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Is it smart to invest in single-family rentals before multi-family? Mar 12, 2022

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A lot of real estate investors start out with single-family homes and soon realize that multifamily helps them scale much faster. But multifamily properties can come with more complications and many investors appreciate having learned the ropes in the single-family space before taking on this asset class. So is it smart to start small and work your way up or just dive into the deep end? In this episode, Emil and Michael share their experience on this topic and point out the pros and cons of either strategy. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: What's going on everyone? Welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today I'm joined by my co-host… Emil: Emil Shour Michael: …and today Emil and I are going to be chatting about does it make sense to start with single family or with multifamily? So let's get into it. Alright, Emil, how's it going, man? It's been a minute. Emil: Good dude. How you doing? Michael: Hanging in there hanging in, I got a couple of refinances that just close today that I'm working on for a long time, so really excited about that. So I'm going to be redeploying some capital here to some short term rentals. How's, how's the triplex sailing all smooth? Emil: Yeah, I haven't, I haven't received an email in weeks. So that's my favorite kind of news is no news for my property manager. Michael: It’s a good sign. Yeah, oftentimes I would say. Emil: Yeah, yeah… We've got tenants in place, you know, they're all fresh, no bad news. So fingers crossed, it keeps staying that way. Michael: Sweet! Well, today, Emil and me want to talk about if it makes sense to start with single family or multifamily as you're just getting started. And you are someone that started with single families, right? Emil: I did! My first investment property or actually any property I purchased. It was an investment property. It was a single family in Jacksonville, Florida in 2017. Michael: Okay, and now you're a seasoned investor, you've got six units, I think, you've done some multifamily. Emil: Yes sir. Michael: Should you have done differently? Emil: I am happy I started with single family. I think starting with one tenant, one home one unit, is the ideal way to start. I don't think, I don't think this is like one of those. There's a better or worse way. I think it's what is what is your appetite for pain? Do you do want to like learn really fast and deal with a lot of craziness at first or do you want something slow and steady and just like an easy on ramp? So for me having a full time job, at the time, starting with a single family was perfect. It was like, I got to learn how to manage a property manager different things that can go wrong. It was just an easier transition for me and I'm happy I started that way. Michael: Yeah, it's funny you say appetite for pain. I think we just want to be careful to not give people the impression that single families can't be a highway on ramp to pain because you know, my first, my first investor was also a single family and it was like the most painful one ever. So I think it's, it's you can have you can have it either way. You can have horrible experiences with single family, you can have amazing experiences of multifamily. So it really just depends, I think how the asset is structured and where you're buying it. Emil: Yeah, but you could… let's say you bought a quad Plex, right? You had the same thing, but times fours. It's just like your percentage. No, actually, I don't know, you could look at it either way, you could say, well, I have 4 units, my likelihood of 100% pain is much, is much less likely than so I think personally it’s just easier to go with one, learn the ins and outs. Again, you're learning, especially if you're remote investing, you're learning how to do that, you're learning how to deal with a property manager. I think overall, it's just easier with one. Michael: Okay, and let's dive a little bit deeper. I mean, talk to talk to us a little bit about like, when you say learning the ins and outs, what does that mean? What did you learn from investing in that single family that then better prepared you to invest in that triplex and what was totally brand new? Like what caught you off guard with the triplex? Emil: That's a good question. I think it's just, you know, if you never if you've never owned your own home, there's all these moving parts of a home that you're not really like, I don't know how an H back works. How does plumbing work? What's uh, what's the main line? What's all these things? I've even forgotten already, as we're on this podcast, but like all, all these bars, all these parts of a home that you just you don't really know. I think that's one just getting more familiarized with all the moving parts. Michael: Does it matter that you didn't know how an H back works? I mean, you don't know how a car engine work. I mean, I assume I don't want to I don't want to put words in your mouth. But do you know how a car engine works? Emil: Here's the difference. A lot of things go wrong with your property. I don't say a lot, but things go wrong, right? And it's on you to know, how much does it cost to get that fixed, right? Like if someone said, Hey, your condenser broke? We're gonna replace it for $10,000, how would you know if that's accurate or not? Michael: I gotcha, I see what you're saying. Okay! Emil: So that's that's one thing. Michael: But it's the same thing with car if you take your car to the mechanic and they say, oh, you're continuing to trance function or is broken. We're gonna turn into $1,000 to fix it. So our concept, right, I guess you have to you have to chat with other people… Emil: Well my first car was a $6,000 used car. So I would just say, okay, you guys keep it, I'll go get a new one, you know what I mean…? I mean, it's like, it's, it's also, in most cases, less less dollars in, right. So a multifamily is going to be more dollars in your learning on more dollars versus single families less dollars in potentially, so less dollars you potentially have on the line to learn. Michael: All right, all right. I will, I'm gonna I'm gonna take a… alternative position on that one and push back, I think that you can actually find multifamily in particular markets that are as inexpensive or less than some single family. I mean, they're single family all over the place in the 2,3,4- $100,000 verse multifamily, you can find properties that are less than so I think that's a very common misconception that people fall into is oh, multifamily is automatically more expensive and I don't know that that's necessarily the case for every market. Emil: Yeah. But then you're putting you're potentially putting the cart before the horse, right? You're saying I'm going to go find a market where it meets this versus you should find a market that you like, and then look within that market? Michael: Hmmm… Yep. So you're letting the deal dictate the market or letting the market dictate the deal? Emil: Right! I think it's like some people will just I started that way, right. I said, okay, this is how much I want to spend, which markets kind of fall into that, which is one way, but I don't know if that's the right way. I don't know if it's the wrong way. But I would, I would rather if I could start it all from scratch, say like, what is the market I want to really invest in? And then secondarily, who is the property manager, I want to invest with? Michael: Oh, that's very well said. And so you're someone that wants to kind of cluster their investments in the same market? It sounds like…? Emil: I would yeah, I think I've said that, like on previous episodes being scattered across couple different markets, I think finding one market you like, you're finding good deals, you have a good property manager, again, to me, that's the key is finding a property manager. It's tough, it's like how do you find that good property manager without trying several markets, right? Michael: If you get some perspective and you go other places, you realize, oh, man, my manager was amazing, or well, my property manager kind of sucked. Emil: Right, right. Well, that's the value of I think networking and talking to other people who are doing real estate investing rather than just going solo. Michael: Totally, totally. And I cut you off before to go down this rabbit hole but you were saying, you were talking about what the ins and outs were that you actually learned that prepped you to be ministers as a multifamily investor. Emil: I don't think I'm a successful multifamily investor. I have one drive legs and that's been a big learning experience. I don't know, it was just it was a different learning experience in that I had multiple tenants leave at the same time. You know, single family, you're not paying a lot of the utility bills, right. So you're learning on the multifamily, like, what are my actual expenses? What do I cover? And how much are they each month? So it's like, yeah, you can estimate and talk to people, but like, it's just things you're going to learn by doing and buying? I don't know… Michael: Yeah, I think it makes a lot of sense, I think it makes a lot of sense… Emil: Those are of the things that come to mind. Michael: Yeah. Emil: And then, you know, how long does your average single family tenant stay versus multifamily? Like, yes, their stats online, but it's to me another one of those things you learn by doing? Michael: Yes, very much so, very much so. See, it's so funny, so many of the points you brought up for single family, I agree with and I think are valid, but I have like the opposite experience and I experienced those things with multifamily. So I actually have another episode too, like my first two investments were single family. I had the tenants leave every single year, they did a ton of damage on the way out and had to go to small claims court. So I was like, oh my God, this sucks. So that's ultimately kind of what led me to multifamily, I was like, oh, I gotta do something different. This is not this is not working out. So had much better luck with multifamily and that's where I've been focusing on since. Emil: For the record, where are your single family, those two single families you bought? Michael: They were both in California, in Southern California. Emil: Southern California is a tough market for landlords, man… Michael: It very much is… Emil: That I think probably played some into it, potentially for you. Michael: I think so, I think so. But also I mean, like given that I've also purchased I purchased two flip properties. One was in Birmingham, Alabama and the other in Kansas City, KC Mo, and that's been those have been paying to the butts too and so I think it's it's not a one size fits all like you were saying and it's it's very much personal preference. Emil: Sure Michael: But some takeaways that I had from investing in small multifamily, so two, three and four units is, as he touched on earlier, was the likelihood that you have both tenants or all of the tenants having issues or vacancy or causing damage, the Cisco likelihood just goes down. And so that's why a lot of people buy multiple properties because if you have one property, the likelihood of having one vacancy is fairly high if you have two that goes down, so on and so forth as you expand your portfolio. And so you can do that and acquire more units and increase the statistical likelihood of success. Success in this case, meaning not no vacancy and less repairs, with fewer transactions and so it just becomes, easier from a management standpoint and easier from a mental capacity standpoint, when you're thinking about, okay, I've got one address to worry about, these are all the things going on there as opposed to these five different addresses to keep track of and so I think for from a small multifamily perspective, like, again, those two to four units, it's fairly similar from a how to own and operate perspective and I think you nailed that also talking about like the expenses and so from that perspective, it can be a little bit different, and your expense load and what your operating costs look like, and who pays what and how often you might have a turn. And but the cool thing is, the financing is the same. So if you go buy a one single family or a two to four unit, and you're getting conventional financing, that's the same, which is really, really cool. It's not until you make that gap into that five plus unit space that it changes into commercial financing. Emil: Right. And that's probably something important to consider here as well, if you're like thinking about multifamily or single family is, well, if you have less time, let's say you wanna invest real estate, but you have less time, right? Multifamily, we know is valued on how well can you make it perform, it's more like a business, tather than, you know, one to four unit, you're kind of writing the ups and downs of the market to value it right. It's all sales comps. So maybe if you have more time, and you can you feel like you can manipulate the NOI on that property, get it valued higher to do those things. Maybe multifamily makes more sense for you and then but maybe if you're you know, super busy and you want something a little bit more passive, I've just found that my single family has been more passive, my attendance stay longer. I haven't done the triplex for a ton of time. It's been a year and a half. But my tenants stay longer, I hear less things overall, is what I've is my personal experience with, very limited units, so… Michael: Yeah, I think you've made a great point talking about time, time perspective, I would just add to that, that if you're just starting out and taking on a multifamily investment, finding something that's that has a value add component might be tough. And it really comes down to like, I know, I was way in over my head with my first multifamily deal I had. Because I just feel like you don't know what you don't know and so you're jumping in, like you mentioned, to this multiple unit situation where all of these things are new, versus trying to figure it out with one tenant and one property in one door, where everything is still new. And so I think that there it's it's often an easier pill to swallow. But if someone is super gung ho and wants to take risks and has the financial wherewithal to back it up, and is like yeah, I know I'm gonna I'm no, I'm gonna learn lessons, but I want to learn lessons hard and fast. Multifamily can be a really great way to do that. Most value add now layering that on top of that is another way to learn even harder and faster and more expensively. So if someone's just starting out, I think and they're gung ho about multifamily, I think a turnkey multifamil…

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Raising private capital, kids, and generational wealth with Matt Faircloth Mar 05, 2022

