passion for building wealth and helping others achieve financial freedom, Omni has coached hundreds of real estate investors, real estate agents and clients alike to create and execute a plan to grow their real estate business, grow their investment portfolio, or both. With a hyper-focus on building wealth and passive income through real estate investing, Omni is committed to helping as many people as possible stop needing to earn money, and start down the path of creating money, and setting up what he calls "PIFL" or Passive Income For Life. Join Omni, as he talks on the subject of passive income and rental properties. He will share his story, and what people need to be aware of going into 2022 with their investment career. Episode Links: https://www.omnitheinvestorguy.com/ https://www.instagram.com/omnitheinvestorguy/?hl=en https://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. Michael: What’s going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, I have a guest Omni Casey, who's an investor, broker, author, coach, and he's gonna be talking to us today about what his story has looked like, and what people need to be aware of going into 2022 with their investment career. So let's get into it. Before we get to the episode, let me just give a quick shout out to the Roofstock Academy, which is a one stop shop for all real estate investors independent of where you're on your investment journey, whether you're just getting started, or a seasoned investor, our program offerings have access to over 50 hours of on demand lectures, one on one coaching, private slack forums as well as a plethora of other things. So come check us out at roofstockacademy.com and all of this is backed by the way with a full money back guarantee. So there is no risk to you for just coming in trying it out. We hope to see in there. Omni Casey, what's going on man, thank you so much for taking the time to hang out with me today. I really appreciate you. Omni: Okay, super excited. Thanks for having me on. Michael: Oh my God, my pleasure. You've got a really interesting story and we were chatting a bit about it just for hit record here but for all of our listeners, give us the background who are you? Where do you come from? What is it that you do in real estate today? Omni: I'd love to um, Omni Casey is my name, I am originally from Hawaii born and raised in the islands and I don't live there anymore, migrated out to East Coast just outside of DC Northern Virginia about 10 maybe 11 years ago but started in Hawaii very entrepreneurial family, got into real estate investing fairly young. That wasn't my first business venture but it turns out that you know, real estate's a really cool business I love the business aspect of it I just always knew I wanted to be an entrepreneur business owner and eventually got into real estate investing real estate brokerage as well side of things so just all things real estate for the last 20 years it's been my passion and for the last few years I've been nominated the investor guy I do some coaching we run a meet up to about this site and I just love helping people learn how to invest you know, especially new investors starting out for the first time. I remember how daunting it was and so we do a lot to you know help them get to their first few transactions and most of what we do is cashflow rental properties I love that's why I love your podcast because it is you know that you know remote investing concept less of the active hands on concept more of the remote concept that that I love and then we teach that as well. Michael: Awesome. So did you get your teeth cut out on the islands when you're doing real estate investing or has it always been remote talk to us a little bit about that. Omni: I started on a wall who is which is where I'm from I saw actually started. I was a surface surfboard salesman, you know I was working absolutely and you know I read the book Rich Dad Poor Dad and I'm like alright, so I love business and I was doing a couple of businesses at the time. But then I really wanted to find out more about real estate but no one in my family really was in real estate and especially on the investing side. So I just started talking about it more and more and it was really a couple customers that came into the shop that I was having this conversation with and you know, they they were a real estate investor. So I said, well, you know, tell me about that. What did we do and it traded off, you know, some surf lessons for some education on the investing side and I lucked out by finding some friends and really they became mentors at that point and invested in Waikiki in Honolulu and as slowly as I want to expand and as I wanted to really shift towards the passive income side the cashflow side Hawaii just doesn't cashflow that well great for appreciation rate for equity, but I had to find some outside markets and that's where I started to invest you know in the mainland you know, various markets that that were more affordable that the rent to price ratio was more accurate to my goals there. Michael: Oh man, that's awesome. I used to work as a surf instructor too, but I didn't get diddly squat from my clients and then you'd lucked out big time. Omni: Yeah, paid off. Definitely! Michael: That's awesome, all right. So now let's fast forward you move to the mainland. Now you're out on the East Coast. What are you doing out there as Island guy? I mean, you don't have snow on a wahoo but you do where you live in now? Omni: Yeah, it's what is it spring well, I'm recording this and I think we just know today so it's crazy weather not quite used to it's still you know, my wife's from the area and one of the beauties of real estate, you know, both on the investing side and as an agent brokerage side. You can take that and do anywhere, you know, once you learn the core skills, it you can do it remotely and, and you know about I don't know, 10,11,12 years ago, having a conversation about if you wanted to move back home and be closer to family, we can do that and we can make that work and she took that and ran with that fairly quickly and we haven't looked back, but I've loved it because by that point, we're already into the remote investing side and the downside, if there's a downside to living in Hawaii, the downside is a time zone difference. And I love being on a, a similar or closer time zone to my property managers, my agency, other investors that I was networking with and so I jumped at the opportunity to be able to do that, and, you know, be a little bit closer to the properties that we owned. Michael: Yeah, that makes total sense, for about the better part of a year back in 2019-2020. I was traveling internationally, and trying to sync up my calls with clients and people on my team was pretty difficult to do. So I totally get that. Awesome well, I know you just wrote a book and I would love if you could share with our listeners a little bit about what it is where they can find it, what they might expect to see in it. Omni: Yeah, I'm super excited about this. It's called the cashflow Breakfast Club. I don't know if this will ever be on video, but just got my author copy today. So I'm like super stoked… Michael: Nice Omni: because it's been written for a few years, it's been written for a few years, actually never planned to publish this or never thought I'd really published it, it was just kind of my story, I just need to get it on paper and it was the steps have kind of a step by step process that I went through to become financially free through passive income through real estate investing, and really very, very simple steps that anyone can do. And I started coaching my real estate agents and my, my, you know, new investors that came to me for help and this kind of became my instruction manual. So for a time it was a manual and then last year, my wife was kind of pushing me said, we might as well you wrote it, you might as well publish it. So finally got off the ball and this turns out, I'm pretty good at writing a book, I'm terrible at publishing books. So find the right publisher to help me through that creating the website, actually go through the vetting process of the various publishers and finally, as of this week, got my publisher, copy, author copy, and a should be out, probably in about two weeks or so. So we're excited about that. But really, it's a story, you know, I think in bullet points, and I'm very direct and so I love, you know, you know, just reading like a manual. But I know that makes a terrible book and so I was able to kind of look back at some of the books that really impacted me the most, you know, you got Rich Dad, Poor Dad, you have several others and a lot of them were in this parable format, the story format and so I rewrote this manual in a parable format and it had to be happened to be about this character that grew up in Hawaii that got into real estate investing that started to invest remotely. So it was the same story but it allows kind of the reader to one experience becoming an investor vicariously, you know, ups and downs, and everything in between real estate agent side as well, look gives you a glimpse into that, as well and then the foray of having to trust you know, how do you trust someone overseas to kind of help you invest remotely as well. So it kind of takes you through those emotions, vicariously from the comfort of your, hopefully your couch there while you're reading it and I'm excited to put it out there. Michael: I love it. Well, I'm very excited to read it, where can people grab a copy of it? Omni: So my website is https://www.omnitheinvestorguy.com/ , that's probably the best place to get it. I'm assuming at some point, it'll get syndicated out to everywhere you can buy a book. But right now, I'm not the investigator calm, there's a tab that says: book and that'll take you there. Michael: Awesome and we'll link to that in the show notes here. I want to shift gears here just a little bit and I'm curious, you have a mantra that everyone needs two professions, one for you and one for your money. Talk to us a little bit about what that means and why it is you feel that way. Omni: Yeah, it's a training and I guess I need to come up with a better name for that. But it's a training that I've done over the years multiple times and I'm a father of three they're the my whole life. You know, my oldest son is 13 year old, my daughter is nine and my youngest son is seven and everything I do is like most parents are involved around them and I kind of keep them involved on the investing side the education side and I would love nothing more than my kids should just be obsessed with real estate investing like I am. But the reality is one of them is and the other two I'm not sure yet right and kind of to figure out from a parent's standpoint, you know, what's the right way to go about that? How much do I actually push? How much do I actually kind of encouraged them to kind of go down the path that I found and I guess you can kind of take that whether it's real estate investing or any sort of profession you're in and realizing that even though they might not be passionate about real estate investing down the road, the reality is real estate investing or that knowledge. If they get that baseline now and start investing, you know, as soon as possible, they can eventually do anything they want. So you don't actually have to be passionate, you know about real estate investing to make money in real estate investing. So my daughter wants to be a ballerina, she can go be a ballerina, she wanted to go be a barista, somewhere, she can be a barista, that's not going to pay the bills. So hopefully the real estate investing side right making your money work for you. Because for a very long time, like, I'm passionate about real estate investing is the only thing that really makes sense to me and I'm talking to people, I'm like, can't you get it? Why don't you understand this? Why don't you understand? Why don't you and then just the reality is not everyone's as passionate about it as, as I am. That being said, everyone could benefit from that. So understanding how to put your money to work for you, or how do you set up that passive income coming in, so that it can fund whatever you actually want to do with your time and you know, it doesn't always need to be the same thing, I just feel blessed that I happen to do both at the same time. Michael: I love it, I love it. Any pieces of advice or tips or tricks that you've picked up from being a father and a parent over the years to get your young ones involved. Omni: So one of the things that I did recently, in the last few years, I started to invest closer to where I am not because it's the best place to invest, I think it's a decent place to invest it. But there's clearly other markets that outperform my market. But I wanted to have something that I could just drive by, take my kids do and keep them involved. So if you are, you know, investing, not everyone invest, you know, somewhere near them, but try to find something where you can kind of take them and keep them involved. Every single weekend we're driving by we're visiting a project, we're checking on a renovation, we're doing something where they just kind of feel like alright, they get to kind of point and we actually assigned the rights, I guess, if you will, to various rental properties to each of our kids. So they know that that's their property, right? Technically, they're not old enough to own the properties yet. But that's their property and so we got to go over the numbers with them. We go over the details when we get it from our property manager, we go over kind of the breakdown and so they can kind of see the numbers on the back end and on the oldest side, my son, he gets it. My daughter's getting there. My youngest is like I don't understand it, any of them but I think just having that knowledge and having those conversations or you know, they're hearing terms at some point. I mean, it took me a whole life to kind of start hearing these terms until I started investing and so they're very involved and then just to kind of spark the conversation. There's a great game, Robert Kiyosaki put out the game, the cashflow a board game and we play that we play that quite often and we have the kids challenge the parents, and we talk about it after and they get to see the correlation with the game, and actual P&I statements that we review together about our properties. Michael: I…

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Can you still get good deals on turnkey real estate in Florida? Apr 19, 2022

