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Why investing in portfolios might be a good idea, or why not Nov 06, 2021

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Should you buy a portfolio of homes instead of one at a time? What are the benefits of this? What are the downsides? Why would anyone want to do this and how do you go about doing it? In this episode Tom, with his experience with portfolio acquisitions, leads this weekend wisdom episode to get to the bottom of these questions. --- 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. Tom: Greetings, and welcome to The Remote Real Estate Investor. On this episode, I'm joined by Emil: Emil Shour Michael: and Michael Abaum. Tom: And on today's episode, we're gonna be talking about portfolio acquisitions as well as portfolio management now, you know, obviously, with a portfolio, it's a little bit more money to get into the game and to buy multiple properties at once. But there are a ton of advantage. So within this episode, we're going to talk a little bit about reasons why some tips and different phases and acquisitions and management, and a little bit in between. Alright, let's get going. All right, excellent weekend wisdom today. So we're going to be talking about portfolios. And for the conversation, I think I'm going to be really leading a bunch of it and Michael and Emil are going to be peppering some stuff in, but I'm going to talk about my experience in going through a portfolio acquisitions. I'm going to start by talking about the benefits, and then we're going to go into the specific process some different ways to go about it. So Michael and Emil, I'm gonna I'll start but you guys can feel free to pepper in. So I'll start on the acquisition side, there's some benefit in buying portfolios in that you can deploy more money at once, Emil: What is a portfolio for people who don't know what a portfolio is Tom: Excellent hosting Emil. So a portfolio would be considered buying multiple properties at once from the same seller. So Roofstock has some cool features around buying portfolios, just a quick plug for the marketplace. But you know, these what we're going to… Michael: And selling! Tom: That's right, and selling so you know, but this, this episode is going to be agnostic to where you do your buying and selling as all of our advice is. But we're gonna be talking about Yeah, specific portfolio related stuff. So any other clarifying questions there for me Emil? Emil: No, that was it. Continue, I'm sorry to interrupt. Tom: Okay, so we're gonna start with benefits. So one of them as I was getting going, is the ability to deploy more money at once. Oftentimes, when I'm in acquisition mode, I have a target amount of dollar that I'm trying to spend. And it's much easier to get to a bigger dollar amount in buying multiple homes, right? Pretty, pretty straightforward. But there is for sure, some real benefit to that. The other benefit is, this is somewhat intuitive, it's kind of like going to Costco where you're, you can get a little bit of a discount, I'd say versus just buying individual properties. Oftentimes, when I'm submitting my offer on a property on a portfolio, I'll just sort of put a blanket dollar amount for both of them. And when I'm underwriting them, you know, I'll put in the specific individual numbers. But at a, generally speaking, in making that portfolio acquisition, you're usually to get able to get a little bit more of a discount to the marketplace. The benefits on the operation side is typically portfolios are in the same market. So I love being able to scale a little bit quicker. In a market, perhaps this could lead to some discounts from the local property manager, because they're managing properties, perhaps even discounts related to the lender, or the lender, and maybe the lender, but the insurance as well. But generally speaking, you're OPEX can could see a benefit or a boon by doing things in a little bit of scale, just because you're able to get a little bit of economies of scales from the vendors, perhaps if you're able to negotiate that. Michael: And what is OPEX Tom? Tom: OPEX would be operational expenditure. So perhaps your property management fees all basically blanket for that right. Am I articulating that correctly? Michael? Michael: Yeah, totally. Tom: Any other benefits you guys see on the acquisition operation side that I may not have touched? Oh, I see Emil’s is raising his hand. Emil! Emil: I think one benefit to buying a portfolio is that you have less competition. I don't think people are as attracted to portfolios because you know, you have to you have to put more money down you're buying multiple you know, the seller may choose to only sell the portfolio right? I have these three properties. I will not sell them individually. You have to buy all three. So that will create less buyers I think. So if you play that right, you know you're doing I think that can be an advantage to you as the buyer. Michael: I'm gonna I'm gonna push on you both a little bit. You both now have mentioned needing more money or the portfolio being more expensive but is it always? Tom: Not necessarily, I think that like the cost per unit should be less, because you're in practice, you're getting a little bit of a discount. So but I mean, if I'm going to buy a super expensive house somewhere, right, I'll be deploying more money doing that, Michael, but yes, Michael. Emil: Yeah Michael. Michael: You can't just say my name and then assume you are making your point. Tom: That tone, it kind of works. It kind of worked Emil: You’re wrong. Here's why. Michael. Michael: That's exactly the point that I was hoping to tease out of you guys that, too, by the same type of asset? Yes, of course, with more with more properties in a portfolio, that will be more expensive. But to your exact point, Tom, if you were looking to go buy a $500,000 single family home, or a $300,000 portfolio, I mean, you could do that. So the fact that it's a portfolio doesn't intuitively mean that it will be more expensive, even on $1 per unit basis, or on a just total dollar amount base. Tom: Yep. Great point. Michael. See, I said your name that time. Michael: It's not what you say but how you say it. Emil: Inflection, Tom: How you say it. So great point, Emil, great point Michael. barrier to entry less buyers. And Michael, you know, there's different ways to spend more capital, anything left here on the benefit side, or she would jump into some kind of tips and tricks along the way? Michael: When it comes to the financing of portfolios, it can often be done a little bit differently. And so it can be really advantageous, depending on how you're going to finance it, there's something called Portfolio loans, they kind of have a double meaning people refer to them and use them in slightly different capacities, some people will refer to a portfolio loan that remains on the books of the lender, it's held in their own portfolio. And so that's technically a portfolio loan. But then there are also Portfolio loans that actually spread across a portfolio, a single note across multiple properties inside someone's portfolio, that's also referred to as a portfolio loan. So you just want to understand who's using the term and what and how they're referencing it. But if you go get a portfolio loan, let's say across five properties, you get a single note that encompasses all five properties. That's only one loan. And that's not going to be a Fannie Freddie traditional or conventional loan. So that's not going to use up one of your 10, verses, you go finance those properties individually, if they're all single families, you're going to go use five, five loans of your 10 loan limit. And so from just a ease of financing perspective, portfolios can be great. And then they also can be easier to cash out refi of or get a line of credit against, because they will often be looking at the total equity as opposed to individual properties. And then you can also Tom, as you mentioned, get savings when it comes to the actual financing costs, because you may only be originating one loan as opposed to five separate individual loans. Tom: That makes sense, I'll walk through a little bit of my my use case, and then tease out some specific tips and stuff that I thought was effective along the way. So I bought a portfolio out of it Atlanta, it wasn't a big portfolio, it was three homes, but they were all in, you know, fairly nice neighborhoods, I within the offering process, I you know, offered on the three of them and got a little bit of a discount. And the seller was kind enough to let me set them up into unique transactions. So even though I like made the offer negotiation on as of the three of them at once, we are able to close the three of them separately, because I hadn't filled out my 10 loan loan limit. So I had individual loans and individual transactions. Normally with a portfolio transaction, it would be just, you know, the single transaction to close all three. But in this particular use case that I had, I broke it up just because I wanted to take advantage of that cheaper financing that I had available. Let's see in so I acquired them three separate transactions after the negotiating on them as individual, excuse me three individual transactions after negotiating them as a portfolio transaction. And then just load them all up with a property management that a company that I'd worked with before that I had a lot of trust in and was just able to kind of quickly scale that group up a little bit more with some more properties. Some tips in in doing it I had alluded to this a little bit before but you know, really rigorously underwrite each individual property and come up with an appropriate discount. And, you know, with the sort of portfolio transaction, there definitely is something to getting a little bit more of a discount. So I had underwrote, each of them kind of came at a price and then added it all together and then like hair, cut it off another five or 10%. So in use that sort of as a starting place from it, and from the sellers point of view, like you know, who cares on where the dollar amount is going towards each one. I guess in this case, it did matter because we ended up doing individual transactions, but you know, thinking of it all kind of holistically together. The three properties that make up the whole of the portfolio. Michael: Tom, I'm curious, in that transaction for a due diligence perspective, did you just look at one of the properties and kind of say, Oh, well, it's the same owner. So they're likely going to be in similar condition? Or did you do inspections on all of them? Talk to us about how you did that. Tom: Yeah, so I did inspections on all of them. And the way that portfolio transactions are set up, there's a lot of flexibility. I've seen portfolio transactions where someone would have maybe, you know, 20 properties, and they're allowed a certain number of kick outs. So depending on the size of the deal you're doing, you can get kind of creative with that. And when I say kick outs, it means, okay, I'm planning to go buy, you know, 18 properties, I'm going to make an offer on these 20. And if two of them don't look very good, I can say, Nope, take that out of the portfolio transaction. So there's really some flexibility in the way that these contracts can be structured, of doing these portfolio deals, and it's, it's like, oftentimes very much kind of creativity of the buyer and the seller on how they want to get comfortable to make the deal happen. Michael: That's great. Tom: What are some other kind of fun portfolio stuff. So I'd mentioned Roofstock has some really cool tools for for buying portfolios, go ahead Emil. Emil: I keep raising my hand, I'm being very polite today. Tom: Throw some elbows, Emil, Michael: Class is in session. Emil; In trying to remain neutral and unbiased on our podcast, what would you say are the disadvantages of buying a portfolio? Tom: So downsides of a portfolio would be perhaps you you know, don't do the same rigor and underwriting property and individual property as you would in a portfolio, I could say that could be mitigated by by doing the work right by doing the same level of rigor, but you know, perhaps if it's like a bigger portfolio, maybe 20, homes, 50, homes, whatever, it can be hard to apply the same sort of, you know, level of diligence. The other one is perhaps if it's in a market that's newer to you, or the property manager, is someone you know, you haven't really established that trust with yet, there could be an issue. And instead of just having, you know, one bad apple, that's going to be two bad apples, that you're managing with that with that property managers. But again, that can be mitigated by being really thorough in the way that you're evaluating your vendors. And, in doing that, Michael: Another risk to think about is your aggregate risk from a natural catastrophe standpoint. And this is something we looked a lot at in the insurance world is if we have too many properties that we're insuring in this one general area, and there's a fire or a hurricane or a flood, it's going to damage all of those properties. So same thing, same risk to you as an owner operator, if there's a catastrophe in the area, that could affect all of your properties unilaterally. And so that can be problematic. So you just want to be sure that you have kicked butt insurance, sound type policies with great carriers. Because what we saw happen in 911, to use as an extreme example, is a lot of insurance companies actually went out of business, because they had taken on too much risk in the area. And they just were paying out all these claims. And so after post 911, there are a lot of carriers that just went out of business. And so people think, Oh, I have insurance, that's great. But if the insurance company has taken on too much risk in an area, you could go out of business, which is a pretty scary thing to think about. So highly unlikely to happen. And I don't want people running to their insurance carriers, like Oh, my God, you know, I want to make sure you're still gonna be in business. But just something to think about as an operator getting heavily involved in a particular or singular geographic area. Tom: Natural disasters, and other ones perhaps or something, if you're buying in a smaller area in something major happens the economy, you know, by by getting more concentrated in an area, there's there's a little more risk of a single point of failure. I would say I mean, that that doesn't keep me up at night. But in in the under the guise of coming up with more reasons why getting geographically dense with the portfolio would be a bad idea. That could be another reason Michael: Something else is just systematic and habitual issues. So if the owner never cleaned the filters for any of the HVAC or HVACs properties like that might not come up in inspection, but you might start losing all of your furnaces simultaneously across the portfolio. So deferred maintenance, how one property is maintained in a portfolio is likely going to be indicative o…

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Real estate investing horror stories with Paul Moore, Heath Silverman, and Michael Albaum Oct 30, 2021