Show notes

Matt Faircloth is the co-founder and president of the DeRosa Group, a real estate investment company that specializes in buying and renovating residential and commercial properties. Matt and his wife, Liz, started investing in real estate in 2004 with a $30,000 loan. They founded DeRosa Group in 2005 and have since grown the company to managing more than 370 units throughout the east coast. DeRosa has completed more than $30M in real estate transactions involving private capital—including fix-and-flips, single-family home rentals, mixed-use buildings, apartment buildings, office buildings, and tax lien investments. He is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’ educational webinars. In this episode, Matt shares his background in real estate investing, and a roadmap for investors looking to raise more private capital to close more deals. Additionally, he talks about the reality of running a real estate business. Episode Links: https://derosagroup.com/ https://www.instagram.com/themattfaircloth/ https://www.linkedin.com/in/mdfaircloth/ https://www.biggerpockets.com/blog/contributors/mattfaircloth --- 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 Matt Faircloth, author, podcast speaker, co-founder, president, investor, syndicator. He does a lot and we're gonna hear a ton from Matt about what he's been doing in the real estate space, and what he's currently putting together and actually closing on today. So let's get into it. Matt Faircloth, thank you so much for coming on the show today. Really appreciate you taking the time to hang out with me. Matt: Michael, I appreciate your time and having me on your show, man. Thank you. Michael: Absolutely, absolutely. So I know a little bit about you but I would love if you could share with our listeners who maybe have never heard of you. They've been living under a rock for the last couple of years, who you are, where you come from, and what you're doing in real estate? Matt: Where did you come from… Um, it's cool that my company's called the DeRosa group and I just love saying this, that we're a company dedicated to transforming lads real estate through real estate transforming lives to real estate. We can get into that in the show if you like. I… where I came from, let's see, I grew up Baltimore, bopped around the East Coast for a minute. Before I landed in Philly, met the woman of my dreams because she put Rich Dad Poor Dad in my hand, and we were still dating, that got me to read that. And that that gave got me to drink the entrepreneur Kool Aid, which I guzzled and quit my job in 2005 to start a real estate company, bumped into a lot of walls, you know, did a lot of it, made a lot of mistakes, made some money and then and then just built it and grew over time and just learned how to run an effective real estate company through the school of hard knocks. And now I've been doing it for 16 years and just apply what I've learned over the years, you know, attracted more and more the right people who work with me and build what I think to be a phenomenal brand now. Michael: Oh, that's awesome, man. That's awesome. You said that once or twice before I can tell it just rolled off your tongue there so nicely. Matt: You know, this is not my first podcast. Sometimes people ask me, let's just get real, screw it, man. Let's get real right now… Michael: Let's do it. Matt: What I get I go on a lot of podcasts and when you go on a lot of podcasts, people tend to ask the same questions, Michael, right and so when they do, it's almost like I'm that guy, I'm the DJ sing in a DJ booth and then in the in the DJ booth of Matt's brain. And then people ask like, Hey, Matt, tell me about your first deal and I'm like, okay, let's get the first deal track pull the first track. Michael: Go, pull the file. Matt: You know, yeah, go pull the file, first deal, right. Tell us about the first time that you raise money, tell us about a mistake you made. Okay, let's go ahead skip, let's go pull up mistake file eight. Okay, let's write that file out, right. So it's more fun to go curveball. You know, like… Michael: Totally Matt: Yeah, that was a good curveball in the first five seconds of the show that you and I went down right and you into it, you can't help it you end up just going to a script a lot of times you know talking about things on podcast over and over and over again and I was it that a want to be plastic like that, but you end up like, if I've told that story six times the seventh time it starts to come off the same way over and over again, right. Michael: I totally get it, and I hope that today is not one of those repetitive podcasts. Matt: You're getting not to be that show already man, you are curve balling, I love it. Keep it up! Michael: Well as a follow up Matt, what's your favorite mammal, man? Matt: It's good one, I am, okay, growing up, I have an eight year old, right, so my eight year old is always: Daddy who would win… I wish he was here because you and me, we would have a ball right now… Daddy who would win when a colossal squid or a great white shark? And I'm like Simon, first of all like, but he'll even be like a gorilla or a colossal squid and like girl is gonna drown buddy battle… Give me more data, that would depth are we talking about the ocean? Are we talking about like 3000 gorillas... To you question, I probably go a gorilla, if I had to pick or, or maybe I don't know why, but growing up I loved Black Panthers. Michael: Mm hmm. Okay, pretty majestic animals. Matt: Yeah, I don't know, I don't know, the majestic, they are majestic animals. Yeah, so that would be my favorite, those are my two favorite man… Michael: I love it, well so real real quick change because we're already on this rabbit hole. You know that there was a show put on by I think NatGeo or discovery that answered your son's questions they would pit these two animals together in a simulation… like that exists… Matt: You can google and they would show cuz he would be like, daddy who would win a saltwater… It's just you can google saltwater crocodile versus great white shark… Michael: Great white shark, I saw that episode… Matt: It’s good, it’s good, right. Good job displaying well you see the saltwater croc would try and take the deathroll on this or do that... Oh, he was my son's itch was scratched with that, you know. I don't know, why he is up to the Komodo dragons. Komodo dragon versus anything you can name, that's what you want to talk about… Michael: That's a battle royale this century… Oh my god. I love it. Matt: Well, dragons are badasses man, these are like, there they are… Would you know that? Michael: Yeah, that’s the kiss of death, yeah… Matt: It is! Not only the monstrous lizards like little dinosaurs, but they also the venomous bite, you know… Michael: It's such a ridiculous concept like, oh, let's take two of like humans worst fears, like, long tailed long tongue lizards, and then give it venom, sounds awesome. Matt: Right! Give it nasty teeth. Yeah, like a really weird awful roar and give them venom, too… Michael: Oh my god, so good. Matt: They're nasty creatures, man. Good thing that'll make them in North America. Michael: I know, I'm stoked, I'm stoked. All right, well, if we bring it slightly back towards the real estate, you know. Do you want me to do a whole podcast on mammals like komodo dragons… So you started a company, your real estate company in 2005 and when people hear that, I think it might be ominous to some people, you know, what is a real estate company mean? And so what was the transition, like, I mean, like, what is the DeRosa group do first and foremost and then what was that transition, like going from just owning stuff on your own to now I have a business focusing on it? Matt: That's interesting, you know, that man, um, interesting concept, because a lot of people out there are running real estate investing, like it's a gig, you know, like, or it's like driving Uber, you know, you could just decide to not do it at some point, you know, I mean, it's not a gig, it's a real estate investing is a business because it's a marathon, unless you're wholesaling or just doing a deal here and there something like that. Not for nothing. This business… the business of real estate investing is a business and you should treat it as such. And we didn't always do that the first couple years, I treated it like a hobby and I bumped into walls and did a bunch of different things but like once I really got my legs underneath me, as a real estate investor and really found the calling found the purpose and got and got and got focused on real estate investing. I got clear that it's a business that is like a living animal it's a it's a living thing… Michael: It’s a living Komodo dragon?... Matt: Real estate investing is like a Komodo dragon, right, it needs food, you know… It can have a venom’s bite and can be nasty and shit and can get the fuck out of you. And a lot of people are scared of it, you know, right… Yeah. People read articles about it only exists in certain places we can keep going. But it is something that needs, you know, if you want to grow real estate investing business and sustain yourself in this, in this industry, and not just make it a hobby, you have to have a company that's got you know, clean books and has a purpose and has a mission and has roles and responsibilities and job descriptions and stuff like that, because there's sucky things in real estate you have to do and it's like, well, you know, and you could look on Instagram. And if you look on Instagram for real estate investing, people think that it either means you close deals every day, because it's the people every time people close stuff, they put it on Instagram, or they go to it's like, Instagram thinks that for real estate investors, all you do is close deals, go to conferences and go on vacation That's what you see people doing on Instagram, the real estate investing, right? But there's actually like, this sucky part of real estate investing, which is sitting on your desk and answering emails and you know, just corresponding and looking for deals and swinging and missing and dealing with knucklehead tenants and stuff like that that want to, you know, recently Michael, we had a tenant, had his girlfriend come in and he must have done something bad because she went, put all his clothes on his bed, dumped gasoline on the bed, lit it on fire, walked out. Michael: Mike dropped… Matt: This is what happens, that's real stuff, you know… That did not make on Instagram unfortunately, you know… Michael: No, that wasn't the highlight reel. Matt: Living my best life, look it’s amazing… Michael: Well, so you bring up a really great point that and that it should be treated like a business and I, I wholeheartedly agree. But so what about all the people out there that are just getting started that could never see themselves as a business owner as an entrepreneur but hear about real estate investing as a great side gig like you mentioned that what about what about all those folks? Where are they left? Matt: Okay, they need to decide if they want to do it full time or not, right…And there are people out there that have a day job that they love and it's, it's probably something that's very fulfilling to them, or maybe they went to school for a long time, like a doctor or an MD or whatever. I mean, Jesus, those folks go to school, God bless them for like another 12 years after they get out of college, right? So why would they change careers, right? They want, there are people that really in their heart of hearts probably ought to go passive for real estate investing, as a side gig and as a way to build wealth. And there are people that that are doing it because they want to build up the passive income and become a business owner out of it. So you got to choose if you want to be an investor or be, let's remember Robert Kiyosaki Cashflow Quadrant book, right. Yes, ESBI, remember that thing? Michael: Mm hmm. Matt: Do you want to be a B or an I, B= business owner, I= investor. And if you're willing to put in your time and and you know, quit your day job eventually become a business owner and that's what you need to do. But unfortunately, people, a lot of people misunderstood Kiyosaki, to think that to be a real estate investor, you have to be an active operator, you have to do it full time. You can make the passive income all you want as an I-quadrate investor and just passively invest in things. And I think that that's, I think it's probably the most misunderstood function in a lot of his books, people that quit their job that really should have never done that they should have just passively invested their way to financial freedom. Michael: Yeah, okay. And let's talk about that for a minute because you wrote a book about raising capital and I think capital is so often the biggest obstacle for people, the biggest hurdle people overcome. So do you see the kind of this roadmap for people? Where if passivity, is it really time is the goal, right? That's what everybody is after and we get there by either usually being a B or an I, by being at B that sounds terrible, don't be a B. So if people are capital is their obstacle, using real estate as a active vehicle to then take a backseat and invest passively? Matt: Yeah, well, that's I mean, my book talks about that and then it goes back to like, let's just keep walking to the B and I road, right. So if you're a B quadrant business owner, we're rising D quadrant business owner for real estate, and you either want to do it full time, you already are doing it full time, then at some point, unless you win the lottery, or unless, like, you know, you just got a silver spoon in your mouth, and you got billions of dollars waiting on the sidelines, from your friends from your family or something like that. You're going to need capital, right? You're gonna run out man you are. And so on the other side of it, you've got I quadrate investors, and they have either retirement accounts, real estate equity, cash, any of those things that they want to put to work and not have to put in the time to make that money, you make that money, do what it's supposed to do, you know, then they can those two can marry up the B quadrant business owner of real estate versus the quadrate investor that wants to make a return on their money without trading money for time. Those two can have a really happy partnership. My book talks about all those things, how those two things can get structured together and how the why in my book are called the cash provider, as SI quadrant investor. Robert Kiyosaki is a good guy, but he probably sue the hell out of me if I use his terms of my books. I didn't use that, I did, I did the the deal provider and the cache provider. The deal provider is the D Quadra business owner…

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How the real estate market is changing and how to adapt to it Mar 04, 2022

Show notes

The past years have seen a confluence of different factors affecting the real estate market: a global pandemic and government's responses to it; the following economic environment, with record inflation, hikes in interest rates, and significant migration; and social unrest around the world. All of this is occurring in an already extremely competitive market.

So, how do you keep up with it all? How do you continue to grow your portfolio, protect your assets, or even minimize your losses?

In this episode, Emil and Michael will share their insights how to adapt, grow, and prosper in the current environment.

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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.

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…

Michael:

Michael Albaum.

Emil:

And on this episode, we're going to be talking about adjusting your expectations as the market changes. So something that's probably on a lot of people's minds, and we want to address it on this episode. So let's hop into it.

Emil:

Michael…

Michael:

Emil…

Emil:

Tell me, is this something that you get a lot in the academy, like people come up to you and say, hey, you know, a couple years ago, I was shooting for an eight to 10% cash on cash and now it's just not really possible with how property values have gone up and rents are growing, but not as quickly? What do I do?

Michael:

Yes, absolutely. I get the question regularly in the sentiment regularly. And my response is usually quite similar. And it's either you're looking in the wrong market. So what you're looking for exists, but just not where you're looking for it. You aren't looking hard enough. So maybe it exists in your market, but you're only looking at the MLS and maybe you need to go off market or wholesalers or change the avenue which are looking for those properties. Or maybe you just need to adjust your expectations. Maybe what you're looking for doesn't exist. And so those are usually the three options.

And the three suggestions that I give to people to go try. And and so I think it's it's absolutely, the market has changed the conversations we were having a year ago, just we're having different conversations now and so you can't go, you know, it's like when a sport that's go to a sporting event, and the rules have changed, you can't keep trying to play the same game, because you're not going to do well. And so I think we absolutely have to adjust expectations for the current conditions. What are you seeing man? Are you are you hearing similar sentiment and kind of the circles that you're running in?

Emil:

Yeah, I mean, you know, I'm a less active more maintenance real estate investor currently. So I haven't been making offers or anything recently. But you know, I follow a lot of real estate guys on Twitter, including you. And it is it's either you two things happen. You either just say I'm done doing deals, or you adjust your expectation. And I think Michael Zuber talks about this a lot, our old pal from one rental at a time, he says you have to stay active in your market to know what's going on in your market. Maybe five years ago, you were doing 10% cash on cash returns, but markets change. Maybe a good deal now is a 7% return, right. And it's it's about finding the good deals in your chosen market versus like just arbitrarily finding a number and scouring to find that.

Michael:

Yeah, I totally agree, I totally agree. And I think it is like you and I and Michael Zuber we talk about hyper hyper local, like real estate investing is hyper local. And so it's really tough if you're chatting with a friend that invest in Kansas City, and they're like, oh, I can't find, you know, I'm.., I'm trying to make 8% cash on cash return and having a difficult time doing that.

And then you're over there in Austin, Texas, like 8%, holy crap, I kill for 8%, I can't make 3% work. So I think it's it's hyperlocal. And you have to really understand your particular market. From A and I know this everyone asks like what is the return? Like, what's the number and everyone's I think a little bit gun shy, myself included because A it's not an evergreen type of situation like today, we're recording this and end to February 2022. So if you're listening to this, in the future, you might think there's no way we're getting those kinds of returns, it could be either way better way worse.

But I think on average, like the number spread of five to 7% levered. So that means like your cash on cash with debt, I think is what is realistic for a lot of people in a lot of markets these days. And a year ago, two years ago, that was just not the case. You know, like you mentioned eight to 10% was totally doable in a lot of different markets. And again, this totally is dependent on the asset class, and the neighborhood and the market and so you might be listening to this, even as we're recording this and say, oh, there's no way I could I can't possibly do that. I'm in San Francisco, California. Okay, yeah, well, that might be true. So you're someone that where the market takes a massive effect and impact on and you can't make those numbers work. So again, take this with a total grain of salt, but just know that the number expectation for me included has totally shifted, has totally, totally shifted.

Emil:

Yeah… So you mentioned you tell people, you engineer the number right or like there's different levers you can pull to get maybe one of the return metrics You're trying to aim for it. Can you talk about that more?

Michael:

Totally yeah, because I'm a reformed engineer, I still like engineering stuff and so, you know, I've learned now that you can really engineer your return. And there are just like mentioned a couple of different levers to pull. So one is obviously purchase price. And so we don't often have a big impact on what the purchase price is, because the seller does, and especially because of how competitive the market is. So we might not be able to affect that lever very much. But we might be able to for making all cash offers. And so if you're able to bring all cash to the table, you might be able to be more competitive. And therefore, you might be able to pull that lever a little bit more than your average bear.

The second lever you can pull, which you absolutely have, I would argue more control over is your down payment amount. And so if you're someone that's using an 80/ 20 mortgage, you're bringing 20% down bank or lender is giving 80%, you're gonna have some expected cash on cash return, and some expected cash flow based on your numbers and how you however you underwrite. Well, if you put down 25% or 30%, you might get not only a better interest rate, but now you're going to have a smaller mortgage amount, which is going to translate to a higher cash flow. Now, we talked about this all the time on the podcast that, in my opinion, I think you should be looking at both cash on cash return, and monthly cash flow in terms of dollars because you can have instances where your cash flows through the roof, but your cash on cash return is a metric how hard your dollars are working for you is like minuscule, right, I can show you how to buy $1,000 a month property, something that cash flowed $1,000 a month. But if you have to go spend a million bucks to get it and might not be worth your while.

And going the other way with it, I could show you how to buy a property that might yield you 50% cash on cash return. And people hear that like, oh, duh that like that would be amazing. But if it only cash flows 27 cents a month, nice property goes negative, like that might not be a good situation either.