Show notes

As a founding partner of JWB Real Estate Capital, Gregg Cohen has seen the company grow from humble beginnings to serving over 1,300 clients in 49 states and 13 countries, managing over $750 million in real estate assets. Gregg’s recipe for success in business includes a belief that whatever is measured gets improved and a true passion for creating passive income for clients. He and his team have been featured in The Wall Street Journal, Inc. Magazine, The Jacksonville Business Journal, The Florida Times-Union, Advantage Business Magazine, and Entrepreneur Anchor Magazine. Gregg is a graduate of the University of Florida and contributes to the JWB Real Estate Capital blog and its Facebook group connecting with the community by sharing insights. Rental properties can be a great source of additional income, but committing to that first one can be intimidating. In this episode, join Gregg Cohen, as he talks on the subject of passive income and rental properties. He discusses the strategies for taking advantage of secondary income through real estate, the pros and cons of turnkey solutions and how vertically integrated companies can produce great results for investors. A great episode to learn from if you’re looking to get into investing in rental properties. Episode Links: http://jwbrealestate.com/ https://www.jwbpropertymanagement.com/nyai-show/ -- 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 Gregg Cohen, who's the founder of JWB real estate capital and he's gonna be talking to us today about vertically integrated companies, turnkey solutions, and what investors should be aware of when it comes to investing in the Florida market. So let's get into it. Gregg Cohen, welcome to the show man, thank you so much for taking the time to hang out with me really appreciate it. Gregg: Absolutely can't wait, man. Michael: I'm really excited because you've got a really interesting story and background. But for anyone who doesn't know, give us the quick spiel who you are, where you come from, what it is, you're doing real estate. Gregg: Yeah, absolutely. So my name is Gregg Cohen, I run a company here in Jacksonville, Florida, called JWB real estate capital. We're here to make rental property investing easy for the masses out there, which, you know, most people see rental property investing as an opportunity to make money to make a great return on investment. That's not usually what holds people back from it. What's usually the thing that holds people back is the experience when it comes to rental property investing. So we really built our business to make this a wonderful experience. It keeps people coming back to be able to take advantage of an asset class here, which, you know, historically has performed so well, and especially for what our country has been through over the last couple of years, has performed incredibly well. And I just think that there's real value for families and communities, when you can invest in a stable asset class that performs well over time. You can do some really great things for your family, for the community for the world. Michael: Totally agree. Just out of curiosity, what is JWB stand for, where does it come from? Gregg: Oh, man, how far do you want me to take you down this path? We've been in business for 16 years and like any other entrepreneur, we didn't know exactly what we were doing when we started right. You know, we started our business. Man, I could just I could just talk for a lot of stories about my business partner is one of my best friends. We went to college together and we lived in a house with a lot of our friends in college and we just nicknamed that house, the huse. Literally, it makes no sense. We call it the who's why I don't know why. So when we first named our company, we were like, oh, we're 23 What should we name our real estate investment company? Let's call it whose homes and investments? Makes no sense at all. All right, so that company, it still is our holding company, we own a large number of rental properties, and it's still in whose homes and investments. But over time that name clearly did not stick did not, you know share what we were hoping to accomplish in the world. We started to market ourselves under the name of Jacksonville wealth builders and that was really when we kind of hit our stride as far as creating these turnkey rental property investments and packaging the Property Management Services here in house and Jacksonville. Jacksonville wealth builders really talked about what we do but you know, we're a vertically integrated company and that means that we have everything under one roof acquisitions, property management construction. It is all here under one roof and so we had Jacksonville wealth builders as a company but another name for our company. Our home buying company was progress homebuyers and then there was peace of mind property management as we became bigger and started to develop a reputation in the community people would say oh, I really love that company. Jacksonville wealth builders. Have you heard about those guys over at progress homebuyers? I really haven't done too much business with them yet or Jacksonville wealth builders is great, but peace of mind property management, I don't know them so well. So eventually, we realized you know, how to actually appropriately name a company and that became under the JWB brand, which is now JWB real estate, capital JWB property management, JWB homebuyers. So JWB actually would stand for Jacksonville wealth builders, we just condensed it and made a little bit more user friendly for everybody realized you're there, who they were doing business with. Michael: Love it and the whose story so I feel like so many people have similar college experiences or stories like yeah, it was a, we were geniuses at the time and looking back at like, what were we thinking? Gregg: You know, we just weren't thinking very much. It's a credit though, because my business partner and I now have three business partners. You know, in the beginning, we just wanted to get out there and try to do something weren't afraid of failing. I think you can clearly see that by the way that we named our companies we weren't afraid of failing and so many investors out there just get paralysis by analysis, paralysis, and they can't move forward, right? Just name your company something you can't possibly screw it up any worse than I did and, you know, there are so many more important challenges to overcome and then simple things like that. Michael: So it's funny, my wife actually works for a company that has a very similar story. When he started it, he didn't think anything was gonna come of it and so the company is named Michael management and so when she posted that on her LinkedIn, a bunch of my college roommates were like, oh, yeah, I also used to work for Michael management in college like, no, no, like, it's a real company, like, I actually have a job. I'm not just managing Michael's like, life and stuff. So he's like, I never thought it would take off and it's an SAP company. But needless to say, so talk to me, Gregg, about what it is that JWB does? Gregg: Yeah, absolutely. So we're a vertically integrated company and what that means, as I mentioned, is we have everything under one roof. So what we do is actually we buy land, and properties, but mainly land, especially in the current environment and we've been doing this for over a decade, we buy a lot more land than we're actually going to build and sell that year. We've been doing this here in Jacksonville, as I mentioned, we started build to rent back in 2011, before all the big hedge funds and private equity groups, and even now we're in this build to rent space, we actually started this in 2011, they put us on the front page of the Wall Street Journal in 2013 as being a pioneer in this space and so we secure this land, we buy this land, we actually own it and what that allows us to do is to create a path so that our clients have a consistent source of inventory, that they can turn, that we can turn into positive cash flow and high growth investments for them. Once we own the land, we then build that new construction home, we then fill that home with a resident, and we do all the property management in house, we really focus on long term residence stays, we believe that's the approach that's going to lead to winning in rental property investments and so we only signed two and three year leases, we set resigned 70% of our residents, and that leads to an average duration of about four and a half years for our residents staying in our homes and then our team is just rock solid, we're here to make this. This a wonderful experience for our clients. Most of our clients live outside of Jacksonville, we have clients in 49 states 13 countries, and we get to serve over 1300 clients and manage about 4400 rental properties here in Jacksonville. And our team, we have about 85 people here on staff here and just really focused on creating a wonderful experience for folks and doing something more than just literally buying selling renting properties, right, we believe we have a higher calling, right, a higher mission here than just doing property management, we think that we can really change people's lives, by the returns that we create for folks and also what we can do in the community through the platform that we have. Michael: Amazing, Gregg, this is like a super niche way to get involved in in real estate. I mean, you're kind of doing it all. So in that sense, it's almost not very niche, but curious to know, how did you get your start, because this is, again, kind of this is a very specific way to go about it. Gregg: You know, my story started, where, you know, I went to school at the University of Florida, I was raised by a single mom and we never really discussed entrepreneurship and we never discussed real estate, it was my both my mom and my dad to have wonderful loving parents, but they never owned a house other than the one that we lived in growing up and so the idea of entrepreneurship or real estate investing was just completely foreign to me, I grew up, went to University of Florida and just tried to work very hard to get a great job and I really found comfort and security in the thought of going and working in corporate America. I realized now how much I just really, really was excited about that. Because it's very different than then how my life and my career has turned out. But I went to go and work for a company here in Jacksonville, a fortune 500 company and after about a year and a half of working there, I was really just depressed, demoralized. What I had thought was going to be my career path was not what I wanted, and I really didn't know what to do. So a friend of mine who was also struggling with the same thing at the same company turned me on to that amazing book, Rich Dad Poor Dad changed my life as I'm sure it did for you, Michael and most of the listeners I would imagine, right? Michael: Hmm. Gregg: So that book, I remember sitting down reading it, it was about nine o'clock at night and I read it all the way through till two o'clock in the morning, I finished the book, I got up and I looked at myself in the mirror and I said I'm gonna quit my job and start my own real estate investment company and if you know me, well, that is not how I make decisions. I'm very conservative, I'm more on the slow side. So this was a really big moment of inflection in my life, and a very, very powerful moment for me. But the thing that I took most away from that book was that I couldn't just put my head in the sand and just assume that I was going to work for a company and that if I worked really hard that I would just hit my financial goals. I had to mind my own business which can mean doing really well in my active job but it also means keeping my mind open and how I'm going to manage my money investments outside of my active income. But for me, the pain of working in corporate America for me was so great at that moment and I was also 23, I didn't have a lot to lose and I said, you know what, let me go big. My business partner, my original business partner, one of one of three business partners now has been my best friend and he realized that, you know, this was an opportunity for to get me on board, he is much more entrepreneurial than I am. So what he did was, he was still in his final season of Gator football over in Gainesville and I was in Jacksonville working and so his big plan was, you know, what, I know I can get Gregg on board if I just literally move in with him. And so I didn't have that for him, I didn't have a room for him. So he came over and he said, hey, I'm gonna come over for the weekend, he ended up not leaving sleeping on my couch and he wanted to make sure that I would see him every day, when I would wake up and go to that job that I did not enjoy, he wanted to make sure that I would see him and every night when I got home, just demoralized, he wanted to make sure that I would see him searching for properties, figuring out how we're going to build this business and we did that for a little while and eventually I gave in and quit that job and we started this company. But in the beginning, we didn't really know what we were doing. We were just trying to survive and over time, and really, you know, this was 2006. So the market started to really change on us. You know, we can certainly talk a little bit more about that. But long story short, we evolved into understanding what really that intersection of what, what we are built to do and what we want to be great at, which is that turnkey rental property investment along with the property management, we really just love the fact that people can trust us with their money, we happen to be experts in real estate and we can perform as a team, even though they may live 1000s of miles away and return their money back to them on the backs of a very stable asset that just became our calling card and that's, that's really what we're very passionate about doing. Michael: I love it, man. Gregg, I'm curious, I think it's probably come as no shock that a lot of turnkey providers get a little bit of a bad rap in the industry and so what makes JWB difference and who is a turnkey provider really a great solution for and maybe who is it not such a great fit for? Gregg: I think it's a great question. You know, I think that when I started to invest, when I started to build this company back in 2006, and we started to go to market with our strategy of what turnkey was, I remember needing to fully explain what the term turnkey meant, because nobody had ever heard it before. Because it wasn't a very profitable niche back in 2006, or 2008, or 2010. Right as the market turned right, but it wasn't very profitable and so you didn't have any turnkey providers. And I remember feeling like I needed to just educate and share with people this this asset class, this possibility for you to inve…

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Is it a good time to refinance your property before for rate rise even more? Apr 12, 2022