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When you have been investing in real estate for years, you've probably seen a lot of weird things. In this episode, longtime real estate investors Heath Silverman, Michael Albaum, and Paul Moore each tell one of their real estate investing nightmare scenarios. Not only are these stories spooky, painful, and entertaining in retrospect, but they offer some lessons for investors on what to look out for in their investing journies. --- 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 we have what has now become known as a tradition on the podcast. We are doing our Halloween Horror Story episode. We did this last year was a lot of fun. We're doing it again this year. So I guess now it's definitely a tradition, we have to do it forward every Halloween going forward. So we have a couple spooky horror stories from some other investors we're gonna be sharing with you. So let's get into it. All right, Heath, so tell us your spooky Halloween story. Heath: Yeah, so as a somebody who's been investing in properties now for around 20 years, I've had my share of horror stories, from people dying and buildings to apparent ghosts that are hunting properties while I'm living in them in the middle of a renovation. But the one I'm going to focus on here was was probably I would say the, the scariest thing that happened to me in my early days of investing. So this is back in, I think it was 2004 when I was remodeling a garage on the first single family rental that I was living in and house hacking at the same time, 17 years ago. When I bought the building, it was a bit rundown, you did a fair amount of work, and is going through, you know, remodel the top floor, found a contractor who was pretty solid, and he had a foreman on the job who I became pretty close with because he was there, you know, all the time, and I was living in the building at the time of the remodel. And once that was done, my very next project that I needed to do was to remodel the detached garage. So it was a detached garage that had some serious water issues, whenever it rained water was like pouring into the walls and there was a fair amount of rot and a significant amount of work needed to be completed. At the time, some of the bids just came in a bit higher than I would have liked. And I didn't have the bandwidth to move the work forward. So I kind of put it on hold. And I don't know it was like six months later, the guy who was the foreman on the earlier job came by and he said hey, I know you wanted to remodel your garage. And hey, I just got my license. And I'm now a GC and I'm starting, you know, kicking off my own business and looks like you haven't done the work. I was driving bios in the neighborhood, I'd love to bid it, I can do a great job. So I said sure. And we you know, we got the work started. And this was one of his early jobs as well. He ended up charging me a fair amount up front, I probably paid like 70% of the work, or 70% of the bid upfront before really getting deep into it. And they ended up demoing, he had a couple other guys who he brought on site, they demo the entire garage, garage, knocked out the roof knocked everything out. And next thing I know, they just stopped showing up. So here I am, you know, in this, in this house that I'm living in, you know, there's just like debris everywhere. We're about to hit the rainy season again. And this whole thing is opened up, there's crap everywhere, they didn't even really have a dumpster and remove anything. They just kind of disappeared. And I didn't really understand what had happened. So I start playing, I'm trying to call him I don't I don't get a response. And I tried to reach out to people who I knew knew him no response. And then finally, a friend of mine said, Hey, if you looked at the newspaper, see what's going on, I think this is your guy. And it turned out that he that the contractor is using ended up being arrested under suspicion of being the 580 sniper. There's somebody who was sitting on top of a mountain, you know, over the interstate 580 and shooting cars as they drove by. And it turned out that that person had, I believe was driving a white pickup truck. And maybe he matched the description of my contractor. But they ended up finding, you know, my contractor in a white pickup truck with a with a firearm in the vehicle. So this guy matches the description. And they arrested him. And then because they arrested him, they did go into his house. And at his house, they ended up finding some a couple other people living in his house, who maybe one of them had violated parole. So So these were the guys who were the ones who are doing the work and my place. And they found a whole bunch of bomb making materials. Again, this is this is what's in the news. Right? So, you know, from my perspective, he was just a normal contractor you happen to have a car you have that, you know, it's all fine and and you have to have a lot of pipes and stuff at his house because the contractor does work. But the news blew this thing up into like, yeah, they arrested basically my GC and a couple people he was living with and it was a disaster. And I didn't know what to do. I was like, Hey, how do I move this thing forward that this place is a mess? There's no way I'm getting my money back. Luckily, I did vet him beforehand and I had worked with him and he was a GC who was licensed and bonded. So I reached out to the Contractor State License Board in California. And then they get for any investor out there either. I recommend do your due diligence before you hire a contractor, make sure they're bonded, make sure they're insured, all that good stuff. So he was all of the above, I reached out and the Contractor State License Board, you know, they gave me all this paperwork. And they're basically like a, you're never supposed to pay more than 10% up front, you really should, you really should have paid all this money up front before the work started. But they went through all the details, you know, did an investigation. Once again, I can't verify this. But one of the people in the CSLB basically said that they were afraid to go and interview him directly, because he was being held somewhere in jail, and they didn't really want to have to do an interview in jail, to get his side of the story. So in some ways, I think he really got screwed, I think I think it was I never followed up. But I highly doubt that he was the actual person who was doing this, he was a good guy, I worked with him on an earlier project. And when all this came out, he didn't really have an opportunity to defend himself or anything, but the CSLB did their investigation. And they ended up getting refunded for the portion that I paid him that was on incomplete and ended up finishing the work with somebody else. But that experience going through the process of having my you know, my job abandoned on one of the first bigger jobs that I had ever done before and then hearing the news that he had been arrested for pretty serious and very scary a crime. It was intense and definitely was a that was sort of my first big horror story as a real estate investor. Pierre: Alright, Mike, what is your horror story? Michael: Alright, so this horror story involves actually my very first property that I ever purchased way back in the day, which seems like a lifetime and a half ago. So it was my first set of tenants actually, that I ever had in my first property. And I was I bought the property and it was vacant, and it was turnkey, it was ready to go. And I was just hounding my property manager, we gotta get it rented. We got to get it rented, we got to get it rented. And the timing was weird, cuz I think I closed like in November so and in Southern California, the weather isn't amazing as it normally is. So a little bit of a slowdown in the holiday months. And I just kept hounding her and honey, we got to get some we gotta get we gotta get some snow. So terrified. So she says, Okay, I have this, I have this tenants they applied. It's a mother and son. They aren't as qualified as I'd like them to be. There's a little bit a few kind of demerits here and there. But what do you think, as a good get them in there, I don't care. We just got to get someone paying rent. So we got him in there. And that was the beginning of the end. So fast forward a couple months, I get a phone call from my property manager. The police have been called numerous times on these folks, that when the mom goes to work, the son is partying, when they're both home, the mom is yelling at neighbors making threats to neighbors just like everything you don't want to hear about your tenants doing. So then fast forward a couple of months, and I went on a European vacation with a buddy of mine. And when I landed in Europe, I got a Facebook message from the tenant from the son. And he writes me, he goes, Hey, but you know, your property manager is a criminal. She's doing all these things, she's robbing you blind is that the other thing and I'm like, Oh my god. So keep in mind, I've known this property manager. She's a good family friend. She's kind of who helped me get involved with real estate. My father knew her for forever. So she's just a good like a good human being above and beyond being a great family friend. And so like, there's no way that, you know, my property manager, she's robbing me blind, I think it's just a tenant who's pissed off. And I said, Thank you for letting me know, I appreciate it, please, you know, communicate through the property manager. I'm not trying to get involved here in a much more polite way. I communicated that. And he was just writing constantly. I don't know I don't know how we got a hold of my contact information. But he somehow figured out who I was found me on Facebook and I started writing in your You're so stupid, she's robbing you blind. She's a criminal. We can't deal with her. She's, she's trying to kick us out. All this sounds like oh, my gosh, all the all the meanwhile, I'm forwarding this to my property manager be like, hey, these people are are bashing your name up and down the street. I don't know who else they're talking to. But like, I know that you're a wonderful person. She goes, oh my god, I'm so pissed. I'll take care of it. So I don't know if I mentioned but they also stopped paying rent. That was that was a caveat to all this. They stopped paying rent. And so my property manager went to evict them. And then they just weren't leaving. And it was this whole thing. So fast forward a few more weeks, maybe a few more months. My property manager calls me she goes Michael, the house is trashed. There's human fecal matter smeared on the walls as they left the property. So it just like all the bad stuff you hear about, like happened all at once and on my first go at this owning rental property thing. So I said, you know, what do we do? And she goes well, we already kept that we're keeping their deposit obviously. She says you can go after them in small claims court because about $15,000 in damage. And I was like yes great. Let's do that. So needless to say if anyone has had experiences small claims court they might be laughing to themselves right now thinking Oh, Michael, how naive of you thinking you're going to go get $15,000 from someone in small claims court but we try it anyhow cuz I didn't know any better. And we the judgment, we basically won the judgment. These folks didn't even appear they didn't show up in court. So the date got moved pushed out again. And it didn't show up again. And so basically made our case my property manager went, I paid her for time, we won the judgment. Okay, great, there's a very big difference between winning a judgment and actually collecting on that judgment. So now we have to go find these people. And, and start to try to collect money for them. So now this person reaches back out to me, again, I can't believe you did this, we don't have any money, we're so poor, this sending their thing. And so I'm like, I just don't even respond to these people. We, my, my property manager finally reaches an agreement with these people. And I think they paid like $3,000 or $4,000, over the course of like two or three years, in increments. And I was like, it's like, you spend so much money on like, buy property manager going to court, and then just the court legal fees and the filing fees. And it's just such a headache. And it occupies so much mental bandwidth and the money is gone. So it's a sunk cost at that point. But I was just so frustrated, and so mad at myself about these people out myself, because I went against my better judgment. And I really pushed my property manager to get someone in there. And she said, it was against her better judgment, too. But I was so forceful, and so scared that we just got somebody in there, and it ended up costing me big time. So I think the big, big, big takeaway for me is you got to listen to your gut. And if something doesn't feel right, if you're if you're seeing red flags, listen to those things. And and investigate those things further. And don't be so short term sighted. Because that's what cost me in the long run. Pierre: Yeah, I mean, it's funny that I mean, these stories are really funny when we look back at it. But I'm sure it was a nightmare as you're going through them… Michael: Yeah, very funny, Pierre! Pierre: But it's interesting to me that I know this being your first property, it didn't scare you out of going back into more. Michael: Yeah, it probably should have truth be told, it would have been very easy. And I don't think anyone would have would have knocked me for it or make fun of me or anything of that sort. But I think I was too naive to know that I should walk away. My property manager said, this isn't typical. This is very abnormal. And so let's just try to do better with the next one. And I said, Okay, that sounds good. So, part of me is glad that I, I don't think it really hit me about how frustrating it was. And part of it too, is that the process took so long. So everyone listening is getting it in a five minute compressed version. But this is happening over months, and even years. And so to get to the end result, I had already done other stuff. I had already made other investments. And so it was it was which I think is great. It made it tougher for me to just walk away from it all saying, oh, man, that sucked. I guess this whole investing thing is is a kaput idea because I was having success with these other investments Pierre: That makes sense. Michael: So, again, just word to the wise. Listen, listen to your gut. Keep an eye out for those red flags. Be be aware of what you're getting into a small claims court and just go hard in the paint. Pierre: Thanks, Mike. Michael: You got it. All right, Paul. So take it away with your Halloween Horror Story. Paul: Man, did I…

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The entrepreneur journey, with the co-founders of Roofstock, Stessa, and Great Jones Oct 22, 2021