Emil:

Right, right…

Michael:

So I think most investors want to find a balance of the two, they want a strong cash on cash return, they want their dollars working for them, but they also want to put dollars in their pocket. And so you can you just simply engineer that by your down payment amount. And a question that I always tell people to ask their lenders, if they're using a mortgage is, hey, where are the interest rate threshold breaks?

So if I'm putting 20% down, this is my interest rate. If I put down 25%, what is the interest rate do if I put down 30%? What is the interest rate to if, what if I put down 35% and go find out where those thresholds are, because you might see that there's a really big jump, or a really big change in the interest rate and depending on the loan amount, and again, depending on your particular deal getting a lower interest rate, even if you have to put more down might actually translate to a better cash on cash return. And that's kind of counterintuitive for most people, because I think a lot of us think of the less you put down, the better our returns will be overall, which isn't necessarily the case. So I've seen tons of instances where actually putting down more cash will yield you both a higher cash flow monthly cash flow number, so more dollars in your pocket, as well as a higher cash on cash return metric. So actually getting your dollars working harder for you, because they're not fighting so much interest headwind.

Emil:

That's a fantastic point to bring up and one of them is that higher down payment you're bringing that. The other point of that other benefit, I guess I would say of that is let's say you think prices are higher, right? When I think if you put your borrowing less, right, you're, you're protecting your downside a little more as well, depends on where you think we are, you could say, nope, I think prices are gonna rise for the next 5-10 years, whatever. But if you're unsure, that is one way you can provide yourself with a margin of safety is a little bit less leverage…

Michael:

Totally less leverage and more equity. Absolutely, absolutely.

And so I think it's important and we were talking a little bit before we hit record here, that in today's market, you might have to sacrifice on one metric or the other. I talked about looking at them in unison and trying to maximize both. But that's often not the case, they often tend to be competing against each other and so you know, pick a number that you're okay with and maybe you have to give a little bit up on the cash and cash return side, maybe your dollars aren't working as hard for you. But you're more excited about the amount of dollars you're putting in your pocket. Or maybe your dollars are working harder for you. And you're you know more excited about that. And you got to give up a little bit in terms of actual dollars going into your bank account. And so it just being flexible, adjusting with the times just in your expectations for where we are in the current market cycle where interest rates are and you know where, where prices are.

Emil:

Yeah. Solid, so what do you think is the let's take away market timing. What do you think is the evergreen takeaway here for just expectations around returns as things go up, down, sideways, all those?

Michael:

Yeah, I think we just have to take into account all of the things. So all of the things in my opinion are purchase prices, whatever prices doing and what are owner occupants doing because 5-10 years ago, we had, I think we saw much less demand from owner occupants and the pandemic has really shifted that, so everyone is trying to buy homes owner occupants and investors, which puts a lot of upward pressure on the market, so that's a change. So we can't, we can't no longer, we can no longer as investors go in knowing, that we're only competing with other investors, and figure out the best way to engineer our offer so that we make the best return, because now we're competing with people that are paying way less than interest, because they're owner occupants. So we've got to change our strategy out again.

So what the Evergreen takeaway is, is figure out what levers you have in your back pocket to pull and so if you can make an all cash offer, think about what that looks like and how that might affect your returns. If you could put more money down, think about what that looks like and how that affects returns and then just run the numbers and it shouldn't be an emotional decision, it should be a fact based and number based decision and like hey, how do I generate the best return for myself and again, that could be heavy on the cash flow and light on the cash on cash, it could be heavy on the cash and cash flow and cash flow or it could be maximizing both, but I think you got to do whatever it takes to get the deal done and in an acceptable like with acceptable metrics, whatever that means for you. And so again, moving those three levers tends to be the best way to that I've seen to get deals done and in today's market, but also I mean think about alternative financing options with like owner seller financing or private capital like these are other ways to give yourself an edge a competitive edge and so think about how those might be able to affect your returns as well.

Emil:

I dig it, good tips.

I will… I will leave with my evergreen tip being know your market, study your market, like Michael Zuber says, we talked about earlier, know your market, right, the market, your market your individual market will change and it's about knowing what a good deal is in your market, not what a good deal what you used to think was, right, so know your market what is the average return and try to beat that.

Michael:

Yeap…

Adapt or die, right.

Emil:

Yep, exactly.

Thank you everybody for tuning in. Hope you found this episode useful if you did, please leave us a review, a comment, we love all those it strokes our ego and it helps us find new episode ideas for you guys. So with that, we will check you on the next one. Happy investing.

Michael:

Happy investing…

Is Charleston SC one of the hottest real estate markets in the US? Mar 01, 2022

Show notes

Joe Porter is a Roofstock Certified Agent and the founder of Lighthouse Real Estate LLC in Charleston SC. Joe is focused on helping clients buy and sell homes, while offering his considerable experience in construction and the large network of tradesmen he gained during his acquisition years. In this episode, Joe shares his knowledge of the Charleston market; economic factors, demographics, neighborhood scores, geographic considerations and the current environment on the ground Episode Links: joe@lighthouscharleston.com http://lighthousecharleston.com/ https://learn.roofstock.com/blog/charleston-real-estate-market --- 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, and welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum and today with me, we have our certified agent Joe Porter for the Charleston, South Carolina Market. He's going to be talking to us today about all the things we need to know as investors before getting involved in that space. So let's get into it. Joe Porter, what's going on, man? Thanks for taking the time to hang out with me today. Joe: Hello, you're welcome. Thanks for having me. Michael: My pleasure. I am super excited to talk to everybody with you about Charleston, South Carolina. Tell us a little bit Joe, first off who you are, where you come from? How long have you been an agent? And are you an investor personally, quickfire questions to get started… Joe: Absolutely, ready to go. So I moved to Charleston to attend the College of Charleston about 22 years ago. And like many other people, never left. I came from the Washington DC area and visited the region one time and never looked back. So shortly after graduating from the College of Charleston, I was one of the many residual recipients of ninja loans, okay, so, you know, I knew a ton of people who needed rooms for rent, and I got the bright idea, let's buy a house. And I was working at a bartender out on Folly Beach at the time, and was making tips and Wells Fargo decided to give me $200,000, which I bought my first house with that sort of kicked off my real estate career. Once I found that house, I kind of got the bug and never stopped looking. So I went in from there and got my real estate license. I'm not a very sales oriented person. So I knew from there, I wanted to embark on sort of the investing side of things. So I signed on as a buyer for: the we buy ugly houses franchise home investor. Michael: Okay. Joe: So that sort of gave me the framework of looking how to, you know, analyze a deal, the repairs, and how to present an offer to the seller. And right about that time, I established a brokerage to sort of dovetail my, you know, investing, dealings and offers to then list retail, I experienced some success there. And then the bottom of the market fell off and I just had a bunch of listings and no buyers. At that point, I guess this was around, you know, 2000/ 7, 8, 9 I came up with a bright idea to start buying houses. So I put together a little mean, machine of a crew with the idea to have the acquisitions improvement and management all under one umbrella. And we started buying houses, okay. So the first house I bought was in North Charleston, it was a single family detached home for $12,000. Michael: What? Joe: It pulled… Yeah, oh yeah. Someone had yanked all the copper plumbing out of it, all the copper wires. It had been, you know, sitting vacant as a foreclosure, you know, owned by, you know, the Bank of New York and so that was the first house. And we went in, renovated it, rather quickly. And, you know, rented it out and that was my proof of concept. I said, this works out great. You know, at the time, I rented it out for $800 a month. Today, I still have that house, you know, what now almost 15 years later, and it's a 1200 a month rental for me. Michael: And what did you spend on the rehab? Do you recall? Joe: You know, at this point, I did everything myself. You know, I knew enough to be dangerous, but now, I know I really didn't know anything about renovations and construction. So I cut some corners but you know, and I was buying used materials, things like that. I spent about seven grand on the rehab Michael: So you bought it for 12, put seven into it and then rented it for a 50. Dude… Joe: Yes, and didn't take an accountant to, to like those returns. Michael: That's incredible. I don't think I've ever heard of it like, that's like a 4% plus property. Joe: Yes, indeed. So after that, you know, I brought in more people on the construction side to help me out, we put… put a crew together, and I continued to participate in the labor, we bought one house after another. And then, you know, we did about 10/ 12 houses a year. And I currently own and manage about 55 rental units in the Charleston area. So they're all scattered site, single family detached. And, you know, so I spent a solid about eight years just doing that cumulating. And then, since the market has shifted, I've focused more on my brokerage activities, I brought my wife, Claire in on the business, and she helps with buying and selling. So last year, we did about 15 million in transactions, but 50 sites. Year before we did about 14 million. So right now, we are solely focused on the brokerage activity. And if you know something should present itself from an acquisition standpoint, we jump on it, our business model is, you know, will present when we go on a listing appointment, will present an array of options. So, you know, first option is, you know, hey, I see what you got, we could sell it as is, for this price, we can also help you with some of the repairs, and we'll pitch in on the repair costs, bring our crew in to help maximize the cost of the or maximize the value, we do a cost value approach there. And then the third and final option, when it's appropriate, we can buy directly from you, no commissions, no closing costs, you know, on your timeline, whatever, whatever you want to do there. So doing that we have, we'll add a couple to the portfolio, we'll buy maybe one or two a year that will be flips, and then we'll list you know, about 50 years. Michael: Joe, this is amazing. Man, there's so much here that I want to unpack, we'll have to have you back on just to talk about that side of your business. But I want to, I want to shift gears here a little bit and talk about Charleston, as a market so that all of our listeners can get an idea of what they could expect why they should be excited about the market. So can you give us just some high level overview of: Are people moving to Charleston? And if so why? You know, what companies are headquartered there? What jobs are available for folks? Joe: Yes, so the secret is out on Charleston. It is currently, I think ranked the 12 fastest growing metro area in the United States, we have about 38 people a day moving to the region. Especially over the past two years, we've seen a bit of a migration of both, you know, people trying to leave more crowded, you know, urban environments, or baby boomers coming to retirement age. And so those are the type of migration that we're seeing in the area. You know, Charleston, people might know it, as, you know, the historic downtown. You know, 20 years ago, our economy was based on tourism, and hospitality. So we were, you know, just in that service sector, and that was about it. But since then, you know, our economy has exploded, we now are anchored in manufacturing. So the state of South Carolina is very sort of, you know, company friendly. We're offering incentives for companies to move here and set up shop. You know, there's not a lot of labor unions or, you know, thing it's a right to work state, so companies like that. So that's lured Boeing from Seattle, to North Charleston. Volvo's setting up here, Mercedes, Daimler, Chrysler, Bosch, new core. Those are examples of some of the companies here in the Charleston area in the manufacturing sector. We also have a military presence. Okay, we have a joint base, that's Air Force. We have a naval, naval weapons station, and a nucular submarine school based in Goose Creek, which is just 15 minutes north of Charleston. And there's also going to be developing one of the larger Coast Guard schools here, so we have military and then education, my alma mater, College of Charleston, the Citadel and the Medical School of South Carolina. You know that along with our port activity, so Charleston, has just completed a port deepening. So that makes us the deepest port on the east coast. So lots of importing, exporting, is bringing a bunch of, you know, auxilary businesses with it to the… Michael: Yeah, oh my gosh, that's really interesting. I had no idea. So…okay… Joe: …there's a lot happening here. Michael: Uh, yeah, sure, sounds like it. Joe, I'm wondering if you could do a screen share and kind of give everybody who's watching this online, a visual tour of the city, if you will. And if you could share with us, where do you like to look for your investments? And where should folks be looking for there's based on if they're targeting cash flow, or some appreciation potential? Joe: So one of the things I like about Charleston is, you know, our sub markets, okay, this is a unique region that's geographically defined by all this water here, okay. So if you could see my cursor, here, we have the downtown Peninsula, okay. So everybody knows, the historic Charleston downtown. There is a district within the Peninsula downtown, that's been designated for short term rentals, okay. And as a result, you know, prices are up your average property will sell for over a million dollars. But that's situated in the middle of the peninsula here where, you know, you know, vacationers guests can come and, you know, walk the city, which is very walkable, you can see it's not very big the, the downtown Peninsula, okay. You know, one of the things that makes Charleston so unique is the fact that they've kept all their historic buildings. So there's buildings, you know, 1800s just beautiful along the battery here, which makes it a big attraction. They also have lots of rules to what you can and can't do with properties. So, for example, we have a height restriction. The buildings cannot be higher than the large, you know, the tallest church steeple. So they call it the holy city, you look at the skyline, and you see nothing but church steeples, okay, downtown. So as a result, they have lifted the height restriction, we call this the neck area, which is part of the Peninsula, that sort of, you know… isn't very wide. And so there's a bunch of growth here in this area, where, you know, there's some high rises, some more development happening, as opposed to the downtown area, which you know, was full about 200 years ago. Michael: Okay. Joe: Then, of course, you have your barrier islands, okay. This is a great place for short term rentals. So we have Folly Beach out here, we have Kiawah Island. And to the north here, we have island homes, and Solomon's Island. These are excellent places to invest in that beach house. Okay, I got one on Folly Beach, where it's a five bedroom, three and a half bath, where we'll do $100,000 in gross rental revenue this year, from our season that's getting ready to start in mid-March and go through September. Michael: Holy smokes, and what do you buy it for Joe? Joe: I bought that house for just over a million dollars. Michael: That's incredible. Joe: And then we have our more suburban communities to the south James Island. That's where I live most of the year. John's Island, one of the largest Sea Islands on the East Coast, that's mostly residential and upcoming area. A lot of this, you know, you could drive not very far outside of Charleston, say 30 minutes to get you through Johns Island, and to more rural places like Guatemala, where you think you're in the middle of nowhere, but you're still a stone's throw away from Charleston. One area of significant growth would be the Somerville area. Okay. So some of these manufacturers that I'm talking about Volvo Chrysler, Daimler, they are setting up shop along this I-26 corridor. And so as a result, we're seeing a lot of newer developments such as: Next in, you know, nicely done, new schools that are becoming great areas to invest. For example, you might see a, you know, three bedroom, single family home, new construction in the mid three hundreds low for hundreds come available, that type of property would rent for about $2,200 a month. Michael: This is great, this is great. And do you have more like entry level price point neighborhoods and suburbs? Joe: Yes. So entry level for Charleston would be right around that mid $300,000. So there's areas Mount Pleasant would be the most sort of desirable suburb. The entry level there is about 700,000, James Island entry level about 400,000. Now John's, we still were in the three hundreds. And then areas north North Charleston, this area of Goose Creek. This outlined area in gray here is the Naval Weapons Station. So this is a great area for rentals, and buying newer homes in Goose Creek, where you can get a house in, you know, around 300 to 350,000 and have a bunch of good renter's here. There's also some areas of North in the south end of North Charleston that are quite popular. This area is referred to as Park Circle, sort of Old North Charleston community developed in the 40s, 50s. And then these areas here where I own a bunch of rental properties, this is called Dorchester Terrace Waylon, where you could still get a house for under 200,000. This was all developed in the 30s and 40s. Because we had the naval base, huge naval base here on the Cooper River. So the houses are 80 years old, but they represent a good location and, you know, high demand for rentals. Michael: Fantastic and Joe, can you give everyone listening and watching an idea of some traditional things to be aware of if they are going to be thinking about investing in Charleston? So for instance, how do property taxes work? And then what kind of natural hazards or catastrophes are known to hit the Charleston area and that people should be aware of? Joe: Okay, well, I'll start with, with the second question here, of course, with all the water, okay, flood insurance, okay. Lots of properties, lots of areas are in flood, well, everything's in a flood zone, but a lot are in A, E, V zones, that would represent, you know, flood risk, and therefore, most properties carry flood insurance. Michael: Okay. Joe: Certainly the ones on the barrier islands do downtown, there are certain areas to be aware of where there's drainage issues. However, in the suburbs here, you get a little bit out of you know, that this 526 corridor here, your typical flood insurance policy in A zone will run you about $700 a year. So nothing, you know, cost prohibitive. However, if you get into some of these beach or low lying areas, you're looking at, you know, 2500- 5,000 a year, as well as you know, the risk of flooding. So there's always something to be aware of. That's one of the first questions I'll ask property owners or sellers: Okay, do you have an elevat…