Show notes

With all the current uncertainty in the markets, recent interest rate hikes, and the fed’s talk of continuing to hike rates through out the year, the decision to refinance should be made carefully. Why are you trying to refinance? For cash out? To lock in a rate? To take advantage of current rates before they increase even more? In today’s episode Emil, Tom and Michael discuss what they think is important to consider before deciding, and Michael shares his recent experience with a lender backing out of a deal. 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. Emil: Hey everyone, welcome back for another episode of the Remote Real Estate Investor. My name is Emil Shour and today I'm joined by my co-hosts… Tom: Tom Schneider Michael: and Michael Albaum Emil: …and on this episode we're going to be diving into refinances. Is it too late as rates are going up, or should you do it now or what's what do we all do it? So let's hop into this episode. What are we doing with our lives? Hey, guys. Hey, Tom, welcome back. Tom: Yeah, yes. What’s up Emil, what's up, Michael? Emil: How you doing? Tom: Excellent, excellent. Hey, but a quick, quick personal note. I was been working in my garage trying waiting to build this little lot of land and I started getting lightheaded and I realized that there is some just kind of like, toxic fumes in my garage. So back in the house, so apologies if you hear some baby noises while we're waiting to build out the exterior office. That's my yeah, I am doing good man, not not lightheaded anymore, so… Michael: and the baby's not in the garage? Tom: ….Right Dukes of Hazzard area. Yeah, we switched babies in I mean, it's good young lungs, like they feel. Obviously… Emil: Did you have the gas company come out and like, report on, what's going on? Tom: I did, they gotta have to come back again. So they came out, I mean, there's like two like gas entry points into the house. There is like a little further away the house like, like a little gear thing you tighten and then next to the house, there's the meter. They replaced all the meter stuff and I think it helps, but there's still stills of issue. So anyways, don't want to go too deep into that rabbit hole, yeah… Michael: Never a dull moment with Tom Schneider. Emil: Alright. Well, I'm glad you are alive, your brain cells are hopefully intact for this episode and yeah, let's get rolling. All right, so we're recording this, it is April 11. Interest rates have been climbing pretty quickly. I think I'm hearing four and a half 5% plus, when we were in like, you know, I got to 2.8 on my primary back in November, so four or five months, pretty crazy how quickly rates have gone up? And Michael, I think you have some pretty interesting going on you were in the middle of a refi currently. And give, I'm not gonna put words in your mouth. Go ahead, tell us tell us what's going on. Michael: So not even in the middle of a refi, I was at the end of it, I was supposed to close today and the lender calls me he goes, hey, Michael, we're not going to be able to do this loan. I'm like, what do you mean, we're not gonna be able to do this loan, he goes, yeah, at the rate that we locked you out, we're, we're not going to be able to do it and so basically just give everyone a little bit of context. I started this investigation like three months ago into getting 30 year fixed mortgages for multifamily commercial property. So five units and up, and I found a lender that would do it and I was making them compete against other lenders at a bunch of different quotes and I found one and they were like, We can beat it, we can do it 4.275 for a 30 year fixed on a commercial multifamily loan directly to my LLC, load docs, they just needed my property specific information how the property performs like a DSCR loan. So we're getting all the paperwork done, I paid for the appraisal, several $1,000 for each property and then my loan processor, like just stops returning my phone calls and emails. I was like, that's weird and we're getting up to the point of closing. So I got a hold of, I called I called his line, and somebody else answered and I said, hey, I'm trying to reach this person. They said, oh, they're no longer with the company. But this other person is handling all of your stuff now and I said, okay, I mean, that happens, turnover happens and this new person who's handling my, my, my files, sends me this email, she's like, hey, I need all these things from you. I'm like, I already sent those to your company months ago, the original person had that, like, do you not have access to my file and went back and forth and back and forth and I got them all these docs, and then they go, oh, we're gonna have to close on Monday, otherwise, your rate will expire and I said, okay, great I'm ready, let's do it and today, Monday, he calls me and says, hey, we can't do this loan. And what I'm pretty sure happened is they just realized that I got too good of a deal, and they can lend that money elsewhere and get a higher interest rate for it and I still have not heard back from them as to why I haven't got a direct specific answer. But as soon as I do, I'm going to be naming and shaming these people all over the place because I posted about it on Twitter and seeing if there's any kind of recourse and be like, yeah, I've been hearing this happening more and more of lenders just dealing with bad PR, rather than taking the loss on their, to their pocketbook. Tom: What does a rate lock mean, if that doesn't allow you to like lock your rate, right? Michael: That's a great question and so what a lot of people online have been saying is that, oh, if the rate lock expires, then then the rate lock is no longer valid and which I totally get. But the question that still I'm having is, well, what if a lender is just dragging their feet intentionally to drag out the rate lock to expire? So that they can say up great lock inspired, sorry. And so they recorded they said, well, we can re quote you at today's rate and I said, great, do that and they said, oh, it's at six and a quarter. I'm like, so 2% greater than what I locked it in and I did this three months ago, because I knew that rate hikes were coming, everyone was talking about it and I said great let me just lock this in, set it and forget and be done with it. So it's pretty infuriating, so everyone, stay tuned, I will keep you all posted, how it how it shakes out, but I have yet to hear a get a call back from these folks explaining themselves. Emil: I wonder if this is like a you said it's a commercial loan product. It's a portfolio loan, right? Like it's a loan they're doing themselves. It's not like government backed or anything from I wonder if there's like different rules, you know, if you're going to get your traditional conventional 30 year fixed rate, Fannie, Freddie, like, is that would that have gone through versus like a portfolio? And like you said, they're like, why would we? Why would we put this money out there for 2%? Less than we can get it today or two to 200 basis points, not 2%. But you know what I mean? Michael: Yeah, no, I gotcha gotcha. Yeah, I don't know and that's the one of the questions that I have out to the Twitter versus Hey, what kind of rules and regulations are these companies governed and bound by and how do we hold them accountable? Because I think for the government back stuff, it is a little bit more clear cut, I would expect this less to happen in that space. But it seems like the commercial world, the private lending world is just a bit more unregulated and so I'm wondering if that just might be the cost of doing business because of that lack of regulation. Tom: Like they're, you're, you're done with, like, their lifetime value of you have a customer is gone. You know, I don't know, like, I think that like, could be kind of short sighted. You know, there's funny, these different vendors where there's like perverse incentives, you know, like for this example, like them just kind of like waiting out the clock, because they see the interest rates going up. There's a couple other incidents, other scenarios where vendors that you rely on could have like, bad incentives, you know, like for literally, property managers that get paid on work orders, you know, they're making more money on work orders, they're gonna be loved to be performing work orders. So I guess this speaks to that whole, like, trust and having a, like, a good partner that you're working with, but and Michael as yeah, that's a that's a bummer like, what a huge jump. Michael: Oh, my God, it's yeah, it's so incredibly frustrating and like, I had so many big plans for this money, too. So it's just been a bit of a whirlwind of a day. But in speaking to, like, the question, and the topic for today, I don't want this whole episode of your woe is me session, my therapy session, you guys can build me later. I hope you take insurance but um, I think it's really important for everyone looking at their portfolios now, or looking at their properties now to determine and kind of ask themselves the same question of hey, does it make sense to refinance right now and for me, it made total sense when I locked it in three months ago, I was paying a little bit higher interest than the current mortgage that I had on the property, but it was going to be a longer amortization period, at 30 years over the 25 years that I that I currently had on the product and then it was going to be fixed also for 30 years. So it wasn't gonna have to go refinance in five years or 10 years, like I will, with the current properties of it, the current mortgages that I have on these properties, and one of them is coming due, I think, next year, or in 2024 and so I said, you know what, I can lock in the rate for 30 years, I know what it's going to be, there might be times when my rates a little bit higher than what the current market is. But my guess is that for the most part, it's going to be less than the average interest rate that we find ourselves in over the course of the next 30 years. So let me just lock it in and I'm sure I'll be stoked today at 6% and a quarter percent, I can't say that with as with as significant with as much confidence and so for everyone out there listening if your rate is less than what you're going to be refi into think long and hard about giving that up. But also, if you're going to be taking I mean, there's two ways to refi right, there's the cash out refi and then there's just a rate and term refi. For your rate and term refi, if you're going to refi into a higher interest rate now might not be a great time to do it. But what are your guys thoughts about like the cash out piece of this? Emil: I mean, look, if you bought a long time ago, maybe you've put some money into the property, you fix it up, your cash flow is nicer and you're sitting on an opportunity to pull some cash out and still cashflow, that's something you should still consider. I don't think it's like, okay, rates have jumped 2% now, it's a definite no, it's just, it's like we always talked about, you gotta run the numbers, see if you're still cash line, right? Don't don't make it negative cashflow I in in my eyes and yeah, make that make that call for yourself. Tom: I'd say, you know, you, obviously you do have like tons of equity and like you have a plan on what to do with that equity if you were to convert it into a cash out finance, that makes sense. I think in, in some markets, with interest rates going up, you would expect a little bit of a reflection in pricing to go down potentially, I don't know, it's hard to say because there's a there is a good amount of demand, I would say it's more likely to be in like secondary and tertiary markets where you have a property with a lot of equity, cash out, refi, get that in your back pocket, there could be some opportunistic acquisition opportunities with interest rates going up, I would say with like primary cities, you know, like really big ones, Dallas and whatnot, since a lot of the maybe institutional investors out there are not going to be, you know, have too much moving within their debt structures. But I'd say in some of the secondary and tertiary markets, there could be a bigger impact on rates going up, and potentially prices going down. Like I don't know, you would you would assume that right, I don't know that, that's my 10 cents, Michael, and Emil thoughts on that take. Michael: I mean, I think that makes sense. But I'm wondering, too, if we can kind of try to think like two steps ahead and is there an instance or a scenario where it makes sense to take out cash via cash out refi, because you know, what the rate is today, and you have equity in the property, knowing full well that you don't have a plan for it in the immediate future. But you are opportunistic, you foresee an opportunistic environment and so you're just going to kind of sit on it and see what happens versus doing nothing and then you might see that equity actually evaporate from the property. Emil: It's good point, right? If rates are going up, right, I just before we hit record, I just threw my loan into a calculator, right that our primary, looking at that 200 basis points difference and it's, it's huge, like, I don't know, if we would have bought it like it's over $1,000 difference, you know, and so it's like, it's big. so, you know, you can't have rates keep going up payments keep going up and like, we have the same kind of crazy appreciation. I don't think I'm not looking into a crystal ball. But yeah, so that that is a good point, right? If you think okay, rates are gonna go up, rates are going up, it's going to keep putting pressure and like prices need to come down, then yeah, that could be a great time to cash out refi, hold some cash, then buy when there's a little bit more opportunity down the road. Michael: Yeah, and that's, it's not something that I've thought about in the past. I've always kind of said, especially as in, in coaching with folks and Roofstock Academy is like, yeah, cash refunds are great if you have a plan for that money in the next 612, nine months. Or even just know what the money is going to be used for versus getting a HELOC could be a better use of funds and time if you're not sure what you're gonna be using the money for. But now, with rates going up so fast, I might I think I'm changing my tune a little bit and saying, yeah, maybe, you know, even the fact like we were joking about Emil last episode that having your money in the bank, it loses 7% in value every year, maybe that 7% hit is more valuable than or should be is is less impactful than the future opportunity down the road. Because if prices dropped 10 or 15% I'll pay that 7% to have money sitting in the bank all day long to be able to jump on something for 10 to 15% discount. So I think you…

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Protect your short term rental with the right insurance strategy Apr 05, 2022