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Over the past year, Roofstock has acquired Stessa, an asset management platform made for real estate investors by real estate investors, and Great Jones a Property management company specifically suited to serve remote real estate investors. This helps make Roofstock a one-stop-shop for remote investors. In this episode we have the cofounders of all three of these companies on to explain the companies, why they joined forces with Roofstock, and their pearls of wisdom for investing and entrepreneurship. --- 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. Tom: Greetings, and welcome to The Remote Real Estate Investor. We have a really fun episode today Michael and I are going to be interviewing the co founders of all the different companies that make up the Rootstock ecosystem. So if you're not aware, over the past six to 12 months, rootstock has acquired an asset management platform called Stessa. A really cool software to manage all of your properties that an asset management layer, as well as a property management company called Great Jones. And altogether it's a it's a really powerful stack of real estate technology tools and operations for investors to have and we brought on the founders from all of these different companies. So we have Gary Beasley from Roofstock, who was a co founder. We have the two co founders from Stessa in Heath Silverman and Jonah Schwartz. And we have two co founders from great Jones and Jay Goldklang, as well as Abigail Besdin. And we ask them about their company, the fit within the roofstock ecosystem, some pearls of wisdom on investing on starting companies, all of that good stuff. So really excited about the episode we have today. And let's get into it. Michael: All right, everyone. Well, thank you for taking the time out of your very, very, very busy schedule. We've got a lot of heavy hitters on the line here. So I would love if you could all introduce yourselves to our listeners. One by one. Gary, you want to kick things off? We'll start with you. Gary: Sure. Great to be here. I'm Gary Beasley. I'm the co founder and CEO of Roofstock. Michael: Fantastic. And Abigail. Abigail: Hi, I'm Abigail Besdin. And I am a co founder of Great Jones. Michael: Perfect Jay. Jay: Hi, I'm Jay Goldklang, founder and CEO of Great Jones now a Roofstock company. Michael: And Heath. Heath: Hey, I'm Heath Silverman, co-founder of Stessa. Michael: And last but certainly not least, Jonah. Jonah: Yeah, I'm Jonah Schwartz, co-founder of Stessa, Michael: And we've got Tom Schneider on the line as well. So I would love if you all could share, why Roofstock, Stessa, Great Jones decided to join forces. What was the impetus behind that? Gary: When we first started Roofstock we knew not only did we want to have a marketplace for transactions, but we wanted to build deeper relationships with owners and build a community. And to do that, we knew that we needed to be relevant to all property owners who own single family rentals, not just those who are looking to trade at any given time. And so from the very early days, we were trying to figure out how to do that. And I met Heath and Jonah was 2017. Yeah, 2017. And we just hit it off right away. And I said, Wow, these guys are building something really cool that it could provide software for every single family rental owner out there. And like a Credit Karma app for real estate owners, it'd be a great way to stitch together community get a lot of data and and invite people into the marketplace at the right time. So we had a marketplace and no community they had this great community they were building through the software. And so when I knew that it would be quite interesting to try to bring the companies together. Unfortunately, they decided to sell their company to JLL and not to us, JLL at the time was a little bit larger than Roofstock still is. But we'll talk about later life comes full circle very recently we were able to buy the business from gll and bring them into the Rootstock family and so that's worked out really well. And then with with Jay and Abigail we also knew that we needed to have a relevant connectivity to retail owners and offer property management because that's the biggest pain point for owners is to be able to outsource a lot of those challenging tasks to professionals and and so we've been tracking Jay Abigail and Great Jones for a long time. There was an opportunity this year to get together get to know each other more recently and that was sort of the one missing piece of our fully integrated platform was retail property management. We have institutional grade property management through Streetlane, which was the first company that we purchased a couple of years ago and now with Great Jones and with Stessa we've all kind of come into the the ecosystem together one big happy family under the Rootstock umbrella. And now we're in the process of integrating the businesses and, and, and growing. So. So why don't we turn it over to maybe Heath or Jonah, maybe you go first and then Jay, Abigail, you could you could chat about how, how this all has worked for you guys. Heath: Yeah, I mean, I don't know if I have anything additional to add other than I still remember those drinks we had back in 2017, where we got introduced and started sort of as a more casual conversation about what we were doing and turned into a couple hours of just diving deep into both of our businesses. And I think it was just very refreshing and super exciting to meet somebody who had, you know, the same big vision, you know, of how do we bring transparency and accessibility to this asset class, that traditionally was just one that, you know, was hard for a lot of people to get into, and just didn't have great technology to help power investors out there. So, yeah, fantastic, it came full circle, we're super excited to be part of rootstock. And yeah, excited to see what we're gonna do together. Jay: I think Heath and I, and also Gary and I have talked about how similar some of the visions are, that we've articulated, maybe the starting points have been a little bit different, because there's a lot to do. But sort of, I think each of us are organically as heard from, you know, the owners we work with, and to some extent, the residents that we work with, how many different moments they they'd like to, you know, have our partnership or, or, you know, partnership with like minded folks to think about using technology or operations to sort of remove friction and let them focus on on what they enjoy doing best. And I would say, you know, really, for the last 12 to 18 months, we've felt even more pull to help our customers, you know, buy more assets, dispose of assets, make good decisions. And so, you know, when, when there came an opportunity to come together, you know, not just in a partnership, but but but more than that with Roofstock. And also with the Stessa. Folks, it's been really exciting to get to work together, you know, to take take on the world, but with a with a shared vision. Jonah: Yeah, we hear that from a lot of our customers as well, that they're, you know, what, what they get from stessa is great, but they'd love for us to do more, they want sort of that one stop shop, full stack solution to a lot of these problems, including transaction, including property management. So, you know, fitting together and putting out one solution for our customer base, or shared customer base makes a lot of sense. Tom: I think what's so neat about these three companies is just solving, you know, three very different problems, from transactions to ownership to asset management. I think a lot of times as a startup, you know, you can have really big eyes and be like, Oh, you know, we want to do all of this, and it works really wonderfully. When it's able to come together. All together, I'd love to hear kind of the evolution that you guys had kind of originally, you know, was it always kind of to build out this full stack on your own? Or was it you know, more niche, I'd love to hear just kind of the evolution of your thought of the strategy of the business. And you know how that unfolded into where we're at today, which I think is a really nice platform, I'll say. Abigail: I could take the great John's piece there. But it sounds like we're all describing a different starting point that very quickly led to this broader vision. Because ultimately, that's what we all learned pretty quickly, the customer wanted a no friction, one stop shop for the full puzzle. And on the great john side, you know, we started, we exclusively were serving what we call the retail customer, the mom and pop investor. And we had started to describe ourselves as institutional grade PM, institutional grade property management, which meant a whole host of things around the type of service that you deliver, and what you actually do as the property manager. But it became clear that to really be institutional grade, you had to give the retail investor access to all the things that institutions have access to, which is really a full stack solution to investing. And so we I mean, I think Jay can correct me, but I think within a matter of months of the business existing had articulated that it's actually a platform vision that property management is this wedge into this much larger space. And it It took us quickly to realize that and then that's a drum that we beat throughout the duration of the business, and continue to hear and in talking to both Gary and Heath and Jonah, it feels like everybody had the same path. It was just a different what is the wedge, but the thesis is the same. Heath: Yeah, 100% are our wedge, we always believe that financials were sort of the foundation of every real estate investors business. So by starting with the financials, we could become the system of record, we have all this data around the performance of their properties of their portfolio. And with that information, we can start providing you know, insights to help them maximize the value of the portfolio. You know, automate a lot of the you know, by automating the financials, we can save them a lot of time, help them make more money and doing so It would basically get us into a place where we could then long term become that platform. But of course, now that we have Roofstock and Great Jones, we've we've definitely accelerated that vision and are able to move a lot faster. Jonah: Another thing that we hear from Stessa users is that by using Stessa, it gives them the confidence to expand their portfolio and obviously Roofstock and the Roofstock marketplace is there when our customers are ready to expand. Gary: Yeah, I think bringing these companies together was a really natural thing. And we could talk about why I think it's working. It's still early, but it's working quite well, relative to I think a lot of business combinations. And I think what you're hearing is a lot of commonality of vision. And as Abigail, I think, probably like aptly, we put, we all just started from a different place, but we're kind of going in the same direction. And so So for us, I think it just says accelerated kind of the growth and the amount of time it would take, rather than having to build all these things ourselves. By bringing them all together, we could just do it much more quickly. And and that's I think what we're seeing and then by getting the businesses together, then in addition to it's not just a one plus one plus one equals three, there are synergies, and we should each be able to grow our businesses faster and more efficiently. Because we're sharing data, we're sharing talent across the organization. And there's a reason most mergers fail. And a lot of that is cultural. We have been very, you know, careful as we evaluate any of the transactions that we've done, it's got to be the right cultural fit. And this these clearly have been an honor. And I think one of the reasons that we've we actually ended up doing both of these deals was the people probably the primary reason they both had good tech and good businesses, but being able to attract all the the talent, the energy and the knowledge of the founding teams and their their core leaders around them really, really powerful. It's it's just hard to find that out in the market. So. So there's lots of reasons I think we're seeing early returns being very promising for this. Abigail: I think that we all started a different entry points, and not randomly, but because those entry points were our strengths. So I see Stessa has like having firsthand financial issues with their portfolios, like really understanding that space very well, coming at it from like a real software sophistication, Jay and I and the team that we've built both come from really heavy hitter operators, you know, operationalizing messy businesses with technology. And then you had Roofstock with really deep real estate expertise, having done more at scale in the transaction space than probably any any other team combined. So it's not that we all just had the shared vision and happen to be coming at it differently, you have these really deep strengths that we're all playing to. And when those come together, I think that's part of the one plus one equals three that Gary's referring to. Tom: Perfect segue into the next question, Abigail. So we've been talking about this kind of platform of the different layers of asset management, property management transactions, I'd love to hear the different founders talk about what is the special sauce within their layer of the transaction? Maybe technology, technology wise, you can explore the face the space of the question, but what would you say is some of the competitive advantages within that vertical of the company that you've started that has come together to form this this platform? I'd love to hear your guys's thoughts on, you know, what makes your segment that much better than other options out there. Jay: On the Great Jones side, I think what we saw was, you know, a number of different areas of inspiration, I think, as Abigail mentioned, a lot of our sort of founding team. And I think at the core of what a lot of what we do is, you know, how do you take hard kind of online offline problems, maybe where there hasn't been a tremendous focus on sometimes efficiency or the Cust customer experience and build something better? That's sort of enabled by by technology and maybe enables, you know, higher growth and higher levels of quality? So, you know, what does that mean, with respect to property management, I think the experience that investors have often had is that it can be run as a local service business. And as with many of those cases, there will be a really wide distribution where some people will be excellent, some some teams won't be. There's not a tremendous amount of consistency, facilitated facilitated by technology. It's heavily reliant on the people. And I think what we found, you know, both them in prior experiences and that Great Jones is by I think the core, the core of what we're doing is thinking about What are the outcomes we want to…

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Welcome to the Central Texas real estate market Oct 19, 2021

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Kevin Guerin is an investor-focused real estate agent and part of the Roofstock Certified Agent network. Serving the Central Texas Market for over 20 years, Kevin is a wealth of knowledge for investors looking to expand into the Central Texas market. In this episode, Michael and Kevin discuss neighborhoods, price points, tax assessments, rates of appreciation, common issues that investors need to be aware of. Contact Kevin: https://www.guerinpropertyservices.com/contact --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: Hey, everyone, welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum and today I'm interviewing Kevin Guerin who is our Roofstock certified agent out in Central Texas. Kevin's going to be talking to us today about some of the Central Texas markets as well as the Austin market and some of the things that we as investors should be aware of. So let's get into it. Kevin Guerin, out in Austin, Texas. Thanks so much for joining us. How are you today, man? Kevin: Good. Thanks for having me. Michael: Now, my pleasure. My pleasure. So I know we were chatting just before we hopped on recording here, but for everyone listening at home, or in the car, or wherever they are. Tell us a little bit about yourself. Are you an Austin guy born and bred and how long you've been in Texas. Kevin Born and raised in Texas, which doesn't happen that much anymore, it seems but I've been a I was born in Houston moved to Dallas at a young age than it was in a small town called Granberry outside of Fort Worth through high school. And then as soon as I graduated high school, I came down here to Central Texas and went to school. It used to be Southwest Texas now it's called Texas State. But that was in 1987. And I haven't gone anywhere since. So I've been down here a long, long time. Michael: Right on and in that time. I mean, just from what I've seen in Texas, or Austin do in the last five to 10 years. You must have seen it really changed in the last 30 years. Kevin: Yeah, the last 30 years have been crazy. This place went from you know, the capital of Texas with the University of Texas downtown to all of these tech businesses moving here and just the growth of people just moving to the city. The high rises downtown. They kind of they call it crane city from time to time because there's just there's cranes building all of these big condo buildings and just people moving here left and right. Because quality living is great, that's a beautiful city. People just love being in Austin. Michael: That's awesome. That's awesome. What do you love most about living in Austin? Kevin: Well, we live out by the lake. there's a there's a few lakes that are out here. So we live out by Lake Travis. So you know, we take the kids, wakeboarding, and hay out of the lake as much as possible. And a bunch of hike and bike trails out here and sports and fitness is huge. And in the Austin area. And so we're on a baseball field or a golf course on the lake most of the most of the time and just kind of get out into the, into the nature in the wilderness and enjoy life. Michael: That's awesome, man. All right, well, let's jump into the meat and potatoes here of the episode. And I would love if you could share with everybody a little bit about Austin as a market and who is coming to the market in terms of companies. Kevin: Yeah, so Austin. Austin has been a solid market Austin and the cities around it has just been a great place for for investing, you know, for years now. Tons of people moving here, our rentals just don't sit vacant very long, because there's just still a shortage of supply. I remember one time I looked and it said that about 186 people per day were moving to the city of Austin. So when you think about that number and how many buildings are here, it's just you know, it's a supply and demand thing. So now we've got you know, Apple is expanding Amazon. Tesla, obviously in Tesla's the latest announcement, I guess they're moving their home offices here. Samsung's talking about putting another big operation where they're building more chips or things in town. It seems like every week, there's a different tech company that's moving here and not just from California, they're coming here from other places like VR Bo is here. Indeed is here there's a lot of different companies that love to have their base here. So it's great with the University of Texas here and the other universities here is huge talent pool of, of employees. And so they're here and they're taking advantage of that. Michael: That's awesome. I mean, it's really sounds like a mini Silicon Valley or another Silicon Valley might even be bigger geographically than what we have out here in California. Kevin: I think it is I think we still have more land to build on. A lot of our current investors like to purchase things that are going to be a little bit closer into where all these tech companies are going. But there's still a lot more land around where you know, we're gonna have the appreciation because of simple supply and demand and people are going to want to buy and live closer in but it's, it's just never going to get as congested as some of the other places because you know, we don't have an ocean right on the other side to where that we have to stop building. There's there's Still space out there. There's still farmland. But I think prices are going to continue what they've been doing for years just because not everybody wants to be an hour out. Everybody wants to be 15 minutes away. Michael: Yeah. Yeah, yeah, that makes total sense. So let's talk about prices for a little bit, what are you seeing and maybe you can give people kind of a high level 30,000 foot level tour of Austin and some of the different markets and sub markets within the city where they could look for rentals if they're looking at they're interested in investing in Austin proper. Kevin: Yeah, prices. Who would have ever thought that through a COVID we would see price increases the way that we have over the last couple of years, but the days of trying to find something around 200,000 or even gone like we're, we're definitely creeping up to more expensive markets, or the sweet spot is kind of in between three and 400,000 that's gonna get you to 2000-2500 square foot house or so. A lot of the markets that that investors are really interested in are going to be kind of north of downtown Austin. So we've got some other sub markets or smaller cities up north of Austin called Round Rock, there's Georgetown, there's Cedar Park, Leander, gosh, Liberty Hill even now hadow bunch of these little areas that have great subdivisions, masterplan subdivisions that have the hike and bike trails, and the resort style pool and the gymnasiums and things that are that are there that that they offer for, for people who live in these places. And, you know, we can rent them out quickly for a nice amount of rent. It's just, we can't get enough of them. We manage a bunch of properties. Here, we manage about 250 or so. And we may have two or three vacant right now. And that's just because we just put them on the market a few days ago. So things go really quick. South is also pretty pretty happening right now because the Tesla that everybody knows about is down right by the airport. So there's some some markets maner Dell Valley and Kyle Buda people are buying those areas to because they know that there's going to be you know, however many 1000 employees at Tesla, they're going to need places to live to so we don't really focus as much in the city of Austin itself. The school systems not as good there as it is as some of these sub markets. So most of my most of my investors want, you know, the better schools. So we go into the other places that have higher rankings in the school districts. Michael: Okay, that's great. And just as kind of a ballpark figure in that three to $400,000 rental, the 2000 2500 square foot, what would an average rent and north of the city expect it to be? Kevin: It all depends on the sun, the square footage and sub square footage in the subdivision. And you know, the age of the home. So if it's a newer home $350,000 and it's going to be 2020 200 square feet somewhere in there. Again, it depends on which subdivision is but we're anywhere from 1900 a month to 20 $500 a month somewhere in there nowhere near the 1% rule that we used to be yours in the past but now hopefully we're still we're still able to you know at 20% down are so we're still even able to get to at least even or maybe cash flowing just a little bit after property management fees and taxes and HOAall that all that good stuff. Michael: All that fun stuff. Yeah. Talk to us a little bit about property taxes. Since this is one of the biggest misses I see, especially for new investors, and even those seasoned investors investing remotely. How do those work in Austin, just again, high level cuz I know county by county, it's likely to differ slightly. Kevin: Yeah, we're gonna be a little bit higher than most of the other markets, we're gonna be anywhere from two and a quarter to 3% of the county assessed value. So a lot of people think when you buy a house at 400,000, that that that percentage is going to be based off of that 400,000. But what it's actually based off of is what each county assesses that property for so the county may think that this house is only worth 300,000. So then then that the 2.5% is only off of that 300,000 instead of the 400,000. So it is definitely a little bit higher than some of the other markets that Roofstock is in. But we thank goodness we don't have a state income tax here. And it is how they pay for a lot of the schools. That's why some of the schools are good. Most of the people here go to public schools, they don't have to go to any kind of charter private schools because the public school system here is really good. And a lot of that comes from property taxes. Michael: That's great. Do you know how often the properties are reassessed Kevin: The property taxes are reassessed every year, and I believe the taxes the tax bills are due may 31. But most people are going to have a mortgage and it's going to be you know rolled into it but they reassess it every single year. Michael: Okay, perfect. So in theory, if you buy that house for 400,000 County assessor's it for 300,000 a year you buy it that could go up year over year. And you know, is there a limit for the amount that that could go up and could have jumped to 400,000? The following year, Kevin: There's a cap, I want to say is 20%. cap. So I don't think you can go all the way up to the top, you know, can't can't jump 100,000. Michael: Okay. Okay, perfect. So that's great to know. And also great to keep in mind for everybody listening, as you're looking to determine what your property taxes are. Definitely chat with Kevin chat with your local personnel on the ground to get a handle on, you know what that current assessed value might be, and to wrap your head around what it might be able to get up to? Kevin: Yeah, all those records are posted on the county website. So the tax assessor website, so whenever we're running our analysis, we go straight there and look to see what it was last year, and see what it was the year before that to kind of get an idea of what the increase may be going forward. But all of those numbers are on there to where you're not really guessing you're you're looking at the actuals. Michael: You're calculating? That's great. That's great. So Kevin, I know there's a lot of other really great markets in Central Texas. Can you talk to our listeners about what some of those might be? And maybe a little bit, they might be a little bit less competitive? Kevin: Yeah, so we, we've helped people buy homes from Killeen, Texas, which is up. That's where Fort Hood is. It's a little bit north of Austin prices are a little bit cheaper up there. We had one listed the other day for rent and my leasing agent said he had to finally just just shut it off because he got so many phone calls on it, but homes up there are going to be you know, under 200,000 or so. So they're a little bit a little bit more affordable. New Braunfels is another market that has just exploded last I saw it was like the seventh fastest growing city in the country. And it's halfway in between Austin and San Antonio. So what I think a lot of people are doing is, you know, mom may work up in Austin dad may work down in San Antonio, but they live in New Braunfels and split the commute time. Georgetown is also another area that if you look on a map, it's going to look like it's a good distance away from Austin, but it's simply not they've we've built some toll roads here where you can legally drive 85 miles an hour on them and get places really quick. And Georgetown has just exploded over the last few years. It's got a it's got a university there, Southwestern University, it's got a bunch of medical but there's just the ton of great subdivisions going on up in the Georgetown area. So that place is also exploded, and, you know, even all the way down to San Antonio, San Antonio is going to be a little bit more affordable. I've been nervous in the years past about how long things were gonna sit in the market, vacant for rent in San Antonio. But those days are gone too. I think people have just been priced out of the Austin market a little bit people that are moving here from different states. And they're going to some of these other areas that are just a little bit more affordable. And San Antonio is definitely one of those along with Killeen, New Braunfels, Georgetown, I mean, I would take a look at all those areas, because I think you're gonna get some really good deals that are going to fill, fill quickly. And you're still going to have that appreciation play that everybody says it's kind of icing on the cake. But around here when it's historical, and it's been 15% over the last 10-15 years, you kind of have to consider that when you're you're looking at the different investments that you want to make. Michael: Yeah, absolutely. And in talking about some of the different price points and some of those different markets you mentioned, does the rent scale fairly linearly, or does that does that price to rent ratio actually get stronger with some of these more affordable markets? Kevin: That definitely get stronger if somebody's strictly looking for cash for the cash flow play, they're going to have to go in some of these sub markets because it won't quite be the 1% but it's going to be a little bit more affordable on the on the price of the home and rents are going to be stronger. Austin the rents just can't keep up with the explosion that we've had with with home prices going through the roof rents are always going to be lagging when it comes to you know, being able to get up to that next levels but some of…