Full show notes at the publisher

How to empower the next generation in the investment world Feb 24, 2022

Show notes

Dan Sheeks is one of the newest BiggerPockets Publishing authors, with his book, First to a Million: A Teenager’s Guide to Achieving Early Financial Freedom. The book introduces teenagers to the strategies, concepts, and mindset needed to achieve early financial freedom. He is a high school Business/Marketing teacher, real estate investor, and personal finance advocate in Denver, Colorado. He and his wife have a variety of real estate investments including multifamily, single-family, Airbnb, and out-of-state BRRRRs (buy, rehab, rent, refinance, repeat). Dan’s passions include working with teenagers, advocating for personal finance education, investing in real estate, and promoting the FIRE movement. In his 19-plus years of teaching high school, he has taught various business subjects, including financial literacy, entrepreneurship, and marketing. In this episode, Dan will share with us his passionate work how he is helping teenagers in personal finance, passive income, real estate investing, and early financial freedom strategies so they can live their best lives. Episode Links: https://www.sheeksfreaks.com https://www.instagram.com/dsheeks/?hl=en https://store.biggerpockets.com/products/first-to-a-million https://www.amazon.com/First-Million-Teenagers-Achieving-Independence/dp/1947200461 --- 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 Real Estate Investor. My name is Michael Albaum. And if you're watching this on camera, I've clearly got a shiny head tonight. I think it's my lighting. On this episode, I will interview Dan Sheeks, author, investor, teacher, and just someone who's full of wisdom and golden nuggets. So let's get right into it. Dan Sheeks, what's going on, man? Thanks so much for coming on the show with me. I appreciate you. Dan: You bet, Michael, great to be here. Thanks for having me. Michael: Oh, my gosh, my pleasure. So we were chatting a little bit before we recorded, we you know, hit the record button. And so I know a little bit about your story. But I would love if you could share with all of our listeners, who you are, where you came from and what it is has to do now with real estate. Dan: Sure. Um, it's not it's not a crazy exceptional story. It's… so I'll keep it short. It's… I've been in Colorado for a little over 20 years. My main gig currently is that I am a high school business teacher in a public high school, just south of Denver and a suburb. This is my 19th year doing that. And I teach classes like entrepreneurship, personal finance, marketing, stuff like that. I love my job. I absolutely love my job. I have great kids and great program. All my classes are electives. And so most of the kids that are in their want to be in there. And so it's it's fun to teach them. I bought my first property…. say 10 years ago, but I really started investing I would say about six or seven years ago, when my wife and I, at the time we weren't married, we had just started dating actually. But we both were just kind of starting to scratch the surface around real estate investing. And when, when we met, we also both found the BiggerPockets community and the Choose FIRE community and really dove like full on into those communities and their blogs and their podcasts and all that good stuff. And so luckily for us, I guess that's probably why we're married. We were really in sync with our future financial goals. And the idea of real estate investing to build wealth. So we've been hammering it ever since. Today, we own 17 units, mostly in Colorado. We have three houses out in Detroit, Michigan, or suburb of Detroit. And a little bit of variety in there. We have single family, small multifamily, we've done some burrs, we have a couple of short term rentals. We house hack, so we rent out our basement as well. Michael: Love it, love it… Dan: Most… mostly long term buy and hold properties. So that's, that's it in a nutshell. Michael: Okay, man, that's awesome. I mean, I think there's a ton there that I want to unpack. But you said at the beginning of that sentence, that's not a very exceptional story. And I'm going to push back a little bit on that, because you said that you're a high school business teacher in a public school. I mean, those words don't exist, didn't exist in a sentence when I was in school. So what is a high school business teacher? I mean, that's, that sounds incredible. Dan: Yeah, there's a lot of people say that, like, Oh, I didn't know they had those classes in high school. Michael: Yeah. Dan: And when I was in school, too, we did… we did have one business teacher, he taught typing and accounting. And that might have been it. I took accounting from him, and I really liked it. But business classes have been around, but nowadays, they're really started. There's a lot of them, especially in the larger urban schools where there's enough, enough of a you know, class size and students to to fill those rooms with with kids. So we have all kinds of classes at our school, we have, I think, seven business teachers… 1, 2, 3, 4, 5, 6, sorry, six full time business teachers that teach a variety of classes. So most of your bigger urban schools are going to have business classes, and even some of your rural schools will have the things I mentioned, like, you know, accounting, and maybe an intro, intro to business class, computer application, stuff like that. So, yeah, they're out there, but they are usually always elective. Michael: Okay. All right. Well, I know I would have for sure jumped on that when I was in school. So I'm so glad to hear now that it's being offered. But it's so cool to hear that. I mean, you're living, like you're living and breathing what it is that you're teaching these kids, right. Dan: I teach personal finance and I teach marketing that's… Marketing is my main, the main thing I teach marketing classes, Social Media for Business and I guess entrepreneurship, too. And so in those classes, because it's a passion of mine, I will drop in, you know, a day here a day there. I call them FIRE-days, Financial Independence Days, and we'll just talk about some random strategy. Maybe it's house hacking, maybe it's frugality. Maybe it's side hustles, maybe it's passive income. And we'll just have some good conversations around it. In the personal finance class, of course, I can get more into that because it's more relevant to the actual curriculum. But even in that class, I still have to cover a lot of the basics. So there's that foundation, because when I get into things like, let's say, real estate investing, or these higher level FIRE-strategies, you know, they have to have that foundation first. Michael: Okay. And when you say the basics, what is that? Because I think so many investors, or people that are just getting into investing in general, hear that real estate's a great investment and think, okay, I gotta go, you know, I gotta go get some real estate, but maybe don't have some of those basics and those fundamentals down. So when you say that, you know, what are you referring to? Dan: Yeah, just the basic personal finance stuff would be things like checking accounts, savings accounts, brokerage accounts, the basic stock market investing, knowledge, credit cards, building a good credit score, using credit, having assets and not liabilities, things of that nature. Insurance… Michael: Okay. Dan: Pay stubs, good doing your taxes. Michael: Love it. And you recently wrote a book, right? Dan: Yeah, I wrote a book, came out about two months ago. Michael: Awesome. And what is it called? And what can people expect to find in it? Dan: Yes. So the book is called: “First to a Million” and the subtitle is “A Teenager's Guide to Achieving Early Financial Independence”. And so it covers, it covers a lot. It's actually pretty, it's kind of a longer book for a teenager, but it's a pretty easy read, I think. But it's not something that someone who read in it in an evening, it's, it's got, it's got some, some girth to it, I would say some a lot of good content. But when I wrote it, I wrote it for teenagers, obviously, that's in the subtitle, but really, it's a book, anybody who's just getting started in the early financial independence world, or, you know, that idea that, hey, I don't have to work till I am 65. The book has a lot of value for anybody. I don't care what, what age you are, it's really an introduction to that, that community, that strategy. And so you know, I wrote the book, assuming the reader knew nothing, right? They were, they're starting with a clean slate, they knew very little about personal finance. The good news is though, and I always laugh about this, because there's a lot of people out there who are very passionate about teaching adults, personal finance, and early financial independence strategies, and bless them for doing that. But I think it's actually easier what I'm doing because a teenager is a blank slate, right? They, they haven't really started bad habits, they haven't tanked their credit score, they haven't incurred a bunch of debt, they don't have any debt. And they haven't engaged in lifestyle inflation. So they're, you know, you can train them from the get go to make good decisions from, from a very early age. And so I think it's kind of easier to deal with teens and to teach them right out of the gate. So that book is really just about introducing the young person to savvy personal finance, the foundation, some of that's covered in the book, and then going into those bigger topics. Like I mentioned before it, frugality, entrepreneurship, side hustles, passive income, real estate investing, index fund investing, and there's a couple chapters in there about should you go to college? Is that a good decision or not? Obviously, teenagers, that's a big decision they have to make. Michael: That's a very big, I'm sure you've got some angry parents of folks reading that book? Because that's a question for so many people, right? It's like you have to go. Dan: Yeah. I mean, I don't have any angry parents because I don't tell anybody what to do. I just lay out the pros and cons. Like if, if you, the reader are interested in early financial independence, then here's the pros and cons of college and I ultimately say it's your choice only, you know what you should do? But a college degree isn't necessary for financial independence. And that sometimes can actually be a hindrance, because, you know, especially if you incur debt, you know, in the book I talked about if you're going to go to college, great. More power to you, but you need to find a way to do it without incurring any student loan debt. Michael: Yeah, yeah. I mean, you think about and just look at the math like an average college costs about 20 grand a year 25 grand a year. If you go put that on a down payment on a house, you could have four properties by the time you would have graduated college. Dan: Yeah, especially if you how sacked one a year you will…You'd have four properties without a doubt. And I know guys who are financially independent with four properties and the house hack to meet, so you can parallel universe there, you have someone who's graduating at 22, let's say with 100,000 / 50,000 in credit card debt, just starting their career in parallel universe, there's their, their twin who's basically at financial independence are very close. Now. They're, they're living pretty meagerly and frugally, but they can, you know, slowly continue to buy more passive income assets and grow that over time. Yeah, so it's, there's a choice. And I don't tell anyone what choice to make. It's everyone's got their personal path to walk. But I do believe everyone should be educated on the options. Michael: Totally, totally. And I mean, you're teaching this stuff day in and day out, Dan. So what inspired you to actually write a book about it? Dan: Um, it was, it started six or seven years ago, when when my wife and I found bigger pockets and Choose FIRE. Because before that, I really, I knew about investing. And I knew about savvy personal finance, but I didn't know about early financial independence. And so as my wife and I learned more and more and more, and I was reading books, and blogs, and listen to podcasts, and all that stuff. I was like, Wow, this, you know, these options that are included under the financial early financial independence umbrella, nobody knows about this stuff. It's just, it's a pretty new movement, at least the last 10 or 15 years. So I, you know, teenagers being my thing, I love working with young people. I just knew that I had to write a book, specifically for that young person, about these early five strategies, because there's nothing else out there. You know, there's nothing, there's no other book out there for young people to introduce them to these other options. Michael: Yeah. And I mean, I love that, I love that. So many people, I think, especially if talking to a financial advisor, or financial planner, get overwhelmed with all of the different options, all the different choices, all the different possibilities out there. So how do you break it down for younger folks to really understand and digest? And, and do you think that they really do? Dan: Um, I know they do. Because I've worked with so many young people who are, who are using these these strategies and these tools and these tactics to be well on their way to early financial independence at a young age. Does every kid soak it up? Don't know yet, right? Because a lot of the students in my class or in my classroom, or in my… sorry, my online community, they're probably listening to stuff and they may not, they may not employ it right away. But it's always going to be in the back of their head. So maybe 15 years down the road, they hate their job. And then that's the impetus that makes them say, you know what, I cannot do this for another 30 years. But I remember that one guy, or that one book, or that one guy… Michael: The Dan guy… Dan: Yeah. Yeah. And so let me Google that and see what that's about again, I want to look into that some more, because now they're more motivated, perhaps. Yeah… Michael: I love that. I love that. So and let's talk about your online community. What's it called? And kind of who's it for? Dan: It's called SheeksFreaks, which is kind of a funny name… Michael: I love the name. Dan: Well, it's my last name plus the word freaks in the whole, you know, the first 2 million book, the whole kind of premise, or the theme of the book is around being freakish. And same with my community. And that that is, you know, it's it's the idea that very few young people are motivated enough to spend time learning and executing personal finance strategies. It's not the norm most young people don't want anything to do with that. That was me when I was younger. So the young pers…

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6 Investment mistakes we will never make again Feb 19, 2022