Show notes

Jason Bott joined Robertson Ryan in 2004 as a Vice President and in 2016 he became a Shareholder. Being part of Robertson Ryan, the largest independent insurance agency in Wisconsin, and a Top 100 US Agency, gives Bott the resources to handle standard and non-standard policies. He specializes in real estate risk management and has developed a national reputation for insuring real estate owners and investors of varying sizes. The short-term rental space has become more accessible over the last several years, with industry leaders like Airbnb currently boasting 5.6 million active listings worldwide. Short-term rentals can be an attractive alternative to long-term rentals because of the increased cash flow on your investment. Before deciding to rent a portion of your home for a vacation rental, though, you need to consider how your homeowner's insurance views short-term rentals. In this episode, Jason will walk us through the short-term rental space and what we as landlords need to know about the types of insurance that are available. Episode Links: jbott@robertsonryan.com https://www.robertsonryan.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 Jason Bott an insurance broker with Robertson and Ryan, and Jason's gonna be talking to us about the short term rental space and what we as landlords need to know about the types of insurance that are available. So let's get into it. Hey, Jason, welcome to the show. Thank you so much for taking the time to hang out with me today. I appreciate you. Jason: Thanks for having me. Michael: No, my pleasure. So for those folks that don't know who you are, give us a quick bio on who you are, where you're come from, and what it is you're doing real estate. Jason: Sure. My name is Jason Bond, I'm an insurance commercial insurance broker with Roberts, Ryan and Associates based on Waukee. I currently write about 25,000 units in 30 states with my team and we specialize in the real estate space, specifically in small to mid-size landlords. So anybody that's got a small single family portfolio, kind of building that all the way up to some of my largest clients have maybe up to 1000 units but that's kind of the space that operated Michal: Right on and today, we're gonna be talking about a super-hot topic that's been popping up all over the real estate space, short term rentals. So I would love if you could just give us kind of a high level on what people need to be aware of what questions they should be asking. But maybe we could start with like, if someone's going to go get an insurance policy and they own like they own the property, its landlord, give us a breakdown of all the different types of policies they could get if it's your long term rental, and we can build up to the short term. Jason: Sure, sure, yeah and this is such a fast moving space, at least in the insurance world terms at the insurance market hasn't fully developed to take on the short term rentals. So it's still in flux and even if somebody listened to this five years from now, it's probably going to even be more, it might even be fully developed at that time who knows. But the way they traditionally the way that the insurance world works is a property in a sort of building the insurance policies based on the occupancy so you could have your homeowner's policy, a long term rental, you could have it use for business and retail, industrial, or basically any building depending on who's inside that's how the insurance company knows what policy to put on there. Okay, so traditionally, homeowners policies for your primary, primary home, okay, so if you're living there, 24/7, that's a homeowner's policy, if a traditional rental policy is based on either month to month, or annual leases, but the idea is that you don't have a high turnover of people. So all the insurance policies written out there that a landlord traditionally set up for annual leases and that's where some of these, the short term rental thing kind of came into play. All of a sudden, it, it kind of, it didn't match up the traditional, you know, insurance policy, you know, they're all legal documents that are all filed with the state and the insurance companies have to keep updating those and that's what we're going through right now, if it makes sense. Michael: Okay, it does make sense, but just a clarifying question. So you said either month to month or annual leases and so when we say the term short term rental, does that mean 30 days or less? Jason: Yeah, it means 30 days or less. I mean, I mean, there was a little there's a little give and take and a gray area there, it's the problem is, is along with the traditional landlord policy, if that property was vacant for more than 60 days, then you would default to what they call basic coverage, which means that we exclude theft, exclude vandalism, and exclude a lot of those items that still might on a short term rental, I mean, that style still might be present. So the short term rental policy picks some of those things up and that's really so that's why if you have a traditional landlord policy, and you're using it for short term rentals, even a month to month there, it's still really not the right fit and still create some gaps. Michael: Interesting okay. Well, I definitely want to circle back to that and what type of policy they should be getting. But curious, because, I mean, I always joke that I get to ask self-serving questions on these podcasts, somewhat like the house hacking, I own the property, I live in the property full time, but I rent out the upstairs unit and so should I be on a homeowner's policy or should I be on a landlord policy? What's right for you? Jason: So, so you should be because it's your primary residence, it should be a homeowner's policy. Okay, all right. Now, knowing that you've you've taken some time and you've traveled in been away from the property for quite a long time. There is also the next step where you can buy another basically, short term rental policy where you can still go visit the politicians The property and live there, but it's not your primary residence. So that's still like another step in the evolution. So if I if I had to talk through, like all the evolutions if you have a single family property, and you live there by yourself, that's a homeowner's policy. If you have a single family home, you live there and you got a roommate, you can add an endorsement to the policy, right? If you have a duplex, you live there by us, you know that your primary residence, and you have a renter upstairs, that's a homeowner's policy with a landlord endorsement on it. The next step is, let's see, you then sell that property or you move out of that property, you buy yourself another single family home, the house hack, that first duplex now turns into more of a either a short term rental property, if that's the way you're going to use it, or landlord property or policy, if you're going to go ahead and lease it out annually. So see, each time you take that step, yeah, in the occupancy changes, it does trigger a change as you should make on your insurance policy. Michael: Okay and that's such a good, I mean, good thing to know, cuz I think so many of us think, oh, well, our mortgage doesn't change if I move out of the property now rent it. But the insurance absolutely does, right. So this is a phone call, we should be making ahead of time with our agent and having that conversation? Jason: Exactly, I think a lot of people think that just because it's still in their personal name, they still have their personal mortgage on there, that they're all good. But again, the key thing you want to think of is, are you changing the usage or the occupancy of the house. And if so, you probably need to make some sort of adjustment on your insurance policy. I mean, all the products are out there. You just have to keep your, you know, as you're scaling up in this real estate, investor space, and you keep going working up your ladder, and keep leveraging, on every step, you do need to make an adjustment. It's your policy. Michael: Okay. Great to know and then kind of another hybrid of the hybrid question. So my situation I live permanently, it's my prime residence downstairs, I rent upstairs monthly, month minimums. But now let's say I want to start renting out the bottom portion when I go out on vacation for doing nightly short term rental, what type of policy or endorsement do I need then? Jason: So you get a short term rental policy, at that point… Michael: A totally separate standalone policy, or is that an endorsement that I'm putting on top? Jason: You could it all depends on the this is the space that's not fully developed, so you could try to go back to your homeowners policy and say, hey, do you offer that I'd say three fourths of them do not offer that type of policy, but then the fourth of the veal, like calm state farms, all states or whomever, a fourth of them may still offer that option to be able to short term your own units along with a duplex. So it gets you kind of get into that in that gray space in the bottom line is where's your primary residence… Michael: Got it, okay. ´ Jason: …that’s what kind of dictates what your true that one. Michael: Okay, okay and if I do if the carrier that I'm currently with does not offer that type of policy change or endorsement, and I do need to go get a true short term rental policy? Is that policy going to cover me for when I'm living in the property as well? Jason: Some of them can you get to and, again, I hate to keep seeing endorsement, but you get to add the endorsement back on there that you will use it personally. Michael: So now I've gone back kind of the opposite direction. Jason: Yeah, yeah. Michael: It's okay. All right. Jason: Yeah and I mean, an overview as well as when you're in a homeowner's policy. That's, that's a personal policy, you know, personal homeowner's policy and then as soon as you move over to the 100%, where you are short term in both units, that becomes a commercial policy. So basically business usage and that's why, okay, now you have a business policy, but now I want to go back in and use it personally, it gets a little bit, you got to, again, add the endorsement to be able to be protected for that. Another thing that you want to think about, which kind of overlaps is if you just get yourself a renters policy for yourself, that will cover you, when you go back to that property, if you have to have it set up an LLC, on a business policy that will cover you for personal use there. Michael: Okay, so if I if okay, so the scenario is I've moved out of my primary, now I'm renting it full time and both units and I've got on a commercial policy and because I've moved out now, I want to put this property in the name of the LLC for business purposes and so I have the short term rental policy on that and for myself, I go get a renters policy and sometimes I come and stay in my short term rental and the bottom unit that renters policy is going to be effective for picking up some of the coverages there? Jason: Correct, correct because on a business policy, it the liability only covers that premises or that building. But from a personal standpoint, you know, you're going all over the place, and you need to have some that those liabilities, you know, picked up on your on prem. So when you go rent somewhere else, they're gonna say, hey, I need some proof of coverage to stay in my unit, that renter's policy now gives you the ability to do that, versus before when you had a homeowner's policy and a homeowner's policy would extend liability all the way over to wherever you're staying. So for instance, when I go on spring break with my kids, and I go stay at the hotel, my home Moroz policy is extending liability All the way to that hotel room. Michael: Got it, okay. Jason: Yeah, yeah. So you lose that when you go to a commercial policy and so, yeah… Michael: Okay. Well, for those people that are still with us, I hopefully we haven't bought it and went to tears. Jason, I'm curious if you could share with us what types of coverages we should be looking for an asking for on a short term rental policy, because, as you well know, there's all these different lineups and coverages and endorsements that you can add on your homeowners policy. So what do we need to be asking for on the short term side of things? Jason: So on the short term side, there's only a few companies that have a very robust, you know, policy. And some of those, some of those coverages, for instance, would be, you know, if you had jet skis at your rental, and at the short term rental, so think of a lake like, a bigger home that will have, you know, bigger, you know, let's say can can house 14 people or something like that, well, they're probably gonna have some parties. So you can get all sorts of other business endorsements onto that, that location that you're not going to get with a traditional like State Farm or Allstate policy, that's going to give you what they call like liquor liability, you know, extension for for jet skis, or for the golf cart, or some of those other items. So if it's, if it's a much more robust, you know, short term rental, you know, it'd be like Orlando, or east or lake house, then you're gonna want to probably go with a little bit more of an expensive, broader short term rental policy. But if it's just in the city, and you don't, you don't have any of those other ancillary exposures, then you can go with this, most of these other smaller policies will, will take care of it. So Okay, hopefully, that that gives you some indication. But again, it goes back to usage and how, you know, what you're gonna be doing there, whether or not which endorsements will cover. Michael: Okay, that makes sense and I guess really, the best way to go about it is to chat with some of the folks that are that do have robust policies in this space, and simply explain to them, hey, this is the type of property I have and this is the type of usage that I envision happening there and then hopefully, that agent or broker can go and put us in touch with the type of policy that we should be is appropriate for the space. Jason: That's correct, yep. Michael: And that's something that you could probably help out with, right? Jason: I can, and then there's a couple options where you can go direct, but again, it's, I'd say, you still want to line up with the insurance broker insurance agency that specializes in that short term rental space, because they're going to be I'll tell you the difference, I'd say the normal home, a normal agent is not really going to know the difference between the two, it's, again, the whole space is still being developed. So most agents still don't know what they don't know, in the space. Michael: Yep, makes sense. A…

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State of the real estate market 2022 with Gary Beasley and John Burns Mar 31, 2022

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John Burns co-authored Big Shifts Ahead: Demographic Clarity for Businesses, a book written to help make demographic trends easier to understand, quantify, and anticipate. Before founding John Burns Real Estate Consulting in 2001, John worked for 10 years at KPMG Peat Marwick—2 as a CPA and 8 in their Real Estate Consulting practice. John Burns founded the company to help business executives make informed housing industry investment decisions. The company’s research subscribers receive the most accurate analysis possible to inform their macro investment decisions, the company’s consulting clients receive specific property and portfolio investment advice designed to maximize profits. Gary Beasley is CEO and Co-Founder of Roofstock, the leading online marketplace for buying, selling and owning single-family rental investment homes. Recognized as a leader in the future of real estate, Roofstock was featured on Forbes' 2019 Fintech 50 list. Gary has spent most of his career building businesses in the real estate, hospitality and tech sectors. After earning his BA in economics from Northwestern, Gary ventured west to earn his MBA from Stanford, where he caught the entrepreneurial bug and still serves as a regular guest lecturer. Immediately before starting Roofstock, Gary led one of the largest single-family rental platforms in the U.S. through its IPO as co-CEO of Starwood Waypoint Residential Trust, now part of Colony Starwood Homes. In this episode, we discuss the current state of the real estate market and the economy more broadly. Gary and John share their thoughts on what has been happening year over year in the housing market; what 40-year highs of inflation, rising interest rates, and geopolitical unrest mean for real estate investors; and highlight some of the risks that investors are faced with today. Episode Links: https://www.realestateconsulting.com/ https://www.linkedin.com/company/john-burns-real-estate-consulting/ https://www.linkedin.com/in/gary-beasley-956647/ https://www.roofstock.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 today with me I have two very heavy hitters in the real estate space. John Burns, CEO of John Burn's real estate consulting, and Gary Beasley, co-founder and CEO of Roofstock. So without further ado, let's jump into hearing their thoughts and opinions around what's been going on in today's real estate market. John Burns and Gary Beasley so happy and excited to have you both back on the podcast. Thank you for taking the time to hang out with me today. John: You bet. Gary: Hey, Michael, great to see you. Michael: So I of course, know a little bit about both of your backgrounds and who you are. But for those of our listeners that might not be familiar with who you both are, if you could give us a quick two minute, two second intro of who you are, where you come from, and what it is you're doing in real estate and John, if you want to go ahead and start, that'd be great. John: Okay, I'm the CEO of John Burn's real estate consulting, I founded it back in 2001, to figure out what's going on the housing market for a lot of people, mostly big companies and that's what we do. Michael: Love it and Gary? Gary: Sure, I am Gary Beasley, I'm the co-founder and CEO of Roofstock and we've been at this for about six and a half years now. Building out really the complete ecosystem for single family rental investors and I've known John now, I think, John, since about when you started the company, it feels like we've known each other for a while we when we I think when we met we we both had dark hair. Remember that? John: It's been a very long time. Michael: That's great. Well, I wanted to chat with you both around a lot of things that I've been getting questions about, and I'm sure that the two of you have as well and that's just kind of what's been going on with the housing, market and economy over the last couple years since the pandemic started. So I would love to just jump into things get into the meat and potatoes and get both of your thoughts on really year over year, what's been going on at the macro level in the housing market. John: Well, I guess I go first, if you let me go back maybe three years, so but pre the pandemic because I think it's relevant. The housing market was extremely hot. We have a different view than a lot of people on on how undersupplied the market was, we don't think it was I just applied at all actually until about 2019, then it started to be under supplied and with interest rates. So damn low everywhere in the world, people had figured out that single family rental housing was a great investment just to get some yield and we were seeing a lot of investors come in to the market, then COVID hit so you know investors are very volatile. They stopped for a few months, and then they came back very strong and probably the biggest difference in the last year is the fear of inflation has piled in on top of the need for yield and it's double the reason to invest in rental homes. So we're seeing money from all over the world focused on housing in America. Gary: I would agree that clearly the residential market has been booming and I would say despite a number of factors that you would have thought might have slowed it down. We went through a global pandemic, and housing chugged right on through and we could talk later perhaps about why some of those things happen. But the reality is really kind of across price points and geographies. You've seen robust demand for housing and if you look at price increases year over year, John, I know you track the SFR space really closely and it kind of mirrors what's been going on even if you look at owner occupied sales, but home prices have been going up call it 15 plus percent, year over year, pretty consistently. That's a big number, when you think about historically, it's been about 4%. If you go back 40 years on a compounded basis. That's how it had been up until fairly recently. So a lot of you know in rents have lagged that a bit but you've seen high single digit to low double digit rent increases as well in a lot of these markets and so in oftentimes, I feel rents are a little bit of a lagging metric because especially a lot of the mom and pop owners don't raise rents every year don't raise them, really even to market so we're seeing a lot of homes come to market today that have rents that are 10 or 20%, below where the markets are today. So, so you've got just a lot of demand for the product and, you know, we're at an interesting time now, and I'm sure we'll talk about, you know, some of the current dynamics in the market, interest rates have moved up quite a bit in the last, you know, month to six weeks, we've got a lot of interesting things going on geopolitically, we're not yet seeing that impact, demand or pricing. One would think that those factors should that have an impact over time. But for now, I think just the supply demand dynamics very, very much in the favor of demand over supply. Michael: Okay. Interesting and I'm curious to get both of your opinions on this, I mean, we are at such a unique time, kind of in history and curious to know your guys's thoughts on do you think that real estate investing fundamentals have it all shifted because of where we find ourselves today? John, I'll let you go first on this one. John: I don't know if the fundamentals have shifted, because I've seen this game before. But what is different is that by investing in rental homes has become a very easy thing to do, thanks to Roofstock and others. I mean, prior to 2012, you couldn't get on your computer and figure out exactly how much a home was worth and how much it could rent it for in about five minutes, you can now there's all sorts of vehicles where you can invest in funds and completely passively invest in housing and I think it's become an asset class that really was very illiquid, and pretty lumpy before that now has become more liquid and I think that is a permanent change in the market, doesn't mean things can't go down. But I think it's actually had a permanent positive increase permanently on home prices. Gary: I would agree with John, I don't think the fundamentals, I don't think the fundamentals of real estate investing have changed. But I would say perhaps some of our maybe preconceptions or assumptions about how it would perform is I kind of mentioned earlier, or maybe a little bit challenged, and that there's just so much demand for the product and in the pandemic. You know, it was almost counterintuitive that home prices would go up and rents would go up. But when you think about the fact that people really demanded shelter, safe shelter, and there was an exodus of from a lot of the coastal cities to secondary and tertiary markets drove a lot of that demand. So but I think still, the fundamentals of real estate are very much about location and supply and demand. Those things, those fundamentals I think are true. I think one of the things we're seeing though is perhaps there are different things get that can drive, demand and pricing for different types of real estate assets. So if you look at for example, housing, and industrial, which have done quite well, throughout the throughout the pandemic and the aftermath, and then you had some real estate asset classes that really suffered, because you look at office and retail and and REIT in hotels, things like that. So it's it. I think real estate broadly can be influenced by different things. The fundamentals of each have to be examined, but certainly for housing. It's been it's been very strong, despite what might you might have considered some some headwinds. Michael: Okay, interesting and you both touched on inflation in the conversation thus far and so I'm curious to know, how much of the demand do you think is being really driven by inflation? And do you think that folks are right or wrong to be considering real estate investing as a hedge or as a defense against inflation? John: People's expenses are going up and your investments should beat inflation and nothing in the treasury market does it in fact, nothing in the high yield bond market pretty much does it now too, I don't know how you earn returns. But this was going on pre COVID and that's why I mean that there was a surge of money coming into the market pre COVID. We at our conference at the end of 2019, we had Bruce flat, the CEO of Brookfield asset management, who at the time manage more than $500 billion was fundraising all over the world and he literally said that this is the most significant thing he seen in the last 15 years, is everything that produces cash is gonna go up in value, and that was pre COVID and so that this this has just got even more accelerated because inflation wasn't even part of the equation. Now if you're now if you need to beat inflation in your return and inflation is right now the latest print is seven 8% where you're going to get seven or 8%? And so housing, if wages go up which they are, you can raise rents, if the cost of the structure going up is going up, which it definitely is, every single component in the house has gone up, their cost of construction has gone up at least 10% in the last year. That's an inflation hedge too, because nobody's gonna replicate what you own for the same amount of money. It's very much an inflation hedge. Gary: Everything points toward continued inflation, in my view in the housing market. Now, that being said, interest rates going up, you would think should moderate that. That's an offsetting influence, but the cost of the inputs, the labor and the materials, clearly upward pressure, everything that's going on in the world, disrupting the global supply chain, and the cost of transport and all that putting upward pressure, Pete wage inflation to keep people in their seats, and to hire people. That's allowing people to have more and more money to spend on housing that's also pulling pricing up. It's hard to see how much that's going to, in an absolute basis reduce the price of housing, I do think that we will see some moderating of the rate of inflation of homes over the upcoming quarters and years, I think that 15% is gonna come down naturally. But I don't see, I don't see it coming down to the point where it actually reverses and you see absolute price declines, like we saw in that really unusual time in the Great Recession, which was, arguably a once in a generation adjustment to housing prices there. I think, a lot of fundamental differences between what we're seeing today and and what we saw back then this is not a credit bubble. John: So I agree with everything you said until this is not a credit bubble. I mean, maybe you meant a credit bubble on housing, because I agree with you. Gary: That's what I mean, I mean that there's a lot of embedded equity, as opposed to people, you know, having 3% or less equity in their homes, they've got 20 plus percent equity. Now, you can talk about the I wasn't speaking to the global kind of free money, credit bubble, but… John: Well, that's a I think there's a credit bubble going on in the world on pretty much everything else. I mean, Dodd Frank, made it impossible to do it on a mortgage going through a bank. But people are lending against crypto, it's the highest borrowing and stock prices ever. We're seeing deals even in single family rental that well, I would say are being done with pretty much no due diligence, because it's a mess piece. So there's a little bit of equity in front of me and what I worry about is a recession caused by a credit bubble outside of the housing market, which impacts housing demand and you know, that's when housing was struggle, but I think everything else in the world would struggle at the same time, maybe even more, so. So I'm not, I'm not saying get into stocks or bonds, because it's just that, that that's what caused the great financial crisis, and it was housing last time. I think it's other stuff this time. We were seeing flip flipper loans are being securitized on Wall Street. I mean, there's, you know, I see that in my business, one of my clients is lending against crypto balances. You know, I think another famous person just came out and said, if you've got if you can put up crypto, I'll give you the value of your crypto to make a down payment for a house, that there's some different stuff going on. That concerns me but not on buying rental homes or Roofstock more concerning on the economy. Michael: Okay and so curious, John, just, you know, personal thoughts. What's a good defense? John: You know, normally it would be cash, but holding on to cash it goes down 7% in a year. So I think Howard Marks who's a famous investors calls this an everything bubble. We're in an everything bubble right now and how do you invest in an everything bubble? I have no idea. That's why I run it… Gary: Maybe maybe negativ…