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What we think about the talk of a pending crash Oct 16, 2021

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There are so many people talking about a pending economic crash. When are they not? In this episode, we discuss how we are thinking about our investment strategies in light of this topic. Even though timing the market is not a reliable strategy, it is important to hedge for the ever-present possibility of an economic downturn. --- 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 everybody, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour and my co host today are Tom Schneider, and Michael Albaum and on this episode we're gonna be talking about all the doom and gloom headlines you may be reading out there so lots of YouTube channels lots of articles out there are saying there's an impending crash and so the three of us are just going to weigh in and tell you what we think tell you how we think you can navigate this and come out ahead so let's hop into this episode. Michael: I think it's important to just start start off by saying that this is not a prediction of crystal balls it's just so that everyone's been talking about it we were talking about the upset everyone's been chittering chatting, chattering, Chaturanga, chatting about this impending crash that we said let's talk about what you can do and this is applicable really for any crash whether it's tomorrow five years from now 10 years from now these are just I think solid and sound principles that we plan on using to insulate ourselves from from a crash. Tom: Definitely anyone who says they know when the crashes like happening just like run the other direction anyone who tells you Here are some easy you know here's the the easy no work way to make money run the other direction so anyways excited for this episode Emil: Let me ask you guys this When did you start investing? When did you guys start investing in real estate? What year? Michael: Like 2012. Tom: Almost like well, yeah about 10 years 2014 Emil: So maybe you guys probably didn't see it as much I started in 2017 and I remember in 2017 I would probably see that headline at least once a week of like another bubble, bubble coming market crash crash like YouTube videos headlines, though since 2017. Michael: Real click-baity stuff. Emil: Yeah, and this is four years ago and so I think my my hypothesis here is it's click baity, no one has any idea at some point right? Someone's going to be right if you just keep saying every single month a crash is coming a crash is coming. You say that for seven years I guess at some point you may be right and then you're like See I told you so. Michael: I'm a genius. Tom: Kind of sorry I'm diverging a little bit I love that that's a great point of just saying that every day I heard the story about like fund managers that would have like tons of different diverse funds and like one would hit and then they would market everything on that one like diverse fund ended up kind of a similar sorry distracted Tom see what's a squirrel running by go ahead sorry keep going. Emil: No I mean yeah, this is just casual conversation. I just think it's it's a it's clickbait I don't think anyone knows when it's going to happen it real estate moves in cycles Yes, there's going to be ups and downs right? This this kind of trajectory have been on where things have only gone up that is not sustainable forever. None of us I don't think are going to say that real estate only goes up or that anything only goes up things come down but I think it's a fool's errand to try to predict when those things will happen. Michael: Oh, fool's errand great great saying. Tom: Totally agree totally agree. I mean I think there's a lot of things in the world you can worry about i think that you know worrying on timing exactly the the crash and the idea of like trying to no that is just unrealistic. I think you know, when we get into the the meat of the episode, it's about Okay, what can you do as an investor to put yourself in the best position to weather the storm? And, you know, perhaps even come out even stronger? Michael: Yeah, I'm with you. Yeah, I second that. Emil: So let's just talk about what what should you be doing what what do we do not what should you be doing? But how do we navigate these things? So Michael, Tom, whoever wants take it off? Like how do you approach investing even at a time like this when values have never been higher? Tom: Michael, would you like to go Would you like me to go? Michael: Yeah, I'll go cuz you always steal my thunder. So… Tom: I totally was, like, Michael: I can see you there like, Oh, I hope he doesn't go first so I can steal his thunder yet again. Tom: I'm sitting on the edge of it. All right, go ahead. Michael: So one thing that I'm doing, and this might be counterintuitive, but I'm actually levering up as much as I possibly can, because what it does is, we're kind of at this unique time and that like you mentioned, milk values are so high Interest rates are so low. And so there's that massive spread, if you've got equity in your property that you're able to take advantage of, and get a lot of it at a very low interest rate. And so that's what I'm doing. And I'm getting some dry powder in my back pocket to be able to utilize if there is a crash. If there is not, well, I'm just going to continue investing. And I'm probably not going to wait on the sidelines for very long before redeploying that capital to wait and see what's going to happen, because if you find a good deal, the numbers make sense. Great. And this is something that we've said all along is something that I've been preaching all along, let the numbers do the dictation for you. But the numbers be your deciding factor. So I'm grabbing as much cash as I can, while the values are still high. And I'm trying to get as long term as long of a term as I can on the debt. And so that's that's what I'm in the process of doing right now. Tom: I love the contrary and take you have a little devil's advocate here. What say there is the crash, right that we are talking about? Are you concerned at all about the value of your properties being underwater? Michael: Yeah, it's a great question. Tom: Since you're maximizing your death. Michael: Yeah, it's something that Emil and I have talked a lot about. And I think we've shared on a podcast as well, I'm less concerned actually, if the if the value of the property goes underwater, because at the end of the day, the value of the property is really only meaningful in a couple of different places. One is from an ego perspective, talking about your net worth. But two is from If a If a transaction is to occur on that particular property. And by transaction, I mean either refinance or sale because I already own the thing, so I'm not buying it again. But if I need to refinance the property, it's and it's underwater, I'm in trouble. If I need to sell the property, and I'm underwater, I'm also in trouble. But in light of those two, barring those two events, that I believe that even if it does go underwater, the value will come up over time. And as long as there's cash flow to support the debt service, and pay myself, I'm okay taking on that risk. Or again, the potential upside of I'm putting cash in my pocket today. So if there is that crash, I'll be able to buy into that crash down the road, and hopefully hedge my downside. Tom: Love it, Michael. Excellent. Excellent answer. Emil, do you want to jump in and I'll take up the wood, if there's any kind of scraps at the end after? Yeah, Michael: Clean up Emil: The scraps at the end? No, I agree. I think that's the number one thing I wouldn't miss is me personally, I'm not going to invest in anything that is me banking on appreciation to make my return, when valuations are high, I would only purchase something that I know I'm going to cash flow to be able to cover my my debt like Michael talked about because even if the value goes down 20-25% as long as I'm still able to pay my bills, I'm still able to make some money on top of it as well, it doesn't really matter to me what the value is I'm planning on holding long term. So my strategy you know, what I would avoid is is going in buying a property in hopes of it appreciating another 20% like it has in the last year or so. Tom: Awesome. So I'll throw a couple of other tidbits in there you know, just like Michael said, making sure well the actual value doesn't matter as much but just making sure that you have some buffer in the in the cash flow is is important to be cognizant of. Just because you don't you don't have a lot of control the value but you know at what you're buying for and the way that you're using debt, you can give a little more control of that cash flow. So if there is a downturn you need to be able to weather the storm. The other thing I would say is making sure that you have the right reserves in place as a cash backstop. Sometimes capex comes up you don't you know the the worst thing that can happen to you as an investor is you need to, not panic sale but sell out of necessity and do it quickly and you can prevent that from happening controlling your exit by making sure that you have the proper reserves so that's like the biggest way that you can get in trouble with this downturn is just needing hafting instead is make up a word there have having hafting data definitely made up a word I think it has a punch to it it's kind of fun to say. So the you know my number one tip is just look at your reserves make sure you have you know six months whatever whatever that number to make you feel comfortable if you have some older properties that have some potential roof stuff maybe you up what that the amount of dollars you have. But to Michael's point about cashing out and having some you know, quote unquote, dry powder on the sideline, should there be some sort of a downturn? You, you can be there but to be honest, I think there's so many investors with that same attitude, but maybe I'm wrong that you know, are kind of catching up and ready to pounce. Perhaps I'm wrong. But, you know, for that reason, I think it also kind of provides a little bit of a backstop if prices were to go down. I think there is some money on the sideline, ready to go. But anyways, as far as kind of a way to go hedge kind of the downside of risk is just making sure that you have proper reserves. I think I repeated that same point like three times, but repetition is the mother of learning. So Michael:Driving it home. Tom, what are your thoughts on getting access to that capital via cash out refi or the lines of credit? Tom: I love it. I'm, I love it, I love it. It's like, I feel like elf talking about maple syrup. Anyways, it's I think getting access to it is, is great. And for the market dynamics that Michael spoke of have really low interest rates, as well as high price appreciation. I too am very comfortable getting as much debt as I can just making sure that the rent covers the the excuse me the loan servicing and the debt payments that I have. So I feel I feel the same way that Michael houses right now is a great time to get that money out and to either reuse it right or just keep it keep it in the background. Michael: But of those two, cash out refi versus HELOC or line of credit, you have a preference for what you what you would prefer? Tom: I think long term fixed deck is great. I mean, on my on my primary like I have a big HELOC that I'll use for some stuff I'm doing around building a little studio shed a little office. But for my rentals, I think getting that long term fixed debt into place. And who knows maybe the the interest rates go down in the future, great, I'll refinance and if they go up great, I'm already locked in for a really low debt. So that is the situation there. I think the the one other thing I'll talk about on this topic around, hey, maybe the great market bubble burst is happening tomorrow or next week, or whatever. We don't know when that is. So you know, if you have acquisition plans, I wouldn't hold your breath and just wait for that to happen. I would, you know, go through the process of building out a buy box, you know, establishing what you want to buy. And then you know, continue to underwrite properties until they they fit and it makes sense. And you know, perhaps there's there's nothing that hits your buy box, like at this time, but I wouldn't basically at a high level, I wouldn't turn off your acquisition machine, if you're in like an acquisition mode, trying to wait in timeout, timing that particular cycle, just because as we said, it's, it's impossible. Michael: The other thing that I think about that, it seems to be on everyone's mind, and everyone's talking about, and it could very well be click Beatty, too. But I think there is some truth to this is the inflation, inflation is coming, on a prior episode with Jason Hartman, we spoke about inflation in great detail. And for those, I highly encourage anybody who's interested to go listen to the episode, at a high level, it's basically you're you're locking in a payback rate in dollars, and then that value is likely going to be floating up. So we get to pay back the loan with cheaper dollars over time. So again, totally recommend going check out that episode. But that's just another reason another benefit to taking on debt. And long the longer term, the better. And so for those two reasons, I'm out, I'm in. I just watched Shark Tank last night. Emil: So you're saying that that's why you are another big reason why you're going out and basically levering up as much as you can? Michael: Exactly, exactly. To get the cash backs up, like Tom was mentioning to have some dry powder, and that inflation is coming, I would probably be doing something similar. Even if there wasn't all of this talk of a crash. My strategy really hasn't changed. I just think it's kind of good practice and nice to have. And again, with the interest rates being so low, it's like how much better do you need it to get for you to go take the cash out? Emil: Yeah. I if I had a crystal ball I doubt we're going to look five years in the future and see lower interest rates. So probably a good time. Michael: Yeah. Yeah. Tom: My final point is in Michael kind of alluded to it as well as at least we're we're longer term hold guys. And with that type of a strategy, there's just a little bit less risk for these market fluctuations. In that you know, we're we're playing the hold these too as retire early, all that good stuff. So you know, if you're a flipper, I would be a little bit more concerned around big changes in the market values of the houses, but as a long term holder, it's less less risky, I would say. Emil: Great. Tom: What actually happens with is a lot of times flippers end up turning into holders just because they can't sell the property for what they're worth. So that's how a bu…