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In real estate, small mistakes can make or break your deal. One slight oversight and your yearly cash flow can be wiped clean. For new and seasoned investors alike it is important to hear where others have messed up so that we can learn their lessons without suffering their pain. In this episode, Tom Schneider is back with Emil and Michael to share their biggest real estate mistakes, ones that hurt so bad they’ll never make them again. Episode Links: https://www.roofstockacademy.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. Tom: Greetings and welcome to the Remote Real Estate Investor. My name is Tom Schneider and I am joined by… Emil: Emil Shour. Michael: and Michael Albaum. Tom: And today we got a fun topic. We're going to be talking about the six mistakes you'll never make again. Let's get into it. I heard of a great question to ask people. You know, when you're trying to not try to understand how they're doing, you know, without leading the witness, what's on your mind? Michael: Uhh, uhh… Emil: Uh, uh, I have… Tom: What's on your mind, Michael? Michael: Ehmm…What's on my mind is got a lot of balls in the air, which I feel like is a standard thing that I've been saying over the last two years, so just got a couple refires in the works, got my rental unit upstairs for a new primary that were house hacking, going to be getting tented here shortly. So just making sure all the cookie crumbles are getting baked into cookie properly. If that's the same… We're putting it back together and putting Humpty Dumpty back together, man. Tom: Why not, why not? How about Emil, what's on your mind? Emil: Oh, man. I was chatting with Michael this morning, actually. We have a weekly calls just talking about what's going on. And I was chatting with him about this person that I've been wanting to hire, the position I've wanted to hire but I keep putting it off. And I'm not sure if right now is the right time in the business to hire this person. And I just keep… I talked to other people who run businesses and they kind of keep nudging me to do it even before I'm ready. So that's been the biggest thing on my mind. So this week, I'm going to start putting together, documenting some processes and putting a job ad out there to at least have some conversations and hopefully find this, this unicorn of a person I'm looking for. Michael: In the words of The Waterboy: You can do it! Emil: If you're, if you're a content marketer, and you like creating briefs for writers and editing content, please, please reach out to me. I would love to chat with you. Free plug, thank you! Michael: At eshour@gmail? Emil: Emilshour@gmail. Yeah! Michael: Sweet. Tom, what's on your mind my friend? Tom: I love that question. It's just kind of you know, cuts a little deeper. So got a baby, I got like a three week old baby so not sleeping in longer since then, like two or three hours. But to be fair, the first baby was… I was it was much worse, worse than that, I don't know what the right word is it… Anyways, so got a very good three week old baby but still a three week old baby. Besides that just yeah. Yeah, doing it. I wish I'd taken a longer paternity leave. I think I kind of blew it on that front in the retrospect but who knows if there's a third one, I'm going to take a good two months off because that is special time, so that's what's on my mind, cruising along. Let's…anything else, guys? Anything else in your mind before we get into the topic today? Michael: No, it's super exciting to hear, everyone's happy and healthy. Tom: Everyone's happy and healthy, that's right. All right. So this is the six mistakes you'll never make again. I love this topic. And I think some of the oddly the best way to learn about real estate is just not learning about other people's mistakes and not making them. So a really juicy helpful topic and to start today's discussion on the way we're going to divide this is we're each going to take two and Emil, you're going to go first what is a mistake? We'll do a snaking order here so Emil what is a mistake that you'll never make again? Emil: In my life or are we talking about real estate investing? Tom: This is the Remote Real Estate Investor. But you know what? Let's not put boundaries. Let's live in the open space, right, so you can take this in any direction you want Emil. Emil: Oh geez. Alright, let's go back to when I was five years old the first mistake I ever made Tom: It’s a long time without making a mistake. Emil: I know for… it well the first one I remember who knows all the other ones. Okay, first one I have is buying the cheapest properties. So this was something when I think, I bought my first property I looked at, you know, I was going for the cheapest to maximize Excel cash flow and something you realize after a while or not even to maximize cashflow, Excel cashflow, maximize Excel returns, right, cash… cash on cash. And we don't realize after a while, until after a while you've been investing is that you know, 50 or $100 difference in those slim cash flow margins completely throw off your returns. So right, let's say you're looking at trying to hit a 10% cash on cash return, and you end up buying, you know, I'll throw out a property I bought years ago for $60,000 in Memphis, right… If if there was a variance one month of 50, or $100, that destroys your, your cash on cash, it completely changed the numbers like anyone who's listening to this and runs their numbers, change your projections by like, throwing extra expensive 25 or $50 a month, just small things right, on cheap properties. They, they make such a big difference in the percentages, both ways, right? So something I didn't appreciate, for a long time was actually like nominal cash flow, not just percentages, Michael: Totally! Tom: Get the rosy glasses off, take them off. Michael: How long into owning that property. Did you realize like: Oh,oh…? Emil: It was at the turn, honestly, it was like, oh, okay, like, I mean, the turns always ruin everything. But you really see how much of a variance like, again, even $100, or like, I guess that's on a monthly like $1,000 expense, one time a year just crushes these, these cheaper properties on like a percentage basis. They can be good investments, but it's like, you got, you got to like play around with the numbers to see even a small variance from your numbers like, changes the percentages a lot. Michael: Yeah. I love that quote. And yeah, Emil Shour, February 14 2022, the turns always ruin everything. Emil: Turns are the worst man… Michael: Yeah… Emil: …just keep people in here. Tom: Have a lot of first time investors. It's like, just getting so excited of that, you know, $50,000 investments, are you kidding me? You know, such great returns. But yeah, hammered on that. Michael, what is the mistake you'll never make again? Michael: A mistake that I'll never make again, is rushing and kind of pressuring my property manager into accepting a tenant that they don't feel really great about. That was on my very first property ever, I talked a lot about it, ended up doing tons of damage on the property and it's just a total headache. And I was so concerned because now here I have this mortgage payment and this property that has expenses associated with it and no tenant in place. And I was like, we gotta get some money, we gotta get some, we gotta get someone in. And so against her better judgment, she capitulated and said, okay, and it was the worst tenant that I've ever had. And that she may have ever had, too. I think she told me that once like, yeah, I remember that tenant, that was the worst tenant I had ever, too. So just like, take your time and be calculated and try to be level headed with stuff because that was a very emotional decision. I had a job at the time, like a really strong paying W-two, I could afford a couple of months of vacancy, I could afford like several months of vacancy, thankfully, but I was just so kind of like a meal looking at that return, oh my God, my returns gonna get shattered. And so didn't listen to my gut, or my property manager and really ended up paying out the nose for it, for a long time, for a very very long time… Tom: …capitulated, that's the word… Michael: …that’s the word of the day? Tom: That’s word of the day. I love it… I think there's, you know, there's like long term decisions and like selecting who is living in your property. Hopefully, it's a long term decision. And one of those things where, you know, you could feel the pressure boiling every month that passes if it's not occupied, but man so much more expensive to refill that that with a bad tenant. Michael: Yes. Yeah, totally. Totally. Alright… Emil: Sounds along the theme of turn suck as well. Michael: Yeah, exactly. To turn through and everything. Tom: I'm gonna go along a similar theme as my goal. So a mistake that I’ll never make, again, is not getting into the details of my property management agreement. So usually, with like terms and conditions like, oh, cool, new phone. Oh, except this. Oh, there's 270 pages of… Michael: Except of… Emil: Yeah, apples made us very good at that. Tom: Yeah. And with a property manager, there are reasons that you might want to not just accept all! So the mistake that I made: I had a property in Florida, bought it, it, it was it was good. It was occupied. I had a turn that come up, turns up, the turn the price to do the turn was kind of expensive, and it had appreciated just Mamet's that's not a good use of language. I got to think like Michael, what would Michael say, not capitulated? What would be what's a lot, a lot of appreciation… Michael: That's a technical term… Tom: …a crap ton of appreciation. So I decided to sell the property, you know, this is one of the awesome things about real estate You can you can make moves like this fed right into a 1031. And it was like a, like a stock split, I ended up getting two properties from that one. And at the point I sold it, my property manager, they, you know, had some escrow funds that I had left in there from just in between tenants and you know, as maintenance or whatever, come up, and I emailed them, like, hey, send me give me my money, you know, on this property more, and they're like, oh, no, this is the breakup fee. And I'm like, what? The breakup fee? Are you kidding me? So this memo, jam is bad mamma jamma date, they had a little line in their fee structure where if I sold the property, they had to retain management, or charge me like a month or two of rent and that is a mistake, that I’ll never make, again, not reading the property management, like, basically, what's all the other…What's all the ways that you can make money? What's all the different ways that you can take money from me and one of them was selling? So that's a mistake that I will not make again. Alright, guys… Michael: Have you come across that language in any other pm agreements? Since now, you're on your radar? Tom: Ah no, I haven't. And that's like, something I will explicitly ask for is like is, you know, more or less like, what's all the different ways you can make money? And usually there's a section within the pm agreement of like breakup fees, you know, how do they charge for maintenance? How do they charge on rent? And, you know, it'd be a fun episode. I've seen more property managers charge a flat rate versus a percentage rent. Future episode idea, future episode idea, yeah, is a ruminating? Emil: Are you ready for the TLDR? Don't do it! Tom: Don't do it. Okay. Alright, that's mine. This is not going to be a traditional steak draft, we're going to go right back to the top of the order with a meal. I mean, what's the number four thing what's a mistake that you'll never make again? Emil: So this was a mistake I made on my most recent property. And it is what I call or actually, it's not what I call, it's what I heard Michael Zuber call a B-property. So he, he classifies three types of properties, he has the A, B and C. A is turnkey, good to go, you don't have to do anything, lift a finger, it's nicely renovated, or it's in good condition, you're good to go. I see properties on the other end of the spectrum, you know, probably needs a partial got rehab, or a full gut rehab, you know, you have to do a lot of work, but you're getting a good deal. You just have to put in that the time and energy and the extra money, though, to make it look nice. The B property is the in between, it's a property where it's a maybe the rent is a little under market, but you know, at the turn, you're gonna have to maybe replace the cabinets or some tile in the shower, you know, like a bunch of little things, little not little things like several cosmetic things, they add up so much more quickly than you think. And they aren't usually sold at that much of a discount these B-properties from what I found. So I bought this triplex. It wasn't like up, when I bought it, it wasn't like a premium price tag. But it wasn't, it wasn't a great, amazing steal of a deal either, right. But in my head, I kind of just looked at things and I was like, oh, this will probably take like $5,000 total, maybe, maybe 10,000 to fix up… Long story short, it was more like 25-30,000 to get it all fixed up. And I don't know, I think these B properties are just like, they're not the way I think it's either you buy the thing that's, that's good to go the A or the C where you're putting in the energy and you're getting an awesome deal. So I do not like the B properties anymore. Tom: It's funny when we do these episodes, I try to guess like, in my head what you guys are gonna do and that's a good one. I did that did not come into my mind is like a potential one. And yeah, you could think with the little the little nicks and dents, you're able to catch a catch a deal, but it's like, yeah, go go in the deep end or go in the baby pool, I like that. Emil: Yeah, that’s my experience, I don't know. Other people may say, no, those properties are great for me, but just my personal experience. I won't, I won't go for those anymore. Tom: Yeah, I've probably done like, the majority of my deals have been more like, the ish-range and it hasn't like, you know, caught me caught me too bad. I mean, I had some terms that were like pretty ugly, where I bought occupied and then… Michael: And then surprise… Emil: I guess the question is, did you go in knowing, like your estimate for what it would require to fix? Was it on par with what it actually cost? Tom: No, it was it was more expensive. I think it wasn't as dramatic as your use case going from, was it like 500% over like, you know, from 5000 to 25,000. Yeah… Emil: Yeah, yeah, like four or five tax of that… Tom: But I don't know. I think that's an interesting way to think about it have like, you know, either go go in and go home. Emil: It's because there's, there's a lot of like these little t…

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How to use your primary home as the foundation of a larger portfolio Feb 17, 2022