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Rachel Richards on what it really takes to succeed with syndicated deals Mar 29, 2022

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At age 27, former financial advisor Rachel Richards quit her job and retired. She now lives off $15,000 per month in passive income. Rachel Richards is the best-selling author of “Money Honey: A Simple 7-Step Guide for Getting Your Financial $h*t Together.” She is an entrepreneur, professional speaker, and investor. In her newest book, "Passive Income, Aggressive Retirement," Rachel dives deep into the topic of passive income and financial independence. She explains why building self-sustaining income streams is so brilliant. She outlines 28 different passive income models and how to start creating them. For most of us, retiring at 27 sounds like a dream, and while it may seem unattainable, it’s certainly not impossible, as we learn from Rachel. In today’s episode, she sheds light on how real estate played a key role in achieving financial freedom. We learn about her real estate journey so far, the metrics she focuses on, and how she ensures that a property will ultimately be a worthwhile investment. Although the rental income she makes from properties is now passive, Rachel does not sugar coat the effort it took to get her into this position. Episode Links: https://theshorttermshop.com/ https://www.instagram.com/moneyhoneyrachel/ https://www.moneyhoneyrachel.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, coach Michael here from the Roofstock Academy just wanted to let everyone know we had Avery Carl on our show a while back and she was talking to us about short term rentals and she was actually kind enough to host me on her show as well. Theshorttermshop.com you can find that anywhere you get your podcasts, and I did an episode with her and it's titled dig your well before you're thirsty. We're talking a little bit about my story and some of my coaching background. So definitely go check that out. We want to support her show as well. You'll find the link in the description right below. Let's get back to the episode Michael: What’s going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me I have a very special returning guest Rachel Richards of money, honey and today Rachel's talking to us about syndications and also her thoughts, predictions, and where we are in today's market. So let's get into it. Rachel Richards, thanks so much for coming back with me and hanging out. I really appreciate you taking the time. Rachel: Yeah. Thanks for having me again. This is so fun. Michael: Oh, my pleasure. You're one of the really fun one. So we're happy to have you back and so excited to hear and chat with you today, because we're talking about syndications and the current market conditions. So definitely, definitely excited to hear from you. For maybe our listeners that aren't familiar with what syndications are, can you just give us a quick two second definition? What is it, how do they work? Rachel: Absolutely! Real Estate syndications are one of my favorite things to talk about right now. So let's say there is a $10 million apartment complex, and an investor wants to buy it but she can't afford it, she can form something called a syndication. This allows her to raise money from private investors, people like you and me. So we can pool our money together to buy this large piece of real estate that otherwise we all might not be able to buy. So we can pull our money together, buy this piece of real estate, the cool thing is we are not lending our money to this syndication or to the syndicator. So we're not earning interest, we're actually part equity owners in this syndication, which means we are entitled to a share of the profits. So and the other cool thing is we're limited partners, we are very passive investors. Once we do the due diligence, and we find this indication, and we analyze it and we send in our money. That's all we do. We're not managing tenants, we're not overseeing renovations or day to day operations, you just sit back and you collect a monthly or quarterly cash flow distribution and if the property's ever refinanced or sold, you get to share profits at that point as well, in addition to all the tax benefits you would normally get by owning real estate. So I'm super excited about them. It's one of my favorite ways to invest in real estate and one of the most passive ways I have found to own rental property. Michael: Yeah, really sounds like it and so it sounds like you kind of meets all the definition of criteria of true mailbox money. Rachel: Absolutely. It's definitely actual mailbox money. Michael: That's awesome. All right, so let's dive a little bit deeper and talk about, you know, what are the mechanics involved behind actually getting involved in one of these syndications? Because I think a lot of people when they hear the word syndication, or they hear 10 million or $100 million apartment complex, they think, well, not for me only for somebody else. So how does somebody get involved with participating in syndication? Rachel: The first thing to be aware of is, you really need to find a good syndicator and people refer to syndicators as different things, sponsors, operators, general partners, GPS. So all those terms mean the same thing. I've heard way a lot of horror stories about people sending in $50,000, to a syndicator. And then the syndicator running off with that money and it's truly scary. Yeah, it's very easy to get scammed and the thing is the syndicator eventually gets caught and gets thrown in jail, but investors typically can't recoup their money. So it's very scary, I don't know anyone that's personally happened to you, I've just heard about this happening online, and, and whatever. So you really need to find a trustworthy syndicator. This is a lot of money that you're sending to somebody, and you need to find an experienced and qualified professional. So let me put it this way, if you're going to spend five hours doing due diligence, make sure you spend one or two hours analyzing the deal itself, and you spend three or four hours doing the due diligence on the syndicator the person you're sending your money to. Michael: Okay. That's a great way to say it. So really, we're evaluating the person or the operator of the company much more so than the deal itself. Rachel: Absolutely. Because they're the ones who are ultimately in control of this asset. They're going to be overseeing the renovations managing the tenants. They did all the underwriting there anyone who found this deal negotiated this deal and they're going to be managing it the entire way through until you sell the property. You don't have control as a passive investor, you're not making decisions. So you need to trust that they know what they're doing. They're knowledgeable and they're going to get you the returns that they promised you. Michael: Okay and you bring up such a great point that they are the ones kind of steering the ship and they should hopefully be the one ones who are experienced, I think of myself as a semi experienced person on the spectrum definitely on the on the ladder on the lower half of the rung when compared to operators and syndicators. But if I'm evaluating a deal, and I'm seeing numbers that really don't make sense to me, or I would underwrite it differently, I mean, how scrupulous should I be underwriting their deal, if they're the operators, they're the really experienced ones doing a massive deal. Rachel: I would be very scrupulous, especially if it's your first deal that you're doing with that syndicator. So I'm the phrase verify her trust, verify, trust, but verify definitely applies here, I'm always looking at their assumptions, and then double checking. So when you are first looking at investing in a syndication, you will get a deal from a syndicator and they'll send you something called an investor deck, and it's normally a 30 or 50, page PDF presentation and shows you the property and not the pictures, the pictures, the financials and the comps and all this data and that's kind of what you have to review and to make your decision based off of, I'm going through all this data and I am asking myself, do I agree with that? Do I think that's right, do I think that's reasonable? So there's a few, there's a ton of things I look for. But here's an example: A lot of syndicators who are not as experienced might put in a really large year one rent increase, whereas more experienced syndicators will gradually increase the rents over the three or five years of the hold up the investment term. So if you see, all of a sudden they're going from, you know, they acquired it in year zero, and they're increasing the rents up to the full max amount that they are projecting right away in year one. That's not a very reasonable projection, or a reasonable assumption. So that's something to look out for. Another thing is to just double check the comps in the area, they will have their own comps of you know, here are some of the other, for example, apartment complexes in the area. Here's what they're renting for. Based on these, here's what we think ours can rent for, I would just double check those, make sure the data is accurate. Make sure it's up to date, and they're not pulling comps that are from a year ago, or they're not pulling comps that are 20 miles away, you know, just again, trust but verify. Michael: Okay, that's so good. That's so so good and I've seen a lot of the syndication, offering memorandums or pitch decks that that I've personally seen, we'll have like a deal track record, showing some of the other deals that they've done and what the returns have been and compared to what they were projecting. Is that something to expect from a syndicator? Is that something that you should have to go get on your own? Rachel: I think it's something to expect and if it's not shown, I would certainly ask for it. I am very hesitant to invest with a syndicator, who hasn't already exited multiple deals, because then it's really hard to see what has his returns actually been that he's gotten for his investors or for her investors. So what that means if somebody has exited a deal is that they've purchased the asset through the syndication, and then three or five or 10 years later, they've already sold the asset. So all their investors’ money have been returned. They know for sure what the actual return was compared to the projected return. The numbers are there, it's it's very black and white and when a syndicator send you those exit deals, it's very clear how the syndicator is doing. Now, here's the thing you want to ask them, though, is hey, are these are you showing all of your exited deals? Or are you just showing the best ones, right? Because they have a good one, they might only just show you the good ones. So one of the best questions I ask any syndicator when I'm sort of interviewing them or screening them is hey, what's the worst deal to date that you've ever done? And how did the returns compared to what you projected? What happened? What did you learn and what are you going to change going forward? Michael: Oh, that's so good. That's so good and when you're interviewing and screening these folks, are you actually getting the main operational team? Are you getting their sales kind of inbound leads person that's going to tell you what you want to hear? I mean, how far up the food chain so to speak can you get with these some of these folks. Rachel: You get the main syndicator you get the head honcho, so I'm not I'm never I'm never delegated or relegated to somebody, that's the sales person or the investor relations person. I'm talking to the main syndicator the main sponsors putting together the deal, and that's always who you should expect to talk to. So basically, I go in anytime that you are introduced to a syndicator or you meet a syndicator, they should always be asking to have a call with you or to have a zoom with you have some type of initial 15 to 20 minute conversation. I feel like it's a red flag if they don't, first of all, a lot of them are required to have some type of preexisting relationship with you before advertising their deals to you. That's an SEC regulation for a lot of not all the time but most of the time, so keep that in mind. If they're not requesting an initial phone consultation, I think it's a red flag and even if they're not required to, it's nice to know that somebody wants to get to know you. They want to get to know your goals and they're giving you an opportunity to get to know them as well and to get to ask them about their experience and their history and what kind of syndications they do. So I think that's a really positive thing when they make the effort to set up a phone consultation with you. Michael: Oh, that sounds so good as well to keep an eye out for all these great like red herrings kind of gotcha. things to look out for, I think is great. Rachel: Yeah, it’s lot of them. Michael: It's, it sounds like there's a lot of them. Yeah and so what types of because I've seen that there are syndications for all kinds of different deals multifamily, industrial, self-storage, what kind of syndications are you investing in, it gets you excited. Rachel: There's so many there are multifamily mobile homes, self-storage, industrial, office, you could kind of syndicate anything, I think, I don't think anything's off limits. The ones that I personally invest in or multifamily, because I'm very familiar with him having on so many multiple multifamily rentals myself, I had a portfolio of 38 doors at one point, by the time I was 26. So being able to analyze those and trust but verify those, it comes very naturally to me. Also, mobile home parks, I think are such a great opportunity right now. It's a supply and demand thing. There's a limited amount of mobile home parks in the US and they're not allowing anyone to create more mobile home parks. But affordable housing is very much needed. So I think mobile home parks is a really great opportunity and then self-storage, I think is a great place to be in because it's another supply and demand issue where there is not enough self-storage for people and people just continue to need a place to store their stuff. I have a self-storage unit, so Michael: I do too. Rachel: Yeah, it's like oh, my gosh, we've just been on the road and traveling since May. So it's killing us. They raised our rates by $30 a month and it's like, what what can we do, you know… Michael: You don't really have much of a choice. Rachel: You can literally just raise rates on you. So anyways, I think it's a really awesome investment opportunity. So I'm looking to get into that and one of my more unique syndication investments that I'm in is a laundromat in California, which is totally random. But I love that because when you don't have tenants, same thing wit…