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How Dave Homyak makes killer returns in the Smoky Mountains Oct 14, 2021

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Dave Homyak is a former engineer that quit his job to go into short-term rental properties full time. Dave runs Smokey Mountain Cabin Realty, helping investors maximize their returns by investing in rental properties in Tennessee. In this episode, Dave shares his investment journey, how he quit his job, how he 1031s his way into bigger properties, what his returns look like, the most powerful price points to get into, and some tips for investors thinking about getting into this game. https://www.facebook.com/dave.homyak https://smokymountaincabinrealty.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 we have with us Dave Homyak, who's going to be talking to us about short term rentals out in the Smoky Mountains of Tennessee, and what he did to leave his job is under two years with these types of investments. Without any further ado, let's get into it. Hey, Dave, thanks so much for taking the time to hang out with me today. Really appreciate it. Dave: Yeah. Thanks for having me. Michael: Now, my pleasure. For our listeners who don't know you give us a brief background, who you are, Where'd you come from? And how'd you get started in real estate? Dave: Okay, so basically, I was an engineer, I did engine calibration for a living, I worked for Chrysler, Detroit, diesel, General Motors, bunch of companies like that, and always wanted to do something in real estate, but quite honestly was afraid to do it. So my first investment property I purchased at 53. And the reason I purchased it is because I wanted to be able to get away from my W2 income. And I had had some money saved up I thought I'd pretty good saver. But I was like, what would it take to make me feel like I can walk away and not have any anxiety whatsoever? And the answer was pretty easy. It's like if I replace my income, then I can walk away and do anything I want. And it's gonna, I will not have to ever worry. And so basically, I set the goal for myself to replace my engineering income in two years with real estate. And I was able to do it in a little bit under a year. And that was due to getting into short term rentals. And I ended up doing it in what I had kind of researched somewhat to the best of my ability at the time. But then what ended up is that an independent third party which is airDNA they ranked it as the best market in 18 best market in 19. It's three of the top six large cities in 20 and I'm waiting for the latest report to come out and I'm sure it's going to be in the top again. So bottom line is I happen to buy in the one of the best markets and my research indicated that was a good plan. I had no idea that it was going to work out the way it did as quickly as it did though. Michael: That's incredible. And so we've got to ask Where is that market? Dave: Said market is in the Smoky Mountains, which is Eastern Tennessee, the three major cities are Gatlinburg and Pigeon Forge, and Sevierville. So Sevierville is the one that people haven't heard of as much but it's equally profitable and made the air DNA dotco list basically ended up you know, I made the decision looked into apartment syndication knew I could replace my income with that didn't know if I could add it to your timeline, ended up deciding on the Smokies. I looked at the Smokies panhandle of Florida, which is also a good choice. I think Smokies are a little better. Less hurricanes there. I really wanted to go into Panama City. And that got hit about a year later. And I'm like, Oh, I'm so glad I don't have to mess with that stuff. Michael: Dodged the bullet. Dave: Yeah, exactly. And then Scottsdale and I ended up going to the Smokies. So started this search and started trying to figure out what I was going to do in March of 18. April is kind of apartment syndication month. first weekend in May, I actually went to the Smokies to look for the first time and ended up seeing six cabins tried to make a decision on three, picked one bought it. So end of May I had that up and running it worked great over the summer, bought another one in August and then bought a third one in November. And in December I got when the General Motors was offering buyouts and I said, I think it's time to go. And my, my goal was actually to probably stay with General Motors through July. And basically they said if you leave now we'll pay you through July. So I said okay. I can start on, on my leaving and yeah, and all the healthcare and stuff like that that goes with it. So yeah, it worked out really well. Michael: Fantastic. So what about the Smokies attracted you? They're just out of curiosity. Dave: So the thing that attracted me was there were people that were making a lot of really good cash on cash return. So one of the things that makes the Smokies a lot different than most other markets and in the panhandle Florida it's fairly similar. But all these things are second homes they're sold turnkey. So if you have to furnish, if you have to buy silverware, if you have to put in beds, TVs, all that stuff, that's just more money that you're gonna have to pay. When the Smokies there's basically two contracts that get written when you buy a house. One is the purchase agreement for the cabin or the chalet, whatever your choice may be. There's a reason that chalets sometimes work a lot better than cabins and mainly due to supply and demand issues of buyers. But you also write a purchase agreement for the entire contents of the house. So you know, you have here's the cabin price, the chalet price, and for $1, you get the contents. So I literally am closing midweek, and that weekend, I have it rented out. So that's one of the benefits of you don't have a whole lot of downtime. And the second benefit that I didn't even know about at the time or didn't, didn't have nearly as much of a priority on as I do now when I help other investors is the whole regulation. So in the Smokies, there's not that many hotels, they cannot take nearly as many visitors into the hotels is a built up entertainment, venues, things like that. So there's no way that they can go in like they do in other cities and say we want to ban short term rentals or we want to regulate heavily short term rentals. And, you know, play that regulatory card in make what used to be a really good investment not nearly as good of an investment. And I think you see that in the panhandle of Florida, as well as the Smokies, but I like the Smokies a little better just weather wise stuff like that. So yeah, I mean, then the other thing is, there's a couple loans that are available down there that I'm not sure if they're available nationwide, I know they're available down there, but there's a 10% down second home loan. So if you're, if your intention is to spend 14 days or more in that property that you're buying the first one down there, you can get a second home loan on it. And that's a fantastic way to get into that market. Because you know, most investment properties you're not going to get for 10% down, right, and certainly not investment properties, you know, that is a primary residence you can put down last but for secondary to put down 10% is pretty crazy. And then the loan that just, it still makes me smile, it's making me smile right now, and I've talked about it hundreds of times with different investors is there's a 15% down investment loan. And to qualify for the loan, you have to project what the income of the cabin is. And if the cabin throws off enough income, that qualifies you on a debt to income ratio. So for example, if the cabin is gonna throw off $5,000 a month and the payments gonna be 2000. And you're maxed out on debt to income right now. You know, if you're at 40%, guess what, you still qualify because of a cash flow project. It's a cabin with projected cash-flow of 5000 a month, and that cash flows enough to cover the the mortgage payment. So it's just, it's like one of those things that you're like, I'm pretty I get I've actually checked with my like, once a year, I check with my loan officer, the person that I've used just is this still a thing? Yep, still a thing. And I'm waiting for somebody to say I'm not sure that should be a thing. You know, but it still is now. So even if you're even if your debt to income is fairly high, you can still qualify on the for the investment loan at 15%. Michael: That is just incredible. Dave: Yeah, I, it makes me smile, every time I tell somebody, I still can't believe it. Michael: Yeah, I'm still trying to wrap my head around it, it doesn't seem to make sense. But if it's a thing, it's a thing. Dave: At least for me, when I've used an investment loan down there, like the property actually made the money it wasn't like you had to stretch your make something up, like I think it's gonna make 10,000 and it makes five or something like that. It's more like if it's going you know, I said an honest five, the payment I think was 16 or 1700 a month and and it did make the five a month that I said it would. And then where it gets really interesting is once you show them once you show the mortgage company a Schedule E and prove that it made what you said it was going to make, you now qualify for another one the next year. So basically, you can get one of these a year, as long as you wait until after you file your Schedule E and give that to the loan officer. And then if you are married, you know and if you're playing in two person mode two player mode, then you and your wife can both do one a year on that plan. And then the next year you can both do one on that plan. Michael: Oh my gosh. Dave: So it's a way to build, build a portfolio very fast and that market is still one of the best markets when it comes to cash on cash returns. So even though there's been a lot of appreciation, the nightly rates have gone up a lot, they had about 2000 cabins burned down in 2016. And before COVID came in, they had I think five developers come in and start to build. And it just the nightly rates have just gone up and up and up. And it's just one of those places that when the when the economy does well, that place does well, the Smokies do well. When the economy does poorly, the Smokies do well, why 60% of the United States is within driving distance of the Smokies. And smokey, Great Smoky Mountain National Park is the most visited National Park. And in 2009 2010, visitorship actually went up when the economy was doing poorly. And when people are like, what how do you Why do you think that happens? You know, I explained, you know, if, if you're afraid about the economy, you're not flying to Florida and taking a one week Disney Cruise, but you're still gonna want to go on vacation. So you're saying you know what, I'm going to drive to the Smokies, I'm going to rent a cabin for three days, we're going to do this thing on the downlow. It's going to be nice, but it's not going to be as extravagant. So I think even when things slow down. There's, I obviously know a lot of people that invest down there and kind of one of the one of the questions that that we asked each other is what am I missing? It seems like there's really big upside, and not a whole lot of downside. And we haven't come up with anything. Yet that makes it scary. What am I, I very well may be missing something. But I've asked a couple guys and we can't figure it out. Michael: So I mean, I just I love hearing all of this because as I was sharing with you when we connected before the podcast here, I just 1031ed into a property down there and severe bill. And so I'm very excited now to to get that up and running right here. And this only makes me even more giddy. Dave: Yeah, yeah, it's pretty, it's pretty cool. I guess the other thing that I've done that I think is interesting, I think your listeners will find interesting is, the other thing I do is as an engineer, I don't sit still very well. So I'm constantly analyzing my properties. And I've owned five, but I keep trading up and 1031ing up. So for example, 2018, I bought a three bedroom, a four bedroom, a five bedroom, middle of 19, I look and I say hey, the five bedrooms doing better than the four, the four bedrooms doing better than the three. And they've all been appreciating, I know, I think I'll sell this three bedroom. So it's underperforming the other two. So I sold the three bedroom and it had gone up enough that I actually use that 10 1031 money as a down payment on an eight bedroom. So very directionally correct eight bedroom does really well it costs me basically you know the downpayment that I put on the three bedroom and then just this you know the sale on the transfer the money to control an eight bedroom a year later. And there are different people that are doing that. So some are on a never sell anything. And I get I get some people upset on some of the real estate investment forums because they say, What's some of the worst real estate investing advice you've ever heard. And I say buy and hold and they say oh, they just don't like that. And I'm like, I think I'm doing okay with it. And maybe I should have kept them all and just bought other ones. And then the other thing I ended up just recently doing is I sold the first cabin I bought which was a four bedroom, and I 1031ed did into this ultimate killer, like five bedroom the most incredible views. Just amazing. So that's kind of the other half of the coin is when you're looking at a lot of the when you're when you're looking to do Airbnb anywhere, when you take a look at the market. And if you if you buy the airDNA data, what you're going to see is, especially when you start to well, bigger places are there are less bigger places. So you're going to get outsized demand for the supply of bigger places, so you're able to charge more more bedrooms is better. In the Smokies a view is better a pool in the basement is better. And what you're also going to see is that if you're running at 95th percentile property, your gross is double what your what a 50th percentile property's gross is going to be. So that isn't if you're running a 95th percentile property, your profits going to be double because you're already making a profit at the 50th percentile, it means your profits going to be you know, times three times four times five, because you've already got your expenses paid at 50th percentile. So anything about 50th percentile You really need, yeah, that's just money in your pocket. So you really need to, I was, you know, I've made, I've made some mistakes along the way that have cost me someplace between, like a pretty lot of money and just like a lot of money. There are no small mistakes that I did. So, you know, one of the mistakes that I made was, well, if I can put 10% down, this will be I'm going to try not to put much more money and like, if something breaks, I'm going to do…

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What a professional project manager can do for your project Oct 12, 2021