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Chris Meunier is a program manager working at Google, but one of his biggest passions is real estate investing and personal finances. Over the past 10+ years, he has worked to build a real estate portfolio with his wife, Jessica, which includes a primary residence in the SF Bay Area and rental properties in California, Indiana and Georgia. Chris believes there are many strategies to achieve your real estate goals and they can be used to accelerate and generate wealth. When not working his day job or keeping an eye on the real estate market, you can find Chris spending time with his family, hiking outside with his dog or planning his next ski trip. In this episode, Chris will share how he started in the real estate business as an investor, some tips & insights and how he found a platform that provided a holistic approach to him. Chris always enjoys talking real estate and personal finances, and you can reach him directly at cmeunier@ymail.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. My name is Michael Albaum and today with me, I have Chris Meunier, who's talking to us about, what it's like to convert your primary into a rental and how he's scaling out estate and what that looks like. So let's get into it. Hey, Chris, what's going on? Man, thanks so much for coming on and hanging out with me. I appreciate you. Chris: Yeah, thanks for having me, Michael. Michael: No, my pleasure. So in… you know, I obviously know you and we have a relationship. And so I would love if you could just give everyone listening a background of who you are, and how you got started in real estate. Chris: Sure! So my name is Chris. My wife and I have, we've been married about almost 10 years now. And I work my day job at Google. My wife's a, she's an entrepreneur, a personal finance coach, which is really exciting. So we're both very passionate about helping people with their finances and real estate as well. And going back a bit, I grew up in a family that was very focused on real estate and had a lot of family members who work in real estate. My dad was an agent, my brother's an agent, uncles and aunts who've done you know, home inspections and things like that. So I was surrounded by all of that growing up, I bought my first property back in 2009, a condo in the San Jose area of California, and, and did whatever it took to get in there, I put 3% down. Because I knew that the earlier I could get in and get my foot in the door that it would be well worth it. And sure enough, it was and I still have that property as a rental. And then I think from there, we've… we've really just kind of kept building from there and look for ways to not just focus on our primary residence, but look for ways out of state as well to build our real estate portfolio. So that's kind of a little bit of background on where we've come from and where we got into today. Michael: Awesome. And, and just with the goal of being fully transparent, you are a Roofstock Academy member, right? Chris: Yeah, we've been for I think, a year or two now we've been with the Academy. And I've really enjoyed it and got a lot of value out of the courses. I'm a program manager in my day job so I've taken I built a lot of Evernote sheets and took copious notes and action items and things like that. So we've really gotten a lot of value out of the academy. And I used it to really, like, analyze properties differently and build out like our ten year plan and things like that. We've told other people about it to say that we're big fans. Michael: Awesome. And how much should I pay you to say that? Chris: Ohh, we'll figure that out later… Michael: You'll send me an invoice. Chris: Yeah. Michael: All right, awesome! So I'm curious, Chris, I mean, for… for you and your wife, what was it? And maybe it was just your family kind of being bugs in your ear, but what was it about real estate that attracted you to investing in the beginning? Because I think people listening to this could say, oh, well, you know, he got started deals at nine, prices were… were at the bottom, so he just got lucky. I mean… Chris: Yeah… Michael: I don't think that's the case. But you know, you've done a lot since then. But what was it about real estate that initially attracted you? Chris: For me for a while, it's, I think a few things. One is about just the fundamentals of real estate that I've learned over time. And then going back to 2009, it was really about like finding a primary residence first and foremost, but knowing the power of buying and holding in the Bay Area, and knowing what that could do. So at the time, I did a lot of research on the tax benefits and things like that, but not so much as an investor more as a primary owner. So I think that was one was just understanding the power of from an investment standpoint of what could be what you could achieve through that. And the second thing is diversification. So we, my wife, and I even now look at okay, what how much do we have in our real estate portfolio? How much do we have in the stock market? How much do we have in other types of investment vehicles? Diversifying, especially when inflation is going crazy, and the stock market's going up and down I think is really important. So that's also been in the back of our minds as we've thought about what can real estate do for us? I've always seen it as a way to build long term wealth and especially now that we have two small children leaving a legacy to see and having something that can carry on, beyond our time, beyond just like inheriting some amount of money, I think is something that's really important to us too. Like, we have just an example of my wife site, her family, they some of them live in the Bay Area and own an apartment, a small apartment complex, and her aunt bought many decades ago. And now it allows them to, and her cousins, you know, to live differently, because she made that investment long ago and is able to support the family in different ways. So things like that really speak to me, I think and show the power of what real estate can do for family and extended family. Michael: Love it, love it… And for you and your wife, Chris, when you first started out, you had some goals in mind. And so now you've been on this journey for over a decade, what is done look like for the two of you and for your family? Chris: We go back and forth on that honestly, like, there was a time where we said okay, like, let's… let's build out our 10 year plan and figure out like, how do we get active, you know, like 50, 70k of passive income a year from real estate, we want to get 100k, is that even feasible? Do we need that? I think we both work day jobs. And we… we want our goal has always been we want to supplement what we will get from retirement, and always look for ways maybe to retire earlier. And, and, and also, like I said a minute ago, just provide kind of that that long term nest egg for us and for our children eventually. But having, having done that math, I think we've landed on like somewhere between five to 10 properties out of state, either single family rentals or duplexes or maybe triplex something like that. But the reason being is that we can get to some amount of stable annual income through those properties. Combine that with like 401k, Ira income and get to this net amount that will allow us to live comfortably in retirement. Those numbers are, you know, they're… they're kind of made up at this point, we don't really know what amount will need to live on. And we don't really know how all of our rental properties will perform down the road. So we're trying to bake in some margin of error there and say, okay, yeah, five to 10 instead of just 10 or, you know, maybe by the time I turned 50, or something like that, I won't want to manage 10 properties, I don't want to have that mental burden of figuring out which ones are doing well or not doing well. At this point, I think I would enjoy that. But yeah, it's hard to know, right? Like, it's there's the time aspect that I think is playing a bigger role in my mind now. About how much time do I want to put in now versus when I'm retired, it sounds really enticing to put time in later and kind of look for deals and look for ways to optimize the portfolio and things like that. So yeah, like, more tactically speaking, like our original goal was to go from like, one property to two to three, roughly every year. So right now we have, we have three, and we intend to buy another one this year, maybe next year. And then we go to, you know, five at some point after that maybe the next year. The pace kind of depends, of course, on our financial situation. But that's kind of how we're playing it right now is at least maybe get to five and then reassess how things work and what our financial situation is, and our job situation, too. Michael: I love that, Chris. I think we've had so many people on the podcast, and I talked to so many investors that are out to get to 100 tomorrow, I'll do it as fast as I can as quickly as possible. And you know, that might work for some people. But I think for others, you really need to take a more strategic and slow and steady approach, which is what it sounds like, you are doing exactly. Chris: Yeah. And I think we've when… when thinking about how can folks starting off benefit from hearing like tips or feedback from others. I think what's really resonated with us is… is just being extremely thoughtful about what your goals are and what you want to do. Because like I said, my wife, she talks to a lot of people who are working in her working to get their finances in order. They bring up real estate a lot. They say, Oh, I hear real estate, I need to I need to own sound like my family slam me down real estate and Jessica says why? And then they say well, I don't know, like, I just heard I should be owning real estate somehow and it kind of just gets to the basics like alright, what are you trying to achieve? Some people want to do buy and hold and they can skip the cash flow every month, some people can… Some people need to live off that cash flow, some people haven't maybe done the math to know they can put a chunk of money and lock it up in real estate for a while. So just being very thoughtful about that and having concrete goals I think is, it sounds so obvious, but I think it's, it's so critical. And then once you have that goal or those goals, like stepping back and making a plan, and because my wife and I think very like project management oriented, like building out milestones throughout a year, like if you want to buy your first property, or even make your first offer, like this year, let's say, put down some, some steps you can take, like, whether it's time for Roofstock Academy, or educate yourself in other ways, or learn about certain neighborhoods, and then get pre-qualified and then get, you know, talk to…, property managers, things like that. That's what helped us a lot, is really putting down those stepping stones along the way to the point where we could feel like alright, like, maybe we can do this, maybe we can buy our first out of state investment. Michael: Yeah… Chris: It takes a while to get to that point, sometimes and that's okay. Michael: And Chris, what would you share with folks now having been on the other side of how do you go from zero to one? How do you know when you're either mentally or physically prepared because you could always listen to one more podcast or read one more book or take one more course? Chris: Yeah. Michael: What does that look like? Chris: I think it's, you know, there's always… there's always hesitation, I think I would dare compare it to like having a kid maybe in a way… Michael: Okay… they're just as expensive. Chris: You can do, all right, you can do all this studying and preparation you want, you'll never be fully, fully ready. And there's always going to be unexpected things that happen. So, you know, as an example, when we bought our first, our first property, we landed on Indiana, Indianapolis more specifically. Now why why did we land there, we did a lot of research on, on areas that were seeing population growth and strong rent growth. And affordability was within our range of we were targeting somewhere around 100 to 120k, for our first property. And Indianapolis seemed great, but it took a while to really, like build up the confidence, like make an offer, because it… first I think is getting over the hurdle of like buying something that you don't see, at least for us, that was a big hurdle to get. Michael: Yeah. Chris: Because the other property we manage locally is only like 30 minutes from our house and we can drive there when we need to. But this was a whole different beast, right? Going, it's like going on eBay and buying something then you hope it shows up in a few weeks. Michael: You hope it’s real, yeah… Chris: Yeah. So I think that was that was a mental hurdle to get over. But, you know, going, we spent a lot of time like, researching Roofstock and other competitors and learn in, in actually talking to folks who had used it, and getting feedback that way, too. So that helped build our confidence. And then on the financials to like we, we took a lot of what Roofstock offered in terms of like estimates for fees and maintenance costs, things like that. And we just kind of put it to the max and very conservative and making sure that we were really planning for okay, like, if, if we don't get, you know, a tenant in place for a month or two months, what would happen? Would we still cash what would we be okay, if we didn't, and just mapping out all the what ifs. I think a really good tip that… that my wife reminded me of was have somebody who's willing to push back on your assumptions, and to question, question what you're doing, whether it's like, you know, like someone like you, Michael, a coach, or your spouse, like in my case, I tended to be more optimistic and my glass half full. Michael: Yeah Chris: And she was the opposite. She would say what about tornadoes, hurricanes, like, do we have enough insurance to cover that? What about, you know, if the tenant just doesn't show up one day, they grew success, somebody there, nobody's there, you know, things like that. And yeah, it's good to have somebody to check your check your assumptions. So those are some things that helped us feel confident and feeling alright, like we can do this. Let's give it a shot. Let's make our attempt. And we have made a couple of offers, it didn't work out, the first time before we got our Indiana property. And it was a good learning experience like we… we figured out how to make a stronger offer, how to… how to look for properties that maybe we're not going to be as competitive as like some that everybody wanted, for example. Michael: Mm hmm. Chris: Yeah. Michael: That's great, Chris. So Chris, now that you and Jessica have owned that Indianapolis property for some time, how is it actually performing? Is it mor…

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How to overcome & find success in the real estate world Feb 15, 2022

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Liz began her real estate journey in 2005. She co-founded DeRosa Group with her husband, Matt Faircloth where she helped the business grow for over a decade. During this time, Liz was active in management consulting where she developed an expertise in a personality assessment program, working with small and Fortune 500 companies. She has created and facilitated hundreds of trainings and workshops for universities, conferences, and executive level trainings. While earning her Masters’ degree in Social Work in her 20's, Liz developed a passion for supporting women. In 2018 she came together with her good friend Andresa to launch the Real Estate InvestHER® podcast and community. Their mission is to empower women to live a financially free and balanced life on their own terms. In this episode, Liz will share how she started in the real estate business as an investor, some tips & insights on how she started her portfolio on her own terms after not finding a platform that provided a holistic approach. Episode Links: https://www.therealestateinvesther.com/ https://www.instagram.com/therealestateinvesther/ https://derosagroup.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 Liz Faircloth, syndicator, investor, women empowerment speaker and podcast host and she's gonna be talking to us today about all those different topics and more. So let's get right into it. Liz Faircloth, thank you so much for joining me on the show this morning. I really appreciate you coming on. Liz: Yeah, thank you so much for having me, Michael, excited to be here. Michael: Oh, awesome. Well, I know a lot about you, I've read so much about you and so for anyone who might not be familiar with you, I would love if you could give us a little background, who you are, where you come from and what it is you're doing real estate now. Liz: Sure, sure. So I got my real estate start about 16 years ago, in my 20s. A long time ago, my husband and I actually started investing together. Quick story I was getting my degree in social work, wanted to be a therapist, and my husband was an engineer, at the time, get a job in engineering, so completely different fields. And we both had to share a passion for like creating a bigger life than what we had at the time. Both of us came from very middle class, wonderful families, hardworking families. But you know, we both had this shared passion of doing something bigger with our lives. And quite honestly, impacting a lot of people was a value we both had at the time rates, I still do. Anyway, at the same time, around the same time, my brother in law, who was the only entrepreneur I knew, you know, I didn't grow up with entrepreneurship or investing or anything like that. He handed me: “Rich Dad, Poor Dad”, and I did like personal growth books. I said: What are you giving this to me for, I'm gonna be a therapist. I don't know why I'm reading this, but I'll read it. He said: You have to read it, you have to read it. Michael: Yeah. Liz: And I got really inspired by that book like many people. I think mostly because I was learning about concepts I never heard of before, you know, in passive income and creating wealth and you know, just things you don't you just really think about trading your time for money. That's how I, you know, thought of it. And so reading that book, and then changing my career right after that I actually got a job in consulting and sales because of that book. So I didn't really and at the same time, started investing, bought our first duplex after a year of study and hard work and door knocking and door slammed in our face and going into local RIA meetings like everyone else. I borrowed $30,000 from my father who didn't have the money to buy the duo duplex, right instead of Philadelphia and got that first deal under our belts in 2004, which is quite some time ago. But we launched our business and started a twists and turns, ups and downs path for the last 16 years. And now we are you know, we are mostly focused on syndication, large multifamily. We will have about close to 1600 units under ownership and management in four states very soon. So, again, it was not a linear path by any means, our path was just our path, a lot of twists and turns and ups and downs and tons of mistakes. But when we went all in on multi family, that was a good move for us. And at the same time, as we scaled our multifamily business, I started another business and community called The Real Estate InvestHER® community, which is all about empowering women to live a financially free and balanced life with my partner and dress, so…. Michael: Amazing, well, there's so much there that I want to unpack, getting back to that first duplex. Was that a house hack? Was that something that you guys lived in as a primary? Or was it a pure investment property? Liz: That was a pure investment properties actually, right around the same time. At the time, my boyfriend, Matt, he bought a single family row home and actually rented out two rooms. So getting the taste so I don't consider that my first investment because I wasn't on the deed. But it's technically his because he always likes to say he house hacked on his first property. And I'm like, I'm not going to take responsibility for that, because I did not buy that. I didn't find it and do anything to contribute to that one. So he had that after we you know, when we already met. But yeah, he had the experience of house hacking, and it's a phenomenal, phenomenal strategy. He actually made I think $30 a month when he rented out those two rooms and after the mortgage was paid so so that really gave him a lot of inspiration around you know, obviously investing on his own and his own way but yeah, the duplex was not it was not a house hack. We bought it with tenants inside and learned about how to acquire multifamily and with tenants, you know, already there and that whole mix of how you manage that. Oh yeah, it was a… it was a district duplex. Michael: Love it, love it. And then I'd love to hear a little bit more about kind of what that nonlinear journey as you mentioned was because I think so many people see someone like yourself or Matt or some of these bigger names in real estate investing and think, oh my gosh, I could never do what they do because I could never get there. And so, versus buying a duplex a lot of people are really comfortable with that. So what came next for you guys? Liz: Yeah, a whole bunch of decisions that in hindsight, in hindsight, we're just steps on our road if I… if you are steps in the journey, like to call it because if they don't break you, they make you stronger, and you learn something from them. So you know, after that, it's funny because we start with a multifamily and we're focused on multifamily. But during that timeframe, we got involved in so many things that were not multifamily. So we decided to really focus on buying in Trenton, New Jersey. Michael: Okay! Liz: We lived, we lived close to Trenton, we lived in a little town in New Jersey. And so we really want to focus locally. So our goal is 30 mile radius. And so we said okay, what area around us can we afford, number one. And number two, can we really make a difference because I came from social work that is my background, that's my values I want to and I had that shared passion with my husband. So our mantra at that time was to transform urban environments, that was our you know, transform lives through real estate in really focused on cities, urban, you know, densely populated areas. So Trenton met the you know, goal there, so we started buying in that city. And we you know, we started buying small multis, we started buying mixed use, then we bought a commercial building, which did not have any residential tenants, it was a 10,000 square foot commercial building. Michael: Was it like an office or a warehouse? Liz: Yeah, an office building. Michael: Okay. Liz: And you know, when you read Rich Dad, Poor Dad, and we were in our 20s, I don't want to say that everyone in their 20s doesn't make… they may all make mistakes, but we were pretty naive. Michael: I was right there with you. Liz: You know, we didn't know it was mentors. You know, we didn't have the community that were… that I'm building now. I mean, I wish we had a mentor or had a little more focus. But anyway, we bought, we looked at this building, we just ran the cash flow. I said: Okay, by square foot, what can we make? And it was like a killer deal on paper, right? It was like this. Absolutely amazing. Like, we'll be out of there, we'll be done and I was still working. He had quit his job at the time, we got married, and I was doing the sales and consulting job. So anyway, we ran the numbers, everything looked amazing, we bought the building. We used a two lines of credit. Michael: Okay. Liz: My mother in law's house, we got a line of credit on their home. Now this is pre the crash. Michael: Right, right. Liz: So, you know, anyone… Michael: They're giving up money? Liz: Yeah, they're just literally just so you want a line of credit, okay we’ll give you like, 90% loan to value we had like zero experience and what we're doing. I mean, in hindsight, I'm like, wow, that was, I don't know, if I was the bank, I would have done it. But hey, you know, you take money where you can get it when you start ours. Michael: Right. Liz: And we did it legally, of course. But you know, in hindsight, they're not writing those loans anymore. But this was 2005. And hey, you know, they did what they did. So we bought the building, it took two lines of credit out and it was a half a million dollars. Michael: Okay. Liz: And, you know, that was a, that was one of those projects that we had to learn by making mistakes, we started renting those a little later than 2005. I want to say it was right before the crash. Great time to buy reversibility. And long story short, we ended up we couldn't find a tenant. So when you do your market analysis and say, okay, who's gonna rent this asset, right? Like we do now. We thought one tenant, one business, but we didn't actually analyze it in a... How many businesses are going to rent a 10,000 square foot building in downtown Trenton? It's not like 100, it's polyana, you know, and a handful. So we couldn't find a tenant. Here we have a vacant building and that's not good for us, buy and hold investors, right, you know… It’s obviously, that's your customer. So long story short, we ended up breaking it up into small offices. Michael: Okay. Liz: And that's what the vision of that building is to date still, we're actually have it under contract. We're selling that building. We've had it for 2007, so it's been a long time we've had that building and so he's been a small office about you know, 18 to 20 users have been in that building so… Michael: So you got tenants? Liz: What… we do, we got tenants, we got them. Michael: Awesome! Liz: …and learned through that process and then we flipped property we bought you know, we flipped play a couple of dozen properties over the years, so learned that side of the business. But yeah, I mean, we so we got involved in a few different niches, which most people don't, they focus, right, they're told to focus so but again, it all adds to our, our journey, and it also adds to why we said okay, 2010 let's really go all in on multifamily and that really helped really, really helped us propel us much faster than the first five years into growth. Michael: Okay, and what about multifamily is so attractive to you and really made you make that decision in 2010? I think a lot of people would agree that yes, multifamily is a great asset class. But if you ask them why they say, well, because that's what everyone's talking about. So what you know, what are… what are kind of the nuts and bolts that that got you excited about multifamily? Liz: Well, you know, it's funny because you start to look at and I think I, I encourage a lot of the women in our community that I'm talking to all the time is people often say: I want to get involved in this niche or that niche, just like you're saying, yet, they need to look at where they've had some successes, you know, and that could be in real estate, or that could be in life, because sometimes they go and people go into this with no real estate investing experience, but they've had success somewhere. And there's, there's little nuggets in that success in my belief that can be used in this business. So what I mean by that, specifically for us, is we looked at everything, we looked at our whole portfolio, we had multifamily, we had flips going on, we had this commercial building where we were like, small office, you know, landlords. Michael: Yeah. Liz: We had a raw land deal that we were doing. I mean, we were kind of like involved in a lot of different things. Michael: Yeah. Liz: And we looked at the numbers and said: Okay, where have we had success? What is forgiving in this business? And quite honestly, multi. We even had single family, we had a bunch of single family rentals as well. And in our experience, multifamily is one of the most forgiving investments. Michael: What do you mean by that? Liz: Yeah, what do I mean by that? For us, we started to say, okay, what, where we had success and then multi families have been forgiving. So we bought one of our first purchases in New Jersey, and outside of Trenton was.. were about three, four units. So we bought three, four units pretty, pretty quickly and when we moved into, you know, building our business, and we bought them too high. Michael: Okay. Liz: I spent too much money on them. So it wasn't like this homerun deal. It wasn't like this. Quite honestly, our first duplex was probably one of the best deals we did really early on. Michael: Really? Liz: Yeah and then the four, the three, four units were just we paid too much for them. And we didn't properly look at capital expenditures. There are older buildings, classy buildings, classy and, you know, community. So you're managing a whole business when you're, you know, in those in a situation where you're figuring out what is the market need. Okay, who am I going to be serving in terms of tenants? This building needs so much, right? Michael: Yeah, yeah. Liz: So my point saying that is even though these were not homeruns, for us, and even though we weren't making the cash flow, we had intended to, we said, if we had made these tweaks, and if we had bought these properties at this amount, we would be, you know, absolutely. And then so we learned, we learned a lot from those first few, four plexes. Then we started doing the bur strategy in Trenton, where we bought two single family homes and bought them at the right price, put, you know, added value in a sense. And then obviously, refinance them pull the cash out, did it over again. And we started doing that really successfully. And we were making cash flow, we pulled the money out. And it was like a win win win, you know, is all the wins that we all want in this…