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How the Russia-Ukraine conflict may affect the real estate industry Mar 24, 2022

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Dana Dunford is the CEO and co-founder of Hemlane, a technology-enabled property management platform. Through real estate she became a strong advocate of purchasing properties anywhere, as the best investments are not typically in your backyard. Dana helps real estate investors set up the most intelligent process to manage rentals from a distance, while connecting them with local, licensed professionals. Russia’s attack on Ukraine has taken financial markets by surprise and its consequences are already having a severe impact upon energy, transport and logistics, stocks and assets. To help you stay understand the situation, Dana will talk us through in today’s episode how likely the war in Ukraine is going to impact and affect our economy locally in the States as well as the real estate investment market. Episode Links: https://resources.hemlane.com/author/dana-dunford/ --- 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 Dana Dunford, CEO and co-founder of hemline property management and today Dana and I are talking about a pretty heavy and serious topic and that's the war in Ukraine, and how it's likely going to impact and affect our economy locally here in the States as well as the real estate investment market. So let's get into it. Dana Dunford, welcome back to the pod, so happy to have you on. Thanks for taking the time. Dana: Yeah, thanks for having me back on. It's been a while. Michael: I know it's been too long and in between our last recording, and now you gotten some series a funding, right? Dana: We did, we did. We announced it in January and now we're on the property management side, ready to ready to rock and roll and provides more innovation there. Michael: Oh, congratulations. That is super exciting. So today, I was hoping that we could talk about kind of a more serious topic, a bit of a heavy topic and that's how the war in Ukraine is likely to affect our economy here locally in the States and this is a sensitive subject, a heavy subject, there's some incredible atrocities going on right now over there. So want to be sensitive to that. But very curious to get your thoughts around what we here at home can be doing on the economy site to kind of help weather through this storm. Dana: Yeah, definitely. Um, so so just to begin with, I think, with the conflict that's happening in Ukraine, I take it back the strategist, tragedy, and think about, again, two to three years ago, also with COVID, right, basically major event that was global, that everyone was watching. And on the real estate side, we got through it, we got through it together, and we got through it also with our tenants, and with communication. So at the end, I want to really talk about that of like, next steps, actions you can do as a current landlord, and what you should be doing immediately, what you should be doing during your lease renewals, and how to handle what is happening today in the news and in the economy. But a lot of questions that I do get is, you know, from the real estate investor perspective, hey, how is this on the rental side going to affect be here at home as well. And so from there, I think the first thing to talk about is essentially the economy. I'm not a politician. So politics stay 100% away from I will really talk about about rentals themselves. There'll be some things I want to talk about in here, such as short term rentals and development. That's not my expertise. So I think we'll just touch on that. I'm really on long term rentals, and talking about what we're seeing in the economy, and then where we're going from there. Um, so I think that like, probably first place to start is at a high level, um, you know, affecting properties here in the US. What are we expecting? Um, obviously, there, it depends on your property depends on the type of property you have the rental property you have, as well as the types of tenants you have in your property. And so we'll go over that. Um, the other thing about it is location. So I think from that perspective, Michael, let's just face it, like people are asking, is the recession imminent? What's going on with the economy? And how does this conflict impacted? I think, at a high level, when you look at it, definitely will help prolong inflation, may speed up some of the concerns that people have had about recession, but from the rental industry, and what you and I think about every day, as owners of investments of rental properties. For us, we're actually here to assist. You saw this in other recessions, such as a Great Depression, when you saw that people were losing their homes, foreclosures, there was no development, I think 95% of development was caught, right of new homes and there was a huge surge in rental properties and or demand for rental properties, I should say. And so it's the same thing here for landlords to consider of hey, there, if there is a recession, and this conflict does kind of spoil it to happen a little bit faster, or prolongs inflation or anything like that, you as a real estate investor can help by providing a roof over people's heads here in the US, because you have that property and you have that decision to make of renting the home versus keeping it vacant or anything like that. And so I'd say at a high level there, there is benefits to owning rental properties and helping spur the economy from that perspective. Now, I think let's talk about geography, as well as that like a good another place to start. Michael: Yeah. Dana: I've learned from that perspective on the rental side and just to also primary residences, people always say what are the most three most important things in real estate and purchasing and it's location, location, location, they say, right. Michael: So it's four things. Dana: Is that is that for location, location, location? Michael: Location, location, location, and then purchasing, right? Dana: Oh, and then purchasing? Yeah, and actually purchasing it, there you go and so from the location perspective, we are overseas where we're, there's one big ocean of the seven seas, that is between the US, the continental US, and the conflict and so I do think Europe is going to be, Europe real estate will be much more impacted than US real estate and so you have that at play there. I also think, with the location of your property and the type of property you have, understanding the tenants that are in your property is something that's super important here with this conflict and the reason I say that is because I wanted to go into inflation and talk about inflation here and from that perspective, with inflation, what you do see is that inflation is expected to be prolonged 8% of gas and oil right comes from Russia and so we're looking at prices going up here in California I don't know, if you've looked at gas prices, but I think I saw $7 when I was down in San Diego last weekend. Michael: Yeah, diesel is like seven bucks, pretty no unleaded is around six and change most places. Dana: Unheard of yeah and so from a location perspective, also your property, the type of property you have in the location. renters who are more cost burdened by that price of gas and oil and just travel and transport to their jobs will be much more greatly impacted than those were up an increase of, you know, seven to 11%, whatever it is, with the inflation doesn't touch too much of those. The consumer goods and stuff that's just part of their of their of their daily life. So I think that would be one thing I would say on the on the location side to think about is not only geography and looking at the big picture, the map, but also where your properties are and who your tenants are. Michael: Dana that makes perfect sense. I think for those folks who are looking kind of towards the future about future purchases based on location and what type of tenant class they would be looking for. But what would you say is important for folks to keep in mind? Or maybe go out and do if they have an existing portfolio? Is there anything that they could do you know, proactively as opposed to reactive? Dana: Yeah, absolutely. Um, so I think from that perspective, it's talking to your tenants, right. So it's the very first thing to do and, um, I'll give some parallels also on the COVID side, but going out and talking to your tenants of, hey, we know there's inflation out there and we, we understand that there are other things in the news that are affecting this inflation even more so that we didn't anticipate back in December. And now that we're in 2022, how are you doing from that perspective, you know, from a perspective of, you know, income to rent ratio should be three to one. So you should have three times the income to the amount that your monthly rent is, but are other things in their lives affecting that where are they suddenly it needs to be higher than three, or they're finding that their salaries not increasing as much as the rental rates? So certain things like that, to just be mindful of to talk to your tenants and from a bank account perspective, are they seen any of their savings deplete they're where they really are living paycheck to paycheck if they didn't before? Or if they are today, living paycheck to paycheck, which many renters are or they find finding that cost burden becoming easy and greater with the inflation rates, rising care, which is more of like general from an economic perspective, something to be mindful of. Michael: Yeah, I think that's a good point and I think that real estate, rental real estate in particular is kind of one of those interesting businesses in that there often maybe isn't a lot of interfacing between owner and client or owner and tenant. And that's just not the case in some of the businesses. If someone goes to retail store, they're going to be interacting with employees of the store and get feedback there on the spot. But in real estate, we often don't get that feedback until it's too late, or those lines of communication aren't open. So I love that you you're talking about just going and having a conversation with folks kind of taking the pulse, finding what their needs are and looking to see if they can't be met to be mutually beneficial. Dana: Yeah, it's KYC, right. Know your customer, I call it KYT, know your tenants and being there for them we actually saw here at Hamline, we saw it really, really helpful in COVID, where landlords reached out to their tenants and just said, hey, listen, there, right now there's a pandemic, how are you doing? How are things going with your job, you know, if you are going to lose your job, or you are affected by COVID, please reach out to me and then if a tenant does reach out, it's like, oh, well, because they think they're going to lose their job, they're in the restaurant industry or anything like that. It's like, okay, well, if that's the case, then let's go ahead and talk about early termination with no fee, or whatever it may be to help the situation. I think that kind of know your, know your tenant is super important in any in any situation like this, and taking a proactive approach and the reason I say that is there's a lot of misinformation out there about how things are handled. We saw it in the news during COVID, where it was like eviction bans, no tenant can get evicted, right. It is headline news. But it was really only if you were affected by COVID and there was like five boxes, would that eviction a plane ban apply? So by knowing your tenant and reaching out to them and telling them, hey, listen, if you're affected, reach out to me, then you're actually in the know more so, you have more information there and you're having a conversation, rather than making assumptions of how the other person will handle the situation. Michael: Yeah, that makes total sense and from a from an implementation standpoint, I mean, if someone has a portfolio of 20, single family rentals, they're all with a professional manager, is it reasonable for the owner to reach out to that manager and say, hey, go, you know, go chat with these folks? Or is this a time that is kind of unprecedented in our history and so those owners really need to be picking up the phone themselves and having those types of conversations? Dana: Well, I think definitely, in that case, if you have a property manager, you should reach out to your property manager about it, right. So from that perspective, definitely, um, the other thing I would say with it is, the biggest time to do it, is during your renewal, right, so when you have an annual renewal, and this is actually a strategy that I wish more landlords, smaller real estate investors would implement, where they really understand during that renewal time, that this is a time to rescreen the tenants and understand are they especially during these unprecedented times? Are they going to be able to afford another year? And is it going to be very passive income to me? And what I mean by that is, for example, if you're expecting to increase your rental rates by let's just say 4%, which actually, by the way, is standard, they saw year over year, that our rental rates increased by 4%, this was in 2021. Michael: Okay. Dana: Then understanding with your tenants are will or is their income increasing by subsequent 4%? And if not, then are they going to be more cost burdened? And is that going to be a concern for you in should you make it month to month rather than any annual contract because of not? And so really understanding from that perspective on what it is what's really interesting is that when you looked at the data, so this is January of 2022. The government actually reported out that businesses had said they were increasing salaries 3.9% for the year, right annual reviews on average for all the data they could get and the reason they had noted that 3.9%, which was the highest they had seen since 2008. The reason they had said was one inflation and two the other reason was new hires, because we've seen kind of we've seen a lot of more jobs transition that we've ever seen before. In November in December, we saw a lot of jobs turnover and so from that perspective 3.9%, then when you looked at the rental rate increase from all the data that they could get was that 3.7% year over year reported in February and so when you look at it, it actually looks like tenant salaries went up equally or close, almost equal to what rental rates went up by and then John Burns had mentioned the same thing and his reporting of the economy, to back that up that he had basically seen something very similar, and his numbers and analysis that he pulled, that really, this whole cost burden by rent increases actually didn't happen, or we haven't seen that happen today, because you're also seeing that salaries are increasing as well, by the same amount. Now, if you are that landlord, who says, well, I looked at Wall Street Journal, and I saw rental rates go up eight per I saw inflation is that close to 8%. So I'm going to increase my rental rates…