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Antonia Botero is a project manager, licensed architect, and urban designer. As the owner of MaddProject, a boutique project management consulting firm, she specializes in advising real estate owners and related-industry businesses with their development projects, keeping them on task, on schedule, and on budget. In this episode, Antonia shares the scope of work of a project manager - what they do, what they don't do, what they cost, and when you would want to bring one in on your developments. --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor Podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Michael: Hey, everyone, welcome to another episode of the remote real estate investor. I'm Michael Albaum, and today I'm joined by a very special guest, Antonia, she is a project manager, extraordinare licensed architect in numerous states, and then the owner of MaddProject, and she's going to be talking to us today about when you should think about hiring a project manager, what are some of the do's and don'ts, do's and also what it's like to be a woman running her own business in the construction space. So without further ado, let's get into it. Antonia, the Conqueror project manager, extraordinaire, licensed architect in multiple states and owner of MaddProject, how are you today? Antonia: I am wonderful. Thanks for having me. Michael: Now, absolutely. Thanks for taking the time to hang out with us. So you are a jack of all trades, you do a lot of different stuff. Tell us a little bit about what it's like to be a project manager. But before we get into that, can you share with everybody what the best way to get ahold of you is or a hold of your company bad project, if after listening to this episode, they're like Antonia is a beast. She's a rockstar, I want to use her as my project manager. Antonia: Sure, absolutely. So my website is great is a great way to get ahold of me, there's a little contact me form in there that I watched very closely. So Mad project.com. And you can scroll down, contact me. Also, there's a great newsletter that I write about once a month. So if you want to get it, you can hear from me that way. And additionally, I'm very active on Twitter. And I will give you my handle and you can share it in the notes as well. But that's a really easy way to contact me. And worst case, if you really just want to get to me, it's Antonia at Madd Project calm with a double D. So that's her always I'm very easy to get a hold of. Michael: Awesome, awesome. Well, again, thank you for coming on and sharing with everybody. What I want to talk about today is what it's like to be a project manager. What are some of the things that a project manager does? And then what are some of the hurdles that you've seen people really stumble over when doing rehab or renovation projects where maybe they should have gotten a project manager? Antonia: Sure, absolutely. So typically, on development projects, there's one person who serves as a point of contact for the owner, who helps coordinate the design team helps to oversee the permitting process and ultimately oversees or helps to oversee the construction manager during construction process. So generally, when you have larger projects, you should expect to have a project manager somebody either in house with the developer or a third party, like my company, that their job is just to make sure that the project is going in the right direction that you're accomplishing through design, all the different, you know, goals that are set forth in the pro forma. So that's generally what a project manager does. Michael: Okay, I guess what would be the scale or the scope of a project that you would feel a project manager would be justified in coming on because a lot of our listeners will do cosmetic rehab, update flooring, kitchen, bathroom, that kind of thing. And they might be thinking to themselves, oh, shoot, do I need a project manager for that? What do you what would you say is kind of the defining scope or cost. Antonia: So you know, it really depends on what you want the project manager to do, if it's something where you just need a little bit of help on strategy. That's one way if you need comprehensive project management because you've got no idea what you're doing. By way either of you know it's a new type of project that you've never done before or you've never done any kind of design or construction before you don't know how to hire an architect. It's really more about the resources that you have available and less about the size of the project itself. I think that's more the thing that I would say pushes you to have a project manager Michael: Okay, now I love that. What about let me give you a scenario because I think this has been a lot of our listeners fall into this category and curious your take on on project management versus their project management. So I'd say 95, maybe 98% of our investors or listeners are remote investors. And oftentimes they are newer investors. And so if they want to take on a project that involves some significant rehab of a house, maybe changing some bedrooms, around changing the footprint of the property, and then some cosmetic stuff, and they don't have any experience and they’re remote, is that something you think they'd be justified in hiring a property manager to help facilitate and coordinate? Antonia: I mean, I definitely think that there could be a lot of value. If they're thinking of doing it again, at some point, because there's a lot of things that you can standardize, for example, like, let's say, you know, that you like a certain tile in the kitchen, you know, that you want your bedrooms to be a certain size. And in order, instead of having to go through the process, you know, learning the lessons, the hard way, you could have a more strategic sort of session with, you know, we do hourly consults, or 30-minute consults, where we could talk about some of those strategies, we could talk about some of the things you could standardize. So I think, perhaps not hiring someone full on, but at minimum, having some sort of conversations with somebody either be at the architect that you end up hiring for the project, because you're going to need one, if you're doing something like that, or the contractor that you hire for it. I think having some general strategy of Hey, like, what are the things that we're going to have to do? What are what is the permit like? How long do those things take, and then ultimately, going back and saying, Hey, we want to do this, again, let's make a list of all the things that we learn in terms of, you know, how long permits actually took, what finishes, we do end up liking that were very easy to get during construction, they were easily available at the local store, and in sort of really find a way to, like, take the lessons and actually use them, right? Because a lot of the problem that people have is that, you know, let's say you do it once, and you're gonna make mistakes, and that's okay. But if this is the first time you're doing it, and you still don't know, like, how to pick tile, I mean, are you doing? Michael: What are you doing? Antonia: I’d really say, sort of sit down for a minute and think a little bit about strategy and about like, and then as you go through the process, write down some of the lessons so that you can refer back to them, and really have a better go around the second, third, fifth time. Michael: I love that. And I think it makes so much sense. And I mean, I love to that mad project does these half hour hourly console's because so many people don't know what they don't know. And so don't even know what questions to ask if they're a property manager or contractor who they're working with. So I think a strategy session could be so valuable. I know you and I have talked about my development project. And I wish we had sat down for numerous strategy sessions before taking on that project, but too little too late that this is how this is the learning lesson on the job. So what about in terms of driving? timing? Is that something that a project manager should be expected to do or could be expected to do? If I'm a remote investor and contractor says, Hey, it'll take a month, I hire a project manager and said, okay, make sure they're out there getting this stuff done, because I'm remote? Is that something that you're able to help help out with? Antonia: Absolutely. So there's a couple of different ways that a project manager should be doing that. And again, it also depends on the size of the project. If you're, for example, in your example, where you're saying, okay, it's for remote investors, you know, the project manager should have a couple of different points of contact with the team that is actually on the ground, whether the project manager is also remote or not, you know, there should be at least a weekly meeting during construction, and that in that weekly meeting, you should be discussing things like, hey, like, did the inspector come this week? Are we gonna run out of the tile that I really like that I know, has like a two week lead time? And so we really need to anticipate it. Hey, are you actually on schedule? And if you're not on schedule, why aren't you on schedule? Oh, because the plumber didn't show up? Why didn't he show up? Did we? Did you not pay him? Or is it because you know his guy last minute had a family thing and couldn't come on Tuesday. So it's really having those touch points and having them constantly like you can say, oh, we're gonna have weekly meetings and then by the third one, people lose steam or, or kind of feel like, Oh, well, you know, we've had them the last two weeks, we don't really need to continue having them. That's absolutely the wrong thing to do. You want to have constant touch points, you want to make sure that you're, you know, all the time paying attention to what's going on, particularly on those remote projects where if you're doing like a single family rehab, they go really quick. So you want to make sure that you're Hearing the problems every week, you know, the contractor a lot of times a lot of these contractors can have a question. And they can forget to ask you for four weeks, and then, you know, they stopped work because they didn't have an answer to a question that they forgot to ask you. So, you know, a project manager can absolutely help to do one, make sure that you're having the meetings. And number two, you can in your agreement with your project manager, you can ensure that they are walking the site, at least, you know, every two weeks. So, there's really a lot of things that you can do you know, the project management, you can also have these periodic meetings with the different parties. So you don't necessarily have to have a meeting with everybody you can have I mean, I highly encourage having like an all hands meeting once a week for for like a single family rehab. But you can also make sure that like Tuesday mornings, you call the architect, and you're just gonna, you know, you're just kind of chit chat, you're like, Hey, how's it going, like, Hey, what are you up to, you know, cuz those are the times when you get like, the dirt, right? Like, Hey, I went out there, and like that green that you chose for that wall is, you know, the contractor is not going to tell you, they're like, Oh, yeah, I painted the wall, Michael: And I got paid for it! Antonia: He’s not gonna say, Hey, I didn't write the I paid for it, I painted the wall, and you you come visit from out of town, and you look at it, you're like, Oh, my God. Good idea. Right. So those are the things you want to avoid. And the way that you avoid them is by keeping that contact. And and again, you know, once you're a remote investor, and you've done this a few times, honestly, these are things that once you kind of get the hang of them, you don't need to hire someone else to do them, you can do them yourself, if you have a good strategy and a good framework to begin to do them. And then you got to have the discipline, right? So having a project manager a lot of times in a project is like having like a coach, you know, it's the person who's saying, like, Hey, you need to pay this invoice, hey, you need to sign this contract, hey, you need to make this decision. You know, hey, like, I need to, I need you to go to down to the city and sign this document like normally, having that extra discipline helps a lot in the project and they helped to drive the schedule. So all of these things and having that constant coaching and sort of follow up, follow up follow up was absolutely the role of Project Manager. And it is the thing that really keeps the schedule, which as we know and development schedule scheme, and that doesn't matter what project you have. Michael: Anyone who's watching the YouTube version of this will have noticed that I was smiling, grinning ear to ear when Antonio was talking about the plumber, because like literally, that's what happened, like flipped by GCS and all the Providence show up and I got family stuff like Are you serious? Are you kidding right now. So it that kind of stuff happens. Antonia: But it's also important to know that the guy didn't show up because he had a kids soccer game that he forgot about, versus Hey, you didn't show up? Because the contractor didn't pay him? And then you're like, wait, I paid you. So why didn't you pay the guy. So and the more you know, the quicker you figured that out, the better because you don't want to be having that conversation when you're like two weeks away from supposedly being done. And then it turns out that, you know, your contractor or your your CM has not been paying your subs for the last, you know, four weeks, and you come to find out that you have a lien on your house, right? So, you know, in that sense, like, that's also why it's important because you can avoid these major sort of problems. If you're able to catch them as they're happening. Michael: Love it. Love it. So that's, I think, a really great summation of what project managers do do. Can you talk to us a little bit about maybe what the clients have expected of you in the past, but you said, you know, like, this really is outside the role and scope of a project manager, when what should people expect to have done by other people or to do themselves? Antonia: Oh, boy, Michael: Feel free to go crazy with this one. Antonia: You know, we've run into some funny situations that I mean, I've I've installed bread, I've built furniture on site, I've I've brought people coffee. I've been on site overnight on installs of big jobs. You know, within the bounds of professional reasonableness, we basically do everything. And I that's a big, you know, caveat that I put at the beginning of that reasonable professionalness. Michael: Right, right, which is so shades of gray. Right, in that statement? Antonia: Oh, yeah. Yeah. And then every now and then, I mean, you know, for for me on the b…

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Michael walks us through an inspection report on his short term rental Oct 09, 2021

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In this episode, Michael wraps up our discussion on reading and deciding what to do about our inspection reports. Michael walks us through his inspection report on a short-term rental property. He highlights the most concerning issues and discusses how he will go about addressing them to set himself up for success. The inspection contingency period is a crucial step in buying a new property. Doing your homework here can make or break a deal. Overlooking issues in the inspection report can potentially leave you with thousands of dollars of repairs in the near future and eat up that precious cash flow. --- Transcription 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, everybody, welcome back for another episode of The Remote Real Estate Investor. My name is Emil Shour. And today I've got Michael: Michael Albaum. Pierre: Pierre Carrillo. Emil: And if you saw the last episode here and I walked through a recent inspection report, I covered a triplex that I bought back in November of 2020. And Peter actually walk you through an inspection report that he's currently in contract for on a property. So last person up is Michael and just a quick recap, what we're doing is we're walking you through these inspection reports, calling out things that we see and just walking you through our thought process giving you an over the shoulder look on how we look at certain items listed how we go about addressing them, either with the seller or getting different bids. So that next time you get an inspection report, you feel confident to do the same. Alright, Michael, kick us off. Michael: Alright, so I'm going to be pulling up this inspection report for a property that I am also in contract for similar to Pierre. So this is a 62 page inspection report, which oftentimes they are. And like Emil mentioned in the prior episode, the inspectors job is just to find everything that they can. And it's also important to note that inspectors there's like a national certifying body for home inspectors, I believe it's national. And so there's set guidelines and parameters for things that they're looking for, and how they report and things that they do look at and things they don't look at. So just keep that in mind. And also something it's important to keep front of mind is that inspectors are looking for safety and habitability issues, not necessarily aesthetics, or rent readiness for a property. And so I've heard people in the academy talk about oh, well I got my inspection report and it was a $2,000 repair estimate. And then my property manager walked it and said, oh, there's an additional $5,000 and make rent ready costs. So these two people are looking at things through two different lenses. So it's really important to keep that in mind. And I always try to have the property manager walk with the inspector if at all possible, or at least walk after the inspector so that way they can give you their two cents around okay, well, that was the inspection, safety, habitability his side Now let's look at the make rent ready stuff, because the inspector is probably not going to tell you if the walls are scuffed or if the you know, the carpet is is thinning, right? That's all stuff that that a property manager is gonna be looking at. Pierre: I was just gonna say, Michael, why does your house look way nicer than Emil and mine? Emil: This is short term. Michael: This is a short term rental. Yeah, I'm getting out of an older property. Similar to Emil’s about 100 years old, I did a bunch of value-add rehab work on it. And now I'm kind of done with it. So I am moving on to something and I said, you know, let's go for something higher end fancier, less headache, because I've dealt with too many headaches in the past. So, the properties built in 89. We can see here that the structure is wood Foundation, race, Foundation, three, three, and then some of just the basic details. And getting into the meat of the property. Here's lots of disclaimers, they talk about all of the things that were inspected versus not inspected. So telling me the smoke detectors were tested. There are some loose siding on the property. They're pointing out some growth, organic growth on doorframes. But let me find where there are some things that made me take pause. And to be honest, there were not many of them, which is really nice, because this is one of the cleaner inspections that I've seen. Alright, so here we have a little, a little hideaway in one of the electrical boxes. So just something to take note of that if animals are present, rodents are presence present. There's a way and a reason that they're present. So look to find out how they're getting into the area and how you can keep them away. That observation. Emil: Was that a mouse? Michael: That was a mouse Yeah, I got a better picture of it too. We've got vegetation growing along the home and then touching the roof here. So trees can drop things that can cause damage to roof. And then they can also rub against the physical structure or the roof and cause damage as well. So keeping things clear of roofs is great. We've got just some loose deterioration on the deck boards. There was an area that needed a hand railing It currently doesn't have one because it's taller than 30 inches. So inspector took a picture of that and said, we've got to put a hand a handrail here. And then getting inside the home, there's no discharge pipe on the water heater over pressure, pressure relief valve. So that's a safety hazard. And basically what this is, the pressure builds too much in the tank, this valve should open and release that pressure and if anyone is standing near here, or sitting near here, that could burn them and cause a cause of problem. So having a proper vent pipe or a discharge pipe is important. Then they found that the anchor, the laundry basin wasn't properly anchored, it was loose when he moved it. So having something to anchor that to the floor is something I want to have done. Some rust on the on the chimney cap. And again, this is all really, really minor minor stuff. There was some mold growth in the bathroom, which is not to be unexpected. If anyone's lived in a place, they'll know that sometimes mold can grow, slow drain in the sink. Again, not a big deal, play some drainage down there snake the drain, Emil: Michael why didn’t that mold give you concern, because I know mold is one that people kind of big red flag freak out about why did that mold not give you any major concern? Michael: Yeah, it's a really good question. So mold in places where it's supposed to be wet, doesn't concern me, this is more of a cleanliness issue than a pervasive systemic issue. In in your infection report that you share, you had a toilet leak from the second floor causing wetness on the ceiling in one of the rooms. The rooms aren't supposed to be wet, ceilings aren't supposed to be wet. So if we saw mold there are starting to get black mold or mildew. That would be a big cause for concern, because two things one, we could maybe see what's on the roof on the ceiling. But what we can't see is what's behind it. And so we might want to cut a hole and do some investigation to see, okay, how pervasive is the mold? Mold in a shower? I mean, I don't have mold in my shower anymore, but I used to. So it's something that happens in wet areas. So the fact that it's here, it's on tile, it's very common, is not cause for concern. Emil: Got it. Michael: Great question. Emil: Thank you. Michael: Yeah, of course. Emil: And you’re gross for having mold in your shower. Michael: Hey, man, Pierre: He’s a married man now! Michael: Yeah I am married man, I had to step up my game big time. When I was when I was young and gross, I had mold in my shower. So here is the, the breaker box for the garage. And you can see there are some blank spots that are just open, they're not filled with blanks. So getting blanks installed is great. It's nice that they're still open, open slots for additional breakers, additional circuits if need be. But we just want to make sure no one sticks their finger in there. And so that's like $1.50 part at at Home Depot or Ace Hardware. So just getting someone to come install that. And then he tells me that the GFCI protection. And that stands by the way for ground fault circuit interrupt, interrupter is supposed to be anywhere near water is where these are supposed to be said it wasn't functioning properly. So he has a testing tool here and just shows that, hey, it's not working properly. And so the fact that it's an outdoor outlet, they should have GFCI, which they do, but it's just not working properly. So getting that corrected is important. And then noting some loose outlets, just screwing that stuff down is important. And then here's an open box, junction box, which doesn't have a cover on it, it's in the attic or basement as you need. It's in the crawlspace in the basement. So not a big deal, because no one should be going down there. But it's not right. So getting that corrected. And again, it's a very easy fix. Pierre: That is so clean down there dude. Michael: It's impressively clean. It's impressively clean. So here we had pooling in one of the quarters corners of the crawlspace. And so this was something like I was mentioning before, there's not supposed to be water here that's supposed to be moisture here. So why is it here? So I had I called the inspector and we just had a really great conversation. He says honestly, Michael, for a home of this age, this is like one of the best inspection reports I've ever seen. And having also looked at a lot of inspection reports This was also a very clean report to look through. So but this is this is again cause for pause. What's going on here? Why is there water here so I had somebody else another contractor actually go out and inspect and kind of get an idea of what was going on. And what they thought was there is actually a vent that goes up to the basically ground level near the lawn. And there are automatic sprinklers to water the vegetation and water the landscaping around this property. So what they thought happened is that water was actually going down that vent, getting getting into the basement, so they don't think that there's water coming up from the ground. They don't think that there's Any kind of leak, but they just think it's it's it's sending natural water intrusion, which making some changes to the watering cycle in the way the sprinklers are pointed is likely going to correct that issue. And so here we also see that there was at one point moisture down here on the block walls. So he noticed the presence of efflorescence. And we can see that here in these pictures that hey, at some point, there was likely a little bit of moisture down here. And so again, I think that's the the same issue of Hey, the landscaping, irrigation is either not timed properly, or it's too much, or it's just the direction of it isn't quite right. We also saw some sweating on the pipes. And so he just said, recommending additional insulation, which not a big deal. We talked about the vegetation near the structure already. And so here we see some additional furry friends. And so we need to get this taken care of so sealing up all the holes into an out of a structure. And this is an outbuilding, so not a huge deal. It's not like it's in the house, but still not correct. So we want to get all of these all of the penetrations into and out of the building sealed, as well as penetrations into an electrical box sealed. Emil: Mama and some babies. Michael: Can't blame Oh, it's nice. Yeah, Mama with my Melissa babies. So very cute picture. But unfortunately, I think we need to evict these these tenants. They're not welcome. So here, that was really it. So 25 pages out of 62 with some pictures. And then he's giving some additional comments on the property as well. And so here we have some interior photos as well. And so he didn't, not any asbestos, which was great, which is, which is common because of the age of the property was built in 89. I believe that especially this was no longer being used at that point in time. So that in a nutshell, was this inspection report, there were not very many issues to speak of. There was nothing really that caused concern other than the water in the basement in a crawlspace. But after hearing some opinions, personal opinions around what they thought was causing that, I think it's a very reasonable explanation. And so it does not think make me think oh my gosh, there's water coming into this basement, it's gonna flood, it's gonna cause a lot of issues. So this, again, was one of the cleanest inspection reports that that I've ever got to view. And I was thrilled. So we're very excited about the purchase of the property. Because I think it is going to be such a such a easy thing to manage short term rental wise, and kind of pre empting for getting ahead of the question. This was actually we didn't ask for a dime in repairs, or credits or reduction in purchase price from the seller, I was so impressed with the way things were maintained that we already got it for less than ask so I said, You know what, we'll just take care of all this stuff, my property manager said there's only about $2,000 of stuff to do little stuff. And I said, You know what, not even worth frustrating the seller over because I need to I had to ask for some favors, because I'm doing this via a 1031 exchange. And so I needed the seller to cooperate with me on my timeline. So I said, I'm going to just treat them as best I can and hope that they're going to do the same to me. So so often, I think we get stuck on the numbers and the price and the dollar amount where that's a piece of the deal. But the deal itself is comprised of terms and different components. And so you want to be able to to negotiate where you can when you need to Emil: Nice this is good we had a spectrum of of different properties yours Michael superclean didn't really need to ask for much peer you had a couple of loose ends and ask the seller to make those repairs. I didn't mind wasn't huge, but I knew I was gonna have some turns where it's gonna add up to like 20 30k with all the little stuff and had a couple bigger items that I asked the seller to either credit or lower the price on so we got a we got a nice spectrum of inspection reports on this one. Michael: Yeah, I think it's also important to keep in mind, you know, where are you in your investing journey. And you know, I, I was like you every inspection report I looked at was was of that caliber with those types of repairs because then it was a value add play. And then you bought this thing knowing you were going to add value to it, versus this type of inspection report that we just looked at. This is like already turnkey, there's not a whole lot of value to be extracted out of it. I'm buying it for the cash flow. So there's it's important to remember keep that front of mind as well. Pierre:…