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Is paying for a real estate coach even worth it? Feb 12, 2022

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In this episode, Devin and Michael talk about some of the most important things they have learned from their mentors, the importance of having experienced people to network with, and if coaching is actually worth paying for. Roofstock Academy https://www.roofstockacademy.com/ --- Tranacript 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, I'm joined by my co-host, Devin Redmond, and he's gonna be talking to us today. Actually, we're both gonna be talking to it to you all today about mentorship, getting some coaching, how we kind of got our start in the real estate space and how it's impacted our trajectory going forward. So let's get into it. Devin, what's going on, man? Good to see you. Devin: Hey, Michael. How are you? Michael: Good, good, but not as good as you. You're out in Hawaii. Right? Devin: I am at the moment. Yeah, I've got a few rental properties here. So I've been here almost two weeks now, doing some renovations and got a vacancy that I just leased up, found what I think is gonna be a great tenant. So going well, so far. And every once in a while I get I get to the beach and work on the tan, too. Michael: Talking about aligning incentives may get to invest in rental properties in Hawaii, and then go there. Love it. Love it. Devin: Yeah, yeah, absolutely. Michael: So Devin, let's chat today about how you kind of got guided in your real estate investing journey. Because I've got I had a personal mentor of mine. And I'll share a little bit about that. But I'm curious, did you have someone in your world and your sphere of influence that was like, really shaped how you became the investor you are today? Devin: Yeah, you know, I would say there's not necessarily one person in particular. But my first job after business school, this is going back 15 years now was in the commercial real estate world. Michael: You don't have to date yourself. No one was asking… I said you don't have to date yourself, that was asking… Devin: I own you an apology. I went to business school at 15, so… No. No, just kidding. It was a while ago now… But yeah, I worked for a big office, developer owner investor. And so there was, you know, a group of senior folks there who had been in the business, you know, up to 30 years, and it kind of seen a lot of cycles. And so I really learned the business from them, how to analyze deals, how to talk to investors, and get them excited about investing with you, without overselling, right. So there was kind of that balance always to try to find. And, you know, I think most importantly, what I learned from doing both acquisitions and asset management after the fact was that, you know, on the day you close, that's great, you did a bunch of analysis, your model looks beautiful, that all goes out the window, the day close. You start hearing from actual tenants as to what the real deal is at the property. Michael: Right… Devin: When you start to break, you have to deal with stuff, the market changes underneath you. So all those things start happening in a very real sense, once you actually own the property. So, you know, that was something I learned very, very quickly, very early through both experience. And from working with this, you know, this group of real estate folks that had been around a while. Michael: Now that's such a good takeaway, and how cool that you got to like, learn and kind of get your teeth cut with other people's money, kind of practicing before you and was this all this was all before he went in and personally invested? Right? Devin: Yeah, it was, yeah, at the time, you know, I was still kind of struggling to scrape together a down payment to actually buy something myself. I eventually was able to do that, you know, for a condo in San Francisco, that kind of got me started, in terms of actually owning something that, that then became eventually my first rental and 1031 out of that. So, so yeah, I mean, it's all it's all connected and was kind of happening around the same time. Michael: That's awesome. And have you taken a lot of those lessons learned? And those early days and really applied them to your personal investing? Thesis? Devin: Yeah, I mean, in part it makes, it gives me some, you know, perspective with the modeling when you're looking at a new deal. Michael: Yeah. Devin: And that you don't really know what's going to happen. So actually look for opportunities that specifically I think, have more potential to go bigger on the upside than, you know, negative on the downside. So this sort of like asymmetric opportunity, but it's not always something you can model either, right. So it's, so it tends to drive me towards investing in markets that have higher history of appreciation, right versus the cashflow, which is tends to be a little more reliable. So, you know, and that's just kind of like what fits my investor profile now, but I think it's different for everyone too, right? If you're someone that's very focused on things happening the way you expect them to, and you don't like surprises, then maybe you want to focus more on cash flow, because that's a more reliable way to way to think about things. Michael: Yeah, that makes sense. Devin: This is something I've seen in just investing. When I got started in the commercial real estate side, in the Bay Area, it's very volatile market, right, there's few jobs, and there's huge downs. So you can see these great outcomes when you hit the cycle, right. And really, really kind of like tough outcomes when you when you don't, but my sense is like, when the cycle is not working, your losses are less than the big upside when it is working. So you know, it's calculated risks that you got to get comfortable with. Michael: Yeah, that makes a ton of sense. And so question for you, if the model breaks the day you close, why even bother running the model? Devin: There's a couple of reasons… Number one is to at least have a baseline going into it, where you can sort of evaluate how you're doing against some sort of baseline, that's, you know, a function of your expectations at the time, right. But I think most importantly it's a great way to set your starting rents understand where you are on insurance, where you are on some of your big expenses. And it's also a great way to get input from others, right. So if you do have a mentor, if you do have other folks that are investing, you can ask them to kind of take a look at the model and pressure check whether how you're thinking about things is really the right way, or if you're missing something, right. Michael: That makes so sense. Devin: …and then yeah, yeah… And it's also like, the modeling has turned me off of a lot of deals. So it's, it often has resulted in a big stop sign for me. Because if you can't make the model work, right, then something is off with your pricing. Or they're asking too much for the property. Or maybe you're not comfortable pushing rents as far as you need to, to get the return you're looking for on this particular deal. Michael: Yeah. Devin: So like, you know, my, my computer is littered with a graveyard of models for deals that I didn't do, right, because the model doesn't support the deal. So I think it's sort of like a minimum threshold that you want to try to get over. Okay, the model works. Now, how do I really feel about this on an emotional level? And what's the upside versus the potential downside? What do you what do you get out of your models? Michael: The proper answer. Duh..! So, no, I'm exactly like you in that regard, in that it probably helps me steer clear of more bad deals than good deals. And I think you're exactly right, that for me, it's a: Hey, this is kind of a worst case scenario type of thing, because I'm super conservative, because I come from the insurance industry. So getting a handle and quantifying. Okay, how bad could it really get? And if that stomach bubble unpalatable? Like that's great, awesome. Let's move forward, because it's probably going to be better. So my models tend to project worst case scenario. I think a lot of other people's scenario, models tend to project best case scenario. So I would, I would recommend people's take the worst case, worst case approach tends to keep you safer. Devin: Yeah, I think yeah, the challenge is like, how do yo… How do you balance that against? What's what the reality of the market right now where you have to be pretty aggressive to win, right? Michael: Yeah Devin: I find that that challenging. Michael: It's extremely challenging. And I think you could very easily and so many of us could make very easily any deal look bad, right? You just add a couple heavy expenses and the deal, all the deals are no go. And so you have to get really clever, and balance. And we talk a lot about there's the art and science of deal analysis. And this is really kind of the art piece of this is balancing reality with expectations and possibilities. How bad could it really be? And what's the likelihood of that actually happening? Devin: Right! So it sounds like you sort of tend to model your worst case scenario, but then take it with a grain of salt, too that it's not necessarily how it's gonna play out. It's getting you it's doing some service and getting you comfortable with a downside scenario almost. Michael: Exactly. It helps me, it helps level set me. Devin: Yep. Michael: And you know, and I had a mentor who just totally reshaped and changed the trajectory of my investing career and frankly, my life because he was he was so impactful. And so he really helped me kind of get an understanding around. This is the type of modeling that makes sense, especially for him and he showed that with me, which has been super, super impactful. Devin: Yeah, interesting. How did you find that person? Michael: Strangely enough, I found him online on like a mentorship website. It wasn't paid. It was like just people helping people. And I kind of poo pooed it. But I was in like, a super bad place like my father had just passed away. And I was like, I don't know what to do and spiraling. And so my wife was super instrumental in helping get me on this website. And so I found this guy, and I was like, I don't know. And we connected, and we just really hit it off. And so it was very much so at the beginning, a mentor mentee type of relationship where I would ask him questions, and this and that, and now we chat regularly. And we're friends. It's a bit it's turned into it's blossomed into this really cool relationship. But he just totally gave me some this incredible advice. I was investing all over the country. And he says, Michael, like, go get laser focused on one or two markets, hammer them hard. And you know, watch what happens, it'll blow your mind. And that was so counterintuitive to everything I thought I knew about investing and diversification and all this kind of thing. But I'm like, whatever, I'll, you know, take a flyer on this. And, and it's just been unbelievably impactful. So I can't stress and I'm so thankful that I was able to get connected with him. I can't stress enough how important I think having someone who has been where you're trying to go is, you know, just in life, and it's funny, we talk about, you know, professional athletes and coaches and sort of thing, if you're gonna go the Olympics, you go get a coach. And no one, no one box at that no one questions that. But I think for doing things outside of the sports arena, like in business, or even in life, like if someone gets a coach, people kind of are looking at them odd or that's just not generally as well accepted. I think outside of the sports, which I don't understand why because it makes perfect sense. If you're trying to do something better have someone like guide you… Devin: Yeah, yeah, absolutely. It kind of I think for some people it takes you set your pride aside a little bit, right. And, and recognize that you don't know everything, you can't do everything on your own good at something, some things that you're that are newer to you, maybe that you're getting into it absolutely helps to have a guide and a coach. Michael: Yeah. Devin: Yeah, it makes, it can make a big difference. Michael: I am interested, because I mean, you got your kind of coaching and mentorship and got paid to do that, because that was a job for you. Would you be open to paying for a coach, I mean, kind of taking turning back the clock a little bit? Do you think paid coaching or paid mentorship is a reasonable thing in this space? Devin: Yeah, yeah, absolutely. Getting access to experience to the right people who can both guide you away from things that aren't going to work out right, or that don't have a good potential return or that are asymmetric to the downside, right. And honestly, like most properties on the market that you can find yourself are overpriced, right, and it's hard to make them work as an investment deal. So I think paying for a coach who can guide you to the right sources, help you understand how to analyze a deal, especially in the beginning. If you're talking about dropping, you know, 30, grand down payment on a rental property, a few 100 bucks to get some expert advice, and put yourself on the right track, is I think the return is huge on that, on that outlay. Michael: Yeah, you know, it's funny, I agree with you, 1,000%. And I think it also applies to a couple other areas like CPAs, or tax professionals and attorneys. Like yeah, the cost might be exorbitantly high when you look on a per hour basis, but you look at what they might be saving you down the road in future headache and future costs. It's like, get done, I'm gonna pay an attorney or tax professional to do these things for me, because if I don't, I'm gonna pay out the nose later. Devin: Yeah, absolutely. A lot of people I think undervalue their own time, right. So like, what do you value your own ass? Is it 50 bucks or is it 250, is it 300, right? And so like, why would you spend 17 hours trying to figure something out on your own online, in random forums, you know, where people are paying for all kinds of things that are in their own self-interest, or just, you know, inexperienced, right? When you can just go to go to someone who knows what they're talking about, for whatever it is an hour and get that, you know… get on track.. quickly. Michael: Yeah. It's so good, you know, and that's it! Like when people value their time out, I used to be very anti, like hiring people to do stuff around the house, like I'm like, I'm perfectly capable of cleaning. I'm perfectly capable of gardening, right. And then it came down. I was like oh, I can pay someone for three hours to clean my house, and it cost me whatever, 30, 40, 50 bucks an hour. And that frees up my three hours to go do something that has a higher dollar per hour value, like: Oh my God, and when I made that mindset shift, I was like, oh, this…