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An insurance professional’s thoughts on risk management in real estate Mar 22, 2022

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Jason Bott joined Robertson Ryan in 2004 as a Vice President and in 2016 he became a Shareholder. Being part of Robertson Ryan, the largest independent insurance agency in Wisconsin, and a Top 100 US Agency, gives Bott the resources to handle standard and non-standard policies. He specializes in real estate risk management and has developed a national reputation for insuring real estate owners and investors of varying sizes. Understanding risk management in real estate is crucial to protecting your hard-earned assets. Being proactive and educating yourself as to where risks lie can save you a lot of time, money, and headaches in the long run. In this episode, Jason talks us through all the things that we need to be aware of as property owners when it comes to insurance. Episode Links: https://www.robertsonryan.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. Today with me I have Jason Bott who's actually a personal friend and my personal broker for a lot of my Midwest portfolio. Jason is gonna be talking to us today about all the things that we need to be aware of as landlords and as investors when it comes to insurance. So let's get into it. Jason Bott, man, what's going on? Happy to have you here and thanks for taking the time. Jason: Thanks, Michael. It's always great to talk with you. Michael: No, it's always a pleasure. So I, of course, know who you are and we'll get into that in just a minute. But I'm curious if you can give everyone a little bit of background on who you are, where you're come from, and what it is that you're doing with real estate. Jason: Sure. So my name is Jason Bott, I am based in Milwaukee, Wisconsin, and I'm a commercial insurance broker and I've been specializing in the space for about six or seven years exclusively and so I currently write about 25,000 units and in about 30 states. So in any state that you can find reasonably priced real estate that cash flows, that's usually more where some of my clients are. Michael: Okay. Jason: And I've been part of the firm, I'm a shareholder at the Robert surronding associates we are top 100 Insurance Agency in the US and you have been doing this for bots, about 20 years now. Michael: Right on and so in full disclosure, for everyone listening, Jason is actually my insurance agent, we got connected like I think three or four years ago now Jason: I think it's about four now. Michael: Yeah and Jason has been handling the vast majority of my Midwest portfolio, and I've been a very satisfied customer. So thank you, Jason. Jason: Hey, thank you, Michael, we always appreciate the business. Michael: No, absolutely. So for those of our listeners that are brand new to insurance, maybe looking to purchase their first rental or are now taking a look at their insurance. What are some high level terms that people need to be aware of? So they can talk intelligently with insurance brokers or agents? Jason: Sure. So I would say that the main thing that everybody comes up with is should I do actual cash value replacement cost. Michael: Okay. Jason: And I mean, that's probably the most universal question of the mall and it's very difficult sometimes to get replacement costs. If you're buying a let's, I mean, that in this market, but let's say three or four years ago, you could pick up a house for 20, grand 30 grand, and it was really difficult to get replacement costs at that low of a level, so you know, you're going to want to do, so when you're starting off, the lender will have certain requirements that may hinder you from making any decisions, they may already tell you, hey, you're going to get replacement cost, you're going to need ACB or you're allowed to have ACB, so I would always say check with your lender first. Anytime we start working with an investor, and they say, hey, I'm going to close on this property, we say that's great, connect us with your lenders, we can get your lenders terms. And then once we have those, we can kind of show the investor what kind of options they'll have. Michael: Okay. Jason: So the best way to maybe compare actual cash value replacement costs is when you're thinking about replacing a roof, let's say you have a $10,000 roof on a single family, and it's a 30 year shingle and the property is you know, 100 years old and let's say the roof is 15 years old, right? Michael: Okay. Jason: The replacement sost policy, if the hail comes through and sheds it and it blows off whatever the case may be the placement costs policies, just gonna replace it, doesn't really matter the cost. So if it's eight grand, 10, grand 12-15 the insurance period is going to replace it. An actual cash value, they're gonna say, hey, this, this, this roof brand new is probably 10 grand, you're 50% through the 30 year lifespan, so we're going to give you five grand and so now that equation applies to every single thing in your house, the door, you know, the paint, you know, the drywall, the flooring, the kitchen. So those things really do. If you don't have enough data building, it can really harm you. So, you know, if you're talking about buying from a turnkey, you know, operation, you know, like yourself with things or maybe fixed up, the next cash value doesn't really hinder you as much because if it was just updated, then the depreciation cyclize and starter, and so you're not going to get killed on it. But if you have a 30 year kitchen or 40 year kitchen, you know, you're probably gonna get 30 cents on the dollar to replace it. Michael: Got it, okay. Jason: So as you can see from a beginning investor, where they're buying their first one, you know, they're using that flush with cash, you know, usually they've, they've put together the nest egg to buy that first property. It's not like they got 30 or 40 grand set aside in reserves yet to compensate for that loss. So I always advise on the first one or two to go replace because and then as you build a portfolio and build up those reserves, then if you want to take a little bit more risk to save on premium, then you can do so. Michael: Okay, Jason. So what is that like, is there a difference in cost savings for the investor? If they go with actual cash value versus replacement costs or how should people be thinking about that? Jason: Sure. I think the easiest way to think about it is if you're buying a single family home, and let's say that single family home was $50,000, but it's 1000 square feet, 50 bucks per square foot is the market value. Michael: Okay. Jason: Many insurance companies will want to, in order to extend the replacement class coverage will require you to insure the building to 100 grand or 100 bucks a square foot. Michael: Okay, just because that $100 is an arbitrary number, that's their number they come up with? Jason: They feel like that they're getting enough rate or premium in order to extend replacement cost. Michael: Okay. Jason: So, you know, versus so let's say, an annualized basis, the replacement cost policy at 100 grand is $1,000… Michael: Yeah. Jason: …versus the ECB policy in trinet, and 50,000, is $500. So they just work their rates of, you know, their actuaries are back in the, you know, in the back room, making as much… Michael: …punch the numbers away… Jason: And that's exactly it and they just say, no, we need this rate in order to extend that replacement cost. Michael: Okay, all right. Jason: So, that makes sense. Michael: It does and so, about, like, thinking about bur investors or value add investors, if I'm someone that goes and buys properties for 50 grand, knowing that they're going to be worth 100 grand after I put, you know, 20 grand into, um, what type of policy should I be looking for if that's my strategy? Jason: Sure, yeah, there's a couple different ways to do it. So one, the insurance company always wants to kind of ensure exactly what you're buying. So if you're buying something for 50, grand, you know, and it's, it could be worth 200 grand, they're not going to ensure that the 200 grand right away. So we do have many investors that will buy that thing for 50 and they'll just say, hey, you know, what, we just got a kitchen done. It's not 30 grand, bump it up to 80 and you can tear it up, you know, throughout the year. Obviously, that's kind of a pain in the butt. So you want to try to maybe, you know, do it in bigger chunks or if you're just in this market gig can get contractors really fast just last time, right? Michael: Yeah. Jason: But that's probably about the easiest way to do it. It's just to kind of inch it up as you go. But here's the here's the thing is, everybody wants to insure for the ARB value, no, that's a replacement cost, or after repair value. But the insurance company is only going to pay out what you invested in it. So and they're not going to give you the market value. So if you buy the property for 50, and you've put 30 in and you're like, hey, man, now it's worth 120. That's great. But if as soon as you get that, you know that you've made the improvements, and you have a claim, the only amount that the insurance carriers gonna give you that 80 grand. Michael: Really? Jason: Yeah. Michael: Even on a replacement cost policy or that now are we still talking about ACB? Jason: No, if you rebuild it, you'll have the policy limits, but if you decide to not rebuild it, and just cash out, you're only getting the money that you put in. Michael: Ah, even the replacments cost? Jason: Yep. Michael: Okay. Jason: Yep and if enough times gone by, you know, meaning like six months to a year, then they'll bring in a third party adjuster, and kind of our appraiser I should say, and kind of give you say, and then at that point, they'll say, oh, yeah, it's worth 120. Michael: Oh, okay Jason: …Very, and so but if you just literally just finished and they're like, hey, man, last, you know, six weeks ago, you bought for 50 grand, and you just put 30 and you're telling me just, you know, what I'm doing for the yeah, we're not paying for the extra. Now to speed that up and say, okay, well, I'm gonna flip this thing really fast and I already have an offer. Well, as soon as you have that offer on paper that somebody says, I'm gonna buy it for 120, then they'll give you the 1/24. But there's a window of time that, you know, though, everybody says I just made, you know, I just made this money, but it's, it needs to season for a little bit for the insurance carrier to to pay that out. And that's kind of a little bit of a gray area. So I've never seen it where people really I've seen it online where people said, you know, I just took the loss right after it. I'm not getting, you know, the true market value, but this was worth. But it's never happened to one of my clients. Michael: Okay. Jason: It's a risk. Michael: Well, you got Jason in your corner. I mean, no way it's gonna happen. That's really interesting, that's really interesting. Okay, so is that seasoning period that you've got up on the property? Jason: Yeah… Michael: Okay. That's really good to know. Jason: Yeah. So as long as you get somebody right offers ASAP, during good again, and this market still works, right. So you're again dodged a bullet. Michael: Okay, awesome… And Jason talk to me, I mean, you're talking about the value add investor, calling their insurance agent telling them hey, I just put another 30 grand into this and so what it sounds like I'm hearing from you is that insurance is not a once a year type of thing, set it and forget it, right? If you're someone that's constantly adding value or making changes to property, there really needs to be a conversation with your insurance representative, not just a, hey, let's talk at renewal time. Jason: Yeah, and I think especially for people who are buying new the brand, their first, you know, the beer method, and then they move to their second, people start to miss start to misunderstand that that's a major insurance change that you need to talk to your agent about. So as soon as you move your primary residence from your home, you know, from address one, to address two, a lot of times people forget that the first location is no longer a homeowner's policy, which is meant to be owner occupied. But it's now a rental or a vacant building, or it's being rehabbed, whatever the case may be. But at that point, if people just leave a regular homeowner's policy on there, and it's been greater than 60 days, and you no longer live in there, you could have a denier, no declaration of a claim, because they're gonna say, hey, you stated that you live there full time and now you don't, you know, we're not covering any of these claims. So, oh, there's another shift… So yeah, as you build a portfolio move from one to the other, you got to make sure that you have those, you know, those coverages in place. Now… Michael: It makes total sense. Jason: Yeah, I can jump ahead a little bit. But when you're doing one or two, and you're working with your home and auto, you know, agent, or whatever the case may be, you really have to be on top of it. Once you get to three or five or more, there are commercial policies that are built for that, or built for real estate ambassadors that kind of take that into consideration. When you're dealing with state farm and allstate or anybody like that anybody that you're ever home and auto with, that you're going to need, they're not going to make that change, then I can have the correct policy fit for you for that… Michael Okay, okay, so and that leads me kind of to my next question. So I think so many investors who are just getting started, they've got maybe they own their home, or they're renting, and then they have a car and so they've got their auto policy and renter's policy or homeowner's policy, with a State Farm with Allstate with the farmers and so that's the insurance, that's kind of the they're known insurance world, as they start investing, they're likely that's the first person they're gonna reach out to is, hey, this is my insurance agent. So do those types of companies have great policies for investors, or should investors be looking elsewhere? Jason: So I, they can have great options, you know, and I'd say, especially on the first one or two, if you're in a very good financial situation, where you have good credit, those, those insurance companies, their premiums are based on your credit. So you can have the exact same house, you know, with somebody with 100 credit, and they're getting $500 a year and somebody who's got 550 credit, they might get, they might be paying double or triple that amount, for that same property. So from that stance, you know, the first individual's probably best to stay with their home and auto carrier for that policy, that second person, you know, they m…