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Here‘s what you need to know about investing in Pittsburgh PA Oct 05, 2021

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Max Feinberg is a Roofstock Certified Agent out in Pittsburgh PA, a fellow investor and a wealth of knowledge about his local market. In this episode, Max tells us about the homes in Pittsburgh, the vintage, neighborhoods, the rent to purchase-price ratio, common issues that come up on inspection reports, and details that only a local would know. Listen to this episode to learn if Pittsburgh is a good market for your 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. Mark: Welcome to The Remote Real Estate Investor. My name is Mark Woodling. Michael Albaum and I are joined today by Max Feinberg, who's from Pittsburgh, Pennsylvania. So he's one of our certified agents and is going to give us a quick market breakdown and tips and tricks that we need to know about investing in Pittsburgh. So let's jump into it. Max: Thanks for having me. Michael: No, We're really excited to have you on So You are our certified agent out in Pittsburgh, right? Max: That's correct. Yep. Pittsburgh, Pennsylvania. Michael: And are you born? Are you a born and bred Pittsburghean? Is that is that the proper term? Max: Pittsburgher, Yeah, I am. Michael: Much better. Max: We could go with Pittsburghean. I was born and raised in Pittsburgh, Pennsylvania. I left when I was 18 years old. I lived in Arizona for about seven years. And I started my real estate career out there. But I'm back home in Pittsburgh and really enjoying working in real estate here. Michael: Where in Arizona where you? Max: I wasn in well, I went to Arizona State University. So I was in Tempe, Scottsdale Phoenix. started my career in Scottsdale. Yeah. Michael: A lot less snow out in Tempe right? Max: Yeah, yeah, well, weather was a little bit better. But it's not how I'll tell you that much. Michael: Yeah I totally can appreciate that. So max curious to know, how did you go from Arizona real estate back to Pittsburgh real estate was it just, you know, the home homesickness or you knew that market better, you'd read that market better? Max: It's a combination of a few things, those those are definitely part of it. Arizona is one of the more competitive real estate markets in the whole country. I'm not going to get the number exactly right. But I remember they had some crazy number of agents in the state of Arizona over 40,000 or something like that. And so just inherently not being from there. And not having that sphere of influence and network made it hard for someone who was just starting in the real estate industry to get you know, some traction. When you combine that with not really knowing the area, like you just mentioned, and being a little bit homesick. All those things brought me back to Pittsburgh. Michael: Fantastic. And I'm curious what what's been the biggest change in Pittsburgh, since you grew up there to now what have you seen? Max: the biggest one has probably been, you know, some of the factors that are making up the economic drivers here in Pittsburgh, the increase in tech jobs, health care, education, all of those things. And then what they've done to the real estate market, some of the crazy amount of appreciation we've seen in certain areas, and now starting to spill over into these other areas. And we're seeing a lot of development. When I when I was younger, we didn't have we didn't have as much of that the Pittsburgh was still coming off that steel town reputation. And that's really changed a lot over the last 2025 years. Michael: Interesting. So when people say when people hear the word Pittsburgh now, what should they think of? Max: They should think of technology, healthcare education? I know it doesn't. Well, you know, you still think of the Pittsburgh Steelers, you think of steel mills and things like that. And I think there's only one steel mill left in the whole city, you know, those have been gone for a long, long time now. So you know, the main economic drivers, as I mentioned before, I've totally changed and we've become a really savvy city. That's more cutting edge. Michael: Interesting. That's really exciting to hear. Max: Yeah. Michael: So as someone that's not familiar with Pittsburgh, asking for a friend, talk to me, like I'm a brand new movie, and give us kind of a high level walkthrough, if you will. Okay, if I'm looking at a Google map of Pittsburgh, how should I be thinking about some of the different sections, sub markets areas, if I'm an investor? Max: Yeah, it's funny you say that, because I always tell clients I'm working with looking at a map of Pittsburgh is really not helpful at all. For a few reasons. One, we have over 90 different cities that comprise of a fairly small, big citiy, you know small major market. So we have a lot of small little neighborhoods, which are all really different. And you know, outside of the city of Pittsburgh, there's another 150 or so small neighborhood. So when you combine that with really the topography of the area, looking at it to the map, as an investor really doesn't help you too much. You know, Michael: Great to know Max: A town that can be right next to another town on a map would be one place would be an A plus type community with great schools. And you look at a map and you say, well, these prices are lower right next door, why can't we invest in this area? Well, you know, it's across a river and there's a mountain there and you know, it looks like it's next to it on a 2d map. It's really not the case. So it's definitely be helpful to be familiar with the area. And that's where I could come in, or I've had a lot of clients come, you know, fly into Pittsburgh and drive around and really learn a lot from just doing that. Michael: What you just said, I think is so valuable for so many investors, because I think so often, especially remote investors will take our local knowledge and apply it elsewhere. And to your point, I mean, you can't do that. You can't do that ever, and especially not in Pittsburgh. So this is great to know. Okay, so then talk to us about some of the markets, sub markets, neighborhoods that you are seeing, really right for investors, where folks are doing quite well. Max: Yeah, you know, it's there's a few different types of investments that could work here in Pittsburgh, as I'm sure there are other areas and with there being so many different communities. I would say there's really not one answer to that, right. There's there's communities, such as Lawrenceville, or Shadyside, or East Liberty, where we've seen a lot of these companies like Google or Facebook, or Uber moved from Silicon Valley and open offices here. And so those are more appreciation plays, right? Or maybe Airbnb or a property like that works in these areas. But when we're looking at analyzing them for cap rate, or cash on cash, the prices are a little too high. So where we see a lot of success with investors in Pittsburgh is some of these areas that are a little more obscure, a little lesser known that I would call more B to C plus type areas. And we have a lot of them. There's no shortage of them. Like I said, there's, you know, 100 of them. Michael: Okay, so awesome. And kind of digging into the numbers a little bit on those more appreciation plays. Can you give us an idea of just a ballpark idea of what a 3-2 would cost and what it would rent for versus some of those more cashflow heavy markets? Max: Yeah, yeah, I mean, in Lawrenceville, and areas like that. Some areas that are popular with nightlife would be like the South Side Mount Washington, Lawrenceville, these types of places are three twos probably going to be the lower end would be 250, you're probably going to be in the 350 to 400 range for something that doesn't really need any work. And the rents are going to be in the mid 2000s. So on the surface, if we do, you know, napkin math, right back in the napkin math, that doesn't really meet that 1% rule that we look at, to further analyze a property. But right, you know, you are getting appreciation you are in areas where you know, it's probably a better tenant base that, you know, wants to be in those areas for the nightlife and things like that. So… Michael: Yeah, totally random question. Where do you think the term back of the napkin came from? Is it because there's like, like food on the front of the napkin? Max: Probably a couple guys sit in like a, you know, a pub in England or something. Maybe just doing some math on the back of a napkin? I'm not sure. Michael: No one ever says some front of the napkin math, it's always back of the napkin. Mark: So Max, I got a quick question. What's the sweet spot that you're finding right now between, you know, the cash flow markets and the appreciation markets? Where Where do you feel like the opportunity is that most investors are really gearing towards in it's competitive, but not overly competitive? Max: Yeah, so for Pittsburgh, there's, there's a few different answers to that, if you're looking for single family homes in those B to C plus type areas, we're going to be looking at prices that are in the low to mid one hundreds, just because that's where the rents are going to match up, and we're going to be near that 1% rule or maybe a little over it. Now, like most cities, if you get a little further away from town, or you go to some areas that are a little less desirable, we may be able to find single family homes where the numbers look a lot better. And there's inherent risk involved with that as well, the buildings are a little rougher, you may have more tenant turnover and issues in that regard. But that's generally where we're going to be for a three bedroom, one or two bath home, duplexes and triplexes are going to be probably in the mid one hundreds to low to hundreds. At this point, which has really gone up, you know, I'm sure like a lot of other cities in the past two years, from, you know, the low to mid one hundreds to high one hundreds, each thing's probably gone up about 30,000. So, you know, probably about 10 to 15% appreciation. But that's where we're going to see the numbers. I like to steer clients towards duplexes and triplexes if they're looking for cash flow. You know, we know that there's probably more turnover on multi units than there are single family units. But cash flows generally going to be a little bit better around here. Michael: Max you bring up such a great point. And it's something that I talked to members in the academy all the time about, how do you have the conversation around someone who says, well, Max, here's this $120,000 house that rents for 1200 bucks, let's say, but over here, here's this $180,000 duplex that rents for two grand gross, and you have to explain to them that those tenants might be very different. We have to get beyond the gross numbers. I mean, how do you have that conversation? Max: Right? Yeah, well, that's tenant turnover is just part of it. I mean, here in Pittsburgh, as I'm sure we'll touch on In a little bit here, some of these buildings are older, and utilities are separated. In some instances, they're not separated. In some instances, the owner may be responsible for paying water and electric, the tenant pays gas. Whereas a single family home generally the tenants responsible for paying all the utilities. But when you dive into the numbers a little bit more, may actually make those single family homes more attractive than they first appeared. But yeah, no tenant turnovers part of it. Utilities being split as part of it, just property maintenance is part of it. I mean, you've got two kitchens, to bathrooms, if not more, probably bigger buildings. So there's a lot of factors while the cash flow may be a little bit better, your expenses maybe a little bit more as well. Michael: That's such a good point to keep in mind. So you, you mentioned it, and I would love to come back to it. So the age of the housing stock in Pittsburgh, talk to us about what that looks like. Is it new builds? Is it 200 years old, 100 year old, you know, what, what is the age of some of these properties that are good cash flow investments look like? Max: Yeah, we don't really have a whole lot that's over 130 years old. And most of the stuff that's going to be that age is going to be really close to the city center. So some of the neighbors like the north side, South Side, you look at the date, those were built in those were in the late 1800s. But oftentimes, that scares people without even really looking into it. I mean, these places were built to last a little bit different than they are nowadays. And then we have new builds, I was just at a friend's house yesterday, who has a townhome that was built less than a year ago, he's already got plumbing issues. So you know, sometimes sometimes age isn't a bad thing. But there are issues that are associated with having buildings that are 100 years old or so which is where I would say a lot of these properties are going to sit about 100 years old 80 to 100. Michael: And how do you determine or decipher? I mean, so I would give an example, I have a four Plex that was built in like 1890. But I took it down to the studs, brand new, everything brand new, you know, roof, electrical, plumbing, whatever, and so on the insurance that says your construction 2019. So how do you get how do you? How do you coach people? How do you walk people through? Yeah, I know, it says it was built in 1900. But it's been rehabbed. So for you, as the owner, it's effective your construction is 2020, or whatever. Max: I tell people that all the time, I say, you know, if this building was built in 1880, there's very few things in this building that are still from 1880, one of them may be the foundation, which I know is a big is a big issue for a lot of people. But again, these foundations oftentimes are 18 to 24 inches thick, and they're not going anywhere. But as you touched on the plumbing, electrical roof, all this stuff's probably within 50 years old. So you know, we go in there, we do inspections, and we figure out the age of some of these mechanicals, and we're better able to figure out what we should be estimating for maintenance capex and things like that. Michael: I love it. And so you touched on foundations, and there may be some damage to those foundations. What are some other common issues that you see in the Pittsburgh market that maybe are custom to the Pittsburgh market that might scare other investors away? Like for one we had, were chatting with an agent, they have termites everywhere, they have termites. So if you see termites is not a big deal. what's what's kind of unique to Pittsburgh? Max: Termites is one of them, but it's not crazy. Common around here. termites are prevalent, though, but a lot of the issues that we see here that I've noticed have caused pause for some investors from out of state are related to the foundations, and then kind of our pretty awful weather. So you know, these foundations that are from 1880 1890, they didn't use basements back then the same way we do. And they desig…