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How to tap into your retirement accounts, penalty and tax free Feb 03, 2022

Show notes

Daniel is a regular contributor to Forbes.com and is the owner of Quest Education, a company that helps entrepreneurs obtain capital for their companies, pay off high-interest debt, and make money tax-free using a self-directed retirement account. Under Daniel's leadership, Quest Education has reached the seven-figure mark two years in a row and has customers in all fifty states. In this episode, Daniel shares how to tap into your retirement accounts, penalty and tax-free, so that you can use your money to invest. Daniel's link: https://www.danielblue.me/ --- 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 Daniel Blue, a Forbes, contributor, author, business owner, entrepreneur, extraordinaire. And he's gonna be talking to us today about how to tap into your retirement accounts, possibly penalty and tax free. So let's get into it. Daniel Blue man, thanks for coming on and hanging out with me. I really appreciate you taking the time. Daniel: Hey, Michael, excited to be here. Thank you so much for having me on your show. Michael: My pleasure. My pleasure! So for those people who aren't familiar with you give us the elevator speech of kind of who you are, where you come from, and what is it that you're doing today? Daniel: Yeah, I'm in the entrepreneur space. I've got a company here in Las Vegas. I have got about 13 employees. And the problem that we solve in the marketplace is helping people access money, their retirement accounts penalty and tax free. So we have a lot of fun with that, and teaching people how to liberate their 401k free of their IRAs and have them use the money the way that they want to use it and not having to rely on Wall Street and the IRS telling them what to do. So I guess I'd have a lot of fun doing that. I kind of stumbled into entrepreneurship. I don't have this cool Gary Vee story where it's like, I was a hustler out the womb, you know. And I was running side hustling and… Michael: Stealing candy on the school yard… Daniel: ….grabbing flowers from one neighbor's house and then go into the next door neighbors and then meet ringing their doorbell, telling those flowers right, like, I don't have any cool things like that. Yeah, played sports growing up. And I think sports had a lot to do with me becoming a business owner. I think there's a lot of parallels between sports and business. But really, when I look back at my story, when I was 12, is when adversity hit. My parents got divorced, my dad moved to Mexico and now it's just my mom and I. And we lived in California, high cost living, my mom's gone all day, working all day doing the best that she can do to provide. And that left me with a lot of time on my hands. And with my dad gone. And I didn't have answers as far as why he left and why he wasn't coming back and why he lived in a foreign country. I definitely rebelled a lot. And I started to seek, you know, other people to kind of fill the void that my dad left, right, I was easily influenced by other people and hung out the wrong crowd. So I started ditching school, you know, smoking weed, drinking alcoholic making a lot of bad decisions. And I just stumbled along in high school, I barely graduated high school, I didn't really have a plan on what I was going to do with my life. In 18 years old, there's a few things that happened that definitely shaped who I am, the day, ended up getting a woman pregnant, got addicted OxyContin and dropped out of college. But while this was happening, I stumbled upon sales. And sales was definitely a gateway for me to create an extra income and a way out, and also teaching me how to become a business owner. Because obviously, you got to learn how to communicate how to sell. And, you know, I didn't have again, these aspirations on being a business owner, I just saw my mom's struggle. And I was like, man, like, I don't want to be that way. I want to be able to help her, I want to be able to help myself, like I got to figure out a way to make more money. And sales was that path on being able to do that. And sales opened up a lot of networking, a lot of relationships. And that's how I was able to find the self-directed space and being able to, you know, help people, you know, really get creative with their retirement accounts. Michael: Man, what an incredible background and story you've had Daniel. I'm just curious what kind of sales did you discover that really opened your eyes? Daniel: Yeah, it was in the real estate space. So people wanting to learn how to do you know flips, tax liens, you know, rentals and things of that nature. So was in the real estate coaching space. And that's kind of how I got introduced to the self-directed retirement account arena. I would talk to these clients and they would be saying things along the lines of I use my retirement account, to invest in real estate. And that was so foreign to me, because I always thought IRAs and 401 ks was just for stocks and mutual funds. The idea of using a retirement account outside the stock market, and also so new to me, and, you know, that world was open to me. And I was like, man, I really like this world. I've always had a knack for wanting to learn about the financial space. So that was a… you know, definitely a seed that was planted in me. And then, about seven years ago, I got it into the self-directed space. And it's been, you know, a fun journey since. Michael: Oh, man. That's amazing. So for everyone listening to the episode, if your ears didn't perk up when Daniel said that you can use your retirement accounts and tap into those to invest in real estate. I mean, this is really really cool stuff! So Daniel tell us, how do you do it? What's the secret sauce? I mean, because this has been always told to so many Americans that this is untouchable money. Daniel: Yeah, and it's the thought process, we've been conditioned to think that this retirement account that we have this for when you get old, it's for when you retire. And if you're fortunate enough to take money out of the retirement account, you're going to pay 30% in penalties and taxes. So that that's what we're conditioned to think is it's going to cost me an arm and a leg to touch my money. And I actually can't even touch my money until I'm retired. Right, right. And those are myths, right? So you know, people that have a 401k, from an old job, for example, or an IRA, there's a way for you to convert that money into an account called a solo 401k. And this is a great account for the solopreneur. If you're listening to this right now and you know, maybe you want to get started in your real estate journey, maybe you're trying to get your first flip. And maybe you've got some kind of side hustle. Basically, if you have some kind of business activity, and there's no W2 employees in the picture, then you qualify for the solo 401k. And the solo 401k can do a lot of cool things: One, it can be self-directed. So you know, you can invest into a real estate syndication deal. You can invest into, you know, a private equity play, right. But what makes a solo 401k so unique is, it has a loan feature where essentially, you can be your own bank, and pull money out of the account penalty and tax free, and use that money however you want, which includes paying off high interest rate, credit card debt, and I want to spend a little bit of time Michael talking about that subject. Because, you know, we were talking off air about you know, your audience and kind of what they're about, you know, kind of being more on the newer side of the journey, you know, maybe you're thinking about starting a business, maybe you've only been in business for a year, two years, couple years. I can relate! I started this business three years ago, using 0% credit cards. I made a lot of mistakes in my earlier days, not valuing my credit score, not playing the credit score game. And I think anyone listening to this right now, credit is king, right? They say cash is king! Cool, I get it. You got to have cash, but you need to have a really good, great credit score, right? Like if you're buying a property with private lending money, how are you going to exit that deal? Like, okay, cool, sell it great. But maybe want to refinance it and have it be VRBO. Right? Or rent it out, you gotta have good credit. And I used to think that I didn't need credit cards, like and I have cash, I don't even need a credit card… I was 20/ 21 years old, and I was a dummy, I was ignorant. You know, credit score is a game, right? Like you want to have a 700 a 750, close to 800, right? Because the better your credit score is, the more you have the ability to go to a bank and get cheap money, right. The problem with credit scores, though, Michael is credit utilization rates. And a lot of people struggle with credit card debt, if you're listening to this right now. And you've got more than $10,000 in credit card debt, and you're paying double digit interest. Like not only are you losing money to the banks, but you're also your credit score is suffering. And not having a good credit score can cost you money on your car insurance, it can cost you money on you know other kinds of car loans, a mortgage, your ability to refinance, right, like so many different connections with the credit score. And one thing that I've seen a lot of our clients do, is being able to be their own bank, where essentially they access the money from their retirement account penalty and tax free, pay off their high interest rate credit card debt in one shot. So now there is no more monthly payments to discover. And now instead of paying the credit card companies, they're just paying their retirement account back, they're paying their solo 401k back so they're their own bank, they're saving a buttload on interest, and then now their credit score goes up. And guys, when you're a real estate investor and you're trying to lock down deals, like it's just life's make your life easier and have a really good credit score. So if you've got credit card debt, you know, solo 401k might be a play for you to you know, break free from that debt once and for all. Michael: That's incredible! And you were saying for who a solo 1k, solo 401k is 4. You said there's no W2 employees in the picture but so if someone's got a side hustle, maybe they have W2 day job, but they've got a side hustle doing whatever, it's just themselves. Are you saying that they qualify for the solo 401k? Daniel: Yeah, let me let's just say you know, they're there in your neck of the woods, Michael. They've got a high paying tech job, W2 salary, but they've got this side hustle on the side. Yeah, they have a 401k from an old job, a previous corporate job, or maybe they have an IRA, they could technically convert that account into the solo 401k, keep working their day job make their W2 income, but because they have this business activity going on, on the side, they qualify for the solo 401k. So now they can have their own retirement account money goes in the solo 401k. And they can do a lot of cool things within that account. Michael: That's incredible! So I actually took a loan from my 401k, a traditional 401k, my traditional employer of my past job, but the limit was like, I think 50,000, or half of the account balance. Is there a limit to the loan size that you can take from a solo 401k? Daniel: Yeah, so there is that limit, and it's 50% of the account value or 50,000, whichever number is less. So think of that card that you have in your back pocket that you can use for different things like it's just like a Swiss army knife, maybe you want to use some of that money to pay off your personal credit card debt, so you can get a better credit score. So then you can go to the bank and get a much larger, larger loan, you know, an actual loan from the bank that allows you to take down this property that you want to buy for 400k, right, or, you know, maybe you just need a bigger down payment, right? So you use the loan feature on the solo 401k For that down payment, right? To actually use the solo 401k the money inside of the account to purchase real estate, this is where it gets a little… what’s the right word?... so a little bit hairy… And I talked about this in my book a lot. And I can just kind of give the brief rundown here, so I don't put your audience asleep. But when you use your retirement account to own real estate inside of the account: set aside the loan! I'm not talking about the loan, but your retirement account owns real estate. There's two different types of real estate it can own. It can own passive or it can own active. If it's passive: easy peasy. And when I say passive, I'm talking private lending a promissory note, right? You're just lending the money. And you're a passive investor, right? You're not actively managing that deal. That's easy peasy. The IRS lets you do that all day long. There's really not a lot of restrictions there. If you want to do an active deal, and your retirement account owns the property, that's when the IRS is like, whoa, whoa, whoa, like, you can't do that. You can't do that. And they call those prohibited transactions. So if you just Google self-directed retirement account prohibited transactions, it'll give you the IRS code have kind of what I'll summarize. But basically, if your retirement account owns this, this property in a cul de sac that you want to flip, you can't commingle funds, like you can't use your retirement account money, and then money you have in savings to take down this deal. If your retirement account owns the property, you can't do any of the repairs yourself, you have to hire a third party. If your retirement account owns this property, you can't live in the property. If your retirement account owns this property, you can't rent it out to your sister or your dad, you can't rent it out to a lineal descendants. So those are some of the prohibited transactions you have to be aware of, if you're going to use your retirement account to actually own a property, like if you want to flip it if you want to do a rental. So I was just you know, we want to have people know ahead of time what they can and can't do. And that's fine education company like ours exists. So as you can see, based off just listening to what I'm saying, if you're going to use your solo 401k, or a self-directed IRA, to invest into passive deals, it's easy peasy. A tons of people do it, there's not a ton of restrictions, when you start going down the path of active deals. You know, that's where you got to think about some things like financing, how are you going to finance that property? Who's going to do the work, making sure you're not living in it and making sure you're aware of some of those restrictions. Michael: That is so interesting! What are your thoughts on taking a loan from your self-directed o…

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