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How American debt in the private sector affects wealth creation Mar 15, 2022

Show notes

As the author of A Brief History of Doom (2019) and The Next Economic Disaster (2014), Richard Vague established himself as a clear and independent voice in the ongoing conversation about the role of private sector debt in the global economy. His illustrated business history of the United States offers a more general audience a clear-eyed view of 250 years of wealth creation and the people and personalities who drove that growth — and hold it today. And now, Richard's new book, The Case for a Debt Jubilee, offers a compelling case and policy recommendations for new forms of consumer debt relief. Following a career that has spanned fields as varied as banking and energy, credit, and the arts, Richard has served since 2020 as Secretary of Banking and Securities for the Commonwealth of Pennsylvania. In this episode, Richard explains the current state of American debt in the private sector, how that affects the economy, what the government response to COVID adds to this calculation, and how investors should be looking at their relationship to debt while building their portfolios. Episode Links: https://www.richardvague.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 today I'm joined by Richard Vague who serves as the Pennsylvania Secretary of Banking and Securities and he's going to be talking to us today about debt and the American household. So let's get into it. Hey, Richard, thank you so much for coming on and chatting with me today. I really appreciate you taking the time. Richard: Well, it's a real privilege. You guys have a great show and I'm honored to be on it. Michael: Thank you, appreciate that. So we are here today to talk about something that I think is on every real estate investors mind. And well, most real estate investors might…, and that's debt and you've got a really unique position to be able to talk about debt. So for anyone who doesn't know who you are, where you're come from, and what your background is, you can give us a quick intro, a quick insider's peek into what those things are. Richard: Well, I was in the banking industry forever and ever, which included some amount of mortgage lending a lot of consumer lending. I spent about the last 10 years in venture capital, which obviously includes more equity than debt, but includes both but kind of as an outgrowth of the Great Recession of a decade plus ago, I've written a series of books, including: The next economic disaster and a brief history of doom and more recently, the case for a debt jubilee that really get deeply into debt and both the positive and negative aspects of debt. So it's a topic that remains heavy on my mind. Michael: It's your… sounds like and for anyone interested, where could they find those, that book? Richard: Well, if you go to my own website, which is https://www.richardvague.com/ , and Vegas, spelled V as in Victor AG, UE, you can see all those books. Michael: Okay, fantastic. So let's dive right in and I'm curious, Richard, in your opinion, I mean, how and why is debt such an issue in in the states in this country? Richard: Well, you know, over the course of pretty much my own lifetime, certainly in the last couple of generations, you know, let's call it World War Two forward, household debt has tripled, you know, in 1950-ish. Household debt, if expressed as a percent of GDP was about 50% and today, it's about 160%. So there's a lot of it around and a lot of households, you know, have accumulated debt of several types so that they really struggling we see households that have a mortgage, perhaps even a second mortgage, they have student debt of their kids, they may even have some residual student debt of their own, they may have had a surprise medical bill that they had to finance through debt. So you, you see folks with this kind of unhappy portfolio of debt that's really weighing them down and affecting their, their lives quite significantly. Michael: Yeah, okay and as investors we joke is the wrong word, because it's no joking matter, but talk about good debt versus bad debt. And would you agree that there is such a, such a discrepancy between the two is such a difference between the two? Richard: Absolutely, in fact, I'm writing a book right now called: The Paradox of debt, which gets to that very issue, because debt is necessary economies absolutely couldn't function at all, without debt. I mean, that includes, you know, your local retail store, the inventory they have in their stores, you know, done on a debt line of credit, the grocery store that you go to, their shelves are stocked by debt. Folks buying their homes, which I know is a near and dear subject for you guys couldn't really achieve that without debt. So there's any number of things that are necessary and positive about debt. But then there's the other side, normally, when it debt accumulates too rapidly or gets too high, and as all sorts of effects that are in the other direction. Michael: Okay and how do you make that distinguishment? I mean, if someone listening is thinking about scaling the real estate portfolio and plans to go get a ton of debt really quickly, I mean, they could be hearing what you're saying and think, oh, you know, maybe I need to pump the brakes. So how do you distinguish between the good debt and bad debt or maybe what's too rapid versus too slow? Richard: Well, I'd make a distinction between how I measure it for a country, which I spend a lot of time doing and how I would measure it for an individual. I think the, the real issues are an individual relate to how much leverage you have on a particular property. You know, if you're leveraging properties at 100%, or 95%, as many folks were doing here a decade or so ago, you know, you need to have really thought it through carefully. And if you, if you have several properties like that, I mean, I, my own expectation is that here over the next couple of years, we're going to have a real flattening of evaluations of real estate, you know, almost inevitably, given the, the boom, we've seen here recently, you know, mortgage rates are going back up. So you know, anybody who's financed real estate, kind of at the hilt, if you will, need to thought that through very, very carefully, because that could, that could unwind on it pretty quickly. And then there's carrying the interest payment on it, you know, if you have a situation where your lenders being so kind as to charge interest and in the form of a bullet, which means you don't have to serve as it currently, you can get a little too optimistic. So you have to make sure that your income is sufficient to carry the interest on an ongoing basis and give it still give you plenty of room to live your life otherwise. Folks that really want to get out there over their skis, you know, that's, they can certainly do that. They just need to be aware that they're doing that they need to have thought through the downside or the risk associated with that. Michael: Okay and talk to us a little bit about what some of those downsides and risks are, because there are many people that subscribe to the thought of well, if it cash flows, and it's a safe investment from a cash flow perspective, I can always afford to service that debt and so the value is going up and down, doesn't really affect the ownership of on a day to day basis. So curious to get your thoughts. Richard: Well, I mean, that's a wonderful situation, you know, they should be happy that they're in that situation to begin with, you have a property where the rental income covers the expense of your debt and expense of the upkeep of that real estate, more power to you. But there's a lot of folks, there's a lot of folks that go beyond that. Beyond that level, you know, if you had a nice portfolio of income yielding net income yielding properties, you've done well. Michael: Great, great. And so where is it that people start to kind of get beyond and start to get themselves into trouble? Richard: Well, I think now is one of those periods, you know, that, you know, maybe not to the extent that hopes 2006 was, but you know, all of a sudden, everything I read is about how real estate values have gone up and are going to continue to go up and that's when they stretch, that's when they start to say, well, if they're going to be going up at this rate, I can afford to buy a property where the rental income doesn't necessarily cover it, or is it right at the razor's edge of covering it in so let me just leverage up and get a lot more property. Because I'm going to be covered by the appreciate subsequent appreciation of the property and you know, that that's just kind of the cycle. You know, I'm, I'm 66 years old, so this will be, you know, which cycle this will be this, like, really seen it. And, you know, you see, you see folks who have, you know, have their pencil out and have a green eyeshade out nevertheless, they get a little bit overly enthusiastic and don't really calculate what might happen. Michael: Yeah and that makes a ton of sense. So it sounds like when folks start flirting with speculation, much more so than kind of sound investing principles from a cash flow perspective, that's when you can get really burned. Richard: Yeah, I mean, if you're careful about what you do, can do. Real estate is a great business, real estate's the largest business in the United States, the oldest business in the United States. It's always going to be there. You know, it's, it's what makes the world go round? Michael: Yes, I was hoping you might say that. Richard: Well, I mean, let's put it in perspective. There's about $35 trillion in private sector debt in the United States, right this moment, about half that's real estate debt, that's 16 trillion. Michael: Wow! Richard: You know, it all energy lending combined is about $1 trillion. You know, all healthcare debt combined is maybe a trillion and a half. Real estate is kind of the center of the universe and has been since this country was founded. Michael: Oh, my God, I had no idea was so significant. And when you say private sector, I mean, does that include private businesses and corporations or is that like everyday people like you and me get mortgages on homes to live in? Richard: Simplistically, we just define that as households and businesses. Michael: Okay and you said 16 trillion, is that right? Richard: Yep. Michael: That’s such a large number. Richard: Well, let's talk about the Great Recession: In 2002, household mortgage debt, which is now 11 trillion was 5 trillion. By the time you got to 2007, it was 10 trillion. So in less than four years, mortgage debt doubled. It had taken, you know, 50 years to get from zero to five, it took four and a half, you know, three and a half, four and a half years, to double from five to 10 trillion. And since that time, you know, it's only grown to about 11 trillion, you know, it actually declined some, and has come back up. So, you know, it's very, I in retrospect, to some it was very, obviously, a runaway debt period. We're certainly not in that today and I don't expect we will be, but it's something we keep our home. Michael: Okay and so what should your kind of average everyday investor do with that kind of information? Is that something that says, hey, you know, let's kind of keep tabs on it and see if we're headed towards a recession? Do they need to be looking at such a macro level? Are they able to focus more so on kind of the micro with their local sphere of influence? Richard: Well, they should spend most of their time focused on the micro. The macro is a very easy thing to keep tabs on, it'll take them five minutes a month, if they want to do that the information is contained by it's on the Federal Reserve website. Michael: Okay. Richard: They come out with fresh data quarterly, the there's some folks that actually augment that monthly, it takes, and we keep charts that, you know, go back, you know, decades and the most important thing is just aggregate real estate debt, divided by GDP, and seeing how that changes over time. For this past decade, that number has actually been very flat, which should give a real estate investor an enormous amount of confidence. It's starting to trickle up a little bit now. Which should, would you say to us that we should continue to be confident, you know, forgetting the dimension of REITs, for short, it's just talking about the level of activity. And but it's not hard to tell when there's a boom or bust. It's not going to happen in a week or a month, it takes a year or two, or three and you can see it coming a mile away with the through that simple exercise. Michael: And so if someone goes and is tracking this and spending a couple minutes a month, as the percentage as real estate debt as a percentage of GDP goes up, that's where we started need to get concerned. Is that what you're saying? Richard: Yeah, it not just a little bit, it needs to go up a bunch, it went up, you know, like 20, or 30%. In that period between 2000 to 2007. It wasn't like you had to get your microscope. Michael: It was obvious. Richard: It was, it was… it was the hockey stick. So I you know, I can't, I can't see, you know, I can see rates going up putting a an effectively a curve on real estate activity right now. I cannot see runaway lending, which is an even bigger problem that we've seen in the 80s. And we saw in the 2000s. I can't see that being an issue for a while and I think that's a helpful fact. Michael: Okay and I'm so glad you mentioned that, Richard, because you said it so nicely into the question I wanted to ask, which is, I think so many of us, especially in the last two to three to four years who have gotten a mortgage, it feels like we've gotten a full cavity search, you know, from from lenders. And so, aren't they there and by law have to protect the consumer to a degree. I mean, they're looking at our debt to income, they're making sure we can afford these properties and so isn't that a really great backstop to preventing that that runaway lending? Richard: Of all the Dodd Frank did and it was a gigantic bill, that's the single most useful thing that was contained in it, the very simple concept that the lender has to be able to demonstrate that the borrower has ability to repay ATR and yes, that has been an eye eyes view it is probably the most valuable maybe the one of the very few valuable things about Dodd Frank, but yes, it does. That doesn't mean you can't get into other areas beyond real estate and get into trouble but real estate at the moment and by the way, it also would suggest to me that you know, clever people somewhere going to figure a way out around that. So, so that you know, they're able to kind of sidestep they haven't yet but it's like in the credit card business right now. This is not real estate, but this is no people buying goods like computers and clothes and things like that. Well, you know, t…

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