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How passive is real estate investing really? Oct 02, 2021

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We often hear real estate investing referred to as passive income. But we feel that can be misleading sometimes. Depending on the cycle of your investment periods, the asset class you are in, and the condition of the properties you are acquiring, real estate investing can require different levels of involvement. In this episode, we discuss what that level of involvement can look like in these different scenarios and how you can turn the dials to adjust your strategy to accommodate your desired level of activity. --- 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 up everybody Michael Albaum here from The Remote Real Estate Investor. And today I'm joined by my co host, Tom: Tom Schneider. Michael: And today Tom and I are going to be talking about why is real estate investing referred to as a passive activity and the benefits some of the benefits that it yields referred to as passive income, we're gonna be talking about how passive investing in real estate actually is. So let's get into it. Alright, Tom, share with me a quick update about what's going on in your world. A little portfolio update, if you would, Tom: Oh, so I've mentioned before building a little, shed a little office shed, bottom of the lot, it is coming along. contractors are busy as all get up. But I have secured I'm in line, I'm in the queue, I'm the next person in the queue for my concrete guy. And then for the contractor actually going to putting it together. Next in queue there. So this is a symphony of development. This is my first development ground up development project. And it's just in the corner. My wife's been asked to get it's a good way to frack totally, like totally, it's, um, you know, on my own whatever, project manager, whatever GM on the site, and it's timing from the materials getting ready from the company, that's prefabricating, the shell, the shed the site team that's doing the actual, like concrete stuff. And, you know, at first in doing this project, and like, yeah, this isn't really real estate investing. But the more that I do it, the more it's like, oh, these are totally muscles that you know, yeah, some some land up development stuff. So anyways, it's it's going along well, that is kind of the extent of my activities as it relates to investing. Right now is some value add stuff at my primary residence. Michael: That's awesome. And I wish I had done something like that. Before I started my total redevelopment projects, I had a goose egg experience doing that kind of stuff. So that's, that's really cool. Tom: Yeah, go getting it somewhere. Yeah. And yourself, Michael? Michael: So I'm in the midst of a 1031 exchange, I'm selling a value add property that I added some value to out in the Midwest, and I'm buying a couple short term rentals via that 1031 exchange. And, man, the timing of it is just like so tight. So I'm scheduled to close on the down like property, the property that I'm selling by Friday or Saturday, and then purchase the new property on Tuesday. And I timed that. So I'm well within my 45 day window, but I didn't realize how tight it was actually going to be. So if one, if the sale of mine gets pushed out a little bit, I might have to scale or slide the purchase a day or two, which I'm hoping doesn't happen, but just really trying to line everything up to be as seamless as possible. But I'm excited to get into the short term rental space. Tom: Exciting, juggle, juggle, juggle. That's it. That's it. timing. Yeah, very cool. Michael: All right. So let's start picking this apart. So a lot of people have referred to real estate investing as passive investing or real estate investing generates passive income. And I'm curious to get your thoughts around how passive you think it truly is. And is it black and white, or are there shades of gray here? Tom: So the way that I would describe it to a friend is, you can get to the point where it can be a pretty passive source of income. But realistically, like upfront, there's, there's some work to do. So in cycles of ownership of the property, there are going to be ones that are more busy. So when a property when you're doing your acquisitions, I'm going to I'm going to spend a good amount of time evaluating properties submitting offers, managing the transaction, stuff getting financed, lined up. So in that upfront part of the process, definitely not an extremely passive process and even up to the point if you're buying it vacant, and perhaps there's some renovation work that needs to be done, I'm going to poke my nose into that process. Either managing contractors with my property manager or managing them directly. That's not a super passive process. And then going up into the editing process where you're working with your property manager to set rent, where they are marketing the property. I mean, I'm at the point now with my property managers where I have an established relationship where I trust them to run with stuff but getting off the ground. I'm a little bit more hands on so the other kind of property lifecycle where it's time consuming is some construction thing comes up and I will usually with my property manager, that what's called a not to exceed limit and NTE, am I using that right i think so anyways, Start with the cost. Yeah, yeah, Michael: Let's run with it. Tom: If the cost is above a certain dollar, I'll say hey, I want to know about it like this could be a repair replace decision, where I did least like to provide some input, you know, I'll you know, talk to you the local property manager. The other high time commitment not passive is it repeats again, right, the tenant moves out goes back into construction. So a property can be occupied for a long period of time that is relatively passive and not really doing a lot except for opening the proverbial mailbox and seeing the rent check come in. However, though, there like is a good amount of time that it's not necessarily passive. So I think it's a little bit of a misnomer, the passive term that is often applied to it, just because especially in the upfront and some of these major milestones you can be a little bit more involved in, as you start building your profile, go from one to five, to 10, to 20, there really can be a lot more involved in it. I mean, I enjoy, I enjoy it, I think it's fun, you know, but it's definitely Michael: It’s because your sick in the head like me! Tom; Because I'm sick in the head! The other time where it's not so passive. I'm sorry, Michael, I'm stealing just all the fodder, I'm just like, Michael: I should never have given you my notes. Tom: You shouldn't, you should have spoke first, all the points and then anything else. The other pretty time consuming event is tax time. And I think I've complained about this before, on where you're, you're collecting all these different documents and passing them on to your CPA, you're collecting your 1099 from your property manager, your 1098 from your mortgage, if you have a mortgage, and all these other documents. So that can be a little bit time consuming. But you know where I'm at right now, I don't spend a whole lot of time and that I have a portfolio that's been humming along for a while. So I'm not necessarily doing acquisitions. I'm doing land development on my own personal primary. So Alright, Michael, I'll stop stealing all the points that we talked about before the episode. So go ahead, Michael. Michael: That was great. You covered everything episode done. Thank you. Just real quick plug, something that you mentioned around tax time is if someone is using Stessa, they'll likely have a much easier time come tax time, because so many of those documents can be housed there and then sent directly over to their CPAs. But I think you nailed it. I think that's definitely a misnomer, calling it passive income. For all the reasons you mentioned that I'll just kind of share an anecdote from when I started investing, because I think it's it's a very common way that people get started investing. So I started buying very turnkey single family homes in Southern California. And so the first one I bought was was relatively new build was a couple of years old, and was turnkey, ready for a tenant. So we got a tenant in place. And then I was freaking out until we actually got that tenant place, which took about a month, just because of the timing, that of what I bought the property. And so once you got a tenant in place, I was very hands on on the property manager trying to keep tabs on everything that was going on, because I didn't know any better. After a couple months of that it was very, that it was versus very passive. I mean, the property didn't need any work, that tenant was placed. And it was just one single property. So there wasn't a whole lot for me to actually do. Now I would keep tabs on what the property manager would send over her reports every month and see, okay, what were the expenses and plug that into my spreadsheet and see how close was I in guesstimating, what my pro forma was going to be. So I spent 20 minutes a month, just checking up on things, reviewing the reports. And then I added a second property to the mix. And that was new construction brand new build. So very similarly, there just wasn't a whole lot of stuff going on with that. And so there was the same property manager in the same market. So now I just had two properties on that monthly report as opposed to one. So okay, I spent 25 minutes reviewing that once a month, then added a third property. And that was my first add a state investment. And so that was a couple duplexes. And very similarly, it was fairly turnkey, fairly new builds about 10 years old. And so already tenants in place, there's just wasn't a whole lot for me to do in terms of being an active manager or managing the manager, so to speak. So I had property managers for all of these. And that was kind of the case for a lot of my investing. And so the more turnkey I think you buy, oftentimes, the easier it is from the ownership and operational side of things. And there's really not a whole lot to do so to speak other than make sure things aren't going off the rails. It wasn't until I started getting really heavily invested in value add projects that I was having to manage a lot of what you were mentioning with your with your shed is managing contractors keeping tabs of okay who's doing what and when and keeping tabs on your property managers because they're much more involved with that process on a day to day basis than I am but getting update reports, checking in seeing what happened, what works scheduled it and make sure things are actually getting done. And then following up and seeing what things are renting for how soon are they getting rented this kind of thing. So because that's been my life, up to my eyeballs for the last Three, four or five years, it's just been a lot, I've been much busier in that capacity. But now that things are starting to slow down from a project standpoint, it's definitely becoming more passive. And I have a four-plex that I've talked about on previous episodes, and took that down to the studs total, I mean, brand new build, essentially. And that is very much humming along because there's not a whole lot that occurs on that property, knock on wood. So I talked to my manager about getting it pre leased and pre marketed and what the rent should be and how we're going to push rents and this kind of a thing, but that's only when the leases come due, so four times a year for that for those four units. So from that perspective, it can be very, very passive. Tom: It's just a great kind of a point in that I think your there always is going to be some time constraints kind of based where you know where the property is, but there is a little bit of a menu of how much how not passive or, you know, by the type of property that the condition of the property so depending on you know, what type of investment that you're looking for, you know, for me looking for a property you know, maybe turnkey maybe some light work that needs to be done but ultimately, you know, a minimal time investment beyond those major events you know, acquisitions terms, what that versus you were, I have an appetite for a little bit more stuff and up to your eyeballs at points in times. But I mean, like life, there's, you know, there's ebbs and flows of… Michael: I thought I had an appetite for, until I threw up, but that's neither here nor there. I think, Michaels, Uber says it really well, too. He talks about regularly. And in his book, he talks about taking on all these value add projects, and in hindsight, he wish teachers would have bought more turnkey. And so like you mentioned, you can really dial it up or down how much time and involvement you want to have. But you'll either pay for it or receive a discount. And so I think a lot of people end up buying properties on the cheaper end of the spectrum and given markets that probably do need work, but expect it to have the same time requirement as a turnkey property. And I just think that's a very big misalignment of expectations. So you really need to understand what does this type of property What does this class of property look like in terms of my time requirement in terms of capital requirement? Because I think people often knock turnkey investments Oh, they're all the equities already been sucked out. Yeah. But if someone doesn't have the time to go manage it, or deal with the headaches or deal with the projects that are needed, like I think it's it can be a really great avenue for people. And so that's I think one of the beauties of real estate is you have this broad spectrum and depending on who you are and where you're looking to go there's likely something for you. Tom: Yeah, and the other you know thing about these you know, massive project type properties kind of against people who say oh, you know, all the values already been sucked out for these properties that are already in good shape, the concept of beta where in taking on a project that has a property that has a big project, sometimes those costs can go over like and you can you know, end up buying this property that you're thinking you're gonna squeeze out some extra value but instead you're actually just squeezing a bunch of extra work and then your costs are going over I mean, it's really easy to look at these projects with some pink rosy glasses and thinking that you're getting some extra value but when in fact you're just doing more work and oh, materials costs are up Oh, your contractors timing so it's vacant for longer like me I don't think that's really the purpose of this episode so I'd like to expunge upon or talk about the value of slightly more turnkey properties Michael: Vut that's where it ended up! Tom: That's where it ended up. Michael: I mean, I Case in point like Exhibit A myself that for that four Ple…

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